10-K

   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(Mark One)

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

For the fiscal year ended: December 31, 1998

                                               OR

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

For the transition period from ___________  to ______________

                          Commission file No.: 0-28494

                        Millennium Pharmaceuticals, Inc.

             (Exact Name of registrant as Specified in its Charter)

           Delaware                                       04-3177038
(State or Other Jurisdiction of                       (I.R.S. Employer
 Incorporation or Organization)                      Identification No.)

               640 Memorial Drive, Cambridge, Massachusetts 02139

               (Address of Principal Executive Offices) (Zip Code)

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


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

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

                          Common Stock, $.001 par value

                                 Title of class

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

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

The aggregate market value of voting Common Stock held by non-affiliates of the
registrant was $983,696,553 based on the last reported sale price of the Common
Stock on the NASDAQ Stock Market on March 15, 1999.

Number of shares outstanding of the registrant's class of Common Stock as of
March 15, 1999:  35,406,467.

Documents incorporated by reference:
Annual Report to Stockholders for fiscal year ended December 31, 1998 - Part II
Proxy Statement for the 1999 Annual Meeting of Stockholders - Part III


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                                     PART I

ITEM 1. BUSINESS

GENERAL

Millennium Pharmaceuticals, Inc. has a mission -- to build the biopharmaceutical
company of the future. Founded in 1993 as a Delaware corporation, Millennium
incorporates large-scale genetics, genomics, high throughput screening, and
informatics in an integrated life science and technology platform. We apply this
technology platform primarily in discovering and developing proprietary
therapeutic and diagnostic human healthcare products and services. The terms
"Millennium" or the "Company," as used in this document, generally include our
subsidiaries. The term "MPI," as used in this document, refers to the parent
company exclusively.

Millennium's technology platform includes advanced capabilities in genetics,
genomics, molecular biology, cell biology, biochemistry, chemistry and
analytical instrumentation. Using these capabilities and advanced robotics and
informatics technologies, we have created a series of high-throughput processes
that we believe have the potential to transform the discovery and development of
life-science-based products and services. Our goal is to improve the speed of
the discovery and development process and the value of its output, and to lead a
change in medical practice through new uses of information across the spectrum
of healthcare, from gene discovery to patient care.

Millennium pursues multiple business opportunities through groups within MPI and
through subsidiaries that specialize in particular areas. The MPI
pharmaceuticals division focuses on the development of small-molecule drugs. The
MPI technology division focuses on continuing development and integration of the
technology platform, on high-throughput processes and services, and on
information and informatics technologies that support our strategic alliances
and discovery efforts across the entire organization.

The Company has two subsidiaries, Millennium BioTherapeutics, Inc. ("MBio") and
Millennium Predictive Medicine, Inc. ("MPMx"), both formed in 1997. MBio focuses
on developing therapeutic proteins and antibodies, vaccines and gene therapy,
and antisense products. MPMx focuses on Diagnomics(TM) (genomics-based
diagnostics) and pharmacogenomics (correlation of patient genotypes to drug
responses), and on generating and integrating diverse biomedical data to provide
products and services to the healthcare industry. Millennium believes that
dedicated business units allow us to pursue opportunities with appropriate
focus, maintain an entrepreneurial environment, and attract and retain
high-caliber employees. We have established formal and informal relationships
between the various units to provide for cooperation and collaboration among
them and to allow each business unit access to Millennium information, assets
and capabilities relevant to that unit's focus area.


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Millennium's commercialization strategy has been to form strategic alliances
with major companies in the pharmaceutical and/or life science marketplaces.
Through December 31, 1998, we had formed ten alliances, nine within MPI, and one
within MBio. The MPI alliances include two separate alliances with the
Wyeth-Ayerst division of American Home Products Corporation ("AHP"), an alliance
with Astra AB ("Astra"), an alliance with Bayer A.G. ("Bayer"), two separate
alliances with Eli Lilly and Company, ("Lilly"), an alliance with Hoffmann-La
Roche Inc. ("Roche"), an alliance with Monsanto Company ("Monsanto"), and an
alliance with Pfizer, Inc. ("Pfizer"). MBio is engaged in an alliance with
Lilly.

In September 1998, Millennium announced the formation of a broad alliance with
Bayer. Under the terms of this agreement, Bayer will receive access to key
technologies in gene research as well as a flow of genomics-based drug
development targets that Millennium discovers through our research efforts. This
collaboration contributes to our ability to expand the scope of our drug
discovery efforts because it gives Millennium residual rights to develop, on our
own behalf, certain products derived from research conducted under the alliance.
As part of the agreement, in November 1998 Bayer made an equity investment of
$96.6 million in exchange for approximately 4.96 million shares of MPI Common
Stock.

In February 1999, MPMx formed an alliance with Becton, Dickinson and Company
("Becton Dickinson"). MPMx has agreed to undertake a research program to
identify genetic markers and related assays that may be used to develop
diagnostic products for several types of cancer. Becton Dickinson has agreed to
manufacture and market any products that result, and MPMx will receive a royalty
based upon gross profits from related product sales. The agreement is subject to
clearance under the Hart Scott Rodino Antitrust Improvements Act. Upon
clearance, Becton Dickinson has agreed to make a $15 million equity investment
in MPMx in exchange for approximately 11% of MPMx voting stock, as well as an
up-front license payment of $3 million.

From its inception in 1993 until 1996, Millennium's main focus was on developing
our technology platform and on applying this platform to the early stages of
drug discovery for important human diseases. Beginning in 1997, we expanded the
scope and scale of our operations through the acquisition of ChemGenics
Pharmaceuticals Inc. ("ChemGenics") and through establishing MBio and MPMx. Our
key objectives in this expansion were to increase our capabilities and
involvement in the later stages of drug discovery and to establish new focused
business units to pursue additional commercial opportunities. During 1998, we
expanded efforts in our subsidiaries as well as in MPI. We hired additional
staff in drug discovery, informatics, biotherapeutics, and
diagnostics/prognostics as well as in other support areas.

Millennium also formed Millennium Information, Inc. ("MInfo") in 1997. MInfo was
established to generate and integrate biomedical data and develop information
products and services for use by the healthcare industry. During 1998 we
reevaluated the market opportunities and business plans


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for MInfo and MPMx, and determined that the two companies had major areas of
common focus. We combined their operations and, in January 1999, merged MInfo
with MPMx. MPMx was the surviving corporation of the merger.

Collaborations with medical, research, and academic institutions are also
critical to our research and technology development success. During 1998, we
formed several new collaborations including agreements with the University of
Pittsburgh and the University of Texas M.D. Anderson Cancer Center to gain
access to clinical samples and tissue collections as well as additional clinical
expertise. In addition, MBio established an umbrella material transfer agreement
with Harvard Medical School to facilitate collaboration and sharing of novel
genes and other biological materials. MPMx also formed a collaboration with the
Mayo Clinic that allows us access to clinical samples and tissue collections. In
1997, we established a corporate consortium with Bristol-Myers Squibb Company
("BMS") and Affymetrix, Inc. ("Affymetrix") to fund a five-year research program
in functional genomics at the Whitehead Institute/Massachusetts Institute of
Technology Center for Genome Research.

During 1999, we expect to continue to pursue additional alliances, and will
consider joint development, merger, or acquisition opportunities that may
provide Millennium with access to products on the market or in later stages of
commercial development than those represented within our current programs.


BACKGROUND

DISCOVERY AND DEVELOPMENT PROCESSES FOR LIFE-SCIENCE-BASED PRODUCTS AND SERVICES

SMALL MOLECULE DRUGS

TRADITIONAL APPROACH. The great majority of drugs in use today consist of
relatively small chemical compounds. Such drugs are often referred to as
"small-molecule drugs," to distinguish them from proteins and other
biotherapeutic drugs which are significantly larger molecules. Typically,
pharmaceuticals can be formulated into pills for oral consumption.
Biotherapeutics, on the other hand, typically are only available in injectable
form. As used in this document, the term "pharmaceuticals" refers only to pills,
or "small-molecule drugs," and the term "biotherapeutics" is used to describe
proteins and other biotherapeutic drugs.

The discovery of new small-molecule drugs for a particular disease typically
involves several steps. The first step is the identification of a drug "target"
for therapeutic intervention -- a molecule or structure somewhere in the body,
inside or on the surface of cells, which is either directly involved in the
disease or lies in a biochemical pathway leading to the disease. The next step
is to identify compounds which interact with this drug target and modulate the
drug target's activity in a manner that might help reverse, inhibit or prevent
the disease process. This step is


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normally accomplished by screening large collections (or "libraries") of
synthetic chemicals and natural products in a trial-and-error process designed
to identify those compounds that can interact with the drug target. The most
promising compounds to emerge from this process are advanced to the next stage,
in which synthetic derivatives of these compounds are generated and tested to
arrive at one or a few "lead compounds." The interactions of these lead
compounds with the drug target and their activity in animal and/or cellular
models of the disease suggest that they could be developed successfully into new
drugs. The best of these lead compounds are then subjected to rigorous testing,
first in animals and then in humans, to establish their safety and efficacy as
drugs.

Because of the absence of any suitable technology for the systematic
identification and characterization of molecules and structures involved in
disease mechanisms, the selection of new targets for drug discovery historically
has been a haphazard process. Drug targets have often been selected based on
speculation that they might be involved in disease processes, rather than
because of any clear, well-documented association with specific diseases. As a
result, many drug candidates fail during clinical trials because they turn out
to be ineffective and/or unsafe, and many drugs that do reach the market treat
only the symptoms of diseases rather than their underlying causes.

GENOMICS AND RELATED TECHNOLOGIES. Diseases ultimately have an underlying
genetic basis. The initiation, continuation and progression of a disease
reflects some aspect of the structure or expression of the patient's genes
and/or the genes of a pathogen. Systematic study of human genes in the context
of disease should therefore lead to the identification of those genes that play
a role in important diseases. These genes, their protein products and/or the
biochemical pathways in which they lie should be important drug targets for
therapeutic intervention.

In the past, however, systematic study of genes in the context of disease has
been extremely difficult. Each person carries a very large number of genes on
his or her chromosomes - according to current estimates, more than 100,000
different genes (known collectively as the "human genome"). Because of the large
numbers of genes, the identification of individual genes or sets of genes
correlated with specific diseases has posed major technological challenges.

In recent years, this situation has changed dramatically. Fueled by broad
interest in determining the entire DNA sequence of the human genome, major
improvements have been made in the technologies available for identifying and
cataloguing genes in complex organisms. These technologies include
high-throughput methods for sequencing genes, for monitoring and comparing their
expression in different situations and for following their inheritance in
families prone to particular diseases. These technologies depend crucially on
the integration of molecular biology with robotics, informatics and analytical
instrumentation. The integration of these disciplines provides powerful
capabilities for generating, capturing and analyzing large volumes of data
concerning genes and their expression, making it possible for the first time to
mount a systematic search to discover and characterize the genes and biochemical
pathways which


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underlie human diseases. At Millennium, this search is providing new drug
targets with well-validated roles in various diseases. We believe that compounds
active against these targets may be highly effective and specific in treating
the underlying causes of these diseases.

Major advances have also been made in the technologies available for screening
synthetic chemical and natural-product libraries to identify compounds active
against specific drug targets and for the subsequent generation of lead
compounds optimized for their activity against these drug targets. Intelligent
integration of robotics, informatics and analytical instrumentation, coupled
with novel combinatorial approaches to the synthesis of chemical libraries, has
played an enabling role in these advances. We believe that the combined effect
of these developments will permit Millennium and others to more rapidly identify
higher-quality lead compounds

Taken together, these new technologies for selecting drug targets and developing
lead compounds may deliver whole new classes of drugs which are safe and
effective for treating a broad range of important diseases in diverse
individuals.

APPLICATIONS FOR BIOTHERAPEUTICS AND PREDICTIVE MEDICINE

Genomics and related technologies have major applications in human healthcare
beyond the discovery of small-molecule drugs. Key additional applications
include the identification of important new biotherapeutic products and the
development of novel approaches to the prediction, diagnosis and management of
diseases.

Biotherapeutics are proteins or nucleic acids administered to patients for
therapeutic benefit. Protein biotherapeutics in current use include: secreted
proteins, such as interferons, erythropoietin, insulin and human growth hormone;
therapeutic antibodies, such as OKT3 and ReoPro(R); and vaccines, such as the
vaccine for hepatitis B. In 1998, biotherapeutic products generated over $12
billion in annual worldwide sales. Nucleic acid biotherapeutics fall into two
general classes: gene therapy products and antisense products. Although no
product in either nucleic acid class has yet reached the marketplace, a number
are currently in development.

There are multiple ways in which genomics technologies can contribute to the
development of novel biotherapeutics. High-throughput gene-discovery programs
can lead to the rapid identification of novel genes. Through the use of
informatics and functional genomics strategies, these genes and/or their protein
products can be identified as potential candidates for therapeutic protein or
gene therapy applications or as potential targets for development of therapeutic
antibodies, antisense or vaccine-based drugs.

In the realm of predictive medicine, genomics technologies can be used to
identify genes that predispose individuals to disease, participate in the
initiation, progression and resolution of disease and determine individual
responses to different treatments that may be available. As a


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result, the identification of such genes can form the basis for novel strategies
and products for the prediction, diagnosis and management of diseases.

Millennium believes that improved methods for the discovery of drug targets and
the development of lead compounds will lead to safer and more effective new
drugs. Efficacy and safety may be enhanced even further by another important
application of genomics technologies, referred to as "pharmacogenomics." The
goal of pharmacogenomics is to understand why a particular drug may be more
effective in some people than in others and/or have more pronounced side effects
in certain people. Differences in the way people respond to a drug are believed
to reflect genetic differences between them: different people may have slightly
different versions of the genes involved in the beneficial and/or the adverse
effects of the drug. Millennium believes that genomics technologies will permit
the identification of the genetic differences that underlie variability in
responses to drugs and that, as a result, it will be possible to individualize
the selection of drugs for patients so that each patient receives only those
drugs likely to be effective and safe for him or her.

OTHER APPLICATIONS

The fundamental power of genomics technologies is their ability to identify, in
a rapid and comprehensive manner, genes that underlie complex biological traits.
In human healthcare, the traits of interest are diseases. Genomics technologies
can be successfully applied outside of human healthcare as well. In plant
agriculture, for example, these include the yields, nutritional content,
disease-resistance and drought-tolerance of crop plants and the susceptibility
of pests, pathogens and weeds to agrochemicals. Millennium's alliance with
Monsanto employs genomics technologies in the field of plant agriculture.

THE MILLENNIUM STRATEGY

Millennium's business strategy is to develop a comprehensive, integrated
platform of genomics and related technologies and to use this platform to pursue
multiple opportunities in life-science-based industries. Our primary focus is on
opportunities relating to the discovery and development of new products and
services in the healthcare industry. To pursue multiple business opportunities
simultaneously, Millennium has established focused units (divisions or
subsidiaries) specializing in particular areas, believing that each unit can
then address its designated area with the energy and drive of a start-up
enterprise. At the same time, we recognize the importance of enabling each unit
to take advantage of the combined capabilities of the overall organization.

MPI and its two subsidiaries have formed agreements under which each party has
assigned or licensed to the other parties' technology and rights in the other
parties' core areas of interest. See "-- Millennium BioTherapeutics, Inc. --
Overview" and "-- Millennium Predictive Medicine, Inc. -- Overview."


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In general, Millennium's strategy for pursuing business opportunities has been
to form alliances with major participants in the relevant markets. We focus in
these alliances on the discovery of innovative new products, relying on our
partners for product development and marketing. Revenues from these alliances
come in the form of fixed up-front payments and research funding, with the right
to milestone payments and royalties (or a share of profits) based on the success
of any products that result from the alliance. Millennium has also formed
alliances based on the transfer of aspects of our technology platform to
partners. Revenues in such alliances may include up-front payments and fees
associated with the successful transfer of technology. In some instances, we
have also obtained access to our partners' technologies (such as libraries of
chemical compounds) to enhance our operations outside of the alliance.

During 1999, we plan to examine opportunities, through acquisition, merger, or
new forms of strategic alliances, to allow us to extend our capabilities in
clinical development and the commercialization of therapeutic products. We
intend to pursue one or more new relationships, consistent with our vision for
Millennium's future and our commitment to current alliance partners. We believe
that Millennium is well positioned to capture value from a broad array of
opportunities in diverse life-science-based industries.

TECHNOLOGY PLATFORM

Millennium's broad technology platform reflects our strong belief that success
in genomics-based product discovery and development requires the use of multiple
parallel approaches, accelerated and integrated through the latest advances in
informatics and "process technologies" (i.e., automation, miniaturization, and
analytical instrumentation).

Millennium has established a number of dedicated technology groups responsible
for developing and maintaining our technology platform and for supporting the
use of this platform by all of the Millennium companies and our strategic
partners.

GENE IDENTIFICATION

GENETIC APPROACHES TO GENE IDENTIFICATION
HUMAN GENETICS. Genetic studies of families and populations prone to particular
diseases can identify genes involved in these diseases. "Markers" spaced at
regular intervals along the human chromosomes are studied in affected and
unaffected individuals, a process known as genotyping. If specific markers are
co-inherited more frequently in affected than in unaffected individuals, these
markers define a chromosomal region (or a "map position") containing a gene or
genes involved in the disease. The genes in question may then be identified by
some combination of three approaches: higher-resolution mapping (repeating the
co-inheritance studies with additional markers known to fall in the region of
interest but located more closely to one another than those used for the initial
"genome scan"); "positional cloning" (isolation of microbial clones of human


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DNA corresponding to the map position which has been identified); and
high-throughput sequencing (to identify protein-encoding regions (i.e. genes) in
the region of interest, and to compare them in normal and affected individuals).

To gain access to suitable families and populations around the world, Millennium
has formed a number of collaborations with academic centers. Our capabilities in
human genetics include the design and proper clinical management of appropriate
studies, technology for automated high-throughput genotyping and sequencing,
custom-developed software for data capture and analysis, and positional cloning.
With these capabilities, Millennium has made significant progress in the mapping
and positional cloning of genes implicated in a number of important human
diseases.

These capabilities in human genetics can be readily adapted and applied to the
identification of genes underlying traits of interest in other species - such as
diseases in mice, as described below, or economically important traits in plants
and animals.

MOUSE GENETICS. Genetic studies in mice can often provide faster identification
of human disease genes than corresponding studies in humans. This is because
genes and diseases in mice are often closely similar to their human
counterparts, but the association between them can be studied more rapidly since
mice (unlike humans) can be bred rapidly and selectively. To capitalize on the
advantages of working with mice, we have built substantial expertise in mouse
genetics. This includes the development of proprietary markers, genetic maps,
advanced breeding strategies and a significant animal facility. In combination
with technologies adapted from our activities in human genetics, this expertise
has allowed us relatively rapidly to identify murine (mouse) genes whose human
counterparts may play significant roles in important diseases. Examples of such
genes and their human counterparts that we have identified include the tub and
db/OB-R genes, believed to be important in obesity.

MICROBIAL GENETICS. Genetic and genomic studies of microbes, such as bacteria
and yeast, are important for two reasons. First, these studies may result in the
identification of genes essential for microbial growth, which should provide
attractive drug targets for new antibiotics for the treatment of infectious
diseases caused by such microbes. Second, such studies can help determine the
functions of human genes, many of which have counterparts in microbial systems.
In fact, the study of these microbial counterparts is particularly useful
because microbial genes are significantly easier to understand and manipulate
than human genes.

Millennium has developed considerable expertise in genetic investigation and
manipulation of a broad range of bacterial and fungal species, including
pathogens important for humans, animals and plants. Millennium has employed this
expertise to identify a significant number of drug targets in our antifungal and
antibacterial research programs. During 1998, the U.S. Patent and Trademark
Office issued Millennium two patents relating to a process for the discovery of
antimicrobial drug targets.


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NON-GENETIC APPROACHES TO GENE IDENTIFICATION
TRANSCRIPTIONAL PROFILING. Genes contain encoded information instructing cells
how to make proteins. Each gene encodes one protein. When the protein is
produced, the gene is said to be "expressed." For a protein to be made, the gene
must first be transcribed into a copy known as messenger RNA (mRNA). This copy,
also called a transcript, then directs synthesis of the encoded protein in a
process known as translation. Cells differ from one another because each cell
type makes a different spectrum of proteins, and, along the way, a different
population of mRNA transcripts. Similarly, diseased cells differ from normal
cells by virtue of the spectrum of proteins, and the population of transcripts,
which they produce. Comparison of transcript populations in normal and diseased
cells and tissues can therefore identify the transcripts, and thus the genes,
associated with a particular disease.

For this reason, Millennium has developed or accessed a number of powerful
approaches for examining and comparing transcript populations in different cells
and tissues representing normal and diseased conditions. Many of these
approaches involve conversion of mRNA transcripts into DNA copies known as
complementary DNA (cDNA), which is easier to handle than mRNA and can be
amplified by the polymerase chain reaction (PCR). Increasingly, these approaches
involve the use of cDNA "microarrays" (multiple different cDNAs placed in
high-density arrays on various surface types) to determine whether samples of
interest contain corresponding mRNAs. Crucial to the success of these approaches
are customized software tools developed by Millennium for tracking experiments,
generating microarrays and capturing and analyzing data.

Millennium has applied its transcriptional profiling technologies to identify a
number of genes with potentially significant roles in various diseases. For
example, we applied transcriptional profiling to identify the gene that encodes
melastatin, a protein that appears to suppress metastasis (spreading to other
tissue) in malignant melanomas.

HIGH-THROUGHPUT SEQUENCING. The information carried within genes to direct the
synthesis of proteins resides within the DNA sequences of those genes. Each gene
is part of a polymeric chain built from four nucleotide monomers (represented by
the letters A, C, G and T). The sequence of these monomers in the chain
specifies what protein should be made. Accordingly, to identify and assign
function to the large number of genes in the human and other genomes, it is
essential to have very high-capacity methods for determining, storing and
analyzing DNA sequence information.

Millennium has developed comprehensively automated processes for high-throughput
DNA sequencing as well as a proprietary suite of software tools for the capture,
storage and analysis of large volumes of DNA sequence data (including
Millennium's proprietary Sequence Explorer(TM) software package). Millennium
uses these capabilities to support multiple approaches to gene discovery,
including positional cloning projects in human and mouse genetics programs;
sequencing of genomic regions surrounding known genes to identify unknown
relatives derived


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by gene-duplication events; and sequencing of cDNA copies made from mRNAs
extracted from various cells and tissues.

EXPRESSION CLONING. Among the most interesting proteins in any organism are
those that are secreted or that reside on cell surfaces. Secreted proteins often
carry signals from one cell/tissue to another. Cell-surface proteins often serve
as the receptors for such signals. Most currently approved biotherapeutics are
secreted proteins; many current small-molecule drugs and most current antibody
therapeutics exert their effects through cell-surface receptors.

Millennium has developed high-throughput methodologies specifically to clone
genes that encode secreted and cell-surface proteins and is applying these
methodologies to identify such genes and proteins in significant numbers. For
example, Millennium has used these methodologies in its discovery of the gene
that encodes ob-r, the receptor for the hormone leptin, which is a fundamental
regulator of weight and appetite.

FUNCTIONAL GENOMICS/DRUG TARGET VALIDATION
Genes discovered by genetic and non-genetic approaches may already be implicated
in a disease or some other biological trait of interest. However, significant
additional study is often required in order to establish more precisely the
specific functions of these genes and the roles they play in the disease or
trait of interest. The process of ascribing function to genes is known as
functional genomics.

In a pharmaceutical project, the main purpose of functional genomics is to
confirm that specific genes or their products may be appropriate targets for new
drugs. Such drug "target validation" requires a demonstration that modulating
the function of the possible drug target gene (or its product) is likely to have
a beneficial therapeutic effect. For non-pharmaceutical applications such as
agriculture, the specifics of what is meant by "validation" is different, but
the general principle (demonstrating the usefulness of modifying gene function)
is the same.

Conversion of newly identified genes into validated drug targets or product
candidates is a key step in the overall process of genomics-based product
discovery. Efficiency and greater productivity at this stage can provide a
significant competitive advantage. Accordingly, we have dedicated a substantial
portion of our research and development activities to functional genomics and
drug target validation, and to methods to increase the throughput and efficiency
of these activities.

One of the major challenges in functional genomics is quickly to reduce the
relatively large numbers of potential drug targets (or product candidates) that
typically emerge from a high-throughput gene-discovery program to a relatively
small number of high-priority candidates for further investigation. Millennium
addresses this challenge with a staged approach, starting with high-throughput
techniques that require relatively little effort per gene, then gradually
increasing our effort on each potential drug target as the total number of drug
targets decreases.


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The high-throughput techniques used for initial prioritization include
computational biology and microarray-based transcriptional profiling. Candidates
which appear promising in these initial studies are then evaluated further by
approaches, such as histology-based expression profiling, pathway profiling and
cellular and animal models, until sufficient information has been gathered to
nominate one or more of these candidates as targets for drug discovery or, in
the case of non-pharmaceutical projects, as being suitable for further
development into products. These techniques are described in greater detail
below.

COMPUTATIONAL BIOLOGY
Using appropriate software tools, it is possible to infer substantial
information about a gene's function from its DNA sequence. Information about
previously known genes gathered over many years by scientists from around the
world can be accessed and analyzed rapidly. Similarities ("homologies")
identified between the previously known genes and newly discovered genes provide
insight into what functions the new genes may have. Of particular interest are
homologies suggesting that a newly discovered gene falls into the same class as
genes with known medical or commercial usefulness, such as those encoding the
receptors, ion channels and enzymes that are the targets of many current
small-molecule drugs.

Millennium's Sequence Explorer software provides powerful tools for accessing
and interpreting both public and private Millennium databases of DNA sequence
information. We are continually developing enhanced computational capabilities
for "mining" DNA sequence data in order to extract the function of the gene (and
its protein product) encoded by such DNA sequence.

BENCH BIOLOGY
EXPRESSION PROFILING. Information about where and when a gene is transcribed and
translated, and in which cells and tissues and under what circumstances,
provides vital clues to the function of that gene. These expression patterns can
be determined using a variety of approaches directed towards either the
transcription or the translation stage of expression. Ideally, both stages
should be monitored, for two reasons. First, not all mRNAs are translated, and
it may be important to know which ones are and which ones are not. Secondly,
many proteins undergo significant "post-translational" modifications after being
synthesized. These modifications cannot be detected by monitoring transcripts
and often have crucial effects on the activities of the proteins under
investigation.

At the mRNA level, expression can be monitored in cells or tissue samples using
cDNA microarrays and other transcriptional profiling technologies, as described
above. Alternatively, transcripts can be localized more precisely to specific
cells and sub-cellular organelles by a technique known as in situ hybridization,
which involves the microscopic examination of tissue slices that have been
treated to highlight the presence and location of specific transcripts.


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Similar options are available for monitoring expression at the protein level.
The locations of proteins within tissue slices can be determined using specially
stained antibodies (a technique known as immunocytochemistry). In addition, the
population of proteins present in a cell or tissue extract can be examined using
"proteomics," technologies designed to identify all of the different protein
species within a cell or tissue sample and/or those protein species which are
present in one sample but not in another.

Millennium's platform includes an integrated set of technologies for
investigating expression patterns at both the mRNA and the protein level,
including cDNA microarrays, in situ hybridization and immunocytochemistry.
Millennium has also invested significant resources in building an extensive
collection of normal and diseased tissue samples in which the expression
patterns of genes of interest can be studied. These technologies and tissue
samples have contributed significantly to our validation of a number of
genes/gene products as targets for drug discovery. We are also actively
developing new proteomics technologies to ascertain differences in expression at
the level of translated proteins and/or post-translational modification status.

PATHWAY PROFILING. Any given property of an organism usually reflects the
coordinated activity of a set of genes (proteins) acting in concert, rather than
the isolated activity of an individual gene (protein). Stated another way, most
processes within an organism take place via pathways in which signals or
metabolites are processed in a defined sequence by different proteins acting in
succession. Accordingly, each gene emerging from a discovery effort has a
two-fold significance. First, it may prove useful as a drug target (or product
candidate) in its own right. Secondly, it represents an entry point into a
pathway composed of additional, possibly superior, potential drug targets. To
take advantage of this latter possibility, appropriate technologies are required
for the identification of other proteins in the pathway, a process known as
"pathway profiling."

Millennium has developed various pathway profiling capabilities, including the
use of yeast two- and three-hybrid systems and BIAcore biosensors (technologies
which can detect and monitor interactions between different proteins lying in a
biochemical pathway) and the application of transcriptional profiling to
identify sets of genes transcribed in a coordinated manner, which indicates that
they may participate in a common biochemical pathway.

CELLULAR AND ANIMAL MODELS. Important information about the function of a gene
can be derived by arranging for expression of the gene to be blocked, or for
that gene to be expressed in specific cells or tissues, or in the organism as a
whole, at levels higher or lower than usual. For experiments of this type,
Millennium has developed significant expertise in the construction and
utilization of specialized gene-delivery systems, and in the generation of
transgenic and knockout microbes and mice. A "transgenic" organism is one
carrying a gene from another species. A "knockout" organism is one in which a
particular gene has been disabled. Millennium also has broad experience in a
variety of the biochemical and cell-biology assays required to interpret such
experiments.

INFORMATICS AND ADVANCED PROCESS TECHNOLOGIES


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Successful application of genomics to the discovery of new drugs and other
products requires the simultaneous deployment of multiple different technologies
across a broad array of experimental procedures. This multi-disciplinary
approach presents numerous challenges, ranging from the diversity and complexity
of the overall process to the sheer volume of data to capture and interpret.

To address these challenges, Millennium places a heavy emphasis on the use of
advanced informatics and process technologies to integrate and accelerate the
many diverse activities of its genomics programs. Accordingly, our technology
platform includes a number of custom-developed informatics tools, including
Sequence Explorer(TM), Expression Explorer(TM), and Sample Manager(TM) that
enable users to capture, track and interpret large volumes of data from various
activities, such as genotyping, DNA sequencing and expression profiling, and to
incorporate data from both Millennium's own programs and published sources into
their analyses. Our technology platform also incorporates a high degree of
automation, controlled in many cases by proprietary software, and advanced
capabilities in analytical instrumentation such as fluorimetry and mass
spectrometry.

APPLICABILITY OF TECHNOLOGY PLATFORM
The technologies and processes from gene identification through target
validation, and the use of informatics and advanced process technologies, are
similar for the development of pharmaceuticals, biotherapeutics, or diagnostic
or pharmacogenomic tests. From this point forward in product discovery and
development, the processes and methods begin to differ in the different areas.
Further discussion of biotherapeutic and diagnostic/pharmacogenomic discovery is
in the sections describing MBio and MPMx, respectively.

PHARMACEUTICAL DISCOVERY APPROACHES AND DISEASE PROGRAMS

OVERVIEW
Through the application of our integrated platform of genomics and related
technologies, our pharmaceuticals division is engaged in discovering novel drug
targets and lead compounds which may be developed into new small-molecule drugs
for major human diseases. Such drugs are the mainstay of the traditional
pharmaceutical industry. Generally taken orally, they are particularly
appropriate for treating chronic diseases that often require the daily
administration of medications over many years.

PHARMACEUTICAL DISCOVERY APPROACHES

HIGH-THROUGHPUT SCREENING
In the discovery process for small-molecule drugs, gene products (that is,
proteins) which have been validated as suitable targets for therapeutic
intervention are configured into screening systems for testing large libraries
of compounds to identify those capable of interacting with these drug targets in
a useful manner. Various skills are required for success in this process. Each
screen must be configured so that it has an easily detectable readout, can be
performed economically, is capable of high throughput, is robust enough to
process samples of widely


                                      -15-
   16
differing purity and quality and has appropriate sensitivity and specificity.
Implementing the screen then requires diverse skills in sample tracking,
automation, data capture and analysis.

Millennium's technology platform incorporates a broad range of skills in the
configuration of assays and their implementation as high-throughput screens. We
are developing technologies, alone and through collaborations, to configure
validated targets into screens in a rapid manner. We believe that these
technologies will allow us to eliminate a key bottleneck in the discovery
process. During 1998, we formed a number of collaborations and entered into
various agreements to allow us access to technology we believe will be useful in
screening genomic targets. We currently develop assays and perform all
high-throughput screening for the antifungal and antibacterial programs, which
are the subjects of our collaborations with Pfizer and AHP, as well as for
Millennium drug targets.

In connection with our alliance with Bayer and with our proprietary drug
development programs, in 1999 we expect to expand our capabilities in assay
development and configuration. We intend to license technologies others have
developed and expand our staffing and other internal efforts in this area.

CHEMICAL DIVERSITY
Also key to success in drug discovery is the availability of large, diverse
libraries of chemical compounds. Ideally, these libraries encompass both
synthetic and natural compounds, since both classes are well represented in the
population of drugs currently on the market.

For its drug-discovery programs, Millennium has secured access to a broad range
of chemical compounds and natural products. Our sources of synthetic chemicals
include libraries made available by Lilly and AHP under the terms of
Millennium's collaborations with these companies (see "-- Strategic Alliances"),
novel combinatorial libraries synthesized at Millennium and compounds purchased
from various sources.

Millennium is currently expanding its efforts to generate additional proprietary
synthetic chemistry libraries. We believe that such libraries will be
particularly useful sources of pharmacologically active compounds.

Millennium's sources of natural products include a proprietary collection of
over 50,000 fungal species collected from numerous sites around the world as
well as proprietary transgenic fungi. These transgenic fungi are readily
culturable fungi, which we have engineered to synthesize compounds, which are
normally made only in fungi that are difficult or impossible to culture. These
transgenic fungi provide Millennium with access to a rich diversity of naturally
occurring compounds which has not previously been accessible to the
pharmaceutical industry.

During 1997, Millennium was issued a United States patent on an approach for
generating novel sources of natural compounds involving crossing two
incompatible strains of the fungus Aspergillus, resulting in synthesis of
compounds not found in either of the parent strains.

DISEASE PROGRAMS


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BACTERIAL INFECTIONS
In the field of bacterial infections, we are engaged in identifying and
validating new targets for antibacterial drugs and in high-throughput screening
to identify potential lead compounds. MPI has formed a collaboration with AHP in
this field. See "-- Strategic Alliances --American Home Products Corporation."

Infectious diseases are the third leading cause of death in the United States,
and account for 25% of all physician visits. Antibiotics are the second most
frequently prescribed class of drugs. Bacterial resistance to antibiotics is a
serious problem. For example, drug-resistant pneumococci cause 15,000 cases of
meningitis each year in the United States, 7,000 cases of sepsis/bacteremia
(blood infections), 150,000 cases of pneumonia and over one million cases of
otitis media (ear infections). Between three and 35% of pneumococcal illness is
due to drug-resistant strains, depending on geographical location and season of
the year. Mortality and hospital length of stay are at least doubled for
resistant strains of bacterial organisms compared with strains responsive to
treatment. Only one antibiotic, vancomycin, remains effective against
hospital-acquired staphylococcal infections.

We are applying our expertise in bacterial genetics and genomics to identify
significant numbers of genes that are essential for the growth of pathogenic
bacteria, to prioritize these genes on the basis of their likely suitability as
targets for novel antibacterial drugs and to pinpoint the molecular targets of
compounds identified by other means as having antibacterial activity. In each of
1997 and 1998, AHP accepted three novel targets for antibacterial drug
discovery. Targets from this program are now at various stages within the drug
discovery process ranging from assay configuration, through screening, to
optimization of chemical compounds that interact with the target.

CARDIOVASCULAR DISEASE
Millennium's research program in cardiovascular disease includes projects in
atherosclerosis and congestive heart failure. We have formed a strategic
alliance with Eli Lilly concerning these projects. See "-- Strategic Alliances--
Eli Lilly and Company."

Heart disease has a prevalence in the United States of approximately 18 million
individuals. Its major cause is atherosclerosis. 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. Approximately five
million Americans suffer from heart failure and an additional 500,000 cases are
diagnosed annually. The mortality rate from heart disease is extremely high. Few
effective therapies are available.

More than two million people in the United States suffer from the effects of
congestive heart failure (CHF) and approximately 400,000 new cases are diagnosed
each year. CHF results from altered cardiac muscle mechanics and function in
response to various conditions including: hypertension, valvular heart disease,
and heart attacks due to atherosclerosis. The response of the


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   18
cardiac muscle to these conditions is felt to be largely under the genetic
control of several, complex signaling pathways. Therefore, it is thought that by
modulating novel molecular targets in heart muscle, CHF may be more effectively
treated.

MPI's programs in atherosclerosis and CHF use three different approaches to
novel gene discovery: human genetics, mouse genetics and expression profiling.
The human genetics program is being conducted through collaborations with
academic investigators and aims to identify genes responsible for, respectively,
early-onset vascular disease and inherited lipid defects in children that
promote atherosclerosis in adulthood. Mouse genetic models of both
atherosclerosis and congestive heart failure are being used with the goal of
identifying genes that modify or protect against developing the disease.
Expression profiling approaches are a major gene/target discovery engine in the
atherosclerosis and congestive heart failure programs. These studies include an
investigation of how biomechanical forces affect gene expression in cells from
the walls of blood vessels (atherosclerosis) and how different mechanical or
growth factor stimuli affect gene expression in cardiac myocytes (congestive
heart failure).

Millennium's efforts in atherosclerosis and CHF have led to the discovery of
several genes which appear to play a role in protecting blood vessels from the
formation of atherosclerotic lesions or in key signaling pathways involved in
regulating cell growth, differentiation and migration - processes that are
fundamental to the initiation and progression of cardiovascular disease. Five of
these genes have been delivered to Lilly for screening against small molecule
compound libraries, including four targets in 1998. In 1998, the US Patent and
Trademark Office issued Millennium a number of patents relating to genes
discovered in our cardiovascular research programs.

CENTRAL NERVOUS SYSTEM DISEASES
In the field of central nervous system diseases, Millennium is principally using
human genetics to identify the genes responsible for affective disorders and
schizophrenia and has formed a strategic alliance with AHP. In addition, we are
using cDNA approaches to identify genes potentially implicated in the initiation
and/or progression of generalized depression, epilepsy and neurodegeneration.
See "-- Strategic Alliances -- American Home Products Corporation."

Bipolar affective disorder, also known as manic depression, affects at least two
million people in the United States, while the related disorder, common
depression, may affect up to 13 million persons. Siblings of people affected
with bipolar affective disorder appear tenfold more likely to develop the
disease than siblings in the general population, suggesting an underlying
genetic basis. Schizophrenia is a debilitating disease of the central nervous
system that is characterized by severe cognitive impairment, and that affects
approximately 2.5 million people in the United States.

For its studies on the genetics of bipolar affective disorder, Millennium is
collaborating with academic investigators who have access to appropriate
populations. Genetic linkages have been identified in these populations, and
positional cloning efforts are in progress to identify the disease genes, which
these linkages represent.


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   19
In the area of schizophrenia and schizoaffective disorders, we are collaborating
with a consortium of academic clinicians who have access to populations of
schizophrenia-prone families that have undergone extensive clinical
characterization. Genotyping of individuals in these populations is in progress.

FUNGAL INFECTIONS
In the field of fungal infections, MPI is engaged in the identification and
validation of new targets for antifungal drugs and in high-throughput screening
to identify potential lead compounds. We are conducting these activities in a
collaboration with Pfizer. See "--Strategic Alliances -- Pfizer."

Approximately two million systemic fungal infections (infections involving the
bloodstream and/or internal organs) occur annually worldwide. The proportion of
hospital-acquired infections in the United States due to fungi (as opposed to
other pathogens) nearly doubled from 1980 to 1990, from 6% to over 10% of all
such infections. The increasing incidence of systemic fungal infections is due
in part to the growing number of patients whose immune systems are compromised
due to HIV infection, chemotherapy treatments, increased use of
immunosuppressive drugs or aging. Despite current approaches to treatment, the
mortality rate in patients with systemic fungal infections is extremely high,
ranging from 30% to 80%, depending on the specific fungal infection.

Only two major classes of antifungal drugs are in use today, both of which have
significant inadequacies. One class of antifungal drugs, which includes
Amphotericin-B, while generally effective against Candida, Aspergillus, and
Cryptococcus, must be administered intravenously and has serious side effects in
many patients. The other major class of antifungal drugs is the azoles. Azoles
are well-tolerated and available in orally active forms. However, they are
ineffective against important pathogenic species such as Aspergillus. Moreover,
strains of fungal infections that are resistant to the azoles have emerged,
particularly in patients with AIDS.

Using our expertise in fungal genetics and genomics and in lead-discovery
technologies, Millennium scientists have identified significant numbers of genes
that are essential for the growth of pathogenic fungi. Our scientists have
prioritized these genes on the basis of their likely suitability as targets for
novel antifungal drugs, configured screens to identify compounds active against
the most promising antifungal drug targets and conducted several high-throughput
screens of large chemical libraries. These activities have led to the discovery
of several series of lead compounds that are the subject of ongoing medicinal
chemistry optimization.

During 1998, the US Patent and Trademark Office issued Millennium two patents
relating to a process for identifying genes essential for a pathogen's survival.
We believe that identifying pathogenic survival genes could be an important step
in developing novel drugs that can actually kill the pathogen (fungi or
bacteria) in question. In contrast, many existing therapeutics merely ameliorate
symptoms of the pathogenic disease or slow the growth of the disease-causing
organism.

INFLAMMATORY RESPIRATORY DISEASES


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In the field of inflammatory respiratory diseases, Millennium is conducting gene
identification and drug target validation activities and has formed 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 environmental factors, a number
of studies have indicated that asthma is substantially attributable to a genetic
component.

Millennium currently is undertaking several projects in the field of
inflammatory respiratory diseases through human genetics and cDNA approaches.
The human genetics program is being conducted in appropriate populations in both
China and Europe. The cDNA - based programs are focused on identifying key genes
that control immunological conditions important in inflammatory respiratory
diseases, including asthma. In this program, high throughput gene-expression
analysis and rapid validation methods are being used to identify critical
regulatory genes in inflammatory pathways. Millennium scientists have also
established several animal disease models expressing physiologic and
inflammatory disease markers for use in both gene discovery and gene validation.
These programs are generating knowledge and information useful in understanding
both respiratory and non-respiratory inflammatory diseases.

OBESITY
In the field of obesity, Millennium is conducting gene identification and drug
target validation activities and has formed 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 30% 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 2 diabetes. Although obesity is believed to have multiple contributing
causes, studies of identical twins suggest that genetic factors are a principal
cause of the disease.

We are currently undertaking several projects in the field of obesity, employing
animal models, mouse genetics, human genetics and other components of
Millennium's technology platform. These have led to the identification of a
number of genes responsible for obesity in animal models or strongly implicated
in the disease, including: the gene encoding ob-r, the receptor for the hormone
leptin, a fundamental regulator of weight and appetite; the gene encoding tub,
which we believe is associated with adult onset diabetes; uncoupling protein
homologue (UCPH), which regulates metabolism and energy expenditure; and the
gene encoding the melanocortin 4-receptor (MC4-R), a G-protein coupled receptor
which is an important regulator of body weight. MPI and Roche have conducted
drug target identification, validation and development programs with respect to
these and other genes. In addition, through collaborations with academic
investigators, we are conducting human genetics studies in appropriate
populations in the American Midwest and the rural Anhui province of China.


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During 1998, Millennium announced that Roche had accepted into its
small-molecule screening program two drug targets identified by Millennium,
achievements for which Millennium received milestone fees under our strategic
alliance agreement with Roche. In addition, the US Patent Office issued
Millennium two patents in 1998 related to UCPH. The first relates to the gene
encoding UCPH, and the second to a drug screening method. Millennium previously
received a U.S. patent relating to diagnostic methods involving UCPH.

ONCOLOGY
In the field of oncology, Millennium is conducting gene identification and
small-molecule drug discovery activities related to mechanisms of drug
resistance and angiogenesis (formation of blood vessels within and around
tumors) in a variety of cancers, including prostate, breast, lung, colorectal
cancer and melanoma. Millennium has a strategic alliance with Lilly in select
areas within oncology, including prostate cancer and mechanisms of drug
resistance, and has granted rights to discoveries and targets in other areas of
oncology to Bayer. See "--Strategic Alliances -- Eli Lilly and Company" and 
"--Strategic Alliances --Bayer AG."

Over one million new cancer cases are reported in the United States annually.
Cancers of all types result in over 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. Many of these therapies
have severe adverse side effects.

We are currently undertaking several projects focusing on the areas of
hormone-refractory prostate cancer, mechanisms of drug resistance, apoptosis
(cell death), early-stage breast, lung and colon cancers, and mechanisms of
angiogenesis using both data base mining and cDNA approaches. We are also using
expression profiling technologies to identify genes that function in the
progression of a variety of different types of cancer. We have collaborations
with major medical centers to gain access to tumor samples. Millennium has
identified drug target candidates in multi-drug resistant tumors,
hormone-refractory prostate cancer and genes implicated in the initiation and
progression of melanomas. We have begun drug target validation studies on these
genes, including gene transfer into animal models of cancer progression. During
1998, Millennium was issued a U.S. patent relating to two novel caspase genes,
which may be involved in the regulation of apopotosis.

TYPE 2 DIABETES
In its type 2 diabetes research program, Millennium is principally using a gene
identification strategy based on human genetics and has formed a strategic
alliance with Roche. See "-- Strategic Alliances -- Hoffmann-La Roche Inc."

Approximately 14 million persons in the United States are affected by type 2
diabetes, also known as adult-onset or non-insulin dependent diabetes mellitus
(NIDDM). The disease is the seventh leading cause of death in the United States.
Studies of identical twins indicate that type 2 diabetes is primarily due to
genetic factors. This condition is a complex disorder involving a


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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 2 diabetes are designed to identify
disease genes involved in both of these disease processes. These studies have
led to the mapping of a gene, NIDDM2, which may be associated with the
development of a form of adult-onset diabetes linked to low insulin secretion.

In November 1996, Millennium and Roche announced the achievement of a research
milestone associated with the identification of a gene implicated in the
development of type 2 diabetes, and in 1998 Millennium and Roche announced two
research milestones associated with genes identified under the collaboration
that would move forward into high throughput screening.

In 1998 the US Patent and Trademark Office granted Millennium a patent covering
a method for identify candidate drugs for the treatment of type 2 diabetes, as
well as a patent covering a test to determine whether an individual has, or is
at risk for developing, certain forms of type 2 diabetes.

OTHER PROGRAMS
In addition to the foregoing disease research programs, the Millennium is
conducting additional research efforts in the fields of osteoporosis,
non-respiratory inflammation and autoimmune diseases, and intends, in connection
with the alliance with Bayer, to begin additional efforts in pain, liver
fibrosis, hematology, and viral infections during 1999.

STRATEGIC ALLIANCES - MPI

OVERVIEW
In accordance with its overall commercialization strategy, Millennium has formed
a number of alliances focused on drug discovery with pharmaceutical partners
that have substantial resources and expertise in research, preclinical and
clinical development, regulatory issues and marketing. We intend to pursue
additional such alliances, as well as other commercialization opportunities
through product acquisition, as appropriate.

MPI has formed a total of nine strategic alliances. These agreements include
alliances based on the transfer of our technology platform, alliances which
combine technology transfer with a focus on a specific disease or therapeutic
approach, and disease-focused programs under which Millennium conducts research
funded by its partners. In each of these alliances, Millennium generally has
agreed that, while the alliance is in place, we will not conduct certain
research, independently or with any commercial third party, that is in the same
field covered by the alliance agreement. Millennium has retained
commercialization rights to certain therapeutic and diagnostic applications of
the discoveries resulting from these funded research programs. See "-- Retained
Commercialization Rights."

Each of the agreements governing the strategic alliances is subject to certain
contingencies including, in certain instances, early termination rights. In the
event that specified additional research, product development and associated
regulatory milestones are achieved, our strategic


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partners will be obligated to make milestone payments to Millennium. Generally,
each of these agreements also entitles Millennium 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.

To realize value from its investment in technology development, and to access
additional resources for such development, Millennium has agreed to transfer
components of its technology platform to its partners as part of certain of its
strategic alliances. These alliances are with companies operating primarily in
the pharmaceutical and plant agriculture industries.

Millennium's alliances with Monsanto, Lilly, Astra, Bayer and AHP, as described
below, include significant technology transfer components. In each case,
Millennium has granted rights to use, and has undertaken to transfer, certain
genomics technologies to its partner, primarily technologies for high-throughput
sequencing, informatics and transcriptional profiling. Millennium also made
certain commitments to provide continuing support for technology it has
transferred. Under certain circumstances, Millennium may receive royalties on
certain products in whose discovery or development Millennium technologies have
played a role.

STRATEGIC ALLIANCES

AMERICAN HOME PRODUCTS CORPORATION
CENTRAL NERVOUS SYSTEM DISORDERS. In July 1996, the Company formed a strategic
alliance with the Wyeth-Ayerst division of American Home Products Corporation to
discover and develop targets and assays to identify small molecule drugs and
vaccines for treatment and prevention of disorders of the central nervous
system. The strategic alliance with AHP consists of three major components:
central nervous system ("CNS") disease drug-discovery research, informatics
technology and support and technology exchange.

In June 1998, Millennium and AHP announced the discovery of a novel gene that
regulates the activity of a key ion channel in the brain, that is likely to be
involved in CNS disorders. Millennium received a milestone payment in connection
with this discovery.

Millennium has focused the CNS drug discovery research program with Wyeth-Ayerst
on psychiatric disorders including anxiety, depression, schizophrenia, and
bipolar disease. The Wyeth-Ayerst division of AHP has been granted exclusive,
worldwide, royalty-bearing rights for the development and marketing of any small
molecule drugs and vaccines arising from the collaboration for the prevention
and treatment of CNS diseases and disorders. Millennium generally retains rights
relating to the worldwide development and marketing of antisense drugs and
diagnostic products and services arising from the collaboration. Millennium has
granted a right of first refusal to AHP with respect to further opportunities
for the joint development of non-vaccine therapeutic proteins and gene therapy
products in the CNS field identified in the research program.

The CNS alliance may continue for up to seven years, through August 2003. AHP
has the option to terminate the agreement in September 1999 if Millennium has
not met certain research


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objectives, in September 2000 if Millennium has not met certain objectives with
respect to technology transfer, or in September 2001 if Millennium has not met
additional research objectives.

ANTIBACTERIALS. Through its acquisition of ChemGenics in February 1997,
Millennium became engaged in a strategic alliance with AHP to discover novel
drug leads for treating bacterial infections in humans.

During 1998, AHP accepted three antibacterial drug targets from Millennium for
drug candidate screening. As a result, AHP made a milestone payment to
Millennium for each drug target and a bonus payment for delivering six drug
targets within the first two years of the agreement.

The alliance agreement provides AHP with exclusive worldwide royalty-bearing
rights to develop and commercialize small-molecule drugs arising from the
collaboration for human bacterial diseases other than H. pylori infections.
Commencing one year after the end of the research term, Millennium will have
certain rights to develop and commercialize Millennium or AHP products arising
from the collaboration if AHP is not developing a product from the collaboration
with the same activity profile.

Under the terms of the alliance, AHP is funding and collaborating with
Millennium on a five-year program that is due to conclude in December 2001. AHP
has the right to terminate in November 1999 if certain research objectives have
not been met by that date.

OTHER. Millennium has obtained certain rights to screen its own drug targets
against small molecule compound libraries owned by AHP as part of a technology
exchange program with AHP.

ASTRA AB
In December 1995, Millennium and Astra formed a strategic alliance in the field
of inflammatory respiratory diseases. The agreement also includes a component of
informatics technology and support and technology exchange. In December 1998,
Astra and Millennium amended the agreement and extended the alliance until
December 2003. Astra has the right to terminate the program in December 2001,
and would be obligated to make an early termination payment in that case.

The agreement gives Astra exclusive worldwide royalty-bearing rights to develop
and commercialize small-molecule drugs in the inflammatory respiratory diseases
field based on Millennium's target discoveries arising from the collaboration.
Millennium and Astra have agreed to explore opportunities to jointly develop and
commercialize therapeutic proteins identified in the research program 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 identified in
the research program. In the absence of an agreement on joint development, Astra
has exclusive worldwide rights in the field


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   25
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. We also have granted Astra a non-exclusive right to use certain
genomics technologies. Millennium has retained exclusive rights to all
diagnostic and gene therapy applications arising from the strategic alliance
research program.


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   26
BAYER AG
In September 1998, Millennium and Bayer formed a strategic alliance in the field
of pharmaceutical drug discovery. Together, Millennium and Bayer will pursue a
new production-oriented approach to rapidly move compounds toward clinical
trials based on genomics research. In November 1998, Bayer made an equity
investment of $96.6 million in exchange for approximately 4.96 million shares of
Millennium common stock, and Bayer paid Millennium $33.4 million as an up-front
licensing fee. Future payments which may be made over the full alliance term
include $219 million of ongoing license and research program funding, as well as
a potential of up to $116 million of performance payments for delivery of
targets. Bayer has the right to cancel the agreement after two and three years
if certain minimum target delivery objectives are not met.

The primary goal of the alliance is for Millennium to supply 225 drug targets to
Bayer over a period of five years. These targets will be relevant for
cardiovascular disease, areas of oncology not covered by Millennium's alliance
with Lilly, osteoporosis, pain, liver fibrosis, hematology and viral infections.
From those identified by the alliance, Bayer will select drug targets for its
exclusive use; the remainder will be available to Millennium to use in its own
proprietary drug development efforts. In addition, both Millennium and Bayer in
certain circumstances have rights to royalty payments on the sale of marketed
products.

ELI LILLY AND COMPANY
In October 1995, Millennium and Lilly formed a strategic alliance in the field
of atherosclerosis and in March 1996, Millennium and Lilly formed a strategic
alliance in select areas within oncology. The atherosclerosis agreement also
includes a component of informatics technology and support and technology
exchange. Under the terms of the atherosclerosis agreement, Lilly made an $8.0
million equity investment in Millennium. Lilly also agreed to fund five-year
programs of atherosclerosis and cancer research by Millennium starting in,
respectively, October 1995 and March 1996. In September 1997, Lilly and
Millennium expanded the scope of the atherosclerosis research program to include
congestive heart failure.

In December 1998, Millennium announced that Lilly had accepted two novel targets
for drug candidate screening under the cardiovascular program. This achievement
triggered a milestone payment to Millennium.

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, congestive heart failure or cancer based on our
gene discoveries in the alliance research programs. Millennium has retained
exclusive rights to all diagnostic and antisense drug applications arising from
the strategic alliance research programs. In addition, Millennium has granted
Lilly a right of first negotiation with respect to research programs in the
cardiovascular area falling outside of the field of atherosclerosis.

Lilly has granted Millennium non-exclusive rights to use select combinatorial
chemistry libraries and high-throughput screening technologies controlled by
Lilly to conduct a limited number of


                                      -26-
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screens with our drug targets to identify product candidates for medical
indications other than specific medical indications designated by Lilly as being
of strategic importance to Lilly. We have exclusive worldwide rights to develop
and commercialize such product candidates. Millennium will be required to pay
Lilly royalties on the sale of any products that we may identify using Lilly's
combinatorial chemistry libraries. Millennium has also granted Lilly a
non-exclusive right to use certain genomics technologies (see "-- Strategic
Alliances").

Lilly originally had the right to terminate the atherosclerosis agreement at any
time after October 1998. In September 1997, based on achievements in several key
areas of the program during its first two years, Lilly waived this right and
accelerated its commitment to fund the program for a full five years. In
December 1998, Millennium and Lilly agreed to extend the oncology alliance to
its full term, through March 2001. Lilly retains the right to terminate its
research funding obligations under each agreement under various circumstances.

HOFFMANN-LA ROCHE INC.
In March 1994, Millennium and Roche formed a strategic alliance in the fields of
obesity and type 2 diabetes. Under the terms of a related stock purchase
agreement, Hoffmann-La Roche Ltd. (Basel, Switzerland), a Roche affiliate, made
a $6.0 million equity investment in Millennium, and agreed to fund a five-year
program of obesity and type 2 diabetes research. In 1998, Millennium and Roche
announced two research milestones associated with genes identified under the
collaboration that would move forward into high throughput screening. The
research phase of the collaboration with Roche will conclude in March 1999.

The agreement provides Roche with exclusive worldwide royalty-bearing rights to
develop and commercialize small molecule therapeutics for obesity and type 2
diabetes based on Millennium's target discoveries arising from the
collaboration. Roche has an exclusive royalty-bearing right to develop and
commercialize therapeutic proteins, antisense drugs, oligonucleotides and gene
therapy for obesity and type 2 diabetes outside of North America. Within North
America, Millennium has retained the right to develop and commercialize
therapeutic proteins, antisense drugs, oligonucleotides and gene therapy for
obesity and type 2 diabetes, subject to Roche's right to co-promote such
products.

MONSANTO COMPANY
In October 1997, Millennium formed a broad five-year collaboration agreement
with Monsanto relating to the application of genomics technologies in Monsanto's
life-science-based businesses. Efforts under this alliance are under way
primarily in MPI's technology division. In connection with this agreement,
Monsanto has established a wholly owned subsidiary, Cereon Genomics LLC
("Cereon"), based in Cambridge, Massachusetts. Millennium granted Cereon and
Monsanto an exclusive license to use Millennium's genomics technologies in plant
agriculture and certain aspects of dairy agriculture and agreed to collaborate
exclusively with Cereon and Monsanto in these fields. Millennium agreed not to
compete or grant licenses to others in these fields for a period of ten years
after the five-year term of the collaboration. Millennium also granted a
non-exclusive license to Monsanto to apply Millennium's genomics technologies
outside of these fields.


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Monsanto agreed to pay Millennium $118 million in up-front, licensing and
technology transfer fees over the five-year term of the agreement. Monsanto also
agreed to pay Millennium up to $100 million over five years for achieving
mutually determined research objectives and for the payment of royalties to
Millennium on the sale of certain products originating from research conducted
by Cereon. Millennium was also granted non-exclusive rights outside the field of
agriculture to use certain discoveries and technologies developed within Cereon
and Monsanto. Millennium realized $38.2 million in revenues associated with
technology transfer and license fees, achievement of mutually agreed-upon
research objectives, and facilities services under this agreement in 1998, and
$38 million in revenues as an up-front payment in 1997.

Monsanto has the right to terminate the agreement in the event that a company
with sales exceeding $1 billion in plant agriculture and certain aspects of
dairy agriculture acquires more than a specified percentage of the combined
voting power of Millennium's outstanding securities or acquires all or
substantially all of Millennium's assets.

PFIZER
Through its acquisition of ChemGenics, Millennium also became engaged in a
strategic alliance with Pfizer to discover novel drug leads for treating fungal
infections in human. Under the terms of this alliance, Pfizer is funding and
collaborating with Millennium on a program of antifungal research. This
agreement, scheduled to conclude in December 1998, was amended in December 1998
and extended through December 2000.

The agreement provides Pfizer the option to acquire exclusive royalty-bearing
worldwide rights to develop and commercialize products to treat human fungal
infections discovered as part of the collaboration. If the option is not
exercised for a particular candidate product and Pfizer is not developing
another product with a similar profile of activity arising from the
collaboration, Millennium will be permitted under certain circumstances to
develop and commercialize that candidate itself or with third parties. If
Millennium or a Millennium licensee sells any such product, we may be required
to make a royalty payment to Pfizer.

RETAINED COMMERCIALIZATION RIGHTS

Millennium has retained a broad range of rights to commercialize certain
therapeutic and diagnostic applications of discoveries resulting from the
disease-focused research programs funded by its strategic partners. These
retained rights fall broadly into three categories: small-molecule drugs, 
biotherapeutics and diagnostics.

In each of its strategic alliances, Millennium has retained the co-exclusive
right to use the molecular drug 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. We are using a number of these drug targets and retained
rights as the basis for additional drug-discovery programs either on our own
behalf or in alliances with other current or future partners.


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Millennium has also retained certain exclusive or co-exclusive rights to develop
and market therapeutic proteins and antibodies, vaccines and gene therapy and
antisense products stemming from discoveries made in MPI's disease-focused
drug-discovery alliances. These rights have been transferred to, and are being
used by, our MBio subsidiary.

Millennium has retained rights to develop and market diagnostic products and
services resulting from the research programs conducted by MPI under the
strategic alliances with AHP, Astra, Bayer, Lilly, Roche, and Pfizer. These
rights have been transferred to, and are being used by MPMx.



MILLENNIUM BIOTHERAPEUTICS, INC.

Millennium BioTherapeutics, Inc. (MBio) was founded in May 1997 to leverage the
MPI genomics and informatics technology platform toward the discovery of new
biotherapeutic drugs. As of March 1, 1999, MBio had approximately 80 full-time
employees and was contracting with other units within MPI for the services of
approximately 40 additional full-time equivalent employees. MBio's core field is
biotherapeutic drugs including therapeutic proteins, therapeutic antibodies,
gene therapy, antisense therapy, and vaccine products. MPI owns approximately
82% of MBio's voting stock, and Lilly, which made a $20 million equity
investment in MBio in 1997, owns 18% of MBio's voting stock.

MBio's initial focus is protein and antibody product discovery efforts. MBio's
protein discovery efforts include a genomics-based program that is funded in
part by Lilly, working toward identification of therapeutic protein drugs, as
well as programs for identification of therapeutic protein opportunities that
are exclusive of MBio's relationship with Lilly. MBio's antibody discovery
effort is focused on novel antibody drugs in the fields of inflammation and
oncology. Potential product opportunities in gene therapy, antisense, and
vaccine products may emerge indirectly from our protein and antibody discovery
efforts. We intend to attempt to exploit these opportunities by selling rights
to assist in funding MBio's efforts in discovery and development of protein and
antibody drugs.

MPI has generally agreed to transfer to MBio all product development
opportunities and technology rights (including opportunities and rights arising
under our collaboration agreements) in MBio's core area of interest which
focuses on biotherapeutic proteins and antibodies, vaccines, and gene therapy
and antisense products. Reciprocally, MBio has generally agreed to transfer to
MPI all product development opportunities and technology rights outside MBio's
core area of interest. MPI has also granted to MBio a royalty-free,
non-exclusive license to MPI's process technologies and a royalty-free,
exclusive license to certain product-related technology, in each case within
MBio's core area of interest. Similarly, MBio has granted to MPI a royalty-free,
non-exclusive license to MBio's process technologies and a royalty-free,
exclusive license to certain product-related technology, in each case outside
MBio's core area of interest. In addition, there are agreements providing for
contracting of research and administrative services. MBio intends


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to continue to contract with MPI for certain research services (e.g., DNA
sequencing) and certain administrative services.

