SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C.  20549

                                     FORM 8-K

                                  CURRENT REPORT

                     Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934


Date of Report (Date of Earliest Event Reported):      November 5, 1999
                                                  ----------------------------

                          TRANSKARYOTIC THERAPIES, INC.
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            (Exact Name of Registrant as Specified in its Charter)


                                   Delaware
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                 (State or Other Jurisdiction of Incorporation)

      000-21481                                           04-3027191
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(Commission File Number)                     (IRS Employer Identification No.)


195 Albany Street, Cambridge, Massachusetts                           02139
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 (Address of Principal Executive Offices)                           (Zip Code)

                                (617) 349-0200
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                  Registrant's Telephone Number, Including Area Code


                                Not Applicable
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            (Former Name or Former Address, if Changed Since Last Report)



Item 5.   OTHER EVENTS.

    Set forth below is an updated description of the business of
Transkaryotic Therapies, Inc. ("TKT" or the "Company").


                                    BUSINESS

OVERVIEW

    TKT is a biopharmaceutical company building a broad and renewable product
pipeline based on three proprietary development platforms: Gene-Activated
proteins, Niche Protein products, and Gene Therapy. The Company currently has
three products in clinical development: Gene-Activated-TM- erythropoietin
("GA-EPO-TM-") in Phase III trials for the treatment of anemia,
alpha-galactosidase A ("alpha-gal") in Phase II for the treatment of Fabry
disease, and Factor VIII gene therapy in Phase I for the treatment of
hemophilia A. TKT intends to expand its clinical pipeline by initiating
clinical trials of two additional Gene-Activated proteins and one additional
Niche Protein product over the next 12 months. The Company has a balanced
commercialization strategy, which is designed to leverage the size and
experience of corporate partners for certain products while building a small
and efficient commercial infrastructure for others. Accordingly, the Company
has entered into collaborations with Hoechst Marion Roussel, Inc. ("HMRI")
with respect to its first two Gene-Activated protein products, with Sumitomo
Pharmaceuticals Co., Ltd. ("Sumitomo") for alpha-gal in Japan, and with
Genetics Institute, Inc. ("GI") for Factor VIII gene therapy in Europe. TKT
intends to independently market its Niche Protein and gene therapy products,
as well as a number of its Gene-Activated products.



GENE-ACTIVATED-TM- PROTEINS: TECHNOLOGY BACKGROUND

    PROTEIN PRODUCTION: THREE TECHNOLOGICAL WAVES

    The therapeutic value of certain proteins produced by the human body has
been known for decades. One of the major advances in 20th-century medicine was
the development of systems for the large-scale production of therapeutic
proteins outside the body. For example, prior to the development of a
manufacturing process for insulin more than seventy years ago, patients with
Type I (juvenile onset) diabetes were offered no effective treatment and
generally died of starvation at an early age. Following the development of
pharmaceutical insulin preparations for injection, Type I diabetics could live
long and relatively normal lives. During this first wave of protein production
technology, proteins were generally purified from human or animal tissue.
Insulin, for example, was isolated from the pancreas of pigs and cattle, and
growth hormone, for the treatment of short stature, was isolated from the
pituitaries of cadavers.

    During the second wave of protein production technology, based on the
cloning of human genes, proteins were manufactured using conventional genetic
engineering techniques. As a result, by the mid-1980's, it became routine to
engineer cells to produce therapeutic proteins at levels that were substantially
in excess of what could be obtained by purification from tissue. However, since
many of the proteins produced by conventional genetic engineering techniques had
previously been purified, the patent protection afforded to this second wave of
protein production technology tended to focus on the genes encoding therapeutic
proteins. Accordingly, many patents have been issued covering isolated and
purified DNA sequences encoding such proteins, various vectors used to insert
such DNA sequences into production cell lines, and cell lines modified by the
insertion of such DNA sequences.

