Back to GetFilings.com

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

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2003
or

For the transition period from                               to                              

Commission file number 000-30289

PRAECIS PHARMACEUTICALS INCORPORATED
(Exact name of registrant as specified in its charter)

(781) 795-4100
(Registrant's telephone number, including area code)

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

(Title of Class)

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

Common Stock, par value $.01 per share

(Title of Class)

Preferred Stock Purchase Rights

(Title of Class)

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

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

        The aggregate market value of voting and non-voting stock held by non-affiliates of the registrant, based upon the last sale price of the common stock, par value $.01 per share, reported on The Nasdaq National Market on June 30, 2003, was $240,343,790.

        The number of shares of common stock, par value $.01 per share, outstanding as of February 29, 2004 was 52,191,092.

Documents Incorporated By Reference

        Specified portions of the definitive Proxy Statement with respect to the registrant's 2004 Annual Meeting of Stockholders to be filed by the registrant with the Securities and Exchange Commission are incorporated by reference into Part III of this Annual Report on Form 10-K.

Factors That May Affect Future Results

        The Company's prospects are subject to certain uncertainties and risks. This Annual Report on Form 10-K also contains certain forward-looking statements within the meaning of the federal securities laws. The Company's future results may differ materially from its current results and actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors. READERS SHOULD PAY PARTICULAR ATTENTION TO THE CONSIDERATIONS DESCRIBED IN THE SECTION OF THIS REPORT ENTITLED "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—RISK FACTORS THAT MAY AFFECT FUTURE RESULTS." Readers should also carefully review the risk factors described in the other documents the Company files from time to time with the Securities and Exchange Commission.

PRAECIS PHARMACEUTICALS INCORPORATED

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I

ITEM 1.    BUSINESS.

Overview

        We are a biopharmaceutical company focused on the discovery and development of innovative therapies to address unmet medical needs. In November 2003, we received FDA approval to market our first product, Plenaxis (abarelix for injectable suspension), in the United States for the treatment of the symptoms of men with advanced prostate cancer for whom other hormonal therapies are not appropriate and who have refused surgical castration. We are promoting Plenaxis in the United States through our own marketing and sales team. We have also initiated the regulatory review process for Plenaxis in the European Union with a submission in Germany in June 2003. We expect an action by the German regulatory authorities during 2004 and, assuming it is favorable, plan to pursue further European Union approval under the Mutual Recognition Procedure to market Plenaxis for the treatment of hormonally responsive prostate cancer. We are in discussions with potential partners for the commercialization of Plenaxis in Europe and the development and/or commercialization of Plenaxis in Japan and other areas of the world.

        We are also developing Apan, our investigational drug candidate for the treatment of Alzheimer's disease. Apan is designed to treat what we and others believe to be the underlying cause of Alzheimer's disease, rather than the symptoms. A hallmark of Alzheimer's disease is the accumulation of plaque-like deposits in brain tissue. A major component of this plaque is a small peptide called beta-amyloid. Results of our preclinical studies suggest that Apan may be facilitating the clearance of beta-amyloid from the brains of guinea pigs and transgenic mice. In March 2003, we completed a phase Ia dose escalation study of Apan in healthy volunteers. In this study, we evaluated the safety and pharmacokinetics of the compound and identified a maximum tolerated dose, or MTD, in healthy volunteers. In June 2003, we initiated a phase Ib trial in Alzheimer's patients. In this study, a single dose of Apan is administered, with the goal of establishing the MTD in patients. We anticipate completing the phase Ib study during the first half of 2004. Upon completion, and assuming favorable FDA review of the study's results, we expect to initiate a phase Ic trial examining the safety of multiple administrations of a selected dose of Apan in Alzheimer's patients.

        During 2003, we filed an investigational new drug application, or IND, for PPI-2458, a novel, proprietary molecule that is based on the fumagillin class of compounds. This class of compounds has been shown to prevent both abnormal cell growth and the formation of new blood vessels (known as anti-angiogenesis), which contribute to the growth of aberrant tissues in diseases such as cancer and rheumatoid arthritis. In December 2003, we initiated an open-label phase I dose escalation study in non-Hodgkin's lymphoma patients. In March 2004, the FDA placed this trial on clinical hold until questions relating to a finding in a recently completed three-month animal safety study have been satisfactorily resolved. The results of this study were not available at the time that the clinical study was initiated. The finding consisted of a neuropathological abnormality in some of the animals tested, similar to findings reported in connection with certain other approved products. In discussions, the FDA indicated that we will need to submit a detailed plan in order to address this finding. These discussions were confirmed in a letter recently received by the Company. We intend to further explore this finding, with input from leading experts as appropriate, to assess its potential implications and prepare a plan for the FDA.

        We have also developed the foundation for a potentially simple, non-invasive endometriosis diagnostic test based on the presence of unique proteins in the serum of disease sufferers. Considering that an estimated 5.5 million females in the United States and Canada suffer from endometriosis, and that only approximately 300,000 females in the United States and an unknown number in Canada are actually diagnosed with the disease, we believe a diagnostic test is critical to better identify, assess and treat those who suffer from the disease. Using our proteomics-based Biomarker Discovery Platform, we have identified proteins whose abundance in serum can discriminate between diseased and non-diseased individuals. These proteins could also enhance understanding of the disease process. We

2

have developed a clinically relevant diagnostic test which can be performed on a commercially available platform. This will allow for the implementation and further clinical assessment of our findings in a broad population. If the findings hold, we believe that this test could be available in a specialty testing laboratory environment on an expedited timetable.

        In addition to our clinical programs, we have numerous programs in the research or preclinical development stage. We are focusing our discovery efforts on opportunities in the areas of oncology, inflammation and infectious diseases.

        Our proprietary drug discovery technology called Ligand Evolution to Active Pharmaceuticals, or LEAP, has been valuable in the development of our pipeline of product candidates, particularly with respect to Plenaxis and Apan. LEAP technology enables the identification of drug candidates from extremely large libraries of molecules in a more efficient manner than traditional methods of drug discovery. Recently, we announced that we have advanced the scientific approach behind LEAP technology, with a platform we have named Direct Select Technology. This novel technology is an enhancement which should allow us to generate vast pharmaceutical libraries and more rapidly and directly identify leads with higher affinity and specificity than before, and will serve as the foundation for our future drug development projects. We have several granted foreign patents, as well as pending patent applications in the United States and abroad, that cover the essential steps of the LEAP process. In addition, we have filed patent applications in the United States covering the essential steps of the Direct Select process and also intend to pursue patent protection abroad.

        Our technology platform also includes a proprietary drug delivery system known as Rel-Ease. Plenaxis is formulated in Rel-Ease, which allows it to be administered to prostate cancer patients once every four weeks. We have demonstrated that Rel-Ease is also useful for formulating various other molecules in sustained release formulations. We hold patents that cover the general application of this technology for a broad range of peptide-based drugs.

        We were incorporated in Delaware in July 1993 under the name Pharmaceutical Peptides, Inc. In June 1997, we changed our name to PRAECIS PHARMACEUTICALS INCORPORATED. Our corporate headquarters and research facility is located in Waltham, Massachusetts. We conduct our business in one business segment. For the years ended December 31, 2001 and 2002, substantially all of our revenue was derived in the United States. We did not have any revenue for the year ended December 31, 2003. Long-lived assets consist primarily of property and equipment and are located solely in the United States for all periods presented.

        PRAECIS™, Plenaxis™, Apan™, LEAP™, Direct Select™, Rel-Ease™, MASTRscreen™ and the PLUS Program™ are trademarks or trade names of our Company. This Annual Report on Form 10-K also contains trademarks, trade names and service marks of other companies, including but not limited to Casodex®, Eligard®, Lupron Depot® and Zoladex®, all of which are the property of their respective owners.

