MILLENNIUM PHARMACEUTICALS INC, 424B1, 1996-05-08

MILLENNIUM PHARMACEUTICALS INC
424B1, 1996-05-08
PHARMACEUTICAL PREPARATIONS

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<PAGE> 1
Filed pursuant to Rule 424(b)(1)
Registration No. 333-2490

4,500,000 SHARES

LOGO MILLENNIUM PHARMACEUTICALS, INC.
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
---------------------
All of the 4,500,000 shares of Common Stock offered hereby are being sold
by the Company. Prior to this offering, there has been no public market for the
Common Stock. For factors considered in determining the initial public offering
price, see "Underwriting".

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.

Two of the Company's strategic partners -- Hoffmann-La Roche Inc. and Eli
Lilly and Company -- have indicated their non-binding intention to purchase
$2,000,000 and $3,500,000, respectively, of Common Stock in this offering;
however, the Underwriters have indicated to the Company that these strategic
partners likely will be allocated a number of shares that would result in
purchases significantly below these amounts.

The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "MLNM".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
---------------------------------------------------
<S> <C> <C> <C>
Per Share.................................... $12.00 $0.84 $11.16
Total(3)..................................... $54,000,000 $3,780,000 $50,220,000
<FN>
- ---------------

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

(2) Before deducting estimated expenses of $500,000 payable by the Company.

(3) The Company has granted to the Underwriters an option for 30 days to
purchase up to an additional 675,000 shares at the initial public offering
price per share, less the underwriting discount, solely to cover
over-allotments. If such option is exercised in full, the total initial
public offering price, underwriting discount and proceeds to Company will be
$62,100,000, $4,347,000 and $57,753,000, respectively. See "Underwriting".
</TABLE>

---------------------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about May
10, 1996, against payment therefore in immediately available funds.

GOLDMAN, SACHS & CO. ROBERTSON, STEPHENS & COMPANY
---------------------
The date of this Prospectus is May 6, 1996.
<PAGE> 2

LOGO

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

The Company intends to furnish to its stockholders annual reports
containing audited financial statements and quarterly reports containing
unaudited interim financial information for the first three fiscal quarters of
each fiscal year of the Company.

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

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

<TABLE>
MILLENNIUM PHARMACEUTICALS, INC.
AN OVERVIEW
Millennium is engaged in the commercial application of genetics, genomics and bioinformatics to discover and develop new,
proprietary therapeutic and diagnostic products capable of addressing major common diseases at their root causes

<S> <C> <C>
TECHNOLOGY STRATEGY

MAJOR
COMMON GENE TARGET
DISEASES IDENTIFICATION VALIDATION

- - focus on major diseases - employ multiple synergistic - employ a comprehensive set
that affect millions and that approaches to identify genes of bench and computational
are underserved by current responsible for major common biology technologies to convert
therapeutic alternatives diseases the Company's gene discoveries
into pharmaceutically useful
targets

OBESITY GENETIC APPROACHES BENCH BIOLOGY

TYPE II DIABETES Human Genetics Tissue Profiling

ATHEROSCLEROSIS Mouse Genetics Biochemical Pathways

ASTHMA NON-GENETIC Cellular and Animal
APPROACHES Models
CANCER
Differential Bioassays
CNS DISEASES Expression
COMPUTATIONAL
OSTEOPOROSIS cDNA BIOLOGY
Sequencing
AUTOIMMUNE Functional Prediction
DISEASES Expression
Cloning

BIOINFORMATICS AND AUTOMATION

BUSINESS STRATEGY
RETAINED RIGHTS/
STRATEGIC PARTNER FUTURE BUSINESS
PARTNERS REVENUES OPPORTUNITIES

- - diversify business risk, - obtain significant up-front - create additional
leverage technology and and research funding and business opportunities by
accelerate commercialization create multiple potential retaining select rights to
through multiple strategic royalty and profit-sharing commercialize discoveries
alliances revenue streams made in strategic alliance
research programs

HOFFMANN- LICENSING FEES DIAGNOSTICS
LA ROCHE
RESEARCH FUNDING Predispositional
Obesity Testing
RESEARCH MILESTONES
Type II Diabetes Differential
CLINICAL MILESTONES Diagnostics
ELI LILLY
ROYALTIES Pharmacogenetics
Atherosclerosis
PROFIT-SHARING SMALL MOLECULE
Oncology DRUGS

ASTRA BIOLOGICS

Respiratory Diseases Therapeutic
Proteins

Gene Therapy

Antisense Drugs

</TABLE>
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus, including the information under "Risk Factors". Except as
otherwise noted herein or presented in the Financial Statements, all information
contained in this Prospectus (i) reflects the conversion, at the closing of this
offering, of all outstanding shares of the Company's Series A, B, C and D
Convertible Preferred Stock (the "Preferred Stock") into an aggregate of
12,172,221 shares of Common Stock, and (ii) assumes no exercise of the
Underwriters' over-allotment option.

THE COMPANY

Millennium Pharmaceuticals, Inc. ("Millennium" or the "Company") is engaged
in the commercial application of genetics, genomics and bioinformatics to
discover and develop a broad range of novel therapeutic and diagnostic products.
Independently and in strategic alliances with leading pharmaceutical companies,
the Company has focused its research efforts on identifying and elucidating the
function of genes responsible for diseases that affect millions of individuals
and are underserved by current therapeutic alternatives. These diseases include
obesity, type II diabetes, atherosclerosis, asthma, cancer and diseases of the
central nervous system. The Company's principal objective is to use its
technology platform to enable and accelerate the discovery and development of
new, proprietary therapeutic and diagnostic products capable of addressing these
diseases at their root causes, rather than simply identifying and treating their
symptoms.

The Company is distinctive in the genomics industry in employing a
comprehensive technology platform that couples multiple synergistic approaches
for identifying disease genes with a broad set of bench and computational
biology technologies for elucidating the function of these genes and their role
in disease initiation and progression. This highly automated, computer-enhanced
technology platform is designed to enable the Company and its strategic partners
to rapidly convert the Company's gene discoveries into useful targets for drug
discovery and pharmaceutical intervention. The Company believes that its
discoveries will be valuable for the development of therapeutic products
(including orally available small molecule drugs, therapeutic proteins, gene
therapy and antisense drugs), diagnostic products and services, and disease
management programs for a wide range of diseases.

Millennium's business strategy has two major components. The first is to
establish strategic alliances with leading pharmaceutical companies in order to
accelerate product development and commercialization, leverage the Company's
technological resources, and minimize operating losses and equity requirements.
The Company has secured strategic partners for its five most advanced disease
research programs: Hoffmann-La Roche Inc. ("Roche") in obesity and type II
diabetes; Eli Lilly and Company ("Lilly") in atherosclerosis and select areas
within oncology; and Astra AB ("Astra") in inflammatory respiratory diseases.
The Company expects that these strategic alliances will provide a total of
approximately $175.0 million in up-front and follow-on payments, equity
contributions and research funding (assuming each alliance research program
continues for its full five-year term and that the Company achieves certain
research objectives), exclusive of any amounts invested by Lilly or an affiliate
of Roche in this offering. This amount also excludes additional payments to be
made should specified research, product development and associated regulatory
milestones be achieved. Equity contributions and revenue earned under these
alliances totalled $44.8 million through December 31, 1995. If Millennium and
these strategic partners are successful in their collaborative research and
development efforts, the Company expects to receive a substantial, diversified
stream of royalty and/or profit sharing payments from the sale of resulting
products or services commercialized by its strategic partners. The Company
intends to pursue further strategic alliances as appropriate.

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

The second component of Millennium's business strategy is to retain
substantial rights to develop and market certain diagnostic and therapeutic
applications of the discoveries it makes in its funded strategic alliance
research programs. The Company currently is at an early stage of formulating
strategies and assembling the resources and capabilities necessary to further
develop and exploit these proprietary opportunities. For example, as part of its
agreement with Lilly, the Company obtained access to certain combinatorial
chemistry libraries and high-throughput screening technologies for the
development of small molecule drugs. The Company generally intends to
collaborate with pharmaceutical, biotechnology or other companies for the later
stages of development and commercialization of these proprietary opportunities;
however, the Company may consider developing certain potential proprietary
products or services on its own.

The Company and its collaborators have recorded significant progress in
several disease research programs, highlighted by the following scientific
accomplishments:

- Discovered the mouse and human versions of tub, a gene which causes
obesity in a mouse model that closely mimics human obesity;

- Discovered the mouse and human versions of ob-r, the leptin receptor
that plays a central role in modulating weight and appetite;

- Identified small chromosomal regions surrounding disease genes that
predispose individuals to type II diabetes; and

- Identified small chromosomal regions surrounding disease genes that
predispose individuals to bipolar affective disorder (manic depression).

The Company has received two research milestone payments from Roche for
discovering the tub and ob-r genes.

The Company seeks United States and international patent protection for the
genes it discovers, as well as related therapeutic and diagnostic products and
processes. As of April 1, 1996, the Company had filed 36 United States patent
applications, and several corresponding foreign applications, covering the
Company's discoveries.

The Company was incorporated in Delaware in 1993. The Company's principal
office is located at 640 Memorial Drive, Cambridge, Massachusetts 02139 and its
telephone number is (617) 679-7000.

<TABLE>
THE OFFERING
<CAPTION>

<S> <C>
Common Stock offered by the Company................................ 4,500,000 shares
Common Stock to be outstanding after the offering.................. 22,837,678 shares(1)
Use of proceeds.................................................... Research and development,
working capital and other
general corporate purposes
Nasdaq National Market symbol...................................... MLNM
Risk Factors....................................................... The offering involves a
high degree of risk. See
"Risk Factors".
<FN>

- ---------------
(1) Includes 2,325,874 shares that were subject to repurchase by the Company as
of April 1, 1996 under certain conditions at a weighted average repurchase
price of $0.29 per share. Excludes 2,249,073 shares of Common Stock issuable
upon exercise of options and warrants outstanding as of April 1, 1996. See
"Management -- Stock Plans".
</TABLE>
- --------------------------------------------------------------------------------

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<PAGE> 5

<TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<CAPTION>
PERIOD FROM
JANUARY 13, 1993
(DATE OF INCEPTION)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------- -------------------
1993 1994 1995
-------- ------- -------
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue under strategic alliances..................... $ -- $ 7,963 $22,880
Costs and expenses:
Research and development............................ 2,859 10,990 17,838
General and administrative.......................... 1,530 3,240 3,292
------- ------- -------
Income (loss) from operations......................... (4,389) (6,267) 1,750
Interest income (expense), net........................ 101 (105) (466)
------- ------- -------
Net income (loss)..................................... $(4,288) $(6,372) $ 1,284
======= ======= =======
Pro forma net income per share(1)..................... $ 0.07
=======
Shares used in computing pro forma net income per
share(1)............................................ 19,150,695
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------
ACTUAL AS ADJUSTED(2)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments................... $17,847 $ 71,067
Working capital..................................................... 10,498 63,718
Total assets........................................................ 25,105 78,325
Long-term debt, net of current portion.............................. 1,467 1,467
Capital lease obligations, net of current portion................... 2,499 2,499
Accumulated deficit................................................. (9,376) (9,376)
Total stockholders' equity.......................................... 13,096 66,316
<FN>
- ---------------

(1) Computed on the basis described in Note 2 of Notes to Financial Statements.

(2) Gives effect to the automatic conversion of all outstanding shares of
Preferred Stock (including 388,888 shares of Series D Convertible Preferred
Stock sold at $9.00 per share in February 1996) into shares of Common Stock
upon the closing of the offering and the sale of the 4,500,000 shares of
Common Stock offered by the Company hereby, after deducting the underwriting
discount and estimated offering expenses payable by the Company. See "Use of
Proceeds" and "Description of Capital Stock".
</TABLE>

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RISK FACTORS

In addition to the other information in this Prospectus, prospective
purchasers of the Common Stock offered hereby should consider carefully the
following risk factors in evaluating the Company and its business. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such differences include those discussed below.

UNCERTAINTIES RELATING TO TECHNOLOGICAL APPROACHES OF THE COMPANY

To date, the Company has not developed or commercialized any products based
on its technological approaches. There can be no assurance that these approaches
will enable the Company to successfully identify and characterize genes that
predispose individuals to the diseases that are the principal focus of its
disease research programs or to use any resulting information to develop
molecular targets of utility for pharmaceutical product development. The
Company's lead programs and development focus are primarily directed to complex
polygenic and multifactorial diseases. There is limited scientific understanding
generally relating to the role of genes in these diseases and relatively few
products based on gene discoveries have been developed and commercialized.
Accordingly, even if the Company is successful in identifying genes associated
with specific diseases, there can be no assurance that its gene discoveries will
lead to the development of therapeutic and diagnostic products. The Company's
success will depend, in part, upon its ability to focus its research efforts on
diseases that are suitable candidates for diagnostic and therapeutic products.

The development of diagnostic and therapeutic products based on the
Company's gene discoveries also will be subject to the risks of failure inherent
in the development of products based on new technologies. These risks include
the possibilities that any products based on these technologies will be found to
be ineffective or toxic, or otherwise fail to receive necessary regulatory
approvals; the products, if safe and effective, will be difficult to manufacture
on a large scale or will be uneconomical to market; proprietary rights of third
parties will preclude the Company or its strategic partners from marketing
products; or third parties will market superior or equivalent products. As a
result, there can be no assurance that the Company's research and development
activities will result in any commercially viable products. See
"Business -- Millennium's Technology Platform", "-- Strategic Alliances" and
"-- Retained Commercialization Rights".

Genomics, biotechnology and pharmaceutical technologies have undergone and
are expected to continue to undergo rapid and significant change. The Company's
future success will depend in large part on its ability to maintain a
competitive position with respect to these technologies. Rapid technological
developments by the Company or others may result in compounds, products or
processes becoming obsolete before the Company recovers any expenses it incurs
in connection with the development of such products.

EARLY STAGE OF DEVELOPMENT; HISTORY OF OPERATING LOSSES; ANTICIPATION OF FUTURE
LOSSES

The Company was founded in January 1993 and is at an early stage of
development. Substantially all of the Company's resources have been, and will
for the foreseeable future continue to be, dedicated to the development of the
Company's technology and its application to discovering and elucidating the
function of genes associated with major common diseases. To date, all of the
Company's revenues have resulted from payments from strategic partners. The
Company has not yet identified any lead compounds nor generated any products
which have entered preclinical studies or generated any revenue. All of the
Company's potential products and services will require significant research and
development expenditures. It will be a number of years, if ever, before the
Company recognizes revenue from sales or royalties.

As of December 31, 1995, the Company had an accumulated deficit of
approximately $9,376,000. Even if the Company succeeds in developing a
commercial product, the Company

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expects to incur losses for at least the next several years and that such losses
will increase as the Company expands its research and development activities. To
achieve profitability, the Company, alone or with others, must successfully
discover genes associated with particular diseases and, thereafter, utilize such
discoveries to develop products, conduct clinical trials, obtain required
regulatory approvals and successfully manufacture, introduce and market such
products. The time required to reach commercial revenue and profitability is
highly uncertain and there can be no assurance that the Company will be able to
achieve any such revenue and profitability on a sustained basis, if at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

FUTURE CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FUNDING

The Company's comprehensive technological approach to developing products
through the application of genomics has required that Millennium establish a
substantial scientific infrastructure. The Company has consumed substantial
amounts of cash to date and expects capital and operating expenditures to
increase over the next several years as it expands its infrastructure and its
research and development activities. The Company believes that the net proceeds
from this offering, existing cash and investment securities and anticipated cash
flow from existing strategic alliances will be sufficient to support the
Company's operations for at least the next 24 months. The Company's actual
future capital requirements, however, will depend on many factors, including
progress of its disease research programs, the number and breadth of these
programs, achievement of milestones under strategic alliance arrangements, the
ability of the Company to establish and maintain additional strategic alliance
and licensing arrangements, and the progress of the development efforts of the
Company's strategic partners. These factors also include the level of the
Company's activities relating to commercialization rights it has retained in its
strategic alliance arrangements, competing technological and market
developments, the costs associated with collection of patient information and
DNA samples, the costs involved in enforcing patent claims and other
intellectual property rights and the costs and timing of regulatory approvals.
The Company expects that it will require significant additional financing in the
future, which it may seek to raise through public or private equity offerings,
debt financings or additional strategic alliance and licensing arrangements. No
assurance can be given that additional financing will be available when needed,
or that, if available, such financing will be obtained on terms favorable to the
Company or its stockholders. To the extent the Company raises additional capital
by issuing equity securities, ownership dilution to stockholders will result. To
the extent that the Company raises additional funds through strategic alliance
and licensing arrangements, the Company may be required to relinquish rights to
certain of its technologies or product candidates, or to grant licenses on terms
that are not favorable to the Company, either of which could have a material
adverse effect on the Company's business, financial condition and results of
operations. In the event that adequate funds are not available, the Company's
business would be adversely affected. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".

RELIANCE ON STRATEGIC PARTNERS

The Company's strategy for development and commercialization of diagnostic
and therapeutic products based upon its gene discoveries depends upon the
formation of various strategic alliances and licensing arrangements. The Company
has entered into strategic alliances with Roche, Lilly and Astra. There can be
no assurance that the Company will be able to establish additional strategic
alliance or licensing arrangements necessary to develop and commercialize
products based upon the Company's disease research programs, that any such
arrangements or licenses will be on terms favorable to the Company, or that the
current or any future strategic alliances or licensing arrangements ultimately
will be successful. The Company is dependent on its strategic partners for the
preclinical study, clinical development, regulatory approval, manufacturing and
marketing of products based on the results of these collaborative research
programs. The agreements with these

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strategic partners allow them significant discretion in electing whether to
pursue any of these activities. The Company cannot control the amount and timing
of resources its strategic partners devote to the Company's programs or
potential products. If any of the Company's strategic partners were to breach or
terminate its agreement with the Company or otherwise fail to conduct its
collaborative activities successfully in a timely manner, the preclinical or
clinical development or commercialization of product candidates or research
programs would be delayed or terminated. Any such delay or termination could
have a material adverse effect on the Company's business, financial condition
and results of operations.

The Company relies on its strategic partners for significant funding in
support of its research operations. The Company would be required to devote
additional internal resources to product development, or scale back or terminate
certain development programs or seek alternative collaborative partners, if
funding from one or more of its collaborative programs were reduced or
terminated. See "-- Future Capital Requirements; Uncertainty of Additional
Funding" and "Business -- Strategic Alliances".

Disputes may arise in the future with respect to the ownership of rights to
any technology developed with strategic partners. These and other possible
disagreements between strategic partners and the Company could lead to delays in
the collaborative research, development or commercialization of certain product
candidates, or could require or result in litigation or arbitration, which could
be time-consuming and expensive, in which case it would have a material adverse
effect on the Company's business, financial condition and results of operations.

Generally, in each of its strategic alliances, the Company agrees not to
conduct certain research, independently or with any commercial third party, that
is in the same field as the research conducted under the alliance agreement.
Consequently, these arrangements may have the effect of limiting the areas of
research the Company may pursue, either alone or with others. The Company's
strategic partners, however, may develop, either alone or with others, products
that are similar to or competitive with the products that are the subject of the
Company's collaborations with such partners. Competing products, either
developed by a strategic partner or to which the strategic partner has rights,
may result in the partner withdrawing financial and related support for the
Company's product candidates, which could have a material adverse effect on the
Company's business, financial condition and results of operations.

All of the Company's strategic alliance agreements are subject to
termination under various circumstances. Each strategic partner has the right to
terminate the research program it is funding (while maintaining rights and
licenses to certain Company discoveries) should the Company fail to meet certain
performance criteria specified in the relevant strategic alliance agreement.
Certain of the Company's strategic alliance agreements provide that, upon
expiration of a specified period after commencement of the agreement, its
strategic partner has the right to terminate the agreement on short notice
without cause. Roche has the right, at any time after March 1997, to terminate
its agreement with the Company, either in whole or with respect to either the
obesity or type II diabetes programs, if Millennium is unable to perform any of
its material obligations under the agreement. The agreement is also subject to
termination by Roche at any time after March 1999 upon 180 days notice, as well
as upon 90 days notice upon a sale of majority control of the Company or the
sale of all or substantially all of Millennium's assets. Lilly has the right to
terminate its funding of the Company's atherosclerosis research program at any
time after October 1998 or its oncology research program at any time after April
1999, in each case upon 90 days notice and with continuation of research funding
for one year provided that Millennium has met certain performance criteria
specified in the relevant agreement. Lilly also has the right to terminate its
research funding obligations under various circumstances, including the failure
by Millennium to achieve specified research objectives, the termination of the
employment of two or more specified employees of the Company without replacement
reasonably acceptable to Lilly and upon the acquisition of majority control of
Millennium by a competitor of Lilly. Astra has the right to terminate its
funding of the Company's research program in early 1999 in the event that
Millennium fails to achieve specified

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research objectives. The termination of any strategic alliance could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Strategic Alliances".

POTENTIAL CONFLICTS OF INTEREST

The Company has established relationships with strategic partners, research
collaborators and scientific advisors. Conflicts of interest could arise between
the Company and these third parties which, depending upon the nature of such
conflicts, could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Strategic
Alliances".

The Company relies on its strategic partners for support in its disease
research programs and intends to rely on its strategic partners for preclinical
evaluation and clinical development of its potential products and manufacturing
and marketing of any products. Each of the Company's strategic partners is
conducting multiple product development efforts within each disease area that is
the subject of its strategic alliance with the Company. Generally, in each of
its strategic alliances, the Company's strategic partners may develop, either
alone or with others, products that are similar to or competitive with the
products that are the subject of the Company's collaborations with such
partners. Competing products, either developed by a strategic partner or to
which the strategic partner has rights, may result in the partner withdrawing
financial and related support for the Company's product candidates, which could
have a material adverse effect on the Company's business, financial condition
and results of operations.

Michael Steinmetz, a member of the Board of Directors of the Company, is
Vice President, Preclinical Research and Development of Roche, the Company's
strategic partner in its obesity and type II diabetes research programs.

The Company has relationships with collaborators and scientific advisors at
academic and other institutions, some of whom conduct research at the Company's
request, particularly with respect to the Company's human genetics programs.
These collaborators and scientific advisors are not employees of the Company and
may have commitments to, or consulting or advisory contracts with, other
entities that may limit their availability to the Company. As a result, the
Company has limited control over their activities and, except as otherwise
required by its collaboration and consulting agreements, can expect only limited
amounts of their time to be dedicated to the Company's activities.

INTENSE COMPETITION

Millennium faces, and will continue to face, intense competition from
organizations such as large pharmaceutical, biotechnology and diagnostic
companies, as well as academic and research institutions and government
agencies. The Company is subject to significant competition from organizations
that are pursuing the same or similar technologies as those which constitute the
Company's technology platform and from organizations that are pursuing
pharmaceutical or diagnostic products that are competitive with the Company's
potential products. Most of the organizations competing with the Company have
greater capital resources, research and development staffs and facilities, and
greater experience in drug discovery and development, obtaining regulatory
approvals and pharmaceutical product manufacturing and greater marketing
capabilities than the Company.

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specific knowledge of the function of such genes or gene fragments. In addition,
certain other entities are pursuing a gene identification, characterization and
product development strategy based on positional cloning. The Company's
competitors may discover, characterize or develop important genes in advance of
Millennium, which could have a material adverse effect on any related Millennium
disease research program. The Company also faces competition from these and
other entities in gaining access to DNA samples used in its research and
development projects. The Company expects competition to intensify in genomics
research as technical advances in the field are made and become more widely
known. See "Business -- Background" and "-- Millennium's Technology Platform".

The Company relies on its strategic partners for support in its disease
research programs and intends to rely on its strategic partners for preclinical
evaluation and clinical development of its potential products and manufacturing
and marketing of any products. Each of the Company's strategic partners is
conducting multiple product development efforts within each disease area that is
the subject of its strategic alliance with the Company. For example, Roche, with
whom the Company is collaborating in the field of obesity, currently has a
product for the treatment of obesity in late stage clinical trials. Generally,
the Company's strategic alliance agreements do not restrict the strategic
partner from pursuing competing development efforts. Any product candidate of
the Company, therefore, may be subject to competition with a potential product
under development by a strategic partner. See "-- Reliance on Strategic
Partners" and "Business -- Strategic Alliances".

PATENTS AND PROPRIETARY RIGHTS; THIRD PARTY RIGHTS

The Company's commercial success will depend in part on obtaining patent
protection on gene discoveries and on products, methods and services based on
such discoveries. As of April 1, 1996, the Company had 36 patent applications
pending in the United States, and had filed several corresponding foreign patent
applications. However, no patents based on the Company's discoveries have issued
to date. The patent positions of pharmaceutical, biopharmaceutical and
biotechnology companies, including Millennium, are generally uncertain and
involve complex legal and factual questions. There can be no assurance that any
of the Company's pending patent applications will result in issued patents, that
the Company will develop additional proprietary technologies that are
patentable, that any patents issued to the Company or its strategic partners
will provide a basis for commercially viable products or will provide the
Company with any competitive advantages or will not be challenged by third
parties, or that the patents of others will not have an adverse effect on the
ability of the Company to do business. In addition, patent law relating to the
scope of claims in the technology fields in which the Company operates is still
evolving. The degree of future protection for the Company's proprietary rights,
therefore, is uncertain. Furthermore, there can be no assurance that others will
not independently develop similar or alternative technologies, duplicate any of
the Company's technologies, or, if patents are issued to the Company, design
around the patented technologies developed by the Company. In addition, the
Company could incur substantial costs in litigation if it is required to defend
itself in patent suits brought by third parties or if it initiates such suits.

The Company has applied for patent protection for novel genes, partial gene
sequences ("ESTs") of novel genes and novel uses for known genes identified
through its research programs. There is substantial uncertainty regarding the
patentability of ESTs or full-length genes absent data demonstrating functional
relevance. Based on recent technological advances in gene sequencing technology,
a number of groups other than the Company are attempting to rapidly identify
ESTs and full-length genes, the functions of which have not been characterized.
Washington University, for example, is currently identifying ESTs through
partial sequencing pursuant to funding provided by Merck & Co., Inc., and
depositing the ESTs identified in a public database. The public availability of
EST information prior to the time the Company applies for patent protection on a
corresponding full-length gene could adversely affect the Company's ability to
obtain patent protection with respect to such gene. To the extent any patents
issue to other parties on such partial or full-length genes, the

10
<PAGE> 11

risk increases that the potential products and processes of the Company or its
strategic partners may give rise to claims of patent infringement.

Others may have filed and in the future are likely to file patent
applications covering genes or gene products that are similar or identical to
those of the Company. No assurance can be given that any such patent application
will not have priority over patent applications filed by the Company. Any legal
action against the Company or its strategic partners claiming damages and
seeking to enjoin commercial activities relating to the affected products and
processes could, in addition to subjecting the Company to potential liability
for damages, require the Company or its strategic partner to obtain a license in
order to continue to manufacture or market the affected products and processes.
There can be no assurance that the Company or its strategic partners would
prevail in any such action or that any license required under any such patent
would be made available on commercially acceptable terms, if at all. The Company
believes that there may be significant litigation in the industry regarding
patent and other intellectual property rights. If the Company becomes involved
in such litigation, it could consume a substantial portion of the Company's
managerial and financial resources.

There is substantial uncertainty concerning whether human clinical data
will be required for issuance of patents for human therapeutics. If such data is
required, the Company's ability to obtain patent protection could be delayed or
otherwise adversely affected. Although the United States Patent and Trademark
Office ("USPTO") issued new utility guidelines in July 1995 that address the
requirements for demonstrating utility for biotechnology inventions,
particularly for inventions relating to human therapeutics, there can be no
assurance that USPTO examiners will follow such guidelines or that the USPTO's
position will not change with respect to what is required to establish utility
for gene sequences and products and methods based on such sequences.
Furthermore, the enactment of the legislation implementing the General Agreement
on Trade and Tariffs has resulted in certain changes to United States patent
laws that became effective on June 8, 1995. Most notably, the term of patent
protection for patent applications filed on or after June 8, 1995 is no longer a
period of seventeen years from the date of grant. The new term of United States
patents will commence on the date of issuance and terminate twenty years from
the earliest effective filing date of the application. Because the time from
filing to issuance of biotechnology patent applications is often more than three
years, a twenty-year term from the effective date of filing may result in a
substantially shortened term of patent protection, which may adversely impact
the Company's patent position. If this change results in a shorter period of
patent coverage, the Company's business could be adversely affected to the
extent that the duration and level of the royalties it is entitled to receive
from its strategic partners is based on the existence of a valid patent.