    TKT believes its proprietary gene activation technology represents the third
wave in the evolution of protein production technology in that it is based on
the activation of genes encoding therapeutic proteins in human cells rather than
the cloning and transfer of these genes. TKT's gene activation technology avoids
using the approach to protein production associated with the second wave. The
Company believes this will allow it to develop and commercialize a large number
of therapeutic proteins, including potentially improved versions of many that
are currently marketed.

    GENE STRUCTURE AND REGULATION OF GENE EXPRESSION

    Recent advances in molecular biology, cell biology, and genomics have led to
a much better understanding of the structure and function of human genes than
was possible only a few years ago. It is now generally accepted that virtually
all genes contain certain DNA sequences that provide information necessary for
the cell to assemble a specific sequence of amino acids that make up a protein
("coding DNA sequences"). Thus each gene can be viewed as the blueprint for a
particular protein, and "gene expression"

                                       1


is the process which leads to the synthesis of the protein it encodes. Gene
expression is controlled by certain DNA sequences which function as switches
that "turn on" the gene and trigger the synthesis of the protein ("regulatory
DNA sequences"). Despite the staggering variety of proteins synthesized by the
cells of the body, this process is universal.

    Essentially every human cell contains the same set of approximately 100,000
genes, but each cell type actually produces only a subset of the 100,000
proteins possible. For example, although essentially all human cells contain the
insulin gene, only certain cells of the pancreas actually produce insulin. The
regulatory switches that turn on gene expression in the appropriate cell type
also turn off gene expression in all other cell types. For this reason, only
pancreatic cells express insulin--the regulatory DNA sequences normally
associated with the insulin gene prevent expression elsewhere in the body. TKT's
gene activation technology is based on activating previously silent genes by
bypassing regulatory DNA sequences set in the "off position" with regulatory DNA
sequences set in the "on position."

    CONVENTIONAL RECOMBINANT PROTEIN PRODUCTION
    By the 1970's, the clinical benefits of several proteins were well-known
and the potential benefit of many others was envisioned. Based on a series of
basic discoveries in the 1960's and 1970's, scientists learned to clone and
manipulate genes of therapeutic interest, leading directly to the birth of
the biotechnology industry and the large scale production of therapeutic
proteins. To produce large quantities of a therapeutic protein using
conventional genetic engineering techniques, scientists first clone the
relevant human gene by isolating the coding DNA sequences for the gene from
the human cell and transferring them to bacteria, where large quantities of
the gene are copied. The cloned gene is then isolated from the bacteria and
placed in a test tube. In this test tube, the cloned gene is then fused to
appropriate regulatory DNA sequences, and the resulting DNA fragment
containing both the regulatory DNA sequences and the coding DNA sequences is
inserted into a non-human (mammalian, yeast, or bacterial) cell. This
genetically modified cell is then propagated in large bioreactors for
commercial-scale production of the protein.


                                       2


TKT'S PROPRIETARY GENE ACTIVATION TECHNOLOGY

    Although the conventional approach to recombinant protein production is
quite powerful, its use today faces certain commercial barriers and technical
limitations. The primary barrier is that biotechnology companies have sought and
obtained patent protection covering many of the techniques used to produce
commercially-marketed proteins using conventional genetic engineering
techniques. These patent rights have served as effective barriers to entry,
minimizing competition in the therapeutic proteins market. In addition,
conventional genetic engineering techniques for protein production may face
technical

                                       3

limitations arising from the need to first clone the gene of interest. For
certain proteins, this step adds to development times, increases costs, and is
technically challenging. Technical difficulties may also arise from the use of
non-human production cell lines, which may result in the production of proteins
which have therapeutically significant differences from those naturally produced
by the cells of the human body. Furthermore, production processes based on
conventional genetic engineering may not have incorporated recent advances in
cell culture systems with significant efficiency and cost advantages as compared
to processes originally developed over a decade ago.

    To overcome these commercial barriers and technical limitations, TKT has
developed gene activation technology for the production of therapeutic
proteins. This proprietary technology does not rely on the manipulation of
cloned genes. Using this proprietary technology, TKT has succeeded in
producing therapeutic proteins in human cells by bypassing regulatory DNA
sequences set in the "off position" with regulatory DNA sequences set in the
"on position" in order to activate the gene of interest. The Company's gene
activation technology does not require the manipulation of the protein coding
DNA sequences of the gene. The bypass of an "off switch" with an "on switch"
is accomplished by "gene targeting."