Approved Product

        In November 2003, we received FDA approval to market our lead product, Plenaxis (abarelix for injectable suspension) in the United States. Plenaxis is the first gonadotropin releasing hormone (GnRH) antagonist available as a depot formulation. Plenaxis is indicated for the palliative treatment of men with advanced symptomatic prostate cancer, in whom LHRH agonist therapy is not appropriate and who refuse surgical castration, and have one or more of the following: (1) risk of neurological compromise due to metastases, (2) ureteral or bladder outlet obstruction due to local encroachment or metastatic disease, or (3) severe bone pain from skeletal metastases persisting on narcotic analgesia. Plenaxis is not indicated for use in women or children. For safety reasons, Plenaxis is approved with marketing restrictions under 21 CFR 314, Subpart H, and will be available only to physicians who enroll in the PLUS (PLenaxis User Safety) Program. FDA approved full prescribing information for Plenaxis is available at www.plenaxis.com.

3

        In January 2004, we began shipping Plenaxis to our authorized distributors. We are promoting Plenaxis to physicians, primarily oncologists and urologists, through our own dedicated marketing and sales team.

        Background.    Prostate cancer is one of the most commonly diagnosed cancers in men. The American Cancer Society estimates that approximately 231,000 new diagnoses of, and 30,000 deaths from, prostate cancer will occur in the United States in 2004. Prostate cancer cells require hormones, specifically testosterone and its derivatives, for growth. These hormones stimulate the growth of the cancerous cells. The primary goal of treatment is to reduce testosterone to low, or castrate, levels, leading to inhibition of prostate cancer cell growth. Available treatments for prostate cancer patients include hormonal therapies, radiation therapy and surgery.

        Currently available hormonal therapies, known as LHRH agonists, act by overstimulating the GnRH receptor, located on the pituitary gland, a small gland in the center of the brain. Overstimulation of the pituitary GnRH receptor causes the GnRH receptor to become non-responsive after approximately three weeks. However, this overstimulation first leads to increased production of two hormones, luteinizing hormone, or LH, and follicle stimulating hormone, or FSH. The increased level of LH causes an initial surge of testosterone from the testes. The temporary surge in hormone levels may result in an exacerbation of symptoms, or clinical flare, in some patients. Only after several weeks following administration of these hormonal therapies does the GnRH receptor become non-responsive and the desired reduction of hormone levels occurs. Due to this surge, LHRH agonists, such as Lupron Depot, marketed by TAP Pharmaceutical Products Inc., and Zoladex, marketed by AstraZeneca Pharmaceuticals L.P., have precautionary labeling about the hormone-induced flare and resulting worsening of clinical symptoms in some patients. In contrast, Plenaxis has a blocking, or antagonist, effect on the GnRH receptor. Plenaxis reduces levels of testosterone with no initial surge.

        For some advanced symptomatic prostate cancer patients, whose disease has progressed, the use of currently available hormonal therapies may not be appropriate. In these patients, the testosterone surge may lead to an exacerbation of symptoms, which could include urinary blockage, worsening pain, kidney failure, paralysis and nerve damage due to spinal cord compression, or, in rare instances, death. For these patients, removal of the testes, known as surgical castration, may be the only treatment option available to rapidly reduce testosterone levels and avoid the testosterone surge, and this option is not always an acceptable one for the patient. Plenaxis offers the first non-surgical alternative approved for these patients.

        Clinical Experience in Indicated Population.    The use of Plenaxis was studied in 81 patients with advanced symptomatic prostate cancer who were at risk for clinical exacerbation (clinical flare) if treated with an LHRH agonist in an open-label, multicenter, uncontrolled, single-arm study. The primary endpoint of this study was the avoidance of surgical castration at 4 and 12 weeks of treatment. No patient required surgical castration through 12 weeks of Plenaxis treatment, or through 40 weeks (median study duration) in a follow-up study. Specific clinical outcomes in those experiencing symptoms from advanced prostate cancer were also evaluated, although these evaluations were not the primary objective of the study. None (0) of 8 patients with vertebral or epidural metastases and without neurological symptoms developed neurological symptoms. Ten of 13 patients with bladder outlet obstruction and a bladder drainage catheter had relief of their obstruction leading to catheter removal by 12 weeks. Eleven of 15 patients with pain due to skeletal metastases were able to reduce the potency, dose and/or frequency of narcotic analgesia at 12 weeks.

        Three of 81 patients withdrew from the study because of an immediate-onset systemic allergic reaction, all of which occurred within minutes of receiving Plenaxis. One patient exhibited hives, another exhibited hives and itching, and the third exhibited transient lowering of blood pressure and fainting. Other reasons for withdrawal from Plenaxis treatment included adverse events, voluntary withdrawal and death due to progressive prostate cancer. The most frequent adverse events (without regard to causality) resulting from (1) Plenaxis treatment, (2) prostate cancer itself, or (3) patients' co-existing medical conditions, included hot flushes (79%), sleep disturbances (44%), pain (31%),

4

breast enlargement (30%), breast pain/nipple tenderness (20%), back pain (17%), constipation (15%) and swelling of the extremities (15%).

        Pharmacology.    The effectiveness of Plenaxis in suppressing serum testosterone was also studied in two randomized, open-label, active-comparator trials. Patients in these trials did not have advanced symptomatic prostate cancer. Patients were randomized such that for every two patients given Plenaxis one patient was given either an LHRH agonist alone or an LHRH agonist plus nonsteroidal antiandrogen. Plenaxis was administered on Days 1, 15, 29, then every 4 weeks thereafter for at least 6 months. LHRH agonist therapy was administered once every 28 days and nonsteroidal antiandrogen therapy was administered daily. After completing 6 months of treatment, patients could continue randomized treatment for an additional 6 months. In both studies combined, 100% (348/348) of Plenaxis patients and 16% (28/172) of comparator patients avoided a testosterone surge. In addition, the percentage of Plenaxis-treated patients who were castrate at Days 2, 4, 8, 15, and 29, was 24%, 56%, 70%, 73% and 94%, respectively.

        Additional Safety Information.    The description in the following four paragraphs summarizes important safety information contained in the Plenaxis package insert approved by the FDA. Immediate-onset systemic allergic reactions, some resulting in hypotension (lowering of blood pressure) and syncope (fainting), have occurred after administration of Plenaxis. These immediate-onset reactions have been reported to occur following any administration of Plenaxis, including after the initial dose. The cumulative risk of such a reaction increases with the duration of treatment. Following each injection of Plenaxis, patients should be observed for at least 30 minutes in the physician's office and in the event of an allergic reaction, managed appropriately. In all of the prostate cancer clinical trials with Plenaxis (mostly in men without advanced symptomatic disease), immediate-onset systemic allergic reactions occurred in 1.1% (15/1397) of patients treated with Plenaxis. Of the 15 total reactions, seven resulted in hypotension or syncope, representing 0.5% of all patients.

        The effectiveness of Plenaxis in suppressing testosterone to castrate levels decreases with continued dosing in some patients. Effectiveness beyond 12 months has not been established. Treatment failure can be detected by measuring testosterone concentrations just prior to administration on Day 29 and every 8 weeks thereafter.

        In certain clinical trials comparing Plenaxis to an LHRH agonist alone or an LHRH agonist plus nonsteroidal antiandrogen, clinically meaningful elevations of liver enzymes were observed in both patients who received Plenaxis and those who received the comparator drugs. Liver enzyme levels should be obtained before starting treatment with Plenaxis and periodically during treatment.

        In a clinical study comparing Plenaxis to an LHRH agonist plus nonsteroidal antiandrogen, periodic electrocardiograms were performed. Both therapies prolonged the QT interval, which measures a portion of the electrical impulse conduction in the heart, by greater than 10 msec from pre-treatment levels. QTc prolongations can be associated with irregularities of the heart rhythm, which in rare cases, can lead to sudden death. It is unclear whether these changes were directly related to the study drugs, to hormone deprivation therapy or to other variables. Because Plenaxis may prolong the QT interval, physicians should carefully consider whether the risks of Plenaxis outweigh the benefits in patients with elevated QTc levels at the start of treatment and in patients taking certain heart medications.