BIOTHERAPEUTICS
Biotherapeutics fall into five main product classes: therapeutic proteins,
therapeutic antibodies, gene therapy products, antisense products and vaccines.

Most therapeutic proteins now available are produced from cloned genes. These
proteins may represent biotechnology's biggest contribution to date to human
healthcare. Examples of therapeutic protein products include: Humulin(R) (human
insulin); Humatropin(R) (human growth hormone); Neupogen(R) (granulocyte
colony-stimulating factor, G-CSF); Epogen(R) (erythropoietin); Intron-A(R)
(interferon alpha); Betaseron(R) and Avonex(R) (interferon beta); Kogenate(R)
(factor VIII); Activase(R) (tissue plasminogen activator, TPA); and Ceredase(R)
(glucocerebrosidase).

Therapeutic proteins are often divided into two main categories. The first
category, which may be termed "replacement therapies," consists of proteins
which supplement or replace proteins whose absence or deficiency is an
underlying cause of the disease in question. Examples include glucocerebrosidase
in Gaucher's disease and factor VIII in hemophilia. The second category, which
may be termed "pharmacologic therapies," consists of proteins which stimulate
natural processes within the body for therapeutic effect, but whose absence is
not an underlying cause of the disease. Examples of pharmacologic therapies
include G-CSF, which stimulates the regeneration of neutrophils following cancer
chemotherapy, thereby protecting patients against infection, and TPA, which
stimulates the breakdown of dangerous blood clots in heart-attack and stroke
patients. MBio believes that genomics technologies will enable the
identification of many new potential products in both of these categories.

Therapeutic uses of antibodies are based on the unique ability of antibodies to
recognize and bind potently to specific molecular shapes. In some cases, the
antibody targets a protein or process in the body, which will otherwise have
adverse effects. For example, by blocking the aggregation of platelets,
ReoPro(R) inhibits potentially dangerous blood clotting after angioplasty. In
other cases, the antibody binds specifically to the surface of unwanted cells,
such as tumor cells, and initiates the destruction of these cells by the body's
immune system. In an alternative but similar approach, a toxin or radioactive
label is coupled with the antibody and used to destroy the unwanted cells. MBio
believes that genomics technologies will enable the identification of a new
generation of targets whose neutralization or recognition by antibodies could
have a beneficial therapeutic effect.

Gene therapy consists of the administration to a patient of a gene that encodes
a protein having a therapeutic benefit. Gene therapy may have potential
advantages in situations in which there is a need for prolonged administration
of therapeutic proteins or for their delivery only to defined sites within the
body. For example, a protein that is chronically deficient in a particular
disease might be provided by relatively infrequent administration of the gene
encoding that protein, rather than by frequent intravenous or subcutaneous
administration of the purified protein. Alternatively, a disease might most
appropriately be treated by localized administration of a


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specific protein to a particular organ system, which is difficult to achieve
with injectable proteins but expected to be achievable by gene therapy. MBio
believes that genomics technologies will be successful in enabling the
identification of many genes that will be good candidates for use in gene
therapy products.

Antisense therapy can be viewed as the opposite of gene therapy. Instead of
providing a gene that encodes a protein whose effect is beneficial, the goal of
antisense therapy is to block the activity of a gene that encodes a protein
whose effect is harmful. The gene's activity is blocked using a synthetic DNA-
or RNA-like molecule which by virtue of its sequence is capable of binding to
mRNA transcripts copied from the gene. This binding prevents translation of the
mRNA, and thereby inhibits synthesis of the harmful protein. Genomics
technologies have the capability to identify genes and transcripts whose
activities it would be beneficial to block. Such genes and transcripts represent
potential targets for antisense therapies.

A vaccine is a preparation that resembles a pathogen in a way that is sufficient
to provoke an immune response, but without causing disease. Vaccination primes
the immune system to mount a vigorous response upon subsequent exposure to the
pathogen in question, preventing development or progression of the disease that
the pathogen causes. Historically, the main targets of vaccines have been
infectious diseases. Accordingly, the target pathogens have been viruses and
bacteria, such as poliovirus and the bacteria, which cause diphtheria, pertussis
and tetanus. More recently, there has been a strong interest in developing both
preventive and therapeutic cancer vaccines, for which the target "pathogens" are
cancer cells. Whatever the nature of the pathogen, proteins that are present on
its exterior surface and unique to the pathogen have the potential to provoke
pathogen-specific immune responses. Such proteins therefore represent potential
constituents of vaccines. MBio believes that genomics technologies will be
useful in identifying such proteins.

TECHNOLOGY PLATFORM
As applied at MBio, the key components of the technology platform include
high-throughput DNA sequencing, advanced informatics technologies including
Sequence Explorer(TM) and Expression Explorer(TM), genetic mapping,
transcriptional profiling, high-throughput expression cloning, modified
retroviral vector technology for gene expression and in vivo functional
validation, and generation of transgenic and knock-out mice. In addition, MBio
has external agreements to provide transgenic and knockout mice.

In addition to technologies obtained through MPI, MBio has expanded its platform
to include high-throughput mammalian cell- and yeast-based signal sequence
expression cloning technologies, development of a proprietary naive antibody
phage display library, and "PLATO", an automated cell panning-based antibody
phage display technology for high-throughput generation of antibodies and
biological validation of genes through functional knock-out strategies.

DISCOVERY PROGRAMS
Discovery research efforts at MBio are currently focused on two major product
categories, therapeutic proteins and therapeutic antibodies. In the field of
therapeutic proteins, MBio has


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formed a strategic alliance with Lilly. See "-- Strategic Alliances -- Eli Lilly
and Company." MBio is not currently engaged in efforts directed specifically to
the discovery of gene therapy, antisense or vaccine products, although it
anticipates that it may have programs in these areas in the future.

MBio's therapeutic protein discovery program includes the Lilly collaboration,
which is using cDNA-based sequencing, transcription profiling, and genomic
sequencing approaches for gene discovery. At present, MBio has discovered and is
engaged in research on approximately 100 priority therapeutic protein candidates
in various stages of pre-clinical development.

In addition, potential antibody targets have been identified as an outcome of
the therapeutic protein discovery effort. The therapeutic focus for MBio's
therapeutic antibody efforts is inflammation and oncology. MBio has developed
"PLATO", a high-throughput antibody generation platform using phage display
technology. "PLATO" allows rapid generation of single-chain antibodies for use
as immunohistochemistry reagents as part of antibody target validation.

STRATEGIC ALLIANCES
ELI LILLY AND COMPANY. In May 1997, MBio and Lilly formed a strategic alliance
in the field of therapeutic proteins. Under the terms of this alliance, Lilly
and MBio each provides half of the funding for a research program at MBio to
discover candidate therapeutic proteins, and each receives exclusive rights to
half of the therapeutic proteins discovered. Therapeutic antibodies and certain
other proteins are excluded from the alliance. In conjunction with the formation
of this alliance, Lilly made an equity investment of $20 million in MBio, for
which it received approximately 18% of MBio's voting stock. In the event that
Lilly achieves specified research, product development and associated regulatory
milestones in its development of proteins resulting from the alliance, Lilly
will be obligated to make milestone payments to MBio. Lilly also will be
obligated to pay royalties to MBio on the sale of certain therapeutic products
that may result from the alliance.

Candidate therapeutic proteins identified in the jointly funded research program
which meet certain specified criteria become available for selection by either
Lilly or MBio for further development. Each company is entitled to select an
equal number of the proteins from the pool of qualified candidates, with the
companies taking alternating turns to select candidates for further development.
Each company is under obligations of diligence to develop each protein it has
selected. Any protein that is not diligently developed may be returned to the
selection pool, or be transferred to the other partner. Each company has
exclusive worldwide rights, sub- licensable under certain conditions, and
royalty bearing in the case of Lilly, to develop and commercialize therapeutic
proteins it has selected. MBio and Lilly each has royalty-bearing worldwide
rights to use proteins from the jointly funded program as drug targets to
discover small-molecule drugs. MBio has transferred these rights to Millennium
for use by MPI.

Lilly has the right to terminate the research program on its third and its
fourth anniversary upon at least 120 days' written notice. Either party may
terminate the agreement at any time upon 30


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days' written notice if any pharmaceutical or other health care company acquires
majority control of the other party.

OTHER AGREEMENTS

MBio and Abgenix, Inc., an antibody technology company, have entered into a
development and commercialization agreement that provides MBio access to
Xenomouse(TM) technology for two therapeutic antibody targets. Xenomouse(TM)
technology involves a genetically engineered mouse that, when exposed to an
antigen, produces human antibodies in response. The genes encoding these human
antibodies can be deciphered and used to produce candidate therapeutic
antibodies for human use. Under the agreement, MBio maintains all commercial
rights to human antibodies generated from the Xenomouse(TM) and will pay Abgenix
certain development milestones as well as royalties upon product
commercialization.

MBio has entered into an agreement with Harvard Medical School that provides
MBio with access to various research capabilities. MBio is also participating in
academic collaborations established by MPI, and is engaged in a number of
consulting, materials transfer, and collaboration agreements with academic
investigators and institutions, primarily to allow us access to expertise in
validating genes. MBio has also formed several technology acquisition and
research collaboration agreements for generation of transgenic and knockout
mice, use of phage display technology and use of certain cell lines.

MILLENNIUM PREDICTIVE MEDICINE, INC.

Millennium Predictive Medicine, Inc. ("MPMx") was founded in September 1997 as a
wholly owned MPI subsidiary. The MPMx vision is to change the practice of
medicine by developing products and services that place information in the hands
of clinicians and pharmaceutical researchers, allowing them to improve decisions
about drug treatment and other aspects of patient management. MPMx is applying
the Millennium technology platform to discover novel molecular markers of
disease and drug effects. As of March 1, 1999, MPMx had approximately 40
full-time employees. MPMx initially is focusing its efforts in diagnostics and
in pharmacogenomic services.

MPMx's initial commercialization strategy is to seek partners that will provide
funding for product research and development and that will have the capability
to manufacture and market these products.

MPI has generally agreed to transfer to MPMx all product development
opportunities and technology rights (including opportunities and rights arising
under our collaboration agreements) in MPMx's core area of interest which
focuses on Diagnomics(TM), pharmacogenomics and on generating and integrating
diverse biomedical data to provide patient management services to the healthcare
industry. Reciprocally, MPMx has generally agreed to transfer to MPI all product
development opportunities and technology rights outside MPMx's core area of
interest. MPI has also granted to MPMx a royalty-free, non-exclusive license to
MPI's process technologies and a royalty-free, exclusive license to certain
product-related technology, in each case within MPMx's


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core area of interest. Similarly, MPMx has granted to MPI a royalty-free,
non-exclusive license to MPMx's process technologies and a royalty-free,
exclusive license to certain product-related technology, in each case outside
MPMx's core area of interest. In addition, there are agreements providing for
contracting of research and administrative services. MPMx intends to continue to
contract with MPI for certain research services and certain administrative
services.

In February 1999, MPMx announced the formation of an alliance with Becton,
Dickinson Company ("Becton Dickinson"). Overall, the alliance will aim to
develop tests designed to provide individualized diagnostic and prognostic
information, assist in treatment selection for patients with cancer, and improve
the prediction of patient healthcare outcomes. MPMx will supply markers which
are clinically validated to Becton Dickinson for the following cancers:
melanoma, cervical, breast, ovarian, uterine, prostate and colon. MPMx and
Becton Dickinson will jointly determine which tests, from among diagnostics and
pharmacogenomics, will be developed for each type of cancer included in the
alliance.

Becton Dickinson will receive exclusive rights to all diagnostic products (with
the exception of colon cancer diagnostic products for which it will have
co-exclusive rights), and co-exclusive rights to all pharmacogenomic products,
developed in the collaboration. The rights to all therapeutic discoveries and to
all products outside of the specific cancers included in the alliance will be
retained by MPMx. The agreement also provides Becton Dickinson with certain
rights of first refusal to commercialize pharmacogenomic products developed by
MPMx in connection with drugs to treat these cancers.

The agreement is subject to clearance under the Hart Scott Rodino Antitrust
Improvements Act. Upon clearance, Becton Dickinson will make a $15 million
equity investment in exchange for approximately 11% of the voting stock of MPMx,
as well as an up-front license payment of $3 million. Becton Dickinson has
agreed to pay MPMx up to $51.5 million in research funding and additional annual
license fees over the five-year term of the agreement. Becton Dickinson has also
agreed to pay milestones and royalties to MPMx in connection with the
commercialization and sale of any products developed through the alliance.
Becton Dickinson has the right to terminate the alliance after three years if
MPMx fails to meet certain performance objectives.

BACKGROUND
Despite tremendous advances during the twentieth century, Millennium believes
that much medical care is still suboptimal. Many diseases are diagnosed using
tests that provide only a snapshot of current symptoms, rather than a predictive
assessment of underlying causes. In addition, many diseases are treated with
drugs that, while safe and effective in some patients, may be ineffective and
even dangerous in others. We believe that genomics and related technologies can
make a fundamental contribution to the optimization of medical care by providing
tests that report informatively on the underlying causes and likely outcomes of
diseases and predict accurately the responses of individual patients to drugs.
We also believe that MPMx can gain a competitive advantage in developing such
tests and related services through the application of Millennium's integrated
platform of genomics and related technologies.


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Diagnostic products and services generally have shorter product development and
regulatory approval time than therapeutic products. Therefore, Millennium
believes that products and services developed by MPMx may be among the first
arising from our genomics programs to generate sales revenues.

DIAGNOMICS(TM)
Many current diagnostic tests are directed towards the symptoms, rather than the
causes, of the diseases that they are used to diagnose or monitor. As a result,
these tests generally provide information only about a patient's current
condition. In contrast, Millennium has coined the term "Diagnomics(TM)" to
describe genomics-derived molecular diagnostics that assess the underlying
causes of diseases rather than just their symptoms. We believe that
Diagnomics(TM) products and services will provide information with inherent
prognostic, therapeutic and economic implications, enabling a shift in medical
care towards planned and cost-effective treatment of the underlying causes of
disease. The initial focus for MPMx's Diagnomics(TM) program is in cancer.

PHARMACOGENOMICS
Different people often respond in different ways to the same drug. A drug that
is safe and effective in one patient may be toxic and ineffective in another.
MPMx believes that such differences in response reflect genetic differences
between the individuals concerned. Pharmacogenomic studies seek to establish
correlations between specific genetic variations and specific responses to
drugs. By establishing such correlations, pharmacogenomics may permit both new
and existing drugs to be targeted to those patients in whom they are most likely
to be both effective and safe. MPMx therefore expects that the pharmacogenomics
products and services it is developing will enable pharmaceutical companies to
accelerate clinical trials, improve the success rate of such trials and realize
significant extra value from existing drugs and failed clinical development
candidates. MPMx further expects that these products and services will allow
healthcare organizations to provide improved patient care at the same or lower
cost.

MPMx is currently focusing its pharmacogenomics efforts in clinical areas for
which there is a strong need for more informed pharmaceutical care. These areas
include therapeutic classes for which drug choice has a strong impact on patient
outcome, and areas in which a drug that may be very effective and safe for some
patients shows potentially life-threatening toxicities for other patients.
Examples of the former category include oncology, arrhythmia, and depression;
examples of the latter category include hematological toxicity and
hepatotoxicity.

For the application of pharmacogenomics to drugs in clinical development, MPMx
will pursue strategic alliances with pharmaceutical companies as its initial
business model. The objective of these alliances will be to discover molecular
markers - at the DNA, RNA, or protein level - of either efficacy or toxicity
associated with specific drugs. Such markers may be used for assessing
predisposition to efficacy or toxicity or improved assessment of drug response
post-administration. Resulting pharmacogenomic tests are expected to improve
clinicians' ability to use those drugs in patient management (i.e. the right
drug for the right patient). In addition, a pharmacogenomic approach to drug
development may improve efficiency by allowing pre-selection of positive
responders.


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RESEARCH AND DEVELOPMENT
DIAGNOMICS(TM)
The two main phases of the Diagnomics(TM)research program are marker discovery
and marker validation. Markers are genes or gene products that are identified
with and can be used, in an assay, to diagnose or monitor a particular disease
or disease condition. In general, marker discovery involves acquiring and
preparing samples, preparing representative cDNA libraries, constructing
subtracted libraries, and array profiling. Marker validation involves selection
of a subset of candidate markers that are over- or under-expressed in test tumor
samples; assay formatting as appropriate; and clinical validation using patient
samples.

In addition to the research funded by the oncology Diagnomics(TM) alliance with
Becton Dickinson, MPMx may conduct internally funded research to position
ourselves for further diagnostics collaborations.

Millennium owns two issued U.S. patents relating to the gene that encodes
melastatin, a protein that appears to suppress metastasis in malignant
melanomas. MPMx has a license under these patents for the development of
Diagnomics(TM) products and services.

PHARMACOGENOMICS
MPMx has preliminary plans to develop a pharmacogenomics research program in
oncology. The program would involve laboratory-based discovery (including
bioinformatics analyses), bioinformatics-based discovery, and clinical
validation.

RESEARCH AND DEVELOPMENT

Millennium's total research and development expenses were $114.2 million, $74.8
million, and $34.8 million for 1998, 1997 and 1996, respectively. Revenues under
collaborative research and development agreements totaled $133.7 million, $89.9
million, and $31.8 million in 1998, 1997, and 1996, respectively.

SIGNIFICANT CUSTOMERS

Substantially all of Millennium's revenues are derived from our strategic
alliances. In 1998, revenues from our strategic alliances with Bayer, Monsanto,
Lilly, and AHP accounted for approximately 25%, 29%, 15% and 15%, respectively,
of the Company's total revenues. Millennium has three alliances with Lilly and
two alliances with AHP. A loss of any of these strategic alliance partners could
have a material adverse effect on the Millennium's business, financial condition
and results of operations. See "-- Strategic Alliances " and "-- Factors That
May Affect Results -- Reliance on Strategic Partners."

PATENTS AND PROPRIETARY RIGHTS

As of March 1, 1999, Millennium and its subsidiaries own, or are the exclusive
licensee under, more than 500 pending U.S. and international patent applications
and 25 issued U.S. patents. Millennium seeks United States and international
patent protection for the genes, proteins and


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small molecule drug leads that it discovers, as well as therapeutic, diagnostic
and pharmacogenomic products and processes, drug screening methodologies,
transgenic animals and other inventions based on such genes, proteins and small
molecules. Our commercial success will depend in part on obtaining such patent
protection. We also intend to seek patent protection or rely upon trade secret
rights to protect certain other technologies which may be used to discover and
characterize genes, proteins and small molecules and which may be used to
develop novel therapeutic, diagnostic and pharmacogenomic products and
processes.

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 Millennium's
pending patent applications will result in issued patents. We cannot assure that
Millennium will develop additional proprietary technologies that are patentable,
or that any patents issued to either Millennium or our strategic partners will
provide a basis for commercially viable products. We cannot assure that any
issued patents will provide us with any competitive advantages or will not be
challenged by third parties, or that the patents of others will not adversely
affect our ability to do business. In addition, patent law relating to the scope
of claims in the technology fields in which Millennium operates is still
evolving, and the extent of protection for our proprietary discoveries is
therefore uncertain. We cannot assure that others will not independently develop
similar or alternative technologies, duplicate any of our technologies, or
design around the patented technologies that we develop. In addition, others may
discover uses for genes, proteins and small molecules other than those uses
covered in our patents and patent applications, and these other uses may be
separately patentable. It is possible, therefore, that we could be excluded from
selling a product for which we have a composition of matter claim if another
party were to hold a patent covering the use of a product of that same
composition.

Millennium has applied for patent protection for novel, full-length genes,
partial gene sequences of novel genes and novel uses for known genes identified
through its research programs. There has been and continues to be uncertainty
regarding the patentability of partial gene sequences and full-length genes
absent functional data and the scope of patent protection available for
full-length genes and partial gene sequences. Based on recent technological
advances in gene sequencing technology, a number of groups other than Millennium
are attempting to rapidly identify gene sequences, whose functions have not been
characterized. Washington University (in conjunction with Merck & Co., Inc.) and
The Institute for Genomic Research (in collaboration with the National Center
for Biological Information) have made certain gene sequences available in
publicly accessible databases. It is possible that these and other similar
disclosures could adversely affect our ability to obtain patent protection for
full-length genes claimed in subsequent patent applications. We routinely
conduct searches of publicly available databases to determine whether other
parties have previously identified gene sequences corresponding to the various
partial gene sequences and full-length genes that Millennium has discovered. To
the extent any patents issue to other parties on such gene sequences, the risk
increases that Millennium's or Millennium's partners' potential products and
processes may give rise to claims of patent infringement.


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Others may have filed and in the future are likely to file patent applications
covering inventions that are similar or identical to those we have filed. We
cannot assure that any such patent application will not have priority over
patent applications we have filed. We believe that certain of our patent
applications cover genes that may also be claimed in patent applications filed
by other parties. Interference proceedings before the USPTO may be necessary to
establish which party was the first to invent a particular gene.

Our potential products and services may conflict with patents that have been or
may be granted to competitors, universities or others. As the biotechnology and
biopharmaceutical industries expand and more patents are issued, the risk
increases that our potential products and services may give rise to claims that
they infringe the patents of others. Other parties could bring legal actions
against Millennium or our strategic partner claiming damages and seeking to
enjoin clinical testing, manufacturing and marketing of the affected products
and services. If any such actions are successful, in addition to any potential
liability for damages, Millennium or our strategic partner could be required to
obtain a license in order to continue to manufacture or market the affected
products and processes. We cannot assure that we or our 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. We believe
that there will continue to be significant litigation in the industry regarding
patent and other intellectual property rights. If Millennium becomes involved in
such litigation, it could consume a substantial portion of the our 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, our ability to obtain patent protection could be delayed or otherwise
adversely affected. Although the 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, utility
will be determined on a case-by-case basis. Moreover, we cannot assure that the
USPTO's position will not change with respect to what is required to establish
utility for biotechnology inventions.

Millennium relies upon trade secret protection for its confidential and
proprietary information. We believe that we have developed proprietary
technology for use in gene discovery and characterization, including proprietary
genetic marker sets, proprietary software (including proprietary software for
the capture, storage and analysis of DNA and protein sequence data) and an
integrated informatics system. We have not sought patent protection for many of
these technologies. In addition, Millennium has developed databases of
proprietary gene sequences and biological information, which are updated on an
ongoing basis. We have taken security measures to protect our data and we
continue to explore ways to further enhance data security. We cannot assure,
however, that such measures will provide adequate protection for our trade
secrets or other proprietary information. While we require employees, academic
collaborators and consultants to enter into confidentiality agreements, we
cannot assure that proprietary information will not be disclosed, that others
will not independently develop substantially equivalent proprietary information
and techniques or otherwise gain access to our trade secrets or disclose such
technology, or that we can meaningfully protect our trade secrets.


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Millennium's academic collaborators have certain rights to publish data and
information in which we have rights. While we believe that the limitations on
publication of data developed by its collaborators pursuant to its collaboration
agreements will be sufficient to permit Millennium to apply for patent
protection, there is considerable pressure on academic institutions to publish
discoveries. We cannot assure that such publication would not affect our ability
to obtain patent protection for some inventions in which we may have an
interest.

Millennium is a party to various license agreements that give us rights to use
certain technologies in our research and development processes. We cannot assure
that we will be able to continue to license such technology on commercially
reasonable terms, if at all. Our failure to maintain rights to such technology
could have a material adverse effect on our business, financial condition and
results of operations.


GOVERNMENT REGULATION
Millennium is applying its technologies to the discovery and development of
therapeutic and diagnostic products including: small-molecule drugs,
biotherapeutic proteins and antibodies, vaccines, gene therapy and antisense
products and genomic-based and proteomic-based diagnostic and pharmacogenomic
products. The FDA in the United States, comparable authorities in other
countries, will regulate Millennium and our proposed products in a variety of
ways. These regulatory authorities and other federal, state, and local entities
apply to, among other things, the preclinical and clinical testing, safety,
effectiveness, approval, clearance, manufacture, labeling, marketing, export,
storage, record keeping, advertising, and promotion of our proposed products.

FDA approval or clearance of our proposed products, including a review of the
manufacturing processes and facilities used to produce such products, will be
required before such products may be marketed in the United States. The process
of obtaining approvals or clearance from the FDA can be costly, time consuming,
and subject to unanticipated delays. There can be no assurance that approvals or
clearances of our proposed products, processes, or facilities will be granted on
a timely basis, or at all. Moreover, if Millennium fails to obtain approval or
clearance, we would be unable to market the proposed products. If approvals are
delayed, our ability to market proposed products would be adversely affected.
Approval or clearance may include significant limitations on indicated uses for
which a product could be marketed. In addition, the product approval or
clearance could be subject to suspension or withdrawal under certain
circumstances.

Any diagnostic testing products that Millennium may develop will be regulated in
the United States as medical devices. Prior to introduction into interstate
commerce, medical devices must be found "substantially equivalent" to a legally
marketed Class I or Class II device or to a Class III device for which the FDA
has not required premarket approval. In order to demonstrate substantial
equivalence, a manufacturer must submit a premarket notification (510(k)) under
section 510(k) of the Food Drug and Cosmetic Act (the Act). FDA may require
additional data to support a substantial equivalence determination, and there is
no assurance FDA will find a device substantially equivalent. If FDA finds that
a device is not substantially equivalent, the manufacturer may ask the FDA to
make a risk-based classification to place the device in Class I


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or Class II. However, if a timely request for risk-based classification is not
made, or if FDA determines that a Class III designation is appropriate, an
approved premarket approval application (PMA) will be required before the device
may be marketed.

The PMA approval process is lengthy, expensive, and typically requires, among
other things, extensive data from pre-clinical testing and a well-controlled
clinical trial or trials that demonstrates a reasonable assurance of safety and
effectiveness. There is no assurance that review will result in timely or any
PMA approval, and there may be significant conditions of approval, including
limitations on labeling and advertising claims and the imposition of post-market
testing, tracking, or surveillance requirements. In addition, although
diagnostic devices are exempt from investigation device exemption (IDE) approval
requirements for clinical trials under certain specified circumstances, FDA may
notify a sponsor that an approved IDE is required before clinical trials may
commence. If FDA requires an approved IDE, there is no guarantee that the agency
will approve the IDE, and an IDE approval process could result in significant
delay.

Certain devices may be exempt from premarket notification, but other regulatory
requirements will apply, including the Food, Drug and Cosmetic Act's general
controls, for example, the Quality System Regulations governing current good
manufacturing practices (cGMP) and enforced with periodic inspections, the
Medical Device Reporting (MDR) requirements, and the adulteration and
misbranding provisions of the Act.. Permission to market may be suspended or
withdrawn if compliance with regulatory standards is not maintained or if
problems occur following initial marketing.

The MDR regulations require that reports be submitted to FDA to report
device-related deaths, serious injuries, and malfunctions the recurrence of
which would likely cause serious injury or death. MDRs can result in agency
action such as inspection, recalls, and patient/physician notifications, and are
often the basis for agency enforcement actions. Because MDRs are publicly
available, they can also become the basis for private tort suits, including
class actions. Depending on their significance, MDRs could have a material
adverse effect on Millennium's business, financial condition, results of
operations, and ability to market its products.

If a manufacturer makes a change to a device cleared for marketing under section
510(k) that is a major change in intended use, or is a change to design,
material, composition, energy source, or manufacture that could significantly
affect the safety and effectiveness of the marketed device, a new 510(k) will be
required before the modified device may be marketed. Changes to approved PMA
devices that affect safety and effectiveness require supplemental PMA approvals
before the modified PMA device may be marketed. Failure to obtain timely or any
approval for changes to marketed devices could have a material adverse effect on
Millennium's business, financial condition, and results of operations.

The process required by the FDA before drug or biological products may be
approved for marketing in the United States generally involves (i) preclinical
laboratory and animal tests, (ii) submission to the FDA of an IND, which must
become effective before clinical trials may begin, (iii) adequate and well-
controlled human clinical trials to establish the safety and efficacy of the


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product for its intended indication, (iv) submission to the FDA of a marketing
application and (v) FDA review of the marketing application in order to
determine, among other things, whether for a new drug, the product is safe and
effective for its intended uses or whether, for a biological product, the
product is safe, pure and potent, and the facility in which it is manufactured,
processed, packed or need meets standards designed to assume the products
continued safety, priority, and potency. There is no assurance that the FDA
review process will result in product approval on a timely basis, or at all.

An IND is a submission which the sponsor of a clinical trial of an
investigational new drug or biological product (such as a vaccine) must make to
the FDA, and which the agency must allow to become effective before clinical
trials may commence. The IND submission must include, among other things
preclinical testing; a description of the sponsor's investigational plan;
protocols for each planned study; chemistry, manufacturing, and control
information; pharmacology and toxicology information; and a summary of previous
human experience with the investigational drug or biological product.

A New Drug Application ("NDA") is an application to the FDA to market a new
drug. A Biologics License Application ("BLA") is an application to the FDA to
market a biological product. An NDA or BLA, depending on the submission, must
contain, among other things, information on chemistry, manufacturing controls
and potency and purity; nonclinical pharmacology and toxicology; human
pharmacokinetics and bioavailability; and clinical data. The new drug or
biologic may not be marketed in the United States until the FDA has approved the
NDA or BLA, as the case may be. In addition, for both NDAs and BLAs, the
application will not be approved until the FDA conducts a manufacturing
inspection and approves the applicable manufacturing process for the drug or
biologic.

Preclinical tests include laboratory evaluation of product chemistry and animal
studies to gain preliminary information about a product's pharmacology and
toxicology and to identify any safety problems that would preclude testing in
humans. Products must generally be manufactured according to cGMP and
preclinical safety tests must be conducted by laboratories that comply with FDA
regulations regarding good laboratory practices. The results of the preclinical
tests are submitted to the FDA as part of an IND and are reviewed by the FDA
prior to the commencement of human clinical trials. Unless the FDA objects to,
or makes comments or raises questions concerning, an IND, the IND will become
effective 30 days following its receipt by the FDA and initial clinical studies
may begin, although companies often obtain affirmative FDA approval before
beginning such studies. There can be no assurance that submission of an IND will
result in the ability to commence clinical trials.

Clinical trials can involve the administration of the investigational new drug
or biologic to healthy volunteers and to patients under the supervision of a
qualified principal investigator. Clinical trials must be conducted in
accordance with the FDA's Good Clinical Practice requirements under protocols
that detail, among other things, the objectives of the study, the parameters to
be used to monitor safety, the effectiveness criteria to be evaluated and a
statistical plan to evaluate the study results. Each protocol must be submitted
to the FDA as part of the IND. Further, each clinical study must be conducted
under the authority of an Institutional


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   42
Review Board ("IRB"). The IRB will consider, among other things, ethical
factors, the safety of human subjects, the possible liability of the institution
and the informed consent disclosure which must be made to participants in the
clinical trial.

Clinical trials are typically conducted in three sequential phases, although the
phases may overlap. During Phase I, when the drug or biologic is initially
administered, often to healthy human subjects, the product is tested for safety,
dosage tolerance, absorption, metabolism, distribution, and excretion. Phase II
involves studies in a limited patient population to (i) evaluate preliminarily
the efficacy of the product for specific, targeted indications, (ii) determine
dosage tolerance and optimal dosage, and (iii) identify possible adverse effects
and safety risks. When a new product is found to have an effect and to have an
acceptable safety profile in Phase II evaluation, Phase III trials are
undertaken in order to further evaluate clinical efficacy and to further test
for safety within an expanded patient population. The FDA may place clinical
trials on hold at any point in this process, among other reasons, if it
concludes that clinical subjects are being exposed to an unacceptable health
risk.

The results of the preclinical studies and clinical studies, the chemistry and
manufacturing data, and the proposed labeling, among other things, are submitted
to the FDA in the form of an NDA or BLA, approval of which must be obtained
prior to commencement of commercial sales. The FDA may refuse to accept the NDA
or BLA for filing and substantive review if certain administrative and content
criteria are not satisfied, and even after accepting the NDA or BLA for review,
the FDA may require additional testing or information before approval of the NDA
or BLA. In any event, the FDA must deny an NDA or BLA if applicable regulatory
requirements are not ultimately satisfied. Moreover, if regulatory approval of a
product is granted, such approval may be made subject to various conditions,
including post-marketing testing and surveillance to monitor the safety of the
product, or may entail limitations on the indicated uses for which it may be
marketed. Finally, product approvals may be withdrawn if compliance with
regulatory standards is not maintained or if problems occur following initial
marketing.

In November 1997, Congress amended the Food and Drug Modernization Act of 1997
and eliminated certain previously required filings including Product License
Applications (PLAs), which were previously required to market biologic products,
and Establishment License Applications (ELAs), which were previously required to
obtain biologic manufacturing establishment licenses. All biologic products are
now subject only to the BLA process. The FDA has proposed regulations to
implement BLAs. Although the FDA's intent in promulgating new regulations for
biologics has been, in part, to lessen the burdens of the regulatory approval
process, there can be no assurance that any new regulations, will have the
effect of reducing review times.

Changes to approved drug and biological products that affect safety or
effectiveness require approved supplemental applications, as do changes in
manufacturing that have a substantial potential to adversely affect product
safety or effectiveness. Such supplemental applications must be approved before
the product may be marketed as modified.


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Both before and after approval or clearance is obtained, a product, its
manufacturer, and the sponsor of the marketing application for the product are
subject to comprehensive regulatory oversight. Violations of regulatory
requirements at any stage, including the preclinical and clinical testing
process, the approval or clearance process, or thereafter (including after
approval or clearance) may result in various adverse consequences, including FDA
delay in approving, clearing or refusal to approve or clear a product, or
suspension, revocation or withdrawal of an approval or clearance. Violations of
regulatory requirements may also result agency enforcement actions including
voluntary or mandatory recall, seizure of products, fines, injunctions and/or
civil or criminal penalties.

In addition, the nature of marketing claims that Millennium will be permitted to
make in the labeling and advertising of its products will be limited to those
specified in an FDA clearance or approval, and claims exceeding those that are
cleared or approved will constitute violation of the Act. Millennium's
advertising of its products will also be subject to regulation by the Federal
Trade Commission (FTC) under the FTC Act. The FTC Act prohibits unfair methods
of competition and unfair or deceptive acts in or affecting commerce. Violations
of the FTC Act, such as failure to have substantiation for product claims, would
subject Millennium to a variety of enforcement actions, including compulsory
process, cease and desist orders, and injunctions. FTC enforcement can result in
orders requiring, among other things, limits on advertising, corrective
advertising, consumer redress, and recision of contracts. Violations of FTC
enforcement orders could result in substantial fines or other penalties.

Whether or not FDA approval has been obtained, approval of a therapeutic product
by comparable government regulatory authorities in foreign countries must be
obtained prior to marketing such product in such countries. Further, applicable
FDA export requirements must be met. The approval procedure varies from country
to country, and the time required may be longer or shorter than that required
for FDA approval. Although there are some procedures for unified filing for
certain European countries, in general, each country has its own procedures and
requirements.

In addition to regulations enforced by the FDA, Millennium also is subject to
regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other present and potential future federal, state or local
regulations. Millennium's research and development involves the controlled use
of hazardous materials, chemicals and various radio active compounds. Although
we believe that our safety procedures for storing, handling, using an disposing
of such materials comply with the standards prescribed by applicable
regulations, the risk of accidental contaminations or injury form these
materials cannot be completely eliminated. In the event of such an accident,
Millennium could be held liable for any damages that result and any such
liability could have a material adverse effect.

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


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institutions and government agencies. We are subject to significant competition
from organizations that are pursuing the same or similar technologies as those
which constitute our technology platform and from organizations that are
pursuing pharmaceutical or diagnostic products that are competitive with our
potential products. Most of the organizations competing with us 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 Millennium.

Research in the field of genomics is highly competitive. Our competitors 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 Axys 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. Millennium's competitors may discover, characterize or
develop important genes in advance of Millennium. We also face competition from
these and other entities in gaining access to DNA samples used in research and
development projects. We expect competition to intensify in genomics research as
technical advances in the field are made and become more widely known.

In the field of small-molecule drug discovery and development we compete with
other companies using using advanced technologies for assay configuration,
high-throughput screening and combinatorial chemistry as well as with companies
using conventional methods of discovering and developing drugs for the treatment
of disease. In the future we may also have to compete with new non-gene therapy
treatments which may be developed by our competitors. A number of commercial
entities, including major established biotechnology and pharmaceutical
companies, as well as development stage entities, currently are involved in the
discovery and development of small-molecule drugs. The number and diversity of
Millennium's drug discovery programs are comparable to those of major
pharmaceutical companies. However, such pharamaceuticals companies have
significantly larger organizations and financial resources than Millennium. In
most or all of the disease areas for which it is trying to discover drugs,
Millennium also faces competition from biotechnology companies focused on
particular therapeutic areas or classes of drug targets.

Our primary competition in the development of biotherapeutics is from major
pharmaceutical and biotechnology companies including Human Genome Science,
Lilly, American Home Products, Schering Plough, Novo Nordisk, Amgen, Genentech,
Immunes, and Biogen. Several pharmaceutical and biotechnology companies have an
established presence in the field of biotherapeutic development and therapeutic
protein production.

In the diagnostics and pharmacogenomics fields, we compete primarily with other
genomic companies such as Genset and Axys Pharmaceuticals as well as certain
collaborative ventures


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   45
involving pharmaceutical and biotechnology companies such as diaDexus (joint
venture of Smith Kline Beecham and Incyte Pharmaceuticals).

We rely on our strategic partners for support in our disease research programs
and we intend to rely on our strategic partners for preclinical evaluation and
clinical development of potential products and manufacturing and marketing of
products. Each of Millennium's strategic partners is conducting multiple product
development efforts within each disease area that is the subject of its
strategic alliance with us. Generally, our strategic alliance agreements do not
restrict the strategic partner from pursuing competing development efforts. It
is therefore possible that any Millennium product candidate could be subject to
competition with a potential product under development by a strategic partner.

EMPLOYEES

As of March 1, 1999, Millennium, including its subsidiaries, had approximately
730 full-time employees, of whom approximately 180 hold Ph.D. or M.D. degrees
and approximately 270 hold other advanced degrees, approximately 580 are engaged
in research and development activities and approximately 150 are engaged in
business development, finance, operations support and administration. Millennium
currently has plans to hire up to approximately 200 additional employees by the
end of 2000.


FACTORS THAT MAY AFFECT RESULTS

This Annual Report on Form 10-K contains forward-looking statements. For this
purpose, any statements contained in this Annual Report that are not statements
of historical fact may be considered to be forward-looking statements. Although
this is not a complete list, we use the words "believes," "anticipates,"
"plans," "expects," "intends," and similar expressions to identify
forward-looking statements. There are a number of important factors that could
cause our actual results to differ materially from those that are indicated by
forward-looking statements. Those factors include, without limitation, those
listed below and elsewhere in this Annual Report on Form 10-K.

UNCERTAINTIES RELATING TO TECHNOLOGICAL APPROACHES; RISKS RELATED TO PRODUCT
DEVELOPMENT. To date, we have not developed or commercialized any products or
services based on our genomics and related technologies. Millennium's lead
programs and development focus have been primarily directed to disease that may
be linked to several or many genes, working in combination. The scientific and
medical communities have a limited understanding relating to the role of genes
in these diseases. Relatively few products and services based on gene
discoveries have been developed and commercialized. Our technological approach
to gene identification and target validation may not consistently enable
Millennium to successfully identify and characterize genes that predispose
individuals to diseases.

Any therapeutic, diagnostic or pharmacogenomic products and services based on
gene discoveries that Millennium or any of our current and future strategic
partners may develop in


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   46
the future will require significant research, development, testing and
regulatory approvals prior to commercialization. Development of these products
and services will be subject to the risks of failure that accompany the
development of products and services based on new technologies. These risks
include the possibilities that any products or services based on these
technologies will be found to be ineffective, unreliable or unsafe, or otherwise
fail to receive necessary regulatory approvals; that products or services, if
safe and effective, will be difficult to manufacture on a large scale or will be
uneconomical to market; that proprietary rights of third parties will preclude
us or our strategic partners from marketing products or services; and that third
parties will market superior or equivalent products or services.

Accordingly, even if Millennium is successful in identifying genes associated
with specific diseases, there can be no assurance that our gene discoveries will
lead to the development of therapeutic and diagnostic products capable of
addressing these diseases. The failure to successfully commercialize products
based on Millennium-discovered genes would have a material adverse effect on our
business, financial condition and operating results.

HISTORY OF OPERATING LOSSES; ANTICIPATION OF FUTURE LOSSES; UNCERTAINTY OF
ADDITIONAL FUNDING. To date, substantially all of our revenues have resulted
from payments from strategic partners. We have not yet generated any therapeutic
or diagnostic products or services that have entered preclinical studies. We
have not generated any revenue from therapeutic or diagnostic product sales. We
anticipate that it will be a number of years, if ever, before we will recognize
revenue from therapeutic or diagnostic product sales or royalties.

As of December 31, 1998, Millennium had an accumulated deficit of approximately
$89 million including a non-recurring charge of $83.8 million in 1997 for
acquired in-process research and development related to the acquisition of
ChemGenics. We may incur losses for at least the next several years, or may show
periods of profitability and periods of losses. Losses may increase as we
expand our infrastructure, research and development, and commercialization
activities. To achieve sustained profitability, Millennium, alone or with
others, must successfully develop therapeutic, diagnostic and pharmacogenomic
products or services, conduct clinical trials, obtain required regulatory
approvals and successfully manufacture, market and sell such therapeutic or
diagnostic products or services. The time required to reach commercial revenue
and profitability is highly uncertain. Millennium may not be able to achieve any
such revenue and profitability on a sustained basis, if at all.

Our approach of applying a comprehensive platform of genomics and related
technologies in the discovery of life-science based products and services has
required that Millennium establish a substantial scientific infrastructure.
Millennium has consumed substantial amounts of cash to date and expects capital
and operating expenditures to increase over the next several years as we expand
our infrastructure, research and development, and commercialization activities.

We believe that existing cash and investment securities and anticipated cash
flow from existing strategic alliances will be sufficient to support our
operations for the foreseeable future. Our actual future capital requirements,
however, will depend on many factors, including progress of our development and
discovery programs, the number and breadth of these programs, costs


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associated with acquisition of products and other opportunities, achievement of
milestones under strategic alliance arrangements, our ability to establish and
maintain additional strategic alliance and licensing arrangements, and the
progress of the development efforts of our strategic partners. Other factors
that may affect our future capital requirements include the level of our
activities relating to commercialization rights it has retained in its strategic
alliance arrangements, competing technological and market developments, costs
associated with acquiring rights to technologies developed outside Millennium,
costs associated with facility expansion, costs associated with collection of
patient information and DNA samples, costs involved in enforcing patent claims
and other intellectual property rights and the costs and timing of regulatory
approvals.

We expect that Millennium will require significant additional financing in the
future, which we may seek to raise through public or private equity offerings,
debt financings or additional strategic alliance and licensing arrangements.
Such additional financing may not be available when needed, or may not be
available on terms that are favorable to Millennium or our stockholders. To the
extent we raise additional capital by issuing equity securities, ownership
dilution to stockholders will result. To the extent that we raise additional
funds through strategic alliance and licensing arrangements, we may be required
to relinquish rights to certain of our technologies or product candidates, or to
grant licenses on terms that are unfavorable, either of which could have a
material adverse effect on our business, financial condition and results of
operations. In the event that adequate funds are not available, our business
would be adversely affected.

RELIANCE ON STRATEGIC PARTNERS. Millennium's strategy for development and
commercialization of therapeutic, diagnostic and pharmacogenomic products and
services based upon our gene discoveries depends upon the formation of various
strategic alliances. We may not be able to establish additional strategic
alliance or licensing arrangements necessary to develop and commercialize
products and services based upon our discovery and development programs. Any
such arrangements or licenses may not be on terms favorable to us. Moreover, any
current or future strategic alliances or licensing arrangements ultimately may
not be successful.

In certain of our strategic alliances, we are dependent on our partners for the
development, regulatory approval, and commercialization of therapeutic,
diagnostic and pharmacogenomic products and services based on the results of
these collaborative programs. The agreements with these strategic partners allow
them significant discretion in electing whether to pursue any of these
activities. We cannot control the amount and timing of resources our strategic
partners devote to our discovery and development programs or to the potential
products or services which may result from these programs.

If any of our strategic partners were to breach or terminate its agreement with
us or otherwise fail to conduct its collaborative activities successfully in a
timely manner, our discovery and development programs, including the preclinical
or clinical development or commercialization of products or services, would be
delayed or terminated. Any such delay or termination could have a material
adverse effect on our business, financial condition and results of operations.


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We rely on our strategic partners for strategic alliances in support of our
discovery and development programs. We could be required to devote additional
internal resources to our product and service development, or scale back or
terminate certain development programs or seek alternative collaborative
partners, if funding from one or more of our collaborative programs were reduced
or terminated.

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 Millennium could lead to delays in
the collaborative research, development or commercialization of certain products
and services, or could require or result in litigation or arbitration, which
could be time consuming and expensive. Such disagreements could have a material
adverse effect on our business, financial condition and results of operations.

Recently there have been a significant number of consolidations among
pharmaceutical companies. Any such consolidation involving a company with which
Millennium is collaborating could result in the diminution or termination of, or
delays in, the development or commercialization of products or research programs
under one or more of our strategic alliances.

In each of our strategic alliances, we generally agree not to conduct certain
research and development, independently or with any commercial third party, that
is in the same field as the research and development conducted under the
alliance agreement. Consequently, these arrangements may have the effect of
limiting the areas of research and development we may pursue, either alone or
with others. Our strategic partners, however, may develop, either alone or with
others, products and services that are similar to or competitive with the
products and services that are the subject of our collaborations with such
partners. Competing products and services, 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 our product and service
candidates, which could have a material adverse effect on Millennium's business,
financial condition and results of operations.

All of our strategic alliance agreements are subject to termination under
various circumstances. Each strategic partner has the right to terminate its
agreement with Millennium (while maintaining rights and licenses to certain
Company discoveries) should we fail to meet certain performance criteria
specified in the relevant strategic alliance agreement. Certain of our strategic
alliance agreements provide that, upon expiration of a specified period after
commencement of the agreement, our strategic partner has the right to terminate
the agreement on short notice without cause. We may not be able to successfully
negotiate a continuation of such agreements, if we seek to do so. The
termination or non-renewal of any strategic alliance could have a material
adverse effect on our financial condition and results of operations.

RISKS ASSOCIATED WITH ESTABLISHMENT OF SUBSIDIARIES. Millennium has adopted a
strategy of establishing business divisions and subsidiaries in order to pursue
multiple business opportunities and increase our capabilities and involvement in
the later stages of drug discovery and development. In 1997, we organized three
subsidiaries, MBio, MPMx and MInfo. During 1998, we combined MPMx and MInfo. We
do not hold all of the equity in MBio and, if the


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alliance between MPMx and Becton Dickinson receives clearance under the
Hart-Scott-Rodino Antitrust Improvements Act, we will not hold all of the equity
of MPMx. We anticipate that there could be additional minority stockholders in
both subsidiaries in the future.

Millennium has sought to develop both informal and formal relationships between
and among subsidiaries and divisions to provide each unit within the overall
group with access to the assets and capabilities of the overall group that are
relevant to the business of the particular unit. However, conflicts could arise
in the future between or among Millennium and its divisions and subsidiaries
with respect to, among other things, future business opportunities and the
sharing of rights, technologies, facilities, administrative services or other
resources.

Certain officers and directors of Millennium, including Mark Levin, Chief
Executive Officer and Chairman of the Board of Directors, and Steven Holtzman,
Chief Business Officer, currently serve as directors of each of the
subsidiaries. Mr. Levin also serves as the President of MBio. Our present
executive officers and managers may assume other positions within Millennium's
current or future subsidiaries, causing them to be unavailable to serve the
parent company or to reduce the amount of time they devote to its affairs.
Furthermore, members of the Board of Directors of Millennium and the officers of
Millennium who are also affiliated with one or more of the subsidiaries will be
required to consider not only the short-term and long-term impact of operating
decisions on the parent company, but also the impact of such decisions on the
subsidiaries. In some cases, the impact of such decisions could be
disadvantageous to Millennium or to any or all of the subsidiaries. Conflicts
may arise among the parent company and its subsidiaries and/or the minority
stockholders of such subsidiaries, which could have a material adverse effect on
our business, financial condition or results of operations.

RISKS ASSOCIATED WITH ACQUISITIONS. As part of our business strategy, we may
acquire assets and businesses relating or complementary to our operations and
business. Such acquisitions could include companies, specific technology, or
in-licensed products that are in later stages of development than those in our
current programs. Any acquisitions we may make will be accompanied by the risks
commonly encountered in acquisitions of companies or products. Such risks
include, among other things, potential exposure to unknown liabilities of
acquired companies or to acquisition costs and expenses exceeding amounts
anticipated for such purposes, the difficulty and expense of assimilating the
operations, acquired technology and personnel of the acquired businesses, the
potential disruption of our ongoing business, diversion of management time and
attention, and the potential failure to achieve anticipated financial, operating
and strategic benefits from such acquisitions.

In order to finance any such acquisition, it may be necessary for Millennium to
raise additional funds through public or private financing. Such financing, if
available at all, may be on terms which are not favorable to us, and, in the
case of equity financings, may result in dilution to Millennium stockholders.

There can be no assurance that we would be successful in overcoming these risks
or any other problems encountered in connection with any such acquisitions. If
Millennium is unsuccessful


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in doing so, our business, financial condition and results of operations could
be materially and adversely affected.

EXPANSION OF OPERATIONS; MANAGEMENT OF GROWTH. We have significantly increased
the scale of our operations to support the expansion of our disease research
programs and our strategic alliances, including expansion due to the acquisition
of ChemGenics in 1997, the organization during 1997 of subsidiaries, the
initiation of a major strategic alliance with Monsanto in October 1997 and the
initiation of an alliance with Bayer in November 1998. This expansion has
included the hiring of a significant number of additional personnel. As of March
1, 1999, Millennium and its subsidiaries had approximately 730 full-time
employees, an increase of 210 employees since March 1, 1998. We plan to hire up
to approximately 200 new employees by the end of 1999. In addition to hiring new
employees, our growth has required and will continue to require the acquisition
of significant amounts of additional equipment, including software and
informatics resources, and the leasing of additional facilities.

Our growth has resulted in an increase in responsibilities placed upon
management and has placed added pressures on our operational and financial
systems. Our ability to manage such growth effectively will depend upon our
ability to broaden our management team and to attract, hire and retain skilled
employees. Our success will also depend on the ability of our officers and key
employees to continue to implement and improve our operational, management
information and financial control systems and to expand, train and manage our
employee base. If we are unable to manage growth effectively, such inability
could have a material adverse effect on our business, financial condition and
operating results.

INTENSE SCIENTIFIC AND COMMERCIAL COMPETITION. The fields of genomics and
pharmaceuticals are highly competitive. Millennium's competitors 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 pursing a gene
identification, characterization and product development strategy based on
positional cloning and other genomics technologies.

Many of the organizations competing against Millennium have greater capital
resources, research and development staffs and facilities, and greater
experience in drug discovery and development, obtaining regulatory approvals and
product manufacturing and greater marketing capabilities than us. Our
competitors may discover, characterize or develop therapeutic or diagnostic
products or services for important genes in advance of Millennium or may make
discoveries which render non-competitive or obsolete the products or services
that Millennium or our strategic alliance partners may seek to develop, any of
which could have a material adverse effect on any related Millennium disease
research program. We expect competition to intensify in genomics research as
technical advances in the field are made and become more widely known.


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Generally, our strategic alliance agreements do not restrict the strategic
partner from pursuing competing development efforts. Any product candidate of
Millennium, therefore, may be subject to competition with a potential product
under development by a strategic partner.

PATENTS AND PROPRIETARY RIGHTS; THIRD PARTY RIGHTS. Millennium'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 March 1,
1999, Millennium and its subsidiaries own, or are the exclusive licensee under,
more than 500 pending U.S. and international patent applications and 25 issued
U.S. patents.

The patent positions of pharmaceutical, biopharmaceutical and biotechnology
companies, including Millennium, are generally uncertain and involve complex
legal and factual questions. Patent law relating to the scope of claims in the
technology fields in which Millennium operates is still evolving, and the extent
of protection for our discoveries is therefore uncertain. We may not be issued
patents in respect of the patent applications that we file relating to our
technology pending patent applications will result in issued patents. Millennium
may not develop additional proprietary technologies that are patentable, and any
patents issued to either Millennium or our strategic partners may not provide a
basis for commercially viable products. Any issued patents may not provide us
with any competitive advantages or may not be challenged by third parties.

The patents of others may adversely affect our ability to do business. For
example, others may independently develop similar or alternative technologies,
duplicate any of our technologies, or design around the patented technologies we
develop. In addition, others may discover uses for genes, proteins and small
molecules other than those uses covered in our patents and patent applications,
and these other uses may be separately patentable. It is possible, therefore,
that we could be excluded from selling a product for which we have a composition
of matter claim if another party were to hold a patent covering the use of a
product of that same composition. It is also possible that Millennium could
incur substantial costs in litigation if we are required to defend ourselves in
patent suits brought by third parties, or if we initiate litigation against
others.

Millennium has applied for patent protection for novel, full-length genes,
partial gene sequences of novel genes and novel uses for known genes identified
through its research programs. There has been and continues to be uncertainty
regarding the patentability of partial gene sequences and full-length genes
absent functional data and the scope of patent protection available for
full-length genes and partial gene sequences. Based on recent technological
advances in gene sequencing technology, a number of groups other than Millennium
are attempting to rapidly identify gene sequences, whose functions have not been
characterized. Washington University (in conjunction with Merck & Co., Inc.) and
The Institute for Genomic Research (in collaboration with the National Center
for Biological Information) have made certain gene sequences available in
publicly accessible databases. It is possible that these and other similar
disclosures could adversely affect our ability to obtain patent protection for
full-length genes claimed in subsequent patent applications. We routinely
conducts searches of publicly available databases to determine whether other
parties have previously identified gene sequences corresponding to the various
partial gene sequences and full-length genes that Millennium has


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discovered. To the extent any patents issue to other parties on such gene
sequences, the risk increases that Millennium's or Millennium's partners'
potential products and processes may give rise to claims of patent infringement.

Others may have filed and in the future are likely to file patent applications
covering inventions that are similar or identical to inventions that we have
made. Any such patent applications covered have priority over patent
applications filed by Millennium. We believe that certain of our patent
applications cover genes that may also be claimed in patent applications filed
by other parties. Interference proceedings before the United States Patent and
Trademark Office may be necessary to establish which party was the first to
discover a particular gene.

Our potential products and services may conflict with patents that have been or
may be granted to competitors, universities or others. As the biotechnology and
biopharmaceutical industries expand and more patents are issued, the risk
increases that our potential products and services may give rise to claims that
they infringe the patents of others. Other parties could bring legal actions
against Millennium or our strategic partner claiming damages and seeking to
enjoin clinical testing, manufacturing and marketing of the affected products
and services. If any such actions are successful, in addition to any potential
liability for damages, We or our strategic partner could be required to obtain a
license in order to continue to manufacture or market the affected products and
processes. We cannot assure that we or our 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. We believe that there
will continue to be significant litigation in the industry regarding patent and
other intellectual property rights. If Millennium becomes involved in such
litigation, it could consume a substantial portion of the our 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, our ability to obtain patent protection could be delayed or otherwise
adversely affected. Although the 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, utility
will be determined on a case-by-case basis. Moreover, we cannot assure that the
USPTO's position will not change with respect to what is required to establish
utility for biotechnology inventions.

Millennium relies upon trade secret protection for its confidential and
proprietary information. We believe that we have developed proprietary
technology for use in gene discovery and characterization, including proprietary
genetic marker sets, proprietary software (including proprietary software for
the capture, storage and analysis of DNA and protein sequence data) and an
integrated informatics system. We have not sought patent protection for many of
these technologies. In addition, Millennium has developed databases of
proprietary gene sequences and biological information, which are updated on an
ongoing basis. We have taken security measures to protect our data and we
continue to explore ways to further enhance data security. We cannot assure,
however, that such measures will provide adequate protection for our trade
secrets or other proprietary information. While we require employees, academic
collaborators and consultants to enter into confidentiality agreements, we
cannot assure that proprietary


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   53
information will not be disclosed, that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to our trade secrets or disclose such technology, or that we can
meaningfully protect our trade secrets.

Millennium's academic collaborators have certain rights to publish data and
information in which we have rights. While we believe that the limitations on
publication of data developed by its collaborators pursuant to its collaboration
agreements will be sufficient to permit Millennium to apply for patent
protection, there is considerable pressure on academic institutions to publish
discoveries. We cannot assure that such publication would not affect our ability
to obtain patent protection for some inventions in which we may have an
interest.

Millennium is a party to various license agreements that give us rights to use
certain technologies in our research and development processes. We cannot assure
that we will be able to continue to license such technology on commercially
reasonable terms, if at all. Our failure to maintain rights to such technology
could have a material adverse effect on our business, financial condition and
results of operations.

IMPACT OF THE YEAR 2000
The Year 2000 issue is the result of computer programs that were written using
two digits rather than four to define the applicable year. Any computer program
that has date-sensitive software may recognize a date using "00" as the year
1900 rather than the Year 2000. It is possible that this incorrect recognition
of dates could cause system failures or miscalculations of data. If these errors
were to occur in Millennium systems, they could cause us to be unable to process
data and engage in normal business activities.

Millennium has determined that we have Year 2000 exposure in the following
areas: (i) software and hardware embedded in our laboratory equipment and used
in our research and development programs, (ii) computer software and hardware
used in our business and facilities operations and (iii) computer systems used
by vendors and suppliers with whom we do business. In addition, we have Year
2000 exposure with respect to internally developed informatics application
software that is used by Millennium and certain alliance partners who have
access to our technology platform.

Millennium has a Year 2000 task force that is evaluating our internal computer
programs, systems and equipment and overseeing our Year 2000 efforts. We are
using both internal and external resources to identify potential issues, costs
and solutions to address Year 2000 concerns. For this effort, we are using
procedures outlined in the Government Accounting Office's Y2K Guide. We have
completed a preliminary inventory of our informatics applications, and we are
conducting an in-depth assessment of this inventory. In addition, we have
inventoried a substantial amount of software and hardware embedded in our
laboratory and facilities equipment as part of our effort to determine Year 2000
compliance. We are also making inquiries of our important suppliers and vendors
to assess their Year 2000 readiness. We have inventoried software used in our
business operations as well. We intend to identify critical systems and
equipment on which to focus our inquiries and testing.


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   54
To date, we have identified aspects of our computer hardware, network
infrastructure and business systems that are not Year 2000 compliant. We have
obtained and begun to implement vendor recommendations for correcting these
deficiencies. We have also identified aspects of internally developed software
applications that are not Year 2000 compliant and have begun testing and
corrective programs in this area. In addition, we expect to complete an
inventory and assessment of critical laboratory and facilities equipment and
systems by the end of the first quarter of 1999. We expect to complete testing
and remediation for critical computer hardware, network infrastructure, business
systems and internally developed software applications by the end of the third
quarter of 1999. We expect to complete testing and any remediation of critical
laboratory and facilities equipment by the end of the year. We are not
experiencing and do not anticipate any forward-looking problems.

At the current time, we expect to be able to correct the problems of which we
are aware in a reasonable and timely manner. As we have not completed our
evaluation of all of our critical systems, software or equipment, there can be
no assurance that we will not find problems that will require us to incur
substantial costs to correct or will disrupt our business. Should such problems
occur, they could have a material adverse effect on our business, financial
position or results of operations.

We do not currently have contingency plans for all critical aspects of our
systems and operations in the event that we or any of our important suppliers or
vendors are not able to become Year 2000 compliant. We expect to develop
contingency plans for critical areas if we determine that we or any important
vendors or suppliers are not likely to become Year 2000 compliant.

We have not incurred material remediation costs to date and we do not currently
expect that the aggregate cost of our efforts will be material to our operations
or financial position taken as a whole. However, it is possible that remediation
costs will be greater than we anticipate and that such costs could have a
material adverse effect on our financial position or results of operations. Our
alliance partners or collaborators may also experience disruption as a result of
the Year 2000 issue. If our alliance partners and collaborators experience
disruption, it is possible that our alliances with these partners could be
adversely affected, which could have a material adverse effect on our financial
position and results of operations.

There can be no assurance that we will identify all Year 2000 compliance
problems as a result of our efforts or that we will be able to correct
compliance problems that are identified in a timely manner. If we are unable, in
a timely manner, to identify and correct compliance problems in critical systems
and equipment, our business, financial position and results of operations could
be adversely affected.

UNCERTAINTY OF GOVERNMENT REGULATORY APPROVALS. The FDA, FTC and comparable
agencies in foreign countries impose substantial requirements upon the
manufacturing and marketing of human therapeutic, diagnostic and vaccine
products and services such as those proposed to be developed by Millennium or
its strategic alliance partners. Failure to comply with applicable regulations
or to obtain the necessary marketing clearances or approvals will significantly
impair Millennium's ability to market its products and services. The process of
obtaining FDA and


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other required regulatory approvals is lengthy and expensive. The time required
for FDA and other clearances or approvals is uncertain and typically takes a
number of years, depending on the complexity and novelty of the product. We
and/or our strategic alliance partners may encounter significant delays or
excessive costs in our efforts to secure necessary clearances, approvals or
licenses.

Because certain of the products likely to result from the our research and
development programs involve the application of new technologies and may be
based on a new therapeutic approach, such products may be subject to substantial
additional review by various governmental regulatory authorities. As a result,
regulatory approvals may be obtained more slowly than for products using more
conventional technologies. For example, 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. In addition, the U.S. Government has recently established a
working group to assess whether additional regulations in the area of genetic
testing may be appropriate, which could result in further regulation.

There can be no assurance that FDA or other clearances or approvals will be
obtained in a timely manner, if at all. Any delay in obtaining, or the failure
to obtain, such clearances or approvals could materially adversely affect our
ability to generate product or service or royalty revenues. Furthermore, such
clearances or approvals may include significant limitations on indications for
use for which the product or service may be marketed. Even if FDA or other
clearances or approvals are obtained, the marketing and manufacturing of
diagnostic and therapeutic products are subject to continuing FDA and other
regulatory review. Later discovery of previously unknown problems with a
product, manufacturer or facility may result in restrictions on the product or
manufacturer, including, suspension, revocation, or withdrawal of product
approvals or clearances and/or withdrawal of the product from the market.
Violations of the Act or regulatory requirements at any time during the product
development process, approval process, or after approval may result agency
enforcement actions, including voluntary or mandatory recall, seizure of
products, fines, injunctions and/or civil or criminal penalties. Any such agency
action could have a material adverse effect on Millennium.