    Gene targeting is a technology by which DNA fragments can be "cut and
pasted" precisely at pre-selected, desirable locations within the cell's genome.
Gene targeting can be thought of as molecular surgery, with the surgical tools
literally functioning at the molecular level. The technical term for gene
targeting, homologous recombination, reflects its underlying mechanism: cells
have the capacity to align two homologous DNA sequences (two sequences that are
quite similar) and exchange one with the other. In gene activation, the new
regulatory sequences are flanked with "homing" sequences and structural
sequences which allow the cell to exchange the new active regulatory sequences
in place of the old inactive ones. The new sequences must be introduced
precisely in order to allow the proper initiation of gene expression.

    In order to manufacture a protein of therapeutic interest using gene
activation technology, a human cell line producing the protein must be
generated. This cell line will ultimately become the master cell bank for large
scale manufacturing and is generated as follows:

    1.  Determine the sequence of a portion of the regulatory DNA sequences that
       control the gene of interest;

    2.  Build a "targeting fragment" by fusing homing sequences to a new
       regulatory region known to be active in the human cell line chosen for
       manufacturing;

    3.  Introduce the targeting fragment into the cell line;

    4.  Identify and propagate an activated cell line producing the protein of
       interest; and

    5.  Optimize protein productivity and prepare the cell line for commercial
       scale manufacturing.

    The Company has successfully accomplished all of the steps described
above for GA-EPO, a second, undisclosed Gene-Activated protein ("GA-II"), and
a third Gene-Activated protein ("GA-III"). The results of TKT's work in this
area have led to proof-of-concept that (i) gene targeting can be used to
direct the integration of regulatory and structural sequences to a specific,
pre-selected position in the genome, (ii) the product of the targeting event
is a cell containing an activated gene, and (iii) the protein production
properties of cells created by gene activation are predictable and suitable
for, and have been successfully used in, large-scale manufacturing.
Accordingly, the Company believes that these methods may be used to express a
wide variety of therapeutically valuable proteins at levels suitable for
large-scale manufacturing purposes. Because the gene activation process
avoids many of the technical limitations of conventional recombinant protein
production technology, the Company also believes that the gene activation
process is at least as efficient as, and may be more cost-effective than,
conventional genetic engineering techniques for protein production.

                                       4

TKT'S GENE-ACTIVATED-TM- PROTEIN PROGRAMS

    The Company's initial strategy in exploiting its proprietary gene activation
technology is to commercialize Gene-Activated versions of protein products that
have proven medical utility, have received marketing approval from regulatory
authorities and have achieved significant revenues in major markets. These
protein products have experienced high rates of acceptance among physicians and
health care providers. The Company estimates that 1998 total worldwide sales for
the ten largest marketed therapeutic proteins were approximately $15.1 billion
(see Table I). As the number of new approved protein products increases and as
the number of approved indications for such products increases, the Company
believes that the market for these protein products will continue to experience
substantial growth. The Company also believes that the broad applicability of
its gene activation technology for protein production and the fact that many
additional proteins are currently in clinical development will provide a large
number of candidates for commercialization using TKT's gene activation
technology.

    TABLE I. COMPANY ESTIMATE OF 1998 WORLDWIDE PROTEIN PRODUCT REVENUES (IN
                                   MILLIONS)



PROTEIN                           PRIMARY INDICATION                REVENUES
- -------                           ------------------                --------
                                                              
Erythropoietin                    Anemia                            $ 3,900
Insulin                           Diabetes                            2,800
G-CSF                             Neutropenia                         1,900
Growth Hormone                    Short stature                       1,500
alpha-Interferon                  Hepatitis/Cancer                    1,300
Factor VIII                       Hemophilia A                        1,300
beta-Interferon                   Multiple sclerosis                    800
FSH                               Infertility                           800
tPA                               Myocardial infarction                 400
Glucocerebrosidase                Gaucher disease                       400
                                                                    -------
                                                                    $15,100
                                                                    =======