In connection with the Company's discovery of the gene that encodes the
leptin receptor that regulates body weight ("ob-r"), a search of the Washington
University database revealed the existence of an EST of unknown function that
possessed great similarity to a small portion of the full-length ob-r gene. The
public availability of this EST prior to the time that the Company filed its
patent application based on the full-length ob-r gene could adversely affect the
breadth of patent protection available to the Company related to ob-r. In
addition, prior to the time that the Company filed its patent application
covering ob-r, a third party, Progenitor Inc.("Progenitor"), filed a patent
application disclosing DNA sequences that encode shorter forms of leptin
receptors and describing a potential role for such receptors in cell
proliferative disorders such as cancers and leukemias. Although the Company
believes that the patent application filed by Progenitor does not describe the
Company's ob-r, or the role of any receptor in body weight regulation or obesity
control, there can be no assurance that such patent application, or additional
patent applications if filed by others, will not result in issued patents
covering ob-r or specific fragments of the ob-r gene.

11
<PAGE> 12

Company has not sought patent protection for these technologies. In addition,
the Company has developed a database of proprietary gene sequences which it
updates on an ongoing basis. The Company has taken security measures to protect
its data and continues to explore ways to further enhance the security for its
data. There can be no assurance, however, that such measures will provide
adequate protection for the Company's trade secrets or other proprietary
information. While the Company requires employees, academic collaborators and
consultants to enter into confidentiality agreements, there can be no assurance
that proprietary information will not be disclosed, that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets or disclose
such technology, or that the Company can meaningfully protect its trade secrets.

The Company's academic collaborators have certain rights to publish data
and information in which the Company has rights. While the Company believes that
the limitations on publication of data developed by its collaborators pursuant
to its collaboration agreements will be sufficient to permit the Company to
apply for patent protection on genes in which it is interested in pursuing
further research, there is considerable pressure on academic institutions to
publish discoveries in the genetics and genomics fields. There can be no
assurance that such publication would not affect the Company's ability to obtain
patent protection for some genes in which it may have an interest.

The Company is party to various license agreements which give it rights to
use certain technologies in its research and development processes. There can be
no assurance that the Company will be able to continue to license such
technology on commercially reasonable terms, if at all. Failure by the Company
to maintain rights to such technology could have a material adverse effect on
the Company's business, financial condition and results of operations.

UNCERTAINTIES RELATING TO RETAINED COMMERCIALIZATION RIGHTS

In each of its strategic alliances, Millennium has retained
commercialization rights for the development and marketing of certain
pharmaceutical and diagnostic products and services. The Company may seek to
exploit these retained rights directly or may seek to develop certain retained
rights through collaborations with others. To date, the Company has not
initiated significant activities with respect to the exploitation of these
retained commercialization rights. The value of these rights, if any, will be
largely derived from the Company's gene identification and target validation
efforts, the success of which is also uncertain. See "-- Uncertainties Relating
to Technological Approaches of the Company". Even if the Company identifies and
characterizes relevant disease genes, the exploitation of retained
commercialization rights requires, in addition to capital resources,
technological, product development, manufacturing, regulatory, marketing and
sales resources that the Company does not currently possess. There can be no
assurance that the Company will be able to develop or obtain such resources. To
the extent that the Company is required to rely on third parties for these
resources, such as Lilly for access to combinational chemistry libraries and
high-throughput screening technology, failure to establish and maintain such
relationships could have a material adverse effect on the Company's ability to
realize value from its retained commercialization rights. If the Company seeks
to exploit retained commercialization rights through joint ventures or strategic
alliances, it may be required to relinquish material rights on terms that may
not be favorable to the Company. No agreements concerning any such arrangements
currently exist, and there can be no assurance that the Company will be able to
enter into any such agreements on acceptable terms, if at all, or that the
Company will be able to realize any value from its retained commercialization
rights. See "Business -- The Millennium Strategy", "-- Strategic Alliances" and
"-- Retained Commercialization Rights".

GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL

12
<PAGE> 13

marketing surveillance, of each compound to establish its safety and efficacy,
can take many years and require the expenditure of substantial resources. Data
obtained from preclinical studies and clinical trials are susceptible to varying
interpretations that could delay, limit or prevent regulatory approval. The rate
of completion of clinical trials is dependent upon, among other factors, the
enrollment of patients. Patient accrual is a function of many factors, including
the size of the patient population, the proximity of patients to clinical sites,
the eligibility criteria for the study and the existence of competitive clinical
trials. Delays in planned patient enrollment in clinical trials may result in
increased costs, program delays or both, which could have a material adverse
effect on the Company. Delays or rejections may also be encountered based upon
changes in United States Food and Drug Administration ("FDA") policies for drug
approval during the period of product development and FDA regulatory review of
each submitted new drug application ("NDA") in the case of new pharmaceutical
agents, or product license application ("PLA") in the case of biologics. Similar
delays also may be encountered in the regulatory approval of any diagnostic
product and in obtaining regulatory approvals in foreign countries. Under
current guidelines, proposals to conduct clinical research involving gene
therapy at institutions supported by the National Institutes of Health ("NIH")
must be approved by the Recombinant DNA Advisory Committee ("RAC") and the NIH.
There can be no assurance that regulatory approval will be obtained for any
drugs or diagnostic products developed by the Company or its strategic partners.
Furthermore, regulatory approval may entail limitations on the indicated use of
a drug. Because certain of the products likely to result from the Company's
disease research programs involve the application of new technologies and may be
based upon a new therapeutic approach, such products may be subject to
substantial additional review by various government regulatory authorities and,
as a result, regulatory approvals may be obtained more slowly than for products
using more conventional technologies.

Even if regulatory approval is obtained, a marketed product and its
manufacturer are subject to continuing review. Discovery of previously unknown
problems with a product may have adverse effects on the Company's business,
financial condition and results of operations, including withdrawal of the
product from the market. Violations of regulatory requirements at any stage,
including preclinical studies and clinical trials, the approval process or
post-approval, may result in various adverse consequences to the Company,
including the FDA's delay in approval or refusal to approve a product,
withdrawal of an approved product from the market or the imposition of criminal
penalties against the manufacturer and NDA or PLA holder. The Company has not
submitted an investigational new drug application ("IND") for any product
candidate, and no product candidate has been approved for commercialization in
the United States or elsewhere. The Company intends to rely primarily on its
strategic partners to file INDs and generally direct the regulatory approval
process. No assurance can be given that the Company or any of its strategic
partners will be able to conduct clinical testing or obtain the necessary
approvals from the FDA or other regulatory authorities for any products. Failure
to obtain required governmental approvals will delay or preclude the Company's
strategic partners from marketing drugs or diagnostic products developed by the
Company or limit the commercial use of such products and could have a material
adverse effect on the Company's business, financial condition and results of
operations.

The Company's research and development activities involve the controlled
use of hazardous materials, chemicals and various radioactive materials. The
Company is subject to federal, state and local laws and regulations governing
the use, storage, handling and disposal of such materials and certain waste
products. Although the Company believes that its safety procedures for handling
and disposing of such materials comply with the standards prescribed by federal,
state and local laws and regulations, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, the Company could be held liable for any damages that result
and any liability could exceed the resources of the Company. See "Business --
Government Regulation".

13
<PAGE> 14

ETHICAL, LEGAL AND SOCIAL IMPLICATIONS OF GENETIC DIAGNOSTIC TESTING

The prospect of broadly available diagnostic tests which evaluate genetic
predisposition to disease has raised issues regarding the appropriate
utilization and the confidentiality of information provided by such testing. It
is possible that discrimination by third party payors could occur through the
raising of premiums by such payors to prohibitive levels, outright cancellation
of insurance or unwillingness to provide coverage to patients shown to have a
genetic predisposition to a particular disease. If insurance discrimination were
to become a significant barrier to the acceptance of such diagnostic tests, the
Company could experience a delay in diagnostic market penetration or a reduction
in the size of the potential serviceable market. Similarly, employers could
discriminate against employees with a genetic predisposition due to the
increased risk of developing disease resulting in possible cost increases for
health insurance and the potential for lost employment time. Finally,
governmental authorities could, for social or other purposes, limit the use of
genetic testing or prohibit testing for genetic predispositions to certain
conditions. If efforts by the Company and others to mitigate potential
discrimination are not successful, the Company could experience a delay or
reduction in test acceptance, which could have a material adverse effect on the
Company's or its strategic partners' ability to commercialize certain potential
diagnostic products.

ATTRACTION AND RETENTION OF KEY EMPLOYEES

The Company is highly dependent on the principal members of its management
and scientific staff. The loss of services of any of these personnel could
impede significantly the achievement of the Company's development objectives.
Furthermore, recruiting and retaining qualified scientific personnel to perform
research and development work in the future will also be critical to the
Company's success. There is intense competition among pharmaceutical and health
care companies, universities and nonprofit research institutions for experienced
scientists, and there can be no assurance that the Company will be able to
attract and retain personnel on acceptable terms. Pursuant to the Lilly
strategic alliance agreements in the atherosclerosis and oncology fields, Lilly
has the right to suspend funded research programs under these agreements upon
the termination of the employment of two or more specified employees of the
Company without replacement reasonably acceptable to Lilly. See
"Business -- Strategic Alliances", "-- Competition" and "-- Scientific Advisors
and Consultants".

EXPANSION OF OPERATIONS; MANAGEMENT OF GROWTH

The Company recently has significantly increased the scale of its
operations to support the expansion of its disease research programs and its
strategic alliances. The increase has included the hiring of a significant
number of additional personnel. The number of employees of the Company increased
from 92 on January 1, 1995 to 166 on April 1, 1996, and the Company currently
plans to hire approximately 80 additional employees by the end of 1996. The
resulting growth in personnel and facilities could place significant strains on
the Company's management, operations and systems. See "Business -- Employees"
and "-- Facilities".

DEPENDENCE ON RESEARCH COLLABORATORS AND SCIENTIFIC ADVISORS

The Company has relationships with collaborators at academic and other
institutions who conduct research at the Company's request, particularly with
respect to the Company's human genetics programs. Such collaborators are not
employees of the Company. All of Millennium's consultants are employed by
employers other than the Company and may have commitments to, or consulting or
advisory contracts with, other entities that may limit their availability to the
Company. As a result, the Company has limited control over their activities and,
except as otherwise required by its collaboration and consulting agreements, can
expect only limited amounts of their time to be dedicated to the Company's
activities. The Company's ability to discover genes involved in human disease
and commercialize products based on those discoveries may depend in part on
continued collaborations with researchers at academic and other institutions.
There can be no assurance that

14
<PAGE> 15

the Company will be able to negotiate additional acceptable collaborations with
collaborators at academic and other institutions or that its existing
collaborations will be successful.

The Company's research collaborators and scientific advisors sign
agreements which provide for confidentiality of the Company's proprietary
information and results of studies. There can be no assurance, however, that the
Company will be able to maintain the confidentiality of its technology and other
confidential information in connection with every collaboration, and any
unauthorized dissemination of the Company's confidential information could have
an adverse effect on the Company's business. See "Business -- Millennium's
Disease Research Programs".

UNCERTAINTY OF PHARMACEUTICAL PRICING, REIMBURSEMENT AND RELATED MATTERS

The Company's business, financial condition and results of operations may
be materially adversely 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 certain foreign markets pricing and profitability of
prescription pharmaceuticals are subject to government control. In the United
States, the Company expects that there will continue to be a number of federal
and state proposals to implement similar government control. In addition,
increasing emphasis on managed care in the United States will continue to put
pressure on the pricing of pharmaceutical products and diagnostic tests. Cost
control initiatives could decrease the price that the Company or any of its
strategic partners receives for any products in the future and have a material
adverse effect on the Company's business, financial condition and results of
operations. Further, to the extent that cost control initiatives have a material
adverse effect on the Company's strategic partners, the Company's ability to
commercialize its products and to realize royalties may be adversely affected.

The ability of the Company and any strategic partner to commercialize
pharmaceutical or diagnostic products may depend in part on the extent to which
reimbursement for the products will be available from government and health
administration authorities, private health insurers and other third party
payors. Significant uncertainty exists as to the reimbursement status of newly
approved health care products. Third party payors, including Medicare,
increasingly are challenging the prices charged for medical products and
services. Government and other third party payors are increasingly attempting to
contain health care costs by limiting both coverage and the level of
reimbursement for new therapeutic products and by refusing in some cases to
provide coverage for uses of approved products for disease indications for which
the FDA has not granted labeling approval. There can be no assurance that any
third party insurance coverage will be available to patients for any products
discovered and developed by the Company or its strategic partners. If adequate
coverage and reimbursement levels are not provided by government and other third
party payors for the Company's products, the market acceptance of these products
may be reduced, which may have a material adverse effect on the Company's
business, financial condition and results of operations.

PRODUCT LIABILITY EXPOSURE

Clinical trials, manufacturing, marketing and sale of any of the Company's
or its strategic partners' potential pharmaceutical products may expose the
Company to liability claims from the use of such pharmaceutical products. The
Company currently does not carry product liability insurance. There can be no
assurance that the Company or its strategic partners will be able to obtain such
insurance or, if obtained, that sufficient coverage can be acquired at a
reasonable cost. An inability to obtain sufficient insurance coverage at an
acceptable cost or otherwise to protect against potential product liability
claims could prevent or inhibit the commercialization of pharmaceutical products
developed by the Company or its strategic partners. A product liability claim or
recall could have a material adverse effect on the business or financial
condition of the Company. While under certain circumstances the Company is
entitled to be indemnified against losses by its strategic partners, there can
be no assurance that this indemnification would be available or adequate should
any such claim arise.

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<PAGE> 16

CONTROL BY EXISTING STOCKHOLDERS

Following completion of this offering, the Company's directors, executive
officers and principal stockholders and certain of their affiliates will
beneficially own approximately 59% of the Common Stock. Accordingly, they
collectively will have the ability to determine the election of all of the
Company's directors and to determine the outcome of most corporate actions
requiring stockholder approval. See "Principal Stockholders".

POTENTIAL ADVERSE EFFECT OF ANTI-TAKEOVER PROVISIONS

Provisions of the Company's Restated Certificate of Incorporation, which
will take effect upon the closing of the offering (the "Restated Certificate"),
will require that any action required or permitted to be taken by stockholders
of the Company must be effected at a duly called annual or special meeting of
stockholders and may not be effected by any consent in writing. Special meetings
of stockholders may be called only by the Chief Executive Officer or, if none,
the President of the Company or by the Board of Directors. The Restated
Certificate provides for a classified Board of Directors, and members of the
Board of Directors may be removed only for cause upon the affirmative vote of
holders of at least two-thirds of the shares of capital stock of the Company
entitled to vote. The Company's Board of Directors is authorized to issue up to
5,000,000 shares of Preferred Stock and to determine the price, rights,
preferences and privileges of those shares without further vote or action by the
Company's stockholders. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
shares of Preferred Stock that may be issued in the future. While the Company
has no current intention to issue shares of Preferred Stock, any such issuance
could have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. In addition, any such
Preferred Stock may have other rights, including economic rights senior to the
Common Stock, and, as a result, the issuance thereof could have a material
adverse effect on the market value of the Common Stock. Furthermore, the Company
is subject to anti-takeover provisions of Section 203 of the Delaware General
Corporation Law, which prohibits the Company from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person first becomes an "interested
stockholder", unless the business combination is approved in a prescribed
manner. The application of Section 203 also could have the effect of delaying or
preventing changes of control or management of the Company, which could
adversely affect the market price of the Company's Common Stock. These
provisions, and other provisions of the Restated Certificate, may have the
effect of deterring hostile takeovers or delaying or preventing changes in
control or management of the Company, including transactions in which
stockholders might otherwise receive a premium for their shares over then
current market prices. In addition, these provisions may limit the ability of
stockholders to approve transactions that they may deem to be in their best
interests. See "Management -- Executive Officers, Directors and Key Employees"
and "Description of Capital Stock".

NO PRIOR TRADING MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Company's
Common Stock and there can be no assurance that an active public market for the
Common Stock will develop or be sustained after this offering. The initial
public offering price was determined by negotiations between the Company and the
Representatives of the Underwriters and may not be indicative of future market
prices. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price. The trading price of the
Company's Common Stock could be subject to significant fluctuations in response
to announcements of results of research activities, technological innovations or
new commercial products by the Company or its competitors, changes in government
regulations, regulatory actions, changes in patent laws, developments concerning
proprietary rights, quarterly variations in operating results, litigation or
other events. The stock market has from time to time experienced extreme price
and volume fluctuations that have affected particularly the market

16
<PAGE> 17

prices for biotechnology companies and that often have been unrelated to the
operating performance of such companies. These broad market fluctuations may
adversely affect the market price of the Company's Common Stock. See
"Underwriting".

SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON FUTURE MARKET PRICE

Sales of a substantial number of shares of the Company's Common Stock in
the public market after this offering could adversely affect the market price of
the shares of the Company's Common Stock. Of the 22,837,678 shares to be
outstanding after this offering, the 4,500,000 shares offered hereby will be
eligible for sale in the public market immediately following the effective date
of the Registration Statement, 14,612,457 shares will become eligible for sale
in the public market 90 days after the effective date of the Registration
Statement, and the remaining shares will become eligible for sale in the public
market at various dates beginning 180 days after the effective date of the
Registration Statement. However, the Company's executive officers and directors
and certain other stockholders of the Company (who in the aggregate will hold
18,021,012 shares of Common Stock upon completion of this offering) have agreed
not to sell or offer to sell or otherwise dispose of any shares of Common Stock
held by them for a period of 180 days after the date of this Prospectus without
the prior written consent of Goldman, Sachs & Co. In addition, holders of
12,993,074 shares of Common Stock (including warrants to purchase 820,853
shares) have contractual rights to have those shares registered with the
Securities and Exchange Commission for resale to the public. The Company intends
to file a registration statement covering the 8,100,000 shares of Common Stock
issued or reserved for issuance under its stock plans and upon filing any shares
subsequently issued under such plans will be eligible for sale in the public
market, subject to compliance with Rule 144 in the case of affiliates of the
Company. The Company is unable to predict the effect that sales may have on the
then prevailing market price of the Common Stock. See "Management -- Stock
Plans", "Description of Capital Stock" and "Shares Eligible for Future Sale".

DILUTION

Purchasers in the offering will experience immediate and substantial
dilution in the net tangible book value of the Common Stock from the initial
public offering price. Additional dilution is likely to occur upon exercise of
options and warrants granted by the Company. See "Dilution".

ABSENCE OF DIVIDENDS

The Company has never paid dividends and does not intend to pay any
dividends for the foreseeable future. See "Dividend Policy".

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<PAGE> 18

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 4,500,000 shares of
Common Stock offered hereby are estimated to be $49,720,000 ($57,253,000 if the
Underwriters' over-allotment option is exercised in full), after deducting the
underwriting discount and estimated offering expenses. The Company intends to
use the net proceeds for research and development, working capital and general
corporate purposes. The Company may also use a portion of such net proceeds to
acquire or invest in businesses, products and technologies that are
complementary to those of the Company, although no such acquisitions are planned
or being negotiated as of the date of this Prospectus, and no portion of the net
proceeds has been allocated for any specific acquisition. Pending such uses, the
net proceeds will be invested in short-term, interest-bearing, investment-grade
securities.

The amounts actually expended for each purpose may vary significantly
depending upon numerous factors, including progress of the Company's disease
research programs, the number and breadth of these programs, achievement of
milestones under strategic alliance arrangements, the ability of the Company to
establish and maintain additional strategic alliance and licensing arrangements,
and the progress of the development efforts of the Company's strategic partners.
These factors also include the level of the Company's activities relating to
commercialization rights it has retained in its strategic arrangements,
competing technological and market developments, the costs involved in enforcing
patent claims and other intellectual property rights and the costs and timing of
regulatory approvals. See "Risk Factors -- Future Capital Requirements;
Uncertainty of Additional Funding" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources".

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain earnings, if any, to support the
development of its business and does not anticipate paying cash dividends for
the foreseeable future.

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<PAGE> 19
<TABLE>
CAPITALIZATION

The following table sets forth the capitalization of the Company (i) as of
December 31, 1995; (ii) on a pro forma basis to give effect to the conversion of
all outstanding Preferred Stock, including 388,888 shares of Series D
Convertible Preferred Stock issued in February 1996, into Common Stock at the
closing of this offering; and (iii) on a pro forma as adjusted basis to reflect
the issuance and sale by the Company of 4,500,000 shares of Common Stock offered
hereby, after deducting the underwriting discount and estimated offering
expenses.

<CAPTION>
DECEMBER 31, 1995
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(2)(3)
------- ------------ -----------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Capital lease obligations, net of current
portion(1)....................................... $ 2,499 $ 2,499 $ 2,499

Long-term debt, net of current portion(1).......... 1,467 1,467 1,467

Stockholders' equity
Preferred Stock, $0.001 par value, 14,000,000
shares authorized, 11,783,333 shares issued
and outstanding (actual); 5,000,000 shares
authorized, none issued or outstanding (pro
forma and pro forma as adjusted).............. 12 -- --

Common Stock, $0.001 par value, 25,000,000 shares
authorized, 4,211,926 shares issued and
outstanding (actual); 100,000,000 shares
authorized, 16,384,147 shares issued and
outstanding (pro forma); 20,884,147 shares
issued and outstanding (pro forma as
adjusted)(4).................................. 4 16 21

Additional paid-in capital....................... 22,722 26,222 75,937

Note receivable from officer..................... (266) (266) (266)

Accumulated deficit.............................. (9,376) (9,376) (9,376)
------- -------- --------
Total stockholders' equity............... 13,096 16,596 66,316
------- -------- --------
Total capitalization..................... $17,062 $ 20,562 $ 70,282
======= ======== ========
<FN>

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

(1) As of December 31, 1995, the current portion of capital lease obligations
was $1,643,168, and the current portion of long-term debt was $1,600,000.
See Notes 5 and 6 of Notes to Financial Statements for a description of the
Company's long-term debt and obligations under capital leases.

(2) Gives effect to (i) the conversion of all outstanding Preferred Stock,
including 388,888 shares of Series D Convertible Preferred Stock issued in
February 1996, into Common Stock at the closing of this offering, and (ii)
the authorization of a new class of Preferred Stock. See "Description of
Capital Stock -- Preferred Stock".

(3) Reflects the issuance and sale by the Company of 4,500,000 shares of Common
Stock offered hereby, after deducting the underwriting discount and
estimated offering expenses.

(4) The foregoing assumes no exercise of outstanding options or warrants. As of
December 31, 1995, there were outstanding options to purchase 2,724,261
shares of Common Stock under the Company's 1993 Incentive Stock Plan (the
"1993 Plan"), and warrants to purchase 776,853 shares of Common Stock.
Between January 1, 1996 and April 1, 1996, a total of 2,271,944 shares were
issued upon exercise of such options. As of April 1, 1996, 2,325,874 shares
acquired upon the exercise of options issued under the 1993 Plan were
subject to repurchase by the Company under certain conditions. In March
1996, the Company repurchased 327,946 shares of Common Stock. In addition,
as of April 1, 1996, 1,428,220 shares of Common Stock were reserved for
future issuance pursuant to the exercise of outstanding options under the
1993 Plan and the 1996 Equity Incentive Plan (the "Equity Plan"). See
"Management -- Stock Plans" and Notes 7 and 10 of Notes to Financial
Statements.
</TABLE>

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<PAGE> 20

DILUTION

The pro forma net tangible book value of the Company as of December 31,
1995 was $16,595,862 or $1.01 per share, after giving effect to the conversion
upon completion of this offering of all outstanding shares of Preferred Stock,
including 388,888 shares of Series D Convertible Preferred Stock issued in
February 1996, into an aggregate of 12,172,221 shares of Common Stock. Pro forma
net tangible book value per share represents the amount of total tangible assets
(total assets less intangible assets) of the Company reduced by the Company's
total liabilities, divided by the number of shares of Common Stock outstanding.
After giving effect to the sale by the Company of 4,500,000 shares of Common
Stock in this offering (after deducting the underwriting discount and estimated
offering expenses), the pro forma net tangible book value of the Company as of
December 31, 1995 would have been $66,315,862 or $3.18 per share. This
represents an immediate increase in pro forma net tangible book value of $2.17
per share to existing stockholders and an immediate dilution in pro forma net
tangible book value of $8.82 per share to new investors purchasing Common Stock
in this offering.
<TABLE>
The following table illustrates this per share dilution:

<S> <C> <C>
Initial public offering price per share............................. $12.00
Pro forma net tangible book value per share at December 31,
1995........................................................... $1.01
Increase per share attributable to this offering.................. 2.17
Pro forma net tangible book value per share after this offering..... 3.18
------
Dilution per share to new investors................................. $ 8.82
======
</TABLE>

<TABLE>
The following table sets forth, on a pro forma basis, as of December 31,
1995, the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price paid per share by the
existing stockholders and by the investors purchasing shares of Common Stock
offered hereby:

<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 16,384,147 78.5% $26,238,254 32.7% $ 1.60
New investors........... 4,500,000 21.5 54,000,000 67.3 $ 12.00
---------- ----- ----------- -----
Total......... 20,884,147 100.0% $80,238,254 100.0%
========== ===== =========== =====
</TABLE>

The foregoing assumes no exercise of outstanding options or warrants. As of
December 31, 1995, there were outstanding options to purchase 2,724,261 shares
of Common Stock under the 1993 Plan at a weighted average exercise price of
$0.24 per share, and warrants to purchase 776,853 shares of Common Stock at a
weighted average exercise price of $2.04 per share. Between January 1, 1996 and
April 1, 1996, a total of 2,271,944 shares were issued upon exercise of such
options at a weighted average exercise price of $0.28. As of April 1, 1996,
2,325,874 shares acquired upon the exercise of options issued under the 1993
Plan were subject to repurchase by the Company under certain conditions at a
weighted average repurchase price of $0.29 per share. In March 1996, the Company
repurchased 327,946 shares of Common Stock at a purchase price of $0.001 per
share. In addition, as of April 1, 1996, 1,428,220 shares of Common Stock were
reserved for future issuance pursuant to the exercise of outstanding options
under the Company's 1993 Plan and Equity Plan. To the extent such shares are
issued or any shares are issued pursuant to the Company's other stock plans,
there will be further dilution to new investors. See "Management -- Stock
Plans", "Certain Transactions", "Description of Capital Stock" and Notes 7 and
10 of Notes to Financial Statements.

20
<PAGE> 21

SELECTED FINANCIAL DATA
<TABLE>
The selected financial data set forth below with respect to the Company's
statements of operations for the period from January 13, 1993 (date of
inception) through December 31, 1993 and for the years ended December 31, 1994
and 1995 and with respect to the Company's balance sheets as of December 31,
1994 and 1995 have been derived from the Financial Statements of the Company and
Notes thereto included elsewhere in this Prospectus that have been audited by
Ernst & Young LLP, independent auditors. The balance sheet data set forth at
December 31, 1993 is derived from audited financial statements that are not
included herein. The selected financial data set forth below is qualified in its
entirety by, and should be read in conjunction with, the Company's Financial
Statements, related Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.

<CAPTION>
JANUARY 13, 1993
(DATE OF INCEPTION)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------- --------------------
1993 1994 1995
---- ---- ----
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue under strategic alliances................. $ -- $ 7,963 $22,880
Costs and expenses:
Research and development........................ 2,859 10,990 17,838
General and administrative...................... 1,530 3,240 3,292
------- ------- -------
4,389 14,230 21,130
------- ------- -------
Income (loss) from operations..................... (4,389) (6,267) 1,750
Interest income (expense), net.................... 101 (105) (466)
------- ------- -------
Net income (loss)................................. $(4,288) $(6,372) $ 1,284
======= ======= =======
Pro forma net income per share(1)................. $ 0.07
=======
Shares used in computing pro forma net income per
share(1)........................................ 19,150,695
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1993 1994 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments.............. $ 4,629 $ 6,105 $17,847
Working capital................................................ 3,517 3,151 10,498
Total assets................................................... 6,156 10,101 25,105
Long-term debt, net of current portion......................... -- 3,067 1,467
Capital lease obligations, net of current portion.............. 826 2,359 2,499
Accumulated deficit............................................ (4,288) (10,660) (9,376)
Total stockholders' equity..................................... $ 4,164 $ 1,559 $13,096
<FN>
- ---------------

(1) Computed on the basis described in Note 2 of Notes to Financial Statements.
</TABLE>

21
<PAGE> 22

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in those forward-looking statements. Factors that might cause
such differences include those discussed in "Risk Factors".

OVERVIEW

The Company was incorporated in January 1993 and has devoted substantially
all of its resources to the development and application of genetics, genomics
and bioinformatics technologies used to identify the genes responsible for major
diseases, as well as comprehensive technologies to elucidate the role of these
genes in disease initiation and progression. To date, all of the Company's
revenue has resulted from payments from strategic partners and the Company has
not received any revenue from the sale of products or services. As of December
31, 1995, the Company had total stockholders' equity of $13,096,000, including
an accumulated deficit of $9,376,000.