        PLUS Program.    As an element of the FDA's approval of Plenaxis, we are marketing Plenaxis under a comprehensive risk management program developed with the FDA to ensure that patients and physicians are fully informed about the risks and benefits of Plenaxis before using it. The PLUS Program includes, among other elements:

•

Product labeling regarding the risk of immediate-onset systemic allergic reactions and the decreased effectiveness of Plenaxis in suppressing serum testosterone to castrate levels with continued dosing in some patients;



•

An agreement for physicians which must be signed in order to become a prescriber of the drug;

5

•

An agreement for hospital pharmacists confirming their participation in the program and the actions required prior to dispensing the drug;



•

A patient information form which patients sign, indicating that they are informed about the risks and benefits of the drug;



•

A program for reporting adverse events, including immediate-onset systemic allergic reactions (anaphylaxis, hypotension (lowering of blood pressure) and/or syncope (fainting)) to the Company and the FDA; and



•

Measures to actively monitor and evaluate the program, including several phase IV studies.

Product Pipeline

        We focus our drug development efforts on conditions or diseases where there are unmet medical needs creating a potential for significant product revenues. In addition to Plenaxis, we have two programs that have moved beyond the research phase into clinical testing, as well as various research and preclinical programs. We continually evaluate in early research potential candidates for development and are currently focusing our discovery efforts on opportunities in the areas of oncology, inflammation and infectious diseases.

        We have outlined our clinical programs and our more advanced programs in the research or preclinical development stage, along with the clinical indications they address, in the following table:

Plenaxis Program

Prostate Cancer

        European Regulatory Status.    In June 2003, we initiated the regulatory submission process in the European Union seeking approval to market Plenaxis for the treatment of a broad population of hormonally responsive prostate cancer patients. We submitted a marketing authorization application, or MAA, in Germany comprised of comprehensive safety and efficacy data from three phase III safety and efficacy studies, one of which was conducted in Europe, one phase III safety study, an open-label study in advanced symptomatic prostate cancer patients, as well as phase I and phase I/II pharmacokinetics studies. We expect the German regulatory authorities to provide initial feedback on our application during the first half of 2004 and to complete its review of the MAA during 2004. Assuming a favorable action by the German regulatory authorities, we plan to seek additional European Union member state approvals under the Mutual Recognition Procedure, or MRP.

        We are in discussions with potential partners for the commercialization of Plenaxis in Europe. We are also in discussions regarding the development and/or commercialization of Plenaxis in Japan and other areas of the world. It is likely that the Japanese regulatory authorities would require clinical trials to be conducted in Japanese men prior to a filing for marketing approval in Japan. Other foreign regulatory authorities may also require additional clinical studies. We cannot assure investors that we will be successful in obtaining regulatory approval abroad for the commercialization of Plenaxis for the

6

treatment of any portion of the hormonally responsive prostate cancer patient population or for any other indication, or that we will be able to enter into collaboration agreements on favorable terms, or at all.

Endometriosis

        Background.    We have also conducted clinical studies of Plenaxis for the treatment of endometriosis. Endometriosis is a condition where endometrial tissue grows beyond the uterine lining, most often on the surfaces of organs in the pelvic cavity. Endometrial tissue, regardless of location in the body, responds to the normal menstrual cycling of women. When the location of the endometrial tissue prevents the appropriate sloughing of tissue that normally occurs during menstruation, inflammation, gastrointestinal symptoms and internal scarring occur. This causes, among other things, pain, fatigue, heavy menstrual bleeding, painful sexual intercourse and infertility. An estimated 5.5 million females in the United States and Canada suffer from endometriosis. Each year only approximately 300,000 females in the United States are diagnosed with endometriosis, in part due to the lack of a simple diagnostic test. Existing treatments for endometriosis include the use of pain management medications, birth control pills, hormonal therapies to reduce estrogen and surgery.

        Endometriosis Clinical Studies.    To date, we have completed a 40 patient, phase I/II study and a 363 patient, phase II study. Patients appear to have generally tolerated treatment with Plenaxis well in these studies. As expected, we observed adverse reactions in both Plenaxis and Lupron Depot patients, including headache, temporary and reversible irritation at the injection site and temporary and reversible elevation of some liver enzymes. In addition, it is well documented that the use of hormonal therapies that lower estrogen levels results in bone mineral density loss. Analysis of the results of our phase II study indicates that patients treated with Plenaxis experienced more bone mineral density loss than those treated with the comparator drug, and that this loss was dose-related. In order to better understand the bone mineral density loss, during 2002 and 2003 we conducted a pharmacokinetic study of Plenaxis in healthy women to determine the appropriate dose and dosing schedule necessary to maximize the benefit of the therapy for patients while minimizing attendant bone mineral density loss. The results of this study will be used as guidance for potential future clinical studies. We do not currently have any additional endometriosis studies planned and do not expect to conduct further studies without a corporate partner. Any additional development in endometriosis would also require consultation with the FDA.

Other Potential Indications

        Plenaxis, in addition to its approved indication, may have potential use in treating other diseases that respond to the reduction of either testosterone or estrogen. For example, we have completed a small clinical study evaluating the utility of treating hormonally responsive advanced prostate cancer patients with Plenaxis for 12 weeks followed by treatment with LHRH agonist therapy. In addition to our studies in hormonally responsive advanced prostate cancer and endometriosis, a small, investigator-sponsored clinical study was also conducted in which the effects of using Plenaxis to treat androgen-independent prostate cancer were evaluated. In this disease, the prostate cancer cells no longer need testosterone and other hormones to grow and, as a consequence, hormone-lowering therapies are ineffective. The focus of this study was on the suppression of FSH and the results of the study were encouraging. We plan to continue the evaluation of Plenaxis in this patient population through a Company-sponsored study of the use of Plenaxis in patients who have androgen-independent prostate cancer, including those for whom previous hormone therapies have failed, and have submitted a proposed protocol to the FDA for their review.

        We are also evaluating the possibility of conducting other small, investigator-sponsored studies in indications where there are unmet medical needs, and where we believe that the benefits of treatment with Plenaxis will outweigh the potential risks. Examples of these diseases may include endometrial cancer, ovarian cancer, breast cancer, benign prostatic hypertrophy and precocious puberty. We intend to work with the FDA to reach agreement on clinical research initiatives, as well as eventual label

7

expansion, in these and other patient populations which could be appropriately treated with Plenaxis in the future.

Apan

        We are developing Apan for the treatment of Alzheimer's disease. Alzheimer's disease affects an estimated 4.5 million people in the United States, and is expected to become increasingly prevalent as the population ages, according to the Alzheimer's Association. Current therapies provide temporary relief for the symptoms of Alzheimer's disease in some patients, but do not affect the progression of the disease itself.

        A hallmark of Alzheimer's disease is the accumulation of plaque-like deposits in brain tissue. A major component of this plaque is a small peptide called beta-amyloid. A large body of clinical, biochemical and genetic evidence has emerged suggesting that the aggregation of beta-amyloid peptide may be the underlying cause of Alzheimer's disease. This body of evidence has led to the widely held theory that when single beta-amyloid molecules aggregate they become toxic to nerve cells, and that this toxicity leads to the development and progression of Alzheimer's disease. We used our LEAP technology to select Apan to interfere with this aggregation process.