    TKT has focused its initial gene activation efforts on the development of
its GA-EPO product in collaboration with HMRI. Erythropoiesis is the process by
which red blood cells (erythrocytes) are produced. When the body requires
additional red blood cells, the kidney normally produces erythropoietin, a
circulating protein hormone which stimulates the differentiation of certain
progenitor cells in the bone marrow. The kidney's critical role in red blood
cell production was determined in the 1950's, and erythropoietin was first
isolated and purified from the urine of patients with anemia in the 1970's (the
first wave). The gene encoding erythropoietin was cloned in the 1980's and used
for production of the protein using conventional genetic engineering techniques
(the second wave). Erythropoietins have been successfully used to treat anemia
associated with a variety of conditions, including the anemia of kidney failure
(which causes a reduction in the body's ability to produce the protein) and the
anemia of chemotherapy (which causes the destruction of a large number of bone
marrow progenitor cells).

    GA-EPO-TM- DEVELOPMENT STATUS

    TKT has successfully applied its gene activation technology to produce
GA-EPO in human cells (the third wave). To illustrate the underlying concept of
the gene activation process, consider that essentially all human cells contain
the erythropoietin gene, yet only certain cells of the kidney actually produce
erythropoietin. In all other cells in the human body, the erythropoietin gene is
inactive. The erythropoietin gene is not expressed in most human cells because
regulatory sequences in those cells prevent the protein from being made; the
gene is controlled by a switch ("regulatory DNA sequences") that is permanently
in the "off" position. The goal of TKT's GA-EPO program was to remove this "off
switch" in a human cell in which the erythropoietin gene is inactive and, in
effect, replace it with regulatory sequences comprising an "on switch" to
activate erythropoietin expression.

                                       5

    TKT has generated a GA-EPO producing cell line that has been scaled up to
commercial production levels. To accomplish this, TKT first studied the
regulatory region that prevents expression of the erythropoietin gene in most
human cells and developed an activation strategy. Next, a targeting fragment was
constructed by fusing certain homing sequences to a new regulatory region known
to be active in the human cell line chosen for manufacturing. The targeting
fragment was then introduced into the cell line under conditions appropriate for
homologous recombination to occur, and a resulting cell line that produced
GA-EPO was identified. The GA-EPO productivity of the cell line was optimized,
and the cells were prepared for commercial-scale manufacturing. The production
process is at commercial scale and has been successfully used to produce GA-EPO
for clinical trials.

    The purified protein has been subjected to an extensive series of analyses
and has the properties expected of a human erythropoietin preparation. In
particular, the protein has an appropriate molecular weight, amino acid
composition, amino acid sequence, secondary structure, and glycosylation
profile. GA-EPO has been shown to function IN VITRO and IN VIVO in a
dose-dependent manner. Finally, preclinical safety tests performed to date have
yielded satisfactory results.

    In a Phase I study completed in 1997 by HMRI, 15 healthy volunteers were
administered GA-EPO. The goal of the study was to assess safety of GA-EPO
administration. In this study, GA-EPO exhibited a satisfactory safety profile
and resulted in a dose-dependent increase in red blood cell production.

    In 1998, HMRI completed a Phase II study of GA-EPO. Thirty-two patients with
end-stage renal disease were treated in two dosage groups. In this study, no
adverse events related to GA-EPO resulted, and GA-EPO demonstrated a
dose-dependent increase in red blood cell production.


    In September 1998, HMRI commenced Phase III clinical trials of GA-EPO in
the U.S., the goal of which is to support a Biologics License Application
("BLA") for U.S. Food and Drug Administration ("FDA") approval for the
indications of anemia of renal failure in patients who are receiving dialysis
and in patients who are not yet undergoing dialysis. Furthermore, this
program has been designed to obtain such approval for both intravenous and
subcutaneous administration of GA-EPO. The Company expects the anemia of
renal failure program to be completed by the end of 1999. The Company also
expects HMRI to conclude a Phase III clinical trial in the U.K. in 1999.
During 1999, the Company expects HMRI to commence Phase III clinical trials
of GA-EPO for anemia associated with cancer chemotherapy. GA-EPO is being
reviewed within the FDA by the Center for Biologics Evaluation and Research
("CBER").


