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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549

FORM 10-Q

(Mark One)

|X|  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
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 number 0-28494
MILLENNIUM PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware   04-3177038
(State or other jurisdiction
of incorporation or organization)		   (I.R.S. Employer
Identification No.)

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

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

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

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

Number of shares of the registrant's Common Stock, $0.001 par value, outstanding on August 2, 2004: 305,099,660

MILLENNIUM PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2004

TABLE OF CONTENTS

    Page
  
PART I FINANCIAL INFORMATION    
       
Item 1. Condensed Consolidated Financial Statements    
       
  Condensed Consolidated Balance Sheets as of
June 30, 2004 and December 31, 2003		 3      
       
  Condensed Consolidated Statements of Operations for the
three and six months ended June 30, 2004 and 2003		 4      
       
  Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 2004 and 2003		 5      
       
  Notes to Condensed Consolidated Financial Statements 6      
       
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations		 14      
       
  Risk Factors That May Affect Results 24      
       
Item 3. Quantitative and Qualitative Disclosures About Market Risk 36      
       
Item 4. Controls and Procedures 36      
       
PART II OTHER INFORMATION    
       
Item 4. Submission of Matters to a Vote of Security Holders 37      
       
Item 6. Exhibits and Reports on Form 8-K 37      
       
  Signatures 38      
       
  Exhibit Index 39      
       

The following Millennium trademarks are used in this Quarterly Report on Form 10-Q: Millennium®, the Millennium “M” logo and design (registered), Millennium Pharmaceuticals™, VELCADE® (bortezomib) for Injection, and INTEGRILIN® (eptifibatide) Injection. All are covered by registrations or pending applications for registration in the U.S. Patent and Trademark Office and many other countries. Campath® is a registered trademark of ILEX Pharmaceuticals, L.P., ReoPro® (abciximab) is a trademark of Eli Lilly & Company, Aggrastat® (tirofiban) is a trademark of Merck & Co., Inc., Thalomid® (thalidomide) is a trademark of Celgene Corporation and Angiomax® (bivalirudin) is a trademark of The Medicines Company. Other trademarks used in this Quarterly Report on Form 10-Q are the property of their respective owners.

2

PART I     FINANCIAL INFORMATION

Item 1.    Condensed Consolidated Financial Statements

Millennium Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets

  June 30, 2004
   December 31, 2003
  
  (unaudited)      
(in thousands, except per share amounts)    
Assets    
Current assets:                
Cash and cash equivalents     $ 7,525   $ 55,847  
Marketable securities       808,774     859,456  
Accounts receivable       104,886     59,025  
Inventory       102,040     110,213  
Prepaid expenses and other current assets       17,790     30,207  
     
 
 
    Total current assets       1,041,015     1,114,748  
Property and equipment, net       224,440     231,469  
Restricted cash       14,944     16,297  
Other assets       14,215     14,767  
Goodwill       1,202,510     1,201,635  
Developed technology, net       355,529     372,260  
Intangible assets, net       62,562     59,087  
     
 
 
    Total assets     $ 2,915,215   $ 3,010,263  
     
 
 
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
Accounts payable     $ 30,989   $ 27,341  
Accrued expenses       95,604     97,045  
Current portion of restructuring       36,286     36,572  
Current portion of deferred revenue       66,510     80,402  
Current portion of capital lease obligations       11,787     14,398  
     
 
 
    Total current liabilities       241,176     255,758  
Restructuring, net of current portion       54,666     46,614  
Deferred revenue, net of current portion       12,353     13,015  
Capital lease obligations, net of current portion       82,519     87,889  
Long term debt       105,461     105,461  
         
Commitments and contingencies                
         
Stockholders' equity:                
Preferred Stock, $0.001 par value; 5,000 shares authorized,
none issued		       —     —  
Common Stock, $0.001 par value; 500,000 shares
authorized: 304,982 shares at June 30, 2004 and 302,291
shares at December 31, 2003 issued and outstanding		       305     302  
Additional paid-in capital       4,535,753     4,513,143  
Deferred compensation       —     (271 )
Accumulated other comprehensive income (loss)       (6,030 )   4,844  
Accumulated deficit       (2,110,988 )   (2,016,492 )
     