Millennium cannot predict the nature of any future laws, regulations,
interpretations, or applications, nor can it predict what effect additional
governmental regulations or administrative orders, when and if promulgated,
would have on its business in the future. Any such requirements could delay or
prevent regulatory approval or clearance of products under development. Any such
requirements could have a material adverse effect on Millennium's business,
financial condition, results of operations, and ability to market its products.

Our research and development activities involve the controlled use of hazardous
materials, chemicals and various radioactive materials. Millennium 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 we
believe that our 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


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completely eliminated. In the event of such an accident, Millennium could be
held liable for any damages that result and any liability could exceed our
resources.

UNCERTAINTY ASSOCIATED WITH PRECLINICAL AND CLINICAL TESTING. The grant of
regulatory approval for the commercial sale of any of our potential products
will depend in part on us and/or our strategic alliance partner successfully
conducting extensive preclinical and clinical testing to demonstrate the
product's safety and efficacy in humans. We have limited experience in
conducting preclinical and clinical development activities. Neither Millennium
nor any strategic alliance partner has submitted an IND to the FDA for any
product candidate based upon our discoveries.

The results of preclinical studies by Millennium and/or our strategic alliance
partners may be inconclusive and may not be indicative of results that will be
obtained in human clinical trials. In addition, results attained in early human
clinical trials relating to the products under development may not be indicative
of results that will be obtained in later clinical trials. As results of
particular preclinical studies and clinical trials are received, we and/or our
strategic alliance partners may abandon projects which we might otherwise have
believed to be promising.

We may not be permitted to undertake and complete human clinical trials of any
of our potential products, either in the U.S. or elsewhere. If such trials are
permitted. The products under development covered have undesirable side effect
or other characteristics that may prevent them from being approved or limit
their commercial use if approved. Clinical testing is very expensive, and we
and/or our strategic alliance partners will have to devote substantial resources
for the payment of clinical trial expenses.

In certain circumstances we may rely, in part, on our strategic alliance
partners, academic institutions and on clinical research organizations to
conduct and monitor certain clinical trials. Such entities may not conduct the
clinical trials successfully. Furthermore, we will have less control over such
trials than if Millennium were the sole sponsor. As a result, these trials may
not begin or be completed as planned. Failure to begin or complete any of our
planned clinical trials could have a material adverse effect on our business,
financial condition or results of operations.

ABSENCE OF SALES AND MARKETING EXPERIENCE; LIMITED MANUFACTURING CAPABILITY.
Although Millennium plans to rely significantly on strategic alliance partners
for the marketing and distribution of its products and services once developed,
we may market and sell certain of our products and services directly and may
engage in certain other marketing activities in collaboration with our strategic
alliance partners. During 1999, we intend to consider joint development, merger,
or acquisition opportunities that could provide Millennium with access to
products on the market or in later stages of commercial development than those
represented within our current programs. We have no experience in sales,
marketing or distribution. We do not expect to establish a direct sales
capability until such time as we have one or more products or services in
development which are approaching marketing approval.

To the extent Millennium enters into marketing or distribution arrangements with
strategic alliance partners, any revenues we receive will depend upon the
efforts of third parties. Any


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third party may not market our products and services successfully any
third-party collaboration may not be on terms favorable to us. If any marketing
partner did not market a product or service successfully, our business and
financial results would suffer. If our plan to rely on strategic alliance
partners for significant aspects of marketing and selling our products were
unsuccessful for any reason, Millennium would need to recruit and train a
marketing and sales force which would require us to incur significant additional
costs.

Millennium may not be able to attract and build a sufficient marketing staff or
sales force, the cost of establishing such a marketing staff or sales force may
not be justifiable in light of any product or service revenues, and our direct
sales and marketing efforts would be successful. In addition, if Millennium
succeeds in bringing one or more products or services to market, we may compete
with other companies that currently have extensive and well-funded marketing and
sales operations. Our marketing and sales efforts may not enable us to compete
successfully against such other companies.

Millennium does not have commercial-scale facilities to manufacture any products
under development in accordance with current Good Manufacturing Practices
("GMP") requirements prescribed by the FDA. We expect to be dependent on third
party manufacturers or collaborative partners for our clinical trials and
commercial production of products. In the event that we were unable to obtain
contract manufacturing, we may not be able to commercialize our products. Where
third-party arrangements are established, we expect to depend upon these third
parties to manage our clinical trials and meet our production needs in a timely
manner. Any such third parties we depend on may not perform. Any failures by
third parties could delay clinical trial development or the submission of
products for regulatory approval, impair our ability to commercialize products
as planned and deliver products on a timely basis, or otherwise harm our
competitive position, all of which could have a material adverse effect on our
business, financial condition or result or operation.

If we determined to develop our own manufacturing capabilities, we would need to
recruit qualified personnel and build or lease the requisite facilities and
equipment. We do not have any experience in manufacturing on a commercial scale
and do not have manufacturing facilities or equipment. We may not be able to
successfully develop our own manufacturing capabilities in a cost-effective or
timely manner. In addition, the manufacture of any potential Millennium products
regulated by the FDA and comparable agencies in foreign countries. Our delay in
complying, or our failure to comply with these agencies' manufacturing
requirements could materially adversely affect the marketing of our products and
our business, financial condition and results of operations.

AVAILABILITY OF, AND COMPETITION FOR, FAMILY RESOURCES. Our gene identification
strategy includes genetic studies of families and populations prone to
particular diseases. These studies are based upon statistical analyses of
disease inheritance patterns and require the collection of large numbers of DNA
samples from affected individuals, their families and other suitable
populations. We are dependent upon collaborations with a number of academic
centers for the identification of donor populations and the collection and
supply of the DNA samples used in its human disease gene research programs. The
availability of DNA samples from large, family-


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based or other suitable populations is therefore critical to our ability to
discover the genes responsible for human diseases through human genetic
approaches. The competition for these resources is intense and certain of our
competitors have obtained rights to significantly more family resources than we
have obtained. We may not be able to obtain access to DNA samples necessary to
support our human gene discovery programs and any material lack of availability
of such DNA samples would have an adverse effect on our business.

ATTRACTION AND RETENTION OF KEY EMPLOYEES AND CONSULTANTS. We are highly
dependent on the principal members of our management and scientific staff, none
of whom is bound by a long-term employment agreement. The loss of services of
any of these personnel could impede significantly the achievement of our
development objectives and could have a material adverse effect on our business,
financial condition and operating results. Furthermore, recruiting and retaining
qualified scientific personnel to perform research and development work in the
future will also be critical to our 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 we
will be able to attract and retain personnel on acceptable terms.

In addition, we rely on our scientific advisors to assist us in formulating our
discovery and developing strategy. All of the scientific advisors are employed
by employers other than Millennium and have commitments to other entities that
may limit their availability to us. Some of our scientific advisors also consult
for companies that may be competitors of Millennium.

DEPENDENCE ON RESEARCH COLLABORATORS AND SCIENTIFIC ADVISORS. We have
relationships with collaborators at academic and other institutions who conduct
research at our request. Such collaborators are not Millennium employees. All of
Millennium's consultants are employed by employers other than us and may have
commitments to, or consulting or advisory contracts with, other entities that
may limit their availability to Millennium. As a result, we have limited control
over their activities and, except as otherwise required by our collaboration and
consulting agreements, can expect only limited amounts of their time to be
dedicated to our activities. Our 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.
We may not be able to negotiate additional acceptable collaborations with
collaborators at academic and other institutions and our existing collaborations
may not be successful.

Our research collaborators and scientific advisors sign agreements which provide
for confidentiality of Millennium's proprietary information and results of
studies. There can be no assurance, however, that we will be able to maintain
the confidentiality of our technology and other confidential information in
connection with every collaboration, and any unauthorized dissemination of our
confidential information could have an adverse effect on our business.

UNCERTAINTY OF THERAPEUTIC AND DIAGNOSTIC PRICING, REIMBURSEMENT AND RELATED
MATTERS. Millennium'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


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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, we expect 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 therapeutic, diagnostic and
pharmacogenomic products and services. Cost control initiatives could decrease
the price that we or any of our strategic partners receives for any therapeutic,
diagnostic and pharmacogenomic products or services in the future and have a
material adverse effect on our business, financial condition and results of
operations. Further, to the extent that cost control initiatives have a material
adverse effect on our strategic partners, Millennium's ability to commercialize
our products and to realize royalties may be adversely affected.

The ability of Millennium and any strategic partner to commercialize
therapeutic, diagnostic and pharmacogenomic products and services may depend in
part on the extent to which reimbursement for the products and services 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 and services. 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 and diagnostic
products and services 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. Any third party insurance coverage may not be available to
patients for any products and services discovered and developed by Millennium or
our strategic partners. If adequate coverage and reimbursement levels are not
provided by government and other third party payors for our products and
services, the market acceptance of these products and services may be reduced,
which may have a material adverse effect on our business, financial condition
and results of operations.

PRODUCT LIABILITY EXPOSURE. Clinical trials, manufacturing, marketing and sale
of any of Millennium's or our strategic partners' potential therapeutic products
may expose Millennium to liability claims from the use of such therapeutic
products. We currently do not carry product liability insurance. There can be no
assurance that we or our 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 therapeutic products
developed by Millennium or our strategic partners. A product liability claim or
recall could have a material adverse effect on the business or financial
condition of Millennium. While under certain circumstances we are 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.

ITEM 2. PROPERTIES


                                      -59-
   60
The Company's facilities currently consist of an aggregate of approximately
560,000 square feet of office, research and laboratory space in several
locations in Cambridge, Massachusetts, pursuant to leases and subleases that
expire from 1999 to 2014.

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings.

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

No matters were submitted to a vote of security holders of the Company, through
solicitation of proxies or otherwise, during the last quarter of the year ended
December 31, 1998.

EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth the names, ages and positions of the executive
officers of the Company.



     Name                Age                     Position
     ----                ---                     --------
                           
Mark J. Levin            48      Chairman of the Board, Chief Executive Officer
                                 and Director
Steven H. Holtzman       45      Chief Business Officer
Frank D. Lee, Ph.D.      47      Chief Research Technology Officer
Michael Pavia, Ph.D.     43      Chief Technology Development Officer
Kevin Starr              36      Chief Financial Officer



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 and
Focal, 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, which he attended as a Rhodes Scholar. Mr.
Holtzman currently serves as


                                      -60-
   61
co-chairperson of the Biotechnology Industry Organization's Bioethics Committee
and is a member of the National Bioethics Advisory Commission.

Frank D. Lee, Ph.D. joined the Company in July 1994 as Vice President, Research,
became Chief Scientific Officer in January 1996 and became Chief Research
Technology Officer in November 1997. 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.

Michael Pavia, Ph.D. has served as Chief Technology Development Officer of the
Company since September 1997. From 1993 to 1997, he was employed by Sphinx
Pharmaceuticals, a division of Eli Lilly & Company, where he was most recently
Vice President-Cambridge Research. From 1992 to 1993, Dr. Pavia was Vice
President of Chemistry at Genesis Pharmaceuticals, Inc., a drug development
company. Dr. Pavia also worked in senior scientific positions in the Department
of Chemistry at the Parke-Davis Pharmaceutical Research Division of
Warner-Lambert Co., a pharmaceutical company. He holds a B.S. in Chemistry from
Lehigh University and a Ph.D. in Organic Chemistry from the University of
Pennsylvania.

Kevin Starr joined Millennium in February 1997 as Vice President of Finance,
Millennium BioTherapeutics and became Chief Financial Officer of Millennium
Pharmaceuticals in January 1999. Mr. Starr was Corporate Controller of Biogen,
Inc. from 1994 to 1997 and Manager of Financial Analysis from 1991 to 1994. Mr.
Starr also worked in various financial positions at Digital Equipment
Corporation from 1984 to 1991. He earned a Master of Science in Finance from
Boston College and a Bachelor of Arts from Colby College. Mr. Starr also serves
on the Board of Trustees of Cambridge Savings Bank.

                                     PART II

ITEM 5.   MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)       MARKET PRICE OF AND DIVIDENDS ON MILLENNIUM'S COMMON STOCK AND RELATED
          STOCKHOLDER MATTERS

The Common Stock of Millennium has been traded on the NASDAQ National Market
under the symbol MLNM since May 6, 1996. Prior to May 6, 1996, Millennium's
Common Stock was not publicly traded. On March 15, 1999, the closing price for
the sale of a share of Millennium's Common Stock on the NASDAQ Stock Market was
$34.375. The following table sets forth for the periods indicated the high and
low closing prices per share of our Common Stock as reported by the NASDAQ
National Market.


                                      -61-
   62


                                             1997
                                             ----
                                                   
                                 High                      Low
                                 ----                      ---
        First Quarter          $ 21.50                   $13.625
       Second Quarter          $ 17.50                   $ 13.00
        Third Quarter          $21.125                   $ 12.50
       Fourth Quarter          $ 21.25                   $ 16.75
                                             1998
                                             ----

                                 High                      Low
                                 ----                      ---
        First Quarter           $22.38                   $17.75
       Second Quarter           $19.00                   $14.13
        Third Quarter           $18.69                   $10.57
       Fourth Quarter           $25.88                   $14.75


(b)       RECENT SALES OF UNREGISTERED SECURITIES

On November 10, 1998, Millennium sold 4,957,660 shares of Common Stock, $.001
par value per share, of Millennium to Bayer AG, a corporation organized and
existing under the laws of Germany, in exchange for an aggregate of $96,600,000.

No person acted as an underwriter with respect to the above transaction.
Millennium relied on Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), for the exemption from the registration requirements of the
Securities Act, since no public offering was involved.

On March 15, 1999, Millennium had approximately 394 stockholders of record.
Millennium has never declared or paid any cash dividends on its Common Stock. We
currently intend to reinvest earnings, if any, to support the development of our
business and do not expect to pay cash dividends for the foreseeable future.

ITEM 6.   SELECTED FINANCIAL DATA

Incorporated by reference from Millennium's 1998 Annual Report to Stockholders
under the heading "Selected Financial Data", which appears in Exhibit 13 to this
Annual Report on Form 10-K.

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

Incorporated by reference from Millennium's 1998 Annual Report to Stockholders
under the heading "Management's Discussions and Analysis of Financial Condition
and Results of Operations", which appears in Exhibit 13 to this Annual Report on
Form 10-K.


                                      -62-
   63
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company maintains an investment portfolio in accordance with its Investment
Policy. The primary objectives of the Company's Investment Policy are to
preserve principal, maintain proper liquidity to meet operating needs and
maximize yields. The Company's Investment Policy specifies credit quality
standards for the Company's investments and limits the amount of credit exposure
to any single issue, issuer or type of investment.

The Company does not believe that there is any material market risk exposure
with respect to derivative or other financial instruments which would require
disclosure under this item.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements filed as part of this Annual Report on Form 10-K are
listed under Item 14 below and are incorporated by reference from the Company's
1998 Annual Report to Stockholders under the heading "Financial Statements and
Notes Thereto", which appears in Exhibit 13 to this Annual Report on Form 10-K.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

During the Company's two most recent fiscal years there have been no
disagreements with our independent accountants on accounting and financial
disclosure matters.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

The information required by this item (with respect to Directors) is
incorporated by reference from the information under the captions "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance"
contained in our Proxy Statement to be filed with the Securities and Exchange
Commission in connection with the solicitation of proxies for the Company's 1999
Annual Meeting of Stockholders to be held on June 2, 1999 (the "Proxy
Statement").

The required information about Executive Officers of the Company is contained in
Part I of this Annual Report on Form 10-K under the heading "Executive Officers
of the Company."

ITEM 11.  EXECUTIVE COMPENSATION

The information required regarding executive compensation is incorporated by
reference from the information under the captions "Election of Directors --
Compensation for Directors," "Executive Compensation," "Report of the
Compensation Committee" and "Compensation Committee Interlocks and Insider
Participation" contained in the Proxy Statement.


                                      -63-
   64
ITEM 12.  STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by reference from the
information under the caption "Stock Ownership of Certain Beneficial Owners and
Management" contained in the Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference from the
information contained under the caption "Certain Transactions" contained in this
Proxy Statement.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)      The following documents are included as part of this Annual Report on
         Form 10-K or are incorporated by reference from the Company's 1998
         Annual Report to Stockholders.

1. The following financial statements (and related notes) of Millennium are
incorporated by reference from the 1998 Annual Report to Stockholders.

                                                                          
Report of Independent Auditors on Financial Statements                       20

Consolidated Balance Sheets at December 31, 1998 and 1997                    21

Consolidated Statements of Operations
  for the years ended December 31, 1998, 1997, and 1996                      22

Consolidated Statements of Cash Flows
  for the years ended December 31, 1998, 1997, and 1996                      23

Statements of Stockholders' Equity
   for the years ended December 31, 1998, 1997 and 1996                      24

Notes to Financial Statements                                                26



  *Refers to page number of 1998 Annual Report to Stockholders

2. All schedules are omitted as the information required is inapplicable or the
information is presented in the consolidated financial statements or the related
notes.

3. The Exhibits listed in the Exhibit Index immediately preceding the Exhibits
are filed as a part of this Annual Report on Form 10-K.




                                      -64-
   65
(b) The following Current Reports on Form 8-K were filed by the Company during
the last quarter of the period covered by this report:

                  1. Current Report on Form 8-K filed with the Securities and
Exchange Commission on December 1, 1998.




         The following trademarks of the Company are mentioned in this Annual
Report on Form 10-K: Millennium, Millennium Pharmaceuticals, Millennium
Predictive Medicine, Millennium Information, Millennium BioTherapeutics, MBio,
MPMx, MInfo, Diagnomics(TM), Sequence Explorer, Expression Explorer, and Sample
Manager . Other trademarks used in this Annual Report on Form 10-K are the 
property of their respective owners.


                                      -65-
   66
                                   SIGNATURES

In accordance with the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the undersigned, duly authorized officers of Millennium
have signed this report on Millennium's behalf.


                                        MILLENNIUM PHARMACEUTICALS, INC.


                                            By:      /s/ Mark J. Levin
                                                     ---------------------------
                                                     Mark J. Levin
                                                     Chief Executive Officer

In accordance with the requirements of the Securities Exchange Act of 1934, the
following persons have signed this report below, on behalf of the Company, in
the capacities and on the dates indicated.



Signature                         Title                                        Date
- ---------                         -----                                        ----
                                                                         
/s/ Mark J. Levin                 Chief Executive Officer and Director         March 18, 1999
Mark J. Levin                     (Principal Executive Officer)

/s/ Steven H. Holtzman            Chief Business Officer                       March 18, 1999
Steven H. Holtzman

/s/ Kevin Starr                   Chief Financial Officer (Principal           March 18, 1999
Kevin Starr                       Financial and Accounting Officer)

/s/ Joshua Boger                  Director                                     March 18, 1999
Joshua Boger, Ph.D.

/s/ Eugene Cordes                 Director                                     March 18, 1999
Eugene Cordes, Ph.D.

/s/ A. Grant Heidrich             Director                                     March 18, 1999
A. Grant Heidrich, III

/s/ William W. Helman             Director                                     March 18, 1999
William W. Helman

/s/ Raju Kucherlapati             Director                                     March 18, 1999
Raju Kucherlapati

/s/ Eric S. Lander                Director                                     March 18, 1999
Eric S. Lander, Ph.D.



                                      -66-
   67
                                  Exhibit Index


         The following exhibits are filed as part of this Annual Report on Form
10-K.



Exhibit No.       Description
- -----------       -----------
               
(2)       3.1     Amended and Restated Certificate of Incorporation of the Company

(2)       3.2     Amended and Restated Bylaws of the Company

(1)       4.1     Specimen Certificate for shares of Common Stock, $.001 par value, of the
                  Company

(8)(1)   10.1     1996 Director Option Plan

(1)      10.2     Third Amended and Restated Investors' Rights Agreement, as amended, dated
                  February 1, 1996 by and among the Company and the persons named on the
                  signature pages thereto.

(1)      10.3     Agreement dated as of August 10, 1995 by and between the Company and Joshua
                  Boger.

(1)      10.4     Agreement dated as of August 10, 1995 by and between the Company and Eugene
                  Cordes.

(1)      10.5     Agreement dated as of April 21, 1993, by and between the Company and Raju
                  Kucherlapati.

(1)      10.6     Letter Agreement dated November 30, 1994 by and between the Company and Mark
                  J. Levin.

(1)      10.7     Letter Agreement dated April 14, 1994 by and between the Company and Steven H.
                  Holtzman.

(1)      10.8     Promissory Note dated March 15, 1996 made in favor of the Company by Steven H.
                  Holtzman.

(1)      10.9     Master Lease Agreement dated March 22, 1993 by and between the Company and
                  Comdisco, Inc.

(1)      10.10    Loan and Security Agreement dated October 28, 1994 by and between the Company
                  and MMC/GATX Partnership No. 1



                                      -67-
   68
               
(1)      10.11    Master Equipment Lease Agreement dated July 14, 1995 by and between the
                  Company and Lighthouse Capital Partners, L.P.

(1)      10.12    Loan Agreement dated February 15, 1996 by and between the Company and
                  Lighthouse Capital Partners, L.P.

(4)      10.13    Form of Master Equipment Lease Financing Agreement, as
                  amended, dated September 19, 1996 by and between the Company
                  and GE Capital Corporation.

(7)      10.14    Amendment to Master Equipment Lease Agreement dated June 16, 1997 by and
                  between the Company and GE Capital Corporation.

(1)      10.15    Lease Agreement dated August 25, 1993, as amended, by and between the Company
                  and the Massachusetts Institute of Technology.

(4)      10.16    Lease Agreement dated October 26, 1996 by and between the Company and Fort
                  Washington Limited Partnership

(5)      10.17    Lease Agreement between the Company and Old Cambridge Realty Trust, Inc.

(5)      10.18    Form of Sub-Lease Agreement, dated June 28, 1996, by and
                  between the Company (as successor to ChemGenics) and
                  PerSeptive Biosystems, Inc.

(6)      10.19    Lease dated March 28, 1997 by and between the Company and Old Cambridge
                  Property LLC

(6)      10.20    Subordination Non-Disturbance and Attornment Agreement dated March 28, 1997 by
                  and among LaSalle National Bank, as Trustee for Asset Securitization
                  Corporation Commercial Mortgage Pass-Through Certificates, Series D-4, Old
                  Cambridge Property LLC and the Company.

(7)      10.21    Lease dated May 15, 1997 by and between the Company and Massachusetts
                  Institute of Technology.

(11)     10.22    Lease dated November 17, 1997 by and between the Company and FC 45/75 Sidney,
                  Inc.

(12)     10.23    Lease dated June 12, 1998 by and between the Company and 270 Albany Street
                  Realty Trust.

(12)     10.24    Lease dated June 17, 1998 by and between the Company and TransAmerica Business
                  Credit Corporation.




                                      -68-
   69
               
+(1)     10.25    Sponsored Research Agreement dated March 25, 1994 by and between the Company
                  and F. Hoffman-La Roche Ltd.

+(1)     10.26    Research and License Agreement dated October 3, 1995 by and between the
                  Company and Eli Lilly and Company.

+(1)     10.27    Research and License Agreement dated December 9, 1995 by and between the
                  Company and Astra AB.

+        10.28    Amended and Restated Research and License Agreement dated December 22, 1998 by
                  and between MPI and Eli Lilly and Company .

+(3)     10.29    CNS Research, Collaboration and License Agreement
                  effective as of August 1, 1996 by and between American Home
                  Products Corporation and the Company.

+(3)     10.30    Bioinformatics Access and License Agreement effective as
                  of August 1, 1996 by and between American Home Products
                  Corporation and the Company.

+(3)     10.31    Transcription Profiling Technology Access and License
                  Agreement effective as of August 1, 1996 by and between
                  American Home Products Corporation and the Company.

+(5)     10.32    Collaborative Research Agreement, dated as of January 1,
                  1995, by and between the Company (as successor to ChemGenics)
                  and Pfizer, Inc.

+(5)     10.33    License Option, License and Royalty Agreement, dated as
                  of January 1, 1995, by and between the Company (as successor
                  to ChemGenics) and Pfizer, Inc.

+(5)     10.34    Collaborative Research and License Agreement, dated as
                  of November 1, 1996, by and between the Company (as successor
                  to ChemGenics) and American Home Products Corporation,
                  represented by its Wyeth-Ayerst Laboratories division.

+(5)     10.35    License Agreement, dated as of June 28, 1996, by and
                  between the Company (as successor to ChemGenics) and
                  PerSeptive Biosystems, Inc.

(5)      10.36    Master Agreement, dated as of May 7, 1996, by and
                  between the Company (as successor to ChemGenics) and
                  PerSeptive Biosystems, Inc.

(5)      10.37    Amendment, dated November 22, 1996, to the Master Agreement dated May 7, 1996
                  between the Company (as successor to ChemGenics) and PerSeptive Biosystems,
                  Inc.

(5)      10.38    Omnibus Amendment Agreement dated December 18, 1996
                  between the Company (as successor to ChemGenics) and
                  PerSeptive Biosystems, Inc.




                                      -69-
   70
               
(5)      10.39    Consulting and Interim Services Agreement dated as of June 28, 1996, by and
                  between the Company (as successor to ChemGenics) and PerSeptive Biosystems,
                  Inc.

(5)      10.40    Confidentiality and Non-Competition Agreement dated as of June 28, 1996, by
                  and between the Company (as successor to ChemGenics) and PerSeptive
                  Biosystems, Inc.

(5)      10.41    Amendment, Consent and Waiver dated January 18, 1997 by and among the Company,
                  ChemGenics and American Home Products Corporation acting through its
                  Wyeth-Ayerst Division ("Wyeth-Ayerst").

(5)      10.42    Letter Agreement dated January 18, 1997 by and among the Company, ChemGenics
                  and Pfizer, Inc.

(5)      10.43    Letter Agreement dated January 18, 1997 by and among the Company, ChemGenics
                  and PerSeptive Biosystems, Inc.

(5)      10.44    Amendment to Collaborative Research and License Agreement dated March 20, 1997
                  by and among the Company, ChemGenics and Wyeth-Ayerst.

+(7)     10.45    Sponsored Research Agreement by and among Whitehead Institute for Biomedical
                  Research, Affymetrix, Inc., Bristol-Myers Squibb Company and the Company dated
                  April 28, 1997.

+(7)     10.46    Consortium Member Agreement by and among Affymetrix,
                  Inc., Bristol-Myers Squibb Company and the Company dated April
                  28, 1997.

+(7)     10.47    Collaboration Agreement by and among the Company, Millennium BioTherapeutics,
                  Inc. ("MBio") and Eli Lilly and Company dated as of May 28, 1997.

+(7)     10.48    Technology Transfer and License Agreement by and between
                  the Company and MBio dated as of May 28, 1997.

+(7)     10.49    Rights Exchange Agreement by and between the Company and MBio dated as of May
                  28, 1997.

+(9)     10.50    Agreement dated October 27, 1997 by and among the Company, Monsanto Company
                  and Cereon Genomics Inc. (formerly Monsanto Agricultural Genomics II LLC).




                                      -70-
   71
               
  (10)   10.51    Agreement and Plan of Merger dated January 20, 1997 by and
                  among the Company, CPI Acquisition Corp. and ChemGenics
                  Pharmaceuticals, Inc.

+ (13)   10.52    Agreement dated September 22, 1998 by and between the Company
                  and Bayer AG.

+ (13)   10.53    Investment Agreement dated September 22, 1998 by and between
                  Bayer AG and the Company.

+ (13)   10.54    Registration Rights Agreement dated November 10, 1998 by and
                  between Bayer AG and the Company.

+        10.55    Amendment No. 1 dated December 1998 to Collaborative Research
                  Agreement and License Option, License and Royalty Agreement
                  Each Dated As of January 1, 1995.

+        10.56    Amended and Restated Research and License Agreement dated
                  December 1998 by and between Astra AB and Millennium
                  Pharmaceuticals, Inc.

         10.57    Sixth Amendment dated January 29, 1999 to Lease Agreement
                  dated August 25, 1993 by and between the Company and
                  Massachusetts Institute of Technology.

         13       1998 Annual Report to Stockholders (which shall be deemed
                  filed only with respect to those portions specifically
                  incorporated by reference herein).

         21       Subsidiaries of the Company.

         23.1     Consent of Ernst & Young LLP, Independent Auditors.

         27       Financial Data Schedule.



(1)      Incorporated herein by reference to the Company's Registration
         Statement on Form S-1, as amended (File No. 333-2490).

(2)      Incorporated herein by reference to the Company's 10-Q for the quarter
         ending March 31, 1996.

(3)      Incorporated herein by reference to the Company's 10-Q for the quarter
         ending June 30, 1996.

(4)      Incorporated herein by reference to the Company's 10-Q for the quarter
         ending September 30, 1996.





                                      -71-
   72
(5)      Incorporated herein by reference to the Company's 10-K for the fiscal
         year ending December 31, 1996.

(6)      Incorporated herein by reference to the Company's 10-Q for the quarter
         ending March 31, 1997.

(7)      Incorporated herein by reference to the Company's 10-Q for the quarter
         ending June 30, 1997.

(8)      Management contract or compensatory plan or arrangement filed as an
         exhibit to this Form pursuant to Items 14(a) and 14(c) of Form 10-K.

(9)      Incorporated hereby by reference to the Company's Amendment No. 1 to
         Current Report on Form 8-K, filed with the SEC on January 30, 1998.

(10)     Incorporated herein by reference to the Company's Current Report on
         Form 8-K, filed with the SEC on February 20, 1997.

(11)     Incorporated herein by reference to the Company's 10-K for the fiscal
         year ending December 31, 1997.

(12)     Incorporated herein by reference to the Company's 10-Q for the quarter
         ending June 30, 1998.

(13)     Incorporated herein by reference to the Company's 10-Q for the quarter
         ending September 30, 1998.


+        Confidential treatment requested as to certain portions.


                                      -72-

EX-10.28

   1
                                                                   EXHIBIT 10.28

          Confidential Materials omitted and filed separately with the
        Securities and Exchange Commission. Asterisks denote omissions.




               AMENDED AND RESTATED RESEARCH AND LICENSE AGREEMENT
  (Incorporating amendments to the Research and License Agreement made through
              December 28, 1998 (the "Restatement Effective Date"))

     This Amended and Restated Research and License Agreement (the "Agreement")
is effective as of March 31, 1996 (the "Effective Date"), by and between
Millennium Pharmaceuticals, Inc., a corporation organized and existing under the
laws of the State of Delaware and having its principal office at 238 Main
Street, Cambridge, Massachusetts 02142 ("Millennium") and Eli Lilly and Company,
a corporation organized and existing under the laws of the State of Indiana and
having its principal place of business at Lilly Corporate Center, Indianapolis,
Indiana 46285 (together with its Affiliates, "Lilly").

     WHEREAS, Millennium is in the business of conducting research in the field
of human genomics, an objective of which is to discover potential biological
targets and assays for use in drug discovery, diagnostics and gene therapy.

     WHEREAS, Lilly is in the business of discovering, developing and marketing
pharmaceuticals, diagnostics and animal health products.

     WHEREAS, Lilly has substantial experience and expertise in assaying for and
developing drugs which are useful in various human disorders, and in developing
and commercializing protein therapeutics.

     WHEREAS, Lilly is interested in funding and collaborating with Millennium
in discovering and developing assays to develop therapeutics in the area of
Oncology (defined hereinafter), in discovering and developing proteins to use as
therapeutics, and in obtaining rights to such technology for diagnostics and
gene therapy under specified circumstances.

     WHEREAS, Lilly and Millennium entered into the Research and License
Agreement (the "Original Agreement") effective as of the Effective Date, as
amended by a certain Addendum to Research and License Agreement executed in May
1997.

     WHEREAS, Lilly and Millennium are desirous of amending and restating the
terms of the Original Agreement, as amended.

     NOW, THEREFORE, Millennium and Lilly agree as follows:





                                      - 1 -

   2


          Confidential Materials omitted and filed separately with the
         Securities and Exchange Commission. Asterisks denote omissions.


                                    Article I
                                    ---------
                                   Definitions
                                   -----------

     SECTION 1.1.   GENERAL. When used in this Agreement, each of the following
terms shall have the meanings set forth in this Article.

     SECTION 1.2.   "Affiliate" means a) any corporation or business entity, of
which Lilly or Millennium, at the time in question, directly or indirectly owns
or controls fifty percent (50%) or more of the stock having the right to vote
for directors thereof or otherwise controls the management of the corporation or
business entity, or b) any corporation, individual or business entity which now
or hereafter directly or indirectly owns or controls fifty percent (50%) or more
of the stock of Lilly or Millennium having the right to vote for directors
thereof.

     SECTION 1.3.   "Analog Protein Drug" means a protein or polypeptide which 
has been modified through a change in its primary structure resulting in a
functionally significant change (such as a change in its pharmacokinetic or
pharmacodynamic properties) to allow it to become a therapeutic Product
demonstrating relevant IN VITRO and IN VIVO activity. For purposes of this
definition, a polypeptide constituting the pharmacologically active fragment of
a protein, that has not been modified through a change in its primary structure
resulting in a functionally significant change, shall not be considered an
Analog Protein Drug.

     SECTION 1.4.   "Antisense Drug" means any drug or drug candidate which
consists of nucleic acid or a functional analog, derivative or homologue thereof
and which is complementary to a segment of DNA of a target gene or such target
gene's cognate RNA and which, upon delivery by any means, alters the
transcription, processing, elaboration, RNA expression, or protein production of
or by such target gene.

     SECTION 1.5.   "Candidate Gene" means (a) [**] which has been implicated in
a disease or condition in the Field, or (b) [**] in a disease or condition in
the Field. The gene must be implicated in the disease or condition in the Field
(i) by Millennium prior to the Effective Date or by Millennium, by Lilly or
jointly by the parties in the course of the Program and (ii) [**] the Candidate
Gene shall mean [**]; or (C) by any other method, including but not limited to
expression profiling or other cDNA technique (in which case it shall be
appropriately [**] ; all as determined in good faith by the Joint Management
Team. Notwithstanding the foregoing, a gene may be designated a Candidate Gene
pursuant to Section 5.6.


                                      - 2 -

   3


          Confidential Materials omitted and filed separately with the
        Securities and Exchange Commission. Asterisks denote omissions.


     SECTION 1.6.   "Candidate Protein Drug" means a Protein encoded by a
Candidate Gene or other Protein, the identification of which other Protein was
based upon the identification of a Candidate Gene, and which, in either case, is
potentially suitable for development into a therapeutic product.

     SECTION 1.7.   "Confidential Information" means all materials, Know-How or
other information, including, without limitation, proprietary information and
materials (whether or not patentable) regarding a party's technology, products,
business information or objectives, which is designated as confidential in
writing by the disclosing party, whether by letter or by the use of an
appropriate stamp or legend, prior to or at the time any such material, trade
secret or other information is disclosed by the disclosing party to the other
party. Notwithstanding the foregoing to the contrary, materials, Know-How or
other information which is orally, electronically or visually disclosed by a
party, or is disclosed in writing without an appropriate letter, stamp or
legend, shall constitute Confidential Information if the disclosing party,
within thirty (30) days after such disclosure, delivers to the other party a
written document or documents describing the materials, Know-How or other
information and referencing the place and date of such oral, visual, electronic
or written disclosure and the names of the persons to whom such disclosure was
made, provided, however, that any technical information disclosed at a meeting
of the Joint Management Team shall constitute Confidential Information unless
otherwise specified.

     SECTION 1.8.   "Contract Year" means the twelve (12) month period beginning
on the Effective Date, and each succeeding twelve (12) month period thereafter.

     SECTION 1.9.   "Diagnostic Product" means any diagnostic product in the
Field, in the form of a device, compound, kit or service discovered, or the
utility of which is discovered, or the development of which is undertaken, in
the course of the Program or the Lilly Development Program, using or
incorporating Millennium Field Know-How and/or Millennium Field Patent Rights.

     SECTION 1.10.  "Field" means the application in Oncology of:
     (a)  All genes located at chromosome [**] , including but not limited to
          loss of [**] cancer [**], and [**] cancer [**];
     (b)  Mechanisms of [**] including but not limited to the association with
          [**] such as [**] and the mechanism of action of factors that mediate
          [**], including but not limited to [**];
     (c)  Mechanisms of [**] proliferative conditions including but not limited
          to the discovery of novel genes implicated in the susceptibility,
          progression

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          Confidential Materials omitted and filed separately with the
        Securities and Exchange Commission. Asterisks denote omissions.


          and metastasis of [**] cancer, analysis of [**] cells and variants of
          these cells, and malignant tissues;
     (d)  All [**] mechanisms including but not limited to inhibition of [**]
          activity; and
     (e)  All [**] mechanisms including but not limited to the inhibition of the
          [**].

     SECTION 1.11.  "FTE" means a full time equivalent scientific person year
(consisting of a total of forty-seven (47) weeks or one thousand eight hundred
eighty (1,880) hours per year of scientific work on or directly related to the
Millennium Research Program), carried out by a Millennium employee, having at
least a Bachelor Degree in a science. Scientific work on or directly related to
the Millennium Research Program to be performed by Millennium employees can
include, but is not limited to, experimental laboratory work, recording and
writing of results, reviewing literature and references, holding scientific
discussions, managing and leading scientific staff, development and application
of bioinformatic tools related to the Millennium Research Program, and carrying
out project management duties.

     SECTION 1.12.  "Gene Therapy Drug" means any drug or drug candidate,
excluding an Antisense Drug, which consists of nucleic acid or a functional
analog, derivative or homologue thereof and which, upon delivery by any means,
provides a gene product encoded therein which is expressed.

     SECTION 1.13.  "Know-How" means any information, data and materials,
including organic compounds and biological materials such as cell lines, RNA,
DNA, DNA fragments, organisms, proteins, polypeptides, plasmids and vectors and
software, user's manuals and guides.

     SECTION 1.14.  "Lilly Development Program" means the development program to
be undertaken by Lilly during the term of the Millennium Research Program and
for [**] thereafter to discover and develop Products in the Field based on the
results arising from the Millennium Research Program and the Lilly Research
Program.

     SECTION 1.15.  "Lilly Field Know-How" means Know-How in the Field which is
necessary or useful in order to discover, develop, make, use, sell or seek
approval to market Products and, in particular, any such information, data or
materials that are necessary or useful to the discovery, development,
manufacture or use of and relating to the pharmacological, biological or
clinical properties of Products, and which is either (a) in Lilly's possession
on the Effective Date and to which Lilly has the right to grant licenses without
violating the terms of any agreement with a third

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        Securities and Exchange Commission. Asterisks denote omissions.


party, or (b) Know-How which Lilly develops or acquires in the course of the
Lilly Research Program or the Lilly Development Program.

     SECTION 1.16.  "Lilly Field Patent Right(s)" means a Patent Right within 
the Field that is owned or controlled by Lilly and a Patent Right within the
Field as to which Lilly has the right to grant licenses or sublicenses without
violating the terms of any agreement or other arrangement with a third party, at
least one claim of which covers the making, using or selling of a Product or any
methods and substances that were at any time included in Lilly Field Know-How
that are useful in discovering Products, and which is developed or acquired in
the course of the Lilly Research Program or the Lilly Development Program. Lilly
Field Patent Rights are specifically excluded from the definition of Lilly Field
Know-How under this Agreement.

     SECTION 1.17.  "Lilly Research Program" means the research program, the
term of which is during the time that research at Millennium is funded by Lilly
pursuant to this Agreement, and which is to be undertaken by Lilly to discover
Products in the Field based on Millennium Field Know-How and Millennium Field
Patent Rights. For any specific compound, the Lilly Research Program shall not
extend beyond the time that such compound is [**] .

     SECTION 1.18.  "Major Market Countries" means the United States, Canada,
Japan, the United Kingdom, Germany, France, Spain and Italy.

     SECTION 1.19.  "Millennium Field Know-How" means Know-How in the Field
which is necessary or useful in order to discover, develop, make, use, sell or
seek approval to market Products and, in particular, any such information, data
or materials that are necessary or useful to the discovery, development,
manufacture or use of and relating to the pharmacological, biological, or
clinical properties of Products, other than information and biological samples
relating to human materials acquired or otherwise accessed by Millennium and
used in genetic analysis in the Program, and which is either (a) in Millennium's
possession on the Effective Date and to which Millennium has the right to grant
licenses without violating the terms of any agreement with a third party, or (b)
Know-How which Millennium develops or acquires in the course of the Millennium
Research Program, excluding generalized methods for conducting genomic research
and characterizing the function of genes.

     SECTION 1.20.  "Millennium Field Patent Right(s)" means a Patent Right
within the Field that is owned or controlled by Millennium and a Patent Right
within the Field as to which Millennium has the right to grant licenses without
violating the terms of any agreement or other arrangement with a third party, at
least one claim of

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        Securities and Exchange Commission. Asterisks denote omissions.


which covers the making, using or selling of a Product or any methods and
substances that were at any time included in Millennium Field Know-How that are
useful in discovering Products, and which is either (a) owned or controlled by,
or under license to, Millennium on the Effective Date, or (b) developed or
acquired in the course of the Millennium Research Program. Millennium Field
Patent Rights are specifically excluded from the definition of Millennium Field
Know-How under this Agreement.

     SECTION 1.21.  "Millennium Research Program" means the research program,
the term of which extends during the time that research is funded by Lilly
pursuant to this Agreement, and which is to be undertaken by Millennium using
genomic technology to discover and characterize Candidate Genes, Validated
Targets and Candidate Protein Drugs with potential utility for the development
of Products in the Field, as described in greater detail on APPENDIX A to be
attached to this Agreement within ninety (90) days after the Effective Date
(which APPENDIX A is subject to review and modification by the Joint Management
Team).

     SECTION 1.22.  "Modified Drug" means a compound in the Field which, (a)
[**], prior to or outside of the Program, was identified by [**] to its
development as a therapeutic product in the Field, and (b) was modified through
the use of [**] at any time during the term of the Program or the Lilly
Development Program. Modified Drug does not include any Candidate Protein Drug,
Peptido Mimetic, Analog Protein Drug, Small Molecule Drug, Gene Therapy Drug or
Antisense Drug.

     SECTION 1.23.  "Net Sales" means with respect to the Product, the gross
amount invoiced by Lilly, its Affiliates or sublicensees to unrelated third
parties for the Product, in the Territory, less:
     (a)  Trade, quantity and cash discounts actually allowed;
     (b)  Discounts, refunds, rebates, chargebacks, retroactive price
          adjustments, and any other allowances which effectively reduce the net
          selling price;
     (c)  Actual product returns and allowances;
     (d)  That portion of the net selling price associated with the cost of drug
          delivery systems;
     (e)  Any tax imposed on the production, sale, delivery or use of the
          product (excluding federal, state or local taxes based on income);
     (f)  Distribution expenses reasonably documented by Lilly; and
     (g)  Any other similar and customary deductions (as defined and accepted by
          generally accepted accounting principles ("GAAP")), actually incurred.

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        Securities and Exchange Commission. Asterisks denote omissions.


Such amounts shall be determined from the books and records of the parties
maintained in accordance with GAAP, consistently applied.

     In the event the Product is sold as part of a Combination Product, the Net
Sales from the Combination Product, for the purposes of determining royalty
payments, shall be determined by multiplying the Net Sales of the Combination
Product (as defined in the standard Net Sales definition) by the fraction, A/A+B
where A is the average sale price of the Product when sold separately in
finished form and B is the average sale price of the other product(s) sold
separately in finished form.

     In the event that the average sale price of the Product can be determined
but the average sale price of the other product(s) cannot be determined, Net
Sales for purposes of determining royalty payments shall be calculated by
multiplying the Net Sales of the Combination Products by the fraction C/C+D
where C is the selling party's average sales price of the Product and D is the
difference between the average selling price of the Combination Product and the
average selling price of the Product. If the average sale price of the other
product(s) can be determined but the average price of the Product cannot be
determined, Net Sales for purposes of determining royalty payments shall be
calculated by multiplying the Net Sales of the Combination Products by the
following formula: one (1) minus C/C+D where C is the average selling price of
the other product(s) and D is the difference between the average selling price
of the Combination Products and the average selling price of the other
product(s). In no event, however, shall the Net Sales of Products be less than
fifty percent (50%) of the Net Sales of the Combination Products.

     In the event that the average sale price of both the Product and the other
product(s) in the Combination Product cannot be determined, the Net Sales of the
Product shall be deemed to be equal to fifty percent (50%) of the Net Sales of
the Combination Product.

     The Net Sales price for a Combination Product shall be calculated once each
calendar year and such price shall be used during all applicable royalty
reporting periods for the entire calendar year. When determining the average
sale price of a Product or product(s), the average sale price shall be
calculated using data arising from the twelve (12) months preceding the
calculation of the Net Sales price for the Combination Product. As used above,
the term "Combination Product" means any pharmaceutical product which comprises
the Product and other active compounds and/or ingredients.


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        Securities and Exchange Commission. Asterisks denote omissions.


     SECTION 1.24.  "Oncology" means preventative or therapeutic interventions
for malignant processes, including, without limitation, initiation, progression,
proliferation and metastasis and the development of benign processes that are
known, or become known, to become malignant processes, such as adenomas.
Oncology shall not mean the discovery of interventions for benign processes that
do not become malignant processes, including without limitation, fibroids. The
Joint Management Team shall make a good faith determination based on available
scientific data whether a benign process becomes known to become a malignant
process. Such determination shall be made by a majority vote of the Joint
Management Team. In the event that the Joint Management Team is equally divided
on the question of whether a benign process becomes known to become a malignant
process, such question shall be decided by a majority vote of a panel of three
(3) experts in the field of oncology, one expert selected by Millennium, another
expert selected by Lilly and the third expert selected by the two experts
selected by the parties. Notwithstanding the foregoing, a benign process that
(i) becomes known to become a malignant process after the Effective Date, and
(ii) is the subject of an agreement between Millennium and a third party that
was entered into prior to the time that such benign process became known to
become a malignant process and that precludes a collaboration between Millennium
and Lilly with respect to such benign process, shall not be included in
Oncology.

     SECTION 1.25.  "Patent Right(s)" means a patent or patent application and
all divisions, continuations, continuations-in-part, reissues, reexaminations,
extensions, Supplementary Protection Certificates and foreign counterparts
thereof that is owned or controlled by Millennium or by Lilly, or a license to
the same to which either Millennium or Lilly has the right to grant a
sublicense.

     SECTION 1.26.  "Peptido Mimetic Drug" means a synthetic organic molecule
which is a mimetic of, or is designed or developed using medicinal, SAR or
combinatorial chemistry techniques to incorporate, key structural features of a
Candidate Protein Drug and which is a therapeutic product.

     SECTION 1.27.  "Product" means (a) any Candidate Protein Drug, Analog
Protein Drug, Small Molecule Drug, or Peptido Mimetic Drug discovered or the
development of which is undertaken (i) in the course of the Program, or (ii)
using Program Know-How and/or Program Patent Rights at any time during the term
of the Lilly Development Program, and which is sold for use as a human
pharmaceutical or animal health product, and (b) any Modified Drug, provided
that Products shall not include (a) Gene Therapy Drugs, subject to the option
set forth in Section 5.3, (b) Antisense Drugs, or (c) Diagnostic Products,
subject to the option set forth in Section 5.4.

     SECTION 1.28.  "Program" means, collectively, the Millennium Research
Program and the Lilly Research Program.

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        Securities and Exchange Commission. Asterisks denote omissions.



     SECTION 1.29.  "Program Know-How" means Millennium Field Know-How and Lilly
Field Know-How, collectively, whether or not it was developed or acquired solely
or jointly by Millennium and/or Lilly. Program Know-How includes but is not
limited to Candidate Genes, Validated Targets and Candidate Protein Drugs.

     SECTION 1.30.  "Program Patent Rights" means Millennium Field Patent Rights
and Lilly Field Patent Rights, collectively, whether or not it was developed or
acquired solely or jointly by Millennium and/or Lilly.

     SECTION 1.31.  "Project Team Status" means the point in the Lilly
Development Program when a potential Product has been [**].

     SECTION 1.32.  "Protein" means any of a class of high molecular weight
(i.e., weighing greater than [**]) polymer compounds composed of a variety of
amino acids joined by peptide linkages, including aggregates, hybrids and
fragments thereof, as well as naturally post-translationally modified variants
thereof (i.e., glycosylated proteins) and chemically modified versions thereof
(e.g., pegylated or liposomally encapsulated proteins).

     SECTION 1.33.  "Small Molecule Drug" means a small molecule therapeutic
product within the Field originating from a screen using a Validated Target,
other than a Candidate Protein Drug, an Analog Protein Drug, a Peptido Mimetic
Drug, a Modified Drug, a Gene Therapy Drug or an Antisense Drug.

     SECTION 1.34.  "Territory" means all countries of the world.

     SECTION 1.35.  "Validated Target" means a biological target which, based on
demonstrating relevant IN VITRO and IN VIVO activity, is appropriate for [**] ,
and which has been [**]. A Validated Target may be a Candidate Gene, a Protein
encoded by a Candidate Gene or other qualifying biological molecule in a
relevant biochemical pathway, the identification of which or the linkage with a
disease is based upon the identification of a Candidate Gene.

     SECTION 1.36.  "Valid Claims" means any claim(s) pending in a patent
application or in an unexpired patent which has not been held unenforceable,
unpatentable or invalid by a decision of a court or other governmental agency of
competent jurisdiction, unappealable or unappealed within the time allowed for
appeal, and which has not been admitted to be invalid or unenforceable through
reissue or disclaimer. If in any country there should be two or more such
decisions

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        Securities and Exchange Commission. Asterisks denote omissions.


conflicting with respect to the validity of the same claim, the decision of the
higher or highest tribunal shall thereafter control; however, should the
tribunals be of equal rank, then the decision or decisions upholding the claim
shall prevail when the decisions are equal in number, and the majority of
decisions shall prevail when the conflicting decisions are unequal in number.

     SECTION 1.37.  "Program Gene" means an isolated gene that (a) was
identified or discovered in the course of the Program, (b) is not designated as
a Candidate Gene, and (c) is permanently dropped from investigation for use in
the Field as part of the Program or the Lilly Development Program. Without
limiting the generality of the foregoing, a Program Gene does not include any
gene that is temporarily dropped from investigation for use in the Field as part
of the Program or the Lilly Development Program.

     SECTION 1.38.  "Outside of the Field" means (a) all human medical
indications other than those in the Field and (b) all animal medical
indications.

                                   Article II
                                   ----------
                       Research and Collaboration Program
                       ----------------------------------

     SECTION 2.1.   EXCLUSIVE ARRANGEMENT. During the term of the Millennium
Research Program, Millennium agrees that it shall not participate, either
directly or in collaboration with others in any genomics research relating to
the Field except pursuant to the terms of this Agreement, including the
provisions of Section 5.2 hereof, provided that the foregoing shall not apply to
activities in the Field by Millennium relating to the research, development and
commercialization of Diagnostic Products (subject to the provisions of Section
5.4), Gene Therapy Drugs (subject to the provisions of Section 5.3) and
Antisense Drugs. Wherever used in the immediately preceding sentence, the term
"Field" shall be limited in its scope to the areas set forth in subsections (a),
(b) and (c) of Section 1.10. Millennium acknowledges that Lilly has independent
research efforts directed to the Field but not relating to the Millennium
Research Program. To the extent that such activities do not fall within the
scope of the Lilly Research Program, Millennium acknowledges that it is not
granted any right to such research.

     SECTION 2.2.   JOINT MANAGEMENT TEAM. As soon as practicable after
execution of the Original Agreement, the parties shall establish a Joint
Management Team, consisting of four (4) representatives designated by Lilly and
four (4) representatives designated by Millennium. Each party shall make its
initial designation of its representation not later than thirty (30) days after
execution of the Original Agreement. Each party shall cause its representatives
to attend the meetings of the Joint Management Team. If a representative of a
party is unable to attend a meeting, such party may designate an alternate to
attend such meeting in place of the missing representative. In addition, each
party may at its discretion invite non-voting

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        Securities and Exchange Commission. Asterisks denote omissions.


employees, consultants or scientific advisors to attend the meetings of the
Joint Management Team. The Joint Management Team shall meet no less frequently
than once each calendar quarter, and shall meet at such other times as deemed
appropriate by the Joint Management Team. Each party may change any one or more
of its representatives to the Joint Management Team at any time upon notice to
the other party. The location of the Joint Management Team meetings shall
alternate between Massachusetts and Indiana, or as otherwise mutually agreed.

     SECTION 2.3.   JOINT MANAGEMENT TEAM RESPONSIBILITIES. The Joint Management
Team shall be responsible for coordinating and reviewing the activities of the
parties under this Agreement, including without limitation the Program. Without
intending to limit the generality of the foregoing, the Joint Management Team
shall oversee the disclosure and transfer of relevant Know-How to facilitate the
research and development of Candidate Genes, Validated Targets, Candidate
Protein Drugs and Products pursuant to Article III. Subject to the minimum
funding levels established in Section 8.1, the Joint Management Team shall
determine the level and extent of research work to be conducted by Millennium
and funded by Lilly under this Agreement. The Joint Management Team shall be
informed of the specific individuals who will work on the Millennium Research
Program. The Joint Management Team shall also attempt to settle any disputes
that may arise between the parties.

     SECTION 2.4.   GOALS AND OBJECTIVES. As soon as practical after the
execution of the Original Agreement, the Joint Management Team shall agree on
the initial goals and objectives and research and development activities of the
Program, including the specific targets to be initially pursued under the
Program. At each meeting of the Joint Management Team, the progress of the
Program will be reviewed and if necessary the goals and/or resource allocation
for the Millennium Research Program will be modified. No later than October 1 of
each year during the Millennium Research Program, the Joint Management Team
shall meet to discuss in detail the progress of the Program and agree upon the
short- and long-term goals and prospective budget for the Millennium Research
Program. In the event a significant development occurs which may affect the
short- or long-term goals or resource allocations of the Program or methods of
achieving said goals, the Joint Management Team shall reconvene, reassess and
change such methods, resource allocations and/or goals of the Millennium
Research Program.


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        Securities and Exchange Commission. Asterisks denote omissions.


     SECTION 2.5.   JOINT MANAGEMENT TEAM DECISIONS. The affirmative vote of
[**] of the members of the Joint Management Team shall be required to take any
action. Any member of the Joint Management Team who is not present at any
meeting either in person or by a designated alternate may appoint another
representative or alternate as his proxy to act on his behalf on all matters
coming to a vote. The Joint Management Team may conduct meetings by telephone or
videoconference. Except as otherwise provided in this Agreement, if the Joint
Management Team is unable to reach a [**] or greater vote on any issue, it shall
refer that issue to the President of Lilly Research Laboratories (a division of
Lilly) and the Chief Executive Officer of Millennium for resolution. If the
President of Lilly Research Laboratories and the Chief Executive Officer of
Millennium are unable to reach agreement on any issues relating to the Program,
[**]; provided, however, that in the event of a disagreement pertaining to [**]
comprising the Millennium Research Program (or any current or future
collaborative programs) with regards to any current or future Programs agreed
upon between the parties, then [**]. For purposes of this Section 2.5,[**] shall
be deemed to be significant if more than [**].

     SECTION 2.6.   PROGRAM PLAN. The parties shall engage in the Program to
expedite the discovery and development of Candidate Genes, Validated Targets,
Candidate Protein Drugs and Products in substantial accordance with the research
schedule and goals set forth in APPENDIX A.

     SECTION 2.7.   MILLENNIUM'S COMMITMENT TO MILLENNIUM RESEARCH PROGRAM.
Millennium shall conduct the Millennium Research Program for the first five (5)
Contract Years. Prior to the close of the fifth Contract Year, Lilly shall have
the option to extend the Millennium Research Program at Millennium for three (3)
consecutive one Contract Year periods provided that Lilly gives notice to
Millennium at least six (6) months prior to the expiration of the fifth Contract
Year and any succeeding Contract Year. However, Lilly and Millennium shall begin
discussions concerning the expiration or extension of the Millennium Research
Program at least twelve (12) months prior to the end of the fifth Contract Year
and each Contract Year thereafter. If Lilly so exercises such option, Millennium
and Lilly will diligently attempt to mutually agree on the level and extent of
research to be conducted at Millennium during such additional period. If the
parties are unable to agree on the level of research for such additional period,
then at Lilly's request Millennium shall conduct, and Lilly shall fund, research
at a level that is the lesser of (i) the level that was funded during the
immediately preceding Contract Year, or (ii) the number of FTEs agreed upon in
Section 8.1 for the fifth Contract Year. In the absence of such agreement or
request, the Millennium Research Program shall not be extended. Nothing herein
shall be interpreted to eliminate any required adjustments to the FTE

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        Securities and Exchange Commission. Asterisks denote omissions.


rate pursuant to Section 8.1(a). During the term of the Millennium Research
Program, Millennium shall submit to Lilly a quarterly report stating the name of
each Millennium employee working on the Millennium Research Program and the
number of hours that employee spent on the Millennium Research Program.

     SECTION 2.8.   DILIGENCE. Millennium shall use reasonable efforts in
pursuing and conducting research and development of all Candidate Genes,
Validated Targets, Candidate Protein Drugs and related assays developed under
the Millennium Research Program. Millennium shall use reasonable efforts to
carry out all work done in connection with the Millennium Research Program in
compliance with any federal, state or local laws, regulations and guidelines
governing the conduct of such work. In addition, all animals involved in the
Millennium Research Program shall be provided humane care and treatment in
accordance with generally acceptable current veterinary practices.


                                   Article III
                                   -----------
                             Disclosure of Know-how
                             ----------------------

     SECTION 3.1.   MILLENNIUM KNOW-HOW. Commencing with the execution of the
Original Agreement, Millennium shall disclose to Lilly all existing Millennium
Field Know-How which Millennium reasonably believes to be pertinent to the
Program. Millennium shall disclose to Lilly on an ongoing basis all additional
Millennium Field Know-How which Millennium reasonably believes to be pertinent
to the successful execution of the Program for the duration of the Program.
Notwithstanding the foregoing, Millennium need not disclose to Lilly any
Know-How which Millennium is precluded from disclosing under any agreement
binding upon it.

     SECTION 3.2.   BIOLOGICAL MATERIALS. Millennium shall also provide Lilly
with genes, gene fragments, vectors, cell lines, strains, transgenic organisms,
model organisms, DNA and DNA fragments and other biological materials, as well
as information relating to such materials, which Millennium reasonably believes
to be pertinent to Lilly's activities in the Program. Notwithstanding the
foregoing, Millennium need not provide Lilly with any such biological materials
or related information which Millennium is precluded from providing under any
agreement binding upon it.

     SECTION 3.3.   LILLY KNOW-HOW. Lilly shall disclose to Millennium such
Lilly Field Know-How which Lilly reasonably believes is needed by Millennium to
carry out its obligations within the Millennium Research Program hereunder;
provided, however, that Lilly need not disclose to Millennium any Know-How which
Lilly is precluded from disclosing under any agreement binding upon it or which
Lilly deems to be inappropriate for disclosure.

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        Securities and Exchange Commission. Asterisks denote omissions.


                                   Article IV
                                   ----------
                                 Confidentiality
                                 ---------------

     SECTION 4.1.   CONFIDENTIAL INFORMATION AND KNOW-HOW. All Know-How or other
Confidential Information disclosed by one party to the other during the term of
this Agreement shall not be used by the receiving party except in connection
with the Program or the identification, selection, preparation, development,
manufacture or sale of Products, shall be maintained in confidence by the
receiving party, and shall not be disclosed by the receiving party to any other
person, firm, or agency, governmental or private, without the prior written
consent of the disclosing party, except to the extent that the Know-How or other
Confidential Information: 

     (a)  is known by or in possession of the receiving party at the time of its
          receipt as documented in contemporaneous written records; or 

     (b)  is properly in the public domain; or 

     (c)  is subsequently disclosed to the receiving party without obligation of
          confidentiality by a third party who may lawfully do so; or 

     (d)  is required to be disclosed to governmental agencies in order to gain
          approval to sell Products; or (e) is necessary to be disclosed to
          agents, consultants, Affiliates and/or other third parties for the
          research and development and/or marketing of Products, under this
          Agreement, which entities first agree to be bound by the
          confidentiality obligations contained in this Agreement.

     SECTION 4.2.   EMPLOYEE OBLIGATIONS. Millennium and Lilly each agree that
it shall provide Know-How and other Confidential Information received from the
other party only to its employees, consultants and advisors who have a need to
know and have an obligation to treat such information and materials as
confidential. On a regular basis, Millennium agrees to explicitly counsel its
consultants and advisors of the implications arising from such obligations.

     SECTION 4.3.   TERM. All obligations of confidentiality and non-use imposed
under this Article IV shall expire ten (10) years following termination of the
Millennium Research Program. Notwithstanding the foregoing, with respect to
Know-How necessary to manufacture Products, such obligations shall not expire
until the first to occur of an event specified in clause (a), (b) or (c) of
Section 4.1.


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                                    Article V
                                    ---------
                                 Grant of Rights
                                 ---------------

     SECTION 5.1.   LICENSE TO LILLY. Subject to the terms and conditions of
this Agreement, Millennium hereby grants to Lilly:

     (a)  an exclusive, worldwide, non-royalty bearing license (subject to
          Millennium's retained rights), under Millennium Field Patent Rights
          and Millennium Field Know-How, to make, have made, use, and have used
          Candidate Genes and Validated Targets within Oncology; such license
          [**] on prior notice to Millennium, provided however, that Lilly [**];
     (b)  an exclusive, worldwide, royalty bearing license, under Millennium
          Field Patent Rights and Millennium Field Know-How to make, have made,
          import, use, have used, offer to sell and sell Products; such license
          [**] on prior notice to Millennium, provided however, that [**];
     (c)  an option to obtain exclusive licenses to [**] (as defined in Section
          5.2), pursuant to the provisions of Section 5.2;
     (d)  a right to either i) negotiate for rights to collaborate on Gene
          Therapy Drugs, which embody or are discovered or developed using
          Millennium Field Patent Rights or Millennium Field Know-How, or ii) a
          co-exclusive right to make, have made, import, use, have used, offer
          to sell and sell Gene Therapy Drugs, which embody or are discovered or
          developed using Millennium Field Patent Rights or Millennium Field
          Know-How, pursuant to the provisions of Section 5.3;
     (e)  an option to co-develop and/or co-promote certain Diagnostic Products,
          for use in the Field and the area of Oncology, which embody or are
          discovered or developed using Millennium Field Patent Rights or
          Millennium Field Know-How, pursuant to the provisions of Section 5.4;
          and
     (f)  a co-exclusive (with Millennium), worldwide, non-royalty bearing
          license, under Millennium Field Patent Rights and Millennium Field
          Know-How, to make, have made, use, and have used Program Genes [**]
          and to make, have made, use, and have used Candidate Genes and
          Validated Targets [**]; such license shall include the right to grant
          sublicenses on prior written notice to Millennium, provided however,
          [**].