    DEVELOPMENT STATUS OF OTHER GENE-ACTIVATED-TM- PROTEIN PRODUCTS

    In collaboration with HMRI, TKT is developing GA-II. HMRI accepted for
development the Gene-Activated cell line for GA-II in June 1997 and
manufacturing is at commercial scale. Preclinical testing is in progress,
with satisfactory results achieved to date. The Company expects HMRI to file
an Investigational New Drug Application ("IND") for this product in 1999.

    GA-III is in preclinical testing. Manufacturing scale-up is in process, and
the Company expects to file an IND for this product in late 1999 or early 2000.
TKT is currently developing GA-III independently.

    TKT believes that numerous development opportunities exist for
Gene-Activated proteins. In addition to the proteins discussed above, the
Company is currently developing four other Gene-Activated proteins. These
programs are in the research or preclinical stage.

GENE-ACTIVATED-TM- PROTEIN PRODUCT COLLABORATIONS AND COMMERCIALIZATION STRATEGY

    In order to rapidly develop and exploit its gene activation technology, TKT
has entered into two strategic alliances with HMRI, the first in May 1994 and
the second in March 1995. The alliances are focused on the development of two
products, GA-EPO and GA-II. In December 1998, HMRI announced its intention to
merge with Rhone-Poulenc SA to create Aventis. The merger is expected to be
completed in 1999, subject to regulatory approval, and will create the second
largest global pharmaceutical company.

                                       6

    Under two license agreements, HMRI was granted worldwide exclusive rights to
make, use, and sell the two products. HMRI is responsible, at its own expense,
for all worldwide development, manufacturing, and marketing activities for both
products. Pursuant to the agreement pertaining to GA-II, TKT also granted HMRI
an option to commercialize certain aspects of TKT's gene therapy technologies.
As to both products, TKT has successfully generated cell lines sufficient for
scale-up to commercial production levels that have been accepted and scaled up
by HMRI.

    Each of the license agreements expires, on a country by country basis, on
the later of (i) 10 years after the first commercial sale of the covered product
in such country and (ii) the last to expire of the patents licensed under such
agreement with respect to such country, subject to earlier termination by either
party under specified circumstances, including a material breach of the
agreement by the other party.

    TKT has the potential to receive up to $125.0 million ($58.0 million for
GA-EPO and $67.0 million for GA-II) from HMRI from the two alliances, consisting
of license fees, equity investments, milestone payments, and research funding.
As of September 30, 1999, TKT had received $58.0 million of such amount
($27.0 million for GA-EPO and $31.0 million for GA-II). The remaining payments
are contingent upon the achievement of milestones in connection with the
continued development of these products. The amounts received to date include
all of the scheduled equity payments. TKT also is entitled to a low double-digit
royalty on net sales of these two products worldwide.

    Future Gene-Activated protein products may include currently-marketed
proteins, proteins currently in late stage clinical development, or proteins
that are in much earlier stages of development. At present, TKT intends to focus
on the currently-marketed products until products from these latter two
categories demonstrate clinical and commercial viability. TKT believes that its
focus on currently-marketed proteins for near-term commercialization and on
development-stage proteins for the long-term appropriately utilizes Company
resources, maximizes near-term commercial potential, and will allow the Company
to build a strong Gene-Activated protein product pipeline for the future.

NICHE PROTEIN-TM- PRODUCT DEVELOPMENT PLATFORM

    Certain genetic diseases are known to be caused by the deficiency of a
single, well-defined protein. The patient's inability to produce sufficient
amounts of the specified protein results in symptoms which can be debilitating
and, ultimately, life threatening. These diseases include Fabry disease, Gaucher
disease, Hunter syndrome, Hurler syndrome, Pompe disease, and Tay-Sachs disease.
The most direct approach to treat these diseases is to manufacture the missing
or deficient protein and deliver it to the patient. No effective treatment
currently exists for most of these rare diseases. TKT's Niche Protein product
platform is focused on developing protein replacement products to treat patients
suffering from certain of these diseases. The Company plans to develop and
commercialize products for a number of these diseases, with the goal of reducing
symptoms and potentially reversing progression of the disease.