        We have shown in in vitro experiments that Apan specifically inhibits the aggregation of beta-amyloid and prevents the associated nerve cell toxicity. In addition, we have shown in rats and mice that Apan reaches the brain in quantities that we believe may be sufficient to block the aggregation of beta-amyloid molecules and alter the course of the disease. Studies in transgenic mice that develop human Alzheimer's disease plaques in their brains and in guinea pigs suggest that Apan can facilitate the clearance of beta-amyloid from the brain. Alzheimer's disease, with the associated accumulation of beta-amyloid in the brain, is often thought of as a defect in the ability to clear excess beta-amyloid from the brain to the cerebrospinal fluid, or CSF. Both humans and transgenic mice with Alzheimer's disease-like plaques show increased levels of beta-amyloid in the brain and decreased levels in the CSF as the disease progresses. In contrast, transgenic mice treated with Apan show increases in beta-amyloid levels in the CSF, suggesting that Apan may be facilitating the clearance of beta-amyloid from the brain.

        In March 2003, we completed a phase Ia dose escalation study of Apan in healthy volunteers. In this study, we evaluated the safety and pharmacokinetics of the compound and identified a maximum tolerated dose, or MTD, in healthy volunteers. An analysis of the CSF taken from ten of these healthy volunteers indicates that Apan can be quantified in the CSF. These preliminary CSF results also indicate that Apan may be promoting clearance from the brain of beta-amyloid. This trend in the early data is consistent with the CSF beta-amyloid results we have seen with Apan in animal models.

        In June 2003, we initiated a phase Ib trial in Alzheimer's patients. In this study, a single dose of Apan is administered, with the goal of establishing the MTD in patients. We anticipate completing the phase Ib study during the first half of 2004. Upon completion of the phase Ib study, and assuming favorable FDA review of the study's results, we expect to initiate a phase Ic trial examining the safety of multiple administrations of a selected dose of Apan in Alzheimer's disease patients.

PPI-2458

        PPI-2458 is a novel, proprietary molecule that acts by irreversibly inhibiting the enzyme methionine aminopeptidase type 2, or MetAP2. PPI-2458 is based on the fumagillin class of compounds. This class of compounds has been shown to prevent both abnormal cell growth and the formation of new blood vessels (known as anti-angiogenesis), which contribute to the growth of aberrant tissues in diseases such as cancer and rheumatoid arthritis. The dose limiting toxicity associated with certain fumagillin derivatives has largely prevented their clinical development. In preclinical studies to date, PPI-2458 has demonstrated the potent activity of this class of compounds while displaying an improved toxicity profile.

8

        In preclinical studies conducted separately by us and the National Cancer Institute, or NCI, using both in vitro and animal models, PPI-2458 demonstrated significant anti-tumor activity against certain types of cancerous cell lines. We have also developed a proprietary pharmacodynamic assay that is being utilized in clinical studies to assess the level of inhibition achieved by PPI-2458 of its target enzyme, MetAP2. Data from preclinical studies in the B16F10 xenograft mouse model, which is a commonly used cell line in cancer studies, showed that PPI-2458 significantly inhibited tumor growth and that the degree of growth inhibition was directly linked to the level of MetAP2 inhibition by PPI-2458. The NCI has also presented its data on the anti-angiogenic activity of PPI-2458 and its in vivo efficacy in a variety of xenograft animal models of human cancer, which indicate that the activity of PPI-2458 compares favorably to that of another compound of this class known as TNP-470, which was in development at TAP Pharmaceutical Products Inc.

        During 2003, we filed an investigational new drug application, or IND, for PPI-2458, and in December 2003, initiated an open-label phase I dose escalation study in non-Hodgkin's lymphoma patients. In March 2004, the FDA placed this trial on clinical hold until questions relating to a finding in a recently completed animal safety study have been satisfactorily resolved. In support of our IND, we had completed and submitted to the FDA results from preclinical studies evaluating the safety of PPI-2458 through 28-days of treatment. These studies showed no evidence of any unexpected safety issues. The FDA's decision was related to a preliminary finding in a recently completed three-month animal safety study. The results of this study were not available at the time that the clinical study was initiated. The finding consisted of a neuropathological abnormality in some of the animals tested, similar to findings reported in connection with certain other approved products. The FDA has confirmed in writing that we will need to submit a detailed plan in order to address this finding. We intend to further explore this finding, with input from leading experts as appropriate, to assess its potential implications and prepare a plan for the FDA. While we intend to work diligently with the FDA to resolve this issue, we cannot currently predict when the clinical hold will be released.

        Assuming that the FDA releases the clinical hold, we will resume our phase I clinical study of PPI-2458 in non-Hodgkin's lymphoma patients. The primary endpoint of this study is safety, with disease response being evaluated as a secondary endpoint. In this study, we are utilizing our MetAP2 inhibition assay to assist in the determination of a safe and efficacious dosing regimen for future studies. Initial results collected prior to the clinical hold confirm that orally dosed PPI-2458 is achieving inhibition of its molecular target, MetAP2, in humans.

        There are approximately 50,000 new cases of non-Hodgkin's lymphoma in the United States annually, and approximately 25,000 deaths from non-Hodgkin's lymphoma each year. The PPI-2458 trial includes patients with diffuse large B-cell lymphoma and follicular lymphoma. These two types of non-Hodgkin's lymphoma represent approximately one half of all newly diagnosed non-Hodgkin's lymphoma cases in the United States.

        In December 2003, we entered into a collaboration with the NCI's Division of Cancer Treatment and Diagnosis for the expansion of clinical development of PPI-2458 for the treatment of various forms of cancer. Under the collaboration agreement, we will work with the NCI to optimize a clinical development path for PPI-2458 in cancers other than non-Hodgkin's lymphoma. However, the Division of Cancer Treatment and Diagnosis can not proceed with the initiation of any clinical trials under this agreement until release of the recently imposed clinical hold discussed above.

        We intend to continue to evaluate potential trials for PPI-2458 in autoimmune diseases, including rheumatoid arthritis. Preclinical studies have demonstrated the efficacy of PPI-2458 in several rodent models of rheumatoid arthritis, including a rodent model of collagen-induced arthritis. In one such study, radiographs showed that, as compared to the untreated control group, PPI-2458 significantly inhibited structural damage when the compound was administered via any of three routes: oral, subcutaneous or intravenous. Despite the availability of several new effective disease-modifying anti-rheumatic drugs, also known as DMARDs, for the treatment of rheumatoid arthritis, there remains a significant unmet medical need. We believe that new drugs which could be used alone or in combination with established DMARDs could be useful in treating rheumatoid arthritis.

9

Endometriosis Diagnostic

        Considering that an estimated 5.5 million females in the United States and Canada suffer from endometriosis, and that only approximately 300,000 females in the United States and an unknown number in Canada are actually diagnosed with the disease annually, we believe a diagnostic test is critical to better identify, assess and treat those who suffer from the disease. Currently, endometriosis is diagnosed by a relatively painful and expensive invasive surgical procedure called laparoscopy. We are developing a simple, non-invasive endometriosis diagnostic test based on the presence of unique proteins in the serum of disease sufferers. Using our Biomarker Discovery Platform described below, we have discovered proteins whose abundance in serum can discriminate between diseased and non-diseased individuals. These proteins could prove useful to diagnose individuals with the disease, as well as enhance understanding of the disease process. We have developed a clinically relevant diagnostic test which can be performed on a commercially available platform. This will allow for the implementation and further clinical assessment of our findings in a broad population. If the findings hold, we believe that this test could be available in a specialty testing laboratory environment on an expedited timetable.