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     SECTION 5.2. [**].
     (a) The parties understand and agree that during the term, [**], Millennium
may undertake genomics research activities designed primarily to yield
biological molecules likely to be useful as targets or as pharmaceutical
products in the Field (such as the use of [**] . For the purposes of the
foregoing definition of [**], which definition shall apply wherever such term is
used in this Agreement, the term "Field" shall be limited in its scope to the
areas set forth in subsections (a), (b) and (c) of Section 1.10, PROVIDED THAT
the limitation set forth in this sentence shall only apply prospectively from
the Restatement Effective Date and PROVIDED FURTHER THAT [**] by Millennium to
Lilly pursuant to the provisions of this Section 5.2(a) set forth below shall
not be affected by such limitation. The parties agree that [**] shall have the
[**]. In order to achieve this goal, for the term of the Millennium Research
Program, [**] at its regularly scheduled quarterly meetings of any [**] it
intends to commence in the upcoming quarter as well as a progress report on any
ongoing Non-Program Field Project (the first such notice of a Non-Program Field
Project hereinafter referred to as the "Notice Date"). If the Joint Management
Team reasonably determines that such [**] shall either [**] or shall [**],
provided however, that [**] shall not be required to [**] on a process that, at
the time of such initiation, was not known to be a [**] and was only
subsequently included in [**] by the Joint Management Team pursuant to Section
[**]. If a [**] is approved by the Joint Management Team,[**] during the term of
the Millennium Research Program [**] and, in so doing, obtain all rights and
incur all obligations associated therewith as if such [**] , except as otherwise
provided in this Section 5.2 and Section 8.3. [**] . If such [**] is used in a
[**], then the parties shall [**] to the terms by which such [**] shall be used
in said [**] before the [**] is used in said [**].

     In the event that [**] with respect to a [**], all prior Patent Rights and
prior Know-How developed or acquired in the course of such [**] under this
Section 5.2) shall be deemed to be [**], respectively. [**] at any time during
the term of the Millennium Research Programs as follows: (i) during the first
year after a Notice Date,[**] (as determined by Millennium's certified public
accountants) to the relevant [**] that Millennium has incurred from the Notice
Date to the date [**], including but not limited to [**] which are directly
attributable to such [**] (the "External Reimbursement Cost"),[**] (a "Milestone
Payment"); (ii) during the second year after a Notice Date, [**] External
Reimbursement Cost [**] of any Milestone Payment; (iii) during the third year
after a Notice Date,[**] of the Internal Reimbursement Cost [**] of the External
Reimbursement Cost [**] of any Milestone Payment; or (iv) anytime during or
after the fourth year after a Notice Date until the end of the term of the
Millennium Research Program,[**] of the Internal Reimbursement Cost [**] of the
External Reimbursement Cost [**] of any Milestone Payment. In the event that
[**]

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with respect to a [**] in order to recompense Millennium for relevant pre-Notice
Date expenditures, Lilly shall pay to Millennium, in addition to the other
relevant payments set forth above in this Section 5.2(a),[**], reasonably
allocable (as determined by Millennium's certified public accountants) to all
prior research included in the [**] that Millennium has incurred in the conduct
of such research from the date of its inception (as shown by documentation
reasonably acceptable to Lilly) to the Notice Date.

     (b) The parties further understand and agree that during the term [**],
Millennium, alone or in collaboration with a third party, may undertake (i)
genomic research activities primarily designed to identify genetic and other
biological markers of disease initiation and progression as well as drug and
treatment responsiveness useful for diagnostic, prognostic and pharmacogenetic
purposes but which may also yield biological molecules of possible utility as
targets or as pharmaceutical products in the Field (a "Millennium Diagnostic
Project"), and/or (ii) genomic research activities not designed primarily to
yield biological molecules likely to be useful as targets or as pharmaceutical
products in the Field but which may yield such biological molecules (the [**]).
In the event that (x) a biological molecule with utility as a target or a
pharmaceutical product in the Field is identified in the course of a Millennium
Diagnostic Project or a [**] during the term of the Millennium Research Program;
(y) Millennium elects to exploit the potential of such biological molecule for
therapeutic use in the Field on its own or in collaboration with a third party
and (z) Millennium has no prior commitment to a third party concerning the
research, development and/or commercialization of such biological molecule, then
Millennium shall (1) [**] in the Field of such [**] and (2)[**] regarding the
possibility of a [**] concerning the research, development and/or
commercialization of such [**] for therapeutic purposes within the Field.
Wherever used in this Section 5.2(b), the term "Field" shall be limited in its
scope to the areas set forth in subsections (a), (b) and (c) of Section 1.10.

     SECTION 5.3.   GENE THERAPY. During the term of the Program, Millennium and
Lilly agree to discuss collaborations within the Field and the area of Oncology
concerning candidates for gene therapy arising from the Program. The initial
opportunity to begin such discussions concerning gene therapy shall arise when a
gene that is appropriate for use in gene therapy is discovered in the course of
the Millennium Research Program or a [**] and is brought to the attention of the
Joint Management Team. When this occurs, the parties shall have a period of [**]
in which to decide whether to begin good faith negotiations with each other
concerning a potential gene therapy collaboration on such a gene. If the parties
decide to

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collaborate on a gene therapy project, the terms of such collaboration shall be
governed by the terms and conditions of a separate agreement.

     If, either (a) a gene described in the preceding paragraph has a potential
application only outside of Oncology, (b) the parties choose not to negotiate
with each other concerning a collaboration within Oncology, or (c) the parties
cannot agree to the terms of a collaboration within Oncology, then each party
shall have a co-exclusive right to make, use and sell a Gene Therapy Drug
embodying such a gene for all gene therapy applications, both within the Field
and outside the Field, within the Territory. Each party shall be entitled to
sublicense the co-exclusive rights to make, use and sell each Gene Therapy Drug
embodying such gene to one (1) sublicensee per country. Any further licensing of
the Gene Therapy Drug embodying such gene shall require the [**]. Each party
shall pay the other party a [**] on its Net Sales of the Gene Therapy Product
within the Territory. All royalty payments shall be made subject to the
provisions of Article VIII of this Agreement. In the event that the total
royalty burden of any Gene Therapy Product sold by a party is greater than [**]
of the Net Sales of the Gene Therapy Product in the Territory (inclusive of the
[**] paid under the terms of this Section 5.3), then that party's royalty
payable to the other party shall [**] of the excess over [**] paid by that
party; provided, however, the royalty payment to the other party shall not fall
below [**] of Net Sales of the Gene Therapy Product in the Territory. Nothing
within this Section 5.3 grants Millennium any rights to Candidate Genes,
Candidate Protein Drugs or Validated Targets within the Field, except as
necessary for Millennium fully to exercise its rights to Gene Therapy Products
as granted herein.

     SECTION 5.4.   [**]. During the term of the Program and the Lilly
Development Program,[**] Products arising from the Millennium Research Program
and related to the Field and the area of Oncology under the following
circumstances:

     (a)  [**] or its development partner [**] (provided that Millennium is made
          aware of the Lilly [**] product at least three (3) years in advance of
          the date on which this [**] as specified in this paragraph) which are
          not being developed by Millennium, a Millennium Affiliate or a
          commercial partner of Millennium. With respect to each [**] shall
          become [**] in a Major Market Country for a [**] in the event that
          Millennium, a Millennium Affiliate or its commercial partner has not
          earlier submitted the pertinent regulatory approval package for said
          [**] to the FDA (or its equivalent in any Major Market Country) for
          marketing approval or, if relevant, is not capable of providing, or is
          unwilling to provide, [**] of its interest, and the parties shall
          negotiate the specific terms of such an

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          agreement in good faith. [**] set forth in this Section 5.4(a), [**]
          Millennium's Net Sales of the [**] in the Territory.

     (b)  The parties acknowledge and agree that promotion by [**] of a [**]
          associated with a product marketed by [**] or a [**] in development by
          [**] may advantageously affect the sales of [**] and the associated
          product or Product. Therefore,[**] related to the Field and the area
          of [**] on the market related to such [**] or a product or Product in
          development which is also related to such [**]. The [**] shall not be
          [**] but shall be [**]. Millennium shall review the position of Lilly
          and the parties shall negotiate in good faith a [**] with respect to
          such [**] . Millennium shall [**] on the Net Sales of the [**] in
          those countries where Lilly co-promotes the [**] , whichever is lower;
          provided, however, that [**] if Lilly is receiving royalty payments
          pursuant to Section 5.4(a). Millennium shall also [**] , at
          Millennium's, its Affiliate's or its partner's [**].

     SECTION 5.5.   USE OF PROGRAM GENES, CANDIDATE GENES, AND VALIDATED
TARGETS. Pursuant to the grant set forth in Section 5.1(f), Lilly shall have a
co- exclusive right (with Millennium) to use Program Genes [**]. In the event
that any such use results in the identification of a compound (i) derived from
the use of a [**] or (ii) derived from the use of a [**] the clinical
development and commercialization of such [**] (where such compound was derived
from the use of a Program Gene) or [**] (where such compound was derived from
the use of a Candidate Gene or a Validated Target), [**] (Net Sales as redefined
for purposes of this Section 5.5 to include amounts invoiced by Lilly [**]);
provided however, that (i) in the case of a [**] that is identified through the
use of a Program Gene, [**] pursuant to Section 8.3, as if such [**], and (ii)
in the case of a [**] that is identified through the use of a Candidate Gene or
Validated Target,[**] pursuant to Section 8.3, as if such [**].

     Millennium shall retain a co-exclusive right to use Program Genes [**] and
to use Candidate Genes and Validated Targets [**] (including but not limited to
any [**]) any work in the Field arising from any resulting compound discovered
using a Program Gene or any work [**] arising from any resulting compound
discovered using a Candidate Gene or Validated Target.

     SECTION 5.6.   THIRD PARTY GENE. The parties agree that during the term of
the Program, an isolated gene that has been implicated in a disease or condition
in the Field by a third party before or during the term of the Program (a "Third
Party Gene") may be designated a Candidate Gene if it is determined by the Joint

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Management Team that the study of such Third Party Gene may lead to further
development of such Third Party Gene as a Candidate Gene and Validated Target.

                                   Article VI
                                   ----------

                          Patent Ownership, Protection,
                          Validity and Related Matters
                          ----------------------------    

     SECTION 6.1.   PATENTABLE INVENTIONS. If a patentable invention related to
the Field is conceived in the course of and within the scope of the Program and
is reduced to practice within the course of the Program or within twelve (12)
months after its expiration or termination, Lilly and Millennium shall discuss
that invention and the desirability of filing a United States patent application
covering the invention, as well as any foreign counterparts. The party owning
the invention shall make the final decision with respect to any such filings. If
an invention is made jointly pursuant to 35 U.S.C. ss.116, the Joint Management
Team shall determine which party shall file and prosecute the application. If no
decision is made regarding which party shall file and prosecute the application
covering such jointly owned invention, Lilly shall make the decision.

     SECTION 6.2.   OWNERSHIP. Lilly shall own all inventions within the scope
of the Program made solely by its employees, and Millennium shall own all
inventions within the scope of the Program made solely by its employees. All
inventions made jointly by employees of Lilly and employees of Millennium shall
be owned jointly by Millennium and Lilly. All patent applications and patents
covering any invention made within the scope of the Program shall be owned by
the parties or party, as the case may be, that own(s) said invention.

     SECTION 6.3.   REVIEW AND COMMENT. Each party shall provide the Joint
Management Team with a copy of any patent application which first discloses any
specific Program Know-How, including without limitation any DNA fragment, gene,
Candidate Gene, Candidate Protein Drug, Validated Target or assay within the
Field and/or any IN VITRO or IN VIVO data from such Candidate Genes, Candidate
Protein Drug, Validated Targets or assays within the Field prior to filing the
first of such applications in any jurisdiction, if possible, for review and
comment by the Joint Management Team or its designees. The Joint Management Team
and/or its designees shall maintain any such patent application in confidence,
pursuant to Article IV.

     SECTION 6.4.   NOTICE OF DECISION. If a party decides not to file or
maintain an application or patent on its invention, or on a joint invention, in
any country, it shall give the other party reasonable notice to this effect.
After such notice, the other party may file or maintain the application or
patent.


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     SECTION 6.5.   RETENTION OF RIGHTS. Each party shall continue to own and
retain proprietary rights to its Know-How and Patent Rights which are licensed
or disclosed under this Agreement except as specifically provided herein.

     SECTION 6.6.   PROSECTION AND MAINTENANCE. Each party agrees to prosecute
and maintain the Patent Rights owned by it, and to prosecute any interference
proceedings with respect to such Patent Rights. Patent Rights jointly owned by
the parties shall be prosecuted and maintained, including the prosecution of any
interference proceedings with respect thereto, by the party who has
decision-making authority with respect thereto under Section 6.1. The party
initially responsible for such prosecution and maintenance (the "Initial
Responsible Party") shall give notice to the other party of any decision to
cease such prosecution and maintenance and, in such case, shall permit the other
party at its sole discretion to continue prosecution or maintenance. If the
other party elects to continue prosecution or maintenance, the Initial
Responsible Party shall execute such documents and perform such acts as may be
reasonably necessary for the other party to continue prosecution or maintenance.

     SECTION 6.7.   THIRD PARTY INFRINGEMENT. Millennium and Lilly each agrees
to take reasonable actions to protect the Program Patent Rights from
infringement in the Field and the area of Oncology and to protect the Program
Know-How from unauthorized use in or Outside of the Field and the area of
Oncology, when, from its own knowledge or upon notice by the other party, the
party with knowledge or receiving notice becomes aware of the reasonable
probability that such infringement or unauthorized use exists in or Outside of
the Field and the area of Oncology.

     SECTION 6.8.   COOPERATION. If within sixty (60) days of becoming aware of
the reasonable probability of an interference or infringement of the Program
Patent Rights in the Field and the area of Oncology or unauthorized use of the
Program Know-How in the Field and the area of Oncology, the Initial Responsible
Party refuses to institute an infringement suit or take other appropriate action
that the other party feels is reasonably required to protect the Program Patent
Rights and Program Know-How in the Field and the area of Oncology, the other
party shall have the right at its sole discretion to institute such suit or
other appropriate action in the name of either or both parties. In such event,
the Initial Responsible Party shall cooperate with the other party to the extent
reasonably possible.

     SECTION 6.9.   NOTICE OF CERTIFICATION. Millennium and Lilly each shall
immediately give notice to the other of any certification filed under the U.S.
"Drug Price Competition and Patent Term Restoration Act of 1984" claiming that a
Program Patent Right is invalid or that any infringement will not arise from the
manufacture, use or sale of any product in the Field and the area of Oncology by
a third party. If Millennium decides not to bring infringement proceedings
against the entity making such a certification, Millennium shall give notice to
Lilly of its decision not to bring suit within twenty-one (21) days after
receipt of notice of such certification. Lilly

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may then, but is not required to, bring suit against the party that filed the
certification. Any suit by Lilly or Millennium shall either be in the name of
Lilly or in the name of Millennium, or jointly by Lilly and Millennium, as may
be required by law. For this purpose, the party not bringing suit shall execute
such legal papers necessary for the prosecution of such suit as may be
reasonably requested by the party bringing suit.

     SECTION 6.10.  COSTS AND EXPENSES. Lilly shall bear its own costs and
expenses in filing, prosecuting, maintaining and extending Lilly Field Patent
Rights under this Article VI and shall reimburse Millennium for [**] of
Millennium's external costs of filing, prosecuting, maintaining and extending
any Millennium Field Patent Rights to which Lilly is licensed under the terms of
this Agreement and for which costs are incurred after the Effective Date. The
Joint Management Team shall review and have oversight responsibility for all
patent matters pertaining to Millennium Field Patent Rights concerning
technology relating to the Program.

     SECTION 6.11.  NOTICE OF INFRINGEMENT. If the activities of either party in
connection with the Program or as the result of making, using or selling a
Product in the Field and the area of Oncology result in a claim of patent
infringement or other violation of the intellectual property rights of any third
party, the party to this Agreement first having notice of that claim shall
promptly notify the other party in writing. The notice shall set forth the facts
of the claim in reasonable detail. Except as otherwise provided herein, Lilly
shall have the primary obligation to defend against said claim (whether or not
it arises as a counterclaim in any infringement action commenced by Millennium
hereunder) and to prosecute any counterclaims, or any other claims that may
arise in connection with such litigation. Millennium shall cooperate with Lilly
in such defense and prosecution and shall have the right to be represented by
counsel of its own choice. If Lilly shall fail to diligently commence and
continue defense against such claim (or prosecution of any claim or
counterclaim), Millennium may assume the primary obligation for such defense or
prosecution, and Lilly shall cooperate with Millennium and shall have the right
to be represented by counsel of its own choice. Notwithstanding the foregoing,
if the claim involves an allegation of a violation of the trade secret rights of
a third party, the party accused of such violation shall have the obligation to
defend against such claim and shall indemnify the other party against all costs
associated with such claim.

     SECTION 6.12.  LITIGATION EXPENSES. Each party shall assume and pay all of
its own out-of-pocket costs incurred in connection with all litigation described
in this Article VI, including without limitation, the fees and expenses of that
party's counsel.


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     SECTION 6.13.  SETTLEMENT APPROVAL. Neither party shall settle any such
proceeding without the approval of the other party, which approval shall not be
unreasonably withheld.

     SECTION 6.14.  RECOVERY. Any recovery obtained by any party as a result of
any proceeding described in this Article VI, by settlement or otherwise, shall
be applied in the following order of priority: 

     (a)  first, to reimburse each party for all litigation costs in connection
          with such proceeding paid by that party under Section 6.12 and not
          otherwise recovered; and 

     (b)  second,[**].

     SECTION 6.15.  PATENT TERM EXTENSIONS. The parties shall cooperate with
each other in gaining patent term extension wherever applicable to Program
Patent Rights covering Products. The party selling the product shall determine
which patents shall be extended. All filings for such extension shall be made by
the party to whom the patent is assigned after consultation with the other
party, provided, however, that in the event that the party to whom the patent is
assigned elects not to file for an extension, such party shall (i) inform the
other party of its intention not to file and (ii) grant the other party the
right to file for such extension.

                                   Article VII
                                   -----------
                              Commercial Diligence
                              --------------------

     SECTION 7.1.   CANDIDATE GENES. After the term of the Program and during
the term of the Lilly Development Program, Lilly shall commit resources to
continue research on Candidate Genes sufficient to move each Candidate Gene into
Validated Target or Candidate Protein Drug status within three (3) years from
the date of the termination or expiration of the Program. If a Candidate Gene
does not attain Validated Target or Candidate Protein Drug status within said
three (3) year period, then Lilly's exclusive right to use said Candidate Gene
in the Field and the area of Oncology shall be converted into a co-exclusive
right to use said Candidate Gene in the Field and the area of Oncology, subject
to the other terms of this Section 7.1. Millennium may thereafter pursue the
creation of a Validated Target or the development of a Candidate Protein Drug
from said Candidate Gene the Field and the area of Oncology, and retain rights
to therapeutic leads found by Millennium using such a Validated Target or to
protein therapeutics based on such Candidate Protein Drug, and proceed with the
development of such therapeutic products on its own or sublicense the rights to
such therapeutic products and [**].


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     Notwithstanding the provisions of the prior paragraph, after the term of
the Program and during the term of the Lilly Development Program, [**] of a
Validated Target or a Candidate Protein Drug based upon any Candidate Gene if
Lilly is [**] which demonstrates [**] if the project succeeds in bringing a
Product to the market.

     SECTION 7.2.   VALIDATED TARGETS. During the term of the Program and the
Lilly Development Program, Lilly shall diligently screen the Validated Targets
to discover and develop Products. Lilly shall screen all Validated Targets
within [**] of the date upon which the Validated Target milestone is paid to
Millennium pursuant to Section 8.2. If a Validated Target is not screened within
[**] of the payment of the milestone, then Lilly's exclusive right to use said
Validated Target in the Field and the area of Oncology shall be converted into a
co-exclusive right to use said Validated Target in the Field and the area of
Oncology, subject to the other terms of this Section 7.2. Millennium may
thereafter screen such a Validated Target in the Field and the area of Oncology,
and retain rights to therapeutic leads found by Millennium using such a
Validated Target, and proceed with the development of such compound on its own
or sublicense the rights to such a compound and [**]. After a Validated Target
is first screened, Lilly shall screen said Validated Target at least once every
[**]. For each Validated Target, Lilly will be deemed to be diligent under this
Section 7.2 so long as Lilly presents a compound arising from a screen against
such Validated Target to [**] from the use of the Validated Target in a screen.
In the event Lilly does not screen against a specific Validated Target within
the time period set forth above, or does not present a compound arising from
said screen to [**] within the time specified, Lilly's exclusive right to use
said Validated Target in the Field and the area of Oncology shall be converted
into a co-exclusive right to use said Validated Target in the Field and the area
of Oncology, subject to the other terms of this Section 7.2. Millennium may
thereafter screen such a Validated Target in the Field and the area of Oncology,
provided, however, that such screening efforts shall be deemed to be a
Non-Program Field Project subject to Lilly's rights under Section 5.2, except
Lilly's rights thereto shall extend for [**] , Millennium may proceed with the
development of such compound on its own or sublicense the rights to such a
compound and [**].

     Lilly shall not be required to continue to screen a Validated Target [**]
from the Program in its development program (defined as a program that has been
[**], or its successor) which (i) reacts with said Validated Target or which
demonstrates the same clinical utility (and no significant clinical advantages)
as a compound which reacts with said Validated Target, and (ii) for which [**]
from the Program in its development program or its product portfolio which (i)
reacts with the Validated Target or which demonstrates the same clinical utility
(and no significant clinical

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advantages) as a compound which reacts with said Validated Target, and (ii) for
which [**]. Furthermore, if Lilly, or its sublicensee, is diligently screening a
Validated Target which would lead to compounds with the same clinical utility
(and no significant clinical advantages) as a drug identified using other
Validated Target, then Lilly's diligent use of the first Validated Target will
be deemed to demonstrate diligence for all Validated Targets which would lead to
compounds with the same clinical utility (and no significant clinical
advantage).

     SECTION 7.3.   PROTEIN PRODUCTS. During the term of the Program and the
Lilly Development Program, Lilly shall diligently pursue the development of
Candidate Protein Drugs by either continuing the development of the Candidate
Protein Drug within the Lilly product development program (defined as a program
that has been accepted by Lilly's Project Team Approval Committee, or its
successor) or by pursuing [**] said Candidate Protein Drug, provided [**] to the
diligence requirements of this Section 7.3. Lilly shall review the feasibility
of continuing the development of those Candidate Protein Drugs in the
development program on a yearly basis. In the event Lilly abandons the
development of a Candidate Protein Drug for reasons other than a [**] ,
Millennium shall have the right to obtain exclusive rights to such a Candidate
Protein Drug so long as (i) there are [**] which demonstrate the same clinical
utility (and no significant clinical advantages), and (ii) [**]. 

     In the event [**] with the Candidate Protein Drug, [**] the right to
develop and commercialize the Candidate Protein Drug according to the terms set
forth in the previous paragraph, or (ii) maintain the exclusive rights to the
Candidate Protein Drug and [**].

     SECTION 7.4.   COMMERCIALIZATION. Lilly agrees to use commercially
reasonable efforts to seek regulatory approval in all Major Market Countries for
all Products and, upon receipt of such approval, to market and sell such Product
in all Major Market Countries. In the event Lilly enters into an arrangement
with a third party concerning research, development, registration, marketing and
selling of any Product in a Major Market Country, Lilly shall guarantee the
diligence of such third party.


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     SECTION 7.5.   MILLENNIUM'S RECIPROCAL OBLIGATIONS. In the event Millennium
obtains any rights to Candidate Genes, Validated Targets or Candidate Protein
Drugs under this Article VII, and thereafter does not demonstrate the same
degree of diligence as is required by Lilly in this Article VII, then
Millennium's rights to such Candidate Genes, Validated Targets or Candidate
Protein Drugs shall revert back to Lilly.

                                  Article VIII
                                  ------------
                                    Payments
                                    --------

     SECTION 8.1.   RESEARCH FUNDS. In support of research and development to be
conducted by Millennium pursuant to this Agreement, Lilly will make the
following payments to Millennium:

     (a)  From the Restatement Effective Date through the end of the fifth
          Contract Year or, if the Millennium Research Program is extended
          pursuant to Section 2.7, through the end of such extension, Lilly
          shall pay to Millennium [**] per FTE to fund the Millennium Research
          Program, as adjusted in the immediately following sentence for periods
          subsequent to December 31, 1999 (the "FTE Rate"). On each January 1
          thereafter, the FTE Rate shall be increased by an amount equal to the
          percentage increase, if any, in the United States Consumer Price Index
          (or any comparable successor index thereto) from the immediately
          preceding January 1. The FTE Rate for all periods prior to the
          Restatement Effective Date shall remain as stated in the Original
          Agreement.

     (b)  From the Effective Date to March 31, 1997, Millennium shall provide
          (subject to reasonable ramp-up considerations) and Lilly shall fund up
          to (but not more than the number of FTEs actually provided by
          Millennium) [**] FTEs for research. From April 1, 1997 to the
          Restatement Effective Date, Millennium shall provide (subject to
          reasonable ramp-up considerations) and Lilly shall fund up to (but not
          more than the number of FTEs actually provided by Millennium) [**]
          FTEs for research, provided however, that if, in the reasonable
          judgment of the majority of the Joint Management Team, there is not
          research and development of sufficient scientific and commercial merit
          within the Field to justify all [**] FTEs, this number may be reduced
          but not below [**] FTEs. From the Restatement Effective Date through
          the end of the fifth Contract Year, Millennium shall provide and Lilly
          shall fund up to (but not more than the number of FTEs actually
          provided by

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          Millennium) [**] FTEs for research. Millennium shall keep Lilly
          reasonably informed of its plans for research staffing and shall
          afford Lilly a reasonable opportunity to review such plans and provide
          input to Millennium. After the Restatement Effective Date through the
          end of the fifth Contract Year, Millennium shall ensure, for so long
          as he remains employed by Millennium, that Andy Shyjan (i) remains
          assigned as Millennium's leader with respect to Millennium Research
          Program activities, (ii) devotes at least eighty percent (80%) of his
          employment efforts to Millennium Research Program activities for the
          six months immediately following the Restatement Effective Date and
          (iii) devotes one hundred percent (100%) of his employment efforts to
          Millennium Research Program activities after the date six months
          subsequent to the Restatement Effective Date, unless the members of
          the Joint Management Team mutually agree otherwise. After January 1,
          1999 through the end of the fifth Contract Year, Millennium shall also
          ensure that no Millennium employee assigned on a full-time basis to
          Millennium Research Program activities is reassigned to other
          activities by Millennium unless (i) Millennium has identified a
          replacement for such employee prior to such reassignment, (ii) the
          Joint Management Team has determined that the replacement for such
          employee has credentials that are acceptably similar to those of the
          employee to be reassigned and (iii) the Joint Management Team has
          approved such reassignment, which approval shall not be unreasonably
          withheld. Millennium shall further ensure that none of the scientists
          assigned on a full-time basis to the discovery and validation of
          Candidate Genes and Validated Targets within the Millennium Research
          Program are at the time completing their post-doctoral fellowships at
          Millennium. All FTEs shall be deployed by the Joint Management Team in
          accordance with the provisions of Section 2.3. The numbers set forth
          above for FTE employees to be provided by Millennium, and funded by
          Lilly, for research and development from the Effective Date through
          the end of the Millennium Research Program may be adjusted from time
          to time by decision of the Joint Management Team, provided, however,
          that the number of FTEs funded by Lilly shall not be below the
          minimums set forth above, except by mutual agreement of the parties or
          as provided by Section 8.1(d), below.

     (c)  Within fifty (15) working days of the execution date of the Original
          Agreement, Lilly shall pay to Millennium the full amount of the level
          of FTE funding for the first contract quarter (execution date through
          June 30, 1996). Within five (5) working days of the first day of each
          contract

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          quarter, Lilly shall pay to Millennium the total amount due for the
          upcoming quarter. Within thirty (30) days of the completion of each
          contract quarter, Millennium shall provide Lilly with a written
          statement setting forth the actual numbers of FTEs provided and the
          funds expended during such contract quarter, and shall provide Lilly
          with a credit for any amounts overpaid by Lilly or bill Lilly for any
          amounts underpaid during such contract quarter.

     (d)  If third party collaborative research expenses incurred by Millennium
          in support of the Program in any Contract Year exceeds an amount equal
          to the product of [**] multiplied by the number of FTEs for such
          Contract Year, then Millennium can request, through and with the
          approval of the Joint Management Team, that Lilly provide additional
          funding to reimburse Millennium for such excess collaborative research
          expenses. Nothing in this Section 8.1 relieves Millennium of its
          obligations to be responsible for all past and future payments of
          funding, milestones and royalties arising from Millennium's prior
          third party research agreements.

     SECTION 8.2.   MILESTONES. Upon the achievement of the following
milestones, Lilly shall also pay to Millennium the specified milestone
payments,[**] in connection with the Net Sales of the Product with respect to
which [**]; provided, however, that the [**]: 

     (a)  The sum of [**] provided that no more than [**] may qualify for this
          milestone payment [**] under subsection (b) or [**] under subsection
          (c). Upon each and every approval of a [**] , the number of [**] . 

     (b)  The sum of [**] for the successful [**] . 

     (c)  The sum of [**] for each [**] which has been placed into [**]. 

     (d)  Upon the [**] or the sum of [**]. 

     (e)  Upon the [**] or its equivalent in the first Major Market Country, the
          sum of [**] or the sum of [**]. 

     (f)  Upon [**] or its equivalent in the first Major Market Country, the sum
          of [**] or the sum of [**] . 

     If Lilly begins the development of a Product and later ceases development
of said Product due to lack of efficacy, potency or adverse reactions found in
the course of human clinical trials or the Product is not registered after the
filing of an NDA, then [**] which reacts with the same [**] and which [**].

     SECTION 8.3.   ROYALTY PAYMENTS TO MILLENNIUM ON PRODUCTS. In addition to
the foregoing, with respect to each calendar quarter, Lilly shall pay to
Millennium royalties equal to [**] of Net Sales of Products which are [**] of
Net Sales of Products

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which are [**] of Net Sales of Products which are either [**]; and [**] of Net
Sales of Products which are [**] .

     Notwithstanding the terms of the prior paragraph, for any Products that are
the result, to any extent, of research conducted by Millennium in a [**] with
respect to which [**], conducted in accordance with [**] standards, then [**] of
Net Sales of such products which are [**] , except as provided in the following
paragraph;[**] of Net Sales of such products which are [**] of Net Sales of such
products which are [**] of Net Sales of such products which are [**] . If the
compound which is the basis of the [**] of Net Sales of such product.

     In addition, for any [**] that are the result, to any extent, of research
conducted by Millennium in a [**] with respect to which [**] conducted in
accordance with [**] standards capable of fulfilling such requirements for an
[**] (or its equivalent) in any Major Market Country, then [**] of Net Sales of
such products which are [**].

     If the Joint Management Team decides that it is desirable to have a third
party provide support on the Program (a "Third Party Collaborator"), and in an
agreement between Lilly or Millennium and such Third Party Collaborator payment
by either Millennium or Lilly of a royalty on the sale of Products is required,
then Millennium and Lilly, at that time shall discuss in good faith whether an
increase or decrease in the royalty on Net Sales of Products payable to
Millennium under this Agreement is appropriate, and if agreed shall negotiate
and agree to such an increase or decrease in royalty.

     SECTION 8.4.   LENGTH OF ROYALTY PAYMENTS. The royalties payable under
Sections 8.3 shall be paid on a country-by-country basis from the date of first
commercial sale of each Product in a particular country until the expiration of
the last to expire Lilly Field Patent Right or Millennium Field Patent Right
owned by Millennium or Lilly or any of their respective Affiliates in such
country with respect to which a Valid Claim covers the manufacture, use or sale
of such Product, or until ten (10) years after such first commercial sale in
such country, whichever is longer.

     SECTION 8.5.   ROYALTY ADJUSTMENT. If (i) Lilly sells a Product in any
country for which there is no Valid Claim which, if legally enforced, would
prevent the making, using or selling of a competing product in that country,
(ii) such competing product is generically equivalent to the Product, and (iii)
[**] in any given two (2) year period, as measured against the year prior to the
year in which the competing product was introduced, then the royalty payable by
Lilly in any such country shall

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[**] under Section 8.3 of this Agreement. [**] shall be retroactive to the first
year used to calculate the two (2) year period and Lilly's future royalty
payments shall be [**] made within the two (2) year period.

     If (i) Lilly sells a Product in any country for which there is no Valid
Claim which, if legally enforced, would prevent the making, using or selling of
a competing product in that country, (ii) such competing product [**] as the
Product, and (iii) [**] in any given two (2) year period, as measured against
the year prior to the year in which the competing product was introduced, then
the royalty payable by Lilly in any such country shall [**] under Section 8.3 of
this Agreement. This [**] shall be retroactive to the first year used to
calculate the two (2) year period and Lilly's future royalty payments shall be
[**] made within the two (2) year period.

     SECTION 8.6.   SALES TO AFFILIATE. Sales of Products between Lilly and its
permitted sublicensees or Affiliates, or among such Affiliates and permitted
sublicensees, shall not be subject to the royalty, but in such cases the royalty
shall be calculated upon Lilly's or its sublicensee's or Affiliate's Net Sales
to an independent third party.

     SECTION 8.7.   ROYALTIES PAYABLE ONLY ONCE. The obligation to pay royalties
is imposed only once with respect to the same unit of Product. Except as
specifically provided in this Agreement, it is understood and agreed that there
shall be no deductions from the royalties payable hereunder.

                                   Article IX
                                   ----------
                                   Accounting
                                   ----------

     SECTION 9.1.   ROYALTY REPORTS. Lilly shall deliver to Millennium within
sixty (60) days after the end of each calendar quarter a written accounting, of
Lilly's and its Affiliates and sublicensees' sales and other consideration
received subject to royalty payment due to Millennium for such quarter. Such
quarterly reports shall indicate the Net Sales of Products on a
country-by-country basis.

     SECTION 9.2.   DELIVERY OF ROYALTY. When Lilly delivers the accounting to
Millennium, Lilly shall also deliver all royalty payments due to Millennium for
the calendar quarter.

     SECTION 9.3.   AUDITS. Lilly shall keep accurate records in sufficient
detail to enable the amounts due to Millennium to be determined. Within the term
of this Agreement and within one year after its termination, Millennium shall
not more than

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once each year have the right at its expense to have Lilly's independent
certified public accountants inspect Lilly's records for any of the two
preceding years for the purpose of determining the accuracy of royalty payments.
The independent certified accountants shall keep confidential any information
obtained during such inspection and shall report to Millennium only the amounts
of royalties due and payable. If Lilly has underpaid a royalty amount due under
this Agreement by more than five percent (5%), Lilly shall promptly pay the
appropriate amount to Millennium and shall also reimburse Millennium for the
cost of such audit.

     SECTION 9.4.   EXCHANGE RATES. All payments to be made by Lilly to
Millennium under this Agreement shall be made in United States dollars. In the
case of sales outside the United States, the rate of exchange to be used in
computing the amount of currency equivalent in United States dollars due
Millennium shall be made using Lilly's then current standard exchange rate
methodology, which methodology shall be in conformity with generally accepted
accounting principles.

     SECTION 9.5.   MILLENNIUM'S OBLIGATIONS. The accounting and payment
obligations set forth in this Article IX shall also apply to Millennium in the
case of Gene Therapy Products and Diagnostic Products sold by Millennium, its
Affiliates or sublicensees, upon which a royalty is due Lilly hereunder, and in
which case all references to Lilly shall mean Millennium and all references to
Millennium shall mean Lilly.

     SECTION 9.6.   WITHHOLDING TAXES. The party who pays a royalty hereunder to
the other party shall have no liability for any income taxes levied against such
other party on account of such royalties. If laws or regulations require that
any such taxes be withheld by the party paying the royalty, such party shall
deduct such taxes from the payment due the other party, pay the taxes so
withheld to the proper taxing authority, and send proof of payment to the other
party within thirty (30) days following such payment. If the other party desires
to obtain a refund of any taxes so withheld and paid to a taxing authority, upon
request the party who withheld and paid such taxes shall cooperate in the
pursuit of such refund.

                                    Article X
                                    ---------
                                Corporate Control
                                -----------------

     In the event that a third party makes an unsolicited offer to purchase all
or substantially all of the assets or securities of Millennium or proposes a
merger or similar transaction, or in the event that Millennium's Board of
Directors determines to seek proposals for or the sale of all or substantially
all of the assets of Millennium or the merger or consolidation with a third
party, then Millennium, to the extent consistent with applicable law and the
fiduciary duties of the Board of Directors of Millennium, as reasonably
determined by the Board of Directors of Millennium, shall

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notify Lilly thereof and shall provide Lilly with the opportunity to engage in
discussions with Millennium regarding such a transaction.

                                   Article XI
                                   ----------
                                    Duration
                                    --------

     This Agreement becomes effective as of the Effective Date, may be
terminated as set forth in Article XII hereof, and otherwise remains in effect
until the expiration of the term of Lilly's or Millennium's obligation to pay
royalties. Notwithstanding the foregoing, Article IV and Article V shall remain
in effect for the respective periods stated therein.

                                   Article XII
                                   -----------
                                   Termination
                                   -----------

     SECTION 12.1.  TERMINATION FOR MATERIAL BREACH. Upon any material breach by
either party under this Agreement, the other party may terminate this Agreement
by ninety (90) days' written notice to the breaching party, specifying the
material breach, default or other defect. The termination becomes effective at
the end of the ninety (90) day period unless the breaching party cures the
breach during the ninety (90) day period. The parties will use best efforts to
work together to cure any breach.

     SECTION 12.2.  RIGHTS UPON TERMINATION FOR BREACH. If a party (the "Non-
Breaching Party") terminates this Agreement under Section 12.1 following
material breach by the other party (the "Breaching Party"), (a) the Breaching
Party shall return to the Non-Breaching Party all Confidential Information and
materials received from the Non-Breaching Party after the Effective Date, (b)
the Breaching Party shall cease all use of the Confidential Information and
materials received from the Non- Breaching Party for any purpose, except that
the Breaching Party may keep a copy of all documents for record keeping purposes
only, (c) the Breaching Party shall deliver to the Non-Breaching Party all data
and information developed by the Breaching Party prior to such termination as a
result of the Program which can reasonably be viewed as necessary or useful to
obtain governmental regulatory approvals, (d) subject to any agreements with
third parties, the [**] and shall have [**], and (e) the licenses granted under
Article V to the Breaching Party shall terminate and the licenses granted under
Article V to the Non-Breaching Party shall continue.

     SECTION 12.3.  VOLUNTARY TERMINATION BY AGREEMENT. The parties may agree to
terminate the Millennium Research Program at any time after the first
twenty-four (24) months of the Program. If the Millennium Research Program is
voluntarily

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terminated under this Section 12.3, all rights and obligations under this
Agreement concerning the making, using or selling of all Candidate Genes,
Candidate Protein Drugs and Validated Targets already produced by the Program,
and any future Products arising therefrom, shall not be affected by the
termination of the Program. Following any termination of the Millennium Research
Program under this Section 12.3, Millennium shall have the right to undertake,
either alone or in collaboration with a third party, research, development and
commercialization in the Field, including research, development and
commercialization that utilizes Millennium Field Know-How and/or is covered by
Millennium Field Patent Rights, other than research, development and
commercialization in the Field exclusively related to Candidate Genes, Candidate
Protein Drugs and Validated Targets already produced by the Program and any
future Products arising therefrom.

     SECTION 12.4.  KEY PERSONNEL. During the term of the Millennium Research
Program,[**] , for any reason, Lilly may voluntarily terminate the Millennium
Research Program upon thirty (30) days written notice to Millennium if within
one hundred twenty (120) days following the departure of the last to leave of
said individuals Millennium is unable to select replacements for such
individuals that are reasonably acceptable to Lilly. If the Millennium Research
Program is voluntarily terminated under this Section 12.4, all rights and
obligations under this Agreement concerning the making, using or selling of all
Candidate Genes, Candidate Protein Drugs and Validated Targets already produced
by the Program, and any future Products arising therefrom, shall not be affected
by the termination of the Program. Following any termination of the Millennium
Research Program under this Section 12.4, Millennium shall have the right to
undertake, either alone or in collaboration with a third party, research,
development and commercialization in the Field, including research, development
and commercialization that utilizes Millennium Field Know-How and/or is covered
by Millennium Field Patent Rights, other than research, development and
commercialization in the Field exclusively related to Candidate Genes, Candidate
Protein Drugs and Validated Targets already produced by the Program and any
future Products arising therefrom.

     SECTION 12.5.  CHANGE OF CONTROL. Lilly may terminate the Millennium
Research Program upon thirty (30) days written notice if at any time majority
control of Millennium is acquired by any health care company or any other party
reasonably deemed to be a competitor of Lilly. If the Millennium Research
Program is voluntarily terminated under this Section 12.5, all rights and
obligations under this Agreement concerning the making, using or selling of all
Candidate Genes, Candidate Protein Drugs and Validated Targets already produced
by the Program, and any future Products arising therefrom, shall not be affected
by the termination of the

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Program. Following any termination of the Millennium Research Program under this
Section 12.5, Millennium shall have the right to undertake, either alone or in
collaboration with a third party, research, development and commercialization in
the Field, including research, development and commercialization that utilizes
Millennium Field Know-How and/or is covered by Millennium Field Patent Rights,
other than research, development and commercialization in the Field exclusively
related to Candidate Genes, Candidate Protein Drugs and Validated Targets
already produced by the Program and any future Products arising therefrom.

     SECTION 12.6.  VOLUNTARY TERMINATION BY LILLY. If at any time after the
first thirty-six (36) months of the Millennium Research Program, Lilly decides
to voluntarily terminate the Millennium Research Program, Lilly may do so by
providing to Millennium ninety (90) days notice of such termination, and by
paying to Millennium the value of the FTE payments which otherwise would have
been due between the date of such notice and the twelve (12) month period
following such notice. If the Millennium Research Program is voluntarily
terminated under this Section 12.6, all rights and obligations under this
Agreement concerning the making, using or selling of all Candidate Genes,
Candidate Protein Drugs and Validated Targets already produced by the Program,
and any future Products arising therefrom, shall not be affected by the
termination of the Program. Following any termination of the Millennium Research
Program under this Section 12.6, Millennium shall have the right to undertake,
either alone or in collaboration with a third party, research, development and
commercialization in the Field, including research, development and
commercialization that utilizes Millennium Field Know-How and/or is covered by
Millennium Field Patent Rights, other than research, development and
commercialization in the Field exclusively related to Candidate Genes, Candidate
Protein Drugs and Validated Targets already produced by the Program and any
future Products arising therefrom.

     SECTION 12.7.  RESIDUAL RIGHTS. Upon expiration or early termination of
this Agreement, except as provided herein to the contrary, all rights and
obligations of the parties shall cease, except as follows: 

     (a)  Obligations to pay royalties and other sums accruing hereunder up to
          the date of termination;

     (b)  The right to complete the manufacture and sale of Products, which
          qualify as "work in process" under generally accepted cost accounting
          standards or which are in stock at the date of termination, and the
          obligation to pay royalties on Net Sales of such products; 

     (c)  The obligation to pay milestones as achieved and royalties with 
          respect to Products; 

     (d)  All provisions regarding confidentiality shall continue in full force
          and effect; 

     (e)  Obligations for record keeping and accounting reports for so long as
          Products are sold. At such time after termination of this Agreement

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          when sales or other dispositions of products have ceased, Lilly shall
          render a final report along with any royalty payment due;

     (f)  Millennium's (and/or Lilly's) rights to inspect books and records as
          described in Article IX;

     (g)  Obligations of defense and indemnity;

     (h)  Obligations set forth in Sections 6.10-6.14 but only with respect to
          those causes of action which accrued prior to such termination;

     (i)  Any cause of action or claim of Millennium or Lilly accrued or to
          accrue because of any breach or default by the other party hereunder;

     (j)  All other terms, provisions, representations, rights and obligations
          contained in this Agreement that by their sense and context are
          intended to survive until performance thereof by either or both
          parties.

     SECTION 12.8.  RIGHTS TO WORK IN PROCESS. Within three (3) months following
the expiration of the Millennium Research Program, Lilly may designate any
potential Candidate Gene as a Candidate Gene, any potential Candidate Protein
Drug as a Candidate Protein Drug and/or any potential Validated Target as a
Validated Target, provided, however, that at the time of such designation(s)
Lilly shall pay to Millennium the appropriate milestone payment(s) set forth in
Article XVII. Upon any such designation(s), each designated Candidate Gene,
Candidate Protein Drug and/or Validated Target shall be subject to all terms and
conditions of this Agreement that relate to any Candidate Gene, Candidate
Protein Drug and/or Validated Target.

                                  Article XIII
                                  ------------ 
                        Product Liability Indemnification
                        ---------------------------------

     Lilly agrees to defend Millennium at Lilly's cost and expense, and will
indemnify and hold Millennium and its directors, officers, employees and agents
(the "Millennium Indemnified Parties") harmless from and against any losses,
costs, damages, fees or expenses arising out of any claim relating to personal
injury from the development, manufacture, use, sale or other disposition of any
Product. In the event of any such claim against the Millennium Indemnified
Parties by any party, Millennium shall promptly notify Lilly in writing of the
claim and Lilly shall manage and control, at its sole expense, the defense of
the claim and its settlement. The Millennium Indemnified Parties shall cooperate
with Lilly and may, at their option and expense, be represented in any such
action or proceeding. Lilly shall not be liable for any litigation costs or
expenses incurred by the Millennium Indemnified parties without Lilly's prior
written authorization. In addition, Lilly shall not be responsible for the
indemnification of any Millennium Indemnified Party arising from any negligent
or intentional acts by such party.

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                                   Article XIV
                                   -----------
                    Good Faith Negotiation/Dispute Resolution
                    -----------------------------------------

     Any controversy, claim, or dispute arising out of or relating to this
Agreement shall be settled if possible through good faith negotiations between
the parties. Only if such efforts are not successful shall such dispute be
resolved by arbitration (if agreed by the parties) or litigation.

                                   Article XV
                                   ----------
                                  Governing Law
                                  -------------

     This Agreement shall be construed and the respective rights of the parties
hereto determined according to the substantive laws of the State of Delaware
notwithstanding the provisions governing conflict of laws under such Delaware
law to the contrary.

                                   Article XVI
                                   -----------
                                   Assignment
                                   -----------

     Neither party may assign this Agreement in whole or in part without the
consent of the other, except if such assignment occurs in connection with the
sale or transfer of all or substantially all of the business and assets of
Millennium or Lilly.

                                  Article XVII
                                  ------------
                                   Insolvency
                                   ----------

     The parties hereto intend that the Agreement shall not be deemed an
executory contract under the Bankruptcy or Insolvency laws of the United States.

                                  Article XVIII
                                  -------------
                                   Amendments
                                   ----------

     This Agreement constitutes the entire agreement between the parties and
supersedes all previous arrangements whether written or oral, including the
Original Agreement, as amended. Any amendment or modification to this Agreement
shall be made in writing signed by both parties.

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                                   Article XIX
                                   -----------
                                     Notices
                                     -------

     Notices to Millennium shall be addressed to:

                        Millennium Pharmaceuticals, Inc.
                        238 Main Street
                        Cambridge, Massachusetts 02142

                        Attention: Chief Executive Officer
                        Facsimile No.: [(617) 621-0264]

          with a copy to:

                        Attention:  Legal Department

     Notices to Lilly shall be addressed to:

                        Eli Lilly and Company, Inc.
                        Lilly Corporate Center
                        Indianapolis, Indiana 46285

                        Attention:    Vice-President, Oncology Discovery
                                      and Clinical Development Research

                        Facsimile No.:  (317) 277-3652

          with a copy to:

                        Attention:  General Counsel

     Either party may change its address by giving notice to the other party in
the manner herein provided. Any notice required or provided for by the terms of
this Agreement shall be in writing and sent by registered or certified mail,
return receipt requested, postage prepaid and properly addressed in accordance
with the paragraph above. The effective date of notice shall be the actual date
of receipt by the party receiving the same.

                                   Article XX
                                   ----------
                                  Force Majeure
                                  -------------

     No failure or omission by the parties hereto in the performance of any
obligation of this Agreement shall be deemed a breach of this Agreement or
create

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any liability if the same shall arise from any cause or causes beyond the
control of the parties, including, but not limited to, the following: acts of
God; acts or omissions of any government; any rules, regulations or orders
issued by any governmental authority or by any officer, department, agency or
instrumentality thereof; fire; storm; flood; earthquake; accident; war;
rebellion; insurrection; riot; and invasion and provided that such failure or
omission resulting from one of the above causes is cured as soon as is
practicable after the occurrence of one or more of the above-mentioned causes.

                                   Article XXI
                                   -----------
                         Representations and Warranties
                         ------------------------------

     SECTION 21.1.  REPRESENTATION OF AUTHORITY. Millennium and Lilly each
represents and warrants to the other that as of the date of execution hereof it
has full right, power and authority to enter into this Agreement, including the
right to grant the licenses and sublicenses granted under Articles V hereof and
provide the Know- How under Articles III hereof, including the biological
materials, subject to the limitations set forth in this Section 21.1. Millennium
has furnished Lilly with a copy of all license agreements and options pertaining
to the Millennium Field Patent Rights and Millennium Field Know-How existing as
of the Effective Date, and by its execution and delivery of the Original
Agreement, Lilly agreed to be bound by the terms of such agreements to the
extent required thereby.

     SECTION 21.2.  OUTSTANDING AGREEMENTS. Appendix B lists all material
outstanding options, licenses or agreements of any kind between Millennium and
any third party relating to Millennium Field Patent Rights and Millennium Field
Know- How as of the Effective Date.

     SECTION 21.3.  KNOWLEDGE OF PENDING OR THREATENED LITIGATION. Each party
represents and warrants to the other that it is not aware of any pending or
threatened litigation (and has not received any communication) which alleges
that such party's activities in the Field to date have violated, or by
conducting its business as currently proposed under the Program contemplated
herein would violate, any of the intellectual property rights of any other
person. To the best of each party's knowledge, there is no material unauthorized
use, infringement or misappropriation of any of its intellectual property rights
licensed hereunder to the other party.

     SECTION 21.4.  EMPLOYEE OBLIGATIONS. Each party represents and warrants
that all of its employees, officers, and consultants have executed agreements or
have existing obligations under law requiring, in the case of employees and
officers, assignment to such party of all inventions made during the course of
and as the result of their association with such party and obligating the
individual to maintain as confidential such party's Confidential Information as
well as confidential

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information of a third party which such party may receive, to the extent
required to support such party's obligations under this Agreement.

                                  Article XXII
                                  ------------
                              Public Announcements
                              --------------------

     SECTION 22.1.  PRESS RELEASES AND ANNOUNCEMENTS. Any announcements or
similar publicity with respect to the execution of this Agreement shall be
agreed between the parties in advance of such announcement. Lilly understands
that this Agreement and Millennium's efforts hereunder are likely to be of
significant interest to investors, analysts and others, and Millennium therefore
intends to make such public announcements with respect thereto. Millennium
agrees that any such announcement will not contain confidential business or
technical information and, if disclosure of confidential business or technical
information is required by law or regulation, will make reasonable efforts to
minimize such disclosure and obtain confidential treatment for any such
information which is disclosed to a governmental agency or group. Each party
agrees to provide to the other party a copy of any public announcement as soon
as reasonably practicable under the circumstances prior to its scheduled
release. Except under extraordinary circumstances, each party shall provide the
other with an advance copy of any press release at least five (5) working days
prior to the scheduled disclosure. Each party shall have the right to
expeditiously review and recommend changes to any announcement regarding this
Agreement or any studies carried out under this Agreement. Except as otherwise
required by law, the party whose press release has been reviewed shall remove
any information the reviewing party reasonably deems to be inappropriate for
disclosure.

     SECTION 22.2.  PUBLICATIONS. The parties acknowledge that scientific lead
time is a key element of the value of the research to be performed under this
Agreement and further agree that scientific publications must be strictly
monitored to prevent any adverse effect of premature publication. The Joint
Management Team will establish a procedure for publication review and approval
and each party shall first submit to the Joint Management Team an early draft of
all such publications, whether they are to be presented orally or in written
form, at least sixty (60) days prior to submission for publication. The Joint
Management Team shall review each such proposed publication in order to avoid
the unauthorized disclosure of a party's Confidential Information and to
preserve the patentability of inventions arising from the research performed in
the course of the Program. If, within thirty (30) days of receipt of an advance
copy of a party's proposed publication, the Joint Management Team informs such
party that its proposed publication contains Confidential Information of the
other party, then such party shall delete such Confidential Information from its
proposed publication. If, within thirty (30) days of receipt of an advance copy
of a party's proposed publication, the Joint Management Team informs such party
that its proposed publication could be expected to have a material adverse
effect on any Program Patent Rights or Program Know-How, then such party shall

                                     - 39 -

   40


          Confidential Materials omitted and filed separately with the
        Securities and Exchange Commission. Asterisks denote omissions.


delay such proposed publication, sufficiently long to permit the timely
preparation and filing of a patent application(s) on the information involved.
If, within forty five (45) days of receipt of an advance copy of a party's
proposed publication, the Joint Management Team fails to approve of such party's
proposed publication, then such proposed publication shall be regarded as denied
by the Joint Management Team and shall not be published.

                                  Article XXIII
                                  -------------
                              Additional Agreements
                              ---------------------

     SECTION 23.1.  INDEPENDENT CONTRACTORS. It is understood and agreed that
the relationship between the parties hereunder is that of independent
contractors and that nothing in this Agreement shall be construed as
authorization for either Lilly or Millennium to act as agent for the other.
Members of the Joint Management Team shall be, and shall remain, employees of
Millennium or Lilly, as the case may be. Neither party shall incur any liability
for any act or failure to act by members of the Joint Management Team who are
employees of the other party.

     SECTION 23.2.  CONSENTS NOT UNREASONABLY WITHHELD. Whenever provision is
made in this Agreement for either party to secure the consent or approval of the
other, that consent or approval shall not unreasonably be withheld, and whenever
in this Agreement provisions are made for one party to object to or disapprove a
matter, such objection or disapproval shall not unreasonably be exercised.

     SECTION 23.3.  NO STRICT CONSTRUCTION. This Agreement has been prepared
jointly and shall not be strictly construed against either party.

     SECTION 23.4.  HEADINGS. The captions or headings of the Sections or other
subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions hereof.

     SECTION 23.5.  SEVERANCE OF CLAUSES. Each party agrees that, should any
provision of this Agreement be determined by a court of competent jurisdiction
to violate or contravene any applicable law or policy, such provision will be
severed or modified by the court to the extent necessary to comply with the
applicable law or policy, and such modified provision and the remainder of the
provisions hereof will continue in full force and effect.

     SECTION 23.6.  NO WAIVER. The waiver of a breach hereunder may be effected
only by a writing signed by the waiving party and shall not constitute a waiver
of any other breach.


                                     - 40 -

   41


          Confidential Materials omitted and filed separately with the
        Securities and Exchange Commission. Asterisks denote omissions.



     IN WITNESS WHEREOF, this Agreement is executed this 28 day of December,
1998 to be effective as of the Effective Date.

ELI LILLY AND COMPANY, INC.                 MILLENNIUM PHARMACEUTICALS, INC.

By:   /S/AUGUST M. WATANABE, M.D.           By: /S/STEVEN H. HOLTZMAN
      -----------------------------             ----------------------
      August M. Watanabe, M.D.                  Steven H. Holtzman
      Vice President and President,             Chief Business Officer
      Lilly Research Laboratories
      December 28, 1998                         December 28, 1998


                                     - 41 -

   42


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        Securities and Exchange Commission. Asterisks denote omissions.


                                   APPENDIX A

                           Millennium Research Program












                                 To be provided.


                                     - 42 -

EX-10.55

   1
                                                                   EXHIBIT 10.55

                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.


                               AMENDMENT NO. 1 TO
                      COLLABORATIVE RESEARCH AGREEMENT AND
                  LICENSE OPTION, LICENSE AND ROYALTY AGREEMENT
                        EACH DATED AS OF JANUARY 1, 1995


This Agreement dated as of December 1998 by and between Pfizer Inc, a Delaware
corporation having an office at 235 East 42nd Street, New York, New York 10017
(together with its Affiliates, "Pfizer") and Millennium Pharmaceuticals, Inc., a
Delaware corporation having an office at 238 Main Street, Cambridge,
Massachusetts 02142 (together with its Affiliates, "Millennium").

     Whereas, Pfizer and Myco Pharmaceuticals, Inc. ("Myco") entered into a
Collaborative Research Agreement dated as of January 1, 1995 (the "Research
Agreement") and a License Option, License and Royalty Agreement dated as of
January 1, 1995 (the "License Agreement" and together with the Research
Agreement, the "1995 Agreements"); and

     Whereas, Millennium is the successor in interest to Myco under the 1995
Agreements; and

     Whereas, Pfizer and Millennium wish to extend the Research Program under
the Research Agreement, modify the scope of the research and other licenses
thereunder and under the License Agreement, and amend certain other provisions
of the 1995 Agreements;

     NOW THEREFORE, the parties agree as follows:

1.   Amendments to the Research Agreement

     1.1  The term "Millennium" shall replace the term "Myco" wherever the
latter appears in the Research Agreement.

     1.2  Section 1 is hereby amended by adding the phrase", subject to such
written amendment as the parties, acting through the Research Committee, may
adopt from time to time," at the end of the existing text of Section 1.9 and by
deleting

                                       -1-

   2


                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

the existing definitions after Section 1.18 and adding the following new
definitions after the text of Section 1.18:

     "1.19     `Patent Rights" shall mean the issued patents and pending
applications, whether domestic or foreign, claiming all inventions within
Program Technology and all inventions made by Pfizer using Program Technology
during the Exclusivity Period including all continuations,
continuations-in-part, division and renewals, all letters patent granted
thereon, and all reissues, reexaminations and extensions thereof."
         
     "1.20     `Product' means an Antifungal Drug the manufacture, use, sale,
offer for sale or importation of which in the absence of a license would
infringe a claim within Patent Rights."

     "1.21     `Cost/person year' means, in the first four Commitment Years of
the Contract Period, [**]; and, in the fifth and sixth Commitment Years of the
Contract Period, [**]

     "1.22     `Program Technology' means, collectively, Millennium Program
Technology, Pfizer Program Technology and Joint Technology."

     "1.23     `Program Materials' means any biological, synthetic chemical and
biochemical materials that are part of Program Technology."

     "1.24     `Target' means any Program Technology consisting of any gene or
protein encoded by such gene which in the course of the Research Program is
identified as a potentially useful target for the identification or development
of Antifungal Drugs."

     "l.25     `[**]' means the [**]."

     "1.26     `[**]' means any Product acting at the [**]."

     "1.27     `Exclusivity Period' means the period beginning January 1, 1999
and ending on the first to occur of (a) the third anniversary of the conclusion
of the Contract Period or (b) the second anniversary of the conclusion of the
Contract Period if, before such anniversary, Millennium has notified Pfizer that
Millennium is exercising its option to shorten such period so that it ends on
said second anniversary."

     "1.28     `Candidate Product' means a compound (a) which Pfizer identifies
in the course of the Research Program or the Exclusivity Period, and (b) which
Pfizer believes satisfies (1) a Profile of Activity and (2) an appropriate
safety profile and (c) which Pfizer believes is a bona fide candidate for
development as an Antifungal Drug."

     "1.29     `Lead' means a compound (a) which is identified in a screen
employing a Target and (b) which Pfizer selects to begin structural modification
to yield a Candidate Product."


                                       -2-

   3


                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

     1.3  The membership of the Research Committee, as provided by Section 2.2,
is hereby amended to be as follows:

     Pfizer Appointees:            [**]
                                   [**]
                                   [**]

     Millennium Appointees:        [**]
                                   [**]
                                   [**]

     1.4  Section 3.1 is hereby amended and restated in its entirety to read as
follows:

     "3.1 The Annual Commitment for each Commitment Year is as follows:

     Commitment Year                         Annual Commitment
          [**]                               [**]
          [**]                               [**]
          [**]                               [**]
          [**]                               [**]
          [**]                               [**]
          [**]                               [**]"

     1.5  Section 4.1.1 is hereby amended and restated in its entirety to read
as follows:

     "4.1.1    Pfizer and Millennium each recognize that the other's
Confidential Information constitutes highly valuable confidential information.
Subject to the terms and conditions of the License Option, License and Royalty
Agreement of even date with this Agreement (the "License Agreement"), the
obligations set forth in Section 4.3 and the publication rights set forth in
Section 4.2, Pfizer and Millennium each agree that during the term of this
Agreement and during the Exclusivity Period, it will keep confidential, and will
cause its Affiliates to keep confidential, all Millennium Confidential
Information or Pfizer Confidential Information, as the case may be, that is
disclosed to it or to any of its Affiliates under this Agreement. Neither Pfizer
nor Millennium or any of their respective Affiliates shall use such Confidential
Information of the other party except as expressly permitted in this Agreement
or the License Agreement."


                                       -3-

   4


                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

     1.6  Section 4.5 is hereby amended and restated in its entirety to read as
follows:

     "4.5 RESTRICTIONS ON TRANSFERRING PROGRAM MATERIALS. Pfizer and Millennium
recognize that Program Materials represent valuable commercial assets. During
the Exclusivity Period, neither party shall transfer to a third party any
Program Materials, unless such transfer is (1) first approved in writing by the
other party or (2) otherwise expressly permitted by this Agreement or the
License Agreement; provided that the foregoing restriction shall not apply to
Pfizer Non-Program Technology in the case of Pfizer or to Millennium Non-Program
Technology (including improvements to Millennium Non-Program Technology made in
the course of the Research Program) in the case of Millennium."