TKT'S NICHE PROTEIN-TM- PRODUCT DEVELOPMENT PROGRAMS AND COMMERCIALIZATION
  STRATEGY

    The Company's product development strategy for its Niche Protein product
platform is to leverage the Company's core competencies in gene expression, cell
culture, and protein characterization to create protein replacement products to
treat rare genetic diseases which are characterized by the absence of certain
metabolic enzymes. Since the defects in many of the diseases which the Company
intends to address with its Niche Protein product platform are understood in
depth, product development pathways have the potential to be straightforward.
The Company is currently developing seven Niche Protein products, including
treatments for Fabry disease, Hunter syndrome, and Gaucher disease.

    TKT views its Niche Protein product platform as a near term opportunity to
develop and commercialize products on a relatively cost-effective, lower risk
basis. TKT expects to develop and commercialize these products in the U.S. and
Europe and to seek corporate collaborators for Japan.

    The Company believes that it will be able to arrange for manufacturing of
its Niche Protein products under the terms of contract manufacturing agreements
with third parties. In addition, the Company

                                       7

believes that it will be able effectively to serve Niche Protein product markets
with a small, focused sales force, thereby limiting the Company's investment in
sales and marketing infrastructure. The Company hired a Senior Vice President,
Commercial Operations in April 1999 to direct its commercialization efforts and
is developing a commercial infrastructure for the sale of its Niche Protein
products.

    FABRY DISEASE

    TKT's first target in the Niche Protein product program is Fabry disease.
Fabry disease is an inherited lysosomal storage disease caused by the deficiency
of the enzyme alpha-gal. The disorder is characterized by the accumulation of
lipids in lysosomes of vascular endothelial and smooth muscle cells and in a
variety of other tissues. Patients with Fabry disease show diverse clinical
manifestations beginning as early as adolescence. These manifestations include
severe pain and cardiovascular and renal complications. The Company believes
that there are 5,000 Fabry disease patients worldwide. Current treatment of the
disease is limited to the reduction of symptoms. The Company believes that
alpha-gal enzyme replacement therapy could result in a decrease or an
improvement in the clinical manifestations of the disease.

    In 1997, the Company, in collaboration with the National Institutes of
Health ("NIH") under a Cooperative Research and Development Agreement ("CRADA"),
conducted a Phase I clinical trial designed to characterize the safety and
pharmacokinetic profile of the Company's alpha-gal product. Ten patients with
Fabry disease were treated with a single dose of highly purified alpha-gal
manufactured at TKT, with two patients treated at each of five escalating dose
levels. Plasma half-life and alpha-gal enzyme activity were examined before and
after treatment, along with a series of clinical and laboratory safety
assessments. Nine out of ten patients showed a reduction of the toxic lipid that
causes the symptoms of Fabry disease, with the reduction observed in both the
liver and the kidney. The treatment was well-tolerated, and no clinically
significant side-effects were observed. The half-life of the enzyme appears to
support dosing at intervals of one week or longer.

    The Company initiated a Phase II clinical trial of its alpha-gal product in
December 1998 with patients with Fabry disease. The 24 patient,
placebo-controlled trial is being conducted at the NIH and is expected to be
completed by the end of 1999. The goal of the study is to assess safety and
efficacy of the alpha-gal protein as a treatment for the disorder.

    The Company has received Fast Track designation for its alpha-gal product
from the FDA and is therefore eligible for the FDA to review the Company's BLA
within six months of submission, although it is likely to take longer to obtain
approval. TKT has also received orphan drug designation for its alpha-gal
product. As a result, if TKT's alpha-gal product is the first product to receive
FDA marketing approval for the indication for which it has designation as an
orphan drug, the FDA may not approve any other applications to market the same
product for the same indication, except in limited circumstances, for a period
of seven years. The Company has entered into a contract manufacturing agreement
with a third party to produce alpha-gal for the Company. The Company has
developed a cell line for commercial manufacturing and, in conjunction with its
contract manufacturer, has developed a commercial scale manufacturing process.