The Company has entered into several strategic alliances: in March 1994
with Roche in obesity and type II diabetes; in October 1995 and April 1996 with
Lilly in atherosclerosis and select areas of oncology, respectively; and in
December 1995 with Astra in inflammatory respiratory diseases. These agreements
have provided the Company with various combinations of equity investments,
up-front and follow-on fees and research funding and may provide certain
additional payments upon the attainment of research and regulatory milestones
and royalty and/or profit sharing payments based on sales of any products
resulting from the collaborations. Revenue recognized under these collaborations
through December 31, 1995 has aggregated approximately $30,843,000.

Although the Company intends to enter into additional strategic alliances,
it also expects to incur increasing expenses and additional losses for at least
the next several years, primarily due to expansion of its research and
development programs. Payments under strategic alliance and licensing
arrangements will be subject to significant fluctuation in both timing and
amounts resulting in periods of profitability and periods of losses; therefore,
the Company's results of operations for any period may not be comparable to the
results of operations for any other period.

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1995 AND 1994

Revenue under strategic alliances increased to $22,880,000 in 1995 from
$7,963,000 in 1994. The increase in 1995 was due to the inclusion of a full year
of research funding and a research milestone payment from Roche, up-front fees
from Lilly and Astra, and research funding from Lilly.

Research and development expenses increased to $17,838,000 in 1995 from
$10,990,000 in 1994. The increase was primarily attributable to increased
payroll and personnel expenses as the Company hired additional research and
development personnel, increased purchase of laboratory supplies, increased
equipment depreciation and facilities expenses in connection with the expansion
of the Company's research efforts, and increased costs associated with the
collection of patient information and DNA samples. The Company expects research
and development expenses to continue to increase as personnel and research and
development facilities are expanded to accommodate the Company's existing
strategic alliances. Such expenses will also increase to the extent that the
Company enters into additional strategic alliances with third parties.

General and administrative expenses were relatively unchanged at $3,292,000
in 1995 as compared to $3,240,000 in 1994. It is anticipated that general and
administrative expenses will increase in 1996 and later years as the Company
continues to expand its operations. In addition, the Company expects to record a
non-cash charge of approximately $3,000,000 relating to compensation expense
associated with the grant of options between January 1 and April 12, 1996 to
purchase

22
<PAGE> 23

1,055,422 shares of Common Stock. This compensation expense will be recognized
over the vesting period of the options, which is generally four years.

Net interest expense increased to $466,000 in 1995 from $105,000 in 1994.
This increase was due to increased interest expense incurred on capital lease
obligations and debt, both entered into in 1995, partially offset by increased
interest income earned on higher balances of cash and investment securities.

The Company has accumulated losses of $9,376,000 since inception and,
therefore, has not paid any federal taxes. Realization of deferred tax assets is
dependent on future earnings, if any, the timing and amount of which are
uncertain. Accordingly, valuation allowances in amounts equal to the deferred
tax assets have been established to reflect these uncertainties. See Note 9 of
Notes to Financial Statements.

YEAR ENDED DECEMBER 31, 1994 AND PERIOD FROM JANUARY 13, 1993 (DATE OF
INCEPTION) THROUGH DECEMBER 31, 1993

Revenue under strategic alliances totaled $7,963,000 for the year ended
December 31, 1994. The Company did not have any revenue during the period from
January 13, 1993 (date of inception) to December 31, 1993 (the "1993 Period").
The 1994 revenue resulted from the Company's strategic alliance with Roche and
consisted of up-front fees and research support.

Research and development expenses increased to $10,990,000 in 1994 from
$2,859,000 for the 1993 Period. The increase was primarily attributable to
increased payroll and personnel expenses as the Company hired additional
research and development personnel, increased purchase of laboratory supplies,
increased facilities costs related to the move to a new facility, equipment
depreciation, and increased costs associated with the collection of patient
information and DNA samples.

General and administrative expenses increased to $3,240,000 in 1994 from
$1,530,000 in the 1993 Period. The increase was primarily attributable to
increased payroll and personnel expenses as the Company hired additional
management and administrative personnel, increased facilities costs related to
the move to a new facility, and professional fees in connection with the overall
scale-up of the Company's operations and business development efforts.

The Company had net interest expense of $105,000 in 1994 and net interest
income of $101,000 for the 1993 Period. The transition to net interest expense
was due to increases in interest expense incurred on capital lease obligations
entered into in 1994.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations since inception primarily through
strategic alliances, private placement of equity securities, issuance of debt
and capital leases. Through December 31, 1995, the Company had recognized
approximately $30,843,000 of revenue under strategic alliances. The private
placement of equity securities has provided the Company with aggregate gross
proceeds of approximately $22,450,000, including $6,000,000 from Roche and
$8,000,000 from Lilly. The Company also has obtained $4,000,000 in long-term
debt and $6,470,000 in capital lease financings. See Notes 5 and 6 of Notes to
Financial Statements. As of December 31, 1995, the Company had approximately
$17,847,000 in cash, cash equivalents and short-term investments.

Equipment acquired under capital lease financings during 1995, 1994 and the
1993 Period were $2,215,000, $3,014,000 and $1,241,000, respectively. The
Company also purchased equipment that amounted to $760,000 in 1995, $40,000 in
1994, and $223,000 in the 1993 Period. Although the Company had no material
commitments for capital expenditures at December 31, 1995, the Company expects
capital expenditures to increase over the next several years as it expands
facilities and acquires scientific equipment to support the planned expansion of
research and development efforts.

23
<PAGE> 24

As of December 31, 1995, the Company had net operating loss carryforwards
of approximately $7,925,000 to offset federal and state income taxes. The
Company's research and development tax credit carryforwards were estimated to be
approximately $1,673,000 for federal income tax purposes. If not utilized, the
federal and state net operating loss carryforwards will expire through 2009. See
Note 9 of Notes to Financial Statements.

The Company believes that the net proceeds from this offering, existing
cash and investment securities and anticipated cash flow from its current
strategic alliances will be sufficient to support the Company's operations for
at least the next 24 months. The Company's actual future capital requirements,
however, will depend on many factors, including progress of its disease research
programs, the number and breadth of these programs, achievement of milestones
under strategic alliance arrangements, the ability of the Company to establish
and maintain additional strategic alliance and licensing arrangements, and the
progress of the development efforts of the Company's strategic partners. These
factors also include the level of the Company's activities relating to
commercialization rights it has retained in its strategic alliance arrangements,
competing technological and market developments, the costs associated with the
collection of patient information and DNA samples, the costs involved in
obtaining and enforcing patent claims and other intellectual property rights and
the costs and timing of regulatory approvals. The Company expects that it will
require significant additional financing in the future, which it may seek to
raise through public or private equity offerings, debt financings or additional
strategic alliance and licensing arrangements. No assurance can be given that
additional financing or strategic alliance and licensing arrangements will be
available when needed or that, if available, such financing will be obtained on
terms favorable to the Company or its stockholders. See "Risk Factors -- Future
Capital Requirements; Uncertainty of Additional Funding".

24
<PAGE> 25

BUSINESS

GENERAL

Millennium Pharmaceuticals, Inc. ("Millennium" or the "Company") is engaged
in the commercial application of genetics, genomics and bioinformatics to
discover and develop a broad range of novel therapeutic and diagnostic products.
Independently and in strategic alliances with leading pharmaceutical companies,
the Company has focused its research efforts on identifying and elucidating the
function of genes responsible for diseases (DISEASE GENES) that affect millions
of individuals and are underserved by current therapeutic alternatives. These
diseases include obesity, type II diabetes, atherosclerosis, asthma, cancer and
diseases of the central nervous system. The Company's principal objective is to
use its technology platform to enable and accelerate the discovery and
development of new, proprietary therapeutic and diagnostic products capable of
addressing these diseases at their root causes, rather than simply identifying
and treating their symptoms.

The Company is distinctive in the genomics industry in employing a
comprehensive technology platform that couples multiple synergistic approaches
for identifying disease genes with a broad set of bench and computational
biology technologies for elucidating the function of these genes and their role
in disease initiation and progression. This highly automated, computer-enhanced
technology platform is designed to enable the Company and its strategic partners
to rapidly convert the Company's gene discoveries into useful targets for drug
discovery and pharmaceutical intervention. The Company believes that its
discoveries will be valuable for the development of therapeutic products
(including orally available small molecule drugs, therapeutic proteins, gene
therapy and antisense drugs), diagnostic products and services and disease
management programs for a wide range of diseases.

The Company has secured strategic partners for its five most advanced
disease research programs: Hoffmann-La Roche Inc. ("Roche") in obesity and type
II diabetes; Eli Lilly and Company ("Lilly") in atherosclerosis and select areas
within oncology; and Astra AB ("Astra") in inflammatory respiratory diseases.
The Company intends to pursue further strategic alliances as appropriate. The
Company has retained substantial rights to develop and market certain diagnostic
and therapeutic applications of the discoveries it makes in its funded strategic
alliance research programs. The Company currently is at an early stage of
formulating strategies and assembling the resources and capabilities necessary
to further develop and exploit these proprietary opportunities.

BACKGROUND

THE DRUG DISCOVERY AND DEVELOPMENT PROCESS

Historically, pharmaceutical products have been developed primarily through
the synthesis and screening of large collections of chemical compounds and
natural products. Compounds are identified as pharmaceutical candidates based on
their activity in simple in vitro and in vivo assays believed to mimic aspects
of human physiology or biochemistry. Where significant activity is found in an
assay, the compound is then tested in animal models believed to simulate human
disease conditions. The principal limitation with this approach has been that
these assays and animal models have not always proven to be predictive of the
candidate drug's safety and efficacy in humans with the disease. In addition,
the mechanism of action of these compounds and the underlying causes of the
disease generally have remained unknown. Consequently, the resulting candidate
drugs are often either ineffective or only ameliorate symptoms without
addressing the root cause of the disease.

Recent advances in genetics have the potential to significantly improve
drug discovery and development by enabling the identification of the root causes
of diseases at the molecular level. In contrast to traditional drug discovery
and development, a genetics approach commences by

25
<PAGE> 26

identifying those genes that, when defective, are responsible for the initiation
or progression of disease. The next step in this approach is to characterize the
specific role of these genes in the disease process. To identify an appropriate
molecular target for therapeutic intervention, it may also be necessary to
characterize fully the biochemical pathway in which the disease gene functions.
Millennium believes that this type of comprehensive commitment to understanding
the disease process is essential to realizing the full value of a genetics
approach to drug discovery and development.

A genetics approach to drug development also may guide more efficient
selection of the most appropriate therapeutic modalities by providing
significant information about the structure and function of the molecular target
for pharmaceutical intervention. These modalities include orally available small
molecule drugs, protein therapeutics, gene therapy and antisense drugs. As a
result, it is expected that a genetics approach to drug development will be
important to both the pharmaceutical and biotechnology industries. Genetics is
already affecting the diagnostics industry, providing tests used to identify an
individual's predisposition to disease, to guide therapy and to enhance disease
management.

GENETICS, GENOMICS AND BIOINFORMATICS

All genetic information in an organism is maintained in CHROMOSOMES, which
contain deoxyribonucleic acid (DNA). DNA comprises a linear string of four
"bases" (known as adenine (A), guanine (G), cytosine (C) and thymine (T)), and
genetic information is encoded by the specific order (SEQUENCE) of the bases
within units called GENES. An organism's complete set of chromosomes, embodying
its entire complement of genes, constitutes the organism's GENOME. The human
genome is estimated to comprise approximately three billion bases and 100,000
genes.

The information stored in the DNA of a gene is a set of instructions to
living cells of the organism. These instructions direct the cells to synthesize
specific proteins such as hormones or enzymes that perform basic biochemical and
physiological functions of the cells. Disease may occur when a defect (MUTATION)
in a gene or genes, resulting in incorrect instructions to the cells, disrupts
the normal balance or function of these essential proteins. The ability to
detect such a mutation and to understand how the disruption of normal protein
function contributes to the initiation and progression of the resultant disease
are potentially valuable aids to pharmaceutical discovery and development.

Many complex physiological processes rely on the interaction of sets of
different proteins to perform individual steps of such processes. An error or
breakdown in any one of the steps can affect the outcome of the process
resulting in a disease condition. Disease occurs when one or more steps in a
normal physiological process is upset or blocked. This can occur because of an
intrinsic defect, a harmful external stimulus (the environment) or the
combination of both. Intrinsic defects arise from mutations in particular genes,
affecting the proteins they encode. The study of the inheritance patterns of
genes, including disease genes, is the science of GENETICS.

A number of relatively rare diseases, such as cystic fibrosis and sickle
cell anemia, have a genetic basis resulting from a mutation in a single gene
(MONOGENIC diseases). The genes responsible for many of these monogenic diseases
have been identified over the last decade. In contrast, the genes underlying the
major common diseases, including obesity, diabetes, heart disease, asthma,
cancer and diseases of the central nervous system, have remained more elusive.
These diseases tend to be complex conditions which involve multiple responsible
genes (POLYGENIC diseases) and often the interaction of genetic and
environmental factors (MULTIFACTORIAL diseases). Understanding the genetic bases
of these diseases requires processing, analyzing and interpreting vast amounts
of data. Until recently, there have been technological limitations in the
requisite information systems, process technologies and laboratory reagents.

However, these technological limitations are being addressed by significant
advances in information technologies, automated robotics and high-throughput
screening methods, particularly as part of the Human Genome Project (a worldwide
research effort to sequence the entire human

26
<PAGE> 27

genome). GENOMICS commonly refers to genetic analysis, and even more broadly
molecular biology, conducted in a high-throughput, automated environment with
high-level computer-supported data analysis and integration. The use of
computer-based information systems to assist in the identification, analysis and
elucidation of the biological function of genes is referred to as
BIOINFORMATICS.

Many observers of the genomics industry have found it useful to classify
genomics companies as either GENE MAPPERS or GENE SEQUENCERS. Gene mappers
characteristically use human genetic approaches to isolate single genes that,
when defective, cause or predispose individuals to particular diseases. This
focused approach identifies specific molecular changes of undisputed importance
in disease origins. In contrast, gene sequencers use high-throughput,
non-genetic DNA sequencing methodologies to identify large numbers of genes on
an essentially random basis. Attempts to associate these genes with specific
disease mechanisms occur only subsequently. Both gene mapping and gene
sequencing are already making significant contributions to therapeutic and
diagnostic discovery and product development in the pharmaceutical and
biotechnology industries.

THE MILLENNIUM STRATEGY

The Company's objective is to discover and develop novel, proprietary
therapeutic and diagnostic products that address diseases at their root causes.
Key elements of Millennium's strategy include:

TECHNOLOGY STRATEGY

- Focus on major common diseases that affect millions of individuals and
that are underserved by current therapeutic alternatives.

- Employ multiple synergistic gene identification approaches -- including
gene mapping, gene sequencing and additional approaches -- to optimize
the number and relevance of the Company's gene discoveries.

- Employ a comprehensive set of bench and computational biology
technologies to elucidate the function of the genes discovered by the
Company and convert them into useful targets for drug discovery and
diagnostic development.

BUSINESS STRATEGY

- Establish strategic alliances with leading pharmaceutical companies to
accelerate product development, regulatory approvals and
commercialization and to leverage the Company's technological resources.

- Diversify business risk by securing multiple strategic alliance
partners, thereby minimizing the Company's reliance on any single
partner or disease research program while creating several potential
royalty and profit-sharing revenue streams.

- Minimize operating losses and equity requirements by obtaining from
strategic partners substantial payments that are not contingent on the
achievement of research and product development milestones.

- Create additional business opportunities by retaining significant rights
to develop and market certain therapeutic and diagnostic applications of
the discoveries the Company makes in its funded strategic alliance
research programs.

27
<PAGE> 28

MILLENNIUM'S TECHNOLOGY PLATFORM

Millennium employs a comprehensive genomics approach to disease research
with the following two key elements:

- GENE IDENTIFICATION -- the use of multiple synergistic techniques,
including genetic approaches (human and mouse) and non-genetic approaches
to identify disease genes.

- TARGET VALIDATION -- the integrated use of advanced bench and
computational biology techniques to elucidate mechanisms of disease
initiation and progression, to identify and validate molecular targets
for therapeutic intervention and diagnostics, and to develop bioassays
and animal models of disease to accelerate product development efforts.

Millennium conducts its research using high-throughput, automated robotic
systems and advanced bioinformatics for data capture, analysis, integration and
interpretation.

The following chart illustrates the process flow of a typical Millennium
disease-focused research program:

[CHART]

28
<PAGE> 29

GENE IDENTIFICATION STRATEGIES

The Company employs multiple synergistic genetic and non-genetic approaches
to disease gene identification. This strategy combines the disease focus of gene
mapping with the breadth and rapidity of non-genetic approaches such as gene
sequencing.

GENETIC APPROACHES

The Company's genetic approaches to gene identification use a comparative,
statistical methodology that correlates disease susceptibility with the
inheritance of specific genes. The genomes of individuals with the disease are
physically compared with those of unaffected, normal individuals. Given a
sufficient number of appropriately selected individuals, a chromosomal region in
which a disease gene must reside can be identified. The disease gene of interest
is then identified based on this knowledge of its position in the genome, a
technique commonly referred to as POSITIONAL CLONING. Millennium uses both human
genetics and mouse genetics in its research programs.

HUMAN GENETICS. The Company bases its human genetics programs on the
identification of populations that contain families in which the disease of
interest appears to be inherited. For any given disease, the Company assembles
multiple family collections from different population structures and genetic
backgrounds. To gain access to appropriate populations and to obtain extensive
and accurate clinical data, the Company has established collaborations with
internationally recognized academic medical centers and leading clinical
experts. The Company believes that this "diversified portfolio" approach to
human genetics increases the likelihood of rapidly identifying prevalent disease
genes and provides a means of independently confirming results found in any
single population. For example, in Millennium's type II diabetes program, the
Company uses select family collections from homogeneous populations in
Scandinavia and Israel and from heterogeneous populations in the United States.

Millennium analyzes DNA taken from its sample populations to find LINKAGES,
that is, small chromosomal regions with variations shared by those who have the
disease and lacking in those who do not. This process, referred to as
GENOTYPING, involves the use of genetic MARKERS that serve to identify these
variations and define or MAP the chromosomal position of genes. Millennium has
established a set of genetic markers that has been optimized for use in the
Company's high-throughput automated genotyping process. Compilation and analysis
of the resulting genotypic and clinical data are performed using proprietary and
public databases and bioinformatics systems. Millennium has utilized this
approach to identify small chromosomal regions inherited by certain individuals
with type II diabetes.

Once genetic linkage analysis is completed, Millennium employs additional
positional cloning techniques to identify the complete DNA sequence of a disease
gene. These techniques use the Company's proprietary automated DNA sequencing
technology and bioinformatics tools to analyze the linkage regions, identify and
analyze all of the genes in the region and compare the DNA sequences of these
genes taken from different individuals. The disease gene will show a consistent
difference between diseased and healthy individuals.

MOUSE GENETICS. Millennium complements its human genetics programs with
mouse genetics where appropriate. Many mouse models exist in which genetic
defects give rise to conditions comparable or identical to human diseases. Mouse
genetics studies offer several significant advantages over human genetics
studies, including extensive genetic information relating to the animals;
availability of large, multigenerational pedigrees; much shorter generation
cycles; and the ability to control both genetic and environmental factors. These
advantages provide a more efficient process for positionally cloning disease
genes. In addition, many of the steps involved in cloning mouse genes are
identical to those pursued in the positional cloning of human disease genes,
allowing Millennium to utilize common technology platforms and resources.

29
<PAGE> 30

Millennium's substantial capabilities in mouse genetics enable the Company
to identify multiple disease genes simultaneously in several of its disease
programs. Millennium has successfully employed its capabilities in mouse
genetics to clone the tub gene from an important mouse model of human obesity.
See "--Millennium's Disease Research Programs -- Obesity".

NON-GENETIC APPROACHES

In addition to its genetic approaches to disease gene identification, the
Company employs a variety of non-genetic approaches, including its proprietary
rapid analysis of differential gene expression (RADE) technology, large-scale
DNA sequencing, and high-throughput expression cloning. These technologies take
advantage of the fact that, while all cells of an individual's body contain an
identical set of genes, not all of those genes are operative in all cells at all
times. When a gene is operative, it produces a protein and is said to be
EXPRESSED. In order to produce the protein it encodes, the gene is first
transcribed into an intermediary molecule called MESSENGER RNA (MRNA). Using
various molecular biological techniques, researchers are able to reverse
transcribe these mRNAs back into COMPLEMENTARY DNA (CDNA). A collection of cDNA
molecules corresponding to all of the mRNAs expressed in a particular cell type
is referred to as a CDNA LIBRARY. The Company has developed a bank of cDNA
libraries and high-throughput methodologies for the isolation of full-length
genes from these libraries, which have increased the efficiency of the Company's
non-genetic approaches to disease gene identification.

Millennium's RADE technology allows the Company to compare patterns of gene
expression in cDNA libraries prepared from different tissue samples. For
example, a gene that is expressed in the fat cells of an obese mouse but not a
thin mouse, or a gene that is expressed at lower levels in cancerous human colon
cells than in normal colon cells, is potentially of interest as a disease gene.
Similarly, genes that are regulated by specific physiological stimuli, such as
increases in serum cholesterol, may be implicated in the initiation or
progression of a disease, such as atherosclerosis. Therefore, Millennium uses
RADE extensively in many of its disease research programs.

In addition to RADE, Millennium employs high-throughput automated CDNA
SEQUENCING in a non-random, disease-focused and tissue-selective manner. For
example, in the context of its type II diabetes research program, the Company
has employed cDNA sequencing extensively to identify candidate disease genes.
The Company also uses its sequencing technology in a focused manner to identify
genes encoding specific classes of molecules which may serve as suitable
candidates for pharmaceutical product development. These include genes encoding
secreted hormones that represent potential protein therapeutics and genes
encoding enzymes from classes that are known to be good sites of action for
orally available small molecule drugs.

Millennium also uses techniques, such as EXPRESSION CLONING, to identify
unknown genes through detailed knowledge of the proteins they encode. Employing
expression cloning, Millennium identified ob-r, the leptin receptor which plays
a central role in modulating appetite and body weight. This receptor and other
proteins with which it interacts are currently being studied at Millennium and
Roche as potential targets for small molecule drug screens. Millennium is
currently using expression cloning techniques to identify additional novel drug
development targets of functionally proven relevance in its obesity and asthma
research programs.

TARGET VALIDATION

Once a disease gene has been identified, the Company undertakes further
cellular and molecular biology studies to evaluate the gene's specific function
in the disease process (TARGET VALIDATION). Where the target validation process
indicates that the disease gene (or the protein it encodes) may not be
practically useful or the most appropriate molecular target for therapeutic
intervention or product development, cellular and molecular biology studies may
also identify other molecules located in the same biochemical pathway(s) as the
disease gene. These other molecules may serve as better molecular targets for
drug discovery and therapeutic intervention. In addition,

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these studies assist in the development of biological materials, reagents,
cellular assays and animal models, which are critical to the product development
efforts of the Company and its strategic partners.

The Company has dedicated a substantial portion of its research and
development activities to molecular target validation. The Company has
significant cellular and molecular biology capabilities, including (i) bench
biology, which involves a wide range of experimental laboratory techniques, and
(ii) computational biology, which uses computers to model the structure and
predict the function of genes and proteins.

BENCH BIOLOGY

Millennium's BENCH BIOLOGY approaches take advantage of the Company's
capabilities in automation and bioinformatics, enabling a high-throughput,
comprehensive approach to molecular target validation. These efforts include:
(i) comparative profiling of the pattern of disease gene expression in diseased
and normal tissues, (ii) identification and elucidation of additional molecules
that participate in the same biochemical pathway(s) as the disease genes, (iii)
development of cellular and/or animal models of disease, and (iv) development of
cellular and/or biochemical assays for screening drug candidates.

TISSUE PROFILING. Millennium has access to well-characterized tissue banks
containing normal and diseased tissues for comparative profiling of a disease
gene's expression pattern. Such information is of value because selective
expression of the disease gene in only the diseased tissue suggests that a
therapeutic product that targets the gene is less likely to be active in normal
tissue and therefore less likely to have deleterious side effects. The Company
has used tissue profiling to characterize disease genes identified in its
obesity, atherosclerosis, asthma and oncology research programs.

BIOCHEMICAL PATHWAYS. The experience of the pharmaceutical industry
indicates that some classes of molecular targets are more likely than others to
yield commercializable therapeutic products. Capitalizing on this experience,
Millennium employs a variety of automated approaches to search the biochemical
pathways of the disease genes it discovers in order to find the most useful
molecular targets. In its obesity research program, the Company is currently
evaluating molecular targets found through its analysis of the biochemical
pathway in which the tub gene functions.

CELLULAR AND ANIMAL MODELS. Millennium elucidates the physiological
function of the disease genes it discovers by manipulating their normal
expression levels in cells and animals. This information can be critical to
assessing the desirability of a gene as a site for pharmaceutical intervention.
The Company has developed various viral-based systems to deliver genes to cells
and tissues and also creates animal models with new genes (TRANSGENIC MICE) or
with altered genes (KNOCK-OUT MICE). Millennium is currently using these
technologies to confirm the function of disease genes in its obesity,
atherosclerosis, asthma and oncology research programs.

BIOASSAYS. Millennium's bioassay group synthesizes the results of the
foregoing bench biology efforts to create bioassays that can be employed in
high-throughput drug screening, whether by the Company or its strategic
partners. This represents the culmination of Millennium's distinctive commitment
to rapidly convert the Company's gene discoveries into useful targets for drug
discovery and pharmaceutical intervention.

COMPUTATIONAL BIOLOGY

COMPUTATIONAL BIOLOGY comprises a set of sophisticated computer-assisted
techniques and algorithms for inferring information about the functional,
biological role of a protein directly from the DNA sequence of the gene that
encodes it. This ability to bypass and/or direct many of the more time-consuming
and arduous steps involved in bench biology can facilitate target validation,
thereby accelerating drug development. For example, when Millennium identified
the ob-r gene, computational biology techniques rapidly predicted from the
gene's DNA sequence that the leptin receptor encoded by the ob-r gene most
likely fell within a well-known class of cytokine receptors. This knowledge
immediately directed the Company's bench biology group to commence
investigations of specific classes of interacting molecules as potential targets
for drug screening and to utilize, from

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among the Company's large panel of biochemical assays, test systems specifically
appropriate for cytokine receptors. See "-- Millennium's Disease Research
Programs -- Obesity".

Millennium believes that its computational biology capabilities will be
enhanced by the significant growth in publicly accessible DNA sequence databases
resulting from governmental, philanthropic and privately funded efforts
worldwide, such as the Human Genome Project. Millennium has developed
proprietary software to enable its computational biology research group to
access and rapidly synthesize information from these public databases.

BIOINFORMATICS AND AUTOMATION

The Company's genomics approach to molecular genetics requires a broad
commitment to developing and implementing advanced bioinformatics and
high-throughput automated robotic systems. Millennium's proprietary
bioinformatics systems, including software and relational databases, are used to
store and analyze the large quantities of information generated in the Company's
gene identification and target validation programs. In addition, the Company has
developed software to enable efficient access to public biomedical databases and
to integrate information contained in these databases with information in
Millennium's proprietary databases. Millennium has developed proprietary
automated platforms to support its gene identification and target validation
technologies. The generation of raw data from genotyping, DNA sequencing, RADE,
expression cloning and other gene identification technologies is achieved on
fully- or semi-automated robotic platforms. Automated methodologies are further
applied to bench biology techniques essential to target validation.

In addition, Millennium has developed software that manages sample transfer
between research project teams and the Company's automated DNA sequencing
platform. This software integrates information with the samples and provides
instructions to both humans and robots. All DNA sequencing information is
transferred to a relational database that organizes the samples and the results
of DNA sequencing. Additional software uses feature-recognition analysis to
integrate public sequence and biomedical databases with the Company's results
and analyses. Millennium's automation and bioinformatics capabilities played a
key role in its discovery of the tub gene and the identification of the ob-r
gene.

MILLENNIUM'S DISEASE RESEARCH PROGRAMS

OVERVIEW

The Company's technology platform is broadly applicable to a wide range of
diseases. The Company has chosen to focus initially on large medical markets
underserved by current therapeutic products. In order to enhance its
pharmaceutical product commercialization efforts, the Company has entered into
strategic alliances with multinational pharmaceutical partners that have
substantial research and development resources, and clinical, regulatory and
marketing expertise. The Company's current major research programs include the
following disease areas: obesity, type II diabetes, atherosclerosis,
inflammatory respiratory diseases, oncology and diseases of the central nervous
system.

Millennium sponsors a number of research collaborations with leading
academic and medical institutions relating to specific disease areas in order to
augment the Company's internal research capabilities. Generally, in each
collaboration Millennium obtains an option to negotiate an exclusive, worldwide
license to the collaborator's rights in any invention resulting from the
collaborative research program. Inventions made solely by Millennium scientists
in these collaborations are owned exclusively by Millennium.