     1.7  Section 5.2 is hereby amended and restated to read in its entirety as
follows:

     "5.2 GRANTS OF RESEARCH LICENSES. (a) Millennium and Pfizer each hereby
grants to the other a nonexclusive, irrevocable, worldwide, royalty-free,
perpetual license, including the right to grant sublicenses to Affiliates to
make and use Confidential Information, Program Technology and Patent Rights for
all research purposes.

          (b)  During the exclusivity Period, Pfizer shall have the exclusive
right to seek Products based on the Program Technology.

          (c)  Notwithstanding the provisions of Subsection 5.2(b), if during
the exclusivity Period Pfizer withdraws its medicinal chemistry program
associated with the [**], Pfizer shall so notify Millennium in writing and
Millennium shall then have the right, exercisable within 90 days of such notice,
to obtain from Pfizer (1) an exclusive royalty-fee research license for the [**]
to discover Products (the "NMT Research License"); (2) subject to Pfizer's
exclusive reservation set forth in Section 2.2 of the License Agreement, an
exclusive, royalty-bearing, worldwide license to make, use, sell, offer for sale
and import Products discovered using the NMT Research License (the "NMT
Commercial License"); (3) copies of, and the right to use under the NMT Research
License, Pfizer Confidential Information relating to the NMT program and (4) up
to six different samples, each of 50 milligrams, selected by Millennium from
among the analogues prepared by Pfizer in the course of its medicinal chemistry
program associated with the [**], to the extent such samples are then available.
Pfizer shall be under no obligation to re-synthesize any compounds in order to
provide Millennium with such samples."

                                       -4-

   5


                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

     1.8  Section 5.4 is hereby amended to add the following phrase before the
first sentence of the existing text "Subject to the obligations to pay royalties
on products set forth in Section 3.2 of the License Agreement". Further,
Section 5.4 is hereby amended so that the term "Program Technology" replaces the
term "Joint Technology" wherever the latter appears, and so that the term
"Patent Rights" replaces the term "Joint Patent Rights" wherever the latter
appears.

     1.9  Section 9.1 is hereby amended so that the term "December 31, 2000"
replaces the term "December 31, 1998."

2.   Amendments to the License Agreement

     2.1  The term "Millennium" shall replace the term "Myco" wherever the
latter appears in the License Agreement.

     2.2  Sections 2.1 and 2.2 are amended and restated to read in their
entirety as follows:

     "2.1 Licenses Under the Patent Rights.

          (a)  Subject to the provisions of Section 2.1(c) below, Millennium
hereby grants Pfizer an exclusive license ("License"), including the right to
grant sublicenses, under the Patent Rights to make, use, sell, offer for sale
and import any Product for human pharmaceutical purposes.

          (b)  Subject to the provisions of Section 5.2(b) of the Research
Agreement, Pfizer hereby grants Millennium an exclusive license, including the
right to grant sublicenses, under the Patent Rights to make, use, sell, offer
for sale and import Program Technology for research purposes [**] after the end
of the Exclusivity Period.

          (c)  Whenever Pfizer, in the course of the Research Program or during
the Exclusivity Period, identifies a Candidate Product, then Pfizer shall so
notify Millennium and issue a "Candidate Alert Notice" or equivalent in
accordance with Pfizer's internal procedures. Pfizer shall then have [**] in
which to determine whether to pursue the development of such Candidate Product.
If Pfizer determines to pursue the development of such Candidate Product, it
will be treated as a Product under Section 2.1(a) above. If Pfizer does not
pursue the development of such Candidate Product, Pfizer shall nevertheless have
the right to reconsider such Candidate Product during the [**] period following
its decision not to pursue its

                                       -5-

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                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

development. If Pfizer does not pursue the development of such Candidate Product
during such time period, Millennium will be free to develop and commercialize
such Candidate Product itself or with third parties after the expiration of such
[**] time period, provided however that Millennium shall not have such right if
(1) Pfizer discontinues development of such Candidate Product because of
Pfizer's determination, in its sole unfettered discretion, that the Candidate
Product is unsafe or (2) Pfizer is developing or selling a Product with the same
Profile of Activity. If Millennium commercializes such Candidate Product,
Millennium shall be obligated to pay Pfizer a royalty with respect to commercial
sales of such Product, as set forth in Section 3.10 hereof. In such
circumstances, Pfizer shall have no rights to such Candidate Product or any
resulting Product.

     2.2  OPTION EXERCISE BY PFIZER AS TO POTENTIAL [**] IDENTIFIED BY
MILLENNIUM.

          (a)  Millennium hereby grants Pfizer the option to acquire an
exclusive, worldwide, royalty-bearing license to commercialize any [**] arising
under an NMT Research License obtained by Millennium under Section 5.2(c) of the
Research Agreement. 

          (b) If Millennium identifies any potential [**] arising under an NMT
Research License and if Millennium thereupon decides, using a format
substantially similar to a Candidate Product, to nominate such potential [**]
for development, Millennium will notify Pfizer within [**] of such decision and
will supply Pfizer, as Pfizer may request before or after such notification,
with all Millennium Confidential Information relating to such potential [**].
Pfizer shall have a period of [**] following such notification in which to
exercise the option as to that potential [**]."

     2.3  Section 2.3 is hereby amended to read in its entirety as follows:

     "Unless terminated earlier as provided below, the licenses granted
hereunder shall terminate on the date of the last to expire of the Patent
Rights."

     2.4  Section 3.1 is hereby amended by renumbering and recaptioning "3.1
Payment of Royalties" as "3.1(a) Payment of Royalties by Pfizer" and adding,
after the end of the existing text, the following text;

     "3.1(b) PAYMENT OF ROYALTIES BY MILLENNIUM.

     During the term of any license granted by Pfizer to Millennium to
commercialize any [**] pursuant to Section 5.2(c) of the Research Agreement,
Millennium shall pay Pfizer a royalty equal to [**] of the Net Sales of such
[**]. Such

                                       -6-

   7


                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

royalties shall be determined and paid in the same manner as Pfizer would be
required by the terms of this Agreement to determine and pay royalties."

     2.5  Section 3.2.3 is hereby amended and restated to read in its entirety
as follows:

     "3.2.3 (a) The royalty paid by Pfizer to Millennium for any (i) Product or
(ii) therapeutic or prophylactic product for human pharmaceutical use made under
the licenses granted in Section 5.4 of the Research Agreement, in each case for
which Pfizer identifies a Lead during the Exclusivity Period, shall be the sum
of the Net Sales in each Tier multiplied by the applicable royalty rate for that
Tier as follows:




                                                       Minimum Royalty Rates
Net Sales in Millions of   Royalty Rates as a          as a Percentage of Net
Dollars ("Tiers")          Percentage of Net Sales     Sales
- -------------------------- --------------------------  -------------------------
                                                 
[**]                       [**]                        [**]
[**]                       [**]                        [**]
[**]                       [**]                        [**]
[**]                       [**]                        [**]
[**]                       [**]                        [**]


Except for the deduction permitted by Section 3.2.4 and the credit permitted by
Section 3.8, the Minimum Royalty Rate in the third column above is the absolute
minimum after all offsets and deductions permitted under this Agreement.

     (b)  The royalty paid by Pfizer to Millennium for any (i) Product or (ii)
therapeutic or prophylactic product for human pharmaceutical use made under the
licenses granted in Section 5.4 of the Research Agreement, in each case for
which Pfizer identifies a Lead after the Exclusivity Period shall be 5% of the
Net Sales of such Product or such product."

     2.6  Section 3.2 is hereby further amended by adding, after Subsection
3.2.3, a new Subsection 3.2.4 reading as follows:

     "3.2.4 (a) If Millennium or any Millennium sublicensee develops and sells a
Product that acts at the same Target as a Product sold by Pfizer, Pfizer's
royalty obligations to Millennium under Section 3.2.3 shall be calculated on a
country-by-country basis using a percentage equal to [**] of the relevant
percentage

                                       -7-

   8


                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

shown in Section 3.2.3 for any country in which Millennium or any Millennium
sublicensee sells such product."

     2.7  Section 3.6 is hereby amended to add, at the end of the first sentence
of the existing text, the following phrase;

     ", for a period ending with the expiration of the last European or United
States patent covering such Product."

     2.8  Section 3.8 is hereby amended by renumbering and recaptioning the
existing text as "3.8.1 Milestones -- General" and by adding the phrase "Except
as provided in Subsection 3.8.2" before the existing text and by adding, after
the existing text, a new Subsection 3.8.2 reading as follows;

     "3.8.2 Milestones -- [**]

     If Pfizer exercises its option pursuant to Section 2.1 (a)(ii) to license
from Millennium the rights to make, use and sell a [**] developed by Millennium,
then the payments otherwise required under Subsection 3.8.1 for such Product
shall as set forth below:


                        EVENT                        AMOUNT
[**]                    [**]                          [**]
[**]                    [**]                          [**]
[**]                    [**]                          [**]
[**]                    [**]                          [**]
[**]                    [**]                          [**]

     2.9  Section 10 is hereby amended to insert the following new Section 10.3
and 10.4 after the text of existing Section 10.2:

     "10.3 Indemnification of Pfizer by Millennium

     Millennium shall indemnify, defend and hold harmless Pfizer and its
directors, officers, employees, and agents and their respective successors,
heirs and assigns (the "Pfizer Indemnitees"), against any liability, damage,
loss or expense (including reasonable attorneys' fees and expenses of
litigation) incurred by or imposed upon

                                       -8-

   9


                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

the Pfizer Indemnitees, or any one of them, in connection with any claims,
suits, actions, demands or judgments, including without limitation personal
injury and product liability matters (except in cases where such claims, suits,
actions, demands or judgments result from the material breach, negligence or
willful misconduct on the part of Pfizer), arising out of the production,
manufacture, promotion, sale or use by any person of any Product or Antifungal
Drug which is manufactured or sold by Millennium or by an Affiliate,
sublicensee, distributor or agent of Millennium.

     10.4 The indemnification set forth in Section 10.3 shall not apply if a
Pfizer Indemnitee fails to give Millennium prompt notice of any claim it
receives and such failure materially prejudices Millennium with respect to any
claim or action to which Millennium's obligation pursuant to this Section
applies. Millennium, in its sole discretion, shall choose legal counsel, shall
control the defense of such claim or action, and shall have the right to settle
same on such terms and conditions as it deems advisable."

3.   Other Matters

     Except as expressly provided herein, all of the terms and provisions of the
Agreements remain in full force and effect.

In Witness Whereof, the parties have caused their respective authorized
representatives to execute and deliver counterparts of this Amendment No. 1.

Pfizer Inc



By   /s/ George M. Milne, Jr.
     -------------------------------
     (Signature)


George M. Milne, Jr., Vice President
- ------------------------------------
Name and Title (Print)

Millennium Pharmaceuticals, Inc.


By   /s/ Mark J. Levin
     -------------------------------
     (Signature)


Mark J. Levin, President and CEO
- ------------------------------------
Name and Title (Print)

                                       -9-

EX-10.56

   1
                                                                   EXHIBIT 10.56


                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                    Commission. Asterisks denote omissions.








                              AMENDED AND RESTATED
                         RESEARCH AND LICENSE AGREEMENT

                                 BY AND BETWEEN

                                    ASTRA AB

                                       AND

                        MILLENNIUM PHARMACEUTICALS, INC.





   2



                               TABLE OF CONTENTS
                               -----------------

                                                                         Page
                                                                         ----

Introduction ............................................................  1

Article I - Definitions .................................................  2
     Section 1.1.   "Affiliate" .........................................  2
     Section 1.2.   "Airway Delivery" ...................................  2
     Section 1.3.   "Analog Protein Drug" ...............................  2
     Section 1.4.   "Antisense Drug" ....................................  2
     Section 1.5.   "Astra Development Program" .........................  3
     Section 1.6.   "Astra Program Know-How" ............................  3
     Section 1.7.   "Astra Program Patent Right(s)" .....................  3
     Section 1.8.   "Astra Research Program" ............................  3
     Section 1.9.   "Bioinformatics" ....................................  3
     Section 1.10.  "Candidate Drug" ....................................  3
     Section 1.11.  "Candidate Gene" ....................................  3
     Section 1.12.  "Confidential Information" ..........................  4
     Section 1.13.  "Contract Year" .....................................  4
     Section 1.14.  "Diagnostic Product" ................................  4
     Section 1.15.  "Field" .............................................  4
     Section 1.16.  "First Commercial Sale" .............................  4
     Section 1.17.  "FTE" ...............................................  5
     Section 1.18.  "Gene Therapy Drug" .................................  5
     Section 1.19.  "Genetics Candidate Gene" ...........................  5
     Section 1.20.  "Genetics Validated Target" .........................  5
     Section 1.21.  "Geographical Region" ...............................  6
     Section 1.22.  "Hit" ...............................................  6
     Section 1.23.  "Know-How" ..........................................  6
     Section 1.24.  "Lead" ..............................................  6
     Section 1.25.  "Major Market Country" ..............................  6
     Section 1.26.  "Marketing Exclusivity" .............................  6
     Section 1.27.  "Millennium Core Technology" ........................  6
     Section 1.28.  "Millennium Core Technology Know-How" ...............  6
     Section 1.29.  "Millennium Core Technology Patent Right(s)" ........  7
     Section 1.30.  "Millennium Drug" ...................................  7
     Section 1.31.  "Millennium Field Know-How" .........................  7
     Section 1.32.  "Millennium Field Patent Right(s)" ..................  7
     Section 1.33.  "Millennium Research Program" .......................  7
     Section 1.34.  "Modified Drug" .....................................  7
     Section 1.35.  "Net Sales" .........................................  7
     Section 1.36.  "Novel Validated Target" ............................  9
     Section 1.37.  "Other Products" ....................................  9
     Section 1.38.  "Party" .............................................  9


                                      (i)


   3


                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                    Commission. Asterisks denote omissions.

     Section 1.39.  "Patent Right(s)"                                       9
     Section 1.40.  "Peptido Mimetic Drug" ..............................  10
     Section 1.41.  "Pre-Candidate Gene" ................................  10
     Section 1.42.  "Product" ...........................................  10
     Section 1.43.  "Program Analog Protein Drug" .......................  10
     Section 1.44.  "Program Antisense Drug" ............................  10
     Section 1.45.  "Program Know-How" ..................................  10
     Section 1.46.  "Program Patent Rights" .............................  11
     Section 1.47.  "Program Peptido Mimetic Drug" ......................  11
     Section 1.48.  "Program Protein Drug" ..............................  11
     Section 1.49.  "Program Protein Mimic Drug" ........................  11
     Section 1.50.  "Program Small Molecule Drug" .......................  11
     Section 1.51.  "Protein"                                              11
     Section 1.52.  "Protein Drug" ......................................  11
     Section 1.53.  "Protein Mimic Drug" ................................  11
     Section 1.54.  "Public Domain" .....................................  12
     Section 1.55.  [**] ................................................  12
     Section 1.56.  "Related Antisense Drug" ............................  12
     Section 1.57.  "Related Peptido Mimetic Drug" ......................  12
     Section 1.58.  "Related Small Molecule Drug" .......................  12
     Section 1.59.  "Research Program" ..................................  12
     Section 1.60.   [**] ...............................................  12
     Section 1.61.  "Small Molecule Drug" ...............................  13
     Section 1.62.  "Small Molecule Process Flow Schedule" ..............  13
     Section 1.63.  "Sublicensee" .......................................  13
     Section 1.64.  "Territory" .........................................  13
     Section 1.65.  "Validated Protein" .................................  13
     Section 1.66.  "Validated Target" ..................................  13
     Section 1.67.  "Valid Claims" ......................................  14

Article II - Research and Collaboration Program .........................  14
     Section 2.1.  Exclusive Arrangement. ...............................  14
     Section 2.2.  Joint Management Team. ...............................  14
     Section 2.3.  Joint Management Team Responsibilities. ..............  15
     Section 2.4.  Goals and Objectives. ................................  17
     Section 2.5.  Joint Management Team Decisions. .....................  17
     Section 2.6.  Research Program Plan. ...............................  18
     Section 2.7.  Term of the Millennium Research Program. .............  18
     Section 2.8.  Diligence. ...........................................  20
     Section 2.9.  Small Molecule High Throughput Screening .............  21


                                      (ii)


   4


                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                    Commission. Asterisks denote omissions.

Article III - Disclosure of Know-How ....................................  21
     Section 3.1.  Millennium Know-How. .................................  21
     Section 3.2.  Biological Materials. ................................  22
     Section 3.3.  Astra Program Know-How.                                 22

Article IV - Confidentiality ............................................  22
     Section 4.1.  Confidential Information and Know-How. ...............  22
     Section 4.2.  Employee Obligations. ................................  23
     Section 4.3.  Publications. ........................................  24
     Section 4.4.  Term. ................................................  24

Article V - Grant of Rights .............................................  25
     Section 5.1.  Licenses to Millennium Core Technology. ..............  25
     Section 5.2.  Licenses to Millennium Field Patent Rights and
                    Millennium Field Know-How for Research Purposes ...... 25
     Section 5.3.  Product Licenses. ....................................  25
     Section 5.4.  Millennium's Retained Rights. ........................  30
     Section 5.5.  Millennium Drugs. ....................................  30
     Section 5.6.  Rights to Potential Candidate Genes, Validated
                    Targets and Validated Proteins. ...................... 31
     Section 5.7.  Astra's Rights to Diagnostic Products Not Being
                   Commercialized by Millennium. ........................  32

Article VI - Patent Ownership, Protection And Related Matters ...........  32
     Section 6.1.  Ownership. ...........................................  32
     Section 6.2.  Patentable Inventions. ...............................  32
     Section 6.3.  Review and Comment. ..................................  33
     Section 6.4.  Notice of Decision. ..................................  34
     Section 6.5.  Patent Term Extensions. ..............................  34
     Section 6.6.  Costs and Expenses. ..................................  34
     Section 6.7.  Third Party Infringement. ............................  34
     Section 6.8.  Millennium Core Technology. ..........................  36
     Section 6.9.  Notice of Certification. .............................  36
     Section 6.10. Claimed Infringement; Claimed Invalidity. ............  36

Article VII - Astra Due Diligence .......................................  37
     Section 7.1.  Candidate Genes. .....................................  37
     Section 7.2.  Validated Proteins. ..................................  37
     Section 7.3.  Validated Targets. ...................................  38
     Section 7.4.  Astra Minimum Efforts. ...............................  38
     Section 7.5.  Commercialization ....................................  38
     Section 7.6.  Niche Products .......................................  39


                                     (iii)


   5



Article VIII - Payments .................................................  40
     Section 8.1.  Initial License Fees. ................................  40
     Section 8.2.  Additional Fees. .....................................  41
     Section 8.3.  Research Funding. ....................................  43
     Section 8.4.  Milestones. ..........................................  45
     Section 8.5.  Royalty Payments to Millennium on Products. ..........  45
     Section 8.6.  Length of Royalty Payments. ..........................  45
     Section 8.7.  Royalties Payable Only Once. .........................  46
     Section 8.8.  Other Products. ......................................  46
     Section 8.9.  Payment Obligations to Third Parties. ................  46
     Section 8.10. Bankruptcy. ..........................................  46

Article IX - Accounting .................................................  47
     Section 9.1.  Royalty Reports. .....................................  47
     Section 9.2.  Delivery of Royalty. .................................  47
     Section 9.3.  Records and Audits. ..................................  47
     Section 9.4.  Currency of Payments. ................................  47
     Section 9.5.  Tax Withholding. .....................................  48

Article X - Term and Termination ........................................  48
     Section 10.1.  Term. ...............................................  48
     Section 10.2.  Material Non-Performance. ...........................  48
     Section 10.3.  Rights Upon Termination for Default. ................  49
     Section 10.4.  Residual Rights. ....................................  50

Article XI - Product Liability Indemnification ..........................  51

Article XII - Good Faith Negotiation/Dispute Resolution .................  52
     Section 12.1.  General. ............................................  52
     Section 12.2.  Dispute Resolution Process. .........................  52
     Section 12.3.  Arbitration Costs. ..................................  53

Article XIII - Governing Law ............................................  53

Article XIV - Assignment ................................................  53

Article XV - Amendments .................................................  53

Article XVI - Notices ...................................................  54

Article XVII - Force Majeure ............................................  55


                                      (iv)


   6


Article XVIII - Representations and Warranties ..........................  55
     Section 18.1.  Representation of Authority. ........................  55
     Section 18.2.  Outstanding Agreements. .............................  55
     Section 18.3.  Knowledge of Pending or Threatened Litigation. ......  56
     Section 18.4.  Employee Obligations. ...............................  56
     Section 18.5.  Full Disclosure. ....................................  56

Article XIX - Public Announcements ......................................  56

Article XX - Additional Agreements ......................................  57
     Section 20.1.  Independent Contractors. ............................  57
     Section 20.2.  Consents Not Unreasonably Withheld. .................  57
     Section 20.3.  No Strict Construction. .............................  57
     Section 20.4.  Headings. ...........................................  57
     Section 20.5.  Severance of Clauses. ...............................  57
     Section 20.6.  No Waiver. ..........................................  57
     Section 20.7.  Change in Control. ..................................  58

Appendix A -- Research Program Plan

Appendix B -- Third Party Agreements with Millennium

Appendix C -- Small Molecule Process Flow Schedule


                                      (v)


   7


                              AMENDED AND RESTATED
                         RESEARCH AND LICENSE AGREEMENT

     This Amended and Restated Agreement (the "Agreement") is entered into as of
December 1998 and effective as of the 9th day of December, 1995 (the "Effective
Date"), by and between Millennium Pharmaceuticals, Inc., a corporation organized
and existing under the laws of the State of Delaware and having its principal
office at 640 Memorial Drive, Cambridge, Massachusetts 02139-4815 (together with
its Affiliates, "Millennium") and Astra AB, a corporation organized and existing
under the laws of Sweden and having its principal place of business at S-151 85
Sodertalje, Sweden (together with its Affiliates, "Astra").

                                  INTRODUCTION

     1. Millennium is in the business of conducting research in the field of
human genomics, an objective of which is to discover potential biological
targets and assays for use in drug discovery.

     2. Astra is in the business of discovering, developing and marketing
pharmaceuticals.

     3. Astra is interested in funding and collaborating with Millennium in
discovering and developing targets and assays to identify and develop small
molecule drugs primarily for the treatment of inflammatory respiratory diseases,
and in obtaining, under specified circumstances, rights to other types of
therapeutic molecules useful primarily in the treatment of inflammatory
respiratory diseases that are identified through the use of technology developed
before or during the collaboration.

     4. Millennium is willing to provide know-how, materials and licenses to
Astra to allow Astra to use certain of Millennium's technology in all fields and
is also willing to provide know-how, materials and licenses to Astra to use
certain of Millennium's technology in the field of inflammatory respiratory
diseases.

     5. Astra and Millennium entered into a Research and License Agreement (the
"Original Agreement") on December 9, 1995 and desire to amend and restate the
terms of the Original Agreement.

     NOW, THEREFORE, Millennium and Astra agree as follows:


                                       1


   8


                                   ARTICLE I

     When used in this Agreement, each of the following terms shall have the
meanings set forth in this Article I:

     SECTION 1.1. "AFFILIATE" means any corporation, company, partnership, joint
venture and/or firm which controls, is controlled by or is under common control
with a Party. For purposes of this Section 1.1, "control" shall mean, (a) in the
case of corporate entities, direct or indirect ownership of at least fifty
percent (50%) of the stock or shares having the right to vote for the election
of directors, and (b) in the case of non-corporate entities, direct or indirect
ownership of at least fifty percent (50%) of the equity interest with the power
to direct the management and policies of such non-corporate entities.

     SECTION 1.2. "AIRWAY DELIVERY" means a method of administering a drug by
oral inhalation or nasal administration.

     SECTION 1.3. "ANALOG PROTEIN DRUG" means a Protein or polypeptide which has
been modified through a change in its primary structure resulting in a
functionally significant change (such as a change in its pharmacokinetic or
pharmacodynamic properties) to allow it to become a therapeutic product
demonstrating relevant IN VITRO and IN VIVO activity. For purposes of this
definition, a polypeptide constituting the pharmacologically active fragment of
a Protein, that has not been modified through a change in its primary structure
resulting in a functionally significant change, shall not be considered an
Analog Protein Drug.

     SECTION 1.4. "ANTISENSE DRUG" means any drug or drug candidate which
consists of nucleic acid or a functional analog, derivative or homologue thereof
and which is complementary to a segment of DNA of a target gene or such target
gene's cognate RNA and which, upon delivery by any means, alters the
transcription, processing, elaboration, RNA expression, or protein production of
or by such target gene, PROVIDED THAT Antisense Drug shall not include any
nucleic acid or a functional analog, derivative or homologue thereof which, upon
delivery by any means, must be expressed in order to alter the transcription,
processing, elaboration, RNA expression, or protein production of or by a target
gene.


                                       2


   9

                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                    Commission. Asterisks denote omissions.

     SECTION 1.5. "ASTRA DEVELOPMENT PROGRAM" means development activities
performed by Astra, commencing during or after the term of the Millennium
Research Program and concluding on the [**] of the termination of the Millennium
Research Program, to discover and develop Products in the Field based on the
results arising from the Millennium Research Program and/or the Astra Research
Program.

     SECTION 1.6. "ASTRA PROGRAM KNOW-HOW" means Know-How (a) which is necessary
or useful in order to discover, develop, make, use, sell or seek approval to
market therapeutic products for medical indications in the Field, and (b) which
Astra develops, uses or acquires during the term of the Astra Research Program
or the Astra Development Program, and (c) to which Astra has the right to grant
licenses or sublicenses without violating the terms of any agreement or other
arrangement with a third party.

     SECTION 1.7. "ASTRA PROGRAM PATENT RIGHT(S)" means a Patent Right (a) that
relates to Astra Program Know-How, and (b) that is obtained by Astra during the
term of the Astra Research Program or the Astra Development Program, and (c) to
which Astra has the right to grant licenses or sublicenses without violating the
terms of any agreement or other arrangement with a third party.

     SECTION 1.8. "ASTRA RESEARCH PROGRAM" means the research program, to be
undertaken by Astra coincident and coterminous with the term of the Millennium
Research Program, to discover Products in the Field (a) based on Millennium
Field Know-How and Millennium Field Patent Rights, and/or (b) based on
Millennium Core Technology Know-How as used in the Field and Millennium Core
Technology Patent Rights as used in the Field.

     SECTION 1.9. "BIOINFORMATICS" means [**] and any other software tools
developed or acquired by Millennium for the [**].

     SECTION 1.10. "CANDIDATE DRUG" means a Lead that (a) has been sufficiently
optimized, and (b) Astra has decided to enter into Astra Development Program
pre-clinical studies.

     SECTION 1.11. "CANDIDATE GENE" means (a) a Genetics Candidate Gene or (b) a
Pre-Candidate Gene, or a gene in its pathway, whose function has been [**]
before or in the course of the Research Program, as evidenced by at least one IN
VITRO model (including appropriate expression in relevant human cells or
tissues) and at least one IN VIVO model of disease in which for each model i)
the disregulation of the expression of the gene or Protein encoded by the gene,
or ii) the modification of the


                                       3


   10


function of the Protein encoded by the gene, results in a statistically
significant modified biological response, all as determined in good faith by the
Joint Management Team.

     SECTION 1.12. "CONFIDENTIAL INFORMATION" means all materials, KnowHow or
other information, including, without limitation, proprietary information and
materials (whether or not patentable)regarding a Party's technology, products,
business information or objectives, which is designated as confidential in
writing by the disclosing Party, whether by letter or by the use of an
appropriate stamp or legend, prior to or at the time any such material, trade
secret or other information is disclosed by the disclosing Party to the other
Party. Notwithstanding the foregoing to the contrary, materials, KnowHow or
other information which is orally, electronically or visually disclosed by a
Party, or is disclosed in writing without an appropriate letter, stamp or
legend, shall constitute Confidential Information if the disclosing Party,
within thirty (30)days after such disclosure, delivers to the other Party a
written document or documents describing the materials, KnowHow or other
information and referencing the place and date of such oral, visual, electronic
or written disclosure and the names of the persons to whom such disclosure was
made, PROVIDED, HOWEVER, that any technical information disclosed at a meeting
of the Joint Management Team shall constitute Confidential Information unless
otherwise specified.

     SECTION 1.13. "CONTRACT YEAR" means the twelve- (12-) month period
beginning on January 1, 1996, and each succeeding twelve- (12-) month period
thereafter.

     SECTION 1.14. "DIAGNOSTIC PRODUCT" means any diagnostic product in the form
of a device, compound, kit or service.

     SECTION 1.15. "FIELD" means inflammatory respiratory disease, including
without limitation, asthma, rhinitis, chronic obstructive lung disease and
chronic bronchitis, but not including pneumonia, bronchiectasis and
bronchiolithiasis, primary pulmonary hypertension, pulmonary thromboembolism,
cystic fibrosis and neoplasms of the lung.

     SECTION 1.16. "FIRST COMMERCIAL SALE" means, for each Product, (a) with
respect to a Major Market Country, the first commercial sale in such Major
Market Country as part of a nationwide introduction by Astra, and/or its
Sublicensees other than for clinical trial purposes or compassionate use, or (b)
with respect to any country in the Territory other than a Major Market Country,
the first commercial sale in any Major Market Country located in the
Geographical Region in which such country is located


                                       4


   11


                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

as part of a nationwide introduction by Astra and/or its Sublicensees other than
for clinical trial purposes or compassionate use.

     SECTION 1.17. "FTE" means a full time equivalent scientific person year
(consisting of a total of one thousand eight hundred eighty (1,880)hours per
year of scientific work on or directly related to the Millennium Research
Program), carried out by a Millennium employee, having at least a Bachelor's
Degree Scientific work on or directly related to the Millennium Research Program
to be performed by Millennium employees can include, but is not limited to,
experimental laboratory work, recording and writing of results, reviewing
literature and references, holding scientific discussions, managing and leading
scientific staff, development and application of Bioinformatics tools related to
the Millennium Research Program, and carrying out project management duties.
1.18 Section . "Gene Therapy Drug" means any drug or drug candidate which
consists of nucleic acid or a functional analog, derivative or homologue thereof
and which, upon delivery by any means, provides a gene product encoded therein
which is expressed.

     SECTION 1.19. "GENETICS CANDIDATE GENE" means an isolated gene which has
been [**] in the course of the Research Program by either Party. A [**] must be
[**](a) [**]; or (b) [**] (in which instance the Genetics Candidate Gene shall
mean the [**].

     SECTION 1.20. "GENETICS VALIDATED TARGET" means a biological molecule that
(a) is a Genetics Candidate Gene, a Protein encoded by a Genetics Candidate Gene
or another qualifying biological molecule in a relevant biochemical pathway, the
identification of which or the linkage with a disease is based upon the
identification of a Genetics Candidate Gene, and (b) that (i) has been
configured into a research assay that is suitable for the identification of
small molecule agonists or antagonists of such biological molecule and which
research assay is (1) a biochemical assay (including without limitation, a
competitive binding assay for a receptor or an enzyme substrate conversion
assay), or (2) a reporter based assay, in either case having a robust assay
readout (such as fluorescence, chemiluminescence, and/or radioactivity that has
the potential to be configured into a high throughput screen and is therefore
suitable for undertaking research activities to develop a high throughput
screen, or (ii) is suitable for use in rational drug design efforts or (iii) is
suitable for use in Antisense Drug development efforts, all as determined in
good faith by the Joint Management Team.


                                       5


   12


                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.


     SECTION 1.21. "GEOGRAPHICAL REGION" means a geographical region that
consists of (a) North America, Central America and South America, (b) Africa and
Europe, including Turkey and all areas previously a part of the former Soviet
Union as of January 1, 1990, or (c) all countries of the world not included in
either clause (a) or (b).


     SECTION 1.22. "HIT" means a synthetic or naturally derived small molecule
therapeutic product (weighing equal to or less than 5,000 daltons) that is
identified based on its activity in (a) an initial small molecule screen against
a Validated Target, or (b) through rational drug design directed at a Validated
Target, and (c) in either case, has had its activity confirmed in a secondary
assay.

     SECTION 1.23. "KNOW-HOW" means any information, data and materials,
including organic compounds and biological materials such as cell lines, RNA,
DNA, DNA fragments, organisms, Proteins, polypeptides, plasmids and vectors and
software, user's manuals and guides.

     SECTION 1.24. "LEAD" means a Hit that has been analyzed by exploratory
chemistry and which has been determined by Astra to have a structure activity
relationship that is of sufficient interest to warrant an expanded commitment to
resources for medicinal chemistry.

     SECTION 1.25. "MAJOR MARKET COUNTRY" means the United States, Canada, the
United Kingdom, Sweden, Germany, France, Italy, Spain, Japan, China or
Australia.

     SECTION 1.26. "MARKETING EXCLUSIVITY" means the marketing exclusivity
afforded approved drug products pursuant to the exclusivity provisions of the
United States "Drug Price Competition and Patent Term Restoration Act of 1984,"
or its equivalent in a country other than the United States.

     SECTION 1.27. "MILLENNIUM CORE TECHNOLOGY" means [**].

     SECTION 1.28. "MILLENNIUM CORE TECHNOLOGY KNOW-HOW" means Know-How that
relates to Millennium Core Technology, that either (a) is in Millennium's
possession on the Effective Date or (b) is developed by Millennium during the
term of the Millennium Research Program, or (c) is acquired by Millennium during
the term of the Millennium Research Program, with the right to grant licenses or
sublicenses without violating the terms of any agreement or other arrangement
with a third party.


                                       6


   13


                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.


     SECTION 1.29. "MILLENNIUM CORE TECHNOLOGY PATENT RIGHT(S)" means a Patent
Right that relates to Millennium Core Technology.

     SECTION 1.30. "MILLENNIUM DRUG" means any Small Molecule Drug or Peptido
Mimetic Drug, that is discovered, identified or developed as a result of a
screening effort undertaken pursuant to Section 5.5. Millennium Drug shall not
include any Modified Drug, Program Small Molecule Drug, Related Small Molecule
Drug, Program Peptido Mimetic Drug or Related Peptido Mimetic Drug.

     SECTION 1.31. "MILLENNIUM FIELD KNOW-HOW" means Know-How owned or
controlled by Millennium which is necessary or useful in order to discover,
develop, make, use, sell or seek approval to market therapeutic products for
medical indications in the Field, and which (a) is in Millennium's possession on
the Effective Date, or (b) Millennium develops in the course of the Millennium
Research Program, or (c) Millennium acquires in the course of the Millennium
Research Program and to which Millennium has the right to grant licenses or
sublicenses without violating the terms of any agreement or other arrangement
with a third party, provided, however, that Millennium Field Know-How shall not
include (i) Millennium Core Technology Know-How and other generalized methods
for conducting genomic research and characterizing the function of genes, and
(ii) information and biological samples relating to human materials acquired or
otherwise accessed by Millennium and used in genetic analysis in the Millennium
Research Program.

     SECTION 1.32. "MILLENNIUM FIELD PATENT RIGHT(S)" means a Patent Right that
relates to Millennium Field Know-How (including a Patent Right owned jointly by
the Parties and relating to the Field).

     SECTION 1.33. "MILLENNIUM RESEARCH PROGRAM" means the research program, the
term of which extends during the time that research is funded by Astra pursuant
to Section 8.3 of this Agreement, and which is to be undertaken by Millennium
using genetics or genomic technology to discover and characterize Pre-Candidate
Genes, Candidate Genes, Validated Targets and Validated Proteins with potential
utility for the identification and development of Products in the Field, that is
described in greater detail in APPENDIX A.

     SECTION 1.34. "MODIFIED DRUG" means a compound which (a) other than through
the use of [**], was known to [**] to have [**] to its development as a
therapeutic product in the Field, and (b) was [**] or [**] through the use of
[**] to improve its therapeutic properties (but not merely to characterize the
compound) for use in the Field. Modified Drug shall not include any Program
Small Molecule Drug, 


                                       7


   14


Related Small Molecule Drug, Program Peptido Mimetic Drug, Related Peptido
Mimetic Drug, Program Antisense Drug, Related Antisense Drug, Program Protein
Drug, Program Analog Protein Drug, Program Protein Mimic Drug or Gene Therapy
Drug.

     SECTION 1.35. "NET SALES" means with respect to a Product, the gross amount
invoiced by Astra and/or its Sublicensees, on sales or other dispositions of the
Product to unrelated third parties, less the following items, provided that such
items are included in the price charged and do not exceed reasonable and
customary amounts in the country in which such sale occurred:

          (a) Trade, cash and quantity discounts actually allowed and taken;

          (b) Excises, sales taxes or other taxes imposed upon and paid with
     respect to such sales (excluding national, state or local taxes based on
     income);

          (c) Freight, insurance and other transportation charges incurred in
     shipping the Product to third parties;

          (d) Amounts repaid or credited by reason of rejections, defects,
     recalls or returns or because of retroactive price reductions;

          (e) Rebates paid pursuant to government regulations; and

          (f) With respect to Net Sales in Japan, back margin actually allowed
     and taken in customary and reasonable amounts.

Such amounts shall be determined from the books and records of Astra, and/or its
Sublicensees, maintained in accordance with generally accepted accounting
principles, consistently applied.

     If a Product is sold, leased, used or otherwise commercially disposed of
for value (including, without limitation, disposition in connection with the
delivery of other products or services) in a transaction that is not an outright
arm's length sale to an independent third party, then the gross amount invoiced
in such transaction shall be deemed to be the gross amount that would have been
paid had there been such a sale at the average sale price of such Product during
the applicable royalty reporting period. Net Sales shall not include any
consideration received by Astra or its Sublicensees in respect of the sale, use
or other disposition of a Product in a country prior to the receipt of all
regulatory approvals required to commence full commercial sales of such Product
in such country, including the sale, use or other disposition of such Product in
the course of any clinical trial conducted in the course of the Astra
Development Program, sales under "treatment INDs," "named patient sales,"
"compassionate use sales," or their equivalents.


                                       8


   15


     In the event the Product is sold as part of a Combination Product (as
defined below), the Net Sales from the Combination Product, for the purposes of
determining royalty payments, shall be determined by multiplying the Net Sales
of the Combination Product (as defined in the standard Net Sales definition),
during the applicable royalty reporting period, by the fraction, A/A+B where A
is the average sale price of the Product when sold separately in finished form
and B is the average sale price of the other product(s) included in the
Combination Product when sold separately in finished form, in each case during
the applicable royalty reporting period or, if sales of both the Product and the
other product(s) did not occur in such period, then in the most recent royalty
reporting period in which sales of both occurred. In the event that such average
sale price cannot be determined for both the Product and all other product(s)
included in the Combination Product, Net Sales for the purposes of determining
royalty payments shall be calculated by multiplying the Net Sales of the
Combination Product by the fraction C/C+D where C is the fair market value of
the Product and D is the fair market value of all other pharmaceutical
product(s) included in the Combination Product. As used above, the term
"Combination Product" means any pharmaceutical product which comprises the
Product and other active compounds and/or ingredients.

     SECTION 1.36. "NOVEL VALIDATED TARGET" means a Validated Target (other than
a Genetics Validated Target) that, at the time of discovery or subsequently
during its validation, is: (a) determined to encode a novel Protein based on (i)
greater than fifty percent (50%) of the nucleic acid sequence of the full length
coding sequence not being present in the Public Domain or (ii) assignment of the
Protein to a class of Proteins when such classification was previously unknown;
or (b) novelly annotated wherein such novel annotation relates to the role of
such Validated Target in (i) respiratory disease or (ii) inflammation. In order
to qualify as a Novel Validated Target such Validated Target shall be reasonably
believed to lead to a valid and enforceable patent in the United States as
determined in good faith by Joint Management Team.

     SECTION 1.37. "OTHER PRODUCTS" means any pharmaceutical product which does
not comprise a Modified Drug, Program Small Molecule Drug, Related Small
Molecule Drug, Program Peptido Mimetic Drug, Related Peptido Mimetic Drug,
Program Antisense Drug, Related Antisense Drug, Program Protein Drug, Program
Analog Protein Drug or Program Protein Mimic Drug.

     SECTION 1.38. "PARTY" means Astra or Millennium; "PARTIES" means Astra and
Millennium.

     SECTION 1.39. "PATENT RIGHT(S)" means a patent or patent application and
all divisions, continuations, continuations-in-part, reissues, reexaminations,
extensions and foreign counterparts thereof that is owned or controlled by
Millennium and/or 


                                       9


   16


                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.


by Astra, or a license to the same to which either Millennium or Astra has the
right to grant a sublicense.

     SECTION 1.40. "PEPTIDO MIMETIC DRUG" means a synthetic organic molecule
(weighing equal to or less than 5,000 daltons) which is designed or developed
using medicinal chemistry, SAR or combinatorial chemistry techniques to interact
with a Validated Target and which incorporates key properties of a peptide and
which is a therapeutic product.

     SECTION 1.41. "PRE-CANDIDATE GENE" means an [**] which has been [**] by any
method other than [**] and that (a) is [**], or (b) [**] to (i) a gene that
encodes a Protein of demonstrated utility as a therapeutic or (ii) a class of
genes that encode Proteins that have been demonstrated to be generally suitable
as a target for the identification of small molecule functional agonists or
antagonists, and (iii) in each of (i) and (ii) whose pattern of RNA expression
(or a Protein encoded by such gene whose pattern of expression) is of
appropriate distribution in tissues and cell types (human or animal) implicated
in the Field.

     SECTION 1.42. "PRODUCT" means any product that comprises (a) a Program
Small Molecule Drug, (b) a Related Small Molecule Drug, (c) a Program Peptido
Mimetic Drug, (d) a Related Peptido Mimetic Drug (e) a Program Antisense Drug,
(f) a Related Antisense Drug, (g) a Program Protein Drug, (h) a Program Analog
Protein Drug, (i) a Program Protein Mimic Drug, or (j) a Modified Drug,
provided, however, that Product shall not include any (1) Millennium Drug, (2)
Gene Therapy Drug, (3) Diagnostic Product or (4) Other Product.

     SECTION 1.43. "PROGRAM ANALOG PROTEIN DRUG" means an Analog Protein Drug
which, in the course of the Research Program or the Astra Development Program,
is discovered or the development of which is undertaken or the relevant
biological activity of which is identified, and which is based on a Validated
Protein or a Program Protein Drug.

     SECTION 1.44. "PROGRAM ANTISENSE DRUG" means an Antisense Drug which, in
the course of the Research Program or the Astra Development Program, is
discovered or the development of which is undertaken or the relevant biological
activity of which is identified.

     SECTION 1.45. "PROGRAM KNOW-HOW" means Millennium Field Know-How and Astra
Program Know-How, collectively, whether or not developed or acquired solely


                                       10


   17
                    Confidential Materials omitted and filed
                  separately with the Securities and Exchange
                   Commission. Asterisks denote omissions.

or jointly by Millennium and/or Astra. Program Know-How includes but is not
limited to Candidate Genes, Validated Targets and Validated Proteins.

     SECTION 1.46. "PROGRAM PATENT RIGHTS" means Millennium Field Patent Rights
and Astra Program Patent Rights, collectively, whether or not developed or
acquired solely or jointly by Millennium and/or Astra.

     SECTION 1.47. "PROGRAM PEPTIDO MIMETIC DRUG" means a Peptido Mimetic Drug
which, in the course of the Research Program or the Astra Development Program,
is discovered or the development of which is undertaken or the relevant
biological activity of which is identified.

     SECTION 1.48. "PROGRAM PROTEIN DRUG" means a Protein Drug which, in the
course of the Research Program or the Astra Development Program, is discovered,
or the development of which is undertaken or the relevant biological activity of
which is identified.

     SECTION 1.49. "PROGRAM PROTEIN MIMIC DRUG" means a Protein Mimic Drug
which, in the course of the Research Program or the Astra Development Program,
is discovered or the development of which is undertaken or the relevant
biological activity of which is identified, and which mimics a Validated Protein
or a Program Protein Drug.

     SECTION 1.50. "PROGRAM SMALL MOLECULE DRUG" means a Small Molecule Drug
which, in the course of the Research Program or the Astra Development Program,
is discovered or the development of which is undertaken or the relevant
biological activity of which is identified.

     SECTION 1.51. "PROTEIN" means any of a class of high molecular weight
(i.e., weighing greater than [**]) polymer compounds composed of a variety of
amino acids joined by peptide linkages, including aggregates, hybrids and
fragments thereof, as well as naturally post-translationally modified variants
thereof (i.e., glycosylated proteins) and chemically modified versions thereof
(e.g., pegylated or liposomally encapsulated proteins).

     SECTION 1.52. "PROTEIN DRUG" means a Protein that is, or is being developed
for use as, a therapeutic product.

     SECTION 1.53. "PROTEIN MIMIC DRUG" means a synthetic organic molecule which
is a mimic of, or is designed or developed using medicinal chemistry, SAR or


                                       11


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                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.


combinatorial chemistry techniques to incorporate key properties of, a Protein
and which is a therapeutic product.

     SECTION 1.54. "PUBLIC DOMAIN" means available to the general public in any
manner, including without limitation (a) in a published scientific paper, (b) in
an issued patent or a published patent application, or (c) in an electronically
published database (e.g. GenBank, DBEST, etc.).

     SECTION 1.55. [**] means methods developed or acquired by Millennium for
the automated or semi-automated use of [**] that are [**].

     SECTION 1.56. "RELATED ANTISENSE DRUG" means an Antisense Drug which, in
the course of the Research Program or the Astra Development Program, is
discovered or the development of which is undertaken or the relevant biological
activity of which is identified, and which (a) reacts with the same Validated
Target as, and (b) is covered by the same patent(s) or patent application(s) as,
and (c) is a member of the same chemical genus as, a corresponding Program
Antisense Drug.

     SECTION 1.57. "RELATED PEPTIDO MIMETIC DRUG" means a Peptido Mimetic Drug
which, in the course of the Research Program or the Astra Development Program,
is discovered or the development of which is undertaken or the relevant
biological activity of which is identified, and which (a) reacts with the same
Validated Target as, and (b) is covered by the same patent(s) or patent
application(s) as, and (c) is a member of the same chemical genus as, a
corresponding Program Peptido Mimetic Drug.

     SECTION 1.58. "RELATED SMALL MOLECULE DRUG" means a Small Molecule Drug
which, in the course of the Research Program or the Astra Development Program,
is discovered or the development of which is undertaken or the relevant
biological activity of which is identified, and which (a) reacts with the same
Validated Target as, and (b) is covered by the same patent(s) or patent
application(s) as, and (c) is a member of the same chemical genus as, a
corresponding Program Small Molecule Drug.

     SECTION 1.59. "RESEARCH PROGRAM" means, collectively, the Millennium
Research Program and the Astra Research Program.

     SECTION 1.60. [**] means integrated software tools for the [**] to identify
and provide [**], provided that [**] shall not include (a) metatools (i.e.,
software tools 


                                       12


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                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

used to develop the [**] themselves), (b) source code, or (c) tools developed by
Millennium to [**] structure and [**] from primary [**].

     SECTION 1.61. "SMALL MOLECULE DRUG" means a small molecule therapeutic
product (weighing equal to or less than [**]), other than a Modified Drug, a
Peptido Mimetic Drug, an Antisense Drug, a Protein Drug, an Analog Protein Drug,
a Protein Mimic Drug or a Gene Therapy Drug.

     SECTION 1.62. "SMALL MOLECULE PROCESS FLOW SCHEDULE" means the stages of
the discovery process for Pre-Candidate Genes, Candidate Genes, Validated
Targets, Hits, Leads and Candidate Drugs that are identified in the course of
the Millennium Research Program, the Astra Research Program or the Astra
Development Program. The Small Molecule Process Flow Schedule is attached hereto
as Appendix C and is hereby incorporated into the Research Program Plan.

     SECTION 1.63. "SUBLICENSEE" means any third party other than an Affiliate
granted the right, subject to the terms and conditions of Article V, to make,
use and sell a Product, but not including a third party that is not granted the
right to make such Product but merely purchases such Product in finished form
(ready pack or in bulk) for resale.

     SECTION 1.64. "TERRITORY" means all countries of the world.

     SECTION 1.65. "VALIDATED PROTEIN" means a Protein encoded by a [**] or
other Protein, the identification of which other Protein was based upon the
identification of a [**], that is suitable for [**] into a [**], as determined
in good faith by the Joint Management Team.

     SECTION 1.66. "VALIDATED TARGET" means a biological molecule that (a) is a
[**], a Protein [**] by a [**] or another qualifying biological molecule in a
relevant [**] of which or the [**] is based upon the identification of a [**],
and (b) that (i) has been configured into a research assay that is suitable for
the [**] and which research assay is (1) a biochemical assay (including without
limitation, a competitive binding assay for a receptor or an enzyme substrate
conversion assay), or (2) a reporter based assay, in either case having a robust
assay readout (such as fluorescence, chemiluminescence, and/or radioactivity)
that has the potential to be configured into a high throughput screen and is
therefore suitable for undertaking research activities to develop a high
throughput screen, or (ii) is suitable for use in [**] or (iii) is suitable for
use in [**] development efforts, all as determined in good


                                       13


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faith by the Joint Management Team. Unless stated otherwise, a Validated Target
shall include a Genetics Validated Target.

     SECTION 1.67. "VALID CLAIMS" means any claim(s) pending in a patent
application or in an unexpired patent which has not been held unenforceable,
unpatentable or invalid by a decision of a court or other governmental agency of
competent jurisdiction, unappealable or unappealed within the time allowed for
appeal, and which has not been admitted to be invalid or unenforceable through
reissue or disclaimer.


                                   ARTICLE II

                       RESEARCH AND COLLABORATION PROGRAM

     SECTION 2.1. EXCLUSIVE ARRANGEMENT. During the term of the Millennium
Research Program, Millennium agrees that it shall not participate, either
directly or in collaboration with others in any similar program of genetics and
genomics research relating to the Field except pursuant to the terms of this
Agreement, provided that the foregoing shall not apply to activities in the
Field by Millennium relating to the research, development and commercialization
of (i) Antisense Drugs (subject to the provisions of Section 5.3), (ii) Protein
Drugs, Analog Protein Drugs and Protein Mimic Drugs (subject to the provisions
of Section 5.3), (iii) Gene Therapy Drugs and (iv) Diagnostic Products.

     SECTION 2.2. JOINT MANAGEMENT TEAM. The Parties have established a Joint
Management Team, consisting of four (4) representatives designated by Astra and
four (4) representatives designated by Millennium. Each Party shall cause its
representatives to attend the meetings of the Joint Management Team. If a
representative of a Party is unable to attend a meeting, such Party may
designate an alternate to attend such meeting in place of the missing
representative. In addition, each Party may at its discretion invite non-voting
employees, consultants or scientific advisors to attend the meetings of the
Joint Management Team. The Joint Management Team shall meet no less frequently
than once each calendar quarter, and shall meet at such other times as deemed
appropriate by the Joint Management Team. Each Party may change any one or more
of its representatives to the Joint Management Team at any time upon notice to
the other Party. The location of the Joint Management Team meetings shall
alternate between Massachusetts and Sweden, or as otherwise mutually agreed.

     Each Party shall appoint, and reappoint from time to time as necessary, a
project leader to undertake day to day contact with the other Party.


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     The Joint Management Team will function during the term of the Research
Program and thereafter for as long as both Parties agree. Upon termination of
the Research Program, the Parties in good faith shall agree upon an alternative
method of communication with regard to the Astra Development Program and the
commercialization of Products.

     SECTION 2.3. JOINT MANAGEMENT TEAM RESPONSIBILITIES.

          (a) The Joint Management Team shall be responsible for coordinating
     and reviewing the activities of the Parties under this Agreement, including
     without limitation the Research Program. Without intending to limit the
     generality of the foregoing, the Joint Management Team shall oversee the
     disclosure and transfer of relevant Know-How to facilitate the research and
     development of Pre-Candidate Genes, Candidate Genes, Validated Targets,
     Validated Proteins, Hits, Leads, Candidate Drugs and Products, as well as
     the disclosure and transfer of Millennium Field Know-How and Millennium
     Core Technology Know-How to Astra pursuant to Article III, and the
     disclosure of Astra Program Know-How to Millennium pursuant to Article III.

          (b) Subject to the minimum funding levels established in Section 8.3,
     the Joint Management Team shall determine the level and extent of research
     work to be conducted by Millennium and funded by Astra under this
     Agreement.

          (c) As soon as practicable after execution of this Agreement, the
     Joint Management Team shall appoint one (1) representative from each Party
     to be responsible for the preparation of a package of information that
     provides all relevant information concerning each gene being pursued under
     the Research Program. The designated representatives shall prepare and
     deliver a copy of the package of information to each member of the Joint
     Management Team at least fifteen (15) days prior to each Joint Management
     Team Meeting.

          (d) As soon as practicable after the execution of this Agreement, the
     Joint Management Team shall agree on the criteria for each stage of the
     Small Molecule Process Flow Schedule. The Joint Management Team shall also
     review each research project being pursued under the Research Program and
     shall assign each gene within each research project to a specific stage of
     the Small Molecule Process Flow Schedule and designate such gene under the
     appropriate definition for such stage.

          (e) The Joint Management Team shall be responsible for the review of
     the results of the Research Program and shall advance genes being pursued
     under the Research Program according to the Small Molecule Process Flow
     Schedule. At each meeting of the Joint Management Team, the representatives


                                       15


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     shall discuss all information, provided in accordance with subsection (c)
     above, regarding genes being pursued under the Research Program and shall
     decide whether or not each gene shall be advanced to the next stage of the
     Small Molecule Process Flow Schedule. The Joint Management Team may advance
     a gene to the next stage of the Small Molecule Process Flow Schedule even
     if such gene does not meet all requirements of such next stage.

               (i) Should the Joint Management Team decide that insufficient
          information is available to make a decision to advance a gene to the
          next stage of the Small Molecule Process Flow Schedule based on the
          requirements in the Research Program Plan (as defined in Section 2.6),
          then during the Joint Management Team meeting, the Joint Management
          Team shall determine what additional information is required based
          upon the criteria set forth in the Research Program Plan and such gene
          shall remain at its current stage of discovery until sufficient
          information is available for a decision to be made, PROVIDED, HOWEVER,
          that should the Joint Management Team disagree as to what additional
          information is required or as to whether or not sufficient information
          is available to make a decision with respect to a particular gene,
          then such issue shall be resolved as set forth in Section 2.5.

               (ii) Should the Joint Management Team agree that sufficient
          information is available to make a decision to advance a gene or other
          element of the Small Molecule Process Flow Schedule to the next stage
          of the Small Molecule Process Flow Schedule, but the Parties disagree
          as to whether or not a particular gene or other element of the Small
          Molecule Process Flow Schedule should be advanced to the next stage of
          the Small Molecule Process Flow Schedule, then such issue shall be
          resolved as set forth in Section 2.5, PROVIDED, however, if Astra
          determines that such gene or other element of the Small Molecule
          Process Flow Schedule should not be advanced and if Astra is using
          commercially reasonable efforts to identify and develop at least one
          Product and the sale of such Product developed by Astra will yield
          royalties payable to Millennium by Astra under Section 8.5, then such
          gene or other element of the Small Molecule Process Flow Schedule
          shall not be advanced at that time. Notwithstanding the foregoing,
          should the Joint Management Team disagree as to whether a Candidate
          Gene should be advanced to a Validated Target or a Validated Protein,
          then such issue shall not be resolved as set forth in Section 2.5.
          Rather the issue shall be resolved through the use of an expedited
          arbitration process, in which the Parties first try to agree on a
          mutually accepted scientist to serve as the arbitrator (failing mutual
          agreement on a single scientist, each Party appoints a scientist not
          affiliated with such Party and the two scientists so selected pick a
          third unaffiliated scientist and 


                                       16


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                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

          all three shall serve as arbitrators). The arbitrator(s) shall review
          the disputed matter on an expedited basis (not to exceed forty-five
          (45) days), considering the relevant data, standards established by
          this Agreement and the Research Program and relevant precedents. The
          decision of the arbitrator(s) shall be binding on the Parties.

               (iii) Should the Joint Management Team decide that a
          Pre-Candidate Gene or Candidate Gene shall not be advanced to the next
          stage of the Small Molecule Process Flow Schedule, then all research
          with respect to any such gene shall be suspended. If and when the
          Joint Management Team decides to advance any such gene to the next
          stage of the Small Molecule Process Flow Schedule then active research
          on such gene shall resume.

     SECTION 2.4. GOALS AND OBJECTIVES. As soon as practical after the execution
of this Agreement, the Joint Management Team shall agree on the goals and
objectives and research and development activities of the Research Program,
including the specific research projects to be pursued under the Research
Program. At each meeting of the Joint Management Team, the progress of the
Research Program will be reviewed and if necessary the goals and/or resource
allocation for the Millennium Research Program will be modified. No later than
the end of the first month of each Contract Year during the Millennium Research
Program, the Joint Management Team shall meet to discuss in detail the progress
of the Research Program and agree upon the short- and long-term goals and
prospective budget for the Millennium Research Program. In the event a
significant development occurs which may affect the short-or long-term goals or
resource allocations of the Research Program or methods of achieving said goals,
the Joint Management Team shall reconvene, reassess and change such methods,
resource allocations and/or goals of the Millennium Research Program.

     SECTION 2.5. JOINT MANAGEMENT TEAM DECISIONS. The unanimous agreement of
the members of the Joint Management Team shall be required to take any action,
except as provided below in this Section 2.5. Any member of the Joint Management
Team who is not present at any meeting either in person or by a designated
alternate may appoint another representative or alternate as his proxy to act on
his behalf on all matters coming to a vote. The Joint Management Team may
conduct meetings by telephone or video conference. If the Joint Management Team
is unable to agree with respect to the scope and direction of the Research
Program,[**], subject to Astra's obligation to pay the minimum research funding
in accordance with Section 8.3, provided, however, that in the event that the
Joint Management Team is unable to 


                                       17


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                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.


agree with respect to any significant reallocation of Millennium resources or
personnel between or among the projects of the Millennium Research Program,
[**]. (For purposes of this Section 2.5, a reallocation of Millennium resources
and personnel shall be deemed to be significant if more than twenty-five percent
(25%) of the resources and personnel are to be reallocated within any given
calendar year.) If the Joint Management Team is unable to reach a unanimous
agreement on any issue which shall not be decided by Astra or Millennium or as
set forth in Section 2.3(d)(ii), as the case may be, such issue shall be
referred to the Vice President of Pre-Clinical Affairs of Astra AB and the Chief
Executive Officer of Millennium for resolution. If the Vice President of
Pre-Clinical Affairs of Astra AB and the Chief Executive Officer of Millennium
are unable to reach agreement on any issue regarding the Research Program which
shall not be decided by Astra, then such issues shall be submitted to
arbitration pursuant to the provisions set forth in Article XII and the
arbitrators shall have the authority to (i) direct the Parties as to the manner
in which the Parties shall resolve the issue, or (ii) render a final decision
with respect to such issue. The arbitrators shall have no authority to amend
this Agreement or the Research Program Plan (as defined in Section 2.6) and the
budget contained therein.

         SECTION 2.6. RESEARCH PROGRAM PLAN. The Parties shall engage in the
Research Program to expedite the discovery and development of Pre-Candidate
Genes, Candidate Genes, Validated Targets, Validated Proteins, Hits, Leads,
Candidate Drugs and Products in substantial accordance with the research
schedule and goals set forth in the Research Program plan (the "Research Program
Plan"), attached to this Agreement as APPENDIX A (which Research Program Plan is
subject to review and modification by the Joint Management Team and final
resolution by Astra or Millennium, if required, pursuant to Section 2.5).

     SECTION 2.7. TERM OF THE MILLENNIUM RESEARCH PROGRAM.

          (a) Millennium shall conduct the Millennium Research Program for the
     first five (5) Contract Years; provided, however, that Astra may terminate
     the Millennium Research Program by providing notice to Millennium (the
     "Termination Notice") at any time during the two (2) month period following
     the conclusion of the third Contract Year (i.e. during January and
     February, 1999), if, at the conclusion of the third Contract Year, the Year
     3 Success Benchmark (as defined below) has not been achieved. As used
     herein, the term "Year 3 Success Benchmark" means that [**] in each case as
     determined in good faith by the Joint Management Team. The Parties hereby
     agree that the Year 3 Success Benchmark has been achieved.


                                       18


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          (b) As Millennium has achieved the Year 3 Success Benchmark, Astra
     shall choose either (i) to let the Millennium Research Program continue for
     the remainder of its five (5) year term, or (ii) to extend the Millennium
     Research Program for an additional two (2) Contract Years beyond the
     original five (5) year term to a term of seven (7) Contract Years. Astra
     elects to extend the Millennium Research Program for an additional two (2)
     Contract Years, for a total term of seven (7) Contract Years (i.e. up to
     and including December 31, 2002), with Astra having the option to terminate
     the Millennium Research Program after the fifth Contract Year as set forth
     in Section 2.7(c). Astra shall pay to Millennium the additional fee subject
     to and as set forth in Sections 8.2(a) and 8.2(b). Astra shall fund the
     fourth through seventh Contract Years at the levels set forth in Section
     8.3(a) (iii) subject to Section 2.7(c).

          (c) Astra shall have the option to terminate the Millennium Research
     Program after the fifth Contract Year as follows. Three (3) months prior to
     the conclusion of the fifth Contract Year, Astra shall notify Millennium in
     writing of its decision (the "Astra Decision") to either (i) terminate the
     Millennium Research Program at the end of the fifth Contract Year and pay
     to Millennium the additional fee set forth in Section 8.2(c), or (ii)
     continue the Millennium Research Program for a total of seven (7) Contract
     Years and no additional fee shall be due to Millennium. Should the Astra
     Decision be to continue the Millennium Research Program for a total of
     seven (7) Contract Years, and the Parties have achieved the Year 5 Success
     Benchmark (as defined below), then the Millennium Research Program shall
     continue for a total of seven (7) Contract Years. Should the Astra Decision
     be to continue the Millennium Research Program for a total of seven (7)
     Contract Years, and the Parties have not achieved the Year 5 Success
     Benchmark (as defined below), then Millennium shall have the right,
     exercisable within thirty (30) days after receipt of the Astra Decision, to
     elect to discontinue the Millennium Research Program at the conclusion of
     the fifth Contract Year, subject to Astra's option set forth in Section
     2.7(d) below. As used herein, the term "Year 5 Success Benchmark" means
     that (A) at least five (5) Validated Targets have been identified and
     entered into small molecule high throughput screening, and (B) Astra is
     diligently pursuing Hits identified by small molecule high throughout
     screening as determined in good faith by the Parties. Upon the
     recommendation of the Joint Management Team, based upon the allocation of
     resources to and prioritization of work within the Millennium Research
     Program, Millennium and Astra may agree to other objectives, as
     alternatives to the objectives stated in (A) and (B) of the preceding
     sentence, to be included in the Year 5 Success Benchmark.