Androgen Receptor Antagonist

        Because testosterone and other hormones are growth factors for prostate cancer cells, hormone-lowering therapy can be a safe and effective treatment for patients with hormone-dependent prostate cancer. However, most patients eventually progress to a condition known as hormone-independent (or androgen-independent) prostate cancer, where the prostate cancer cells no longer need testosterone and other hormones to grow and, as a consequence, hormone-lowering therapies are ineffective. Genetic studies in these patients reveal that many of them have accumulated mutations in the gene encoding the Androgen Receptor, or AR, allowing it to function in the absence of testosterone. These studies indicate that the AR is central to the growth of prostate cancer cells. In an ongoing effort to develop the most advanced approaches to treating prostate cancer, we have discovered and are testing ligands that bind to the AR using our LEAP technology, which could provide the basis for a new class of drugs to treat hormone-independent prostate cancer. If successful, the use of these drugs could be expanded to treat prostate cancer at all stages.

Antiviral Program

        The development of antiviral agents has captured a worldwide market in excess of $9.0 billion. Most antiviral therapeutics directly interfere with components of viral entry, replication or assembly. However, this therapeutic approach often leads to resistance, as the virus mutates, overcomes the action of the drug and successfully enters the target cell nucleus.

        We have been working across a number of different approaches in pursuit of potential antiviral therapies. For example, we are pursuing a novel strategy targeting cellular pathways which would prevent/reduce viral replication and thereby potentially avoid the problems of drug resistance. Using our LEAP technology, we have identified molecules that cause an antiviral effect; preventing the viral replication, against several different classes of viruses. We are currently testing the activity of these compounds against a wider spectrum of viruses, and are working on improving the potency of these molecules through the medicinal chemistry step of the LEAP process. If we are successful, the use of these molecules could be developed for the treatment of a number of different viral afflictions, such as influenza and respiratory syncytial virus, or RSV.

10

Technology

LEAP and Direct Select

        Our proprietary method for discovering drugs is based on a unique system that combines the power and diversity of biological selection to identify compounds with potentially favorable drug-like properties with an ability to enhance and optimize these compounds using medicinal chemistry. We call this process Ligand Evolution to Active Pharmaceuticals, or LEAP. We believe LEAP is superior to traditional methods of drug discovery that are limited by the number of compounds that can be synthesized and tested manually. In a typical LEAP selection process, we can examine millions of molecules in a few months. By contrast, conventional screening and medicinal chemistry permit the examination of fewer than one million molecules with equivalent resources and require more time.

        In the case of Plenaxis, LEAP allowed us to take a peptide ligand encoded in the human genome and convert that peptide into a drug. GnRH is a natural peptide ligand that binds to the GnRH receptor on the pituitary gland triggering the production of LH, which, in turn, triggers the production of testosterone. We used LEAP to evolve GnRH into Plenaxis, a drug that binds to the same receptor target, but blocks the production of LH. We have several granted foreign patents, as well as pending patent applications in the United States and abroad, that cover the essential steps of the LEAP process.

        As part of the ongoing evolution of our discovery platform, we have recently developed Direct Select Technology. The power of the Direct Select Technology is in both the sheer size of the small molecule libraries—10,000 times the size of compound libraries typically used in the pharmaceutical industry—and the ease of use of the libraries in affinity-based screening assays. Direct Select libraries are not restricted to peptide-based compounds and accomplish what takes two steps in LEAP in a single step selection. Due to these advantages, Direct Select Technology will allow us to rapidly and directly identify leads with higher affinity and specificity than is routinely possible using traditional drug discovery methods. In a pilot trial using Direct Select Technology, we generated a 250,000 member library in less than six weeks. Our scientists are scaling the process to potentially create multiple libraries consisting of greater than 100 million molecules with highly diverse structures. We intend to apply the Direct Select approach to the discovery of new compounds, including orally bioavailable drugs, directed at multiple targets in select human diseases. We have filed patent applications in the United States covering the essential steps of the Direct Select process and also intend to pursue patent protection abroad.

Rel-Ease

        We may be able to further enhance the potential clinical utility of our drug candidates by formulating the drugs with our proprietary sustained release technology, Rel-Ease. For example, using Rel-Ease technology, we are able to formulate Plenaxis in such a way that a physician only needs to administer it to prostate cancer patients once every four weeks because Rel-Ease continuously releases the drug in the body over that period of time. In many cases, infrequent injections of a drug in a sustained release formulation are more desirable than oral administration due to patient compliance, convenience or reimbursement issues. We have formulated a variety of molecules with Rel-Ease technology and believe that Rel-Ease may be useful for formulating drug candidates we discover and develop using our proprietary technology platforms. We may explore in the future the potential use of our Rel-Ease technology to create improved formulations and sustained release formulations of approved drugs. We hold patents that cover the general application of this technology for a broad range of peptide-based drugs.

Biomarker Discovery Platform

        Our LEAP technology platform includes a process to profile highly complex tissues and recognize subtle differences between them. The recognition of differences in complex tissues is a core challenge of performing global protein profiling, or proteomics, to look for diagnostic biomarkers or novel insight

11

into disease mechanisms which could lead to new drug targets and therapies. This technology platform uses liquid chromatography and mass spectrometry to reproducibly measure the relative abundance of many components in tissue samples. Proprietary software is used to distinguish between normal subjects and disease sufferers. The structures of the molecules having different abundances are then determined. As discussed above, we recently employed this proteomics-based Biomarker Discovery Platform successfully in our endometriosis diagnostic program to identify the presence of unique proteins in the serum of disease sufferers.

MASTRscreen

        MASTRscreen is our proprietary screening procedure that rapidly identifies and evaluates ligands for the most successful class of drug targets, known as G-protein coupled receptors. The GnRH receptor is a member of this class of receptors. We developed MASTRscreen in connection with our Plenaxis program, and it was instrumental in the selection of Plenaxis from pools of modified peptides. MASTRscreen is useful because of its sensitivity to low concentrations of screened material, easily measurable endpoints and adaptability to various screening systems. We have several granted foreign patents, as well as pending patent applications in the United States and abroad, that cover the essential steps of the MASTRscreen process.

Technology License

        In October 1996, we entered into a license agreement with Indiana University Foundation. The license agreement was amended in June 1998, and Indiana University Foundation assigned it to Indiana University's Advanced Research and Technology Institute, Inc. Under the agreement, we have an exclusive worldwide license under patent applications, future patents and technology of Indiana University Foundation relating to GnRH antagonist compounds, including abarelix, which is the active ingredient of Plenaxis, and methods of use for abarelix. Through December 31, 2003, we had paid non-refundable fees of $305,000 and performance-based payments of $1.75 million under this agreement. We made an additional $1.0 million performance-based payment under this agreement in February 2004. We have agreed to make performance-based payments of up to an additional $1.5 million, and to pay royalties on our net sales of products covered by the license. The license agreement remains in effect until the last licensed patent expires, currently 2015. Expiration of the license will not preclude us from continuing to develop and market the licensed products and use the licensed technology, provided we obtain the consent of Advanced Research and Technology Institute to extend the license term past the expiration date. Advanced Research and Technology Institute may not unreasonably withhold its consent to our request for such an extension. We can terminate the agreement at any time upon 90 days notice. Advanced Research and Technology Institute may terminate upon 90 days notice if we materially breach the agreement or fail to make required payments.

Research and Development

        As of December 31, 2003, we had a total of 99 employees dedicated to research and development for our product candidates. We have spent substantial funds over the past three years to develop Plenaxis and our other potential drug candidates and expect to continue to do so in the future. We spent approximately $59.4 million in 2001, $56.4 million in 2002 and $41.9 million in 2003 on research and development activities.

Marketing and Sales

        We have established an internal marketing and sales infrastructure to support the launch of Plenaxis in the United States, including marketing and sales support professionals based at our headquarters in Waltham, Massachusetts. As of February 29, 2004, we have hired and trained our regional sales managers and are aggressively hiring and training what we currently estimate will be 40 field sales representatives. In addition to marketing and sales personnel, we have hired and trained

12

medical science liaisons to engage in scientific exchange and help respond to medical and scientific questions from physicians.