 
 
    Total stockholders' equity       2,419,040     2,501,526  
     
 
 
    Total liabilities and stockholders' equity     $ 2,915,215   $ 3,010,263  
     
 
 

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

3

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

  Three Months Ended June 30,
   Six Months Ended June 30,
  
  2004
   2003
   2004
   2003
  
(in thousands, except per share amounts)  
                                 
Revenues:                                
    Net product sales     $ 34,972   $ 7,869       $ 64,620   $ 7,869  
    Co-promotion revenue       48,651     53,151         96,477     104,032  
    Revenue under strategic alliances       61,697     60,702         76,788     91,536  
     
 
     
 
 
        Total revenues       145,320     121,722         237,885     203,437  
     
 
     
 
 
Costs and expenses:                                
    Cost of sales       18,061     15,612         33,832     31,261  
    Research and development       104,382     130,575         200,660     257,385  
    Selling, general and administrative       46,768     40,775         91,597     79,205  
    Restructuring       25,191     65,310         36,784     93,505  
    Amortization of intangibles       8,378     9,676         16,756     19,352  
     
 
     
 
 
        Total costs and expenses       202,780     261,948         379,629     480,708  
     
 
     
 
 
Loss from operations       (57,460 )   (140,226 )       (141,744 )   (277,271 )
                                 
Other income (expense):                                
    Investment income, net       6,147     8,697         12,535     18,304  
    Interest expense       (2,596 )   (5,118 )       (5,287 )   (15,535 )
    Gain on sale of equity interest in joint venture       —     40,000         40,000     40,000  
    Debt financing charge       —     (10,496 )       —     (10,496 )
     
 
     
 
 
Net loss     $ (53,909 ) $ (107,143 )     $ (94,496 ) $ (244,998 )
     
 
     
 
 
Amounts per common share:                                
Net loss per share, basic and diluted     $ (0.18 ) $ (0.36 )     $ (0.31 ) $ (0.83 )
     
 
     
 
 
Weighted average shares, basic and diluted       304,714     297,231         304,063     295,100  
     
 
     
 
 

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

4

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

  Six Months Ended June 30,
  
  2004
   2003
  
(in thousands)    
                 
Cash Flows from Operating Activities:                
Net loss     $ (94,496 ) $ (244,998 )
Adjustments to reconcile net loss to cash
used in operating activities:		                
    Depreciation and amortization       46,109     51,684  
    Restructuring       202     71,804  
    Amortization of deferred financing costs       244   11,956  
    Realized gain on marketable securities, net       (920 )   (959 )
    Stock compensation expense       3,533     5,204  
Changes in operating assets and liabilities:                
    Accounts receivable       (45,861 )   (87,796 )
    Inventory       8,173     (5,943 )
    Prepaid expenses and other current assets       5,962     (1,890 )
    Restricted cash and other assets       683     25,000  
    Accounts payable and accrued expenses       8,526     9,531  
    Deferred revenue       (14,554 )   10,036  
     
 
 
Net cash used in operating activities       (82,399 )   (156,371 )
     
 
 
                 
Cash Flows from Investing Activities:                
Investments in marketable securities       (227,393 )   (848,319 )
Proceeds from sales and maturities of marketable securities       269,800     348,187  
Purchases of property and equipment       (23,532 )   (38,851 )
Other investing activities       4,186     (704 )
     
 
 
Net cash provided by (used in) investing activities       23,061     (539,687 )
     
 
 
                 
Cash Flows from Financing Activities:                
Net proceeds from issuance of common stock       —     28,571  
Net proceeds from employee stock purchases       19,322     16,190  
Repayment of principal of long-term obligations, including
payment of debt premium		       —     (629,880 )
Principal payments on capital leases       (7,980 )   (8,427 )