          (d) If Millennium elects to discontinue the Millennium Research
     Program under the provisions of Section 2.7(c), then at Astra's option, the


                                       19


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     Millennium Research Program shall continue for a period of two (2) Contract
     Years with the following modifications: (1) Millennium shall be obligated
     to continue only the existing genetics research program under the
     Millennium Research Program which is directed at the identification of
     Genetics Candidate Genes and Genetics Validated Targets and shall not be
     obligated to undertake any new program of genetics research; (2) the
     provisions of Section 8.3(a)(iii) and 8.3(a)(iv) shall be deemed amended
     such that the Millennium Research Program shall be funded by Astra at an
     FTE level which is the average number of FTEs during the fourth and fifth
     Contract Years who conducted the research directed at the identification of
     Genetics Candidate Genes and Genetics Validated Targets; (3) Astra shall
     fund such FTEs at the FTE Rate set forth in Section 8.3(a)(i); (4) any
     change in the number of FTEs engaged in such research may be made only by
     consensus agreement of the Joint Management Team; (5) Section 8.3(a)(vi)
     shall be amended to read in its entirety as follows, "Astra shall reimburse
     Millennium for all third party collaborative research expenses incurred by
     Millennium in support of the Millennium Research Program such expenses
     subject to the prior approval of the Joint Management Team"; (6) the
     Millennium Research Program and the Research Program shall be deemed
     terminated at the end of the fifth Contract Year for all purposes under
     Section 1.11(b), Section 1.28, Section 1.41, and Section 2.1; (7) the
     Millennium Research Program and the Research Program shall be deemed to be
     continued for the purposes of Section 1.5, Section 2.9 and Section 4.4; and
     (8) for the purposes of the sixth and seventh Contract Years all other
     Sections shall be amended such that the Millennium Research Program shall
     be limited to consist of the research directed at the identification of
     Genetics Candidate Genes and Genetics Validated Targets; such Sections
     include without limitation Section 1.6, Section 1.7, Section 1.8, Section
     1.17, Section 1.31, Section 1.33, Section 2.8, Section 3.1, Section 3.2,
     Section 3.3, Section 5.6, Section 7.1, Section 7.4, and Section 7.6 (for
     the purposes of clarity, (i) Astra's rights under Section 5.6 with respect
     to all Pre-Candidate Genes and Candidate Genes, that are not Genetics
     Candidate Genes, shall expire ninety (90) days following the end of the
     fifth Contract Year; (ii) Astra's diligence obligations set forth in
     Sections 7.1 and 7.4 with respect to all Candidate Genes, Validated
     Proteins and Validated Targets which are not Genetics Candidate Genes and
     Genetics Validated Targets shall commence at the end of the fifth Contract
     Year; and (iii) Millennium's rights set forth in Section 7.6 with respect
     to Niche Products which do not involve the use of a Genetics Candidate Gene
     or a Genetics Validated Target shall commence at the end of the fifth
     Contract Year).

     SECTION 2.8. DILIGENCE. Millennium shall, in the course of the Millennium
Research Program: (a) use reasonable efforts in pursuing and conducting research
and development of all Candidate Genes, Validated Targets, Validated Proteins
and related assays; (b) furnish, maintain and preserve suitable and sufficient
laboratory 


                                       20


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facilities, equipment and personnel for the research and development
to be undertaken by Millennium; (c) perform its obligations hereunder in good
faith in a scientifically/commercially reasonable and workmanlike manner; (d)
use reasonable efforts to carry out all work in compliance with any federal,
state or local laws, regulations and guidelines governing the conduct of such
work; and (e) cooperate with Astra in good faith, particularly with respect to
unknowns or contingencies.

     SECTION 2.9. SMALL MOLECULE HIGH THROUGHPUT SCREENING. During the term of
the Research Program, Astra shall have the option to engage Millennium to
configure and/or implement high throughput screening for small molecule agonists
and/or antagonists of any Validated Target. Astra shall exercise this option by
providing to Millennium, in writing, a request that Millennium configure and/or
implement small molecule high throughput screening of a stated Validated Target
and shall state the desired compound libraries (Millennium compound libraries
and/or Astra compound libraries) to be screened. If Astra compound libraries are
to be screened, then Astra shall provide to Millennium such compound libraries
in an appropriate format for use by Millennium in such screening. If Millennium
compound libraries are to be screened at Astra, then Millennium shall provide to
Astra such compound libraries in an appropriate format for use by Astra in such
screening. If Millennium agrees to configure and/or implement a small molecule
high throughput screening of a Validated Target, then Millennium shall provide
to Astra an estimate of the fully burdened cost for such screening. If, after
receipt of Millennium's estimate of the fully burdened cost for such screening,
Astra engages Millennium, then Millennium shall perform the agreed upon work.
Astra shall compensate Millennium for such configuration and/or implementation
of small molecule high throughput screening at Millennium's fully burdened cost
which shall not exceed the Millennium estimated cost by more than ten percent
(10%) unless otherwise agreement by the parties in writing.

                                   ARTICLE III

                             DISCLOSURE OF KNOW-HOW

     SECTION 3.1. MILLENNIUM KNOW-HOW. Commencing with the execution of this
Agreement, Millennium shall disclose to Astra all existing Millennium Field
Know-How which Millennium reasonably believes to be pertinent to the Research
Program or which is reasonably requested by Astra, and all Millennium Core
Technology Know-How which Millennium reasonably believes to be pertinent to the
exercise of the licenses granted in Section 5.1 or which is reasonably requested
by Astra. Millennium shall disclose to Astra on an ongoing basis for the
duration of the Millennium Research Program (i) all additional Millennium Field
Know-How which Millennium reasonably believes to be pertinent to the successful
execution of the Research Program or which is reasonably requested by Astra, and
(ii) all additional Millennium Core Technology Know-How which Millennium
reasonably believes to 


                                       21


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be pertinent to the exercise of the licenses granted in Section 5.1 or which is
reasonably requested by Astra. Notwithstanding the foregoing, Millennium need
not disclose to Astra any Know-How which Millennium is precluded from disclosing
under any agreement binding upon it pursuant to any of the agreements listed in
APPENDIX B, as amended by Millennium from time to time, PROVIDED, HOWEVER, that
(a) Millennium shall not, without the prior written consent of Astra, enter into
any future agreement with a third party relating to the Millennium Field
Know-How which would limit the ability of Millennium to disclose Millennium
Field Know-How to Astra pursuant to the provisions of this Agreement or is
otherwise inconsistent with the licenses granted by Millennium to Astra in the
Field under this Agreement, and (b) Millennium shall not, without the prior
written consent of Astra, enter into any future agreement with a third party
relating to the Millennium Core Technology Know-How which limits Millennium's
right to utilize Millennium Core Technology Know-How in the Millennium Research
Program.

     SECTION 3.2. BIOLOGICAL MATERIALS. Millennium shall also provide Astra with
Millennium Field Know-How in the form of genes, gene fragments, vectors, cell
lines, strains, transgenic organisms, model organisms, DNA and DNA fragments and
other biological materials, as well as information relating to such materials,
which Millennium reasonably believes to be pertinent to Astra's activities in
the Research Program and the Astra Development Program or which is reasonably
requested by Astra. Notwithstanding the foregoing, Millennium need not provide
Astra with any such biological materials or related information which Millennium
is precluded from providing under any agreement binding upon it pursuant to any
of the agreements listed in APPENDIX B, as amended by Millennium from time to
time, PROVIDED, HOWEVER, that Millennium shall not, without the prior written
consent of Astra, enter into any future agreement with a third party relating to
the Millennium Field Know-How which would limit the ability of Millennium to
provide Astra, pursuant to this Section 3.2, with the biological materials and
related information which Millennium reasonably believes to be pertinent to
Astra's activities in the Research Program and the Astra Development Program.

     SECTION 3.3. ASTRA PROGRAM KNOW-HOW. Astra shall disclose to Millennium
such Astra Program Know-How which Astra reasonably believes is needed by
Millennium to carry out its obligations within the Millennium Research Program
hereunder; PROVIDED, HOWEVER, that Astra need not disclose to Millennium any
Astra Program Know-How which Astra is precluded from disclosing under any
agreement binding upon it. Millennium's right to use Astra Program Know-How
shall be limited to the Millennium Research Program.


                                       22


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                                   ARTICLE IV

                                 CONFIDENTIALITY

     SECTION 4.1. CONFIDENTIAL INFORMATION AND KNOW-HOW. All Know-How or other
Confidential Information disclosed by one Party to the other during the term of
this Agreement shall not be used by the receiving Party except in connection
with the Research Program or the identification, selection, preparation,
development, manufacture or sale of Products (or, in the case of Millennium Core
Technology Know-How, for permitted uses outside the Field), shall be maintained
in confidence by the receiving Party (except to the extent reasonably necessary
for regulatory approval of Products developed by Astra), and shall not otherwise
be disclosed by the receiving Party to any other person, firm, or agency,
governmental or private, without the prior written consent of the disclosing
Party, except to the extent that the

          (a) was known or used by the receiving Party prior to its date of
     disclosure to the receiving Party; or

          (b) either before or after the date of the disclosure to the receiving
     Party is lawfully disclosed to the receiving Party by sources other than
     the disclosing Party rightfully in possession of the Confidential
     Information; or

          (c) either before or after the date of the disclosure to the receiving
     Party becomes published or generally known to the public, other than
     through the sale of Products in the ordinary course, through no fault or
     omission on the part of the receiving Party or its Sublicensees; or

          (d) is independently developed by or for the receiving Party without
     reference to or reliance upon the Confidential Information; or

          (e) is required to be disclosed by the receiving Party to comply with
     applicable laws, to defend or prosecute litigation or to comply with
     governmental regulations, PROVIDED, THAT the receiving Party provides prior
     written notice of such disclosure to the other Party and takes reasonable
     and lawful actions to avoid and/or minimize the degree of such disclosure.

     SECTION 4.2. EMPLOYEE OBLIGATIONS. Millennium and Astra each agree that it
shall provide Know-How and other Confidential Information received from the
other Party only to its employees, consultants and advisors who have a need to
know and have an obligation to treat such information and materials as
confidential.


                                       23


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     SECTION 4.3. PUBLICATIONS. The Parties acknowledge that scientific lead
time is a key element of the value of the research to be performed under this
Agreement and further agree that scientific publications must be strictly
monitored to prevent any adverse effect of premature publication of results of
the Research Program. The Joint Management Team will establish a procedure for
publication review and approval and each Party shall first submit to the other
Party an early draft of all such publications, whether they are to be presented
orally or in written form, at least sixty (60) days prior to submission for
publication. Each Party shall review each such proposed publication in order to
avoid the unauthorized disclosure of a Party's Confidential Information and to
preserve the patentability of inventions arising from the research performed in
the course of the Research Program and/or the Astra Development Program. If, as
soon as reasonably possible but no longer than sixty (60) days following receipt
of an advance copy of a Party's proposed publication, the other Party informs
such Party that its proposed publication contains Confidential Information of
the other Party, then such Party shall delete such Confidential Information from
its proposed publication. If, as soon as reasonably possible but no longer than
sixty (60) days following receipt of an advance copy of a Party's proposed
publication, the other Party informs such Party that its proposed publication
could be expected to have a material adverse effect on any Program Patent Rights
or Program Know-How, then such Party shall delay such proposed publication,
sufficiently long to permit the timely preparation, first filing, international
filing and publication of patent application(s) on the information involved,
PROVIDED, HOWEVER, that (i) with respect to any agreement between Millennium and
a third party listed in APPENDIX B as of the Effective Date (and any extension
thereof), the terms and conditions of such agreement (and any extensions
thereof) that govern the review, approval and delay of any scientific
publications relating to such agreement shall remain in full force and effect
notwithstanding any provision of this Section 4.3 to the contrary, and (ii) with
respect to any future agreement entered into by Millennium with a third party
relating to the Millennium Field Patent Rights and/or the Millennium Field
Know-How, Millennium shall not agree to any terms and conditions governing the
review, approval and delay of scientific publications that are inconsistent with
those set forth in this Section 4.3, without the prior written consent of Astra.

     SECTION 4.4. TERM. All obligations of confidentiality and non-use imposed
under this Article IV shall expire ten (10) years following termination of the
Millennium Research Program.


                                       24


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                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

                                    ARTICLE V

                                 GRANT OF RIGHTS

     SECTION 5.1. LICENSES TO MILLENNIUM CORE TECHNOLOGY. Subject to the terms
and conditions of this Agreement, Millennium hereby grants to Astra:

          (a) a fully paid-up, non-royalty bearing (other than with respect to
     Products as provided in Section 8.5), non-exclusive right and license in
     the Territory, without the right to grant sublicenses, under Millennium
     Core Technology Patent Rights and Millennium Core Technology Know-How [**]
     within and outside the Field during the term of the Research Program and
     thereafter;

          (b) a fully-paid up, non-royalty bearing (other than with respect to
     Products as provided in Section 8.5), non-exclusive right and license,
     without the right to grant sublicenses, under any applicable Millennium
     copyright to copy and use in the Territory all computer software included
     in Millennium Core Technology, in object code form only, provided to Astra
     by Millennium during the term of the Millennium Research Program for
     Astra's own use only, inside and outside the Field, during and after the
     term of the Research Program.

     SECTION 5.2. LICENSES TO MILLENNIUM FIELD PATENT RIGHTS AND MILLENNIUM
FIELD KNOW-HOW FOR RESEARCH PURPOSES. Subject to the terms and conditions of
this Agreement, Millennium hereby grants to Astra a fully paid-up, non-royalty
bearing (other than with respect to Products as provided in Section 8.5),
co-exclusive (with Millennium and its permitted licensees pursuant to this
Article V), right and license, without the right to grant sublicenses, under
Millennium Field Patent Rights and Millennium Field Know-How, to make and use
Pre-Candidate Genes, Candidate Genes, Validated Targets and Validated Proteins
in the Territory to research and develop Products in accordance with the terms
of this Agreement.

     SECTION 5.3. PRODUCT LICENSES.

          (a) PRODUCTS THAT COMPRISE A PROGRAM SMALL MOLECULE DRUG, A RELATED
     SMALL MOLECULE DRUG, A PROGRAM PEPTIDO MIMETIC DRUG, A RELATED PEPTIDO
     MIMETIC DRUG OR A MODIFIED DRUG.


                                       25


   32

                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

          (i) Subject to the terms and conditions of this Agreement, Millennium
     hereby grants to Astra an exclusive, royalty bearing license, under
     Millennium Field Patent Rights and Millennium Field Know-How, to research,
     have researched, develop, have developed, make, have made, import, use,
     have used, offer to sell, sell and have sold, within the Field in the
     Territory, Products that comprise a Program Small Molecule Drug, a Related
     Small Molecule Drug, a Program Peptido Mimetic Drug, a Related Peptido
     Mimetic Drug or a Modified Drug. Such license shall include the right to
     grant sublicenses, on notice to Millennium as soon as reasonably possible,
     to make or have made, import, use or have used (other than to research,
     have researched, develop or have developed), offer to sell, sell or have
     sold such Products within the Field in the Territory. Astra shall be
     responsible for all obligations of Astra's Sublicensees hereunder, and
     guarantees to Millennium the performance of all such obligations. The
     payment of royalties on Net Sales of Products shall remain a direct
     obligation of Astra, regardless of whether sales are made by Astra or an
     Astra Sublicensee.

          (ii) In the event that [**] that comprises a [**] for use in the [**]
     (as evidenced by the designation of such [**] or [**]), then [**] granted
     in Section [**] shall be deemed to include the [**] contained within such
     Product, or any [**] or any [**] corresponding to the [**] or [**]
     contained within such Product, for any [**], subject to the [**] pursuant
     to Section 8.5.

     (b) PRODUCTS THAT COMPRISE A PROGRAM ANTISENSE DRUG, A RELATED ANTISENSE
DRUG OR A PROGRAM PROTEIN MIMIC DRUG.

          (i) During the term of the Research Program and the Astra Development
     Program, Millennium and Astra agree to discuss collaborations concerning
     the development and commercialization of Products that comprise a Program
     Antisense Drug, a Related Antisense Drug or a Program Protein Mimic Drug
     for use in the Field. The initial opportunity to begin such discussions
     concerning such therapeutic Products shall arise when, in the course of the
     Research Program, either Party recognizes the possibility for developing
     such a therapeutic Product or collaborating with a commercial third party
     who possesses technology relevant to the development of such a therapeutic
     Product. When this occurs, the Party recognizing such possibility shall
     present 


                                       26


   33


     such information to the other Party and the Parties shall have a period of
     sixty (60) days in which to decide whether to begin good faith negotiations
     with each other concerning a potential collaboration, it being understood
     that NEITHER Party shall have any obligation to enter into such
     negotiations. If the Parties decide to collaborate, the terms of such
     collaboration shall be governed by the terms and conditions of a separate
     agreement to be negotiated in good faith by the Parties.

          (ii) If either (A) the Parties choose not to negotiate with each other
     concerning a collaboration regarding a Product that comprises a Program
     Antisense Drug, a Related Antisense Drug or a Program Protein Mimic Drug,
     or (B) the Parties cannot agree to the terms of a collaboration regarding
     such a therapeutic Product, then Millennium shall grant to Astra (1) an
     exclusive license under the Millennium Field Patent Rights and the
     Millennium Field Know-How to research, have researched, develop, have
     developed, make, have made, import, use, have used, offer to sell, sell and
     have sold, within the Field in the Territory, any such Product that
     comprises a Program Antisense Drug, a Related Antisense Drug or a Program
     Protein Mimic Drug that is administered by Airway Delivery, with the right
     to grant sublicenses, on prior notice to Millennium, to make or have made,
     import, use or have used (other than to research, have researched, develop
     or have developed), offer to sell, sell or have sold any such Product
     within the Field in the Territory, (2) a co-exclusive license under the
     Millennium Field Patent Rights and the Millennium Field Know-How to
     develop, have developed, make, have made, import, use, have used, offer to
     sell, sell and have sold outside the Field in the Territory, any Product
     that comprises a Program Antisense Drug, a Related Antisense Drug or a
     Program Protein Mimic Drug that is administered by Airway Delivery for
     which Astra or its permitted sublicensee has commenced a bona fide clinical
     investigation for Airway Delivery of such Product for an indication within
     the Field in the Territory, and (3) a co-exclusive license under the
     Millennium Field Patent Rights and the Millennium Field Know-How to
     research, have researched, develop, have developed, make, have made,
     import, use, have used, offer to sell, sell and have sold, within the Field
     in the Territory, any such Product that comprises a Program Antisense Drug
     or a Related Antisense Drug that is administered by any means other than
     Airway Delivery, with the right to grant sublicenses, on prior notice to
     Millennium, to make or have made, import, use or have used (other than to
     research, have researched, develop or have developed), offer to sell, sell
     or have sold any such Product within the Field in the Territory. Astra
     shall be responsible for all obligations of Astra's Sublicensees hereunder,
     and guarantees to Millennium the performance of all such obligations. The
     

                                       27


   34


     payment of royalties on Net Sales of Products shall remain a direct
     obligation of Astra, regardless of whether sales are made by Astra or an
     Astra Sublicensee. Millennium shall have (w) the co-exclusive right, either
     alone or in collaboration with others, to research, have researched,
     develop, have developed, make, have made, import, use, have used, offer to
     sell, sell and have sold, within the Field in the Territory, any Product
     that comprises a Program Antisense Drug or a Related Antisense Drug that is
     administered by any means other than Airway Delivery; (x) the exclusive
     right, either alone or in collaboration with others, to research, have
     researched, develop, have developed, make, have made, import, use, have
     used, offer to sell, sell and have sold, within the Field in the Territory,
     any Product that comprises a Program Protein Mimic Drug that is
     administered by any means other than Airway Delivery; (y) the exclusive
     right, either alone or in collaboration with others, to research, have
     researched, develop, have developed, make, have made, import, use, have
     used, offer to sell, sell and have sold, outside the Field in the
     Territory, any Product that comprises a Program Antisense Drug, a Related
     Antisense Drug or Program Protein Mimic Drug that is administered by any
     means other than Airway Delivery; and (z) the exclusive right, either alone
     or in collaboration with others, to research, have researched, develop,
     have developed, make, have made, import, use, have used, offer to sell,
     sell and have sold, outside the Field in the Territory, any Product that
     comprises a Program Antisense Drug, a Related Antisense Drug or Program
     Protein Mimic Drug that is administered by Airway Delivery UNLESS Astra or
     its permitted sublicensee has commenced a bona fide clinical investigation
     for Airway Delivery of such Product for an indication within the Field in
     the Territory in which case Millennium's right shall be co-exclusive with
     Astra.

     (c) RIGHT OF FIRST NEGOTIATION FOR PRODUCTS THAT COMPRISE A PROGRAM PROTEIN
DRUG OR PROGRAM ANALOG PROTEIN DRUG.

          (i) During the term of the Research Program and the Astra Development
     Program, Astra shall have a right of first negotiation for collaborations
     concerning the development and commercialization of Products that comprise
     a Program Protein Drug or a Program Analog Protein Drug for use in the
     Field. The initial opportunity to begin such discussions concerning such
     therapeutic Products shall arise when, in the course of the Research
     Program, either Party recognizes the possibility for developing such a
     therapeutic Product or collaborating with a commercial third party who
     possesses technology relevant to the development of such a therapeutic
     Product. When this occurs, the Party recognizing such possibility shall
     present such information to the other 


                                       28


   35


          Party and Astra shall have a period of sixty (60) days in which to
          decide whether to begin good faith negotiations with Millennium
          concerning a potential collaboration. During such sixty (60) day
          period, Millennium shall not enter into an agreement with a commercial
          third party concerning such collaboration. If Astra elects to enter
          into good faith negotiations with Millennium, then the Parties shall
          have sixty (60) days within which to enter into a definitive agreement
          for such collaboration. During this sixty (60) day period, Millennium
          shall not enter into an agreement with a commercial third party
          concerning such collaboration.

               (ii) If either (A) Astra chooses not to negotiate with Millennium
          concerning a collaboration regarding a Product that comprises a
          Program Protein Drug or a Program Analog Protein Drug, or (B) if the
          Parties cannot agree to the terms of a collaboration regarding such a
          therapeutic Product, then Millennium shall grant to Astra: (1) an
          exclusive license under the Millennium Field Patent Rights and the
          Millennium Field Know-How to research, have researched, develop, have
          developed, make, have made, import, use, have used, offer to sell,
          sell and have sold, within the Field in the Territory, any such
          Product that comprises a Program Protein Drug or a Program Analog
          Protein Drug that is administered by Airway Delivery, and (2) a
          co-exclusive license under the Millennium Field Patent Rights and the
          Millennium Field Know-How to develop, have developed, make, have made,
          import, use, have used, offer to sell, sell and have sold, outside the
          Field in the Territory, any such Product that comprises a Program
          Protein Drug or a Program Analog Protein Drug that is administered by
          Airway Delivery for which Astra or its permitted sublicensee has
          commenced a bona fide clinical investigation for Airway Delivery of
          such Product for an indication within the Field in the Territory; in
          each case with the right to grant sublicenses, on prior notice to
          Millennium, to make or have made, import, use or have used (other than
          to research, have researched, develop or have developed), offer to
          sell, sell or have sold any such Product within the Field in the
          Territory. Astra shall be responsible for all obligations of Astra's
          Sublicensees hereunder, and guarantees to Millennium the performance
          of all such obligations. The payment of royalties on Net Sales of
          Products shall remain a direct obligation of Astra, regardless of
          whether sales are made by Astra or an Astra Sublicensee. Millennium
          shall have (x) the exclusive right, either alone or in collaboration
          with others, to research, have researched, develop, have developed,
          make, have made, import, use, have used, offer to sell, sell and have
          sold, within the Field in the Territory, any Product that comprises a
          Program Protein Drug or a Program Analog Protein Drug that is
          administered by any means other than Airway Delivery; (y) the
          exclusive right, either alone or in collaboration with


                                       29


   36


          others, to research, have researched, develop, have developed, make,
          have made, import, use, have used, offer to sell, sell and have sold,
          outside the Field in the Territory, any Product that comprises a
          Program Protein Drug or a Program Analog Protein Drug that is
          administered by any means other than Airway Delivery; and (z) the
          exclusive right, either alone or in collaboration with others, to
          research, have researched, develop, have developed, make, have made,
          import, use, have used, offer to sell, sell and have sold, outside the
          Field in the Territory, any Product that comprises a Program Protein
          Drug or a Program Analog Protein Drug that is administered by Airway
          Delivery UNLESS Astra or its permitted sublicensee has commenced a
          bona fide clinical investigation for Airway Delivery of such Product
          for an indication within the Field in the Territory in which case
          Millennium's right shall be co-exclusive with Astra.

     SECTION 5.4. MILLENNIUM'S RETAINED RIGHTS. Any of Millennium's rights to
Millennium Field Know-How, Millennium Field Patent Rights, Millennium Core
Technology Know-How and Millennium Core Technology Patent Rights not
specifically licensed to Astra pursuant to this Article V shall be retained by
Millennium, including without limitation (a) Millennium's exclusive right to
make, have made, use, and have used Pre-Candidate Genes, Candidate Genes,
Validated Targets and Validated Proteins in the Territory to research and
develop pharmaceutical products for use outside the Field except for Products
that comprise (i) a Program Small Molecule Drug, a Related Small Molecule Drug,
a Program Peptido Mimetic Drug, a Related Peptido Mimetic Drug or a Modified
Drug, or (ii) a Program Antisense Drug, a Related Antisense Drug, a Program
Protein Mimic Drug, a Program Protein Drug, or a Program Analog Protein Drug if
Astra has commenced a bona fide clinical investigation for Airway Delivery of
any such Product for an indication in the Field in which case Millennium shall
have a co-exclusive right with Astra for Airway Delivery of such Products
outside the Field, and (b) Millennium's exclusive right to research, have
researched, develop, have developed, make, have made, import, use, have used,
offer to sell, sell and have sold, within and outside the Field in the
Territory, (i) any Small Molecule Drug (subject to the provisions of Section 5.5
with respect to a Millennium Drug), Peptido Mimetic Drug (subject to the
provisions of Section 5.5 with respect to a Millennium Drug), Antisense Drug,
Protein Drug, Analog Protein Drug and/or Protein Mimic Drug, in each case, that
is owned or otherwise controlled by Millennium and that is not a Product, and
(ii) any Gene Therapy Drug and/or Diagnostic Product that is owned or otherwise
controlled by Millennium.

     SECTION 5.5. MILLENNIUM DRUGS. Millennium shall retain the right to exploit
Millennium Field Know-How and any other Know-How developed by Millennium in the
course of the Research Program to develop and use, whether alone or in
collaboration with third parties, compound screens that embody or are based on


                                       30


   37
                         Confidential Materials omitted and filed
                       separately with the Securities and Exchange
                        Commission. Asterisks denote omissions.

Validated Targets that result from the Millennium Research Program (the
"Millennium Compound Screens"). In the event that as part of its efforts to
develop Millennium Drugs, Millennium transfers a Millennium Compound Screen to a
third party for the purpose of such third party conducting screening efforts at
its facility (a "Third Party Offsite Screening Program"), Millennium shall
notify Astra in writing of such arrangement and provide written evidence that
such third party has no right either to develop or otherwise commercialize any
resulting Millennium Drug in the Field or to further sublicense rights to use
the Millennium Compound Screen to another third party. The foregoing
notwithstanding, [**](as defined below) to undertake a [**]. As used herein, a
[**] shall mean a [**] by the [**] in its then most current survey among the
[**] derived from the [**].

     Millennium shall retain the exclusive right to research, have researched,
develop, have developed, make, have made, import, use, have used, offer to sell,
sell and have sold, any Millennium Drug outside the Field in the Territory,
either alone or in collaboration with others. In the event that, during the term
of the Millennium Research Program or the Astra Development Program, a
Millennium Drug owned, licensed with the right to grant sublicenses, or
otherwise controlled by Millennium is identified to have potential as a
therapeutic product within the Field, then Millennium shall (a) inform Astra of
the existence and potential utility in the Field of such Millennium Drug and (b)
at Astra's request, enter into discussions with Astra regarding the possibility
of a collaboration between Millennium and Astra concerning the research,
development and/or commercialization of such Millennium Drug within the Field.
Millennium shall not, either alone or in collaboration with a third party, make,
have made, import, use, have used, offer to sell, sell, or have sold such
Millennium Drug within the Field in the Territory, without the prior written
consent of Astra.

     In the event that Astra is unable to fully exploit its rights to
commercialize Products within the Field in the Territory, as set forth in
Section 5.3(a)(i), without infringing an intellectual property right that
relates to a Millennium Drug and is owned by, licensed to (with the right to
grant sublicenses) or otherwise controlled by Millennium, Millennium shall grant
to Astra a license (or sublicense) under such intellectual property right to the
extent necessary to enable Astra to fully exploit its rights as set forth in
Section 5.3(a)(i); such license (or sublicense) shall not impose on Astra any
additional financial obligations beyond those otherwise provided for herein.

     SECTION 5.6. RIGHTS TO POTENTIAL CANDIDATE GENES, VALIDATED TARGETS AND
VALIDATED PROTEINS. Within [**] following the expiration of the Millennium
Research 


                                       31


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Program, Astra may designate any Pre-Candidate Gene or Candidate Gene as a
Validated Target and/or a Validated Protein, PROVIDED, HOWEVER, that at the time
of such designation(s) Astra shall pay to Millennium the following milestone
payment(s): (a) two hundred thousand dollars ($200,000) for the first such
designated Validated Target or Validated Protein; (b) three hundred and fifty
thousand dollars ($350,000) for the second such designated Validated Target or
Validated Protein; (c) three hundred and fifty thousand dollars ($350,000) for
the third such designated Validated Target or Validated Protein; and (d) five
hundred thousand dollars ($500,000) for each additional designated Validated
Target or Validated Protein. Upon any such designation(s), each designated
Validated Target and/or Validated Protein shall be subject to all terms and
conditions of this Agreement that relate to any Validated Target and/or
Validated Protein.

     SECTION 5.7. ASTRA'S RIGHTS TO DIAGNOSTIC PRODUCTS NOT BEING COMMERCIALIZED
BY MILLENNIUM. Notwithstanding Millennium's exclusive rights to Diagnostic
Products set forth in Section 5.4, if Astra is developing a Product for which it
is necessary or useful to develop a Diagnostic Product to ascertain the
predisposition of an individual to respond favorably or unfavorably to the
administration of such Product (for example, where (a) the United States Food
and Drug Administration (or a comparable regulatory authority in another
country) requires that an individual be tested with a Diagnostic Product prior
to the administration of the associated Product, as a condition of registering
and approving for commercial sale such Product, or (b) it is determined, in the
reasonable judgment of Astra (based on written information that is made
available to Millennium), that a Diagnostic Product must be marketed and sold
with such Product in order for such Product to achieve significant market
penetration in the Territory), and Millennium is unwilling or unable to develop
and commercialize such Diagnostic Product either alone or in collaboration with
a third party, then Astra shall have the right to develop and commercialize a
Diagnostic Product, either alone or in collaboration with a third party, that is
based on polymorphisms of a Genetics Candidate Gene or Validated Target under
the terms set forth in a separate agreement.

                                   ARTICLE VI

                PATENT OWNERSHIP, PROTECTION AND RELATED MATTERS

     SECTION 6.1. OWNERSHIP. Astra shall own all inventions within the scope of
the Research Program or the Astra Development Program made solely by its
employees, and Millennium shall own all inventions within the scope of the
Research Program made solely by its employees. All inventions made jointly by
employees of Astra and employees of Millennium shall be owned jointly by Astra
and Millennium. All patent applications and patents covering any invention made
within the scope of the 


                                       32


   39


Research Program or the Astra Development Program shall be owned by the Parties
or Party, as the case may be, that own(s) said invention.

     SECTION 6.2. PATENTABLE INVENTIONS.

          (a) If a patentable invention related to the Field is (i) conceived or
     reduced to practice prior to the Effective Date and included within
     Millennium Field Patent Rights, or (ii) conceived in the course of and
     within the scope of the Research Program and is reduced to practice within
     the course of the Research Program or the Astra Development Program (with
     respect to either subsection (i) or (ii), a "Section 6.2 Invention"), Astra
     and Millennium shall discuss that invention and the desirability of filing
     a United States patent application covering such invention, as well as any
     foreign counterparts. The Party owning the Section 6.2 Invention
     (determined in accordance with Section 6.1) shall make the final decision
     with respect to any such filings. If a Section 6.2 Invention is made
     jointly, the Joint Management Team shall determine which Party shall file
     and prosecute the application. If either (1) the Joint Management Team is
     unable to make such a determination or (2) no decision is made regarding
     which Party shall file and prosecute the application covering such jointly
     owned invention, then in the event such jointly made invention relates to a
     (i) Candidate Gene, Validated Target, Validated Protein, Millennium Drug,
     Gene Therapy Drug or Diagnostic Product, Millennium shall have the first
     option to file and prosecute the application for such jointly made
     inventions, and (ii) Modified Drug, Program Small Molecule Drug, Related
     Small Molecule Drug, Program Peptido Mimetic Drug, Related Peptido Mimetic
     Drug, Program Antisense Drug, Related Antisense Drug, Program Protein Drug,
     Program Analog Protein Drug or Program Protein Mimic Drug, Astra shall have
     the first option to file and prosecute the application for such jointly
     made invention. In the event that either Party declines the option to file
     and prosecute any such patent application for such jointly made invention,
     the Party not having such option may, upon written notice to the other
     Party, file and prosecute the application for such jointly made inventions.

          (b) Subject to (i) the grant of licenses to Astra under Article V,
     (ii) the limitations on Astra's rights outside the Field, (iii) the
     retained rights of Millennium and (iv) Astra's royalty payment obligations
     for Products under Article VIII, each Party shall be free to use jointly
     owned patents within the Territory without restriction and without payment
     of any additional compensation to the other Party.

     SECTION 6.3. REVIEW AND COMMENT. Each Party shall provide the other Party
with a copy of any patent application which first discloses any Section 6.2
Invention prior to filing the first of such applications in any jurisdiction, if
possible, for review 


                                       33


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                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

and comment by such other Party, which shall maintain any
such patent application in confidence, pursuant to Article IV.

     SECTION 6.4. NOTICE OF DECISION. If a Party decides not to file, prosecute
or maintain an application or patent on a Section 6.2 Invention in any country,
it shall give the other Party reasonable notice to this effect. After such
notice, the other Party may file, or maintain the application or patent, in
which event the first Party shall execute such documents and perform such acts
as may be reasonably necessary for the other Party to file, prosecute or
maintain such application.

     SECTION 6.5. PATENT TERM EXTENSIONS. The Parties shall cooperate, if
necessary and appropriate, with each other in gaining patent term extension
wherever applicable to Program Patent Rights covering Products. The Parties
shall, if necessary and appropriate, use reasonable efforts to agree upon a
joint strategy relating to patent term extensions, but, in the absence of mutual
agreement with respect to any extension issue, the Party selling the Product
covered by such extension shall determine which patents shall be extended,
PROVIDED THAT if both Parties are selling such Product, Astra shall have the
final decision how and when to apply for such extension. All filings for such
extension shall be made by the Party to whom the patent is assigned, PROVIDED,
HOWEVER, that in the event that the Party to whom the patent is assigned elects
not to file for an extension, such Party shall (i) inform the other Party of its
intention not to file and (ii) grant the other Party the right to file for such
extension.

     SECTION 6.6. COSTS AND EXPENSES. Each Party shall bear its own costs and
expenses in filing, prosecuting, maintaining and extending Patent Rights arising
out of the Research Program and the Astra Development Program, except that Astra
shall reimburse Millennium [**] of the costs of filing, prosecuting, maintaining
and extending Millennium Field Patent Rights incurred on and after the Effective
Date. Astra shall, however, have the right to decline to so reimburse Millennium
with respect to a Millennium Field Patent Right in any country or countries in
the Territory by so notifying Millennium in writing, in which event the licenses
granted to Astra in Article V with respect to such Millennium Field Patent Right
in such country or countries shall terminate, unless otherwise agreed in
writing.

     SECTION 6.7. THIRD PARTY INFRINGEMENT.

          (a) Millennium and Astra each agrees to take reasonable actions to
     protect the Program Patent Rights from infringement in the Field and to
     protect the Program Know-How from unauthorized use in the Field, when, 


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     from its own knowledge or upon notice by the other Party, the Party with
     knowledge or receiving notice becomes aware of the reasonable probability
     that such infringement or unauthorized use exists in the Field.

          (b) Within sixty (60) days of becoming aware of the reasonable
     probability of an interference or infringement of the Program Patent Rights
     in the Field or unauthorized use of the Program Know-How in the Field, the
     Responsible Party (as defined below) shall decide whether to institute an
     infringement suit or take other appropriate action that it believes is
     reasonably required to protect the Program Patent Rights and Program
     Know-How in the Field. If the Responsible Party fails to institute such
     suit or take such action within such 60-day period, then the other Party
     shall have the right at its sole discretion to institute such suit or other
     appropriate action in the name of either or both Parties. In such event,
     the Responsible Party shall cooperate with the other Party to the extent
     reasonably possible.

          (c) Neither Party shall settle or compromise any claim or proceeding
     relating to Program Patent Rights or Program Know-How in the Field without
     the consent of the other Party, which consent shall not be unreasonably
     withheld, PROVIDED THAT no such consent of Millennium shall be required
     with respect to Patent Rights owned by, licensed to or otherwise controlled
     by Astra (other than Millennium Field Patent Rights and Millennium Core
     Technology Patent Rights).

          (d) As used herein, the term "Responsible Party" means (i) Astra with
     respect to Patent Rights owned by, licensed to or otherwise controlled by
     Astra (other than Millennium Field Patent Rights and Millennium Core
     Technology Patent Rights) and Patent Rights owned jointly by Astra and
     Millennium, and (ii) Astra with respect to Millennium Field Patent Rights,
     subject to agreements between Millennium and any third party which has
     licensed such Patent Rights to Millennium.

          (e) Each Party shall assume and pay all of its own out-of-pocket costs
     incurred in connection with any litigation or proceedings described in this
     Section 6.7, including, without limitation, the fees and expenses of that
     Party's counsel.

          (f) Any recovery obtained by any Party as a result of any proceeding
     described in this Section 6.7 or from any counterclaim or similar claim
     asserted in a proceeding described in Section 6.10, by settlement or
     otherwise, shall be applied in the following order of priority:


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                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

               (i) first, to reimburse each Party for all litigation costs in
          connection with such proceeding paid by that Party and not otherwise
          recovered; and

               (ii) second, the remainder of the recovery shall be paid [**] to
          Astra and [**] to Millennium.

     SECTION 6.8. MILLENNIUM CORE TECHNOLOGY. Millennium shall have the right to
make all determinations, control any proceedings and settle or compromise any
claims relating to infringement or unauthorized use of Millennium Core
Technology Patent Rights or Millennium Core Technology Know-How.

     SECTION 6.9. NOTICE OF CERTIFICATION. Millennium and Astra each shall
immediately give notice to the other of any certification filed under the U.S.
"Drug Price Competition and Patent Term Restoration Act of 1984," or comparable
law in other countries where applicable Program Patent Rights are maintained,
claiming that a Program Patent Right is invalid or that any infringement will
not arise from the manufacture, use or sale of any Product in the Field by a
third party. If the Responsible Party decides not to bring infringement
proceedings against the entity making such a certification, the Responsible
Party shall give notice to the other Party of its decision not to bring suit
within twenty-one (21) days after receipt of notice of such certification. The
other Party may then, but is not required to, bring suit against the Party that
filed the certification. Any suit by Astra or Millennium shall either be in the
name of Astra or in the name of Millennium, or jointly by Astra and Millennium,
as may be required by law. For this purpose, the Party not bringing suit shall
execute such legal papers necessary for the prosecution of such suit as may be
reasonably requested by the Party bringing suit.

     SECTION 6.10. CLAIMED INFRINGEMENT; CLAIMED INVALIDITY.

          (a) If the activities of either Party in connection with the Research
     Program, the Astra Development Program or as the result of making,
     importing, using, offering to sell or selling a Product in the Field result
     in a claim of patent infringement or other violation of the intellectual
     property rights of any third party, the Party who is accused of such
     infringement shall defend itself at its sole cost. The other Party shall
     cooperate with the accused Party in such defense and prosecution and shall
     have the right to be represented by counsel of its own choice.


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                       separately with the Securities and Exchange
                        Commission. Asterisks denote omissions.


          (b) If a third party at any time asserts a claim that any Program
     Patent Right is invalid or otherwise unenforceable (an "Invalidity Claim"),
     whether as a defense in an infringement action brought by Astra or
     Millennium pursuant to Section 6.7 or Section 6.9, or in an action brought
     against Astra or Millennium, the Parties shall cooperate with each other in
     preparing and formulating a response to such Invalidity Claim. The Party
     responsible for responding to such claim, at its sole expense, shall be
     initially the Responsible Party, subject to the other Party's right, at its
     sole expense, to assume responsibility if the Responsible Party elects not
     to do so. Neither Party shall settle or compromise any Invalidity Claim
     without the consent of the other Party, which consent shall not be
     unreasonably withheld, PROVIDED THAT no such consent of Millennium shall be
     required with respect to an Invalidity Claim relating to Patent Rights
     owned by, licensed to or otherwise controlled by Astra (other than
     Millennium Field Patent Rights and Millennium Core Technology Patent
     Rights)

                                   ARTICLE VII

                               ASTRA DUE DILIGENCE

     SECTION 7.1. CANDIDATE GENES. After the term of the Research Program and
during the term of the Astra Development Program, Astra shall use [**] to move
each Candidate Gene into Validated Target or Validated Protein status. Such
efforts [**] in connection with [**] that are at a [**] and that are of [**] and
[**]. Within thirty (30) days after the end of each calendar half-year during
the term of the Astra Development Program, Astra shall provide Millennium with a
written report describing Astra's progress in moving each Candidate Gene into
Validated Target or Validated Protein status. If Astra fails to satisfy its
diligence obligations as set forth in this Section 7.1, as agreed between the
Parties or determined pursuant to the dispute resolution process as set forth in
Section 12.2, with respect to any Candidate Gene, then Astra's exclusive rights
with respect to therapeutic products that are identified through use of such
Candidate Gene and its Validated Target or Validated Protein, as the case may
be, [**] (with Millennium, either alone or in collaboration with others), as
[**].

     SECTION 7.2. VALIDATED PROTEINS. During the term of the Research Program
and the Astra Development Program, Astra shall use [**] to utilize each
Validated Protein to discover and develop Products. Such efforts [**] in
connection with [**]


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                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

that are at a [**] and that are of [**] and [**]. Within thirty (30) days after
the end of each calendar half-year during the term of the Research Program and
the term of the Astra Development Program, Astra shall provide Millennium with a
written report describing Astra's progress in using Validated Proteins to
discover and develop Products. If Astra fails to satisfy its diligence
obligations as set forth in this Section 7.2, as agreed between the Parties or
determined pursuant to the dispute resolution process as set forth in Section
12.2, with respect to any Validated Protein, then Astra's exclusive rights (if
any) with respect to therapeutic products that are identified through the use of
such Validated Protein and the Candidate Gene from which it was derived,
[**](with Millennium, either alone or in collaboration with others), as [**].

     SECTION 7.3. VALIDATED TARGETS. During the term of the Research Program and
the Astra Development Program, Astra shall use [**] to utilize each Validated
Target to discover and develop Hits, Leads, Candidate Drugs and Products. Such
efforts [**] in connection with [**] that are at [**] and that are of [**] and
[**]. Within thirty (30) days after the end of each calendar half-year during
the term of the Research Program and the term of the Astra Development Program,
Astra shall provide Millennium with a written report describing Astra's progress
in using Validated Targets to discover and develop Hits, Leads, Candidate Drugs
and Products. If Astra fails to satisfy its diligence obligations as set forth
in this Section 7.3, as agreed between the Parties or determined pursuant to the
dispute resolution process as set forth in Section 12.2, with respect to any
Validated Target, then Astra's exclusive rights with respect to therapeutic
products that are identified through the use of such Validated Target, and the
Candidate Gene from which it was derived, [**] (with Millennium, either alone or
in collaboration with others) as [**].

     SECTION 7.4. ASTRA MINIMUM EFFORTS. Notwithstanding any other provisions in
this Agreement after the Research Program and during the Astra Development
Program, [**] to use [**] (a) [**] into [**] or [**], (b) to [**], or (c) to
[**], if Astra is using [**] and the [**].

     SECTION 7.5. COMMERCIALIZATION. Astra agrees to use [**] to conduct
required clinical development activities and seek regulatory approval in all
Major Market Countries for each Product. Such efforts shall [**] in connection
with [**] that are at a [**] in the [**] and are of [**]. Upon receipt of
regulatory approval, Astra agrees to use [**] to market and sell each such
Product in all Major Market Countries, provided, however, that [**] in a Major
Market Country where (i) [**] to the [**] of the [**], and (ii) [**] with
reasonable written documentation [**]. Within thirty (30) days after the end of
each calendar half-year, Astra shall provide 


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                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

Millennium with a written report describing Astra's efforts with respect to the
development and/or commercialization of each Product in each Major Market
Country. [**], as agreed between the Parties or determined pursuant to the
dispute resolution process as set forth in Section 12.2, with respect to any
Product in any Major Market Country (an "Abandoned Market"), Millennium shall
notify Astra. [**] such [**], then [**] with respect to commercialization of
therapeutic products in such Abandoned Market shall be [**] (with Millennium,
either alone or in collaboration with others), as Millennium's [**], and
Millennium shall have the right, either alone or in collaboration with others,
to develop and commercialize therapeutic products for use in the Field in the
Abandoned Market that are identified through the use of the Candidate Gene from
which such Product was derived, and the related Validated Target or Validated
Protein, as the case may be. [**] with respect to such Product in other Major
Market Countries, or to other Products in the Abandoned Market, [**].

     Notwithstanding the foregoing, [**] to develop or commercialize a Product
in a Major Market Country if (a) Astra provides to Millennium [**] from the
perspective of Millennium, and Millennium, following consideration of [**] as
set forth in this Section 7.5 with respect to such Product in such Major Market
Country or (b) [**] Product in such Major Market Country and the sale of such
other Product will [**].

     SECTION 7.6. NICHE PRODUCTS. From time to time after the conclusion of the
Research Program, but no more than once per Contract Year, Millennium shall have
the right to submit to Astra a written proposal relating to the development of a
product for a specific indication (a "Specified Indication") in the Field
(excluding the following indications: [**] and any other indication in the Field
with respect to which Astra is actively pursuing [**]) (a "Niche Product
Development Proposal"). Notwithstanding the foregoing, Millennium may not make a
Niche Product Development Proposal which involves the use of a Candidate Gene,
Validated Target or Validated Protein currently under active development by
Astra in the Astra Research Program or the Astra Development Program. Each Niche
Product Development Proposal shall include a preliminary development plan to
identify and/or develop such a product as well as a description of known
linkages between the Specified Indication and any Candidate Gene, Validated
Target or Validated Protein. Astra shall provide Millennium with notification,
within ninety (90) days after receipt of a Niche Product Development Proposal,
indicating whether or not it has a good faith interest in evaluating further the
Niche Product Development Proposal (an "Astra Preliminary Notice"). If Astra
indicates in the Astra Preliminary Notice that it wishes to evaluate further the
Niche Product Development Proposal, Astra shall undertake such evaluation in a
reasonably expeditious manner. Astra shall provide Millennium with notification
as soon as possible, but in no event later


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                     Commission. Asterisks denote omissions.

than nine (9) months after the date of the Astra Preliminary Notice, whether it
intends to develop a product for the Specified Indication set forth in the Niche
Product Development Proposal (the "Astra Final Notice"). If either (i) the Astra
Preliminary Notice indicates that Astra does not wish to evaluate the
opportunity to develop a product for such Specified Indication or (ii) the Astra
Final Notice indicates that Astra does not wish to develop a product for such
Specified Indication, or (iii) if Astra does not provide the Astra Preliminary
Notice or Astra Final Notice in the requisite time periods, Millennium shall
have the co-exclusive right (with Astra) to develop (either alone or in
collaboration with others) a product for the Specified Indication and shall have
all requisite rights and licenses under Millennium Field Patent Rights or
Millennium Field Know-How, including rights to sublicense, necessary for the
development, use and sale of such a product solely for such Specified
Indication. In such event, Millennium and/or any third party collaborators shall
use [**] to develop such product for the Specified Indication, conduct required
clinical development activities, seek regulatory approvals and commercialize
such product, PROVIDED THAT Millennium may, at any time, by written notice to
Astra, cease such efforts and waive its rights to develop and commercialize such
product for the Specified Indication. In the event that Astra indicates in the
Astra Final Notice that Astra wishes to develop a product for the Specified
Indication, then (i) such product shall be considered a Product for purposes of
this Agreement, and (ii) Astra's development and commercialization obligations
set forth in Sections 7.2, 7.3, 7.4 and 7.5 shall apply to such Product
regardless of whether another Product is then being developed or commercialized
by Astra.

                                  ARTICLE VIII

                                    PAYMENTS

     SECTION 8.1. INITIAL LICENSE FEES. Astra has made the following
non-refundable payments to Millennium in consideration of the rights granted to
Astra under this Agreement:

          (a) [**] on or before December 20, 1995;

          (b) [**] on or before December 31, 1997.

     SECTION 8.2. ADDITIONAL FEES. Astra shall make the following payments to
Millennium upon the renewal or termination of the Millennium Research Program,
pursuant to Section 2.7


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                     Commission. Asterisks denote omissions.

          (a) [**] within two (2) months after the conclusion of the third
     Contract Year as consideration for Millennium providing in the fourth
     Contract Year an average minimum of twenty (20) FTE's as reviewed and
     verified by the Joint Management Team on a quarterly basis;

          (b) [**] within two (2) months after the conclusion of the fourth
     Contract Year as consideration for Millennium providing in the fifth
     Contract Year an average minimum of twenty (20) FTE's as reviewed and
     verified by the Joint Management Team on a quarterly basis;

          (c) [**] within two (2) months after the conclusion of the fifth
     Contract Year if, pursuant to Section 2.7(c), the Millennium Research
     Program is terminated at Astra's election at the end of the fifth Contract
     Year;

     [**] of the [**] to this [**] except that such [**] for any [**] to [**] of
     the [**] otherwise payable to [**].

     SECTION 8.3. RESEARCH FUNDING.

          (a) FTE SUPPORT. In support of research and development to be
     conducted by Millennium pursuant to this Agreement, Astra will make the
     following payments to Millennium:

               (i) To fund the Millennium Research Program, Astra shall pay to
          Millennium an amount equal to the following amounts per FTE: The
          full-time equivalent rate shall be [**] per FTE (all inclusive) from
          the Effective Date to December 31, 1996 (the "FTE Rate"). On each
          January 1 thereafter, the FTE Rate shall be adjusted by an amount
          equal to the percentage increase or decrease, if any, in the United
          States Consumer Price Index (or any comparable successor index
          thereto) from the immediately preceding January 1.

               (ii) During the first three (3) Contract Years, Millennium shall
          provide, and Astra shall fund, a minimum (but not more than the number
          of FTEs actually provided by Millennium) of [**] FTEs for the first
          Contract Year; [**] FTEs for the second Contract Year; and [**] FTEs
          for the third Contract Year; it being understood that the number of
          FTEs actually working on the Millennium Research Program in the first
          Contract Year will gradually increase as FTEs are hired.


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                     Commission. Asterisks denote omissions.

               (iii) In accordance with Astra's election, pursuant to Section
          2.7(b) and 2.7(c), to extend the term of the Millennium Research
          Program until the end of the seventh Contract Year, Millennium shall
          provide, and Astra shall fund, during the fourth through seventh
          Contract Years, a minimum (but Astra shall not fund more than the
          number of FTEs actually provided by Millennium) of [**] FTEs for the
          fourth Contract Year, [**] FTEs for the fifth Contract Year, [**] FTEs
          for the sixth Contract Year, and [**] for the seventh Contract Year.

               (iv) The numbers set forth above for FTE employees to be provided
          by Millennium, and funded by Astra, for research and development from
          the Effective Date through the end of the Millennium Research Program
          may be adjusted from time to time by decision of the Joint Management
          Team, PROVIDED, HOWEVER, that the number of FTEs funded by Astra shall
          not be below the minimums set forth above, except by mutual agreement
          of the Parties.

               (v) Within ten (10) days of the first day of each contract
          quarter, Astra shall pay to Millennium the total amount due for the
          upcoming quarter. Within thirty (30) days of the completion of each
          contract quarter, Millennium shall provide Astra with a written
          statement setting forth the actual numbers of FTEs provided, and shall
          provide Astra with a credit for any amounts overpaid by Astra or bill
          Astra for any amounts underpaid during such contract quarter (except
          that with respect to the last quarterly payment of the last Contract
          Year, Millennium shall reimburse Astra for any amounts overpaid by
          Astra).

               (vi) If third party collaborative research expenses incurred by
          Millennium in support of the Millennium Research Program in any
          Contract Year exceeds an amount equal to [**], then Astra shall
          reimburse Millennium for such excess collaborative research expenses
          subject to the approval of the Joint Management Team.

     (b) RECORDS AND AUDITS. Millennium shall keep complete and accurate records
of the latest three (3) years of FTEs. Astra shall have the right annually at
Astra's expense to have an independent, certified public accountant, reasonably
acceptable to Millennium, review such records in the location(s) where such
records are maintained by Millennium upon reasonable notice and during regular
business hours for the purposes of verifying FTEs on 


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                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

          an annual basis for which Astra has provided funding pursuant to the
     Millennium Research Program. Results of such review shall be made available
     to both Parties. If the review reflects an overpayment of funding to
     Millennium, such overpayment shall be promptly remitted to Astra. If the
     overpayment is equal to or greater than five percent (5%) of the actual
     annual funding amount that was otherwise due, Astra shall be entitled to
     have Millennium pay all of the costs of such review.

     SECTION 8.4. MILESTONES. Within thirty (30) days upon the achievement of
the following milestones, Astra shall pay to Millennium the specified milestone
payments, all of which shall be non-refundable:

          (a) The sum of [**] for [**] (i) that is [**], or (ii) that is [**] or
     [**] in the Field for the [**], in each case in the course of the
     Millennium Research Program; provided that no more than [**] may qualify
     for this milestone payment until [**]. Upon the identification of each and
     every [**] or [**], the number of [**] eligible for this milestone payment
     shall increase by [**]. In the event that, (i) following the receipt by
     Millennium of a milestone payment with respect to a [**] pursuant to this
     Section 8.4(a), it is demonstrated that [**] in a disease or condition in
     the Field, and (ii) as a result of the circumstance described in clause (i)
     above, [**], if any, with respect to such [**], then [**] of such milestone
     payment shall be [**] as soon as possible [**] under this Agreement.

          (b) The sum of [**] for each [**] that is successfully identified. In
     the event that, (i) following the receipt by Millennium of a milestone
     payment with respect to a [**] pursuant to this Section 8.4(b), it is
     demonstrated that a [**] that constitutes [**] of such [**] in a [**] or
     [**], and (ii) as a result of the circumstance described in clause (i)
     above, [**], if any, with respect to such [**] or such [**], then [**] of
     such milestone payment shall be [**] as soon as possible [**] under this
     Agreement.

          (c) The sum of [**] or each [**] that is successfully identified. In
     the event that, (i) following the receipt by Millennium of a milestone
     payment with respect to a [**] pursuant to this Section 8.4(c), it is
     demonstrated that [**] that constitutes [**] in a [**] or [**], and (ii) as
     a result of the circumstance described in clause (i) above, [**], if any,
     with respect to such [**], then [**] of such milestone payment shall be
     [**] as soon as possible [**] under this Agreement.


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                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

          (d) The sum of [**] for each [**] based on a [**].

          (e) The sum of [**] of either (i) [**] or (ii) [**], including [**]
     but excluding [**]; PROVIDED, that each [**] and each [**] shall be counted
     only once and shall be counted in the order in which it is identified. For
     the purposes of clarity, should the order of identification be [**], then
     [**], then [**], such sequence of identification shall be considered the
     identification of [**].

          (f) The sum of [**] for each [**] that is successfully identified from
     a [**] arising from a [**].

          (g) The sum of [**] for each [**] that is successfully identified from
     a [**] arising from a [**] whether or not it is a [**], but excluding a
     [**].

          (h) Upon the [**] or its equivalent in the first Major Market Country,
     the sum of [**] for each Product.

          (i) Upon the [**] or its equivalent in the first Major Market Country,
     the sum of [**] for each Product.

          (j) Upon the [**] or its equivalent in the first Major Market Country,
     the sum of [**] for each Product.

          (k) Upon filing of a [**] or its equivalent in the first Major Market

          (l) Upon approval of a [**] or its equivalent in the first Major
     Market Country, the sum of [**] for each Product.

Notwithstanding the foregoing to the contrary, (i) [**] payment shall be made
pursuant to [**] for [**] with respect to which [**] has [**] pursuant to such
Subsection, and (ii) the [**] to be made pursuant to [**] shall be [**] of the
amount specified in such Subsection with respect to a Product that (A) comprises
a [**] or a [**] or a [**] that corresponds to a [**] or [**] or a [**], as the
case may be, that [**] with respect to which [**] pursuant to such Subsection,
or (B) comprises a [**] based upon, or a [**], a [**] that is [**] with respect
to which [**] pursuant to such Subsection.

     If Astra begins the development of a Product and later ceases development
of said Product due to [**] or the Product is [**], then any milestone payments
made 


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                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

under [**] shall be [**] which [**] that (1) [**] of the [**] as contained in
the [**], (2) [**] or a [**] that corresponds to the [**] or the [**] or a [**],
as the case may be, contained in the [**], or (3) [**] based upon, or a [**],
the [**] contained in the original Product.

     SECTION 8.5. ROYALTY PAYMENTS TO MILLENNIUM ON PRODUCTS.

          (a) Astra shall pay to Millennium royalties on Products that comprise
     a Program Small Molecule Drug or a Related Small Molecule Drug or a Program
     Peptido Mimetic Drug or a Related Peptido Mimetic Drug or a Program
     Antisense Drug or a Related Antisense Drug or a Program Protein Drug or a
     Program Analog Protein Drug or a Program Protein Mimic Drug. The royalties
     on each Product shall be payable initially at the rate of [**] of Net
     Sales, PROVIDED THAT, at such time as Net Sales for a Product in any
     calendar year exceed [**] then the royalty rate on all Net Sales of such
     Product in such calendar year (retroactive to the beginning of such year)
     and for all future calendar years shall be [**] of Net Sales of such
     Product, and PROVIDED FURTHER, that at such time as Net Sales for a Product
     in any calendar year exceed [**] then the royalty rate on all Net Sales of
     such Product in such calendar year (retroactive to the beginning of such
     year) and for all future calendar years shall be [**] of Net Sales of such
     Product.

          (b) Astra shall pay to Millennium royalties of [**] of Net Sales on
     Products that comprise a Modified Drug. Notwithstanding the provisions of
     paragraphs (a) and (b) above, the royalty rates set forth in this Section
     8.5 shall be reduced, on a country-by-country basis, by [**] on Net Sales
     of any Product [**]. For the purposes of this Article VIII, a Product is
     afforded "[**]," in the circumstance where, on a country-by-country basis,
     (i) the [**] contained within such Product is [**], or (ii) such Product
     [**].

     SECTION 8.6. LENGTH OF ROYALTY PAYMENTS. The royalties payable under
Sections 8.5 shall be paid on a country-by-country basis from the date of First
Commercial Sale for each Product until the termination of any Legal Exclusivity
afforded such Product in such country, or until [**] years after such First
Commercial Sale, whichever is longer. Notwithstanding the foregoing, all
obligations of Astra to pay royalties to Millennium on the Net Sales of Products
pursuant to Section 8.5 shall [**].


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                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

     SECTION 8.7. ROYALTIES PAYABLE ONLY ONCE. The obligation to pay royalties
is imposed only once with respect to the same unit of Product. Except as
specifically provided in this Agreement, it is understood and agreed that there
shall be no deductions from the royalties payable hereunder.

     SECTION 8.8. OTHER PRODUCTS. Astra shall have no obligations to Millennium
to make any milestone payments or royalty payment for any Other Products.

     SECTION 8.9. PAYMENT OBLIGATIONS TO THIRD PARTIES. Each Party shall be
solely responsible for fulfilling any of its past or future payment obligations
arising from such Party's agreements or other arrangements with third parties.

     SECTION 8.10. BANKRUPTCY. In the event that

          (a) a Millennium Event of Bankruptcy (as defined below) occurs during
     the term of the Millennium Research Program; AND

          (b) as a result of the Millennium Event of Bankruptcy, the trustee in
     bankruptcy rejects or disavows this Agreement, or Millennium fails to
     comply with its continuing obligations with respect to the conduct of the
     Research Program,

then the Research Program shall be deemed to be terminated, and Astra shall not
be obligated to make any additional license fee payment or research funding
payments from and after the date of such termination. Furthermore, Astra shall
not be obligated to make any milestone or royalty payments relating to (i)
Modified Drugs that were not in development under the Research Program at the
time of such termination, or (ii) other Products that are not based upon or
derived from Candidate Genes, Validated Proteins or Validated Targets
identified, discovered or the development of which was undertaken in the course
of the Research Program. The foregoing shall not affect, and Astra shall remain
obligated to make all applicable [**] relating to, [**] identified, discovered
or the development of which was undertaken in the course of the Research
Program, and all Products based upon or derived therefrom. As used above, the
term "Millennium Event of Bankruptcy" means (a) the appointment of a custodian
or receiver for Millennium or any material part of the property of Millennium if
such appointment is not terminated or dismissed within ninety (90) days, (b) the
institution by Millennium of any proceeding under the United States Bankruptcy
Code or any other federal or state bankruptcy, reorganization, receivership, or
other similar law affecting the rights of creditors generally or the making by
Millennium of a composition or any assignment or trust 


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mortgage for the benefit of creditors, or (c) the institution against Millennium
of a proceeding under the United States Bankruptcy Code or any other federal or
state bankruptcy, reorganization, receivership, or other similar law affecting
the rights of creditors generally, which proceeding is not dismissed within
ninety (90) days of filing.