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The following chart summarizes the current status of the Company's major
disease research programs:

[CHART]

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OBESITY

In the field of obesity, the Company is conducting gene identification and
target validation activities and has entered into a strategic alliance with
Roche. See "-- Strategic Alliances -- Hoffmann-La Roche Inc."

Approximately 34 million individuals in the United States may be classified
as obese (greater than 20% above ideal body weight). This serious medical
condition has limited therapeutic alternatives and can increase the risk of
additional serious medical conditions such as coronary heart disease, certain
cancers and type II diabetes. Although obesity is a multifactorial disease,
studies of identical twins suggest that genetic factors are a principal cause of
the disease.

The Company is currently undertaking a total of seven projects in the field
of obesity, five through mouse and human genetics and two through cDNA
approaches. Millennium has identified two disease genes that have been shown to
cause obesity in animal models. Millennium and Roche are currently conducting
target identification, validation and development programs with respect to both
of these genes. The tub gene was identified in a mouse model that closely mimics
human obesity. The Company has also identified the gene encoding ob-r, the
receptor for the hormone leptin, which is a fundamental regulator of weight and
appetite. Biological information about the site of action of both of these key
obesity disease genes in human tissues has been generated by Roche and
Millennium. In addition, Millennium is developing novel cellular bioassays for
further analysis of the biochemical mechanisms of action of these two genes. The
Company has additional mouse genetics studies to identify further mouse obesity
disease genes as well as genes which may confer protection against the disease.
See "-- Patents and Proprietary Rights".

Millennium is conducting two human genetics studies to map and identify
genes that underlie susceptibility to obesity. The Company has entered into a
collaboration with the Medical College of Wisconsin Research Foundation (MCW)
and has access through MCW to a database with records covering over 65,000
overweight women. Millennium and MCW jointly are collecting DNA samples and
clinical information from over 1,000 families with a high incidence of obesity
identified through the use of this database. Millennium also has entered into a
collaboration with the Harvard School of Public Health to obtain access to DNA
samples from a study of thousands of obese individuals in the rural Anhui
province of China. This collaboration is directed at identifying obese families
in this large, homogeneous population. Extreme obesity in China is rare and the
Company believes that its access to these samples will facilitate the
identification of the genetic components underlying obesity.

TYPE II DIABETES

In its type II diabetes research program, the Company is principally
employing a gene identification strategy based on human genetics and has entered
into a strategic alliance with Roche. See "-- Strategic Alliances -- Hoffmann-La
Roche Inc".

Approximately 17 million persons in the United States are affected by type
II diabetes, also known as adult-onset or non-insulin dependent diabetes
mellitus (NIDDM). This condition is a complex disorder involving a combination
of factors, including the inability of certain tissues to respond to insulin and
an inability of the pancreas to produce appropriate levels of insulin.
Millennium's human genetics studies in type II diabetes are designed to identify
disease genes involved in both of these disease processes. Studies of identical
twins indicate type II diabetes is primarily due to genetic factors.

The Company is currently undertaking a total of five projects in the field
of type II diabetes, all through human genetics. Millennium and its
collaborators have identified small chromosomal regions inherited by certain
individuals with type II diabetes. The Company and its collaborators are engaged
in positional cloning efforts to identify the disease genes. Millennium has
entered into a collaboration with the University of Lund, Sweden and the
University of Helsinki, Finland to collect

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and analyze DNA samples drawn from homogeneous populations in Sweden and
Finland. The Company, in collaboration with the Whitehead Institute of
Biomedical Research (affiliated with the Massachusetts Institute of Technology),
is performing linkage analysis and genotyping on DNA samples from this study.

Millennium has also entered into a collaboration with investigators from
Washington University (St. Louis, Missouri) and the Hadasit Medical Research
Services & Development Company Limited (Jerusalem, Israel) to collect and
analyze DNA samples from the Israeli Ashkenazi Jewish population. In addition,
Millennium has a collaboration with the Joslin Diabetes Center (Boston,
Massachusetts) to collect and analyze families demonstrating a strong familial
history of type II diabetes at an unusually early age of onset (less than 30
years old). Millennium has identified disease-associated linkages in these
families and has initiated positional cloning projects to isolate the disease
genes.

ATHEROSCLEROSIS

In the field of atherosclerosis, the Company is conducting gene
identification and target validation activities and has entered into a strategic
alliance with Lilly. See "-- Strategic Alliances -- Eli Lilly and Company".

Atherosclerosis is the major cause of heart disease, which has a prevalence
in the United States of approximately 18 million individuals. The risk factors
for atherosclerosis include gender, elevated cholesterol levels, smoking, high
blood pressure, diabetes mellitus and severe obesity. Studies indicate that a
person's genetic make-up, as indicated by a family history of heart disease, is
the single most significant risk factor for early onset of the disease. However,
the genetic basis of atherosclerosis remains largely unclear.

The Company currently is undertaking a total of eleven projects in the
field of atherosclerosis, three through human and mouse genetics and eight
through cDNA approaches. With respect to the latter eight, the Company and Lilly
are conducting target validation activities. Novel genes whose patterns of
expression change dramatically between healthy and unhealthy conditions in
cellular models, animal models and human subjects have been identified using
these cDNA approaches and represent potential drug targets. These genes
currently are being analyzed by the Company for disease relevance using tissue
profiling techniques, gene transfer methodologies and bioassays. Genes with
activity in these assays as well as in human lesions have been identified and
are being used in the generation of novel animal models.

The Millennium atherosclerosis human genetics program is based on
identifying families with a documented history of early-onset heart disease. The
program involves two collaborative centers: the Cleveland Clinic and Adelaide
Hospital (Dublin, Ireland), and is currently being expanded to include up to
four additional major cardiology research centers. The Adelaide study involves a
nationwide survey of the Irish population, which is relatively homogeneous. In
addition, the Irish population has the highest rate of heart disease in Western
Europe. Using mouse genetics, Millennium also is studying a strain of mice with
dramatically elevated serum cholesterol levels to identify genes that protect
against atherosclerosis. Identification of these protective genes may elucidate
key pathways for designing drugs that block atherosclerotic disease initiation
and/or progression.

INFLAMMATORY RESPIRATORY DISEASES

In the field of inflammatory respiratory diseases, the Company is
conducting gene identification and target validation activities and has entered
into a strategic alliance with Astra. See "-- Strategic Alliances -- Astra AB".

Asthma affects approximately 12 million individuals in the United States.
Current treatments for moderate to severe asthma, while effective in managing
symptoms of the disease, are known to have significant side effects over the
long term. Although asthma has both genetic and environmen-

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tal factors, a number of studies have indicated that asthma is substantially
attributable to a genetic component.

The Company currently is undertaking a total of seven projects in the field
of inflammatory respiratory diseases, four through human and mouse genetics and
three through cDNA approaches. Millennium's cDNA disease gene identification
program extensively employs RADE and expression cloning to identify critical
regulatory genes that control harmful immune responses characteristic of
inflammatory respiratory diseases, including asthma. The Company and Astra are
conducting target validation activities with respect to the three targets
identified through cDNA approaches.

Millennium is conducting two human genetics studies to map and identify
human genes that underlie susceptibility to asthma. In the first, a
collaboration with the Channing Laboratory (a joint laboratory of Harvard
Medical School and the Brigham and Women's Hospital), several thousand DNA
samples from asthmatic Chinese families have been collected through Channing's
relationship with Anhui Medical University, China. These DNA samples are being
genotyped. The second study is being conducted in collaboration with the
Massachusetts General Hospital. In this study, DNA samples and clinical
information are being collected from families with severe pediatric asthma in
Northern New England. Millennium is using mouse genetics to identify key genes
that control immunological conditions important in inflammatory respiratory
diseases, including asthma. Millennium has entered into a Cooperative Research
and Development Agreement with the National Institute of Allergy and Infectious
Diseases of the National Institutes of Health to analyze the genetics of a
strain of mice that exhibits a defect in the pathway that generates normal,
mature T-cells, an important component of the body's immune system. Genomic
linkage regions have been identified and positional cloning efforts are in
progress.

ONCOLOGY

In the field of oncology, the Company is conducting gene identification
activities related to a variety of cancers, including prostate, breast and
colorectal cancer, and for melanoma, and has entered into a strategic alliance
with Lilly with respect to select areas within oncology. See "-- Strategic
Alliances -- Eli Lilly and Company".

Approximately one million new cancer cases are reported in the United
States annually. Cancers of all types result in approximately 500,000 deaths in
the United States each year, making cancer the second leading cause of death in
the United States. In addition to surgery and radiotherapy, there are nearly 50
FDA-approved drug therapies for the treatment of a variety of cancers, although
many of these therapies have severe adverse side effects.

The Company is currently undertaking a total of five projects in the field
of oncology, one through human genetics and four through cDNA approaches.
Millennium is identifying genetic changes that underlie the progression of human
prostate cancer through the use of positional cloning techniques. Millennium has
entered into a collaboration with Baylor College of Medicine (Houston, Texas) to
gain access to tumor samples required for this study. Further, Millennium is
employing its RADE technology to identify genes that function in the progression
of a variety of different types of cancer. Millennium has identified genes
implicated in the initiation and progression of melanoma and colon cancer and
the metastasis of melanoma. Some of these genes have been shown to participate
in previously characterized biochemical pathways and therefore offer new insight
into mechanisms of tumor progression. The Company has commenced target
validation studies on these genes, including gene transfer into animal models of
cancer progression.

DISEASES OF THE CENTRAL NERVOUS SYSTEM

In the field of diseases of the central nervous system, Millennium is
principally employing human genetics to identify the genes responsible for
affective disorders and schizophrenia. The Company currently does not have a
strategic partner in this field.

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Bipolar affective disorder, also known as manic depression, affects
approximately 4 million people in the United States, while the related disorder,
common depression, may affect up to 13 million persons. Genetic studies suggest
that the relative risk to siblings of individuals affected with bipolar
affective disorder is increased up to tenfold over siblings in the general
population. Schizophrenia is a debilitating disease of the central nervous
system, characterized by severe cognitive impairment, which affects
approximately 2.5 million persons in the United States.

In the area of bipolar affective disorder, Millennium has entered into a
collaboration with investigators from the University of California, San
Francisco, who have access to clinical samples from an isolated homogeneous
population of substantial utility for genetic analysis. Genetic linkages have
already been identified using DNA samples from this population. In parallel with
an ongoing effort to expand this clinical resource, as well as to add new
clinical populations to fill in the portfolio, Millennium and its collaborators
have initiated positional cloning efforts to identify these disease genes.
Collection of DNA samples from affected individuals representing diverse ethnic
backgrounds is also underway in the wider United States population. Upon
identification of disease-causing genes in the isolated population, this
broader, more diverse collection will allow quantification of the contribution
of particular genes to the global diseased population.

In the area of schizophrenia and schizoaffective disorders, Millennium has
entered into a collaboration with a consortium of academic clinicians based at
Harvard Medical School and Washington University. These institutions have access
to populations of schizophrenia families who have undergone extensive clinical
characterization. Significant numbers of DNA samples and clinical information
have already been collected. Millennium has initiated genotyping and,
simultaneously, the family collection is being expanded by the academic centers.

OTHER PROGRAMS

In addition to the foregoing disease research programs, Millennium has
recently commenced additional research efforts in the fields of osteoporosis and
autoimmune diseases.

STRATEGIC ALLIANCES

In order to accelerate its product development efforts, Millennium has
established strategic alliances with Roche in obesity and type II diabetes;
Lilly in atherosclerosis and select areas within oncology; and Astra in
inflammatory respiratory diseases. These alliances are designed to provide the
Company with the requisite capital and development and marketing capabilities to
commercialize the results of its discovery programs. Each provides significant
up-front payments, follow-on fees and research funding which will reduce the
Company's overall operating losses and need for additional equity capital. In
each of its strategic alliances, Millennium has agreed not to conduct certain
research, independently or with any commercial third party, that is in the same
field as that covered by the alliance agreement. The Company has retained
commercialization rights to certain therapeutic and diagnostic applications of
the discoveries resulting from these funded research programs. See "-- Retained
Commercialization Rights". The Company intends to pursue further strategic
alliances as appropriate.

Each of the agreements governing Millennium's strategic alliances is
subject to certain contingencies including, in certain instances, early
termination rights. See "Risk Factors -- Reliance on Strategic Partners".
Assuming each alliance research program continues for its full five-year term
and the Company achieves certain research objectives, the Company expects to
receive a total of approximately $175.0 million in up-front and follow-on
payments, equity contributions and research funding, exclusive of any amounts
invested by Lilly or an affiliate of Roche in this offering. In the event that
specified research, product development and associated regulatory milestones are
achieved, the Company's strategic partners will be obligated to make additional
milestone payments to the Company. Generally, each of these agreements also
entitles the Company to royalties and/or a share of the profits on product
sales, which are payable for the longer of the life of the applicable patent or
a period of time specified in each agreement. Through December 31, 1995, the
Company had received $44.8 million under these alliances. Lilly and an affiliate
of Roche have indicated their

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non-binding intention to purchase Common Stock in this offering. See
"Underwriting".

HOFFMANN-LA ROCHE INC.

In March 1994, the Company and Hoffmann-La Roche Inc. (Nutley, New Jersey)
entered into a strategic alliance in the fields of obesity and type II diabetes.
Under the terms of a related stock purchase agreement, F. Hoffmann-La Roche Ltd.
(Basel, Switzerland), an affiliate of Roche, made a $6.0 million equity
investment in the Company. Roche has agreed to fund a five-year program of
obesity and type II diabetes research by the Company. Payments by Roche to the
Company in the form of up-front fees and research funding could total up to
$44.5 million if the research program continues for its full five-year term. In
the event that specified research, product development and associated regulatory
milestones are achieved, Roche will be obligated to make additional milestone
payments to the Company. In July 1995 and in January 1996, Roche made research
milestone payments to the Company in connection with the discovery of two novel
genes associated with obesity. Roche also will be obligated to pay to the
Company royalties and/or share profits on the sale of certain therapeutic and/or
diagnostic products that may result from the alliance.

The agreement provides Roche with exclusive worldwide royalty-bearing
rights to develop and commercialize small molecule therapeutics for obesity and
type II diabetes based on the Company's gene discoveries. Roche has an exclusive
royalty-bearing right to develop and commercialize therapeutic proteins,
antisense drugs and gene therapy for obesity and type II diabetes outside of
North America. Within North America, Millennium has retained the right to
develop and commercialize therapeutic proteins, antisense drugs and gene therapy
for obesity and type II diabetes, subject to Roche's right to co-promote such
products. In addition, the agreement provides Roche with a worldwide option to
develop and commercialize diagnostic products for obesity and/or type II
diabetes based on the Company's gene discoveries. Subject to the foregoing
rights, the agreement provides that each party will retain ownership of all
inventions (and any related patents) made solely by its employees during the
course of the arrangement.

Roche has the right, at any time after March 1997, to terminate the
agreement with the Company, either in whole or with respect to either the
obesity or type II diabetes program, if Millennium is unable to perform any of
its material obligations under the agreement. The agreement with Roche is also
subject to termination by Roche at any time after the completion of the
five-year research program in March 1999 on six months notice, as well as upon
three months notice upon a sale of majority control of the Company or the sale
of all or substantially all of Millennium's assets. Unless earlier terminated in
accordance with its terms, the agreement will remain in effect until the
expiration of the obligations of Roche to pay royalties and/or share profits
under the agreement. The agreement may be terminated by either party upon a
material breach by the other party of its obligations under the agreement.

There can be no assurance that the Company's research pursuant to the
agreement will be successful in discovering additional genes related to obesity
or type II diabetes or that Roche will be successful in developing or
commercializing any products based on any gene discoveries of the Company. As a
result, there can be no assurance that any further milestones, royalties or
other payments contemplated by the agreement will ever be made. See "Risk
Factors -- Reliance on Strategic Partners".

ELI LILLY AND COMPANY

In October 1995, the Company and Eli Lilly and Company entered into a
strategic alliance in the field of atherosclerosis (the "Atherosclerosis
Agreement") and in April 1996 Millennium and Lilly entered into a strategic
alliance in select areas within oncology (the "Oncology Agreement"). Under the
terms of the Atherosclerosis Agreement, Lilly made an $8.0 million equity
investment in the Company. Lilly also agreed to fund five-year programs of
atherosclerosis and cancer research by the Company. Payments by Lilly to the
Company in the form of up-front fees and research funding

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could total up to $61.0 million if the research programs continue for their full
five-year terms. Lilly also may elect to extend the funding of the Company's
research in either or both of these fields to up to eight years. In the event
that specified research, product development and associated regulatory
milestones are achieved, Lilly will be obligated to make additional milestone
payments to the Company. Lilly also will be obligated to pay royalties to the
Company on the sale of certain therapeutic products that may result from the
alliance.

Each of the agreements provides Lilly with exclusive worldwide
royalty-bearing rights to develop and commercialize small molecule drugs and
therapeutic proteins and co-exclusive rights to develop and commercialize gene
therapy products for atherosclerosis or cancer based on the Company's gene
discoveries. Millennium has retained exclusive rights to all antisense drug
applications arising from the strategic alliance research programs. Lilly has
granted the Company non-exclusive rights to use select combinatorial chemistry
libraries and high-throughput screening technologies controlled by Lilly to
conduct a limited number of screens with the Company's targets to identify
product candidates for medical indications other than specific medical
indications designated by Lilly as being of strategic importance. The Company
has exclusive worldwide rights to develop and commercialize such product
candidates. The Company will be obligated to pay Lilly royalties on the sale of
products identified by the Company using Lilly's combinatorial chemistry
libraries. The Company also has granted Lilly a non-exclusive right to use
certain genomics technologies. Subject to the foregoing rights, the agreements
provide that each party will retain ownership of all inventions (and any related
patents) made solely by its employees during the course of the arrangement.

Lilly has the right at any time after October 1998 to terminate the
Atherosclerosis Agreement and at any time after April 1999 to terminate the
Oncology Agreement, in each case on 90 days notice and with continuation of
research funding for one year provided that Millennium has met specified
performance criteria. Lilly has the right to terminate its research funding
obligations under each agreement under various circumstances, including the
failure by Millennium to achieve specified research objectives, the termination
of the employment of two or more specified employees of the Company without
replacement reasonably acceptable to Lilly and the acquisition of majority
control of the Company by a competitor of Lilly. Unless earlier terminated in
accordance with its terms, each agreement will remain in effect until the
expiration of the obligations of Lilly or the Company to pay royalties under the
agreement. Each agreement may be terminated by either party upon a material
breach by the other party of its obligations under the agreement. In addition,
Millennium has the right to terminate the Oncology Agreement in the event that
Lilly fails to purchase $3,500,000 of Common Stock in this offering.

There can be no assurance that the Company's research pursuant to these
agreements will be successful in identifying relevant genes or that Lilly will
be successful in developing or commercializing any products based on gene
discoveries by the Company. As a result, there can be no assurance that any of
the milestone, royalty and other payments contemplated by the agreements will
ever be made. See "Risk Factors -- Reliance on Strategic Partners".

ASTRA AB

In December 1995, the Company and Astra AB entered into a strategic
alliance in the field of inflammatory respiratory diseases. Astra has agreed to
fund a five-year program of inflammatory respiratory diseases research by the
Company. Payments by Astra to the Company for up-front, follow-on fees and
research funding could total up to approximately $53.3 million if the research
program continues for its full five-year term and the Company achieves specified
research objectives. Astra has the right to terminate the funded research
program in early 1999 in the event that Millennium fails to achieve these
objectives. Astra may elect to extend its funding of the

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Company's research in this field to seven years. In the event that additional
specified research, product development and regulatory milestones are achieved,
Astra is obligated to make additional milestone payments to the Company. Astra
also will be obligated to pay to the Company royalties based on the sale of
certain therapeutic products that may result from the alliance.

The agreement provides Astra with exclusive worldwide royalty-bearing
rights to develop and commercialize small molecule drugs in the inflammatory
respiratory diseases field based on the Company's gene discoveries. Millennium
and Astra have agreed to explore opportunities to jointly develop and
commercialize therapeutic proteins in the field of inflammatory respiratory
diseases. In the absence of an agreement on joint development, Astra has
exclusive worldwide rights for therapeutic proteins in the field of inflammatory
respiratory diseases delivered by oral inhalation or nasal administration.
Millennium and Astra also have agreed to explore opportunities to jointly
develop and commercialize antisense drugs. In the absence of an agreement on
joint development, Astra has exclusive worldwide rights in the field of
inflammatory respiratory diseases for antisense drugs delivered by oral
inhalation or nasal administration, as well as co-exclusive worldwide rights in
such field for antisense drugs not delivered by oral inhalation or nasal
administration. The Company also has granted Astra a non-exclusive right to use
certain genomics technologies. Millennium has retained exclusive rights to all
gene therapy applications arising from the strategic alliance research program.
Subject to the foregoing rights, the agreement provides that each party will
retain ownership of all inventions (and any related patents) made solely by its
employees during the course of the arrangement.

Unless terminated earlier in accordance with its terms, the agreement will
remain in effect until the expiration of Astra's obligations to pay the Company
royalties under the agreement. The agreement may be terminated unilaterally by
Astra or the Company only upon a default by the other party in a material term,
covenant or provision of the agreement.

There can be no assurance that the Company's research pursuant to the
agreement will be successful in discovering genes related to inflammatory
respiratory diseases or that Astra will be successful in developing or
commercializing any products based on any gene discoveries of the Company. As a
result, there can be no assurance that any of the milestone, royalty and other
payments contemplated by the agreement will ever be made. See "Risk
Factors -- Reliance on Strategic Partners".

RETAINED COMMERCIALIZATION RIGHTS

The Company has retained a broad range of rights to commercialize certain
therapeutic and diagnostic applications of the discoveries resulting from the
research programs funded by its strategic partners.

The Company's retained commercialization rights fall broadly into three
categories -- diagnostics, small molecule drugs and biologics (therapeutic
proteins, gene therapy and antisense drugs). The Company currently is at an
early stage of formulating strategies and assembling the resources and
capabilities necessary to commercialize these rights, and is assessing its
alternatives including, among others, joint ventures, acquisitions and strategic
collaborations. See "Risk Factors -- Uncertainty Relating to Retained
Commercialization Rights". The Company intends to seek to retain similar rights
in any future strategic alliances.

DIAGNOSTICS

Generally, diagnostic products and services have shorter product
development and regulatory approval timelines than therapeutic products.
Therefore, Millennium believes that the first commercial opportunity to arise
from its disease research programs is likely to be realized in the area of
diagnostics. The current major uses of genetic diagnostics are for carrier
testing (in prospective parents) and prenatal screening (for severe genetic
defects in fetuses). The Company believes that three additional diagnostic
applications, predispositional testing, differential diagnosis and
pharmacogenetics, may represent significant commercial opportunities.

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PREDISPOSITIONAL TESTING is expected to detect genetic mutations that
predispose an individual to disease. In conjunction with preventive medicines,
early intervention therapeutics and lifestyle modifications, predispositional
testing may significantly decrease disease occurrence, disease severity and the
cost of disease treatment and management. DIFFERENTIAL DIAGNOSIS will enable
differentiation among diseases which share clinical characteristics but differ
at the level of underlying biological mechanism. Successful implementation of
differential diagnostic testing will guide the prescription of medicines
appropriate to the underlying cause of clinically indistinguishable conditions.
The Company believes that differential diagnosis also may be used for patient
selection in connection with clinical trials of new candidate therapeutic
agents. PHARMACOGENETICS assays will be used to identify the genetic basis of an
individual's response to specific drugs. The Company believes that
pharmacogenetic testing may prove especially valuable in connection with the
registration, administration and modification of therapies of known efficacy
which have toxic side effects in a small group of patients.

Millennium has retained the right to develop and market all diagnostic
products and services resulting from the research programs conducted under the
Lilly and Astra strategic alliances.

In connection with its genomics research efforts, the Company has assembled
significant resources and expertise in several technological areas relevant to
diagnostic medicine, such as RADE, gene mutation detection and analysis, tissue
profiling, automation and bioinformatics. The Company is exploring the potential
for strategic collaborations with a range of industry participants, including
diagnostic companies, clinical and reference laboratories, clinical research
organizations, technology developers, health management organizations and
pharmacy benefit managers.

SMALL MOLECULE DRUGS

SMALL MOLECULE DRUGS are the mainstay of the traditional pharmaceutical
industry. Characteristically amenable to formulation for oral administration,
they are particularly appropriate for the treatment of chronic diseases that
often require the daily administration of medications over many years.
Millennium believes that small molecule drugs will continue to be an important
therapeutic modality and business opportunity.

In each of its strategic alliances, Millennium has retained the
co-exclusive right to use the molecular targets that result from the funded
research programs to identify and develop small molecule drugs to treat medical
indications that fall outside of the field(s) covered by the alliance from which
the target originated.

The Company has obtained certain rights to use high-throughput drug
screening and combinational chemistry library technologies from Lilly. See
"-- Strategic Alliances -- Eli Lilly and Company".

The Company is evaluating the establishment of a high-throughput drug
screening operation that would capitalize on these rights and on the Company's
expertise in automation and bioinformatics technologies. The Company is also
evaluating opportunities to obtain access to additional compound libraries
including natural product, synthetic chemical and additional combinatorial
chemistry libraries.

BIOLOGICS (Therapeutic Proteins, Gene Therapy and Antisense Drugs)

The biotechnology industry has been built largely on the successful
development and commercialization of THERAPEUTIC PROTEINS. More recently, the
industry has focused resources on the development of GENE THERAPY (the direct
delivery of genes rather than the proteins they encode) and ANTISENSE DRUGS
(nucleic acid-based drugs that interfere with the ability of genes to function
properly). These biologics may offer significant commercial opportunities
particularly in "niche" medical indications.

In each of its strategic alliances, the Company has retained specific
exclusive and co-exclusive rights to develop and market therapeutic proteins,
gene therapy and antisense drugs. See "-- Strategic Alliances". The Company is
in the early stages of assessing potential therapeutic protein and gene therapy
applications of certain discoveries it has made in its disease research
programs.

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<PAGE> 42

PATENTS AND PROPRIETARY RIGHTS

As of April 1, 1996, the Company had 36 patent applications pending in the
United States and had filed several corresponding foreign patent applications.
However, no patents based on the Company's discoveries have issued to date. The
Company seeks United States and international patent protection for the genes it
discovers, as well as therapeutic and diagnostic products and processes, drug
screening methodologies, transgenic animals and other inventions based on such
genes. The Company's commercial success will depend in part on obtaining such
patent protection. The Company also intends to seek patent protection or rely
upon trade secret rights to protect certain other technologies which may be used
to discover and characterize genes and which may be used to develop novel
therapeutic and diagnostic products.

The patent positions of pharmaceutical, biopharmaceutical and biotechnology
companies, including Millennium, are generally uncertain and involve complex
legal and factual questions. There can be no assurance that any of the Company's
pending patent applications will result in issued patents, that the Company will
develop additional proprietary technologies that are patentable, that any
patents issued to the Company or its strategic partners will provide a basis for
commercially viable products or will provide the Company with any competitive
advantages or will not be challenged by third parties, or that the patents of
others will not have an adverse effect on the ability of the Company to do
business. In addition, patent law relating to the scope of claims in the
technology fields in which the Company operates is still evolving. The degree of
future protection for the Company's proprietary rights, therefore, is uncertain.
Furthermore, there can be no assurance that others will not independently
develop similar or alternative technologies, duplicate any of the Company's
technologies, or, if patents are issued to the Company, design around the
patented technologies developed by the Company. In addition, the Company could
incur substantial costs in litigation if it is required to defend itself in
patent suits brought by third parties or if it initiates such suits.

The Company has applied for patent protection for novel genes, ESTs of
novel genes and novel uses for known genes identified through its research
programs. There is substantial uncertainty regarding the patentability of ESTs
or full length genes absent data demonstrating functional relevance. Based on
recent technological advances in gene sequencing technology, a number of groups
other than the Company are attempting to rapidly identify ESTs and full length
genes, whose functions have not been characterized. Washington University, for
example, is currently identifying ESTs through partial sequencing pursuant to
funding provided by Merck & Co., Inc., and depositing the ESTs identified in a
public database. The public availability of EST information prior to the time
the Company applies for patent protection on a corresponding full-length gene
could adversely affect the Company's ability to obtain patent protection with
respect to such gene. The Company routinely conducts searches of publicly
available databases to determine whether other parties have previously cloned
ESTs corresponding to the various ESTs and full length genes discovered by the
Company. To the extent any patents issue to other parties on such partial or
full-length genes, the risk increases that the potential products and processes
of the Company or its strategic partners may give rise to claims of patent
infringement.

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<PAGE> 43

such litigation, it could consume a substantial portion of the Company's
managerial and financial resources.

