MILLENNIUM ANNUAL REPORT 1998 Essential Inspiration Extraordinary Innovation We are united in a single pursuit: to create a new type of company and with it, to transform healthcare. Streamlining drug discovery and development. Redefining patient management. Transcending the limits of medicineSM The Vision to Conceive A New Archetype THE PASSION TO SUCCEED Imagine a time when there is no uncertainty in medicine. A time when the promise of science is realized. A time when people are freed from the constraints of disease. At Millennium® we have imagined. And we have acted. Linking the strength of science and technology; drawing on the power of genomics and informatics; harnessing the passion of the industry’s finest minds; we are working toward this vision. Together we are striving to build the biopharmaceutical company of the future. Together we are seeking to transcend the limits of medicine. In 1998 Millennium Pharmaceuticals, Inc. continued to raise the bar that defines success in the biopharmaceutical industry. We formed what is believed to be the largest strategic alliance in the industry. We made outstanding progress in moving our pipeline down- stream, receiving 15 new U.S. patents and establishing four new clinical research collaborations. Our existing pharmaceutical partners moved several of our drug targets into compound screening and several partners extended their alliances with us. And, with over $1 billion in potential partnership funding, we continued to demonstrate our ability to grow Millennium while maintaining a secure financial base. Mark Levin Chairman and 2 Chief Executive Officer To Our Shareholders, Employees and Friends: Bayer AG Alliance Highlights At Millennium, we share the passion and belief that as we And, to develop these products and to remain at the fore- come to understand the molecular basis of disease, we front of the industry, we must continue to aggressively Creates what is believed to be the can and will fundamentally change medicine for the better. build our platform, constantly incorporating the latest largest drug discovery alliance in Among our divisions and subsidiaries we also share a technological advances. the history of the biopharmaceutical technology platform that allows us to understand how specific changes in genes relate to disease – a platform we Over-the-Top Alliances industry worldwide. believe will drive forward the discovery of new medicines, new diagnostic and prognostic products, and new methods Since our inception five years ago, we have consistently Constitutes a broad strategic alliance in for patient management. been focused on building both our platform and the 7 disease areas: cardiovascular disease, company itself. Our modus operandi has been to come cancer, pain, osteoporosis, liver diseases, But we also believe that, to deliver breakthrough products out fast. Get ahead. And stay ahead. To that end, we have blood diseases and viral infections. that will change people’s lives, we first need to create a developed and purchased cutting-edge technology, acquired very significant company. That is why our immediate goal a company and created over-the-top alliances – partner- Harnesses revolutionary new approaches is to build the biopharmaceutical company of the future. ships believed to be of unprecedented magnitude and to utilizing genes, identifying targets and configuration within the biopharmaceutical industry. The Proprietary Platform developing drug screening assays. In 1994, we formed an alliance with Hoffmann-La Roche Our strategy starts with our science and technology Inc. that was one of the first between a pharmaceutical Seeks identification, validation and platform. High throughput, integrated and leverageable company and a genomics company; that partnership helped screening of 225 targets over 5 years. across the life sciences, it is designed to enable us to establish genomics as an important discipline. In 1997, we industrialize drug discovery and development and to acquired and integrated ChemGenics Pharmaceuticals Inc. Provides up to $465 million in total increase productivity, efficiency and quality. We are using for its chemistry, high throughput screening and infectious funding, assuming the alliance goes full it to reduce the impact of bottlenecks in the drug disease research platforms. Later that year we pursued term and milestones are achieved. discovery process. We also anticipate using it to optimize a market opportunity, partnering with the Monsanto key steps across the healthcare continuum from gene Company to transfer our technology platform into a new, Bayer will make an estimated 90% discovery to patient management. nonrelated sector: agriculture. Other alliances with Pfizer of targets available to Millennium for Inc.; Eli Lilly and Company; Astra AB; and American Home With this platform, we are rapidly moving downstream, Products/Wyeth-Ayerst have focused on specific disease its own proprietary drug development advancing our discoveries toward clinical trials and areas, or targeted a certain form of therapeutic. pipeline. moving closer to marketing and commercializing our own products. We expect these products to be truly In 1998, Millennium made significant progress in our alliance breakthrough medicines that could make a difference commitments. We delivered three novel antibacterial drug in the treatment of human disease. targets to Wyeth-Ayerst for screening, and with that company identified two novel genes implicated in central 3 Measured by New Metrics We are creating a new type of company in a new nervous system disorders. We delivered four cardiovascular type of industry and thus must be valued according disease drug targets to Lilly and two obesity drug targets to Roche. Each of these achievements triggered milestone to a new set of standards. payments. In addition, Astra, Lilly and Pfizer each extended Process engineering the length of their alliances. We believe this underscores their faith in our ability to deliver novel high-quality Worked to create efficiencies by industrializing the targets and drug leads. process of drug discovery and development. Yet,our most momentous news was this: in 1998 we Progressed towards goal of increasing number of formed an alliance with Bayer, believed to be the largest drugs being successfully developed. drug discovery partnership ever in the history of the biopharmaceutical industry. Partnerships The Bayer Alliance Established important partnerships across multiple disease states. As part of our overall business strategy to industrialize the pharmaceutical discovery and development process, we Upheld rigorous partnership standards of major established a partnership with one of the world’s leading pharmaceutical companies. pharmaceutical industrialists: Bayer.This alliance effectively creates a strategy for Millennium to work together with Demonstrated partner satisfaction through a strong ally in identifying drug targets, setting up drug renewal of three alliances. screens and identifying small molecule leads. Ultimately, we expect those leads to move through the clinical candidate Leveraged the science and technology platform stage and into clinical testing. for even greater growth. Example: our alliance with Monsanto. Our agreement with Bayer is to identify 225 drug targets over five years across seven disease states: cardiovascular Scientific Excellence disease, cancer, pain, osteoporosis, liver diseases, blood diseases, and viral infections. There are four classes of pro- Attracted outstanding scientists across many teins that are most likely to be suitable for intervention disciplines. with small molecule drugs. Our goal is to identify the genes that encode these classes of proteins, rapidly assess their Published 74 articles in major scientific publications relevance within the seven key disease states, then discover in 1998. small molecule drug candidates that interact with them. We are neither This program is a large-scale industrialization of early drug Financial Strength discovery, from gene to target to drug lead candidate; it is constrained by emblematic of our commitment to introduce significant Reached over $1 billion in total potential alliance scale and efficiencies into the process. funding in 1998. conventional concepts Achieved profitability in 3 years of our 6-year nor divided by corporate history. classifications. At Strengthened balance sheet and ended 1998 with $191 million in cash. Millennium®,, we know no boundaries. 4 Millennium pharmaceuticals Management In addition, our alliance with Bayer provides a mechanism tion, diagnosis, prognosis and treatment of diseases. They to take Millennium further downstream: approximately also know the Company is focused on supporting them Mark J. Levin 90% of the targets we intend to deliver to Bayer will also and is dedicated to their professional growth. We conduct Chairman and Chief Executive Officer be available to feed into the Millennium pipeline. Moreover, a cultural survey every six months, hold an open company Janet C. Bush the alliance will supply us with significant funding, placing forum each quarter, and offer ongoing training in topics Vice President, Finance Millennium over the $1 billion mark in total potential ranging from bioethics to stress management at our alliance funding. internal “Millennium University.” Sandra DiCesare Vice President, Information Systems Providing funding, downstream momentum, and the Fortunately, our commitment to our employees is equaled Nicholas G. Galakatos, Ph.D. opportunity to