                                   ARTICLE IX

                                   ACCOUNTING

     SECTION 9.1. ROYALTY REPORTS. Astra shall deliver to Millennium, within
sixty (60) days after the end of each calendar quarter, a written accounting of
Astra's and its Sublicensees' sales and other consideration received subject to
royalty payment due to Millennium for such quarter. Such quarterly reports shall
indicate the Net Sales of Products on a country-by-country basis. This
obligation shall commence with the first calendar quarter in which there is a
Net Sale of a Product by Astra or any of its Sublicensees.

     SECTION 9.2. DELIVERY OF ROYALTY. When Astra delivers the accounting to
Millennium, Astra shall also deliver all royalty payments due to Millennium for
the calendar quarter.

     SECTION 9.3. RECORDS AND AUDITS. Astra shall keep, and shall require its
Sublicensees to keep, complete and accurate records of the latest three (3)
years of Net Sales. Millennium shall have the right annually at Millennium's
expense to have an independent, certified public accountant, reasonably
acceptable to Astra, review such records in the location(s) where such records
are maintained by Astra or its Sublicensees upon reasonable notice and during
regular business hours for the purposes of verifying royalties payable to
Millennium and Net Sales. Results of such review shall be made available to both
Parties. If the review reflects an underpayment of royalties to Millennium, such
underpayment shall be promptly remitted to Millennium. If the underpayment is
equal to or greater than five percent (5%) of the royalty amount that was
otherwise due, Millennium shall be entitled to have Astra pay all of the costs
of such review.

     SECTION 9.4. CURRENCY OF PAYMENTS. All payments under this Agreement shall
be made in United States dollars by wire transfer to such bank account as
Millennium may designate from time to time. Any payments due hereunder on Net
Sales outside of the United States shall be payable in United States dollars at
the rate of exchange of the currency of the country in which the Net Sales are
made as published by The Wall Street Journal for the last business day of the
calendar quarter for which the royalties are payable.


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                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

     SECTION 9.5. TAX WITHHOLDING. Astra and Millennium shall use all reasonable
and legal efforts to reduce tax withholding on payments made to Millennium
hereunder. Notwithstanding such efforts, if the Parties conclude that tax
withholdings under the laws of Sweden are required with respect to payments to
Millennium under Article VIII, Astra shall withhold the required amount and pay
it to the appropriate governmental authority. In such a case, Astra will
promptly provide Millennium with original receipts or other evidence sufficient
to allow Millennium to obtain the benefits of such tax withholdings. All
royalties payable to Millennium hereunder shall be paid by Astra from its
Swedish headquarters or the United States. In the event that Astra changes its
payment practices or changes the location of its operation and such changes
result in increased withholding taxes, Astra shall remit to Millennium an
amount, in addition to the royalties otherwise payable, necessary to compensate
Millennium in full for the increased withholding taxes. Astra shall not deduct
such tax withholdings from payments to Millennium to the extent that Astra is
able to utilize the tax credits resulting from such withholdings.

                                    ARTICLE X

                              TERM AND TERMINATION

     SECTION 10.1. TERM. This Agreement becomes effective as of the Effective
Date, may be terminated as set forth in this Article X hereof, and otherwise
remains in effect until the expiration of the term of Astra's obligation to pay
royalties. [**] shall be [**] in the [**] under this Agreement.

     SECTION 10.2. MATERIAL NON-PERFORMANCE. In the event that either Party (a
"Defaulting Party") shall default in any material term, covenant or provision of
this Agreement (a "Default"), the other Party (a "Non-Defaulting Party") shall,
without unreasonable delay following discovery of such Default, notify the
Defaulting Party in writing, and the Parties shall consult with each other in
good faith to endeavor to determine whether a Default has occurred and, if so,
to agree upon the most effective means to cure such Default and, if necessary,
to effect restitution in favor of the Non-Defaulting Party for the consequences
of such Default (collectively the "Resolution"). In the event that the Parties
agree upon a Resolution with respect to a Monetary Default (as defined below),
the Defaulting Party shall pay all amounts required to be paid pursuant to such
Resolution within fifteen (15) days of such agreement on the Resolution. Failure
to pay all such amounts within such fifteen 


                                       48


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(15) day period shall result, at the election of the Non-Defaulting Party, in
the termination of this Agreement.

     In the event (i) the Parties are unable to agree upon a Resolution, either
because they are unable to agree upon whether or not a Default has occurred or
because they are unable to agree upon cure or restitution provisions, or (ii) if
with respect to a Default which is not a Monetary Default, within ninety (90)
days after agreement on a Resolution the Defaulting Party, in the exercise of
reasonable diligence shall have been unable to remedy such Default, then in
either such event, the Parties agree that the determination of whether a Default
has occurred and the remedy of the Non-Defaulting Party with respect to the
Default by the Defaulting Party shall be determined by arbitration pursuant to
Section 12.2 hereof, and the arbitrators shall, except as provided below, be
authorized to fashion such remedy, including equitable relief, which may include
termination of this Agreement in whole or in part, as the arbitrators shall
determine appropriate, subject to the following provisions: (a) the termination
of this Agreement in whole shall only be the remedy of last resort, except as
provided in subsection (b); (b) with respect to a Monetary Default, the remedy
for such Monetary Default shall be full payment within fifteen (15) days after
the determination by the arbitrators of all amounts owed PLUS (i) interest on
the unpaid amounts from the due date through the actual payment date at the
prime rate of interest as reported in THE WALL STREET JOURNAL, and (ii) the full
costs of arbitration, including without limitation the fees and expenses of the
arbitrators and of counsel to the Non-Defaulting Party; (c) failure to effect
the remedy set forth in subsection (b) within the fifteen (15) day period
specified therein shall result, at the election of the Non-Defaulting Party, in
the termination of this Agreement; (d) in the event that Millennium is the
Defaulting Party with respect to a Default that is not a Monetary Default, the
arbitrators shall determine the appropriate reduction, if any, in ongoing
milestone and royalty payments to be paid to Millennium, based upon all relevant
factors including the nature of the Default, the relative contributions made to
the development of Products (as compared with the contributions expected to be
made under this Agreement in the absence of such Default), licensing rates
prevailing in the industry and such other factors deemed relevant by the
arbitrators; (e) other than as provided in subsection (d), in fashioning a
remedy, the arbitrators shall not be empowered to modify or alter the provisions
of this Agreement.

     As used herein, the term "Monetary Default" means (i) a Default relating to
any payment obligation under this Agreement, or (ii) a failure to fulfill any
payment obligation imposed upon a Party as a result of a Resolution, or (iii) a
failure to fulfill any payment obligation imposed upon a Party by arbitrators
pursuant to arbitration conducted in accordance with the provisions of this
Section 10.2 and Section 12.2.

     SECTION 10.3. RIGHTS UPON TERMINATION FOR DEFAULT. If this Agreement
terminates pursuant to Section 10.2 following a Default, (a) the Defaulting
Party shall 


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                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

return to the Non-Defaulting Party all Confidential Information and materials
received from the Non-Defaulting Party during the term of the Agreement, (b) the
Defaulting Party shall cease all use of the Confidential Information and
materials received from the Non-Defaulting Party for any purpose, except that
the Defaulting Party may keep a copy of all documents for record keeping
purposes only, (c) in the event that the [**], as set forth in [**], and (d) in
the event that the [**] under this Agreement shall [**]. Further, in the event
that the [**] and at the [**] is developing any Product which comprises a
Program Antisense Drug, Related Antisense Drug, Program Protein Drug, Program
Analog Protein Drug or Program Mimic Drug, then [**] all data and information
which it has developed prior to [**] which can reasonably be viewed as necessary
or useful to obtain governmental regulatory approvals of such Product and,
subject to any agreements with third parties, Millennium and its licensees shall
be entitled to use such information freely; PROVIDED, HOWEVER, [**] hereunder
shall not extend to confidential information of [**] relating to technologies
and methods for manufacturing and/or formulating the [**].

     SECTION 10.4. RESIDUAL RIGHTS. Upon expiration or early termination of this
Agreement, except as specifically provided herein to the contrary, all rights
and obligations of the Parties shall cease, except as follows:

          (a) Obligations to pay royalties and other sums accruing hereunder up
     to the date of expiration or termination; and

          (b) The right to complete the manufacture and sale of Products, which
     qualify as "work in process" under generally accepted cost accounting
     standards or which are in stock at the date of expiration or termination,
     and the obligation to pay royalties on Net Sales of such Products; and

          (c) The obligations, if any, to make milestone payments for milestones
     as achieved and to pay royalties with respect to Products, as determined
     pursuant to Section 10.2; and

          (d) The obligations regarding confidentiality as set forth in Article
     IV; and

          (e) All obligations for record keeping and accounting reports; and

          (f) A Party's right to inspect books and records of the other Party as
     set forth in Article XIII and Article IX, which right shall continue in
     full force 


                                       50


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     and effect for three (3) years following the expiration of such other
     Party's obligation under this Agreement to keep such books and records; and

          (g) Obligations of defense and indemnity, which obligations shall
     continue in full force and effect for an unlimited period; and

          (h) Obligations set forth in Section 6.7 and Section 6.10, but only
     with respect to those causes of action that accrued prior to such
     expiration or termination; and

          (i) Any cause of action or claim of Millennium or Astra accrued or to
     accrue because of any breach or default by the other Party hereunder; and

          (j) All other terms, provisions, representations, rights and
     obligations contained in this Agreement that by their sense and context are
     intended to survive until performance thereof by either or both Parties.

                                   ARTICLE XI

                        PRODUCT LIABILITY INDEMNIFICATION

     Astra agrees to defend Millennium at Astra's cost and expense, and will
indemnify and hold Millennium and its directors, officers, employees and agents
(the "Millennium Indemnified Parties") harmless from and against any losses,
costs, damages, fees or expenses arising out of any claim relating to personal
injury from the development, manufacture, use, sale or other disposition of any
Product by Astra or its Sublicensees (except for products developed,
manufactured, used or sold by Millennium or its licensees (other than Astra)).
In the event of any such claim against the Millennium Indemnified Parties by any
Party, Millennium shall promptly notify Astra in writing of the claim and Astra
shall manage and control, at its sole expense, the defense of the claim and its
settlement. The Millennium Indemnified Parties shall cooperate with Astra and
may, at their option and expense, be represented in any such action or
proceeding. Astra shall not be liable for any litigation costs or expenses
incurred by the Millennium Indemnified Parties without Astra's prior written
authorization. In addition, Astra shall not be responsible for the
indemnification of any Millennium Indemnified Party arising from any negligent
or intentional acts by such Party.


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                                   ARTICLE XII

                    GOOD FAITH NEGOTIATION/DISPUTE RESOLUTION

     SECTION 12.1. GENERAL. In acknowledgment of the benefit to both Parties to
resolve differences quickly and efficiently with as little disruption of each
Parties' business as possible, the Parties agree to abide by the following
provisions in connection with any dispute that should arise between the Parties
with respect to any matter relating to this Agreement, including any questions
regarding the existence, validity or termination thereof.

     SECTION 12.2. DISPUTE RESOLUTION PROCESS.

          (a) SELECTION OF ARBITRATORS. In the event that the Parties are unable
     to resolve a dispute within thirty (30) days after commencement of good
     faith negotiations between the Parties, either Party may submit the matter
     to binding arbitration in accordance with the procedures set forth in this
     Section 12.2. If a Party intends to commence arbitration to resolve a
     dispute, such Party shall provide written notice to the other Party of such
     intention, and shall designate one arbitrator. Within ten (10) days of
     receipt of such notice, the other Party shall designate in writing a second
     arbitrator. The two arbitrators so designated shall, within ten (10) days
     thereafter, designate a third arbitrator. The arbitrators so designated
     shall not be employees, consultants, officers, directors or shareholders of
     or otherwise associated with either Party. The arbitration shall be
     conducted in accordance with the then rules of commercial arbitration of
     and before the American Arbitration Association in New York, New York. The
     language of such arbitration shall be English and all notices and written
     submissions provided in such proceeding shall be in English.

          (b) WRITTEN PROPOSALS. Within fifteen (15) days after the designation
     of the third arbitrator, the arbitrators and the Parties shall meet at
     which time each Party shall be required to set forth in writing the issues
     which need to be resolved and a proposed ruling on each such issue. Written
     submissions shall be limited to thirty (30) pages of text (not including
     exhibits which may include copies of agreements, or extracts from books and
     records, but including testimony affidavits).

          (c) HEARING. The arbitrators shall set a date for a hearing, which
     shall be no later than twenty (20) days after the submission of written
     proposals, to discuss each of the issues identified by the Parties. Each
     Party shall have the right to be represented by counsel. The arbitrators
     shall have sole discretion with regard to the admissibility of any
     evidence. Unless 


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     otherwise determined by unanimous agreement of the arbitrators the hearing
     shall be concluded in one (1) day.

          (d) RULING. The arbitrators shall use their best efforts to rule on
     each disputed issue within twenty (20) days after the completion of the
     hearings described in subsection (c) above. The arbitrators' ruling shall
     be, in the absence of fraud or manifest error, binding and conclusive upon
     both Parties and may be enforced in a court of competent jurisdiction.
     Other than as provided in Section 10.2(d), in fashioning a remedy, the
     arbitrators shall not be empowered to modify or alter the provisions of
     this Agreement. The arbitrators may not award multiple, punitive or
     exemplary damages.

     SECTION 12.3. ARBITRATION COSTS. The arbitrators shall be paid a reasonable
fee plus expenses, which fees and expenses shall be paid as designated by the
arbitrators or if the arbitrators do not so designate such costs shall be shared
equally by the Parties.

                                  ARTICLE XIII

                                  GOVERNING LAW

     This Agreement shall be construed and the respective rights of the Parties
hereto determined according to the substantive laws of the State of Delaware
notwithstanding the provisions governing conflict of laws under such Delaware
law to the contrary.

                                   ARTICLE XIV

                                   ASSIGNMENT

     Neither Party may assign this Agreement in whole or in part without the
consent of the other, except if such assignment occurs in connection with the
sale or transfer of all or substantially all of the business and assets of
Millennium or Astra.

                                   ARTICLE XV

                                   AMENDMENTS

     This Agreement constitutes the entire agreement between the Parties and
supersedes all previous arrangements whether written or oral. Any amendment or
modification to this Agreement shall be made in writing signed by both Parties.


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                                   ARTICLE XVI

                                     NOTICES

     All notices, instructions and other communications hereunder or in
connection herewith shall be in writing and shall be (i) delivered personally,
(ii) sent by registered or certified mail, return receipt requested, postage
prepaid, (iii) sent via a reputable international courtier service, or (ii) sent
by facsimile transmission, in each case to an address set forth below. Any such
notice, instruction or communication shall be deemed to have been delivered upon
receipt if delivered by hand, five business days after it is sent by registered
or certified mail, return receipt requested, postage prepaid, three business
days after it is sent via a reputable international courier service, or when
transmitted with electronic confirmation of receipt, if transmitted by facsimile
(if such transmission is on a business day; otherwise, on the next business day
following such transmission).

     Notices to Millennium shall be addressed to:

                           Millennium Pharmaceuticals, Inc.
                           640 Memorial Drive
                           Cambridge, Massachusetts 02139-4815
                           Attention:  Chief Business Officer
                           Facsimile No.:  (617) 621-0264

          with a copy to:

                           Attention:  Legal Department

     Notices to Astra shall be addressed to:

                           Astra AB
                           S-151 85 Sodertalje, Sweden
                           Attention:  President
                           Facsimile No.:  011-468-553-29000

          with a copy to:

                           Attention:  General Counsel
                           Facsimile No.:  011-468-553-28812

Either Party may change its address by giving notice to the other Party in the
manner herein provided.


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                    Confidential Materials omitted and filed
                   separately with the Securities and Exchange
                     Commission. Asterisks denote omissions.

                                  ARTICLE XVII

                                  FORCE MAJEURE

     No failure or omission by the Parties hereto in the performance of any
obligation of this Agreement shall be deemed a breach of this Agreement or
create any liability if the same shall arise from any cause or causes beyond the
control of the Parties, including, but not limited to, the following: acts of
God; acts or omissions of any government; any rules, regulations or orders
issued by any governmental authority or by any officer, department, agency or
instrumentality thereof; fire; storm; flood; earthquake; accident; war;
rebellion; insurrection; riot; and invasion and provided that such failure or
omission resulting from one of the above causes is cured as soon as is
practicable after the occurrence of one or more of the above-mentioned causes.

                                  ARTICLE XVIII

                         REPRESENTATIONS AND WARRANTIES

     SECTION 18.1. REPRESENTATION OF AUTHORITY. Millennium and Astra each
represents and warrants to the other that as of the effective date of this
Agreement it has full right, power and authority to enter into this Agreement
and to provide the Know-How under Article III hereof, including the biological
materials, subject to the limitations set forth in this Section 18.1. Millennium
represents and warrants to Astra that it (i) is the owner or licensee, as the
case may be, of the Millennium Field Patent Rights, Millennium Field Know-How,
Millennium Core Technology Know-How, and Millennium Core Technology, and (ii)
has the right to grant to Astra the licenses and sublicenses granted pursuant to
this Agreement. Millennium has furnished Astra with (a) a copy of all patent
applications comprising Millennium Field Patent Rights and (b) a summary of all
license agreements and options pertaining to the Millennium Field Patent Rights
and Millennium Field Know-How existing as of the Effective Date, and by its
execution and delivery of this Agreement, Astra agrees to be bound by the terms
of such agreements to the extent required thereby. Millennium further represents
that it will not, without the prior written consent of Astra, [**].

     SECTION 18.2. OUTSTANDING AGREEMENTS. APPENDIX B, which shall be amended by
Millennium from time to time consistent with the provisions of this Agreement,


                                       55


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lists all material outstanding options, licenses or agreements of any kind
between Millennium and any third party relating to Millennium Field Patent
Rights and Millennium Field Know-How and Millennium Core Technology Know-How,
Millennium Core Technology Patent Rights as of the Effective Date.

     SECTION 18.3. KNOWLEDGE OF PENDING OR THREATENED LITIGATION. Each Party
represents and warrants to the other that it is not aware of any pending or
threatened litigation (and has not received any communication) which alleges
that such Party's activities in the Field to date have violated, or by
conducting its business as currently proposed under the Research Program
contemplated herein would violate, any of the intellectual property rights of
any other person. To the best of each Party's knowledge, there is no material
unauthorized use, infringement or misappropriation of any of its intellectual
property rights licensed hereunder to the other Party.

     SECTION 18.4. EMPLOYEE OBLIGATIONS. Each Party represents and warrants that
all of its employees, officers, and consultants have executed agreements or have
existing obligations under law requiring, in the case of employees and officers,
assignment to such Party of all inventions made during the course of and as the
result of their association with such Party and obligating the individual to
maintain as confidential such Party's Confidential Information as well as
confidential information of a third party which such Party may receive, to the
extent required to support such Party's obligations under this Agreement.

     SECTION 18.5. FULL DISCLOSURE. Each Party has disclosed to the other in
good faith all material information such Party believes is relevant to the
subject matter of this Agreement, and to such Party's ability to observe and
perform its obligations hereunder.

                                   ARTICLE XIX

                              PUBLIC ANNOUNCEMENTS

     Any announcements or similar publicity with respect to the execution of
this Agreement shall be agreed between the Parties in advance of such
announcement. Astra understands that this Agreement and Millennium's efforts
hereunder are likely to be of significant interest to investors, analysts and
others, and Millennium therefore intends to make such public announcements with
respect thereto. Millennium agrees that any such announcement will not contain
confidential business or technical information and, if disclosure of
confidential business or technical information is required by law or regulation,
will make reasonable efforts to minimize such disclosure and obtain confidential
treatment for any such information which is disclosed to a governmental agency
or group. Each Party agrees to provide to the other Party a copy of any public
announcement as soon as reasonably 


                                       56


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practicable under the circumstances prior to its scheduled release. Each Party
shall have the right to expeditiously review and recommend changes to any
announcement regarding this Agreement or any studies carried out under this
Agreement. Except as otherwise required by law, the Party whose press release
has been reviewed shall remove any information the reviewing Party reasonably
deems to be inappropriate for disclosure.

                                   ARTICLE XX

                              ADDITIONAL AGREEMENTS

     SECTION 20.1. INDEPENDENT CONTRACTORS. It is understood and agreed that the
relationship between the Parties hereunder is that of independent contractors
and that nothing in this Agreement shall be construed as authorization for
either Astra or Millennium to act as agent for the other. Members of the Joint
Management Team shall be, and shall remain, employees of Millennium or Astra, as
the case may be. Neither party shall incur any liability for any act or failure
to act by members of the Joint Management Team who are employees of the other
party.

     SECTION 20.2. CONSENTS NOT UNREASONABLY WITHHELD. Whenever provision is
made in this Agreement for either Party to secure the consent or approval of the
other, that consent or approval shall not unreasonably be withheld, and whenever
in this Agreement provisions are made for one Party to object to or disapprove a
matter, such objection or disapproval shall not unreasonably be exercised.

     SECTION 20.3. NO STRICT CONSTRUCTION. This Agreement has been prepared
jointly and shall not be strictly construed against either Party.

     SECTION 20.4. HEADINGS. The captions or headings of the Sections or other
subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions hereof.

     SECTION 20.5. SEVERANCE OF CLAUSES. Each Party agrees that, should any
provision of this Agreement be determined by a court of competent jurisdiction
to violate or contravene any applicable law or policy, such provision will be
severed or modified by the court to the extent necessary to comply with the
applicable law or policy, and such modified provision and the remainder of the
provisions hereof will continue in full force and effect.

     SECTION 20.6. NO WAIVER. The waiver of a breach hereunder may be effected
only by a writing signed by the waiving Party and shall not constitute a waiver
of any other breach.


                                       57


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     SECTION 20.7. CHANGE IN CONTROL.

          (a) In the event of the occurrence of a Change of Control (as defined
     below) of Astra, Millennium shall have the right, at its election, to
     provide written notice to Astra (or to the acquiring party) requiring that
     Astra and the acquiring party indicate to Millennium in writing, within
     thirty (30) days after receipt of Millennium's notice, that Astra and the
     acquiring party confirm this Agreement and agree to the continued
     performance of all obligations of Astra under this Agreement. If Astra and
     the acquiring party fail to so confirm and agree in writing within such
     thirty (30) day period, Millennium shall have the right to terminate this
     Agreement immediately upon providing written notice thereof to Astra.

          (b) In the event of the occurrence of a Change of Control (as defined
     below) of Millennium, Astra shall have the right, at its election, to
     provide written notice to Millennium (or to the acquiring party) requiring
     that Millennium and the acquiring party indicate to Astra in writing,
     within thirty (30) days after receipt of Astra's notice, that Millennium
     and the acquiring party confirm this Agreement and agree to the continued
     performance of all obligations of Millennium under this Agreement. If
     Millennium and the acquiring party fail to so confirm and agree in writing
     within such thirty (30) day period, Astra shall have the right to terminate
     this Agreement immediately upon providing written notice thereof to
     Millennium.

          (c) As used in this Section 20.7, the term "Change of Control" shall
     mean (i) a merger or consolidation of Astra or Millennium, as the case may
     be, which results in the voting securities of Astra or Millennium
     outstanding immediately prior thereto ceasing to represent at least fifty
     percent (50%) of the combined voting power of the surviving entity
     immediately after such merger or consolidation; (ii) the sale of all or
     substantially all of the assets of Astra or Millennium, as the case may be;
     or (iii) any "person," as such term is used in Sections 13(d) and 14(d) of
     the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
     than Astra or Millennium, as the case may be, any trustee or other
     fiduciary holding securities under an employee benefit plan of Astra or
     Millennium, as the case may be, or any corporation owned directly or
     indirectly by the stockholders of Astra or Millennium, as the case may be,
     in substantially the same proportion as their ownership of stock of Astra
     or Millennium, as the case may be), together with any of such person's
     "affiliates" or "associates," as such terms are used in the Exchange Act,
     becoming the beneficial owner of fifty percent (50%) or more of the
     combined voting power of the outstanding securities of Astra or Millennium,
     as the case may be.


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     SECTION 20.8 ENTIRE AGREEMENT. This Agreement and the Appendices attached
hereto (which Appendices are deemed to be a part of this Agreement) represent
the full understanding of the Parties with respect to the subject matter hereof
and supersede all prior understandings and writings relating thereto, including
the terms of the Original Agreement, and the provisions of the Original
Agreement are hereby terminated and of no further force and effect. No waiver,
alteration or modification of any of the provisions hereof shall be binding
unless made in writing and signed by the Parties.

     IN WITNESS WHEREOF, this Agreement is executed this 17th day of December,
1998, to be effective as of the Effective Date.

                                        MILLENNIUM PHARMACEUTICALS,
ASTRA AB                                INC.
 /s/ Hakan Mogren                        /s/ Mark J. Levin
- ------------------------------          --------------------------------
Hakan Mogren                            Mark J. Levin


President and Chief Executive           
Officer                                 Chief Executive Officer         
- ------------------------------          --------------------------------
Title                                   Title


December 17, 1998                       December 14, 1998
- ------------------------------          --------------------------------
Date                                    Date




                                       59


   66



                                   APPENDIX A

                                       TO
                         RESEARCH AND LICENSE AGREEMENT
                                 BY AND BETWEEN
                                    ASTRA AB
                                       AND
                        MILLENNIUM PHARMACEUTICALS, INC.
                          DATED AS OF DECEMBER 9, 1995

                              RESEARCH PROGRAM PLAN






                                       60



   67



                                   APPENDIX B

                                       TO
                         RESEARCH AND LICENSE AGREEMENT
                                 BY AND BETWEEN
                                    ASTRA AB
                                       AND
                        MILLENNIUM PHARMACEUTICALS, INC.
                          DATED AS OF DECEMBER 9, 1995

                     THIRD PARTY AGREEMENTS WITH MILLENNIUM

A.   Third Party Agreements relating to Millennium Field Know-How

     Sponsored Research and Collaboration Agreement between Millennium
     Pharmaceuticals, Inc. and The General Hospital Corporation (Dr. Bernard
     Kinane), dated July 15, 1995.

     Agreement between Millennium Pharmaceuticals, Inc. and Megathlin, Sigler
     and Chilmonczyk MDPA, dated June 15, 1995.

     Sponsored Research and Collaboration Agreement between Millennium
     Pharmaceuticals, Inc. and the Brigham and Women's Hospital (Dr. Ziping Xu),
     dated September 1, 1994.

     Cooperative Research and Development Agreement (CRADA) between the National
     Institutes of Health (Dr. William Paul) and Millennium Pharmaceuticals,
     Inc., dated May 31, 1995.

B.   Third Party Agreements relating to Millennium Core Technology Know-How

     License Agreement between the Dana-Farber Cancer Institute, Inc. and
     Millennium Pharmaceuticals, Inc., dated May 15, 1995.





                                       61


   68


                                   APPENDIX C

                                       TO
                         RESEARCH AND LICENSE AGREEMENT
                                 BY AND BETWEEN
                                    ASTRA AB
                                       AND
                        MILLENNIUM PHARMACEUTICALS, INC.

                      SMALL MOLECULE PROCESS FLOW SCHEDULE

Stage I.   Gene Discovery and Expression Analysis -- identification of: Pre-
           Candidate Gene

Stage II.  Validations Studies -- identification of: Candidate Gene
                                     or
           Genetics Studies -- identification of: Genetics Candidate Gene

Stage III. Research Assay Development -- identification of: Validated Target

Stage IV.  Small Molecule High Throughput Screening -- identification of: Hit

Stage V.   Exploratory Chemistry -- identification of: Lead

Stage VI.  Medicinal Chemistry -- identification of: Candidate Drug




                                       62

EX-10.57

   1
                                                                   Exhibit 10.57

                            SIXTH AMENDMENT TO LEASE


         THIS SIXTH AMENDMENT TO LEASE ("Amendment") is made as of the 29th day
of January, 1999 by and between MASSACHUSETTS INSTITUTE OF TECHNOLOGY, a
Massachusetts educational corporation with an address of 238 Main Street,
Cambridge, Massachusetts 02142 ("Lessor"), and MILLENNIUM PHARMACEUTICALS, INC.,
a Delaware corporation with an address of 640 Memorial Drive, Cambridge,
Massachusetts 02139 ("Lessee").

         Reference is made to a lease dated August 26, 1993 by and between
Lessor and Lessee, as amended by amendments dated as of May 18, 1994, January 9,
1996, June 12, 1996, March 1, 1997 and June 19, 1997 (collectively, the
"Lease"), concerning certain premises located at 640 Memorial Drive, Cambridge,
Massachusetts, as more particularly described in the Lease. A Notice of Lease
was filed with the Middlesex Southern Registry District of the Land Court on
March 2, 1994 as Document No. 939638, and noted on Certificate of Title No.
89497, as amended. Capitalized terms used in this Amendment which are defined in
the Lease and not otherwise defined herein shall have the same meaning in this
Amendment as in the Lease.

         Lessee desires (i) to lease approximately 75,450 square feet of
rentable area on the first and second floors of the Building as shown on the
plans attached hereto, collectively, as Exhibit I, currently occupied by
Lifeline Systems, Inc. ("Lifeline") (the "Additional Expansion Premises") and
(ii) to expand the Basement Space to include approximately 8,861 additional
square feet of rentable area approximately in the location shown on the plan
attached hereto as Exhibit II. Lessor is willing so to lease to Lessee the space
on the first and second floors of the Building and such additional Basement
Space, on the terms and conditions set forth in this Amendment.

         FOR GOOD AND VALUABLE CONSIDERATION, the receipt and legal sufficiency
of which are hereby acknowledged, Lessor and Lessee hereby agree to amend the
Lease as follows:

         1. Definitions. For purposes of the Lease, the following terms shall
have the meaning set forth opposite them:

                  "Area A" shall mean the portion of the Additional Expansion
                  Premises marked as "Area A" on Exhibit I, containing 51,353
                  square feet of rentable area.

                  "Area B" shall mean the portion of the Additional Expansion
                  Premises marked as "Area B" on Exhibit I, containing 24,097
                  square feet of rentable area.

                  "Area A Commencement Date" shall mean the date on which Lessor
                  delivers Area A to Lessee, free of occupants but otherwise in
                  the condition in which such space is redelivered to Lessor by
                  Lifeline, which date shall be 
   2

                  fifteen (15) days after Lifeline vacates Area A and delivers
                  possession thereof to Lessor.

                  "Area B Commencement Date" shall mean the date on which Lessor
                  delivers Area B to Lessee, free of occupants but otherwise in
                  the condition in which such space is redelivered to Lessor by
                  Lifeline, which date shall be fifteen (15) days after Lifeline
                  vacates Area B and delivers possession thereof to Lessor.

                  "Basement Space" shall mean, from and after the Second
                  Additional Basement Space Commencement Date, collectively the
                  Basement Space, as that term was amended and defined in the
                  Lease prior to this Amendment, together with the Second
                  Additional Basement Space.

                  "Office Tenant Improvement Costs" shall mean the actual
                  out-of-pocket costs and expenses paid by Lessee to third
                  parties in connection with the construction of alterations or
                  improvements to the Additional Expansion Premises to prepare
                  the same for office use by Lessee, which alterations and
                  improvements are intended to become part of the Building and
                  are not to be removed by Lessee. As an example but not in
                  limitation of the foregoing, there shall be excluded from
                  Office Tenant Improvement Costs (a) all costs and expenses
                  paid in connection with the construction of alterations or
                  improvements to the Additional Expansion Premises to prepare
                  the same for any use by Lessee other than office use
                  (including, without limitation, laboratory, research or
                  manufacturing use), (b) all costs and expenses paid in
                  connection with the Second Additional Basement Space, and (c)
                  all furniture costs. For purposes of the Lease, in no event
                  shall Office Tenant Improvement Costs exceed $17.50 per square
                  foot of rentable area of the Additional Expansion Premises
                  leased by Lessee hereunder.

                  "Second Additional Basement Space" shall mean that portion of
                  the basement floor of the Building containing approximately
                  8,861 square feet of rentable area shown cross-hatched on the
                  plan attached hereto as Exhibit II.

                  "Second Additional Basement Space Commencement Date" shall
                  mean the earlier of (i) the date on which the Second
                  Additional Basement Space is ready for occupancy by Lessee, or
                  (ii) February 15, 1999.

                  "Unamortized Office Tenant Improvement Amount" shall mean, as
                  of the date such determination is being made, the remaining
                  unamortized portion of Lessee's Office Tenant Improvement
                  Costs, amortized on a straight line basis over a period of
                  nine (9) years commencing on the Area A Commencement Date.




                                       2
   3

         2.       Delivery of Additional Expansion Premises to Lessee.

                  (a) Effective as of the Area A Commencement Date, Area A shall
                  be deemed to be part of the Premises for all purposes of the
                  Lease, without the necessity of any further written instrument
                  or other action by the parties, and all rights and obligations
                  of the parties under the Lease with respect to the Premises
                  shall apply equally to Area A. It is the current expectation
                  of Lessor and Lessee that the Area A Commencement Date will
                  occur between February 1, 1999 and March 1, 1999. Lessee
                  hereby acknowledges that Lifeline has given notice that it
                  intends to vacate Area A on or about January 31, 1999, so the
                  anticipated Area A Commencement Date is February 15, 1999.
                  From and after the date on which Lifeline vacates Area A, and
                  while Lifeline is removing its property therefrom, until the
                  Area A Commencement Date, Lessee shall have the right to enter
                  upon Area A to commence preparations for its occupancy
                  thereof, which entry shall be subject to all of the terms of
                  the Lease other than the obligation to pay Rent on account of
                  Area A. Lessee hereby agrees that any delay in the
                  construction of the temporary demising partition separating
                  Area A from Area B will not delay the Area A Commencement Date
                  hereunder. In the event that, for any reason whatsoever, the
                  Area A Commencement Date has not occurred by March 31, 1999,
                  Lessee shall have the right to terminate its obligation to
                  lease the Additional Expansion Premises by giving written
                  notice to Lessor, which termination shall be effective not
                  less than ten (10) days after the date on which such notice is
                  given to Lessor unless, prior to the expiration of such 10-day
                  period, the Area A Commencement Date occurs. Except as
                  otherwise set forth in clause (Y) below, Lessee's right so to
                  terminate its obligation to lease the Additional Expansion
                  Premises shall be Lessee's sole remedy hereunder or at law or
                  in equity for any such delay in the occurrence of the Area A
                  Commencement Date, and such termination shall not effect
                  Lessee's obligations under the Lease or Lessee's obligations
                  hereunder relating to the Second Additional Basement Space.

                  (b) Effective as of the Area B Commencement Date, Area B shall
                  be deemed to be part of the Premises for all purposes of the
                  Lease, without the necessity of any further written instrument
                  or other action by the parties, and all rights and obligations
                  of the parties under the Lease with respect to the Premises
                  shall apply equally to Area B. It is the current expectation
                  of Lessor and Lessee that the Area B Commencement Date will
                  occur between July 1, 1999 and August 1, 1999. In the
                  "Lifeline Termination Agreement" (defined below), Lessor has
                  required Lifeline to use reasonable efforts to give Lessor and
                  Lessee seven (7) days' advance notice of the date on which it
                  will vacate Area B. From and after the date on which Lifeline
                  vacates Area B, and while Lifeline is removing its property
                  therefrom, until the Area B Commencement Date, Lessee shall
                  have the right to enter upon Area B to commence preparations
                  for its occupancy thereof, which entry shall be subject to all
                  of the terms of the Lease other than the obligation to pay
                  Rent on account of Area B. In the event that, for any reason
                  whatsoever, the 



                                       3
   4

                  Area B Commencement Date has not occurred by August 31, 1999,
                  Lessee shall have the right to terminate its obligation to
                  lease Area B only by giving written notice to Lessor, which
                  termination shall be effective not less than ten (10) days
                  after the date on which such notice is given to Lessor unless,
                  prior to the expiration of such 10-day period, the Area B
                  Commencement Date occurs. Except as otherwise set forth in
                  clause (Z) below, Lessee's right so to terminate its
                  obligation to lease Area B shall be Lessee's sole remedy
                  hereunder or at law or in equity for any such delay in the
                  occurrence of the Area B Commencement Date, and such
                  termination shall not effect Lessee's obligations under the
                  Lease or Lessee's obligations hereunder with respect to Area A
                  or the Second Additional Basement Space.

                  (c) Lessee acknowledges that (i) the Additional Expansion
                  Premises are currently occupied by Lifeline pursuant to a
                  lease between Lessor, as lessor, and Lifeline, as lessee (the
                  "Lifeline Lease"), and (ii) contemporaneously with the
                  execution and delivery of this Amendment, Lessor and Lifeline
                  shall execute and deliver an agreement (the "Lifeline
                  Termination Agreement") terminating the Lifeline Lease in
                  phases consistent with the delivery of the Additional
                  Expansion Premises to Lessee as provided in this Amendment.
                  Lessor hereby represents to Lessee that the Lifeline
                  Termination Agreement provides, in part, that:

                                            (A) Lessor may, at any time after
                           March 31, 1999, terminate such agreement in its
                           entirety and maintain the Lifeline Lease in full
                           force and effect if Area A is not surrendered and
                           redelivered to Lessor in accordance with the
                           provisions of the Lifeline Termination Agreement by
                           March 31, 1999;

                                            (B) Lifeline is required to pay the
                           sum of $7,500.00 per day to Lessor for each day after
                           March 1 until the earlier of (1) the day on which
                           Lifeline surrenders and redelivers Area A to Lessor
                           in accordance with the provisions of the Lifeline
                           Termination Agreement, or (2) the effective date of
                           the termination of the Lifeline Termination Agreement
                           as therein provided;

                                            (C) Lessor may, at any time after
                           August 31, 1999, terminate such agreement as to Area
                           B if Area B is not surrendered and redelivered to
                           Lessor in accordance with the provisions of the
                           Lifeline Termination Agreement by August 31, 1999;
                           and

                                            (D) Lifeline is required to pay the
                           sum of $7,500.00 per day to Lessor for each day after
                           August 1 until the earlier of (1) the day on which
                           Lifeline surrenders and redelivers Area B to Lessor
                           in accordance with the provisions of the Lifeline
                           Termination Agreement, or (2) the effective date of
                           the termination of the Lifeline Termination Agreement
                           as to Area B as therein provided.

                                       4
   5


                  Lessor hereby agrees with Lessee that:

                                    (X) Lessor shall not exercise either of the
                           termination options under the Lifeline Termination
                           Agreement as described in clauses (A) and (C) above
                           within one-hundred twenty (120) days after March 31,
                           1999 or August 31, 1999 (as the case may be) without
                           the prior written consent of Lessee; provided,
                           however, that after the expiration of such 120-day
                           period from each of such relevant dates Lessor may
                           (but shall not be required to) exercise either of
                           such termination options without the necessity of
                           obtaining Lessee's prior written consent;

                                    (Y) Lessor shall make diligent efforts to
                           collect from Lifeline the amounts described in the
                           foregoing clause (B) when due and payable by Lifeline
                           to Lessor (if any), and shall pay over to Lessee,
                           promptly upon Lessor's receipt thereof, all amounts
                           so received by Lessor from Lifeline on account of
                           Lifeline's delay beyond March 1, 1999 in so
                           surrendering and redelivering Area A to Lessor; and

                                    (Z) Lessor shall make diligent efforts to
                           collect from Lifeline the amounts described in the
                           foregoing clause (D) when due and payable by Lifeline
                           to Lessor (if any), and shall pay over to Lessee,
                           promptly upon Lessor's receipt thereof, all amounts
                           so received by Lessor from Lifeline on account of
                           Lifeline's delay beyond August 1, 1999 in so
                           surrendering and redelivering Area B to Lessor.

                  (d) Effective as of the Second Additional Basement Space
                  Commencement Date, the definition of "Basement Space" set
                  forth in the Lease shall be deemed to be amended to include
                  the Second Additional Basement Space. It is the mutual
                  intention of Lessee and Lessor that the Second Additional
                  Basement Space shall be deemed to be part of both (i) the
                  Basement Space, and (ii) the Premises, for all purposes of the
                  Lease except as otherwise expressly provided in this
                  Amendment, and all rights and obligations of the parties
                  hereunder with respect to the Basement Space and the Premises
                  shall apply equally to the Second Additional Basement Space.
                  Notwithstanding the foregoing, (i) the area of the Second
                  Additional Basement Space shall not be included (a) in the
                  rentable area of the Premises for determining "Lessee's Share"
                  pursuant to Section 5.1 of the Lease, or (b) in determining
                  the number of parking spaces to which Lessee is entitled under
                  Section 9.0 of the Lease; (ii) the Second Additional Basement
                  Space shall be included in the Premises for purposes of
                  Section 13.0 of the Lease; and (iii) the Second Additional
                  Basement Space shall not be included in the Premises for
                  purposes of the "Work Letter" attached to the Lease as Exhibit
                  C.



                                       5
   6

                  (e) Notwithstanding the foregoing, upon the request of either
                  party the other party shall promptly execute and deliver a
                  written instrument setting forth the actual Area A
                  Commencement Date, the actual Area B Commencement Date and the
                  actual Second Additional Basement Space Commencement Date
                  after such dates have occurred.

                  (f) During the time period between the Area A Commencement 
                  Date and the Area B Commencement Date, Lessee shall provide 
                  to Lifeline access to and use of the loading dock located
                  within the Premises in common with Lessee.

                  (g) In connection with the expiration or termination of the
                  Lease, (i) Lessee shall not be required to remove from the
                  Additional Expansion Premises customary office improvements
                  made thereto by Lifeline or by Lessee, and (ii) Lessee shall
                  not be required to remove any animal storage facility
                  improvements made by Lessee in or to the Second Additional
                  Basement Space.

         3.       Term.

                  (a) Notwithstanding anything to the contrary contained in the
                  Lease, the Term of the Lease with respect to Area A shall
                  commence on the Area A Commencement Date, and shall expire on
                  the last day of the Term as provided in the Lease, unless the
                  Term is sooner terminated as provided in the Lease.

                  (b) Notwithstanding anything to the contrary contained in the
                  Lease, the Term of the Lease with respect to Area B shall
                  commence on the Area B Commencement Date, and shall expire on
                  the last day of the Term as provided in the Lease, unless the
                  Term is sooner terminated as provided in the Lease.

                  (c) Notwithstanding anything to the contrary contained in the
                  Lease, the Term of the Lease with respect to the Second
                  Additional Basement Space shall commence on the Second
                  Additional Basement Space Commencement Date, and shall expire
                  on the last day of the Term as provided in the Lease, unless
                  the Term is sooner terminated as provided in the Lease.

                  (d) Notwithstanding anything to the contrary contained in the
                  Lease or in this Amendment, (1) Lessee may not exercise any 
                  Extension Option with respect to a floor of the Additional
                  Expansion Premises which the named Lessee (or a permitted
                  sublessee or assignee of the type described in Section 8(j) of
                  the Lease) is not itself actually occupying in full as of both
                  the date on which Lessee purports to exercise an Extension
                  Option and the first day of the corresponding Extension Term,
                  and (2) Lessee may not exercise any Extension Option with
                  respect to the Additional Expansion Premises unless Lessee
                  simultaneously exercises, in accordance with the provisions of
                  the 


                                       6
   7

                  Lease, the same Extension Option with respect to all other 
                  portions of the Premises.

         4.       Rent.

                  (a) Lessee shall pay Basic Rent on account of the Additional
                  Expansion Premises as follows:

                           (i) for each Lease Year in the Initial Term,
                           commencing on the Area A Commencement Date (with
                           respect to Area A) and on the Area B Commencement
                           Date (with respect to Area B), $19.65 per square foot
                           of rentable area;

                           (ii) for each Lease Year in the first Extension Term
                           (if Lessee exercises the first Extension Option in
                           accordance with the requirements of the Lease), an
                           amount equal to one hundred percent (100%) of the
                           Fair Market Rent thereof less the Unamortized Office
                           Tenant Improvements Amount, but in no event will
                           Basic Rent be less than $19.65 per square foot of
                           rentable area; and

                           (iii) for each Lease Year in the second Extension
                           Term (if Lessee exercises the second Extension Option
                           in accordance with the requirements of the Lease), an
                           amount equal to one hundred percent (100%) of the
                           Fair Market Rent thereof.

                  Such amount shall be paid in equal monthly installments in the
                  manner and at the times provided in the Lease for the payment
                  of Basic Rent.

                  (b) Lessee shall pay Basement Rent on account of the Second
                  Additional Basement Space as follows:

                           (i) for each Lease Year in the Initial Term,
                           commencing on the Second Additional Basement Space
                           Commencement Date, $16.00 per square foot of rentable
                           area; and

                           (ii) for each Lease Year in an Extension Term (if
                           Lessee exercises an Extension Option in accordance
                           with the requirements of the Lease), an amount equal
                           to (A) for each Lease Year in the first Extension
                           Term, $16.00 per square foot of rentable area
                           increased by three (3%) percent per Lease Year in the
                           Initial Term, and (B) for each Lease Year in the
                           second Extension Term, the Basement Rent payable per
                           Lease Year during the first Extension Term increased
                           by three (3%) percent per Lease Year in the first
                           Extension Term.

                  Such amount shall be paid in equal monthly installments in the
                  same manner and at the same times as provided in the Lease
                  with respect to Basic Rent.



                                       7
   8

                  In addition to Basement Rent, Lessee shall pay to Lessor, as
                  Additional Rent, in connection with the Second Additional
                  Basement Space, all other fees and charges provided for (i) in
                  the Lease with respect to the Basement Space or Additional
                  Basement Space, or (ii) in this Amendment.

         5. Lessee's Share. From and after the Area A Commencement Date (and
assuming that the Area B Commencement Date has not then occurred), Lessee's
Share shall be 66.54%. From and after the Area B Commencement Date (and assuming
that the Area A Commencement Date has occurred previously), Lessee's Share shall
be 79.78%.

         6. Electricity. Electrical consumption in the Additional Expansion
Premises shall be measured by a separate electric meter. Lessee shall be solely
responsible for timely making all payments for electrical service directly to
the utility company providing electrical service to the Building. Lessor shall
have no obligation with respect to any such payment.

         7. Permitted Use.

                  (a) The Additional Expansion Premises shall be used only for
                  the Permitted Uses applicable to the portions of the Premises
                  other than the Basement Space as set forth in the Lease,

                  (b) The Second Additional Basement Space shall be used solely
                  for an animal storage facility and for general storage by
                  Lessee, and for no other purpose. Lessor makes no
                  representation or warranty of any type concerning the
                  permissibility of such use under applicable Legal Requirements
                  or the suitability of the Second Additional Basement Space for
                  such use. In addition to, and not in limitation of, the
                  provisions of the Lease relating to Lessee's use of the
                  Premises, Lessee hereby agrees to comply with all Legal
                  Requirements applicable to Lessee's use of the Second
                  Additional Basement Space and not to permit the emission of
                  any objectionable noise or odors from the Second Additional
                  Basement Space. Lessee shall be solely responsible, at its
                  sole cost and expense, for making such alterations, additions
                  and improvements to any animal storage facilities in the
                  Basement Space as may from time to time (i) be required to
                  maintain such facilities and the use thereof in compliance
                  with all Legal Requirements then applicable, or (ii) be
                  reasonably required by Lessor in order to prevent annoyance of
                  other tenants in the Building or disruption of their normal
                  business operations by reason of the operation of an animal
                  storage facility in the Basement Space.

         8. Delivery of the Second Additional Basement Space. Lessee
acknowledges that a portion of the Second Additional Basement Space is currently
leased to Pathology Services, Inc. ("Pathology"), another tenant of the
Building. In order to induce Pathology to relinquish its right to such space,
Lessee has agreed to assume the following obligations to Pathology:



                                       8
   9

                  (i) Lessee shall, at its sole cost and expense, pay for and
                  perform all work required to relocate Pathology's space in the
                  basement of the Building to substitute space identified by
                  Pathology and Lessor, including, without limitation: (A)
                  cleaning up and demolishing the shelving and other alterations
                  constructed or installed by or on behalf of Pathology in the
                  basement space which it currently occupies, (B) designing (or
                  paying for the design by Pathology) of the layout of such
                  substitute basement space, (C) installing demising partitions
                  to create the perimeter of the substitute basement space to
                  which Pathology will relocate, and installing all doors and
                  lighting in such substitute basement space as shown on Exhibit
                  III attached hereto, (D) installing in such substitute
                  basement space shelving of the same linear and square footage
                  as Pathology presently has in the basement space which it
                  currently occupies, as measured by Pathology's architect, (E)
                  patching the basement floor in such substitute basement space
                  to be occupied by Pathology and eliminating trip hazards, and
                  (F) moving (or reimbursing Pathology for the reasonable and
                  actual costs incurred by Pathology in moving) Pathology's
                  property from the basement space which it currently occupies
                  to such substitute basement space;

                  (ii) Lessee shall surrender three (3) On-Site Parking Spaces
                  to Lessor, one by October 31, 1998 and the other two by
                  December 31, 1998, which parking spaces shall then be leased
                  by Lessor to Pathology; and

                  (iii) Lessee shall pay the sum of $45,000.00 in cash to
                  Pathology within seven (7) days after the delivery to
                  Pathology of the completed substitute basement space to be
                  occupied by Pathology, and provide to Lessor evidence of such
                  payment. Lessor hereby acknowledges that such payment has been
                  made to Pathology.

                  Lessee acknowledges that Lessor has no obligation with respect
to any work to be performed in connection with the demising and finishing of any
such substitute basement space, or the demolition of the basement space
currently occupied by any other tenant of the Building, or the relocation of any
other tenant's property from the basement space which it currently occupies to
any such substitute basement space, or to pay any amount to any tenant of the
Building in connection with any of the foregoing. Lessee shall save Lessor
harmless and indemnified from any loss, cost and expense (including, without
limitation, reasonable attorneys' fees) arising out of or relating to (A) any
work performed by or on behalf of Lessee in the basement of the Building or
elsewhere in the Building or on the Land in connection with the relocation of
other tenants to substitute basement space, (B) any work performed by or on
behalf of Lessee in connection with the construction of the Second Additional
Basement Space, or (C) any claim by any other tenant of the Building alleging
that Lessee failed to perform fully all of its obligations described in this
Section.

         9. Right of First Offer. In the event that at any time during the Term
Lessor commences to market for lease any space in the Building which is not then
part of the 



                                       9
   10

Premises, then, provided that (i) an Event of Default is not then existing, and
(ii) the Lessee named herein (or a permitted sublessee or assignee of the type
described in Section 8(j) of the Lease) is then actually occupying the entire
Premises, Lessee shall have the right (the "Right of First Offer") to lease the
portion of the Building set forth in Lessor's notice for a term commencing on
the date on which Lessor delivers possession thereof to Lessee, and ending on
the last day of the Term, by giving written notice of exercise to Lessor within
twenty (20) days of receipt of Lessor's notice.

                  If Lessee exercises its right under this Section 9 to lease
such space, then such space shall become subject to all of the terms of this
Lease except that Basic Rent therefor shall be due and payable in an amount
equal to the Fair Market Rent thereof as of the date on which Lessor reasonably
anticipates delivering possession of the space to Lessee. Fair Market Rent shall
be determined in the manner provided in Section 3.3 of the Lease. In the event
that Lessee, for any reason whatsoever, fails to give such notice to Lessor
within such 20-day period, Lessee shall be deemed to have waived its rights
under this Section with respect to the space described in Lessor's notice for
the remainder of the Term.

                  Any space which is subjected to the terms of this Lease
pursuant to this Section 9 shall be delivered broom clean but otherwise in the
condition in which it is redelivered to Lessor. Lessor shall have no obligation
to perform any preparatory work in such space in anticipation of Lessee's use
thereof or to provide any allowance to Lessee towards the preparation thereof.
All work performed by Lessee in such space shall be subject to the provisions of
the Lease, including, without limitation, Section 11.0(f). Basic Rent shall be
due and payable on account of such space commencing on the day on which Lessor
delivers possession thereof to Lessee.

                  Lessor shall use reasonable diligence to regain possession of
any space with respect to which Lessee has exercised the Right of First Offer
herein contained, but Lessor shall not be responsible for any delay by any
occupant in vacating such space. Effective upon the date on which Lessor
delivers possession to Lessee of any space which is subjected to the terms of
this Lease pursuant to this Section 9, such space shall be deemed to be part of
the Premises for all purposes of this Lease except that Basic Rent therefor
shall be computed as hereinabove provided, and Lessee's Share shall be
appropriately modified.

                  Lessee's Right of First Offer shall be subject and subordinate
to all rights of extension refusal set forth in any lease executed by Lessor
prior to the date of this Amendment, and shall further be subject and
subordinate (with respect to space on the third and fourth floors of the
Building, to the rights of Pathology).

         10. Construction. All work to be performed by or on behalf of Lessee in
the Additional Expansion Premises, the basement of the Building, or elsewhere on
the Land or in the Building in connection with Lessee's initial occupancy of any
of such spaces shall be performed (i) at Lessee's sole cost and expense, (ii) in
accordance with the terms of the Lease, and (iii) with respect to construction
to be performed in the Second Additional Basement Space, shall also be performed
in accordance with the provisions of the Supplemental Work Letter attached as
Exhibit II to the Second Amendment to Lease. Promptly after the completion of
construction of Lessee's improvements or alterations to the 



                                       10
   11

Additional Expansion Premises, Lessee shall provide to Lessor a reasonably
detailed breakdown of the actual out-of-pocket costs paid by Lessee in
connection therewith, allocated among office improvements and other
improvements, together with reasonable supporting documentation of such costs
and such allocation, certified as accurate by an officer of Lessee.

                  Lessor shall deliver the Additional Expansion Premises and the
Second Additional Basement Space to Lessee in the same condition in which they
are redelivered by Lifeline to Lessor, and Lessee agrees to accept them in their
"as is" condition. Lessor shall not be required to pay for or to perform any
work in the Additional Expansion Premises, the Second Additional Basement Space,
or elsewhere in the Building in order to prepare for Lessee's occupancy
hereunder.

                  Lessee shall, at its sole cost and expense and prior to the
expiration of the Lease Term, remove the temporary demising partition separating
Area A from Area B.

         11. Parking.

                  (a) In addition to the On-Site Parking Spaces which Lessee has
                  leased pursuant to Section 9.0 of the Lease prior to the date
                  of this Amendment, (1) effective on the Area A Commencement
                  Date, Lessor shall lease to Lessee an additional one hundred
                  (100) On-Site Parking Spaces, and (2) effective on the Area B
                  Commencement Date, Lessor shall lease to Lessee an additional
                  forty-eight (48) On-Site Parking Spaces. Lessee shall pay to
                  Lessor, as Additional Rent, for each On-Site Parking Space
                  leased pursuant to this subsection (b), in advance, commencing
                  on the Area A Commencement Date or the Area B Commencement
                  Date, as the case may be, and continuing thereafter on the
                  first calendar day of each month, (i) $75.00 per month during
                  the Initial Term, and (ii) thereafter, an amount equal to the
                  Fair Market Rent of such parking spaces as determined annually
                  in accordance with the Lease. Lessee shall have no right to
                  lease additional On-Site Parking Spaces in connection with its
                  lease of the Additional Expansion Premises other than as set
                  forth in this subsection (b).

                  (b) In addition to the On-Site Parking Spaces, (1) effective
                  on the Area A Commencement Date, Lessor shall lease to Lessee
                  an additional forty (40) parking spaces, and (2) effective on
                  the Area B Commencement Date, Lessor shall lease to Lessee an
                  additional twenty (20) parking spaces (collectively, the
                  "Off-Site Parking Spaces") in a parking lot or lots in the
                  vicinity of the Building as shown cross-hatched on Exhibit IV
                  attached. Lessor reserves the right to relocate all or any
                  portion of the Off-Site Parking Spaces within the area shown
                  on Exhibit IV from time to time during the Term. Lessor shall
                  use its best efforts to spread the Off-Site Parking Spaces
                  over the fewest number of parking lots possible. Lessee shall
                  pay to Lessor, as Additional Rent, for each Off-Site Parking
                  Space so leased, in advance, commencing on the Area A
                  Commencement Date or the Area B Commencement Date, as the case
                  may be, and continuing thereafter on the first calendar day of
                  each month, (i) $60.00 per month during 



                                       11
   12

                  calendar year 1999, and (ii) thereafter, an amount equal to
                  the Fair Market Rent of such parking spaces as determined
                  annually in the manner provided in Section 9.0 of the Lease.

                  Notwithstanding the foregoing, in the event that Lessor
                  hereafter reduces the number of the properties shown on
                  Exhibit IV used for parking purposes, and consequently is
                  unable to provide some or all of the Off-Site Parking Spaces
                  on its own property, the named Lessor shall, upon request by
                  Lessee, make reasonable efforts to lease all or a portion of
                  such spaces from a third party, in which event the rent
                  payable on account of such Off-Site Parking Spaces so leased
                  shall be the amount paid by the named Lessor to such third
                  party therefor, without markup. The provisions of the
                  preceding sentence of this paragraph shall not apply to any
                  Lessor other than MIT.

         12. Transportation of Animals and Related Materials. No animals, animal
waste, food or supplies relating to the animals maintained from time to time in
the Basement Space shall be transported within the Building except as provided
in the Lease (including, without limitation, Section 5 of the Second Amendment
to Lease).

         13. Utilities. Lessee shall pay for all electricity consumed within the
Basement Space and shall make such payment directly to the company which
provides such electrical service. Water and gas consumption in the Basement
Space shall be separately metered and Lessee shall pay all charges therefor
directly to the company which provides such services.

         14. Brokers. Lessor and Lessee each represents to the other that it has
dealt with no broker in connection with this Amendment other than Lynch, Murphy,
Walsh & Partners ("Broker"). Lessee shall be solely responsible for the payment
of all fees and commissions due to Broker in connection with this transaction,
and indemnifies and holds Lessor harmless form and against any claim by Broker
for any such fee or commission. Each of the parties hereby agrees to indemnify
and hold the other party harmless from and against any claims for commissions or
fees by any person or firm other than Broker by reason of any act of the
indemnifying party.

         15. No Services. Notwithstanding anything to the contrary contained in
the Lease, Lessor is not providing any services to the Basement Space. Lessee
shall make its own arrangements for the cleaning of such space, as well as the
provision of electricity, water, gas, HVAC and any other utility or service.

         16. Release.

                  (a) In consideration of the agreements contained in this 
                  Amendment, Lessee hereby releases and forever discharges
                  Lessor and its officers, directors, employees, agents and
                  servants (collectively, the "Lessor Released Parties"), of and
                  from any and all claims, demands, causes of action, costs,
                  expenses, liabilities and obligations, at law or in equity,
                  which 



                                       12
   13

                  Lessee ever had, now has, or hereafter may have against the
                  Lessor Released Parties or any of them, arising out of or
                  relating to the proposed subleasing of the Additional
                  Expansion Premises by Lessee from Lifeline. Lessee hereby
                  acknowledges that its execution and delivery of this Amendment
                  constitute Lessee's intention to enter into the transaction
                  described in this Amendment in full substitution for any
                  proposed sublease of the Additional Expansion Premises from
                  Lifeline.

                  (b) In consideration of the agreements contained in this 
                  Amendment, Lessor hereby releases and forever discharges
                  Lessee and its officers, directors, employees, agents and
                  servants (collectively, the "Lessee Released Parties"), of and
                  from any and all claims, demands, causes of action, costs,
                  expenses, liabilities and obligations, at law or in equity,
                  which Lessor ever had, now has, or hereafter may have against
                  the Lessee Released Parties or any of them, arising out of or
                  relating to the proposed subleasing of the Additional
                  Expansion Premises by Lessee from Lifeline.

         17. Conditions of Effectiveness. Notwithstanding anything contained
herein to the contrary, this Amendment shall not be effective unless and until
all of the following occur:

                  (a) Lessor unconditionally delivers to Lessee an executed
                  counterpart of this Amendment;

                  (b) Lessor receives the unconditional delivery of an executed
                  counterpart of an amendment to the lease between Lessor and
                  Pathology, acceptable in all respects to Lessor, pursuant to
                  which Pathology surrenders all of its right, title and
                  interest in and to any portion of the Second Additional
                  Basement Space which is currently leased by Pathology, and
                  otherwise consistent with the terms of this Amendment; and

                  (c) Lessor receives the unconditional delivery of an executed
                  counterpart of an agreement between Lessor and Lifeline
                  terminating the lease between Lessor and Lifeline, acceptable
                  in all respects to Lessor.

         Lessee acknowledges that Lessor's willingness to enter into this
Amendment is based, in part on Lessor's expectation that other tenants of the
Building, over whom Lessor has no control, will take the actions described in
this Section. Lessor makes no representation or warranty concerning whether or
not such other tenants will take such actions so that the foregoing conditions
to the effectiveness of this Amendment is satisfied in full.

         18. Notice of Amendment to Lease. Either party shall, at the request of
the other, execute and acknowledge a Notice of Amendment to Lease in mutually
satisfactory form.

         19. Authority. Contemporaneously with its execution of this Amendment,


                                       13
   14
Lessee shall furnish to Lessor a certified copy of the resolution of the Board
of Directors of Lessee authorizing Lessee to enter into this Amendment and to
execute and acknowledge the aforementioned Notice of Amendment to Lease.

         20. General. This Amendment constitutes the entire agreement of the
parties with respect to its subject matter, and no oral statement or prior
written matter shall have any force or effect. This Amendment shall not be
modified or canceled except by writing subscribed to by all parties. This
Amendment shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts. The captions of the several paragraphs in this
Amendment are for convenience only and shall not be considered in construing
this Amendment.

         In all other respects, the terms and provisions of the Lease are hereby
ratified and confirmed and remain in full force and effect and unamended.

         EXECUTED UNDER SEAL as of the date set forth above.