In connection with the Company's discovery of the gene that encodes the
leptin receptor that regulates body weight (ob-r), a search of the Washington
University database revealed the existence of an EST of unknown function that
possessed great similarity to a small portion of the full length ob-r gene. The
public availability of this EST prior to the time that the Company filed its
patent application based on the full-length ob-r gene could adversely affect the
breadth of patent protection available to the Company related to ob-r. In
addition, prior to the time that the Company filed its patent application
covering ob-r, a third party, Progenitor Inc. ("Progenitor"), filed a patent
application disclosing DNA sequences that encode shorter forms of leptin
receptors and describing a potential role for such receptors in cell
proliferative disorders such as cancers and leukemias. Although the Company
believes that the patent application filed by Progenitor does not describe the
Company's ob-r, or the role of any receptor in body weight regulation or obesity
control, there can be no assurance that such patent application, or additional
patent applications if filed by others, will not result in issued patents
covering ob-r or specific fragments of the ob-r gene.

The Company relies upon trade secret protection for its confidential and
proprietary information. The Company believes that it has developed proprietary
technology for use in gene discovery, including proprietary genetic marker sets,
proprietary software (including proprietary software for DNA sequence analysis
and laboratory automation) and an integrated bioinformatics system. The Company
has not sought patent protection for these technologies. In addition, the
Company has developed a database of proprietary gene sequences which it updates
on an ongoing basis. The Company has taken security measures to protect its data
and continues to explore ways to further enhance the security for its data.
There can be no assurance, however, that such measures will provide adequate
protection for the Company's trade secrets or other proprietary information.
While the Company requires employees, academic collaborators and consultants to
enter into confidentiality agreements, there can be no assurance that
proprietary information will not be disclosed, that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets or disclose
such technology, or that the Company can meaningfully protect its trade secrets.

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<PAGE> 44

permit the Company to apply for patent protection on genes in which it is
interested in pursuing further research, there is considerable pressure on
academic institutions to publish discoveries in the genetics and genomics
fields. There can be no assurance that such publication would not affect the
Company's ability to obtain patent protection for some genes in which it may
have an interest.

The Company is a party to various license agreements which give it rights
to use certain technologies in its research and development processes. There can
be no assurance that the Company will be able to continue to license such
technology on commercially reasonable terms, if at all. Failure by the Company
to maintain rights to such technology could have a material adverse effect on
the Company's business, financial condition and results of operations.

GOVERNMENT REGULATION

Prior to marketing, any new drug developed by the Company and its strategic
partners must undergo an extensive regulatory approval process in the United
States and other countries. This regulatory process, which includes preclinical
studies and clinical trials, and may include post-marketing surveillance, of
each compound to establish its safety and efficacy, can take many years and
require the expenditure of substantial resources. Data obtained from preclinical
studies and clinical trials are susceptible to varying interpretations that
could delay, limit or prevent regulatory approval. The rate of completion of
clinical trials is dependent upon, among other factors, the enrollment of
patients. Patient accrual is a function of many factors, including the size of
the patient population, the proximity of patients to clinical sites, the
eligibility criteria for the study and the existence of competitive clinical
trials. Delays in planned patient enrollment in clinical trials may result in
increased costs, program delays or both, which could have a material adverse
effect on the Company. Delays or rejections may also be encountered based upon
changes in United States Food and Drug Administration ("FDA") policies for drug
approval during the period of product development and FDA regulatory review of
each submitted new drug application ("NDA") in the case of new pharmaceutical
agents, or product license application ("PLA") in the case of biologics. Similar
delays also may be encountered in the regulatory approval of any diagnostic
product and in obtaining regulatory approval in foreign countries. Under current
guidelines, proposals to conduct clinical research involving gene therapy at
institutions supported by the National Institutes of Health ("NIH") must be
approved by the Recombinant DNA Advisory Committee ("RAC") and the NIH. There
can be no assurance that regulatory approval will be obtained for any drugs or
diagnostic products developed by the Company or its strategic partners.
Furthermore, regulatory approval may entail limitations on the indicated use of
a drug. Because certain of the products likely to result from the Company's
disease research programs involve the application of new technologies and may be
based upon a new therapeutic approach, such products may be subject to
substantial additional review by various government regulatory authorities and,
as a result, regulatory approvals may be obtained more slowly than for products
using more conventional technologies.

Even if regulatory approval is obtained, a marketed product and its
manufacturer are subject to continuing review. Discovery of previously unknown
problems with a product may have adverse effects on the Company's business,
financial condition and results of operations, including withdrawal of the
product from the market. Violations of regulatory requirements at any stage,
including preclinical studies and clinical trials, the approval process or
post-approval, may result in various adverse consequences to the Company,
including the FDA's delay in approval or refusal to approve a product,
withdrawal of an approved product from the market or the imposition of criminal
penalties against the manufacturer and NDA or PLA holder. The Company has not
submitted an investigational new drug application ("IND") for any product
candidate, and no product candidate has been approved for commercialization in
the United States or elsewhere. The Company intends to rely on its strategic
partners to file INDs and generally direct the regulatory approval process. No
assurance can be given that the Company or any of its strategic partners will be
able to conduct clinical testing or obtain the necessary approvals from the FDA
or other regulatory authorities for any products. Failure to obtain required
governmental approvals will delay or preclude the Company's strategic partners
from marketing drugs or diagnostic products developed by the Company or limit
the

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<PAGE> 45

commercial use of such products and could have a material adverse effect on the
Company's business, financial condition and results of operations.

COMPETITION

Millennium faces, and will continue to face, intense competition from
organizations such as large pharmaceutical, biotechnology, and diagnostic
companies, as well as academic and research institutions and government
agencies. The Company is subject to significant competition from organizations
that are pursuing the same or similar technologies as those which constitute the
Company's technology platform and from organizations that are pursuing
pharmaceutical or diagnostic products that are competitive with the Company's
potential products. Most of the organizations competing with the Company have
greater capital resources, research and development staffs and facilities, and
greater experience in drug discovery and development, obtaining regulatory
approval and pharmaceutical product manufacturing and marketing capabilities
than the Company.

In addition, research in the field of genomics is highly competitive.
Competitors of the Company in the genomics area include, among others, public
companies such as Genome Therapeutics Corporation, Human Genome Sciences, Inc.,
Incyte Pharmaceuticals, Inc., Myriad Genetics, Inc. and Sequana Therapeutics,
Inc., as well as private companies and major pharmaceutical companies.
Universities and other research institutions, including those receiving funding
from the federally funded Human Genome Project, also compete with Millennium. A
number of entities are attempting to rapidly identify and patent randomly
sequenced genes and gene fragments, typically without specific knowledge of the
function of such genes or gene fragments. In addition, certain other entities
are pursuing a gene identification, characterization and product development
strategy based on positional cloning. The Company's competitors may discover,
characterize or develop important genes in advance of Millennium, which could
have a material adverse effect on any related Millennium disease research
program. The Company also faces competition from these and other entities in
gaining access to DNA samples used in its research and development projects. The
Company expects competition to intensify in genomics research as technical
advances in the field are made and become more widely known.

The Company relies on its strategic partners for support in its disease
research programs and intends to rely on its strategic partners for preclinical
evaluation and clinical development of its potential products and manufacturing
and marketing of any products. Each of the Company's strategic partners is
conducting multiple product development efforts within each disease area that is
the subject of its strategic alliance with the Company. For example, Roche, with
whom the Company is collaborating in the field of obesity, currently has a
product for the treatment of obesity in late stage clinical trials. Generally,
the Company's strategic alliance agreements do not restrict the strategic
partner from pursuing competing development efforts. Any product candidate of
the Company, therefore, may be subject to competition with a potential product
under development by a strategic partner.

EMPLOYEES

As of April 1, 1996, the Company had 166 full-time employees, of whom 36
hold Ph.D. or M.D. degrees and 45 hold other advanced degrees. Of the Company's
total workforce, 139 are engaged in research and development activities and 27
are engaged in business development, finance and

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<PAGE> 46

administration. The Company currently plans to hire approximately 80 additional
employees by the end of 1996. None of the Company's employees is represented by
a collective bargaining agreement, nor has the Company experienced work
stoppages. The Company believes that its relations with its employees are good.
See "Risk Factors -- Expansion of Operations; Management of Growth".

LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings.

FACILITIES

The Company's facilities currently consist of approximately 50,000 square
feet of office and research space located at 640 Memorial Drive, Cambridge,
Massachusetts pursuant to a lease which expires in 2003. The Company is
currently constructing a 9,000 square foot animal facility at the same location
with a lease term to run concurrently with the existing lease. The Company is
also negotiating for additional space and believes that suitable additional
space will be available to it, when needed, on commercially reasonable terms.

SCIENTIFIC AND MEDICAL ADVISORS AND CONSULTANTS

The Company utilizes a number of scientists and physicians to advise it on
scientific and medical matters, including experts in human genetics, mouse
genetics, molecular biology, bioinformatics, DNA sequencing and disease biology.
Generally, each of the Company's scientific and medical advisors and consultants
has received Common Stock (or options to purchase Common Stock) or directs
research sponsored by the Company. The following is a partial list of the
Company's scientific and medical advisors and consultants:

HUMAN GENETICS

ARAVINDA CHAKRAVARTI, PH.D., Professor of Genetics at Case Western Reserve
University. Dr. Chakravarti played a pivotal role in the discovery of the cystic
fibrosis gene, employing linkage disequilibrium analysis to refine the location
of the gene. Dr. Chakravarti leads a human genetics research group which
recently defined the role of mutations in the Endothelin B receptor in
Hirchsprung's disease, a complex polygenic disorder in humans.

NICHOLAS SCHORK, PH.D., Assistant Professor at Case Western University in
the Department of Epidemiology and Biostatistics and the Department of Genetics;
adjunct faculty member in the Department of Biostatistics, Harvard University;
adjunct faculty member in the Department of Biostatistics, the Cleveland Clinic
Foundation; adjunct Associate Staff Scientist, the Jackson Laboratory. Dr.
Schork's recent work has focused on the genetic dissection of complex traits in
model organisms and humans.

MOUSE GENETICS

STEPHEN BROWN, PH.D., Head of the Medical Research Council Mouse Genome
Center, Harwell, Oxfordshire, England. Dr. Brown's research has utilized
positional cloning strategies to clone deafness genes, including the shaker 1
locus and degenerative muscle disease genes, initially from the mouse and
subsequently from humans.

GEORGE CARLSON, PH.D., Director of the McLaughlin Institute, Great Falls,
Montana. Dr. Carlson's research interests lie in understanding the role of the
prion protein gene in neurodegenerative diseases. Much of his recent work in
this area has utilized transgenic mouse technology to investigate variant prion
protein genes and their role in the disease process. He has extended this work
towards developing mouse models for Alzheimer's disease. Dr. Carlson is also
interested in

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the structure of the major histocompatibility region of the mouse genome and
comparison of mitotic and meiotic recombination.

NEAL COPELAND, PH.D., Director, Mammalian Genetics Laboratory; Head of the
Molecular Genetics of Oncogenesis Section of the ABL-Basic Research Program at
the Frederick Cancer Research and Development Center. Dr. Copeland's research
interests include the utilization of the mouse as a model organism to identify,
clone and understand new oncogenes via common sites of viral integration; the
role of the neurofibromatosis gene in myeloid leukemia; and mapping candidate
genes to mouse models of human disease.

NANCY JENKINS, PH.D., Head of the Molecular Genetics of Development Section
of the ABL-Basic Research Program at the Frederick Cancer Research and
Development Center. Dr. Jenkins has a long-standing interest in mammalian
development. Dr. Jenkins has utilized both positional cloning strategies and
intensive candidate gene mapping to identify and characterize the products of
many important developmental mutants of the mouse, including the dilute gene,
which encodes an unconventional myosin factor. Her other interests include
understanding the role of the Agouti gene in coat color and obesity.

MOLECULAR BIOLOGY

HARVEY F. LODISH, PH.D., Professor of Biology, Massachusetts Institute of
Technology, Cambridge, Massachusetts, and Member of the Whitehead Institute of
Biomedical Research. Dr. Lodish is a member of the National Academy of Sciences.
He is also a recipient of a Guggenheim Fellowship and the Stadie Award from the
American Diabetes Association. Dr. Lodish and his group have cloned the
erythrocyte glucose transporter, a transporter for free fatty acids, the murine
EPO receptor, the calcitonin and endothelin receptors, and two subunits of the
TGF beta receptor. Dr. Lodish was also a founder and scientific advisory board
member of Genzyme, Inc.

BIOINFORMATICS

PEER BORK, PH.D., leads a group working in DNA and protein
sequence-structure analysis at the European Molecular Biology Laboratory and at
the Max Delbruck Center. His main interests are in genome analysis, molecular
evolution, prediction of protein structure and function, and
classification/characterization of modular proteins.

AMOS BAIROCH, PH.D., Founder and Director of SwissProt. SwissProt is widely
considered the premier annotated protein sequence database. Dr. Bairoch is the
author of the PC/Gene sequence analysis package (currently used by more than
1500 laboratories in 30 different countries), conceived and developed the
PROSITE protein motif database as well as the ENZYME database of enzymatic
nomenclature, and co-developed the ExPASy bioinformatics WWW server.

STEPHEN ALTSCHUL, PH.D., Senior Investigator, NCBI/NIH. Dr. Altschul began
investigating the mathematics of sequence similarity in 1985 and, together with
others, has made seminal contributions in several areas, including work on the
statistics of sequence alignment which forms the theoretical basis for many
modern heuristic local alignment algorithms.

SEQUENCING

RICHARD K. WILSON, PH.D., Research Associate Professor, Department of
Genetics, Co-Director, Genome Sequencing Center, Washington University School of
Medicine, St. Louis, Missouri. Dr. Wilson is an expert in large-scale DNA
sequence analysis, and his group in St. Louis is among the world's leaders in
genomic and cDNA sequencing. They have contributed nearly 80 percent of the
publicly available human EST database and analyzed over one third of the
Caenorhabditis elegans genome.

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OBESITY/DIABETES

RUDOLPH L. LEIBEL, M.D., Associate Professor, Rockefeller University, New
York, New York; Co-Head of the Laboratory of Human Behavior and Metabolism. Dr.
Leibel has been involved in obesity research for the past 20 years and is the
Deputy Director of the New York Obesity Research Center. Dr. Leibel is a leader
in the field of obesity genetics, having prepared the first genetic maps around
the mouse ob and db loci, as well as regions of human synteny with rodent
obesity mutations for linkage studies.

AHMED H. KISSEBAH, M.D., PH.D., Professor of Medicine and Pharmacology and
Chief, Division of Endocrinology, Metabolism and Clinical Nutrition, and Program
Director of the General Clinical Research Center at Medical College of
Wisconsin. Dr. Kissebah is an internationally recognized expert in the field of
obesity and diabetes. He is known for his work in differentiating the effects of
fat distribution on morbidity.

LEIF GROOP, M.D., Professor of Medicine, Department of Endocrinology at the
University of Lund, in Malmo, Sweden. Dr. Groop's laboratory is world-renowned
for its extensive characterization of metabolic abnormalities in type II
diabetes. In addition, his research team has demonstrated the importance of
muscle glycogen synthases and the beta-adrenergic receptor in this disease.

M. ALAN PERMUTT, M.D., Professor of Medicine at Washington University, St.
Louis. Dr. Permutt's research has helped to elucidate many aspects of the
etiology of diabetes, including alterations in islet cell physiology and the
contribution of genetic factors. Recently, in collaboration with Dr. Benjamin
Glaser, Dr. Permutt's group elucidated the role of the sulfonylurea receptor in
familial hyperinsulinism.

ATHEROSCLEROSIS

JAN L. BRESLOW, M.D., Frederick Henry Leonhardt Professor and Director of
the Laboratory of Biochemical Genetics and Metabolism, Rockefeller University;
Senior Physician, Rockefeller University Hospital. Dr. Breslow's research has
focused on the genetic aspects of lipoprotein levels and atherosclerosis. His
laboratory has been responsible for isolating a number of genes associated with
lipoprotein disorders and has produced a number of animal models of
atherosclerosis. Dr. Breslow is a member of the National Academy of Sciences.

MICHAEL A. GIMBRONE, JR., M.D., Elsie T. Friedman Professor of Pathology,
Harvard Medical School; Director, Vascular Research Division, Brigham and
Women's Hospital. The focus of Dr. Gimbrone's research is on the localized
interaction of blood leukocytes with the endothelial lining as a key event in
acute and chronic inflammation, ischemic tissue injury, intravascular thrombosis
and the pathogenesis of atherosclerosis. Dr. Gimbrone's laboratory is
responsible for the discovery of the cytokine-inducible endothelial-leukocyte
adhesion molecule E-selectin (ELAM1).

PETER LIBBY, M.D., Director, Vascular Medicine and Atherosclerosis Unit,
Brigham and Women's Hospital; Professor of Medicine, Harvard Medical School. Dr.
Libby is a clinical cardiologist at Brigham and Women's Hospital and a research
leader in the cellular and molecular biology of blood vessel diseases.

RUSSELL ROSS, PH.D., Professor and Director, Center for Vascular Biology,
University of Washington School of Medicine. Dr. Ross is a leading pathologist
in the field of atherosclerosis and developed the response-to-injury hypothesis
of atherosclerosis, which correlates endothelial cell injury and dysfunction
with the sequence of cellular events in the artery wall that culminate in
lesions of atherosclerosis. His discovery of platelet-derived growth factor laid
the foundation for understanding the molecular mechanisms underlying vascular
disease.

ERIC J. TOPOL, M.D., Chairman of the Department of Cardiology and Director
of the Joseph J. Jacobs Center for Thrombosis and Vascular Biology, The
Cleveland Clinic. Dr. Topol is a leader in the area of interventional cardiology
and has directed many clinical trials evaluating novel

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thrombolytic therapies, antiplatelets, antithrombins, angioplasty and new
coronary revascularization devices. Included in these trials was the use of
recombinant tissue plasminogen activator following myocardial infarction and
platelet glycoprotein IIb/IIIa inhibitors in interventional cardiology.

ASTHMA/ALLERGY/IMMUNOLOGY

ABUL ABBAS, M.D., Professor of Pathology, Harvard Medical School and Head,
Immunology Research Division, Brigham & Women's Hospital. Dr. Abbas is a leading
investigator in the biology of T-helper cell function.

JEFFREY RAVETCH, M.D., PH.D., Memorial Sloan-Kettering Cancer Center;
Professor, Rockefeller University, Head of Laboratory of Molecular Genetics and
Immunology; Adjunct Professor, Jefferson Cancer Institute, Jefferson Medical
College. Dr. Ravetch is a leading investigator in the field of Fc receptors.

FRANK SPEIZER, M.D., Co-Director, Channing Laboratory; Edward H. Kass
Professor of Medicine, Harvard Medical School; Senior Physician, Brigham &
Women's Hospital. Dr. Speizer is an internationally recognized epidemiologist
and Principal Investigator for the Nurse's Health Study.

SCOTT WEISS, M.D., M.S., Director, Respiratory Epidemiology, Channing
Laboratory; Associate Professor, Harvard Medical School; Physician, Brigham &
Women's Hospital. Dr. Weiss is an internationally recognized epidemiologist in
allergy and asthma, and other pulmonary diseases.

XIPING XU, M.D., PH.D., Associate Epidemiologist, Brigham and Women's
Hospital; Assistant Professor, Harvard Medical School; Assistant Professor of
Occupational Epidemiology, Harvard School of Public Health. Dr. Xu is an expert
in epidemiology and population genetics.

ONCOLOGY

ARNOLD LEVINE, PH.D., Chairman and Weiss Professor in Life Sciences,
Department of Molecular Biology, Princeton University. Dr. Levine, a member of
the National Academy of Sciences and the Institute of Medicine, is a
world-renowned expert in the biology of tumor suppressor genes and oncogenes. He
is noted for his fundamental research on the function of the p53 gene,
implicated in a wide variety of human cancers. Dr. Levine is the recipient of
many honors, including the Bristol Myers Squibb Award for Distinguished
Achievement in Cancer Research, and is a member of a number of scientific
advisory boards including the Memorial Sloan Kettering Cancer Center and the
Howard Hughes Medical Institute.

JORDAN GUTTERMAN, M.D., Cockrill Professor at the University of Texas, M.D.
Anderson Cancer Center. Dr. Gutterman is a pioneer in the biological therapy of
cancer, having conducted one of the first clinical investigations of alpha
interferon beginning in 1978. These studies identified the potent activity of
this cytokine for the treatment of hairy cell leukemia, leading to the licensing
of this agent by the FDA in 1986. Dr. Gutterman has continued to play a major
role in the clinical evaluation of recombinant biological proteins for the
treatment of cancer and immunological disorders. Dr. Gutterman serves as
Executive Vice President of the Albert and Mary Lasker Foundation and has served
on advisory boards of several pharmaceutical companies and the FDA.

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MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

<TABLE>
The following table sets forth certain information concerning the executive
officers, directors and certain key employees of the Company.
<CAPTION>

NAME AGE POSITION
- ---- --- ----------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Mark J. Levin........................... 45 Chairman of the Board, Chief Executive
Officer and Director
Steven H. Holtzman...................... 42 Chief Business Officer
Frank D. Lee, Ph.D...................... 44 Chief Scientific Officer
Harry F. Arader, Jr..................... 42 Chief Financial Officer
Joshua Boger, Ph.D.(2).................. 44 Director
Eugene Cordes, Ph.D..................... 59 Director
A. Grant Heidrich, III(2)............... 43 Director
William W. Helman(1).................... 37 Director
Raju Kucherlapati, Ph.D.(2)............. 53 Director
Eric S. Lander, Ph.D.(1)................ 39 Director
Michael Steinmetz, Ph.D................. 48 Director
KEY EMPLOYEES
Geoffrey M. Duyk, M.D., Ph.D............ 36 Vice President, Genomics
Robert I. Tepper, M.D. ................. 40 Vice President, Biology
Timothy Clark........................... 42 Director, Bioinformatics
Linda K. Pine........................... 44 Vice President, Human Resources and
Corporate Communications
Mark F. Boshar.......................... 35 Chief Patent Counsel and Director of
Legal Affairs
Peter J. Courossi....................... 38 Director of Finance
<FN>

- ---------------
(1) Member of the Audit Committee of the Board of Directors.

(2) Member of the Compensation Committee of the Board of Directors.

MARK J. LEVIN has served as Chairman of the Board of Directors since March
1996, Chief Executive Officer of the Company since November 1994, and as a
director of the Company since inception. From 1987 to 1994, Mr. Levin was a
partner at Mayfield Fund ("Mayfield"), a venture capital firm, and co-director
of its Life Science Group. While employed with Mayfield, Mr. Levin was the
founding Chief Executive Officer of several biotechnology and biomedical
companies, including Cell Genesys Inc., CytoTherapeutics Inc., Tularik Inc. and
Focal, Inc. Mr. Levin holds an M.S. in Chemical and Biomedical Engineering from
Washington University. Mr. Levin also serves on the Board of Directors of
CytoTherapeutics Inc.

STEVEN H. HOLTZMAN has served as Chief Business Officer of the Company
since May 1994. From 1986 to 1993, Mr. Holtzman was with DNX Corporation
("DNX"), a biomedical company, and its subsidiaries. He was a founder and the
first employee of DNX, served as a member of the Board of Directors, and held
several senior management positions including, from 1992 to 1993, President of
DNX Biotherapeutics Inc., a subsidiary of DNX, and from 1990 to 1993, Executive
Vice President of DNX. Mr. Holtzman received his graduate B.Phil. degree in
Philosophy from Oxford University,
</TABLE>

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<PAGE> 51

which he attended as a Rhodes Scholar. Mr. Holtzman currently serves as
co-chairperson of the Biotechnology Industry Organization's Bioethics Committee.

FRANK D. LEE, PH.D. joined the Company in July 1994 as Vice President,
Research and became Chief Scientific Officer in January 1996. From 1989 to 1994,
Dr. Lee served as Director of Molecular Biology at DNAX Research Institute of
Molecular and Cellular Biology, Inc., a subsidiary of Schering-Plough
Corporation, a pharmaceutical company ("DNAX"), and from 1981 to 1989 he served
as a Senior Staff Scientist at DNAX. Dr. Lee received his Ph.D. from Stanford
University and did his postdoctoral research at Stanford University School of
Medicine in the Department of Pharmacology and was a Senior Fellow of the
American Cancer Society. Dr. Lee also did postdoctoral research at the
Massachusetts Institute of Technology's Center for Cancer Research as a fellow
of the Helen Hay Whitney Foundation.

HARRY F. ARADER, JR. joined the Company in April 1996 as Chief Financial
Officer. From 1986 to 1996, Mr. Arader was employed by G. D. Searle & Company, a
pharmaceutical company ("Searle"), where he held a number of senior management
positions in operations, marketing and strategic planning. From 1994 to 1996, he
was Searle's Managing Director, Greater China; from 1993 to 1994, he served as
Vice President, International Marketing; and from 1990 to 1993, he held the
position of Executive Director, Corporate Strategic Planning. Mr. Arader
received his M.B.A. from the Wharton School.

JOSHUA BOGER, PH.D. has served as a director of the Company since August
1995. Dr. Boger has been the President and Chief Executive Officer of Vertex
Pharmaceuticals, Inc., a biopharmaceutical company ("Vertex"), from 1992 to the
present, and served as President and Chief Scientific Officer of Vertex from
1989 to 1992. Dr. Boger received M.A. and Ph.D. degrees in Chemistry from
Harvard University. He also serves on the Board of Directors of Vertex.

EUGENE CORDES, PH.D. has served as a director of the Company since August
1995. Since August 1995, Dr. Cordes has been a Professor of Pharmacy and
Chemistry, University of Michigan in Ann Arbor. From 1988 to October 1994, Dr.
Cordes served as the Vice President of Sterling Winthrop, Inc., a pharmaceutical
company, and as President of the Pharmaceuticals Research Division.

A. GRANT HEIDRICH, III has served as a director of the Company since 1993.
Since 1983, Mr. Heidrich has served as a general partner of Mayfield Fund. Mr.
Heidrich received his M.B.A. from Columbia University Graduate School of
Business. Mr. Heidrich also serves on the Board of Directors of Vivus, Inc. and
several private companies.

WILLIAM W. HELMAN has served as a director of the Company since 1993. Since
1987, Mr. Helman has served as a general partner of Greylock, a venture capital
firm. Mr. Helman received his M.B.A. from Harvard Business School. Mr. Helman is
a director of Filene's Basement, Inc., Hyperion Software, Vertex and several
private companies.

RAJU KUCHERLAPATI, PH.D. is a founder and has served as a director of the
Company since 1993. Since 1989, Dr. Kucherlapati has served as the Lola and Saul
Kramer Professor and Chairman of the Department of Molecular Genetics at the
Albert Einstein College of Medicine. He received his M.S. in Biology from Andhra
University (India) and his Ph.D. in Genetics from the University of Illinois,
Urbana. Dr. Kucherlapati also was a founder of and serves on the Board of
Directors of Cell Genesys Inc., a biotechnology company.

ERIC S. LANDER, PH.D. is a founder and has served as a director of the
Company since 1993. From 1993 to the present, Dr. Lander has served as Director
of the Whitehead/MIT Center for Genome Research and a member of the Whitehead
Institute for Biomedical Research. From 1989 to the present, Dr. Lander has also
held the positions of Associate Professor and Professor in the Department of
Biology at the Massachusetts Institute of Technology. Dr. Lander received his
Ph.D. in Mathematics from Oxford University, which he attended as a Rhodes
Scholar.

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<PAGE> 52

MICHAEL STEINMETZ, PH.D. has served as a director of the Company since
1994. From 1991 to the present he has served as Vice President, Preclinical
Research and Development at Roche, and from 1986 to 1991 as Associate Director,
heading a pharmaceutical research department, at F. Hoffmann-La Roche Ltd. Dr.
Steinmetz received his Ph.D. in Biochemistry from the University of Munich.

GEOFFREY M. DUYK, M.D., PH.D. joined the Company in July 1994 as Director,
Genomics and became Vice President, Genomics in January 1996. From 1991 to 1994,
Dr. Duyk was an Assistant Professor in the Department of Genetics at Harvard
Medical School and an Assistant Investigator of the Howard Hughes Medical
Institute. From 1992 to 1994, Dr. Duyk was a Co-Principal Investigator in the
Cooperative Human Linkage Center, an NIH sponsored genome center focused on
completing the human genetic maps. Dr. Duyk was a resident and performed his
post-doctoral work at the University of California at San Francisco, where he
was the recipient of a Lucille P. Markey Postdoctoral Fellowship. He received
his Ph.D. and M.D. degrees from Case Western Reserve University School of
Medicine. Dr. Duyk is a member of the NIH Genome Research Review Committee of
the National Center for Genome Research.