        Our goal is to have 100% of our Plenaxis sales force hired, trained and in the field by early in the second quarter of 2004. We are targeting sales representatives with an average of 6-8 years of experience. Our sales force will promote Plenaxis to physicians, particularly oncologists and urologists, who are involved in the treatment of patients with advanced symptomatic prostate cancer, as well as educate physicians and hospital pharmacists about the PLUS Program and the risks and benefits of Plenaxis.

        We intend to leverage our marketing and sales infrastructure to position ourselves as a partner for commercializing other urology/oncology products. In addition, our marketing professionals are also involved with our product candidates at earlier stages of development, such as Apan and PPI-2458. As these products advance in development, our commitment of marketing resources may increase.

        We sell Plenaxis directly to authorized specialty distributors who, in turn, sell the product to physicians and hospital pharmacists enrolled in the PLUS Program. There are a relatively small number of specialty distributors and wholesalers that provide such services. There can be no assurances that these distributors will adequately provide their services to either end users or to the Company.

Manufacturing

        We generally manufacture in-house the drug supply required to support our early preclinical studies. External contractors provide all of our later-stage preclinical and clinical supplies and manufacture them in accordance with FDA and European regulations. We have long-term contracts for each stage of the commercial manufacturing process for Plenaxis.

        We have a development and supply agreement with UCB S.A. under which UCB will supply us with commercial volumes of the Plenaxis drug compound. We have no minimum purchase commitment for commercial supply under the UCB agreement.

        We also have a supply agreement with Cambrex Charles City, Inc., formerly Salsbury Chemicals, Inc. Under this supply agreement, Cambrex has agreed to manufacture for us the commercial depot formulations of Plenaxis. We contributed approximately $6.0 million toward Cambrex's construction and outfitting of a dedicated manufacturing facility. We retain all rights in manufacturing technology developed in connection with this agreement. During 2003, we paid Cambrex approximately $632,000 toward minimum purchase commitments and facility maintenance. Our minimum purchase commitment with Cambrex for 2004 is $792,000.

        In addition, we have a commercial supply agreement with Baxter Pharmaceutical Solutions LLC to supply Plenaxis products in finished vials. Under the terms of the Baxter agreement, we are required to purchase a minimum of $375,000 of product from Baxter each calendar year until January 2005, the first anniversary of the first commercial shipment of Plenaxis, at which time the minimum annual purchase commitment will be adjusted to $650,000.

        In order to meet potential increases in demand in connection with the commercial launch of Plenaxis, we are evaluating the possibility of a second source for certain stages of Plenaxis production. However, the number of qualified alternative suppliers is limited, and we cannot assure investors that we will be able to locate alternative suppliers or negotiate second supply agreements on reasonable terms. Furthermore, the process of engineering a new supplier's facility for the production of Plenaxis and obtaining the necessary FDA approval of the facility would require substantial lead-time and could be extremely costly. We cannot assure investors that we will not lose one or more of our suppliers, or that in such event we would be readily able to continue the commercialization and sale of Plenaxis products or the further development of Plenaxis without substantial and costly delays.

13

Patents and Proprietary Rights

        Proprietary protection for our products, technology and processes is essential to our business. We seek proprietary protection predominantly in the form of patents on our products and the processes we use to discover them. With respect to a particular product, we generally seek patent protection on the compound itself, its commercial formulation, its range of applications and its production. Where possible, we also seek patent coverage that could prevent the marketing of, or restrict the commercial threat of, competitive products.

        We currently hold 24 United States patents and exclusive licenses to three United States patents. These patents have expiration dates from 2012 through 2020. We also hold or have exclusive licenses to 65 granted foreign patents. In addition, we have filed or hold exclusive licenses to 33 United States utility and provisional patent applications, as well as 131 related foreign patent applications, including both Patent Cooperation Treaty filings and national filings. We also have non-exclusive licenses to four United States patents directed to technologies embodied in LEAP.

        In particular, we have or hold exclusive licenses to United States patents that cover both the active ingredient of Plenaxis, known as abarelix, as well as methods of use for abarelix for treating a variety of conditions, including prostate cancer, and the sustained release formulation enabling its once-per-month administration. These patents expire in 2015 and 2016. We also have patents covering the use of abarelix and certain specific uses of any other GnRH antagonist in various therapeutic settings, including in combination with surgery or radiation therapy. We intend to file additional United States and foreign patent applications, where appropriate, relating to new product discoveries or improvements.

        We also rely on trade secrets, know-how and continuing technological advances to protect various aspects of our core technology. We require our employees, consultants and scientific collaborators to execute confidentiality and invention assignment agreements with us to maintain the confidentiality of our trade secrets and proprietary information. These agreements generally provide that the employee, consultant or scientific collaborator will not disclose our confidential information to third parties, compete with us or solicit our employees during the course of their employment, consultancy or collaboration with us. When appropriate, these agreements also provide that inventions conceived by the employee, consultant or scientific collaborator in the course of working for us will be our exclusive property. Additionally, our employees agree, for one year following termination of their employment with us, not to solicit our other employees.

Competition

        A biopharmaceutical company such as ours faces intense competition. Many companies, both public and private, including large pharmaceutical companies, chemical companies and biotechnology companies, develop products or technologies competitive with our products or technologies. Many of these companies have greater financial resources and more experience than we do in developing drugs, obtaining regulatory approvals, manufacturing and marketing. In addition, academic, government and industry-based research is intense, resulting in considerable competition in obtaining qualified research personnel, submitting patent filings for protection of intellectual property rights and establishing strategic corporate alliances.

        Our product, Plenaxis, as well as each of our potential products in research or development, will face competition from other products. For example, Plenaxis, although approved in the United States only for the treatment of the symptoms of men with advanced prostate cancer for whom other hormonal therapies are not appropriate and who have refused surgical castration, will still compete to some extent with established or newly introduced products, including Lupron Depot, Zoladex, Casodex and other pharmaceuticals used by physicians for the treatment of hormonally responsive advanced prostate cancer in the United States and Europe.

14

        We are also aware of another GnRH antagonist, Degarelix, being developed by Ferring Pharmaceuticals, which is in late-stage clinical trials for the treatment of prostate cancer. In addition, for Plenaxis and each of our product candidates, we will face increasing competition from generic formulations of existing drugs whose active components are no longer covered by patents. Specifically, we are aware of various formulations of leuprorelin, the active ingredient of Lupron Depot, including Viadur™, marketed by Bayer Corporation as a 12-month hormone therapy implant, and Eligard, marketed by Atrix Laboratories, Inc. in one-, three- and four-month depot formulations for the treatment of advanced prostate cancer.

        We believe that the principal competitive factors affecting the market for Plenaxis are the safety and efficacy profile, physician and patient acceptance of the product, product features, including the dosing schedule, and pricing and reimbursement decisions. We believe that Plenaxis will be adopted by practitioners and patients as an acceptable therapy for the subset of advanced symptomatic prostate cancer patients described above and will compete favorably with other available treatment alternatives in this arena, although no assurance can be given in this regard.

Government Regulation

        The manufacture and marketing of pharmaceutical products and our ongoing research and development activities in the United States require the approval of numerous governmental authorities, including the FDA. We also must obtain similar approvals from comparable agencies in most foreign countries. The FDA has established mandatory procedures and safety standards which apply to preclinical testing and clinical trials, as well as to the manufacture, storage, distribution, marketing, sales, import and export of pharmaceutical products. State, local and other authorities also regulate pharmaceutical manufacturing and distribution facilities.