         LESSOR:                    MASSACHUSETTS INSTITUTE OF
                                    TECHNOLOGY


                                    By: /s/ Philip A. Trussell
                                        -------------------------------
                                        Name: Philip A. Trussell
                                        Title: Director of Real Estate
                                               Associate Treasurer


         LESSEE:                    MILLENNIUM PHARMACEUTICALS, INC.


                                    By: /s/ Janet C. Bush
                                        -------------------------
                                        Name: Janet C. Bush
                                        Title:  VP FINANCE




                                       14
   15
                              [FLOOR PLAN CHARTS]

EX-13

   1
                                                                      Exhibit 13

Millennium Annual Report

Essential Inspiration

Extraordinary Innovation
   2
Millennium Pharmaceuticals, Inc.
SELECTED FINANCIAL DATA


YEAR ENDED DECEMBER 31,                       1994         1995          1996            1997           1998
- ----------------------------------------------------------------------------------------------------------------
                                                                                              
Statement of Operations Data:
(in thousands, except share and per 
share data)
Revenue under strategic alliances           $ 7,963    $    22,880    $    31,764    $    89,933    $   133,682
Costs and expenses:
  Research and development                   10,990         17,838         34,803         74,828        114,190
  General and administrative                  3,240          3,292          7,973         16,517         24,419
  Acquired in-process R&D                      --             --             --           83,800           --
  Amortization of intangible asset             --             --             --            2,397          2,702
- ----------------------------------------------------------------------------------------------------------------
                                             14,230         21,130         42,776        177,542        141,311
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from operations                (6,267)         1,750        (11,012)       (87,609)        (7,629)
Interest income (expense), net                 (105)          (466)         2,244          2,977          3,788
Minority interest                              --             --             --            3,410         14,179
- ----------------------------------------------------------------------------------------------------------------
Net income (loss)                           $(6,372)   $     1,284    $    (8,768)   $   (81,222)   $    10,338
- ----------------------------------------------------------------------------------------------------------------
Basic net income (loss) per share (pro
forma in 1995 and 1996)                                $      0.09    $     (0.40)   $     (2.87)   $      0.34
Shares used in computing basic net
income (loss) per share                                 13,851,639     21,696,894     28,322,722     30,319,175
Diluted net income (loss) per share (pro
forma in 1995 and 1996)                                $      0.07    $     (0.40)   $     (2.87)   $      0.33
Shares used in computing diluted net
income (loss) per share                                 17,853,914     21,696,894     28,322,722     31,508,308




YEAR ENDED DECEMBER 31,                       1994         1995          1996            1997           1998
- ----------------------------------------------------------------------------------------------------------------
                                                                                              
Consolidated Balance Sheet Data:
(in thousands)
Cash, cash equivalents and marketable
securities                                  $ 6,105    $    17,847     $   63,848    $    96,557    $   190,964
Working capital                               3,151         10,498         60,273         85,571        178,395
Total assets                                 10,101         25,105         87,744        144,513        257,954
Long-term debt, net of current portion        3,067          1,467              -              -              -
Capital lease obligation, net of current
portion                                       2,359          2,499          9,308         19,809         24,827
Stockholders' equity                        $ 1,559    $    13,096     $   66,639    $    91,755    $   206,362

   3
Millennium Pharmaceuticals, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS


OVERVIEW

Millennium Pharmaceuticals, Inc. ("Millennium" or "the Company") incorporates
large-scale genetics, genomics, high throughput screening, and informatics in an
integrated science and technology platform. We apply this technology platform
primarily in discovering and developing proprietary therapeutic and diagnostic
human healthcare products and services. The Company has two subsidiaries,
Millennium BioTherapeutics, Inc. ("MBio") and Millennium Predictive Medicine,
Inc. ("MPMx"). MBio is focused on developing therapeutic proteins and
antibodies, vaccines and gene therapy, and antisense products. MPMx is focused
on Diagnomics(TM) (genomics-based diagnostics) and pharmacogenomics
(correlation of patient genotypes to drug responses), and on generating and
integrating diverse biomedical data to provide products and services to the
healthcare industry. Within the parent company, referred to herein as "MPI,"
Millennium focuses on the development of small-molecule drugs, on continuing
development and integration of the platform, on high-throughput processes and
services, and on information and informatics technologies that support our
strategic alliances and discovery efforts across the entire organization.

During 1998, Millennium expanded efforts in our subsidiaries and in the parent
company. We hired additional staff in research and drug discovery, informatics,
biotherapeutics and diagnostics/prognostics, as well as in other support areas.
Millennium formed MPMx and Millennium Information, Inc. ("MInfo") in September
1997. MInfo was established to generate and integrate biomedical data and
develop information products and services for use by the healthcare industry.
During 1998, Millennium combined the operations of these two subsidiaries. In
January 1999, MInfo was merged with MPMx, and MPMx was the surviving corporation
of the merger.

In September 1998, Millennium formed a broad alliance with Bayer AG ("Bayer").
Under the terms of this agreement, Bayer will receive access to key technologies
in gene research as well as a flow of genomics-based drug development targets
that Millennium discovers through our research efforts. This collaboration also
gives Millennium residual rights to develop, on our own behalf, certain products
derived from research conducted under the alliance. As part of the agreement,
Bayer invested $96.6 million in November 1998 for approximately 4.96 million
common shares of Millennium stock and made an up-front license payment of $33.4
million.

To date, all of Millennium's revenues have resulted from payments from strategic
partners and United States government research grants. We have not received any
revenue from the sale of products. Millennium's strategic alliances through the
end of 1998 include the following: two agreements with the Wyeth-Ayerst Division
of American Home Products ("AHP") in certain disorders of the central nervous
system and in bacterial diseases; an agreement with Astra AB ("Astra") in
inflammatory respiratory diseases; an agreement with Bayer in cardiovascular
disease, areas of oncology not covered by Millennium's alliance with Lilly,
osteoporosis, pain, liver fibrosis, hematology and viral infections; two
agreements with Eli Lilly and Company ("Lilly") in atherosclerosis, and in
select areas of oncology, as well as a third agreement, through MBio, in
therapeutic proteins; an agreement with Hoffmann-La Roche, Inc. ("Roche") in
obesity and type 2 diabetes; an agreement with Monsanto Company
   4
("Monsanto") in plant agriculture; and an agreement with Pfizer, Inc. ("Pfizer")
in the area of antifungal treatments. 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 contingent 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.

During 1999, we expect to continue to pursue additional alliances, and will
consider joint development and acquisition opportunities that may provide
Millennium with access to products on the market or in later stages of
commercial development than those represented within our current programs. We
expect that Millennium will incur increasing expenses and may incur increasing
operating losses for at least the next several years, primarily due to expansion
of facilities and research and development programs, and as a result of efforts
to advance acquired products or our own development programs to
commercialization. Our revenues under strategic alliance and licensing
arrangements may fluctuate from period to period or year to year in both timing
and amounts; these fluctuations, as well as fluctuations in spending, may result
in periods of profitability and periods of losses. Therefore, Millennium'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, 1998 AND DECEMBER 31, 1997

Revenue under strategic alliances increased to $133.7 million for the year ended
December 31, 1998 (the "1998 Period") from $89.9 million for the year ended
December 31, 1997 (the "1997 Period"). During the 1998 Period, Millennium
recognized revenue from all seven of its partners in ten alliances. During the
1997 Period, Millennium recognized revenue from six partners, AHP, Astra, Lilly,
Monsanto, Roche and Pfizer, in nine alliances. The 1998 Period included a $33.4
million one-time payment from Bayer received in November. In addition, during
1998, Monsanto provided $38.2 million in a combination of program and technology
transfer fees, performance payments for achievement of research objectives, and
payments for administrative and facilities services. The 1998 Period included a
full year of research funding under our eight other alliances as well. The 1997
Period included a one-time license fee of $38 million from Monsanto in the
fourth quarter.

Research and development expenses increased to $114.2 million for the 1998
Period from $74.8 million for the 1997 Period. The increase was primarily
attributable to increased personnel expenses, facilities expenses, increases in
spending for laboratory supplies, and external collaborations and increased
equipment depreciation. We expect research and development expenses to continue
to increase as personnel are added and as research and development activities
are expanded to accommodate our existing strategic alliances and additional
commitments that we may undertake in the future.

General and administrative expenses increased to $24.4 million for the 1998
Period from $16.5 million for the 1997 Period. The increase was primarily
attributable to increased expenses for additional management and administrative
personnel, as well as to increases in facilities expenses, consulting, and other
professional fees associated with the expansion and increased complexity of our
operations and business development efforts. We expect that general and
administrative expenses will continue to increase as Millennium continues to
grow.

During 1997, Millennium acquired ChemGenics Pharmaceuticals Inc. ("ChemGenics")
for approximately 4.8 million shares of common stock at $21.50 per share.
   5
In connection with the ChemGenics acquisition, Millennium incurred a
nonrecurring charge of $83.8 million for acquired in-process research and
development in 1997, and amortization expense of $2.7 million in 1998 and $2.4
million in 1997. The in-process research and development was charged to
operations because, in management's opinion, technological feasibility for the
acquired research and development had not been established and would require a
significant amount of additional expenditures over a number of years.

Millennium had net interest income of $3.8 million for the 1998 Period and net
interest income of $3.0 million for the 1997 Period. Interest income increased
in 1998 due to the increase in our average cash balance. Interest expense grew
in 1998 due to increases in capital lease obligations during that year. The
minority interest of $14.2 million in 1998 and $3.4 million in 1997 represents
the entire net loss of MBio. This loss is attributed completely to the minority
stockholder because the minority stockholder has provided all equity funding for
MBio.


YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996

Revenue under strategic alliances increased to $89.9 million for the 1997 Period
from $31.8 million for the year ended December 31, 1996 (the "1996 Period").
During 1997, Millennium recognized revenue from six partners in nine alliances.
During the 1996 Period, we recognized revenue from four partners, AHP, Astra,
Lilly and Roche, in five alliances. The 1997 Period included an up-front license
fee of $38 million from Monsanto in the fourth quarter, a full year of funding
under five alliances, 11 months of funding under two alliances and a partial
year of funding under the MBio alliance with Lilly. The 1996 Period included an
up-front license fee from AHP and various research milestone payments. Effective
March 1996, Lilly exercised its option to enter into a strategic alliance with
the Company in select areas of oncology. As a result, we recognized $2.8 million
of revenue that had been previously deferred.

Research and development expenses increased to $74.8 million for the 1997 Period
from $34.8 million for the 1996 Period. The increase was primarily attributable
to increased personnel expenses associated with staffing growth due to the
ChemGenics acquisition, the establishment and staffing of MBio, and other
additional research and development personnel. Related to these costs were
increases in facilities expenses, increases in purchases of laboratory supplies
and increased equipment depreciation.

General and administrative expenses increased to $16.5 million for the 1997
Period from $8.0 million for the 1996 Period. The increase was primarily
attributable to increased expenses for additional management and administrative
personnel, as well as to increases in facilities expenses, consulting and
professional fees.

Millennium had net interest income of $3.0 million for the 1997 Period and net
interest income of $2.2 million for the 1996 Period. Interest income grew
because of an increase in our average cash balance. Interest expense grew due to
additional capitalized lease obligations during 1997. The minority interest in
1997 of $3.4 million represents the entire net loss of MBio. This loss is
attributed completely to the minority stockholder because the minority
stockholder has provided all equity funding for MBio.


LIQUIDITY AND CAPITAL RESOURCES

Millennium has financed operations since inception primarily through strategic
alliances, a public offering, private placement of equity securities, and
issuance of debt and capital leases. Through December 31, 1998, Millennium has
recognized approximately $286 million of revenue under strategic alliances. In
November 1998, Bayer invested $96.6 million for approximately 4.96 million
shares of Millennium common stock. In May 1996, we completed an initial public
offering of common stock resulting in proceeds, net of underwriting discounts
and offering costs, of $57.1 million. The private placement of equity securities
has provided aggregate gross proceeds of approximately 
   6
$45.9 million. We have obtained $4.0 million in long-term debt, $49.1 million in
capital lease financings and $1.1 million to finance a facility construction
project. As of December 31, 1998, Millennium had approximately $191 million in
cash, cash equivalents and marketable securities.

During 1998, Millennium acquired assets under capital leases totaling $15.2
million and expended an additional $7.6 million for equipment, leasehold
improvements and construction in progress. At December 31, 1998, the aggregate
outstanding commitment under capital lease obligations was $33.5 million. We
expect capital expenditures to continue at a level at least as significant as
expenditures in 1998 over the next several years as we expand facilities and
acquire equipment to support increased research and development and other
efforts. In addition, we have entered into commitments to provide security
deposits associated with facilities leases of approximately $10.8 million
through December 31, 1998.

The Company maintains an investment portfolio in accordance with its Investment
Policy. The primary objectives of the Company's Investment Policy are to
preserve principal, maintain proper liquidity to meet operating needs and
maximize yields. The Company's Investment Policy specifies credit quality
standards for the Company's investments and limits the amount of credit exposure
to any single issue, issuer or type of investment.

The Company does not believe that there is any material market risk exposure
with respect to derivative or other financial instruments which would require
disclosure under this item.

As of December 31, 1998, Millennium had net operating loss carryforwards of
approximately $16.5 million to offset future federal and state taxable income
through 2013. Due to the degree of uncertainty related to the ultimate
realization of such prior losses, no benefit has been recognized as of December
31, 1998. Moreover, Millennium's ability to utilize these losses in future years
may be limited under the change of stock ownership rules of the Internal Revenue
Service.

Millennium believes that existing cash and marketable securities and anticipated
cash payments from its strategic alliances will be sufficient to support our
operations for the foreseeable future. Our forecast of the period of time
through which our financial resources will be adequate to support operations is
forward-looking information, and, as such, actual results may vary. Factors that
may cause actual results to vary include those described below under the heading
"Factors Affecting Future Operating Results."


IMPACT OF YEAR 2000

The Year 2000 issue is the result of computer programs that were written using
two digits rather than four to define the applicable year. Any computer program
that has date-sensitive software may recognize a date using "00" as the year
1900 rather than the Year 2000. It is possible that this incorrect recognition
of dates could cause system failures or miscalculations of data. If these errors
were to occur in Millennium systems, they could cause us to be unable to process
data and engage in normal business activities.

Millennium has determined that we have Year 2000 exposure in the following
areas: (i) software and hardware embedded in our laboratory equipment and used
in our research and development programs, (ii) computer software and hardware
used in our business and facilities operations and (iii) computer systems used
by vendors and suppliers with whom we do business. In addition, we have Year
2000 exposure with respect to internally developed informatics application
software that is used by Millennium and certain alliance partners who have
access to our technology platform.
   7
Millennium has a Year 2000 task force that is evaluating our internal computer
programs, systems and equipment and overseeing our Year 2000 efforts. We are
using both internal and external resources to identify potential issues, costs
and solutions to address Year 2000 concerns. For this effort, we are using
procedures outlined in the Government Accounting Office's Y2K Guide. We have
completed a preliminary inventory of our informatics applications, and we are
conducting an in-depth assessment of this inventory. In addition, we have
inventoried a substantial amount of software and hardware embedded in our
laboratory and facilities equipment as part of our effort to determine Year 2000
compliance. We are also making inquiries of our important suppliers and vendors
to assess their Year 2000 readiness. We have inventoried software used in our
business operations as well. We intend to identify critical systems and
equipment on which to focus our inquiries and testing.

To date, we have identified aspects of our computer hardware, network
infrastructure and business systems that are not Year 2000 compliant. We have
obtained and begun to implement vendor recommendations for correcting these
deficiencies. We have also identified aspects of internally developed software
applications that are not Year 2000 compliant and have begun testing and
corrective programs in this area. In addition, we expect to complete an
inventory and assessment of critical laboratory and facilities equipment and
systems by the end of the first quarter of 1999. We expect to complete testing
and remediation for critical computer hardware, network infrastructure, business
systems and internally developed software applications by the end of the third
quarter of 1999. We expect to complete testing and any remediation of critical
laboratory and facilities equipment by the end of the year. We are not
experiencing and do not anticipate any forward-looking problems.

At the current time, we expect to be able to correct the problems of which we
are aware in a reasonable and timely manner. As we have not completed our
evaluation of all of our critical systems, software or equipment, there can be
no assurance that we will not find problems that will require us to incur
substantial costs to correct or will disrupt our business. Should such problems
occur, they could have a material adverse effect on our business, financial
position or results of operations.

We do not currently have contingency plans for all critical aspects of our
systems and operations in the event that we or any of our important suppliers or
vendors are not able to become Year 2000 compliant. We expect to develop
contingency plans for critical areas if we determine that we or any important
vendors or suppliers are not likely to become Year 2000 compliant.

We have not incurred material remediation costs to date and we do not currently
expect that the aggregate cost of our efforts will be material to our operations
or financial position taken as a whole. However, it is possible that remediation
costs will be greater than we anticipate and that such costs could have a
material adverse effect on our financial position or results of operations. Our
alliance partners or collaborators may also experience disruption as a result of
the Year 2000 issue. If our alliance partners and collaborators experience
disruption, it is possible that our alliances with these partners could be
adversely affected, which could have a material adverse effect on our financial
position and results of operations.

There can be no assurance that we will identify all Year 2000 compliance
problems as a result of our efforts or that we will be able to correct
compliance problems that are identified in a timely manner. If we are unable, in
a timely manner, to identify and correct compliance problems in critical systems
and equipment, our business, financial position and results of operations could
be adversely affected.


FACTORS AFFECTING FUTURE OPERATING RESULTS
   8
This Annual Report to Stockholders contains forward-looking statements. For this
purpose, any statements contained in the Annual Report that are not statements
of historical fact may be considered to be forward-looking statements. Although
not a complete list of words that might identify forward-looking statements, we
use the words "believes," "anticipates," "plans," "expects," "intends" and
similar expressions to identify forward-looking statements. There are a number
of important factors that could cause Millennium's actual results to differ
materially from those indicated by forward-looking statements. These factors
include, but are not limited, those listed below and elsewhere in this Annual
Report to Stockholders and in the Section titled "Business-Factors which May
Affect Results" in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, as filed with the Securities and Exchange Commission,
incorporated herein by reference.

To date, Millennium has not developed or commercialized any products or services
based on our technological approaches. There can be no assurance that these
approaches will enable us to successfully discover and develop
life-science-based products and services. In addition, we face intense
competition from commercial and academic organizations, many of which are larger
and better financed.

Millennium has a substantial accumulated deficit. We may incur losses for at
least the next several years, or may show periods of profitability and periods
of losses. Losses may increase as we expand our infrastructure, research and
development, and commercialization activities. We will require substantial
additional funds for our research and development programs, operating expenses,
the pursuit of regulatory approvals and expansion of our production, sales and
marketing capabilities. Adequate funds for these purposes, whether through
equity or debt financings, collaborative or other arrangements with corporate
partners or from other sources, may not be available when needed or on terms
acceptable to us. Insufficient funds could require us to delay, scale back or
eliminate certain of our research and product development programs or to license
third parties to commercialize products or technologies that we would otherwise
develop or commercialize ourselves.

Millennium's strategy for development and commercialization of therapeutic and
diagnostic products based upon our discoveries and technologies depends upon the
formation of various strategic alliances, licensing and technology transfer
arrangements. There can be no assurance that current or any future strategic
alliances, licensing or technology transfer arrangements ultimately will be
successful. If any of our strategic partners was to breach or terminate its
agreement with us or otherwise fail to conduct its collaborative activities
successfully in a timely manner, such breach, termination or other failure could
have a material adverse effect on our business, financial condition and results
of operations.

Proprietary rights relating to Millennium's future products, and to our methods
and services will be protected from unauthorized use by third parties only to
the extent that they are covered by valid and enforceable patents or are
maintained in confidence as trade secrets. There can be no assurance that any
pending patent applications relating to our products, methods and services will
result in patents being issued or that any such patents will afford protection
against competitors with similar technology. There may be pending or issued
third-party patents relating to our methods and services and we may need to
acquire licenses to, or to contest the validity of, any such patents. It is
likely that we would need to expend significant funds to defend any claim that
Millennium infringes a third-party patent. There can be no assurance that any
license required under any such patent would be made available.

During 1998, Millennium significantly increased the scale of our operations to
support the expansion of our disease research programs and alliances. The
resulting growth in personnel and facilities could place significant strains on
our management, operations and systems. Inability to manage such growth
effectively could have a material adverse effect on the Company's business,
financial position and results of operations.
   9
Other factors that may affect our future operating results include the inherent
risk of product liability claims which may result from testing, marketing and
sale of pharmaceutical products, fluctuations in our quarterly operating
results, our ability to continue to attract and retain qualified management and
scientific staff, and the ability of our alliance partners or ourselves to
obtain on a timely basis regulatory approvals for marketing and sale of products
and to compete successfully in the market.
   10
Millennium Pharmaceuticals, Inc.

Report of Independent Auditors


Board of Directors and Stockholders
Millennium Pharmaceuticals, Inc.

We have audited the accompanying consolidated balance sheets of Millennium
Pharmaceuticals, Inc. as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1998. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Millennium Pharmaceuticals, Inc. at December 31, 1998 and 1997, and the
consolidated results of operations, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.



Ernst & Young LLP

February 8, 1999
Boston, Massachusetts
   11
Millennium Pharmaceuticals, Inc.
CONSOLIDATED BALANCE SHEETS


December 31,                                                 1998        1997
(in thousands, except par value and shares)
- -------------------------------------------------------------------------------
                                                                       
ASSETS
Current assets:
   Cash and cash equivalents                               $138,284    $ 69,236
   Marketable securities                                     52,680      27,321
   Due from strategic partners                                6,660         778
   Prepaid expenses and other current assets                  5,033       4,595
- -------------------------------------------------------------------------------
Total current assets                                        202,657     101,930
Property and equipment, net                                  38,170      29,030
Restricted cash and other assets                             11,416       5,140
Intangible asset, net                                         5,711       8,413
- -------------------------------------------------------------------------------
Total assets                                               $257,954    $144,513


LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                        
Current liabilities:
  Accounts payable                                         $  6,918    $  3,165
  Accrued expenses                                            6,186       4,294
  Deferred revenue                                            2,501       3,053
  Current portion of capital lease obligations                8,657       5,847
- -------------------------------------------------------------------------------
Total current liabilities                                    24,262      16,359
Capital lease obligations, net of current portion            24,827      19,809
Minority interest                                             2,503      16,590
Commitments and contingencies

STOCKHOLDERS' EQUITY:
Preferred Stock, $0.001 par value;
 5,000,000 shares authorized, none issued                        --          --
Common Stock, $0.001 par value;
 100,000,000 shares authorized: 34,923,204 shares in 1998
 and 29,169,398 shares in 1997 issued and outstanding            35          29
Additional paid-in capital                                  296,370     193,254
Deferred compensation                                          (957)     (1,992)
Notes receivable from officers                                  (87)       (166)
Other Comprehensive income (loss)                                29          (4)
Accumulated  deficit                                        (89,028)    (99,366)
- --------------------------------------------------------------------------------
Total stockholders' equity                                  206,362      91,755
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity                 $257,954    $144,513


   12
Millennium Pharmaceuticals, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS



Year Ended December 31,                                                1998          1997          1996
(in thousands, except per share and share data)
- --------------------------------------------------------------------------------------------------------------
                                                                                                  
Revenue under strategic alliances                               $    133,682     $     89,933     $     31,764
Costs and expenses:
     Research and development                                        114,190           74,828           34,803
     General and administrative                                       24,419           16,517            7,973
     Acquired in-process R&D                                            --             83,800             --
     Amortization of intangible asset                                  2,702            2,397             --
- --------------------------------------------------------------------------------------------------------------
                                                                     141,311          177,542           42,776
- --------------------------------------------------------------------------------------------------------------
Loss from operations                                                  (7,629)         (87,609)         (11,012)
Interest income                                                        6,198            4,412            3,131
Interest expense                                                      (2,410)          (1,435)            (887)
Minority interest                                                     14,179            3,410             --
- --------------------------------------------------------------------------------------------------------------
Net income (loss)                                               $     10,338     $    (81,222)    $     (8,768)
- --------------------------------------------------------------------------------------------------------------
Basic net income (loss) per share (pro forma in 1996)           $       0.34     $      (2.87)    $      (0.40)
Shares used in computing basic net income (loss) per share        30,319,175       28,322,722       21,696,894
Diluted net income (loss) per share (pro forma in 1996)         $       0.33     $      (2.87)    $      (0.40)
Shares used in computing diluted net income (loss) per share      31,508,308       28,322,722       21,696,894

   13
Millennium Pharmaceuticals, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS



Year Ended December 31,                                              1998          1997          1996
(in thousands)
- --------------------------------------------------------------------------------------------------------
                                                                                            
OPERATING ACTIVITIES
Net income (loss)                                                 $  10,338     $ (81,222)    $  (8,768)
Adjustments to reconcile net income (loss) to cash provided by
(used in) operating activities:
   Acquired in-process R&D                                             --          83,800          --
   Depreciation and amortization                                     16,284        12,168         3,867
   Minority interest                                                (14,179)       (3,410)         --
   Net loss on asset disposal                                            97           433           199
   Amortized interest income                                           --            --            (280)
   Stock compensation                                                 2,029         1,693           774
   Changes in operating assets and liabilities:
     Prepaid expenses and other current assets                         (438)       (1,706)       (1,818)
     Due from strategic partners                                     (5,882)        4,932        (3,967)
     Restricted cash and other assets                                (6,276)       (4,465)         (288)
     Accounts payable and accrued expenses                            5,645         2,962         1,856
     Deferred revenue                                                  (552)       (1,480)          433
- --------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities                   7,066        13,705        (7,992)

INVESTING ACTIVITIES
Purchase of property and equipment                                   (7,590)       (4,256)       (3,210)
Sale of marketable securities                                        59,606        58,728        52,595
Purchase of marketable securities                                   (84,932)      (30,778)      (99,113)
- --------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities                 (32,916)       23,694       (49,728)

FINANCING ACTIVITIES
Proceeds from sale of Common Stock and warrants                      96,600          --          57,403
Proceeds from sale of subsidiary stock                                 --          20,000          --
Acquisition of ChemGenics, net of cash acquired                        --           7,087          --
Net proceeds from employee stock purchases                            5,699         2,039           653
Payments on long-term debt                                             --          (1,467)       (1,600)
Payments of capital lease obligations                                (7,401)       (5,910)       (2,734)
Proceeds from sale of Preferred Stock                                  --            --           3,500
- --------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                            94,898        21,749        57,222
- --------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents                     69,048        59,148          (498)
Cash and cash equivalents at beginning of year                       69,236        10,088        10,586
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of  year                         $ 138,284     $  69,236     $  10,088
- --------------------------------------------------------------------------------------------------------
NONCASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired under capital leases                           $  15,229     $  17,426     $  11,142

   14
Millennium Pharmaceuticals, Inc.
STATEMENTS OF STOCKHOLDERS' EQUITY




(in thousands, except shares)                Convertible Preferred Stock               Common Stock
- ---------------------------------------------------------------------------------------------------------
                                                   shares        amount             shares        amount
- ---------------------------------------------------------------------------------------------------------
                                                                                 
Balance at December 31, 1995                     11,783,333     $  12              4,211,926       $  4
Issuance of Series D
   Convertible Preferred Stock                      388,888
Conversion of Convertible Preferred
   Stock to Common Stock                        (12,172,221)      (12)            12,172,221         12
Issuance of Common Stock                                                           5,175,000          5
Repurchase of Common Stock                                                          (342,818)
Exercise of stock warrants                                                           300,000          1
Employee stock purchases                                                           2,343,197          2
Issuance of Common Stock in
   exchange for note from officer                                                     54,625
Forgiveness of notes from officers
Deferred stock compensation
Stock compensation earned
Net loss
Unrealized loss on marketable securities
Comprehensive loss
- ---------------------------------------------------------------------------------------------------------
Balance at December 31, 1996                       --               --             23,914,151          24
Issuance of Common Stock                                                            4,783,688           5
Repurchase of Common Stock                                                            (87,130)
Exercise of stock warrants                                                            123,589
Employee stock purchases                                                              415,312
Forgiveness of notes from officers
Stock compensation expense
Write off deferred stock compensation
Stock compensation earned
401K stock match                                                                       19,788
Net loss
Unrealized gain on marketable securities
Comprehensive loss
- ---------------------------------------------------------------------------------------------------------
Balance at December 31, 1997                                                        29,169,398         29
Issuance of Common Stock                                                             4,957,660          5
Repurchase of Common Stock                                                             (55,200)
Exercise of stock warrants                                                              23,090
Employee stock purchases                                                               796,938          1
Forgiveness of notes from officers
Stock compensation expense
Write off deferred stock compensation
Stock compensation earned
401K stock match                                                                        31,318
Net income
Unrealized gain on marketable securities
Comprehensive income
- ---------------------------------------------------------------------------------------------------------
Balance at December 31, 1998                                                         34,923,204     $  35

   15




                                 Notes          Other
  Additional                   Receivable   Comprehensive                    Total
    Paid-in       Deferred        from          Income      Accumulated  Stockholders'
    Capital     Compensation    Officers        (Loss)        Deficit       Equity
- ----------------------------------------------------------------------------------------
                                                                 
   $  22,722                      $(266)                      $  (9,376)    $  13,096

       3,500                                                                    3,500


      57,097                                                                   57,102
          (3)                                                                      (3)
         300                                                                      301
         654                                                                      656

          33                        (54)                                          (21)
                                     75                                            75
       3,487       $(3,487)
                       719                                                        719
                                                                 (8,768)       (8,768)
                                                $(18)                             (18)
                                                                             --------
                                                                               (8,786)
- -------------------------------------------------------------------------------------
      87,790        (2,768)        (245)         (18)           (18,144)       66,639
     102,844          (247)                                                   102,602
         (23)                                                                     (23)

       2,062                                                                    2,062
                                     79                                            79
         370                                                                      370
        (119)          119
                       904                                                        904
         330                                                                      330
                                                                (81,222)      (81,222)
                                                  14                               14
                                                                             --------
                                                                              (81,208)
- -------------------------------------------------------------------------------------
     193,254        (1,992)        (166)          (4)           (99,366)       91,755
      96,595                                                                   96,600
         (23)                                                                     (23)

       5,629                                                                    5,630
                                     79                                            79
         565                                                                      565
        (182)          182
                       853                                                        853
         532                                                                      532
                                                                 10,338        10,338
                                                  33                               33
                                                                             --------
                                                                               10,371
- -------------------------------------------------------------------------------------
    $296,370      $   (957)      $  (87)        $ 29           $(89,028)     $206,362

   16
Millennium Pharmaceuticals, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


December 31, 1998

[1] BASIS OF PRESENTATION

THE COMPANY

Millennium Pharmaceuticals, Inc. incorporates large-scale genetics, genomics,
high throughput screening, and informatics in an integrated science and
technology platform. Millennium applies this technology platform primarily in
discovering and developing proprietary therapeutic and diagnostic human
healthcare products and services. The consolidated financial statements include
the accounts of the Company and its 82%-owned subsidiary, Millennium
BioTherapeutics, Inc. ("MBio"), as well as its wholly-owned subsidiary,
Millennium Predictive Medicine, Inc. ("MPMx"). As more fully described in Note
4, the consolidated financial statements include the accounts of ChemGenics
Pharmaceuticals Inc. ("ChemGenics") subsequent to February 10, 1997. All
intercompany transactions have been eliminated in consolidation.

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 MARKETABLE SECURITIES

Cash equivalents consist principally of money market funds and corporate bonds
with original maturities of three months or less at the date of purchase. Cash
equivalents and marketable securities at December 31, 1998 and 1997 are
classified as available-for-sale.

CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash equivalents and marketable securities.
The Company's cash equivalents and marketable securities are held by high-credit
quality financial institutions. By policy, the Company limits the credit
exposure to any one financial institution. At December 31, 1998, 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.
   17
INTANGIBLE ASSET

Goodwill recorded in connection with the ChemGenics acquisition (See Note 4) is
being amortized over a period of four years.

REVENUE RECOGNITION

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

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
("FASB") Statement of Financial Accounting Standards ("SFAS") 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 PRONOUNCEMENTS

Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which established standards for reporting and displaying
comprehensive income and its components in a full set of general-purpose
financial statements. The adoption of SFAS 130 resulted in revised disclosures
but had no effect on the financial position, results of operations or liquidity
of the Company. Comprehensive income is reported by the Company in the
statements of stockholders' equity.

Effective January 1, 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131 established
standards for the way that public business enterprises report information about
operating segments in annual financial statements and interim financial reports.
SFAS No. 131 also established standards for related disclosures about products
and services, geographic areas and major customers. The adoption of SFAS No. 131
did not affect results of operations or financial position. The Company has
identified three operating segments which, under the applicable provision of
SFAS No. 131, have been aggregated into one reportable segment. The Company
conducts business exclusively in the United States.

In June 1998, the FASB issued SFAS No.133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 1999. The Company believes the adoption of this new
accounting standard will not have a significant effect to its financial
statements as the Company's investment policies prohibit the use of derivatives.

INCOME TAXES

The liability method is used to account for income taxes. Deferred tax assets
and liabilities are determined based on differences between financial reporting
and income tax bases of assets and liabilities, as well as net operating loss
carryforwards, and are measured using the enacted tax rates and laws that will
be in effect when the differences reverse. Deferred tax assets may be reduced by
a valuation allowance to reflect the uncertainty associated with their ultimate
realization.
   18
FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the Company's balance sheets for other current
assets and long-term debt approximate their fair value. The fair values of the
Company's long-term debt are estimated using discounted cash flow analyses based
on the Company's current incremental borrowing rates for similar types of
borrowing arrangements.

NET INCOME (LOSS) PER SHARE

Net income per share for 1998 is computed using the weighted-average number of
common shares and dilutive-equivalent shares from stock options and warrants
using the treasury stock method. Net loss per share for 1997 is computed using
the weighted-average number of common shares outstanding. Pro forma net loss per
share for 1996 is computed using the weighted-average number of common shares,
convertible preferred shares assuming conversion at date of issuance, and
dilutive equivalent shares from stock options and warrants using the
treasury-stock method. At December 31, 1998, the difference between basic and
diluted shares used in the computation of earnings per share is the 1,189,133
weighted-average common equivalent shares resulting from outstanding common
stock options and warrants. Historical earnings per share for 1996 has not been
presented since such amount is not deemed meaningful due to the significant
change in the Company's capital structure that occurred in connection with the
initial public offering.

[3] SUBSIDIARIES

MILLENNIUM BIOTHERAPEUTICS, INC.

In May 1997, the Company established Millennium BioTherapeutics, Inc. ("MBio")
as a subsidiary and, pursuant to a Technology Transfer and License Agreement,
transferred and/or licensed certain technology to MBio in exchange for 9,000,000
shares of the subsidiary's Series A Convertible Preferred Stock. At that time,
MBio entered into a strategic alliance with Eli Lilly and Company ("Lilly") for
the discovery and development of novel therapeutic proteins (See Note 5). Under
the terms of a related stock purchase agreement, Lilly purchased $20 million of
Series B Convertible Preferred Stock of MBio for an approximate 18% equity
interest in MBio. The accompanying consolidated financial statements include the
accounts of MBio since inception. The minority interest included in the
accompanying consolidated balance sheets reflects the equity interest of Lilly
in MBio as of the balance sheet date and the minority interest included in the
accompanying consolidated statements of operations represents the minority
stockholder's interest in the net loss of MBio for the years ended December 31,
1998 and 1997. Since the minority stockholder has provided all equity funding,
the entire net loss of MBio is attributed to the minority stockholder.

The Company is not required to provide any funds for the operations of MBio, but
has entered into certain agreements with this subsidiary to provide specific
services and facilities at negotiated fees. Such fees amounted to $12.2 million
and $5.6 million in 1998 and 1997, respectively. The Company has subleased
approximately $0.6 million of equipment to MBio under an existing capital lease
agreement. All such intercompany transactions have been eliminated in
consolidation.

MILLENNIUM PREDICTIVE MEDICINE, INC.

In September 1997, the Company established a wholly-owned subsidiary, Millennium
Predictive Medicine, Inc. ("MPMx"), to develop products and services to optimize
the prevention, diagnosis, treatment and management of disease. In addition, in
September 1997, the Company incorporated Millennium Information, Inc. ("MInfo")
to generate and integrate biomedical data and develop information products and
services for use by the healthcare industry. The accompanying consolidated
financial statements include the accounts of MPMx and MInfo since
   19
inception. During 1998, Millennium combined the operations of these two
subsidiaries. In January 1999, MInfo was merged with MPMx, and MPMx was the
surviving entity of the merger. All intercompany transactions with these
subsidiaries have been eliminated in consolidation.

[4] MERGER

On February 10, 1997, the Company acquired ChemGenics Pharmaceuticals Inc.
("ChemGenics") for 4,783,688 shares of Common Stock at $21.50 per share,
approximately $103 million in aggregate. In addition, a principal shareholder of
ChemGenics received approximately $4 million in settlement of a promissory note
and repurchase of warrants previously issued by ChemGenics, and outstanding
warrants were purchased from another shareholder of ChemGenics for approximately
$.5 million. The transaction has been recorded as a purchase for accounting
purposes. Consequently, the operating results of ChemGenics have been included
in the Company's financial statements from the date of acquisition, and the fair
value of the issued shares has been allocated to the assets purchased and
liabilities assumed based upon their respective fair values. The acquisition
resulted in goodwill of $10.8 million, which is being amortized over a period of
four years. Amortization expense recorded was $2.7 million in 1998 and $2.4
million in 1997. In connection with the acquisition, in 1997, the Company
incurred a nonrecurring charge of $83.8 million for acquired in-process research
and development which was charged to operations because, in management's
opinion, technological feasibility for the acquired research and development had
not been established.

The following unaudited pro forma consolidated results of operations have been
prepared as if the acquisition of ChemGenics had occurred at the beginning of
1997 and 1996:



Year ended                                                      December 31, 1997     December 31, 1996
(in thousands, except share and per share amounts)
- -------------------------------------------------------------------------------------------------------
                                                                                           
Pro Forma:
Revenues under strategic alliances                              $       90,426        $       35,337
Net loss                                                        $     (82,386)        $     (107,171)
Net loss per share                                              $       (2.86)        $        (4.05)
Shares used in calculating net loss per share                      28,860,068             26,480,582


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

[5] REVENUES -- STRATEGIC ALLIANCES

The Company has formed strategic alliances with major participants in
marketplaces where its discovery expertise and technology platform are
applicable. These agreements include alliances based on the transfer of the
Company's technology platform, alliances, which combine technology transfer with
a focus on a specific disease or therapeutic approach, and disease-focused
programs under which the Company conducts research funded by its partners. The
Company's disease-based alliances and alliances which combine
technology-transfer with a disease focus are generally structured as research
collaborations. Under these arrangements, the Company performs research in a
specific disease area aimed at discoveries leading to novel pharmaceutical
(small molecule) products. These alliances generally provide research funding
over an initial period, with renewal provisions, which vary by agreement. Under
these agreements, the Company's partners are required to make additional
payments upon the achievement of 
   20
specific research and product development milestones, and will pay royalties or
in some cases profit-sharing payments to the Company based upon any product
sales resulting from the collaboration.

ALLIANCES BEGINNING IN 1998

In September 1998, the Company entered into a strategic alliance with Bayer AG
("Bayer"). In November 1998, Bayer made an equity investment of $96.6 million
for approximately 4.96 million shares of Millennium Common Stock. In addition,
Bayer paid $33.4 million as an up-front licensing fee.

The primary goal of the alliance is for the Company to supply 225 drug targets
to Bayer over a period of five years. These targets will be identified as
relevant for cardiovascular disease, areas of oncology not covered by
Millennium's alliance with Lilly, osteoporosis, pain, liver fibrosis, hematology
and viral infections. Future payments which may be made over the full alliance
term include $219 million of ongoing license and research program funding, as
well as a potential of up to $116 million of performance payments for delivery
of targets. Bayer has the right to cancel the agreement after two and three
years if certain minimum target delivery objectives are not met.

ALLIANCES BEGINNING IN 1997

In October 1997, the Company entered into a technology transfer alliance through
a collaborative agreement with Monsanto Company ("Monsanto"). Under this
agreement, the Company granted to Monsanto exclusive rights to its technologies
in the field of plant agriculture, as well as a nonexclusive license to its
technologies outside the plant agriculture field. The Company has agreed to
collaborate exclusively with Monsanto in the application of those technologies
through the establishment of a subsidiary wholly owned by Monsanto. Monsanto
agreed to pay $118 million in up-front, licensing and technology transfer fees
over the five-year term of the agreement. Monsanto may also pay the Company up
to $100 million over five years, contingent upon the achievement of mutually
agreed-upon research objectives. Millennium will also receive royalty payments
from the sale of products, if any, originating from the research conducted by
the Monsanto subsidiary. Millennium realized $38.2 million in revenues
associated with technology transfer and license fees, achievement of mutually
agreed-upon research objectives, and administrative services under the agreement
in 1998, and $38.0 million in revenues as an up-front payment in 1997.

In May 1997, the Company, through MBio, entered into a collaborative agreement
with Lilly in connection with its program to discover and develop therapeutic
proteins. The agreement covers an initial three-year period during which Lilly
is providing $8-$10 million annually in research funding, with a two-year
renewal option at the same funding level. Under the terms of the agreement, MBio
and Lilly are jointly funding the collaborative program and each company will
share the rights to use and commercialize the resulting discoveries. Additional
licensing fees, development milestones and royalties will be payable by Lilly in
connection with specific therapeutic protein product candidates identified
through the collaboration and licensed by Lilly. MBio recorded approximately
$9.1 million in revenues under this alliance in 1998 and $5.5 million under this
alliance in 1997.

Through its merger with ChemGenics, the Company became engaged in an alliance
with the Wyeth-Ayerst Division of American Home Products ("AHP") to discover and
develop antibacterial drugs for human use, as well as a collaboration with
Pfizer, Inc. ("Pfizer") to discover and develop antifungal treatments for human
use. Under the terms of the AHP agreement, as amended in 1997, AHP is funding
and collaborating with the Company over a five-year period ending in December
2001. AHP has the right to terminate the agreement in November 1999 if certain
research objectives are not met. Under the terms of the Pfizer agreement, as
amended in 1997 and 1998, Pfizer is funding a discovery program that is
scheduled to conclude in December 2000.

ALLIANCES BEGINNING BEFORE 1997
   21
In July 1996, the Company entered into a strategic alliance with AHP to discover
and develop targets and assays to identify and develop small molecule drugs and
vaccines for treatment and prevention of disorders of the central nervous
system. In addition, this agreement provides for the license and transfer of
certain technology to AHP. If certain specified research objectives are not met,
AHP may terminate the agreement in September of 1999, 2000 or 2001.

In December 1995, the Company entered into a strategic alliance with Astra AB
("Astra") in the field of inflammatory respiratory diseases. Under the
agreement, as amended in December 1998, Astra will continue to fund a discovery
program in inflammatory respiratory diseases for a four-year period concluding
in December 2002. Astra has the right to terminate the agreement in December
2000, and will be obligated to provide an early termination payment if it
exercises the early termination right.

In October 1995, the Company entered into a strategic alliance with Lilly in the
field of atherosclerosis. Under the terms of this agreement, Lilly purchased $8
million of Series C Convertible Preferred Stock, subsequently converted into
1,333,333 shares of Common Stock. The Lilly alliance included an option
permitting Lilly to fund research in other fields. Effective March 1996, Lilly
exercised this option and entered into a strategic alliance with the Company in
select areas of oncology. In December 1998, the Company and Lilly amended
certain terms of the oncology alliance and Lilly agreed to extend the program
through March 2001.

In March 1994, the Company entered into a five-year strategic alliance with
Hoffmann-La Roche Inc. ("Roche") in the fields of obesity and type 2 diabetes.
Under the terms of a related stock purchase agreement, an affiliate of Roche
purchased $6 million of Series B Convertible Preferred Stock, subsequently
converted into 2,000,000 shares of Common Stock. This alliance is expected to
conclude in March 1999.

[6] MARKETABLE SECURITIES

Marketable securities consist of high-grade corporate bonds, which are carried
at fair value, with the unrealized gains and losses reported in a separate
component of stockholders' equity. There have been no realized gains or losses
on sales of any securities in 1998, 1997 or 1996.

The amortized cost and estimated fair value of debt securities at December 31,
by contractual maturity, are shown below ($ in thousands):


                              
                                        1998                   1997
- ------------------------------------------------------------------------------
                                            ESTIMATED               ESTIMATED
                                   COST     FAIR VALUE     COST     FAIR VALUE
- ------------------------------------------------------------------------------
                                                        
Due in one year or less          $37,406     $37,435     $27,325      $27,321
Due in one year to two years      15,245      15,245          --           --
                                 ---------------------------------------------
                                 $52,651     $52,680     $27,325      $27,321
- ------------------------------------------------------------------------------

   22
[7] PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31 ($ in
thousands):


                                                               1998              1997
- -------------------------------------------------------------------------------------
                                                                          
Equipment                                                    $52,921          $37,452
Leasehold improvements and construction in progress            9,779            4,576
- -------------------------------------------------------------------------------------
                                                              62,700           42,028
Less accumulated depreciation and amortization                24,530           12,998
- -------------------------------------------------------------------------------------

                                                             $38,170          $29,030


[8] COMMITMENTS

LEASE COMMITMENTS

The Company conducts the majority of its operations in leased facilities with
leased equipment. At December 31, 1998 and 1997, respectively, the Company has
capitalized leased equipment totaling $46.4 million and $33.5 million, with
related accumulated amortization of $21.2 million and $12.0 million.

The Company leases its laboratory and office space under operating lease
agreements with various terms and renewal options, including major facilities
with lease expirations in 2003, 2013 and 2014. One of these facilities was under
construction during 1998, and is expected to be occupied in the first quarter of
1999. In addition to minimum lease commitments, these lease agreements require
the Company to pay its pro rata share of property taxes and building operating
expenses. At December 31, 1998, the Company has pledged $10.8 million of
marketable securities as security for three letters of credit for the same
amount with the purpose of securing leased facilities.

At December 31, 1998, future minimum commitments under leases with 
noncancelable terms of more than one year are as follows ($ in thousands):


                                                                               CAPITAL         OPERATING
                                                                                LEASES           LEASES
- -------------------------------------------------------------------------------------------------------------
                                                                                          
Year: 
1999                                                                            $10,378        $  15,163
2000                                                                              9,922           14,892
2001                                                                              9,115           14,133
2002                                                                              6,377           13,093
2003                                                                              3,306           12,891
Thereafter                                                                          340          101,574
                                                                                ------------------------
Total                                                                            39,438         $171,746
Less amount representing interest                                                 5,954
                                                                                -------
Present value of minimum lease payments                                          33,484
Less current portion of capital lease obligations                                 8,657
                                                                                -------
Capital lease obligations                                                       $24,827
- ---------------------------------------------------------------------------------------------------------------

   23
Total rent expense was $8.5 million in 1998, $4.2 million in 1997 and $2.4
million in 1996. Sublease rental income in the amount of $0.4 million was
recorded in 1998. Interest paid under all financing and leasing arrangements
during 1998, 1997 and 1996 approximated interest expense.

EXTERNAL COLLABORATIONS

In April 1997, the Company joined a corporate consortium with Affymetrix Inc.
and Bristol-Myers Squibb to fund a five-year research program in functional
genomics at the Whitehead Institute for Biomedical Research. Under this
agreement, the Company receives certain licensing rights to developments arising
from the consortium. In addition, the Company funds research efforts of various
academic collaborators in connection with its research and development programs.
Total future fixed commitments under these agreements are approximately $6.4
million in 1999, $3.4 million in 2000, $2.6 million in 2001 and $1.3 million in
2002.

[9] STOCKHOLDERS' EQUITY

PREFERRED STOCK

The Company has 5,000,000 authorized 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.

COMMON STOCK WARRANTS

At December 31, 1998, the Company has outstanding exercisable warrants to
purchase 357,470 shares of Common Stock with a weighted-average exercise price
of $3.49 per share, which expire through 2004.

STOCK OPTION PLANS

The 1993 Incentive Stock Plan (the 1993 Plan) allows for the granting of
incentive and nonstatutory options to purchase up to 5,400,000 shares of Common
Stock. 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. 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 option vesting schedule and
exercise price. At December 31, 1998, 173,548 shares issued under the 1993 Plan
are subject to the Company's repurchase option.

The 1996 Equity Incentive Plan (the 1996 Plan) effectively succeeded the 1993
Plan. The terms and conditions of the 1996 Plan are substantially consistent
with those of the 1993 Plan and provide for the granting of options to purchase
4,100,000 shares of Common Stock, effective March 13, 1997.

The 1996 Director Option Plan (the Director Plan) provides that, upon adoption,
each then-eligible nonemployee director be granted a nonstatutory option to
purchase 20,000 shares of Common Stock. Thereafter, each new nonemployee
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 nonemployee 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 have been reserved for issuance under
the Director Plan.
   24
Under the Employee Stock Purchase Plan (the Stock 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 began on October 1, 1996. A total of 350,000 shares of Common Stock have
been reserved for issuance under the Purchase Plan. At December 31, 1998,
subscriptions were outstanding for an estimated 42,000 shares at $13.28 per
share.

In March 1997, the Board of Directors adopted the Company's 1997 Equity
Incentive Plan (the 1997 Plan) covering 2,000,000 shares of Common Stock. The
terms and conditions of the 1997 Plan are substantially consistent with those of
the 1993 Plan and the 1996 Plan.

In 1994, the Company granted its chief executive officer an option to purchase
533,364 shares of Common Stock for $0.30 per share. In connection with the
grant, the Company agreed to provide a loan of up to $267,000 at 7% per annum
upon option exercise. In November 1995, the officer exercised this option. The
Company made the loan and issued the Common Stock, subject to a repurchase
option that lapses over four years. The loan and related interest, secured by a
pledge of the shares issued, are being forgiven ratably over 48 months subject
to the officer's continued employment.

During 1995 and 1996, the Company granted options to purchase 1,580,682 shares
of Common Stock at exercise prices below the deemed fair value for accounting
purposes of the stock options at the date of grant. The Company recorded an
increase to additional paid-in capital and a corresponding charge to deferred
compensation in the amount of approximately $3.5 million to recognize the
aggregate difference between such deemed fair value and the exercise price. The
deferred compensation is being amortized over the option vesting period of four
years.

The following table presents the combined activity of the 1993 Plan, 1996 Plan,
1997 Plan and the Director Plan for the years ended December 31, 1998, 1997 and
1996:

                                                       1998                        1997                        1996
- -----------------------------------------------------------------------------------------------------------------------------
                                                         WEIGHTED-                   WEIGHTED-                   WEIGHTED-
                                                          AVERAGE                     AVERAGE                     AVERAGE
                                                       EXERCISE PRICE              EXERCISE PRICE              EXERCISE PRICE
                                            SHARES                      SHARES                      SHARES
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                                    
Outstanding at January 1                   5,463,635     $12.92         2,762,156     $ 9.19         2,724,261      $  .24
Granted                                    1,897,365     $18.77         3,436,163     $14.79         2,497,958      $10.23
Exercised                                   (693,618)    $ 5.85          (338,903)    $ 3.46        (2,398,265)     $  .29
Canceled                                    (554,187)    $17.35          (395,781)    $11.49           (61,798)     $ 2.42
                                          --------------------------------------------------------------------------------
Outstanding at December 31                 6,113,195     $15.13         5,463,635     $12.92         2,762,156      $ 9.19
- --------------------------------------------------------------------------------------------------------------------------
Options exercisable at December 31         2,435,654     $11.51         1,821,654     $ 5.91         1,251,982      $ 1.78
- --------------------------------------------------------------------------------------------------------------------------


The weighted-average per share fair value of options granted during 1998, 1997
and 1996 was $10.96, $14.79 and $6.01, respectively.
   25
The following table presents weighted-average price and life information about
significant option groups outstanding at December 31, 1998 for the above plans:


                  OPTIONS OUTSTANDING                                   OPTIONS EXERCISABLE
- -------------------------------------------------------------------------------------------------------------
                                        WEIGHTED-
                                        AVERAGE           
                                       REMAINING            WEIGHTED-                          WEIGHTED- 
                                      CONTRACTUAL           AVERAGE                            AVERAGE
  RANGE OF EXERCISE                      LIFE               EXERCISE                           EXERCISE
        PRICES           NUMBER          (YRS.)              PRICE              NUMBER           PRICE
- -------------------------------------------------------------------------------------------------------------
                                                                                    
  $0.10-$12.00           1,024,078           6.64             $ 2.53           893,625           $ 1.86
  $12.63-$15.75          1,097,338           8.54             $14.62           405,373           $14.49
  $16.00-$16.75          1,047,853           8.32             $16.53           421,291           $16.53
  $17.00-$18.88          1,571,461           8.97             $18.22           348,893           $17.97
  $19.00-$21.00          1,019,945           8.55             $19.78           346,256           $19.75
  $21.75-$22.38            352,520           9.54             $21.96            20,216           $22.16
- -------------------------------------------------------------------------------------------------------
                         6,113,195                                           2,435,654


At December 31, 1998, 7,060,823 shares of Common Stock were reserved for
issuance upon exercise of stock options and warrants.

In May 1997, the Board of Directors of MBio adopted the MBio 1997 Equity
Incentive Plan (the MBio 1997 Plan). The plan as amended allows for the granting
of incentive and nonstatutory options to purchase up to 1,500,000 shares of
common stock of MBio. Incentive options granted to employees generally vest over
a four-year period and may be exercised sooner subject to stock repurchase
provisions that vest over the same period as the original option grant.
Nonstatutory options granted to consultants and other nonemployees generally
vest over the period of service.

In November 1997, the Board of Directors of MPMx adopted the MPMx 1997 Equity
Incentive Plan (the MPMx Plan). In April 1998, the Board of Directors of MInfo
adopted the MInfo 1998 Equity Incentive Plan (the MInfo Plan). Both plans allow
for the granting of incentive and nonstatutory options to purchase up to
1,200,000 shares of common stock of each subsidiary. Incentive options granted
to employees generally vest over a four-year period and may be exercised sooner
subject to stock repurchase provisions that vest over the same period as the
original option grant. Nonstatutory options granted to consultants and other
nonemployees generally vest over the period of service. In connection with the
merger of MPMx and MInfo in January 1999, options issued under the MInfo plan
were canceled, and employees were granted options to purchase shares of MPMx.
The MPMx Plan was amended to increase the number of shares reserved to
2,200,000.

Through December 31, 1998, the MBio 1997 Plan, the MPMx 1997 Plan and the MInfo
1998 Plan granted a combined 3,078,539 options to purchase common shares of
these subsidiaries at a weighted exercise price of $0.44 per share. During 1998,
options for 2,103,248 shares at a weighted exercise price of $0.43 per share
were exercised, and options for 41,281 shares at a weighted exercise price of
$0.52 per share were canceled. At December 31, 1998, options for 934,010 shares
at a weighted-average exercise price of $0.47 per share were outstanding and
exercisable, and 1,574,062 shares are subject to the plan's repurchase option.
   26
The following table presents weighted-average price and life information about
significant option groups outstanding at December 31, 1998 for the MBio and MPMx
plans:



         OPTIONS OUTSTANDING AND EXERCISABLE
- ------------------------------------------------------------------------
                                        WEIGHTED-    WEIGHTED-AVERAGE
                                         AVERAGE          EXERCISE
                                        REMAINING           PRICE
     EXERCISE                       CONTRACTUAL LIFE
      PRICES            NUMBER           (YRS.)
- ------------------------------------------------------------------------
                                                     
   $.05                  497,210           9.14              $.05
   $.90-$ 1.10           436,800           9.14              $.95
- ------------------------------------------------------------------------
                         934,010                             $.47


SFAS NO. 123 DISCLOSURES

Pursuant to the requirements of SFAS No. 123, the following are the pro forma
consolidated net income (loss) and consolidated net income (loss) per share for
1998, 1997 and 1996 as if the compensation cost for the stock option and stock
purchase plans had been determined based on the fair value at the grant date for
grants in 1998, 1997 and 1996 (in thousands, except per-share data):


                                                      1998                     1997                     1996
- -----------------------------------------------------------------------------------------------------------------------
                                             AS REPORTED     PRO     AS REPORTED      PRO     AS REPORTED     PRO
                                                            FORMA                    FORMA                   FORMA
- -----------------------------------------------------------------------------------------------------------------------
                                                                                                
Net income (loss)                              $10,338      $(6,782)   $(81,222)   $(94,668)     $(8,768)   $(12,096)
Basic net income (loss) per share                 0.34        (0.22)      (2.87)      (3.34)       (0.40)      (0.54)
Diluted net income (loss) per share               0.33        (0.22)      (2.87)      (3.34)       (0.40)      (0.54)


The fair value of stock options and common shares issued pursuant to the Stock
Option and Stock Purchase Plans at the date of grant were estimated using the
Black-Scholes model with the following weighted-average assumptions:


                                                        STOCK OPTIONS                     STOCK PURCHASE PLAN
- ---------------------------------------------------------------------------------------------------------------------
                                                1998         1997        1996        1998         1997        1996
- ---------------------------------------------------------------------------------------------------------------------
                                                                                             
Expected life (years)                           4.4          4.5         3.7          .5           .5          .5
Interest rate                                   5.36%        6.12%       5.94%       5.15%        6.14%       6.14%
Volatility                                       .7           .7          .7          .7           .7          .7


The Company has never declared dividends on any of its capital stock and does
not expect to do so in the foreseeable future.
   27
The effects on 1996, 1997 and 1998 pro forma net income (loss) and net income
(loss) per share of expensing the estimated fair value of stock options and
common shares issued pursuant to the Stock Option and Stock Purchase Plans are
not necessarily representative of the effects on reported results of operations
for future years as the periods presented include only two, three and four
years, respectively, of option grants and share purchases under the Company's
plans.

[10] INCOME TAXES

The difference between the Company's "expected" tax provision (benefit), as
computed by applying the U.S. federal corporate tax rate of 34% to income (loss)
before minority interest and provision for income taxes, and actual tax is
reconciled in the following chart ($ in thousands):


                                                                                                   
                                                                     1998             1997              1996
- ---------------------------------------------------------------------------------------------------------------
Loss before minority interest                                       $(3,841)         $(84,632)         $(8,768)
- ---------------------------------------------------------------------------------------------------------------
Expected tax benefit at 34%                                         $(1,306)         $(28,774)         $(2,981)
State tax benefit net of federal benefit                               (231)           (5,078)            (526)
Write off of purchased research and development                          --            33,520               --
Amortization of goodwill                                              1,081               958               --
Change in valuation allowance for deferred tax assets
   allocated to tax expense                                            (458)           (1,019)           3,492
Stock compensation expense                                              788               361
Nondeductible expenses                                                  126                32               15
- --------------------------------------------------------------------------------------------------------------
Income tax provision                                                $    --         $      --         $    --


At December 31, 1998, the Company has unused net operating loss carryforwards of
approximately $16.5 million available to reduce federal and state taxable
income, and research and development tax credits of approximately $12.7 million
available to offset federal and state income taxes, both of which expire through
2013. Due to the degree of uncertainty related to the ultimate use of the loss
carryforwards and tax credits, the Company has fully reserved these tax
benefits.

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 ($ in
thousands):


                                                                                        1998             1997
- ---------------------------------------------------------------------------------------------------------------
                                                                                                      
Net operating loss carryforwards                                                     $   6,556        $   5,758
Research and development tax credit carryforwards                                       12,720            6,422
Capitalized research costs                                                               5,875            7,640
Property and other intangible assets                                                     3,310            1,315
Other                                                                                    1,739            1,255
- ---------------------------------------------------------------------------------------------------------------
Total deferred tax assets                                                               30,200           22,390
Valuation allowance                                                                    (30,200)         (22,390)
- ---------------------------------------------------------------------------------------------------------------
Net deferred tax assets                                                               $    --         $    --

   28
The valuation allowance increased by $7.8 million during 1998 due primarily to
the increase in research and development tax credits and of net operating loss
carryforwards. The valuation allowance increased by $12.7 million during 1997
due primarily to the increase in research and development tax credits and the
addition of various deferred tax assets related to the ChemGenics merger offset
by the utilization of net operating loss carryforwards. The deferred tax assets
acquired from ChemGenics are subject to review and possible adjustments by the
Internal Revenue Service and may be limited due to the change in ownership
provisions of the Internal Revenue Code.

Any subsequently recognized tax benefits relating to the valuation allowance for
deferred tax assets as of December 31, 1998 would be allocated as follows ($ in
thousands):
                                                     
Reported in the statement of operations             $27,420
Reported in additional paid-in capital                2,780
- -----------------------------------------------------------
                                                    $30,200
                                                    =======

EX-21

   1
EX - 21
SUBSIDIARIES OF THE REGISTRANT

                                                                      EXHIBIT 21

                SUBSIDIARIES OF MILLENNIUM PHARMACEUTICALS, INC.

NAME OF SUBSIDIARY                                JURISDICTION OF ORGANIZATION

Millennium BioTherapeutics, Inc.                           Delaware
Millennium Predictive Medicine, Inc.                       Delaware
Millennium Information, Inc. (1)                           Delaware

(1)      In January 1999, Millennium Information, Inc. was merged with
         Millennium Predictive Medicine, Inc. Millennium Predictive Medicine,
         Inc. was the surviving corporation of the merger.

EX-23.1

   1
                                                                    EXHIBIT 23.1

               CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Millennium Pharmaceuticals, Inc. of our report dated February 8, 1999,
included in the 1998 Annual Report to Stockholders of Millennium
Pharmaceuticals, Inc.

We also consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 333-15355) pertaining to the 1993 Incentive Stock Option Plan,
(Forms S-8 Nos. 333-15353 and 333-29321), pertaining to the 1996 Equity
Incentive Plan, (Form S-8 No. 333-15349), pertaining to the 1996 Director Option
Plan, (Form S-8 No. 333-15357), pertaining to the 1996 Employee Stock Purchase
Plan, (Form S-8 No. 333-29319), pertaining to the 1997 Equity Incentive Plan,
and (Form S-3 No. 333-28239) of Millennium Pharmaceuticals, Inc. of our report
dated February 8, 1999, with respect to the consolidated financial statements of
Millennium Pharmaceuticals, Inc. incorporated herein by reference in the Annual
Report (Form 10-K) for the year ended December 31, 1998.

                                                           /s/ Ernst & Young LLP

Boston, Massachusetts
March 18, 1999

EX-27

 

                                                              

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<CURRENCY> US DOLLARS
       
                             
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-START>                             JAN-01-1998
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