ROBERT I. TEPPER, M.D. joined the Company in August 1994 as Director,
Biology and became Vice President, Biology in January 1996. From 1990 to 1994,
Dr. Tepper served as Director of the Laboratory of Tumor Biology at
Massachusetts General Hospital Cancer Center where he was the recipient of a
Lucille P. Markey Biomedical Scholar award. Dr. Tepper is also a founder and
member of the Scientific Advisory Board of Cell Genesys Inc. Dr. Tepper received
his M.D. from Harvard Medical School and did his residency in medicine at
Massachusetts General Hospital where he was Chief Resident.

TIMOTHY CLARK joined the Company in June 1994 as Associate Director,
Bioinformatics and became Director, Bioinformatics in January 1996. From 1991 to
1994, Mr. Clark was employed by NCBI/NIH, during which time he led the
Relational Databases Group responsible for NCBI/GenBank and several other
systems in genome informatics. From 1990 to 1991, Mr. Clark was a Senior Systems
Analyst with MSD, a consulting firm. Mr. Clark received his M.S. in Computer
Science from Johns Hopkins University.

LINDA K. PINE has served as Vice President, Human Resources and Corporate
Communications of the Company since October 1994. From 1990 to 1994, Ms. Pine
served as Vice President of Consulting Services for The Survey Group, a regional
human resources survey and consulting firm. Ms. Pine received her M.P.A. from
Northeastern University.

MARK F. BOSHAR has served as Chief Patent Counsel and Director of Legal
Affairs of the Company since January 1995. From 1992 to 1994, Mr. Boshar served
as Chief Patent Counsel and Director of Legal Affairs at Repligen Corporation, a
biotechnology company. From 1989 to 1992, he was an Associate with the law firm
of Hale and Dorr. Mr. Boshar received his J.D. from Northeastern University
School of Law.

PETER J. COUROSSI joined the Company in January 1995 as Director of
Finance. From 1993 to 1995, Mr. Courossi served as Director of Finance and
Accounting for Genzyme Tissue Repair (formerly BioSurface Technology, Inc.), a
biotechnology company, and from 1989 to 1992 he served as its Corporate
Controller. Mr. Courossi received his M.B.A. from Babson College.

Following this offering, the Board of Directors will be divided into three
classes, each of whose members will serve for a staggered three-year term. The
Board will consist of two Class I Directors (Dr. Steinmetz and Mr. Helman),
three Class II Directors (Drs. Cordes, Kucherlapati and Lander) and three Class
III Directors (Messrs. Levin and Heidrich and Dr. Boger). At each annual meeting
of stockholders, a class of directors will be elected for a three-year term to
succeed the directors of the same class whose terms are then expiring. The terms
of the Class I Directors, Class II Directors and Class III Directors will expire
upon the election and qualification of successor directors at the annual meeting
of stockholders to be held during the calendar years 1997, 1998 and 1999,
respectively.

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<PAGE> 53

Dr. Steinmetz has been nominated and elected to the Board of Directors
pursuant to a voting agreement among certain of the Company's stockholders. This
agreement will terminate upon the consummation of this offering. See "Certain
Transactions".

Executive officers serve at the discretion of the Board of Directors. There
are no family relationships among any of the directors and executive officers of
the Company.

BOARD COMMITTEES

The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries and incentive compensation for employees of
and consultants to the Company, establishes and approves salaries and incentive
compensation for certain senior officers and employees and administers and
grants stock options pursuant to the Company's stock option plans. The current
members of the Compensation Committee are Mr. Heidrich, and Drs. Kucherlapati
and Boger. The Board of Directors also has an Audit Committee, which reviews the
results and scope of the audit and other services provided by the Company's
independent public accountants. The current members of the Audit Committee are
Mr. Helman and Dr. Lander.

BOARD COMPENSATION

The Company's non-employee directors receive an annual retainer of $10,000
for serving on the Board of Directors and receive $1,500, plus reasonable travel
and out-of-pocket expenses, for attendance at meetings of the Board of
Directors. Following the completion of this offering, each non-employee director
will participate in the Company's 1996 Director Option Plan (the "Director
Plan").

Dr. Kucherlapati serves as a member of the Board of Directors under the
terms of an agreement with the Company dated April 21, 1993, as amended, and
pursuant to such agreement is entitled to receive compensation equal to $23,750
per quarter, based upon two days per month of services. The agreement shall
remain in effect for so long as Dr. Kucherlapati remains a member of the Board
of Directors. Pursuant to the agreement, Dr. Kucherlapati received $95,000 from
the Company in 1995. See "Certain Transactions".

Drs. Cordes and Boger serve as members of the Board of Directors under the
terms of agreements with the Company effective as of August 10, 1995 and are
each entitled to compensation equal to $10,000 per year. In addition, Drs.
Cordes and Boger each received an option to purchase 50,000 shares of Common
Stock, at an exercise price of $0.30 per share, the fair market value of the
Company's Common Stock on the date of grant as determined by the Board of
Directors. The options vest in equal monthly installments of one forty-eighth of
the total number of shares subject to the option beginning at the end of the
first month after the date of grant. Each agreement expires on the earlier of
August 10, 1999 or the date upon which the director ceases to serve as a
director of the Company. Pursuant to these agreements, Drs. Cordes and Boger
each received $2,500 from the Company in 1995.

The Company has entered into an agreement for consulting services with Dr.
Lander effective as of January 1, 1993. The agreement expires on December 31,
1996. Either party may terminate the agreement upon 60 days prior written
notice. Pursuant to the agreement, Dr. Lander is compensated at the rate of
$2,375 (plus travel and other appropriate expenses) per day of consulting
services, not to exceed the equivalent of 40 full days per year. Dr. Lander is
required to assign to the Company any inventions made during the course of his
consulting services for the Company and which are wholly unrelated to any of his
activities for his primary employer. Furthermore, the Company agrees that it has
no proprietary rights or privileged access to any of the genomic maps (including
clones, sequences, markers and information) produced by Dr. Lander's primary
employer. Pursuant to this agreement, Dr. Lander received $95,000 in 1995. In
connection with the execution of this agreement, Dr. Lander purchased 780,000
shares of the Company's Common Stock at a purchase price of $0.001 per share. In
July 1994, the Company repurchased 30,409 of

53
<PAGE> 54

such shares at the original purchase price. Pursuant to the terms of the stock
purchase agreement, if Dr. Lander ceases to serve as a consultant for any reason
the Company has the right to repurchase from Dr. Lander, at the original
purchase price, that number of shares owned by him as is determined by a formula
based upon the number of days of consulting services provided. The repurchase
option will terminate upon the closing of this offering. The stock purchase
agreement also provides that the Company shall have a right of first refusal in
the event Dr. Lander desires to sell all or any part of the shares.

DIRECTOR OPTION PLAN

The Director Plan was adopted by the Board of Directors in March 1996, was
approved by the stockholders in April 1996, and will become effective upon the
closing of this offering. Under the terms of the Director Plan (i) options to
purchase 20,000 shares of Common Stock will be granted to each non-employee
director serving as a director as of the closing of the offering (the "Existing
Director Options"), except directors who have received stock option grants in
the 12 months preceding the closing of the offering (the "Pre-Offering Director
Options") and (ii) options to purchase 30,000 shares of Common Stock (the "New
Director Options") will be granted to each person who first becomes an eligible
non-employee director after the closing date of the offering, effective as of
the date of election to the Board of Directors. The Existing Director Options
and New Director Options will vest on a monthly basis in 48 equal installments,
commencing on the 30th day after the date of grant. Each eligible director will
be granted an additional option to purchase 20,000 shares of Common Stock as of
the date that such director's Existing Director Options, Pre-Offering Director
Options, or New Director Options have fully vested, and on each four-year
anniversary thereof. The exercisability of these options will be accelerated
upon the occurrence of a change in control (as defined in the Director Plan). A
total of 250,000 shares of Common Stock may be issued upon the exercise of stock
options granted under the Director Plan. The exercise price of options granted
under the Director Plan will equal the closing price of the Common Stock on the
Nasdaq National Market on the date of grant.

EXECUTIVE COMPENSATION

The following table sets forth certain information with respect to the
compensation paid by the Company during the fiscal year ended December 31, 1995
to the Company's Chief Executive Officer and each of the Company's two other
most highly compensated executive officers whose cash compensation exceeded
$100,000 (the Chief Executive Officer and such other executive officers are
hereinafter referred to as the "Named Executive Officers"):

<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>

LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION(1) NUMBER OF
------------------ SECURITIES ALL OTHER
NAME AND PRINCIPAL SALARY BONUS UNDERLYING COMPENSATION
POSITION ($) ($) OPTIONS ($)(2)
- ------------------ -------- ----- ------------ ------------
<S> <C> <C> <C> <C>
Mark J. Levin............................ $300,000 $0 100,000 $ 870
Chief Executive Officer
Steven H. Holtzman....................... 212,046 0 41,125 15,510(3)
Chief Business Officer
Frank D. Lee............................. 208,108 0 45,750 16,852(4)
Chief Scientific Officer
</TABLE>

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<PAGE> 55

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

(1) Includes amounts payable in 1995 and/or 1996 for services rendered by the
Named Executive Officers in 1995. Other compensation in the form of
perquisites and other personal benefits has been omitted because it
constitutes less than the lesser of $50,000 or ten percent of the total
annual salary and bonus for the Named Executive Officers in 1995.

(2) Includes term-life insurance premiums paid by the Company on behalf of the
Named Executive Officers in 1995.

(3) Includes reimbursement of $15,000 for housing differential paid by the
Company in 1995.

(4) Includes a relocation allowance of $16,342 paid by the Company in 1995.

<TABLE>
The following table sets forth certain information regarding options
granted by the Company to the Named Executive Officers during the fiscal year
ended December 31, 1995.
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR

POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
----------------------------------------------
PERCENT AT ASSUMED
NUMBER OF OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO FOR OPTION
OPTIONS EMPLOYEES EXERCISE TERM($)(2)
GRANTED IN FISCAL PRICE EXPIRATION -----------------
NAME (1) YEAR ($) DATE 5% 10%
- ---- --------- ---------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Mark J. Levin..................... 100,000 8.8% $.60 12/21/05 $37,734 $95,625
Steven H. Holtzman................ 1,125 0.1 .30 1/01/05 212 538
40,000 3.5 .30 7/27/05 7,547 19,125
Frank D. Lee...................... 750 0.1 .30 1/01/05 142 359
45,000 4.0 .30 9/21/05 8,490 21,516
<FN>

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

(1) One forty-eighth of the total number of shares subject to the option are
exercisable at the end of the first month after the date of grant and an
additional one forty-eighth of the total number of shares subject to the
option will be exercisable at the end of each month thereafter until all of
such shares are exercised; provided, however, that at the election of the
Named Executive Officer, all of such shares may be immediately exercisable
in which event the portion of the shares of Common Stock issued upon
exercise corresponding to the vesting schedule for the original option shall
be subject to repurchase by the Company.

(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. This table does not take into account any
appreciation in the price of the Common Stock to date. Actual gains, if any,
on stock option exercises will depend on the future performance of the
Common Stock and the date at which the options are exercised.
</TABLE>

55
<PAGE> 56

<TABLE>
The following table sets forth certain information regarding stock options
held as of December 31, 1995 by the Named Executive Officers.
<CAPTION>

AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES

VALUE OF
NUMBER OF UNEXERCISED
SHARES IN-THE-MONEY
UNDERLYING OPTIONS AT
UNEXERCISED FISCAL
OPTIONS AT YEAR-END
NUMBER OF FISCAL YEAR-END ($)(2)
SHARES VALUE ------------------ --------------
ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE ($)(1) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ------------------ --------------
<S> <C> <C> <C> <C>
Mark J. Levin...................... 749,591(3) $ 43,245 100,000(4)/0 $ 0/0
Steven H. Holtzman................. 292,125(5) 107,842 0 /0 0/0
Frank D. Lee....................... 110,939 22,329 234,811(6)/0 109,193/0
<FN>

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

(1) Based on the fair market value of the Common Stock on December 31, 1995
($0.60), as determined by the Board of Directors, less the option exercise
price.
(2) Represents the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise.
(3) Of these shares, 216,227 were exercised for cash, of which 66,163 shares
were subject to repurchase by the Company as of December 31, 1995. The
consideration for the remaining 533,364 shares was provided by the Company
in the form of a loan, with 400,023 shares being subject to repurchase by
the Company as of December 31, 1995. See "-- Employment Agreements".
(4) If exercised, all shares would be subject to repurchase by the Company.
(5) Of these shares, 186,076 were subject to repurchase by the Company as of
December 31, 1995.
(6) If exercised, 234,641 shares would be subject to repurchase by the Company.
</TABLE>

EMPLOYMENT AGREEMENTS

In November 1994, the Company entered into an employment agreement with Mr.
Levin. The agreement provides for an initial annual salary of $300,000. In
addition, Mr. Levin was granted an option to purchase 533,364 shares of the
Company's Common Stock at an exercise price of $0.30 per share. The option was
exercised in November 1995. The shares issued upon exercise of the option are
subject to repurchase by the Company and are released from such repurchase
option at a rate of one forty-eighth of such shares per month. As of December
31, 1995, 400,023 of the shares issued upon exercise of the option were subject
to repurchase by the Company. In connection with the grant of the option, the
Company agreed to loan Mr. Levin up to $266,681, the net after tax purchase
price for the options. The loan bears interest at a rate of 7% per annum and is
secured by a pledge of the shares of Common Stock issued upon exercise of the
option. The Company has agreed to forgive one forty-eighth of the principal plus
accrued interest of the loan monthly beginning on December 31, 1995, subject to
Mr. Levin's continued employment. In the event of Mr. Levin's termination either
voluntarily or by the Company without cause, the unforgiven principal of the
loan will be due on the first to occur of (i) the first anniversary of such
termination, (ii) the first date upon which the fair market value of freely
tradeable shares held by Mr. Levin exceeds $1,000,000 or (iii) the date upon
which Mr. Levin receives cash or freely tradeable securities having a value of
at least $1,000,000 in an acquisition of the Company. The Company also agreed to
pay Mr. Levin's relocation expenses up to a maximum of $100,000.

56
<PAGE> 57

In April 1994, the Company entered into an employment agreement with Mr.
Holtzman. The agreement provides for an initial annual salary of $200,000. In
addition, Mr. Holtzman was granted an option to purchase 250,000 shares of the
Company's Common Stock at an exercise price of $0.10 per share. The option is
exercisable immediately and one-quarter of the resulting shares vest and are
released from the Company's repurchase option on the first anniversary of the
grant and one forty-eighth of the remaining shares vest per month thereafter.
The Company also agreed to pay Mr. Holtzman a one-time relocation allowance of
$65,000 and a yearly allowance of $15,000 in 1994 and 1995 to compensate Mr.
Holtzman for housing differential costs between the Princeton, New Jersey and
Boston, Massachusetts areas. In January 1996, the Company granted to Mr.
Holtzman an option to purchase 54,625 shares of Common Stock at an exercise
price of $0.60 per share. The option was exercised in January 1996. The shares
issued upon exercise of the option are subject to repurchase by the Company and
are released from such repurchase option at a rate of one forty-eighth of such
shares per month. In March 1996, the Company loaned to Mr. Holtzman $53,841, a
portion of the net after tax exercise price paid by Mr. Holtzman to exercise the
option. The loan bears interest at a rate of 6.1% per annum and is secured by a
pledge of the shares which were issued to Mr. Holtzman upon exercise of the
option. The Company has agreed to forgive one forty-eighth of the principal plus
accrued interest of the loan monthly beginning April 15, 1996, subject to Mr.
Holtzman's continued employment. In the event of Mr. Holtzman's termination
either voluntarily or by the Company without cause, the unforgiven principal of
the loan will be due on the first to occur of (i) the first anniversary of such
termination, (ii) the first date upon which the fair market value of freely
tradeable shares held by Mr. Holtzman exceeds $250,000 or (iii) the last date
upon which Mr. Holtzman receives cash or freely tradeable securities having a
value of at least $250,000 in an acquisition of the Company. In the event of Mr.
Holtzman's termination for cause, the unforgiven principal of the loan, plus
interest accrued thereon, will be due and payable in full thirty days after such
termination.

In June 1994, the Company entered into an employment agreement with Dr.
Lee. The agreement provides for an initial annual salary of $200,000, plus a
hiring bonus of $30,000. In addition, Dr. Lee was granted an option to purchase
300,000 shares of the Company's Common Stock at an exercise price of $0.10 per
share. The option is exercisable immediately and one-quarter of the resulting
shares are released from the Company's repurchase option on the first
anniversary of the grant and one forty-eighth of the remaining shares vest per
month thereafter. The Company also agreed to pay Dr. Lee a relocation allowance
of up to $95,000.

The Company has the right to terminate the employment agreements with Mr.
Holtzman and Dr. Lee at any time. In the event the Company terminates any
executive's employment without justifiable cause (as defined in each employment
agreement), the executive is entitled to receive a severance payment equal to 12
months' salary; however, the Company's obligation to make the severance payment
will cease if the executive accepts other employment.

STOCK PLANS

1993 INCENTIVE STOCK PLAN. The Company's 1993 Incentive Stock Plan, as
amended (the "1993 Plan"), was adopted by the Board of Directors in March 1993
and approved by the stockholders of the Company in April 1993. The 1993 Plan
provides for the grant of stock options to employees, officers and directors of,
and consultants or advisors to, the Company and its subsidiaries. Under the 1993
Plan, the Company may grant options that are intended to qualify as incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") ("incentive stock options"), or options not
intended to qualify as incentive stock options ("non-statutory options").
Incentive stock options may only be granted to employees of the Company. A total
of 5,400,000 shares of Common Stock may be issued upon the exercise of options
granted under the 1993 Plan.

The 1993 Plan is administered by the Compensation Committee of the Board of
Directors. Subject to the provisions of the 1993 Plan, the Compensation
Committee (or the Board of

57
<PAGE> 58

Directors) has the authority to select the employees to whom options are granted
and determine the terms of each option, including (i) the number of shares of
Common Stock subject to the option, (ii) when the option becomes exercisable,
(iii) the option exercise price, which, in the case of incentive stock options,
must be at least 100% (110% in the case of incentive stock options granted to a
stockholder owning in excess of 10% of the Company's Common Stock) of the fair
market value of the Common Stock as of the date of grant, and (iv) the duration
of the option (which, in the case of incentive stock options, may not exceed ten
years). The Compensation Committee of the Board of Directors may, in its sole
discretion, include additional provisions in any option or award granted or made
under the 1993 Plan, including without limitation restrictions on transfer,
repurchase rights, commitments to pay cash bonuses, to make, arrange for or
guaranty loans or to transfer other property to optionees upon exercise of
options, or such other provisions as shall be determined by the Compensation
Committee of the Board of Directors, so long as not inconsistent with the 1993
Plan or applicable law. The Compensation Committee of the Board of Directors may
also, in its sole discretion, accelerate or extend the date or dates on which
all or any particular option or options granted under the 1993 Plan may be
exercised.

Payment of the option exercise price may be made in cash, shares of Common
Stock, a combination of cash and Common Stock or by any other method (including
delivery of a promissory note payable on terms specified by the Board of
Directors) approved by the Board of Directors consistent with Section 422 of the
Code and Rule 16b-3 under the Securities Exchange Act of 1934, as amended.
Options are not assignable or transferable except by will or the laws of descent
and distribution.

As of April 1, 1996, the Company had approximately 166 full-time employees
who would have been eligible to participate in the 1993 Plan. The number of
persons receiving stock options varies from year to year depending on various
factors, such as the number of promotions and the Company's hiring needs during
the year, and thus the Company cannot now determine award recipients.

1996 EQUITY INCENTIVE PLAN. The Company's 1996 Equity Incentive Plan (the
"Equity Plan") was adopted by the Board of Directors in March 1996 and was
approved by the stockholders in April 1996. Under the terms of the Equity Plan
the Company is authorized to make awards of restricted stock and to grant
incentive stock options and non-statutory stock options to employees (including
officers and employee directors) of, and consultants and advisors to, the
Company to purchase shares of the Common Stock of the Company. A total of
2,100,000 shares of Common Stock may be issued upon exercise of options granted
or awards made under the Equity Plan.

Stock option grants under the Equity Plan entitle the optionee to purchase
Common Stock from the Company, for a specified exercise price, during the
periods specified in the applicable option agreement. The Compensation Committee
of the Board of Directors will select the persons to whom options are granted,
and determine the number of shares covered by each option, its exercise price,
its vesting schedule and its expiration date. Options are generally not
assignable or transferable except by will or the laws of descent and
distribution.

Restricted stock awards under the Equity Plan entitle the recipient to
purchase Common Stock from the Company under terms which provide for vesting
over a period of time and a right of repurchase of unvested stock when the
recipient's relationship with the Company terminates. The Compensation Committee
of the Board of Directors will select the recipients of restricted stock awards,
determine the times at which restricted stock awards are made, and determine the
number of shares of Common Stock subject to the award, the purchase price (which
can be less than the fair market value of the Common Stock) and the vesting
schedule for such shares. The recipients may not sell, transfer or otherwise
dispose of shares subject to a restricted stock award until such shares are
vested. Upon termination of the recipient's relationship with the Company, the
Company will be entitled to repurchase those shares which are not vested on the
termination date at a price equal to their original purchase price.

58
<PAGE> 59

As of April 1, 1996, the Company had approximately 166 full-time employees
who would have been eligible to participate in the Equity Plan. The number of
individuals receiving stock options or awards may vary from year to year
depending on various factors, such as the number of promotions and the Company's
hiring needs during the year, and thus the Company cannot now determine award
recipients.

1996 EMPLOYEE STOCK PURCHASE PLAN. The Company's 1996 Employee Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board of Directors in
March 1996, was approved by the stockholders in April 1996, and will become
effective upon the closing of this offering. The Purchase Plan authorizes the
issuance of up to a total of 350,000 shares of Common Stock to participating
employees.

All employees of the Company, including directors of the Company who are
employees, and all employees of any participating subsidiaries whose customary
employment is more than 20 hours per week and for more than five months in any
calendar year are eligible to participate in the Purchase Plan. Employees who
would immediately after the grant own 5% or more of the total combined voting
power or value of the stock of the Company or any subsidiary are not eligible to
participate. As of April 1, 1996, approximately 166 of the Company's employees
would have been eligible to participate in the Purchase Plan.

On the first day of a designated payroll deduction period (the "Offering
Period"), the Company will grant to each eligible employee who has elected to
participate in the Purchase Plan an option to purchase shares of Common Stock as
follows: The employee may authorize an amount ( a whole percentage from 1% to
10% of such employee's regular pay) to be deducted by the Company from such pay
during the Offering Period. On the last day of the Offering Period, the employee
is deemed to have exercised the option, at the option exercise price, to the
extent of accumulated payroll deductions. Under the terms of the Purchase Plan,
the option price is an amount equal to 85% of the fair market value per share of
the Common Stock on either the first day or the last day of the Offering Period,
whichever is lower. In no event may an employee purchase in any one Offering
Period a number of shares which is more than 15% of the employee's annualized
base pay divided by 85% of the market value of a share of Common Stock on the
commencement date of the Offering Period. The Compensation Committee may, in its
discretion, choose an Offering Period of 12 months or less for each of the
Offerings and choose a different Offering Period for each Offering.

If an employee is not a participant on the last day of the Offering Period,
such employee is not entitled to exercise any option, and the amount of such
employee's accumulated payroll deductions will be refunded. An employee's rights
under the Purchase Plan terminate upon voluntary withdrawal from the Purchase
Plan at any time, or when such employee ceases employment for any reason, except
that upon termination of employment because of death, the employee's beneficiary
has certain rights to elect to exercise the option to purchase the shares which
the accumulated payroll deductions in the participant's account would purchase
at the date of death.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In 1995, the members of the Compensation Committee of the Board of
Directors were Dr. Kucherlapati and Mr. Heidrich, neither of whom is an employee
of the Company.

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<PAGE> 60

CERTAIN TRANSACTIONS

In January 1993, the Company entered into a consulting agreement with
Daniel Cohen, M.D., a founder of the Company, pursuant to which Dr. Cohen agreed
to provide certain consulting services to the Company. The Company agreed to pay
Dr. Cohen at the rate of $2,375 per day of consulting services. Dr. Cohen
resigned as a consultant to the Company effective December 31, 1995. Pursuant to
the terms of the consulting agreement, the Company sold to Dr. Cohen 780,000
shares of Common Stock at a purchase price of $.001 per share. In July 1994 and
March 1996, the Company repurchased from Dr. Cohen 30,409 shares and 327,946
shares, respectively, at a purchase price equal to $.001, the original purchase
price. In March 1996, Dr. Cohen sold 93,000 and 57,000 of his remaining shares
to Venrock Associates ("Venrock") and Venrock Associates II, L.P. ("Venrock
II"), respectively, at a purchase price of $6.33 per share.

In January 1993, the Company entered into an agreement for consulting
services with Dr. Lander, a director of the Company. Pursuant to the agreement,
Dr. Lander is compensated at the rate of $2,375 (plus travel and other
appropriate expenses) per day of consulting services, not to exceed the
equivalent of 40 full days per year. Pursuant to this agreement, Dr. Lander
received $95,000 in 1995. In connection with the execution of this agreement,
Dr. Lander purchased 780,000 shares of the Company's Common Stock at a purchase
price of $0.001 per share. In July 1994, the Company repurchased 30,409 of such
shares at the original purchase price. Pursuant to the terms of the stock
purchase agreement, if Dr. Lander ceases to serve as a consultant for any reason
the Company has the right to repurchase from Dr. Lander, at the original
purchase price, that number of shares owned by him as is determined by a formula
based upon the number of days of consulting services provided. The repurchase
option will terminate upon the closing of this offering. The stock purchase
agreement also provides that the Company shall have a right of first refusal in
the event Dr. Lander desires to sell all or any part of the shares.

In April 1993, the Company entered into an agreement with Dr. Kucherlapati,
a director of the Company, pursuant to which Dr. Kucherlapati serves as a member
of the Board of Directors and is entitled to receive compensation equal to
$23,750 per quarter, based upon two days per month of services. The agreement
shall remain in effect for so long as Dr. Kucherlapati remains a member of the
Board of Directors. Pursuant to the agreement, Dr. Kucherlapati received $95,000
from the Company in 1995.

In April 1993, the Company sold 8,450,000 shares of Series A Preferred
Stock, at a purchase price of $1.00 per share, to a group of investors including
Greylock Limited Partnership ("Greylock"), Mayfield Medical Partners (1992)
("Mayfield 1992"), Mayfield VII ("Mayfield VII"), Mayfield Associates Fund II
("Mayfield Associates II"), Venrock, Venrock II, Kleiner, Perkins, Caufield &
Buyers VI ("KPCB VI") and KPCB Founders Fund ("KPCB Fund"). Mr. Helman, a
director of the Company, is a General Partner of Greylock Equity GP Limited
Partnership, the General Partner of Greylock. Mr. Heidrich, a director of the
Company, is a General Partner of Mayfield Fund, the General Partner of Mayfield
1992, Mayfield VII and Mayfield Associates II. Mr. Levin, Chief Executive
Officer of the Company, was a partner of Mayfield Fund from 1987 to 1994 and has
retained a 0.6% interest in Mayfield Associates II.

In November 1993, the Company entered into a consulting agreement with
Jeffrey Friedman, Ph.D., a founder of the Company, pursuant to which Dr.
Friedman agreed to provide certain consulting services to the Company. The
Company agreed to pay Dr. Friedman at a rate of $2,375 per day of consulting
services. The consulting agreement was terminated by the Company effective June
30, 1995. Pursuant to the terms of the consulting agreement, the Company sold to
Dr. Friedman 675,000 shares of Common Stock at a purchase price of $.001 per
share. In July 1994 and December 1995, the Company repurchased 30,409 shares and
332,261 shares, respectively, at a repurchase price equal to $.001, the original
purchase price. In April 1994, the Company granted Dr. Friedman a non-statutory
option to purchase 105,000 shares of Common Stock which was cancelled in
December 1995.