        The pharmaceutical research, development and approval process in the United States is typically intensive, uncertain, lengthy and rigorous and can take many years, depending on the product under consideration. As an initial step in the FDA regulatory approval process, an applicant typically conducts preclinical studies in animals to assess a drug's efficacy and to identify potential safety problems. An applicant must conduct specified preclinical laboratory and animal studies in compliance with the FDA's good laboratory practice regulations. Failure to follow these requirements can invalidate the data, among other things. An applicant must submit the results of these studies to the FDA as part of an investigational new drug application, or IND. Proposed clinical testing can only begin if the FDA raises no objections to the IND. We can give no assurance that any submission of an IND to the FDA relating to our product candidates will result in the commencement of a clinical trial. The FDA may prevent studies from moving forward by imposing a clinical hold, and may suspend or terminate studies once initiated. For example, the FDA recently placed our phase I clinical trial of PPI-2458 on hold due to a neuropathological abnormality observed in some of the animals tested in a recently completed three-month animal safety study. The FDA has confirmed in writing that we will need to submit a detailed plan to address this finding. We intend to further explore this finding, with input from leading experts as appropriate, to assess its potential implications and prepare a plan for the FDA. While we intend to work diligently with the FDA to resolve this issue, we cannot currently predict when the clinical hold will be released.

        Clinical testing must meet requirements for institutional review board, or IRB, oversight and study subject informed consent, as well as FDA prior review, oversight and good clinical practice requirements. Independent IRB's are responsible for overseeing studies at particular sites and protecting human research study subjects. An IRB may prevent a study from beginning or suspend or terminate a study once initiated. Typically, clinical testing involves a three-phase process. Phase I clinical trials involve a small number of subjects and are designed to provide information about both product safety and the expected dose of the drug. Phase II clinical trials generally provide additional information on dosing and safety in a limited patient population. Generally, phase II trials may also provide preliminary evidence of product efficacy. Phase III clinical trials are large-scale, well-controlled studies. The goal of phase III clinical trials generally is to provide statistically valid proof of efficacy, as

15

well as safety, in the target patient population. In order to seek approval to commence commercial sales, the company performing the preclinical testing and clinical trials of a pharmaceutical product then submits the results to the FDA in the form of a new drug application, or NDA, along with proposed labeling for the product and information about the manufacturing processes and facilities that will be used to ensure product quality. Each NDA submission requires a substantial user fee payment for which the FDA has committed generally to review and make a decision concerning approval within 10 months, and of a new "priority" drug within 6 months. However final FDA action on the NDA can take substantially longer and also may involve review and recommendations by an independent FDA advisory committee. Preparing NDA applications involves considerable data collection, verification, analysis and expense. In responding to an NDA, the FDA may conduct a pre-approval inspection of the relevant manufacturing facility or facilities to assess conformance to the current good manufacturing practice requirements and may also inspect sites of clinical investigators involved in the clinical development program to ensure their conformance to good clinical practices.

        The FDA must grant approval of our products, which includes a review of the manufacturing processes and facilities used to produce these products, before we can market these products in the United States. The process of obtaining approvals from the FDA can be costly, time consuming and subject to unanticipated delays. The FDA may not approve an NDA, or may require revisions to the product labeling, require that additional studies be conducted prior to or as a condition of approval, or impose other limitations or conditions on product distribution, including, for example, adoption of a special risk management plan. If the FDA grants approval of a drug product, the approval will be limited to specific indications.

        The FDA has considerable discretion in determining whether to grant marketing approval for a drug, and may delay or deny approval even in circumstances where the applicant's clinical trials have proceeded in compliance with FDA procedures and regulations and have met the established end-points of the trials. Challenges to FDA determinations are generally time-consuming and costly, and rarely if ever succeed. In November 2003, we received FDA approval to market Plenaxis for the treatment of the symptoms of men with advanced prostate cancer for whom other hormonal therapies are not appropriate and who have refused surgical castration. We can give no assurance that we will obtain marketing approval for any of our other product candidates.

        Now that we have received marketing approval for Plenaxis, we must comply with FDA requirements for manufacturing, labeling, advertising, record keeping and reporting of adverse experiences and other information. In addition, we must seek FDA approval for any significant changes to the product, the manufacturing of the product, or the labeling. Drug advertising and promotion are subject to federal and state regulations. In the United States, the FDA regulates all company and product promotion, including direct-to-consumer advertising. Violative materials may lead to FDA enforcement action. The manufacturing of a product after approval is also subject to comprehensive and continuing regulation. These regulations require the manufacture of products in specific approved facilities and in accordance with current good manufacturing practices, and to list products and register manufacturing establishments with the FDA. These regulations also impose certain organizational, procedural and documentation requirements with respect to manufacturing and quality assurance activities. All manufacturing facilities are subject to comprehensive, periodic inspections by the FDA.

        In addition, Plenaxis has been approved under regulations concerning drugs with certain safety profiles, under which the FDA has established special restrictions to ensure safe use. Under these regulations, Plenaxis was approved with a comprehensive risk management program. This program includes educational outreach to patients and physicians regarding the risks and benefits of Plenaxis, restricted distribution of the product only to physicians enrolled in a prescribing registry, a system for collecting and reporting adverse events to the FDA and auditing requirements to evaluate the effectiveness of the program. We are also required to conduct several phase IV studies to evaluate the risk management program and the appropriate use of the drug in the indicated population. These regulations also give the FDA authority to pre-approve all promotional materials and permit an expedited market withdrawal procedure if issues arise regarding the safe use of Plenaxis.

16

        Our manufacturing, sales, promotion, and other activities following product approval are subject to regulation by numerous regulatory authorities in addition to the FDA, including potentially the Federal Trade Commission, the Department of Justice, the Centers for Medicare & Medicaid Services, other divisions of the Department of Health and Human Services, and state and local governments. Any distribution of pharmaceutical samples to physicians must comply with applicable rules, including the Prescription Drug Marketing Act. Our sales, marketing and scientific/educational programs must comply with the anti-kickback provisions of the Social Security Act, the False Claims Act, and similar state laws. Our pricing and rebate programs must comply with pricing and reimbursement rules, including the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. All of our activities are potentially subject to federal and state consumer protection and unfair competition laws.

        Depending on the circumstances, failure to meet these applicable regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, private "qui tam" actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter into supply contracts, including government contracts. In addition, even if we comply with FDA and other requirements, new information regarding the safety or effectiveness of a product could lead FDA to modify or withdraw a product approval.

        We also are subject to various laws and regulations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including chemicals, micro-organisms and various radioactive compounds used in connection with our research and development activities. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, we cannot assure you that accidental contamination or injury from these materials will not occur. Compliance with laws and regulations relating to the protection of the environment has not had a material effect on our capital expenditures or our competitive position. However, we cannot accurately predict the extent of government regulation, and the cost and effect thereof on our competitive position, which might result from any legislative or administrative action.

        Additionally, we will likely need to obtain approval of a product from comparable regulatory authorities in foreign countries prior to the commencement of marketing of the product in those countries. The approval procedure varies among countries, may involve additional testing and the time required may differ from that required for FDA approval. Under the current regulatory system in the European Union, marketing authorization applications may be submitted pursuant to a centralized, a decentralized or a national level process. The centralized procedure is mandatory for the approval of biotechnology products and high technology products and available at the applicant's option for other products. The centralized procedure provides for the grant of a single marketing authorization that is valid in all European Union member states. The decentralized procedure is available for all medicinal products that are not subject to the centralized procedure. The decentralized procedure provides for mutual recognition of national approval decisions, changes existing procedures for national approvals and establishes procedures for coordinated European Union actions on products, suspensions and withdrawals. Under this procedure, the holder of a national marketing authorization for which mutual recognition is sought may submit an application to one or more European Union member states, certify that the dossier is identical to that on which the first approval was based or explain any differences and certify that identical dossiers are being submitted to all member states for which recognition is sought. Within 90 days of receiving the application and assessment report, each European Union member state must decide whether to recognize approval. The procedure encourages member states to work with applicants and other regulatory authorities to resolve disputes concerning mutual recognition. Lack of objection of a given country within 90 days automatically results in approval of the European Union country. Following receipt of marketing authorization in a member state, we would then be required to

17

engage in pricing discussions and negotiations with a separate prescription pricing authority in that country.

        We intend to secure European regulatory approval for the use of Plenaxis for hormonally responsive prostate cancer under the decentralized procedure and filed our first MAA in Germany in June 2003. That review is currently pending. We are relying primarily on third party contractors to assist us with our European regulatory filings for Plenaxis. However, although we have sought qualified experience and assistance in dealing with the foreign regulatory processes and interacting with foreign regulatory authorities, we cannot assure investors that we will be successful in filing for and obtaining the necessary governmental approvals for Plenaxis or any of our other product candidates in Europe or any other foreign country.

Price Controls

        In many of the markets where we operate or intend to operate, the prices of pharmaceutical products are subject to direct price controls (by law) and to drug reimbursement programs with varying price control mechanisms.

        In the United States, debate over the reform of the health care system has resulted in an increased focus on pricing. Although there are currently no government price controls over private sector purchases in the United States, federal legislation requires pharmaceutical manufacturers to pay prescribed rebates on certain drugs to enable them to be eligible for reimbursement under certain public health care programs. Various states have adopted mechanisms under Medicaid and otherwise that seek to control drug prices, including by disfavoring certain higher priced drugs and by seeking supplemental rebates from manufacturers. In the absence of new government regulation, managed care has become a potent force in the marketplace that increases downward pressure on the prices of pharmaceutical products. New federal legislation, enacted in December 2003, has altered the way in which physician-administered drugs covered by Medicare are reimbursed, generally leading to lower reimbursement levels. The legislation has also added an outpatient prescription drug benefit to Medicare, effective January 2006. In the interim, Congress has established a discount drug card program for Medicare beneficiaries. Both benefits will be provided primarily through private entities, which will attempt to negotiate price concessions from pharmaceutical manufacturers. While these negotiations may increase pricing pressures, it is also possible that the new Medicare prescription drug benefit may increase the volume of pharmaceutical drug purchases, offsetting, at least in part, potential price discounts. The new law specifically prohibits the United States government from interfering in price negotiations between manufacturers and Medicare drug plan sponsors, but some members of Congress are still pursuing legislation that would permit the United States government to use its enormous purchasing power to demand discounts from pharmaceutical companies thereby creating de facto price controls on prescription drugs.

        This focus on pricing has led to other adverse government action, and may lead to other action in the future. For example, in December 2003 federal legislation was enacted to change United States import laws and expand the ability to import lower priced versions of our and competing products from Canada, where there are government price controls. These changes to the import laws will not take effect unless and until the Secretary of Health and Human Services certifies that the changes will lead to substantial savings for consumers and will not create a public health safety issue. The current Secretary of Health and Human Services has indicated that there is not a basis to make such a certification at this time. However, it is possible that this Secretary or a subsequent Secretary could make the certification in the future. In addition, legislative proposals have been made to implement the changes to the import laws without any certification, and to broaden permissible imports in other ways. Even if the changes to the import laws do not take effect, and other changes are not enacted, imports from Canada and elsewhere may increase due to market and political forces, and the limited enforcement resources of the FDA, the Customs Service, and other government agencies. For example, numerous states and localities have proposed programs to facilitate Canadian imports, and at least one

18

locality has already begun such a program, notwithstanding questions raised by FDA about the legality of such actions. We expect that pressures on pricing and operating results will continue.

        In the European Union, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of such products to consumers. The approach taken varies from member state to member state. Some jurisdictions operate positive and/or negative list systems under which products may only be marketed once a reimbursement price has been agreed. Other member states allow companies to fix their own prices for medicines, but monitor and control company profits. The downward pressure on health care costs in general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products, as exemplified by the National Institute for Clinical Excellence in the United Kingdom which evaluates the data supporting new medicines and passes reimbursement recommendations to the government. In addition, in some countries cross-border imports from low-priced markets (parallel imports) exert a commercial pressure on pricing within a country.

        In Japan, the National Health Ministry biannually reviews the pharmaceutical prices of individual products. In the past, these reviews have resulted in price reductions.

Product Liability Insurance

        We maintain product liability insurance for the manufacturing and commercial sale of Plenaxis, as well as for clinical trials, in the amount of $20.0 million per occurrence and $20.0 million in the aggregate. Although we maintain product liability insurance, we cannot be sure that this coverage is adequate or that it will continue to be available to us on acceptable terms. Insurance coverage is becoming increasingly expensive, and we may be unable to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. We may incur significant liability and our business would be harmed if product liability or malpractice lawsuits against us are successful. Furthermore, product liability claims, regardless of their merits, could be costly and divert management's attention from other business concerns, or adversely affect our reputation and the demand for Plenaxis.

Human Resources

        As of February 29, 2004, we had 175 full-time employees. We also utilize consultants and independent contractors on a regular basis to assist in the development and potential commercialization of our products. None of our employees are party to a collective bargaining agreement and we have never experienced a work stoppage. We consider our employee relations to be good. We believe that our future success is dependent in part on our ability to attract and retain skilled scientific, sales and marketing, and other professional and senior management personnel. Competition in our industry is intense and we cannot assure you that we will be able to attract, integrate and retain these personnel.

Available Information

        We maintain a website with the address www.praecis.com. We are not including the information contained on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. We make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission. We have adopted a code of ethics that applies to all of our directors, officers and employees. We have made a copy of our code of ethics available on our website under "Investor Relations—Corporate Governance." We may satisfy the disclosure requirement under Item 10 of Form 8-K regarding an amendment to, or a waiver from, a provision of our code of ethics that applies to our principal executive officer or our principal financial and accounting officer by posting such information on our website.

19

ITEM 2.    PROPERTIES.

        Our corporate headquarters and principal research facility is located in Waltham, Massachusetts, where we own, through our wholly owned real estate subsidiary, land and a building of approximately 175,000 square feet. We have entered into a 15-year lease for this facility with our subsidiary. We currently occupy approximately 100,000 square feet of this facility and would sublease a portion of the remaining space for up to the next three to five years upon acceptable financial terms. In connection with the acquisition of our corporate headquarters and principal research facility, our subsidiary granted a security interest in the facility, together with all fixtures, equipment, improvements and related items, as more fully discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" appearing elsewhere in this report.

        We believe that our facility will be adequate for at least the next seven years and that we will be able to obtain additional space as needed on commercially reasonable terms.

ITEM 3.    LEGAL PROCEEDINGS.

        We are not currently 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 during the last quarter of the fiscal year ended December 31, 2003.

20

PART II

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

        Our common stock is traded on The Nasdaq National Market under the symbol "PRCS." The following table shows the range of high and low per share sale prices of our common stock as reported on The Nasdaq National Market for the periods indicated.

        As of February 29, 2004, there were approximately 143 holders of record of our common stock registered with our transfer agent, American Stock Transfer & Trust Company. Because many of these shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by the record holders.

        We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends on our common stock in the foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business. Our board of directors will determine future dividends, if any, based upon our financial condition, results of operations, capital requirements and other factors that the board deems relevant. Therefore, you should not expect to receive any funds in respect of shares of our common stock without selling your shares.

        The information under the heading "Equity Compensation Plan Information" in the Company's definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders expected to be held on May 13, 2004 is incorporated into Item 12 of this report by reference.

21

ITEM 6.    SELECTED FINANCIAL DATA.

        You should read the following selected financial data in conjunction with our consolidated financial statements and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this report. We have derived our statement of operations data for each of the three years in the period ended December 31, 2003, and our balance sheet data at December 31, 2002 and 2003, from our financial statements that have been audited by Ernst & Young LLP, independent auditors, and which we include elsewhere in this report. We have derived the statement of operations data for the years ended December 31, 1999 and 2000 and the balance sheet data at December 31, 1999, 2000 and 2001 from our audited financial statements, which we do not include in this report.