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<PAGE> 61

In April 1994, the Company entered into an employment agreement with Mr.
Holtzman, the Chief Business Officer of the Company. The agreement provides for
an initial annual salary of $200,000. In addition, Mr. Holtzman was granted an
option to purchase 250,000 shares of the Company's Common Stock at an exercise
price of $0.10 per share. The option is exercisable immediately and one-quarter
of the resulting shares vest and are released from the Company's repurchase
option on the first anniversary of the grant and one forty-eighth of the
remaining shares vest per month thereafter. The Company also agreed to pay Mr.
Holtzman a one-time relocation allowance of $65,000 and a yearly allowance of
$15,000 in 1994 and 1995 to compensate Mr. Holtzman for housing differential
costs between the Princeton, New Jersey and Boston, Massachusetts areas. In
January 1996, the Company granted to Mr. Holtzman an option to purchase 54,625
shares of Common Stock at an exercise price of $0.60 per share. The option was
exercised in January 1996. The shares issued upon exercise of the option are
subject to repurchase by the Company and are released from such repurchase
option at a rate of one forty-eighth of such shares per month. In March 1996,
the Company loaned to Mr. Holtzman $53,841, a portion of the net after tax
exercise price paid by Mr. Holtzman to exercise the option. The loan bears
interest at a rate of 6.1% per annum and is secured by a pledge of the shares
which were issued to Mr. Holtzman upon exercise of the option. The Company has
agreed to forgive one forty-eighth of the principal plus accrued interest of the
loan monthly beginning April 15, 1996, subject to Mr. Holtzman's continued
employment. In the event of Mr. Holtzman's termination either voluntarily or by
the Company without cause, the unforgiven principal of the loan will be due on
the first to occur of (i) the first anniversary of such termination, (ii) the
first date upon which the fair market value of freely tradeable securities held
by Mr. Holtzman exceeds $250,000 or (iii) the last date upon which Mr. Holtzman
receives cash or freely tradeable securities having a value of at least $250,000
in an acquisition of the Company. In the event of Mr. Holtzman's termination for
cause, the unforgiven principal of the loan, plus interest accrued thereon, will
be due and payable in full thirty days after such termination.

In April and September 1994 and February 1995, the Company sold an
aggregate of 2,000,000 shares of Series B Preferred Stock to F. Hoffmann-La
Roche Ltd., an affiliate of Roche, at a purchase price of $3.00 per share. In
addition, the Company and Roche executed a strategic alliance agreement pursuant
to which Roche will make payments to the Company of up-front fees and research
funding. In the event that specified research, product development and
associated regulatory milestones are achieved, Roche is obligated to pay to the
Company certain milestone payments. In addition, Roche will be obligated to pay
to the Company royalties on the sale by Roche of products which may result from
the alliance. See "Business -- Strategic Alliances -- Hoffmann-La Roche Inc.".
Michael Steinmetz, a member of the Board of Directors, is Vice President,
Preclinical Research and Development of an affiliate of Roche. The Company, its
founders, holders of shares of Series A Preferred Stock of the Company (the
"Series A Holders") and Roche have entered into a Voting Agreement pursuant to
which the founders and Series A Holders have agreed to vote the shares of
capital stock held by them to elect the nominee of Roche to serve on the
Company's Board of Directors. The Voting Agreement will terminate upon the
closing of this offering.

In June 1994, the Company entered into an employment agreement with Dr.
Lee, the Chief Scientific Officer of the Company. The agreement provides for an
initial salary of $200,000, plus a hiring bonus of $30,000. In addition, Dr. Lee
was granted an option to purchase 300,000 shares of the Company's Common Stock
at an exercise price of $0.10 per share. The option is exercisable immediately
and one-quarter of the resulting shares are released form the Company's
repurchase option on the first anniversary of the grant and one forty-eighth of
the remaining shares vest per month thereafter. The Company also agreed to pay
Dr. Lee a relocation allowance of up to $95,000.

In November 1994, the Company entered into an employment agreement with Mr.
Levin, the Chief Executive Officer of the Company. The agreement provides for an
initial annual salary of $300,000. In addition, Mr. Levin was granted an option
to purchase 533,364 shares of the Company's Common Stock at an exercise price of
$0.30 per share. The option was exercised in

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<PAGE> 62

November 1995. The shares issued upon exercise of the option are subject to
repurchase by the Company and are released from such repurchase option at a rate
of one forty-eighth of such shares per month. As of December 31, 1995, 400,023
of the shares issued upon exercise of the option were subject to repurchase by
the Company. In connection with the grant of the option, the Company agreed to
loan Mr. Levin up to $266,681, the net after tax purchase price for the options.
The loan bears interest at a rate of 7% per annum and is secured by a pledge of
the shares of Common Stock issued upon exercise of the option. The Company has
agreed to forgive one forty-eighth of the principal plus accrued interest of the
loan monthly beginning on December 31, 1995, subject to Mr. Levin's continued
employment. In the event of Mr. Levin's termination either voluntarily or by the
Company without cause, the unforgiven principal of the loan will be due on the
first to occur of (i) the first anniversary of such termination, (ii) the first
date upon which the fair market value of freely tradeable securities held by Mr.
Levin exceeds $1,000,000 or (iii) the date upon which Mr. Levin receives cash or
freely tradeable securities having a value of at least $1,000,000 in an
acquisition of the Company. The Company also agreed to pay Mr. Levin's
relocation expenses up to a maximum of $100,000.

In August 1995, the Company entered into agreements with Drs. Cordes and
Boger, directors of the Company, pursuant to which Drs. Cordes and Boger serve
as members of the Board of Directors and are each entitled to compensation equal
to $10,000 per year. In addition, Drs. Cordes and Boger each received an option
to purchase 50,000 shares of Common Stock, at an exercise price of $0.30 per
share, the fair market value of the Company's Common Stock on the date of grant
as determined by the Board of Directors. The options vest in equal monthly
installments of one forty-eighth of the total number of shares subject to the
option beginning at the end of the first month after the date of grant. Pursuant
to these agreements, Drs. Cordes and Boger each received $2,500 from the Company
in 1995.

In October 1995, the Company sold 1,333,333 shares of Series C Preferred
Stock to Lilly at a purchase price of $6.00 per share. In addition, the Company
and Lilly entered into a strategic alliance agreement in atherosclerosis in
October 1995 and in select areas within oncology in April 1996 pursuant to which
Lilly will make payments to the Company of up-front fees and research funding.
In the event specified research, product development and associated regulatory
milestones based upon the Company's discoveries are achieved, Lilly is obligated
to pay to the Company certain milestone payments. In addition, Lilly will be
obligated to pay to the Company royalties on the sale by Lilly of products that
may result from the alliances. See "Business -- Strategic Alliances -- Eli Lilly
and Company".

For a description of certain transactions between the Company and certain
directors and executive officers of the Company, see "Management -- Director
Compensation" and " -- Employment Agreements". For a description of certain
employment and other arrangements between the Company and its executive
officers, see "Management -- Executive Compensation" and "-- Employment
Agreements".

The Company believes that the securities issued in the transactions
involving the Company described above were sold by the Company at their then
fair market value and that the terms of the transactions described above were no
less favorable than the Company could have obtained from unaffiliated third
parties.

The Company has adopted a policy, effective following the consummation of
the offering, that all material transactions between the Company and its
officers, directors and other affiliates must (i) be approved by a majority of
the members of the Company's Board of Directors and by a majority of the
disinterested members of the Company's Board of Directors and (ii) be on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties. In addition, this policy will require that any loans by the Company to
its officers, directors or other affiliates be for bona fide business purposes
only.

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<PAGE> 63

PRINCIPAL STOCKHOLDERS
<TABLE>
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 1, 1996: (i) by each person
known by the Company to beneficially own more than 5% of the outstanding shares
of Common Stock, (ii) by each director, (iii) by each of the Named Executive
Officers and (iv) by all executive officers and directors as a group:

<CAPTION>
PERCENTAGE OF SHARES
OF COMMON STOCK
BENEFICIALLY OWNED
NUMBER OF SHARES OF -----------------------
NAME AND ADDRESS OF COMMON STOCK PRIOR TO AFTER
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OFFERING OFFERING
- ------------------------------------------- --------------------- -------- --------
<S> <C> <C> <C>
5% STOCKHOLDERS
Funds managed by Mayfield Fund................. 3,000,000(2) 16.4% 13.1%
2800 Sand Hill Road
Suite 250
Menlo Park, CA 94025

Funds managed by Kleiner, Perkins,
Caufield & Byers............................. 2,000,000(3) 10.9 8.8
Four Embarcadero Center
Suite 3520
San Francisco, CA 94111

F. Hoffmann-La Roche Ltd....................... 2,000,000(4) 10.9 8.8
Postfach, CH-4070
Basel, Switzerland

Greylock Limited Partnership................... 1,500,000 8.2 6.6
One Federal Street
Boston, MA 02110-2065

Eli Lilly and Company.......................... 1,333,333(5) 7.3 5.8
Lilly Corporate Center
Indianapolis, IN 46285

Entities affiliated with Venrock Associates... 1,000,000(6) 5.5 4.4
30 Rockefeller Plaza
Room 5508
New York, NY 10112

DIRECTORS
Mark J. Levin.................................. 1,563,216(7) 8.5 6.8
Joshua Boger, Ph.D............................. 9,375(8) * *
Eugene Cordes, Ph.D............................ 9,375(9) * *
A. Grant Heidrich, III......................... 3,000,000(10) 16.4 13.1
William W. Helman.............................. 1,500,000(11) 8.2 6.6
Raju Kucherlapati, Ph.D........................ 317,361(12) 1.7 1.4
Eric S. Lander, Ph.D........................... 749,591(13) 4.1 3.3
Michael Steinmetz, Ph.D........................ 0(14) * *
NAMED EXECUTIVE OFFICERS
Steven H. Holtzman............................. 347,600(15) 1.9 1.5
Frank D. Lee, Ph.D............................. 346,600(16) 1.9 1.5
All directors and executive officers as a group
(10 persons)................................. 7,130,343(17) 38.7 31.1
- ---------------
<FN>
* Less than 1% of the outstanding shares of Common Stock.

(1) Except as otherwise noted, the persons named in the table have sole voting
and investment power with respect to all shares shown as beneficially owned
by them, subject to information contained in the footnotes to this table.

</TABLE>
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<PAGE> 64

(2) Includes 135,000 shares of Common Stock held by Mayfield Associates II,
712,775 shares of Common Stock held by Mayfield 1992 and 2,152,225 shares
of Common Stock held by Mayfield VII. The General Partners of Mayfield
Associates II are a group of individuals associated with Mayfield Fund. The
General Partners of Mayfield 1992 are Mark Levin and Mayfield VII. Mr.
Levin disclaims beneficial ownership of such shares except to the extent of
his pecuniary interest in such shares. Mayfield VII Management Partners, a
California limited partnership, is the General Partner of Mayfield VII.

(3) Includes 1,734,000 shares of Common Stock held by KPCB VI and 266,000
shares of Common Stock held by KPCB Fund. KPCB VI Associates is the General
Partner of KPCB VI and KPCB Fund.

(4) Does not include any shares of Common Stock that F. Hoffmann-La Roche Ltd.
may purchase in this offering. F. Hoffmann-La Roche Ltd. has indicated a
non-binding intention to purchase 166,666 shares of Common Stock in this
offering. If F. Hoffmann-La Roche Ltd. purchases such shares it will
beneficially own 9.5% of the Common Stock outstanding after this offering.
See "Underwriting".

(5) Does not include any shares of Common Stock that Lilly may purchase in this
offering. Lilly has indicated a non-binding intention to purchase 291,666
shares of Common Stock in this offering. If Lilly purchases such shares it
will beneficially own 7.1% of the Common Stock outstanding after this
offering. See "Underwriting".

(6) Includes 679,873 shares of Common Stock held by Venrock Associates, a
limited partnership, and 320,127 shares of Common Stock held by Venrock
Associates II, a limited partnership. The General Partners of Venrock
Associates and Venrock Associates II, L.P. are a group of individuals
affiliated with both funds.

(7) Includes 514,165 shares of Common Stock which may be repurchased by the
Company under certain circumstances. Also includes 712,775 shares of Common
Stock held by Mayfield 1992. Mr. Levin is a General Partner of Mayfield
1992 but disclaims beneficial ownership of such shares except to the extent
of his pecuniary interest therein.

(8) Represents 9,375 shares of Common Stock issuable to Dr. Boger within 60
days of April 1, 1996 upon exercise of stock options.

(9) Represents 9,375 shares of Common Stock issuable to Dr. Cordes within 60
days of April 1, 1996 upon exercise of stock options.

(10) Represents 135,000 shares of Common Stock held by Mayfield Associates II,
712,775 shares of Common Stock held by Mayfield 1992 and 2,152,225 shares
of Common Stock held by Mayfield VII. Mr. Heidrich is a General Partner of
Mayfield, the General Partner of Mayfield Associates II, Mayfield 1992 and
Mayfield VII. Mr. Heidrich disclaims beneficial ownership of such shares,
except to the extent of his pecuniary interest in such shares. Mr. Heidrich
shares dispositive and voting power of such shares with the general
partners of Mayfield.

(11) Represents 1,500,000 shares of Common Stock held by Greylock. Mr. Helman is
a General Partner of Greylock. Mr. Helman disclaims beneficial ownership of
such shares, except to the extent of his pecuniary interest in such shares.
Mr. Helman shares dispositive and voting power of such shares with the
general partners of Greylock.

(12) Includes 84,028 shares of Common Stock issuable to Dr. Kucherlapati within
60 days of April 1, 1996 upon exercise of stock options and 30,599 shares
that may be repurchased by the Company under certain circumstances.

(13) Includes 100,000 shares of Common Stock beneficially owned by a trust for
the benefit of Mr. Lander's minor children for which Mr. Lander disclaims
beneficial ownership.

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<PAGE> 65

(14) Dr. Steinmetz is Vice President, Preclinical Research and Development of
Roche, an affiliate of F. Hoffmann-La Roche, Ltd. F. Hoffmann-La Roche,
Ltd. holds 2,000,000 shares of Common Stock and, pursuant to a Voting
Agreement with the Company and certain of its other stockholders, has
designated Dr. Steinmetz to serve as a director of the Company. F.
Hoffmann-La Roche Ltd. may purchase additional shares in this offering, as
discussed in footnote (4) above. Dr. Steinmetz disclaims beneficial
ownership of the shares owned by F. Hoffmann-La Roche Ltd. and has no
dispositive or voting power with respect to such shares. See "Certain
Transactions".

(15) Includes 850 shares of Common Stock issuable to Mr. Holtzman within 60 days
of April 1, 1996 upon exercise of stock options and 219,068 shares of
Common Stock which may be repurchased by the Company under certain
circumstances. Also includes 100,000 shares of Common Stock beneficially
owned by a trust for the benefit of Mr. Holtzman's minor children for which
Mr. Holtzman disclaims beneficial ownership.

(16) Includes 213,813 shares of Common Stock which may be repurchased by the
Company under certain circumstances.

(17) Includes 103,628 shares of Common Stock issuable upon exercise of stock
options held by all directors and executive officers as a group which are
exercisable within 60 days of April 1, 1996. Also includes 977,645 shares
of Common Stock held by all directors and executive officers as a group
which may be repurchased by the Company under certain circumstances.

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<PAGE> 66

DESCRIPTION OF CAPITAL STOCK

Upon the completion of this offering, the Company will be authorized to
issue 100,000,000 shares of Common Stock, $0.001 par value per share, of which
22,837,678 shares will be issued and outstanding, and 5,000,000 shares of
undesignated Preferred Stock, $.001 par value per share, of which no shares will
be issued and outstanding.

COMMON STOCK

Upon the closing of this offering, the Company's Restated Certificate of
Incorporation will authorize the issuance of up to 100,000,000 shares of Common
Stock, $.001 par value per share. Holders of Common Stock are entitled to one
vote for each share held on all matters submitted to a vote of stockholders and
do not have cumulative voting rights. Accordingly, holders of a majority of the
shares of Common Stock entitled to vote in any election of directors may elect
all of the directors standing for election. Holders of Common Stock are entitled
to receive ratably such dividends, if any, as may be declared by the Board of
Directors out of funds legally available therefor and subject to any
preferential dividend rights of any then outstanding Preferred Stock. Upon the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive ratably the net assets of the Company available
after the payment of all debts and other liabilities and subject to any
preferential dividend rights of any then outstanding Preferred Stock. Holders of
Common Stock have no preemptive, subscription, redemption or conversion rights.
The outstanding shares of Common Stock are, and the shares offered by the
Company in this offering will be, when issued and paid for, fully paid and
nonassessable.

PREFERRED STOCK

Upon the closing of this offering, the Company will have an authorized
class of undesignated Preferred Stock consisting of 5,000,000 shares, $.001 par
value per share. The Board of Directors will be authorized, subject to any
limitations prescribed by law, without further stockholder approval, to issue
from time to time up to 5,000,000 shares of Preferred Stock, in one or more
series. Each such series of Preferred Stock shall have such number of shares,
designations, preferences, voting powers, qualifications and special or relative
rights or privileges as shall be determined by the Board of Directors, which may
include, among others, dividend rights, voting rights, redemption and sinking
fund provisions, liquidation preferences, conversion rights and preemptive
rights.

The stockholders of the Company have granted the Board of Directors
authority to issue the Preferred Stock and to determine its rights and
preferences in order to eliminate delays associated with a stockholder vote on
specific issuances. The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of holders of any Preferred
Stock that may be issued in the future. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from attempting to
acquire, a majority of the outstanding voting stock of the Company. The Company
has no present plans to issue any shares of Preferred Stock.

WARRANTS

As of April 1, 1996, there were outstanding warrants to purchase an
aggregate of 820,853 shares of Common Stock, at exercise prices ranging from
$1.00 per share to $6.00 per share. All of such warrants confer upon the holders
thereof no rights as stockholders. Of these warrants, warrants to purchase
300,000 shares of Common Stock will expire if not exercised prior to the date of
this Prospectus; however, the holder of such warrants has indicated its
intention to effect such exercise prior to such expiration. Warrants to purchase
an aggregate of 441,437 shares of Common Stock will expire five years from the
closing of this offering and the remaining warrants to

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<PAGE> 67

purchase 79,416 shares of Common Stock will expire approximately eight years
from the date of grant.

DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS

The Company is subject to the provisions of Section 203 of the General
Corporation Law of Delaware ("Corporation Law of Delaware"). Section 203
prohibits a publicly-held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
certain exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation's voting stock.

The Restated Certificate of Incorporation, which will be effective upon the
closing of this offering, provides for the division of the Board of Directors
into three classes as nearly equal in size as possible with staggered three-year
terms. In addition, the Restated Certificate of Incorporation provides that
directors may be removed only for cause by the affirmative vote of the holders
of two-thirds of the shares of capital stock of the corporation entitled to
vote. Under the Restated Certificate of Incorporation, any vacancy on the Board
of Directors, however occurring, including a vacancy resulting from an
enlargement of the Board, may only be filled by vote of a majority of the
directors then in office. The classification of the Board of Directors and the
limitations on the removal of directors and filling of vacancies could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, control of the Company. See
"Management -- Executive Officers, Directors and Key Employees".

The Corporation Law of Delaware provides generally that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's Certificate of Incorporation or By-Laws, unless a
corporation's Certificate of Incorporation or By-Laws, as the case may be,
requires a greater percentage. The Restated Certificate of Incorporation and the
By-Laws require the affirmative vote of the holders of at least 75% of the
shares of capital stock of the Company issued and outstanding and entitled to
vote to amend or repeal any of the provisions described in the prior paragraph.

The Restated Certificate of Incorporation contains certain provisions
permitted under the Corporation Law of Delaware relating to the liability of
directors. The provisions eliminate a director's liability for monetary damages
for a breach of fiduciary duty, except in certain circumstances involving
wrongful acts, such as the breach of a director's duty of loyalty or acts or
omissions which involve intentional misconduct or a knowing violation of law.
The limitation of liability described above does not alter the liability of
directors and officers of the Company under federal securities laws.
Furthermore, the Restated Certificate of Incorporation contains provisions to
indemnify the Company's directors and officers to the fullest extent permitted
by the Corporation Law of Delaware. These provisions do not limit or eliminate
the right of the Company or any shareholder to seek non-monetary relief such as
an injunction or rescission in the event of a breach by a director or an officer
of his duty of care to the Company. The Company believes that these provisions
will assist the Company in attracting and retaining qualified individuals to
serve as directors.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is State Street Bank
and Trust Company.

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SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 22,837,678 shares
of Common Stock outstanding. Of these shares, the 4,500,000 shares of Common
Stock sold in this offering will be freely transferable without restriction
under the Securities Act unless they are held by "affiliates" of the Company as
that term is used under the Securities Act and the regulations promulgated
thereunder. The remaining 18,337,678 shares of Common Stock outstanding will be
"restricted securities" as that term is defined by Rule 144 (the "Restricted
Shares"). The Restricted Shares were issued and sold by the Company in private
transactions in reliance upon exemptions from registration under the Securities
Act.

Of the Restricted Shares, 14,612,457 shares (14,295,791 of which are
subject to the lock-up agreements described below) will be eligible for sale in
the public market pursuant to Rule 144 and Rule 701 under the Securities Act
beginning 90 days after the date of the Registration Statement. The remaining
3,725,221 Restricted Shares will become eligible for sale in the public market
under Rule 144 at various times.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least two years (including the holding period of any prior owner except
an affiliate), including persons who may be deemed affiliates of the Company,
would be entitled to sell within any three-month period, subject to meeting
certain manner of sale and notice requirements, a number of shares that does not
exceed the greater of one percent of the number of shares of Common Stock then
outstanding (228,377 shares upon completion of this offering) or the average
weekly trading volume of the Common Stock during the four calendar weeks
preceding the filing of a Form 144 with respect to such sale. In addition, a
person who is not deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least three years (including the holding period of
any prior owner except an affiliate), would be entitled to sell such shares
under Rule 144(k) without regard to the volume limitations described above.
Affiliates who pursuant to Rule 144 are selling shares that are not Restricted
Shares must nonetheless comply with the same restrictions applicable to
Restricted Shares with the exception of the holding period requirement.

Rule 701 promulgated under the Securities Act provides that shares of
Common Stock acquired on the exercise of outstanding options may be resold by
persons other than affiliates, beginning 90 days after the date of this
Prospectus, subject only to the manner of sale provisions of Rule 144, and by
affiliates, beginning 90 days after the date of this Prospectus, subject to all
provisions of Rule 144 except its two-year minimum holding period.

The Company's executive officers and directors and certain other
stockholders of the Company (who in the aggregate will hold 18,021,012
Restricted Shares upon completion of the offering) have agreed not to sell or
offer to sell or otherwise dispose of any shares of Common Stock currently held
by them, any right to acquire any shares of Common Stock or any securities
exercisable for or convertible into any shares of Common Stock for a period of
180 days after the date of this Prospectus without the prior written consent of
Goldman Sachs & Co. Goldman Sachs & Co. may, in its sole discretion and at any
time without notice, release all or any portion of the securities subject to
these lock-up agreements. See "Underwriting".

The Company intends to file registration statements on Form S-8 under the
Securities Act to register all shares of Common Stock issuable under the 1993
Plan, the Purchase Plan, the Director Plan and the Equity Plan. These
registration statements are expected to be filed approximately 180 days after
the effective date of the Registration Statement of which this Prospectus is a
part and will be effective upon filing. Shares issued upon the exercise of stock
options after the effective date of the Form S-8 registration statements will be
eligible for resale in the public market without restriction, subject to Rule
144 limitations applicable to Affiliates and the lock-up agreements noted above.

68
<PAGE> 69

As of April 1, 1996, the holders ("Holders") of 12,172,221 shares of Common
Stock and warrants to purchase 820,853 shares of Common Stock are entitled to
certain demand and piggyback registration rights with respect to such shares
(the "Registrable Shares"). Under the terms of an agreement between the Company
and the Holders, if the Company proposes to register any of its securities under
the Securities Act, either for its own account or for the account of other
security holders exercising registration rights, Holders are entitled to notice
of such registration and are entitled to include shares of such Common Stock
therein. Beginning on January 1, 1999, Holders of at least 30% of the
Registrable Shares also have the right to request on three occasions that the
Company file a registration statement under the Securities Act at the Company's
expense with respect to their shares of Common Stock, whereupon the Company is
required to use its best efforts to effect such registration. In addition,
Holders of at least 2% of the Registrable Shares, F. Hoffmann-La Roche, Ltd. and
Lilly each may require the Company to file up to four registration statements on
Form S-3, each having an aggregate offering price of at least $1,000,000 when
such registration form becomes available to the Company. All such registration
rights are subject to certain conditions and limitations, including the right of
the underwriters of an offering to limit the number of shares to be included in
such registration, or to exclude them entirely. In addition, the Company need
not effect a requested registration within three months following a previous
requested registration, or within six months following this offering. Generally,
the Company is required to bear the expense of all such registrations, except
for underwriters' fees, discounts or commissions relating to the sale of
securities by holders. Each of the Holders of Registrable Shares has agreed that
upon the request of the Company or the Underwriters, they will not, without the
prior written consent of the Company or the underwriters, sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of any
of the Registrable Shares for 180 days from the effective date of the
registration of the Company's securities in connection with the Company's
initial public offering. Any exercise of such registration rights may hinder the
efforts by the Company to arrange future financings or have an adverse effect on
the market price of the Common Stock.

Prior to this offering, there has been no public market for the Common
Stock of the Company, and no prediction can be made as to the effect, if any,
that market sales of shares of Common Stock or the availability of shares for
sale will have on the market price of the Common Stock prevailing from time to
time. Nevertheless, sales of significant numbers of shares of the Common Stock
in the public market could adversely affect the market price of the Common Stock
and could impair the Company's future ability to raise capital through an
offering of its equity securities.

69
<PAGE> 70

VALIDITY OF THE SHARES

The validity of the shares of Common Stock being offered hereby has been
passed upon by Hale and Dorr, Boston, Massachusetts, counsel to the Company.
Steven D. Singer, a partner of Hale and Dorr, is Secretary of the Company. The
validity of the shares of Common Stock has been passed upon for the Underwriters
by Sullivan & Cromwell, New York, New York.

EXPERTS

The financial statements of Millennium Pharmaceuticals, Inc. at December
31, 1995 and 1994, and for the years then ended and the period from January 13,
1993 (date of inception) through December 31, 1993 appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein and in
the Registration Statement, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

The statements relating to United States patent matters in the Prospectus
under the captions "Risk Factors -- Patents and Proprietary Rights; Third Party
Rights" and "Business -- Patents and Proprietary Rights", have been reviewed and
approved by Pennie & Edmonds, New York, New York, special patent counsel to the
Company, and have been included herein in reliance upon the review and approval
by such firm as experts in United States patent law.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement (which term
shall include all amendments, exhibits and schedules thereto) on Form S-1 under
the Securities Act with respect to the shares of Common Stock offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission, to which Registration Statement reference is hereby made.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. The Registration Statement and the
exhibits thereto may be inspected and copied at prescribed rates at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of
the Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.

As a result of this offering, the Company will become subject to the
information and reporting requirements of the Securities Exchange Act of 1934,
as amended, and in accordance therewith will file periodic reports, proxy
statements and other information with the Securities and Exchange Commission.

70
<PAGE> 71

<TABLE>
MILLENNIUM PHARMACEUTICALS, INC.

INDEX TO FINANCIAL STATEMENTS
<CAPTION>

PAGE
----
<S> <C>
Report of Independent Auditors........................................................ F-2
Balance Sheets at December 31, 1994 and 1995.......................................... F-3
Statements of Operations for the period from January 13, 1993 (date of inception) to
December 31, 1993 and the years ended December 31, 1994 and 1995.................... F-4
Statements of Cash Flows for the period from January 13, 1993 (date of inception) to
December 31, 1993 and the years ended December 31, 1994 and 1995.................... F-5
Statements of Stockholders' Equity for the period from January 13, 1993 (date of
inception) to December 31, 1993 and the years ended December 31, 1994 and 1995...... F-6
Notes to Financial Statements......................................................... F-7
</TABLE>

F-1
<PAGE> 72

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Millennium Pharmaceuticals, Inc.

We have audited the accompanying balance sheets of Millennium
Pharmaceuticals, Inc. as of December 31, 1995, and 1994, and the related
statements of operations, stockholders' equity, and cash flows for the years
then ended and for the period from January 13, 1993 (date of inception) through
December 31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 financial position of Millennium Pharmaceuticals,
Inc. at December 31, 1995 and 1994, and the results of its operations and its
cash flows for the years then ended and for the period from January 13, 1993
(date of inception) through December 31, 1993, in conformity with generally
accepted accounting principles.

ERNST & YOUNG LLP

Boston, Massachusetts
January 26, 1996, except for Note 10,
as to which the date is April 12, 1996

F-2
<PAGE> 73

<TABLE>
MILLENNIUM PHARMACEUTICALS, INC.
BALANCE SHEETS
<CAPTION>

DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 6,105,468 $10,586,260
Short-term investments................................... -- 7,260,284
Prepaid expenses and other current assets................ 162,041 694,763
----------- -----------
Total current assets.......................................... 6,267,509 18,541,307
Property and equipment, net................................... 3,656,177 4,905,528
Due from strategic partner.................................... -- 1,463,333
Deposits...................................................... 176,898 194,682
----------- -----------
Total assets.................................................. $10,100,584 $25,104,850
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................... $ 797,324 $ 1,122,446
Accrued expenses......................................... 344,581 567,611
Deferred revenue......................................... -- 3,110,000
Current portion of long-term debt........................ 933,331 1,600,000
Current portion of capital lease obligations............. 1,041,318 1,643,168
----------- -----------
Total current liabilities..................................... 3,116,554 8,043,225
Long-term debt, net of current portion........................ 3,066,669 1,466,667
Capital lease obligations, net of current portion............. 2,358,594 2,499,088
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $0.001 par value: 12,000,000 shares in
1994 and 14,000,000 shares in 1995 authorized;
Series A convertible preferred stock: 8,450,000
shares issued and outstanding ($8,450,000
aggregate liquidation preference)................. 8,450 8,450
Series B convertible preferred stock: 1,250,000
shares in 1994 and 2,000,000 shares in 1995 issued
and outstanding ($6,000,000 aggregate liquidation
preference)....................................... 1,250 2,000
Series C convertible preferred stock: 1,333,333
shares issued and outstanding ($8,000,000
aggregate liquidation preference)................. -- 1,333
Common Stock, $0.001 par value: 25,000,000 shares autho-
rized; 2,963,280 shares in 1994 and 4,211,926 shares in
1995 issued and outstanding............................ 2,963 4,212
Additional paid-in capital............................... 12,206,181 22,722,267
Note receivable from officer............................. -- (266,681)
Accumulated deficit...................................... 10,660,077) (9,375,711)
----------- -----------
Total stockholders' equity.................................... 1,558,767 13,095,870
----------- -----------
Total liabilities and stockholders' equity.................... $10,100,584 $25,104,850
=========== ===========
</TABLE>

See the accompanying Notes to the Financial Statements.

F-3
<PAGE> 74

MILLENNIUM PHARMACEUTICALS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 13,
1993 (DATE OF
INCEPTION) THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------ -----------------------------------------
1993 1994 1995
------------------ ------------------ ------------------
<S> <C> <C> <C>
Revenue under strategic alliances............ $ -- $ 7,962,500 $22,880,000
Costs and expenses:
Research and development................ 2,859,068 10,989,679 17,838,260
General and administrative.............. 1,529,632 3,240,118 3,291,634
----------- ----------- -----------
4,388,700 14,229,797 21,129,894
----------- ----------- -----------
Income (loss) from operations................ (4,388,700) (6,267,297) 1,750,106
Interest income.............................. 126,876 125,599 358,635
Interest expense............................. (25,799) (230,756) (824,375)
----------- ----------- -----------
Net income (loss)............................ $(4,287,623) $(6,372,454) $ 1,284,366
=========== =========== ===========
Pro forma net income per share (unaudited)... $0.07
===========
Shares used in computing pro forma net income
per share (unaudited)...................... 19,150,695
</TABLE>

See the accompanying Notes to the Financial Statements.

F-4
<PAGE> 75

<TABLE>
MILLENNIUM PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>

PERIOD FROM
JANUARY 13,
1993 (DATE OF
INCEPTION) THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------ --------------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................ $(4,287,623) $(6,372,454) $ 1,284,366
Adjustments to reconcile net income (loss) to
cash used in operating activities:
Depreciation and amortization........... 98,477 763,165 1,726,074
Changes in operating assets and
liabilities:
Prepaid expenses and other current
assets........................... (53,761) (108,280) (532,722)
Due from strategic partner......... -- -- (1,463,333)
Deposits........................... (108,008) (68,890) (17,784)
Accounts payable and accrued
expenses......................... 837,895 304,010 441,480
Deferred revenue................... -- -- 3,110,000
----------- ----------- -----------
Net cash provided by (used in) operating
activities................................. (3,513,020) (5,482,449) 4,548,081
INVESTING ACTIVITIES
Purchase of property and equipment........... (223,315) (39,763) (760,245)
Sale of short-term investments............... -- 989,517 1,171,729
Purchase of short-term investments........... (989,517) -- (8,432,013)
----------- ----------- -----------
Net cash provided by (used in) investing
activities................................. (1,212,832) 949,754 (8,020,529)
FINANCING ACTIVITIES
Proceeds from sale of Preferred Stock........ 8,450,000 3,750,000 10,250,000
Proceeds from sale of Common Stock........... 1,963 16,977 109,741
Repurchase of Common Stock................... -- (96) (332)
Proceeds from long-term debt................. -- 4,000,000 --
Payments on long-term debt................... -- -- (933,333)
Payments of capital lease obligations........ (86,804) (768,025) (1,472,836)
----------- ----------- -----------
Net cash provided by financing activities.... 8,365,159 6,998,856 7,953,240
----------- ----------- -----------
Increase in cash and cash equivalents........ 3,639,307 2,466,161 4,480,792
Cash and cash equivalents at beginning of
period..................................... -- 3,639,307 6,105,468
----------- ----------- -----------
Cash and cash equivalents at end of year..... $ 3,639,307 $ 6,105,468 $10,586,260
=========== =========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES
Equipment acquired under capital leases...... $ 1,240,593 $ 3,014,148 $ 2,215,180
=========== =========== ===========
</TABLE>

See the accompanying Notes to the Financial Statements.

F-5
<PAGE> 76

MILLENNIUM PHARMACEUTICALS, INC.
<TABLE>
STATEMENTS OF STOCKHOLDERS' EQUITY

<CAPTION>
CONVERTIBLE
PREFERRED
STOCK COMMON STOCK NOTE ADDITIONAL TOTAL
-------------------- ------------------ RECEIVABLE PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT FROM OFFICER CAPITAL DEFICIT EQUITY
---------- ------- --------- ------ ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series A
Convertible Preferred
Stock.................. 8,450,000 $ 8,450 -- $ -- $ -- $ 8,441,550 $ -- $ 8,450,000
Issuance of Common
Stock.................. -- -- 1,963,250 1,963 -- -- -- 1,963
Net loss................. -- -- -- -- -- -- (4,287,623 ) (4,287,623)
---------- ------- --------- ------ ---------- ----------- ----------- -----------
Balance at December 31,
1993................... 8,450,000 8,450 1,963,250 1,963 -- 8,441,550 (4,287,623 ) 4,164,340
Issuance of Series B
Convertible Preferred
Stock.................. 1,250,000 1,250 -- -- -- 3,748,750 -- 3,750,000
Issuance of Common
Stock.................. -- -- 1,095,632 1,096 -- 15,881 -- 16,977
Repurchase of Common
Stock.................. -- -- (95,602) (96) -- -- -- (96)
Net loss................. -- -- -- -- -- -- (6,372,454 ) (6,372,454)
---------- ------- --------- ------- ----------- ----------- ----------- -----------
Balance at December 31,
1994................... 9,700,000 9,700 2,963,280 2,963 -- 12,206,181 (10,660,077) 1,558,767
Issuance of Series B
Convertible Preferred
Stock.................. 750,000 750 -- -- -- 2,249,250 -- 2,250,000
Issuance of Series C
Convertible Preferred
Stock.................. 1,333,333 1,333 -- -- -- 7,998,667 -- 8,000,000
Issuance of Common Stock
in exchange for note
from officer........... -- -- 533,364 533 (266,681) 159,476 -- (106,672)
Issuance of Common
Stock.................. -- -- 1,047,543 1,048 -- 108,693 -- 109,741
Repurchase of Common
Stock.................. -- -- (332,261) (332) -- -- -- (332)
Net income............... -- -- -- -- -- -- 1,284,366 1,284,366
---------- ------- --------- ------ ----------- ----------- ----------- -----------
Balance at December 31,
1995................... 11,783,333 $11,783 4,211,926 $4,212 $ (266,681) $22,722,267 $(9,375,711) $13,095,870
========== ======= ========= ====== ========== =========== =========== ===========
</TABLE>

See the accompanying Notes to the Financial Statements.

F-6
<PAGE> 77

MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995

1. BASIS OF PRESENTATION

The Company

The Company was incorporated in January 1993, and has devoted substantially
all of its resources to the development and application of genetics, genomics
and bioinformatics technologies used to identify the genes responsible for major
diseases, as well as comprehensive technologies to elucidate the role of these
genes in disease initiation and progression.

Until 1995, the Company had devoted a substantial amount of its activities
to initial research and development and securing financing, and, accordingly,
its financial statements were presented in accordance with Statement of
Financial Accounting Standards No. 7 (FAS No. 7), "Accounting and Reporting for
Development-Stage Enterprises". Based upon the commencement of significant
revenue activity in 1995, the Company is no longer considered a
development-stage enterprise, and, accordingly, its financial statements are no
longer presented in accordance with FAS No. 7.

Risks and Uncertainties

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

2. SIGNIFICANT ACCOUNTING POLICIES

Cash Equivalents and Short-Term Investments

Cash equivalents consist principally of money market funds and corporate
bonds with original maturities of three months or less at the date of purchase.
Short-term investments consist of high-grade corporate bonds maturing within one
year from the date of purchase. Cash equivalents and short-term investments at
December 31, 1994 and 1995 are classified as available-for-sale. The estimated
fair value is equal to the cost of the securities and, due to the nature of
these securities, there are no unrealized gains or losses at the balance sheet
date.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash equivalents and
short-term investments. The Company's cash equivalents are held by high-credit
quality financial institutions. By policy, the Company limits the credit
exposure to any one financial institution. At December 31, 1995, the Company had
no significant concentrations of credit risk.

Property and Equipment

Equipment consists principally of assets held under capitalized leases and
is stated at the present value of future minimum lease obligations. Depreciation
is recorded over the shorter of the estimated useful life or the term of the
lease using the straight-line method. Leasehold improvements are stated at cost
and are amortized over the remaining life of the building lease.

Revenue Recognition

The Company recognizes revenue under strategic alliances as reimbursable
expenses are incurred, certain milestones are achieved or license fees are
earned.

F-7
<PAGE> 78

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

Stock-Based Compensation

The Company has elected to follow Accounting Principles Board Opinion No.
25. "Accounting for Stock Issued to Employees" (APB 25) in accounting for its
stock-based compensation plans, rather than the alternative fair value
accounting method provided for under Financial Accounting Standards Board
Statement No. 123, "Accounting for Stock-Based Compensation", as this
alternative requires the use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, when the exercise price
of options granted under these plans equals the market price of the underlying
stock on the date of grant, no compensation expense is required.

Accounting Pronouncement

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of", which establishes criteria
for the recognition and measurement of impairment loss associated with
long-lived assets. The Company will be required to adopt this standard in the
first quarter of 1996. Based on the Company's initial evaluation, adoption is
not expected to have a material impact on the Company's financial position or
results of operations.

Pro Forma Net Income Per Share (Unaudited)

Pro forma net income per share (unaudited) is computed using the
weighted-average number of outstanding shares of Common Stock and Common Stock
equivalents, assuming conversion of Series A, B and C Convertible Preferred
Stock into Common Stock (as of their original date of issuance), which will
occur upon completion of the Company's proposed initial public offering and the
exercise of stock options and warrants (using the treasury stock method). Common
Stock equivalents are excluded from the computation when their effect is
anti-dilutive; however, pursuant to the requirements of the Securities and
Exchange Commission, Common Stock equivalent shares relating to stock options
and warrants (using the treasury stock method and an assumed initial public
offering price of $12.00 per share) and Convertible Preferred Stock issued
during the twelve-month period prior to the initial public offering are included
for all periods presented whether or not they are anti-dilutive. Historical
earnings per share have not been presented because such amounts are not
meaningful due to the significant change in the Company's capital structure that
will occur in connection with the Company's proposed initial public offering.

3. DUE FROM STRATEGIC PARTNER

The Company has recorded a $2,000,000 noninterest-bearing receivable, due
no later than December 31, 1997, in consideration for certain rights granted
under a licensing arrangement with Astra AB (see Note 8). Using the Company's
long-term borrowing rate, the receivable has been recorded net of $560,000 of
deferred interest income. Interest is being amortized using the effective
interest rate method.

F-8
<PAGE> 79

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

4. PROPERTY AND EQUIPMENT

<TABLE>

Property and equipment consists of the following at December 31:

<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Equipment.............................................. $ 4,517,819 $ 7,239,113
Leasehold improvements................................. -- 254,131
----------- -----------
4,517,819 7,493,244
Less accumulated depreciation and amortization......... 861,642 2,587,716
----------- -----------
$ 3,656,177 $ 4,905,528
=========== ===========
</TABLE>

5. LONG-TERM DEBT

On December 1, 1994, the Company borrowed $4,000,000 from a corporate
lender secured by all owned assets of the Company. Interest accrues at 16.05%.
Monthly principal payments of $133,333 commenced on June 30, 1995 and are due
through November 30, 1997. Accordingly, principal payments of $1,600,000 and
$1,466,667 are due in 1996 and 1997, respectively. The fair value of long-term
debt approximates its carrying value based upon current interest rates as
compared to rates in effect at the time of the borrowing.

6. LEASES

The Company conducts the majority of its operations in leased facilities
with leased equipment. The Company has equipment leasing facilities aggregating
$7,000,000. At December 31, 1994 and 1995, respectively, the Company has
capitalized leased equipment totaling $4,254,741 and $6,469,921 and related
accumulated amortization of $825,000 and $2,538,860.

The Company leases its laboratory and office space under an operating lease
agreement with a fixed term of ten years and a five-year renewal option. In
addition to the minimum lease commitments, the agreement requires payment of the
Company's pro rata share of property taxes and building operating expenses.

<TABLE>
At December 31, 1995, future minimum commitments under leases with
noncancelable terms of more than one year are as follows:
<CAPTION>
CAPITAL OPERATING
YEAR LEASES LEASES
------------------------------------------------------ ---------- -----------
<S> <C> <C>
1996.................................................. $1,977,042 $ 1,445,430
1997.................................................. 1,692,821 1,541,792
1998.................................................. 698,122 1,541,792
1999.................................................. 374,622 1,445,430
2000.................................................. -- 1,445,430
Thereafter............................................ -- 4,336,290
---------- -----------
Total................................................. 4,742,607 $11,756,164
============
Less amount representing interest..................... 600,351
----------
Present value of minimum lease payments............... 4,142,256
Less current portion of capital lease obligations..... 1,643,168
----------
Capital lease obligations............................. $2,499,088
==========
</TABLE>

Total rent expense was $250,000 in 1993, $1,591,000 in 1994 and $1,453,000
in 1995. Sublease rental income in the amounts of $228,000 and $391,000 were
recorded in 1994 and 1995,

F-9
<PAGE> 80

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

respectively. Interest paid under all financing and leasing arrangements during
1993, 1994 and 1995 approximated interest expense.

7. STOCKHOLDERS' EQUITY

Preferred Stock

At December 31, 1995, the Company has authorized three series of
Convertible Preferred Stock, Series A, Series B and Series C. The holders of
Series A, B and C Convertible Preferred Stock are entitled to dividends at the
rate of $0.08 per share, $0.24 per share and $0.48 per share, respectively, when
and if declared by the Board of Directors, payable in preference and prior to
any payment of any dividend on the Company's Common Stock. The Series A, B and C
Convertible Preferred Stockholders have a liquidation preference of $1.00 per
share, $3.00 per share and $6.00 per share, respectively, plus all declared but
unpaid dividends.

Each share of Convertible Preferred Stock is convertible at the option of
the stockholder into one share of Common Stock, subject to adjustments to the
conversion price. Each Convertible Preferred Stockholder is entitled to vote on
all matters and is entitled to the number of votes equal to the number of shares
into which the Convertible Preferred Stock is then convertible.

In February 1996, the Company authorized and issued shares of Series D
Convertible Preferred Stock (see Note 10).

Common Stock

Common Stockholders have full voting rights. Dividends and liquidation
rights of Common Stock are subordinated to those of all series of Preferred
Stock.

In connection with the issuance of Common Stock to certain consultants, the
Company has entered into stock purchase agreements that provide that, in the
event of the voluntary or involuntary termination of the consultants' services,
the Company has an irrevocable, exclusive option during the 90-day period
following termination to repurchase, at the original purchase price, all or any
portion of the shares which have not been released from escrow. At December 31,
1995, 772,910 shares of Common Stock remain in escrow and are subject to the
Company's repurchase option.

Warrants

The Company has issued warrants to purchase 417,500 shares of Series A
Convertible Preferred Stock at $1.00 per share, 323,937 shares of Series B
Convertible Preferred Stock at $3.00 per share and 35,416 shares of Series B
Convertible Preferred Stock at $5.62 per share, all of which are exercisable at
December 31, 1995, and generally expire between 2002 and 2004. In January 1996,
the Company issued warrants to purchase 44,000 shares of Series C Convertible
Preferred Stock at $6.00 per share, which were exercisable immediately and
expire in 2003. In connection with the Company's proposed initial public
offering, the automatic conversion of Preferred Stock into Common Stock will
result in the warrants becoming exercisable for the purchase of 820,853 shares
of Common Stock currently reserved.

Stock Option Plan

The 1993 Incentive Stock Plan (the 1993 Plan) allows for the granting of
incentive and nonstatutory options to purchase up to 7,500,000 shares of Common
Stock (see Note 10). Incentive options granted to employees generally vest over
a four-year period. Nonstatutory options granted to consultants and other
nonemployees generally vest over the period of service to the Company.

F-10
<PAGE> 81

MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
Information regarding the 1993 Plan is summarized below:
<CAPTION>
PERIOD FROM
JANUARY 13,
1993 (DATE OF
INCEPTION)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
----------- -------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Outstanding at beginning of period -- 567,269 3,134,529
Granted........................... 567,269 2,804,542 1,349,974
Canceled.......................... -- (46,849) (179,335)
Exercised ($0.001-0.30 per share) -- (190,433) (1,580,907)
---------- ----------- -----------
Outstanding at end of year........ 567,269 3,134,529 2,724,261
=========== =========== ===========
Option price range at end of year $0.001-0.10 $0.001-0.30 $0.001-0.60
----------- ----------- -----------
Exercisable at end of year........ 59,769 970,805 2,148,851
----------- ----------- -----------
Available for grant at end of year 3,932,731 1,175,038 3,004,399
========= =========== ===========
</TABLE>

In December 1995, the Company amended the terms of outstanding option
agreements to allow option holders the right to immediately exercise outstanding
options, with the subsequent share issuances being subject to a repurchase
option by the Company under certain conditions according to the original vesting
schedule. At March 1, 1996, 2,369,881 shares issued under the 1993 Plan are
subject to the Company's repurchase option.

Upon employment in 1994, the chief executive officer was granted an option
to purchase 533,364 shares of Common Stock for $0.30 per share. In connection
therewith, the Company agreed to loan the officer up to $266,681 at 7% per
annum, upon exercise of the option. In November 1995, the officer exercised this
option and was issued the Common Stock, subject to a repurchase option by the
Company that lapses over four years. The resulting loan, secured by a pledge of
all shares issued under the option, and related interest, will be forgiven
ratably over 48 months subject to the officer's continued employment.

At December 31, 1995, 18,288,846 shares of Common Stock were reserved for
issuance for stock options, warrants and conversion of preferred shares.

8. STRATEGIC ALLIANCES

In March 1994, the Company entered into a strategic alliance with
Hoffmann-La Roche Inc. ("Roche") in the fields of obesity and type II diabetes.
Under the terms of a related stock purchase agreement, an affiliate of Roche
purchased $6 million of Series B Convertible Preferred Stock. Under the terms of
the strategic alliance, Roche has agreed to provide up to approximately $44.5
million in the form of up-front fees and research payments over a five-year
period, as well as additional payments upon the achievement of specific research
and product development milestones. Roche received a license to manufacture, use
and sell agreed-upon licensed products in exchange for royalty and/or
profit-sharing payments to the Company.

In October 1995, the Company entered into a strategic alliance with Eli
Lilly and Company ("Lilly") in the field of atherosclerosis. Under the terms of
the agreement, Lilly purchased $8 million of Series C Convertible Preferred
Stock. The Company has deferred a $2.75 million payment Lilly made for an
option, expiring in 1996, to fund research in other fields. Under the terms of
the strategic alliance, Lilly has agreed to provide up to approximately $33.0
million in the form of up-front fees and research payments over a five-year
period, as well as additional payments upon the achievement of specific research
and product development milestones. Lilly received a license to

F-11
<PAGE> 82

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

manufacture, use and sell agreed-upon licensed products in exchange for royalty
payments to the Company. If certain specified research objectives are not met,
Lilly may terminate the agreement after three years. Moreover, the agreement may
be voluntarily terminated by Lilly at any time after October 1998, subject to
continuation of research funding for one year thereafter.

In December 1995, the Company entered into a strategic alliance with Astra
AB in the field of inflammatory respiratory diseases. After three years, Astra
has the option to continue the strategic alliance through the fifth year, or
extend the agreement through seven years. Under the terms of the strategic
alliance, Astra has agreed to provide up to approximately $53.3 million in
up-front, follow-on and research payments over a five-year period, as well as
additional payments upon the achievement of specific research and product
development milestones. Astra received a license to manufacture, use and sell
agreed-upon licensed products in exchange for royalty payments to the Company.

9. INCOME TAXES

In 1993 and 1994, the Company incurred losses and, due to the degree of
uncertainty related to the ultimate use of the loss carryforwards, fully
reserved this tax benefit. In 1995, the Company utilized $515,000 of such tax
benefits to offset the current year tax provision.

At December 31, 1995, the Company has unused net operating loss
carryforwards of approximately $7,925,000 which are available to reduce federal
and state taxable income and which expire through the year 2009. The Company
also has research and development tax credits of approximately $1,673,000,
available to offset federal income taxes, which expire through 2010.
<TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets as of December 31 are as follows:

<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Net operating loss carryforward...................... $4,265,000 $3,750,000
Research and development tax credit carryforward..... 642,000 1,673,000
Other................................................ 120,000 569,000
---------- ----------
Total deferred tax assets............................ 5,027,000 5,992,000
Valuation allowance.................................. (5,027,000) (5,992,000)
---------- ----------
Net deferred tax assets $ -- $ --
========== ==========
</TABLE>

The valuation allowance increased by $965,000 during 1995 due primarily to
the increase in research and development tax credits in 1995.

10. SUBSEQUENT EVENTS

From January 1, 1996 through April 12, 1996, the Company granted options to
purchase 1,055,422 shares of Common Stock at exercise prices of $0.60 to $6.00
per share. The Company recorded an increase to additional paid-in capital and a
corresponding charge to deferred compensation in the amount of approximately
$3,000,000 to recognize the aggregate difference between the deemed fair value
for accounting purposes of the stock options at the date of grant and the
exercise price. The deferred compensation will be amortized over the option
vesting period of four years. Deferred compensation associated with option
grants prior to December 31, 1995 was not material.

On February 1, 1996, the Company issued 388,888 shares of Series D
Convertible Preferred Stock at $9.00 per share and received net proceeds of $3.5
million. The rights and privileges of the Series D stock are substantially
consistent with previously issued convertible preferred stock series.

F-12
<PAGE> 83

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

Series D Convertible Preferred Stockholders are entitled to dividends at the
rate of $0.72 per share, when and if declared by the Board of Directors, and
have a liquidation preference of $9.00 per share, plus all declared but unpaid
dividends. In connection with the Company's proposed initial public offering,
the automatic conversion of all shares of Convertible Preferred Stock
outstanding as of March 1, 1996 will result in the issuance of 12,172,221 shares
of Common Stock currently reserved for such conversion.

In March 1996, the Company repurchased 327,946 shares of common stock, at
their original issue price of $0.001 per share, pursuant to an amendment to a
stock purchase agreement with one of its consultants.

On March 14, 1996, the Board of Directors voted, subject to stockholder
approval, to increase the number of authorized shares of Common Stock to
100,000,000. In addition, the Board of Directors authorized an aggregate of
5,000,000 shares of Preferred Stock, $0.001 par value, issuable in one or more
series, each of such series to have such rights and preferences, including
voting rights, dividend rights, conversion rights, redemption privileges and
liquidation preferences, as shall be determined by the Board of Directors.

On March 14, 1996, the Board of Directors adopted, subject to stockholder
approval, the 1996 Equity Incentive Plan (the 1996 Plan) to effectively succeed
the 1993 Incentive Stock Plan (the 1993 Plan). The terms and conditions of the
1996 Plan will be substantially consistent with those of the 1993 Plan and will
provide for the granting of options to purchase 2,100,000 shares of Common
Stock. As a result, the Board of Directors also voted to reduce the number of
shares of Common Stock reserved for issuance under the 1993 Plan from 7,500,000
to 5,400,000. Upon the closing of the Company's proposed initial public
offering, no further option grants will be made under the 1993 Plan.

On March 14, 1996, the 1996 Director Option Plan (the Director Plan) and
the 1996 Employee Stock Purchase Plan (the Purchase Plan) were also adopted by
the Board of Directors, subject to approval by the stockholders. The Director
Plan provides that each eligible non-employee director, upon the closing of the
Company's proposed initial public offering, will be granted a nonstatutory
option to purchase 20,000 shares of Common Stock. Thereafter, each new
non-employee director will be granted a nonstatutory option to purchase 30,000
shares of Common Stock upon election to the Board of Directors. Upon completion
of the vesting of each option grant under the Director Plan, each non-employee
director will be granted a new nonstatutory option to purchase 20,000 shares of
Common Stock. All options will be issued at the then fair market value of the
Common Stock, vest ratably over four years and expire ten years after date of
grant. A total of 250,000 shares of Common Stock has been reserved for issuance
under the Director Plan.

Under the Purchase Plan, eligible employees may purchase Common Stock at a
price per share equal to 85% of the lower of the fair market value of the Common
Stock at the beginning or end of each offering period. Participation in the
offering is limited to 10% of the employee's compensation or $25,000 in any
calendar year. The first offering period will commence on the date of this
Prospectus. A total of 350,000 shares of Common Stock has been reserved for
issuance under the Purchase Plan.

F-13
<PAGE> 84

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each of
such Underwriters, for whom Goldman, Sachs & Co. and Robertson, Stephens &
Company LLC are acting as representatives, has severally agreed to purchase from
the Company, the respective number of shares of Common Stock set forth opposite
its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
------------------------------------------------------------- ---------
<S> <C>
Goldman, Sachs & Co. ........................................ 1,577,000
Robertson, Stephens & Company LLC............................ 1,577,000
Pacific Growth Equities...................................... 673,000
Vector Securities International, Inc......................... 673,000
---------
Total............................................ 4,500,000
==========
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $.47 per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $.10 per share to certain
brokers and dealers. After the shares of Common Stock are released for sale to
the public, the offering price and other selling terms may from time to time be
varied by the representatives.

The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 675,000
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 4,500,000 shares of Common
Stock offered.

The Company and current holders of 18,021,012 shares of Common Stock have
agreed that, during the period beginning from the date of this Prospectus and
continuing to and including the date 180 days after the date of this Prospectus,
they will not offer, sell, contract to sell or otherwise dispose of any
securities of the Company (other than pursuant to employee stock option plans
existing, or on the conversion or exchange of convertible or exchangeable
securities outstanding, on the date of this Prospectus) which are substantially
similar to the shares of Common Stock or which are convertible or exchangeable
into securities which are substantially similar to the shares of Common Stock,
without the prior written consent of Goldman, Sachs & Co., except for the shares
of Common Stock offered in connection with the offering.

The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Common Stock offered by them.

F. Hoffmann-La Roche Ltd. has indicated its non-binding intention to
purchase $2,000,000 of Common Stock in this offering (166,666 shares). Eli Lilly
and Company has indicated its non-binding intention to purchase $3,500,000 of
Common Stock in this offering (291,666 shares). However, the Underwriters have
indicated to the Company that these strategic partners likely will be allocated
a number of shares that would result in purchases significantly below these
amounts.

Prior to this offering, there has been no public market for the shares. The
initial public offering price was negotiated among the Company and the
representatives. Among the factors considered in determining the initial public
offering price of the Common Stock, in addition to prevailing market

U-1
<PAGE> 85

conditions, were the Company's historical performance, estimates of the business
potential and earnings prospects of the Company, an assessment of the Company's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.

The Common Stock will be quoted on the Nasdaq National Market under the
symbol "MLNM".

The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.

U-2
<PAGE> 86

===============================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 6
Use of Proceeds......................... 18
Dividend Policy......................... 18
Capitalization.......................... 19
Dilution................................ 20
Selected Financial Data................. 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 22
Business................................ 25
Management.............................. 50
Certain Transactions.................... 60
Principal Stockholders.................. 63
Description of Capital Stock............ 66
Shares Eligible for Future Sale......... 68
Validity of the Shares.................. 70
Experts................................. 70
Additional Information.................. 70
Index to Financial Statements........... F-1
Underwriting............................ U-1
</TABLE>

THROUGH AND INCLUDING MAY 31, 1996 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
===============================================================================

===============================================================================

4,500,000 SHARES
MILLENNIUM PHARMACEUTICALS, INC.

COMMON STOCK
(PAR VALUE $.001 PER SHARE)
------------------

LOGO
------------------
GOLDMAN, SACHS & CO.

ROBERTSON, STEPHENS & COMPANY

REPRESENTATIVES OF THE UNDERWRITERS

===============================================================================