    In July 1998, the Company entered into a distribution agreement with
Sumitomo to commercialize TKT's alpha-gal in Japan and other Asian countries.
Under the terms of the agreement, Sumitomo paid TKT an up front fee of $2.0
million and is obligated to make additional payments to TKT as the product moves
through development and commercialization. Sumitomo is responsible for
development and commercialization of alpha-gal in its territories. The
distribution agreement expires on a country-by-country basis under specified
circumstances, including a material breach of the agreement by the other party.

                                       8

    HUNTER SYNDROME

    TKT's second target in the Niche Protein product platform is Hunter
syndrome. Hunter syndrome is an inherited lysosomal storage disorder caused by a
deficiency of the enzyme iduronate-2-sulphatase ("I2S"). As a result of this
deficiency, complex carbohydrates accumulate in cells of the body, causing
debilitating symptoms in the patient. Physical manifestations include skeletal
deformities, obstructive airway disease, cardiac failure and, in severe cases,
central nervous system involvement. Cardiac and respiratory illness are often
the cause of death at an early age in patients with the disorder. The Company
believes that there are approximately 3,000 Hunter syndrome patients worldwide.

    The Company believes that I2S enzyme replacement therapy could result in an
elimination of many of the clinical manifestations associated with Hunter
syndrome and an increased life expectancy and quality of life. The Company plans
to file an IND covering its I2S product in late 1999 or early 2000. The Company
has developed a commercial quality cell line and is developing a commercial
scale manufacturing process.

GENE THERAPY TECHNOLOGY

    TKT'S GENE THERAPY APPROACH

    The first three waves of protein production have a critical feature in
common: regardless of methodology, the proteins are manufactured outside the
human body. The Company believes that its approach to gene therapy,
Transkaryotic Therapy-TM-, represents the fourth wave of protein production--a
system that would restore the patient's natural ability to produce a required
therapeutic protein.

    TKT's approach to gene therapy is based on genetically modifying patients'
cells to produce and deliver therapeutic proteins for extended periods. The
Company believes the approach will be safe, cost-effective, and clinically
superior to the conventional delivery of proteins by injection. In preclinical
animal studies, a single administration of one of the Company's gene therapy
products resulted in the lifetime production and delivery of therapeutic
proteins.

    TKT believes its gene therapy system is broadly enabling and, accordingly,
may be applicable to the treatment of a wide range of human diseases. Because
TKT's gene therapy has demonstrated long-term delivery of therapeutic proteins
in animal model systems, the Company believes its approach may be well-suited to
the treatment of chronic protein deficiency states, including hemophilia,
diabetes, and hypercholesterolemia. The diseases targeted by TKT are
characterized by a significant unmet medical need, and the clinical goals that
must be achieved by TKT's gene therapy products are well-defined. The potential
benefits of TKT's gene therapy products include improved therapeutic outcome,
elimination of frequent painful injections and the problem of patient
compliance, a minimization of side effects due to over- or under-dosing of
conventional proteins, and a reduction in costs.

    There are a large number of technical approaches to gene therapy, but two
basic distinctions can be used to characterize the field. The first distinction
is viral versus non-viral. Viral gene therapy approaches use genetically
modified viruses to introduce genes into human cells by infection. Non-viral
approaches use noninfectious (chemical or physical) means to introduce the
genes. The second distinction is IN VIVO versus EX VIVO. IN VIVO gene therapies
are based on the administration of DNA-based drugs directly to the patient. EX
VIVO gene therapies are based on removing a small number of cells from a
patient, introducing a gene into the cells and implanting the engineered cells
into the patient.

    TKT's enabling gene therapy technology platform is a non-viral, EX VIVO
system which the Company believes is significantly different from other
approaches to gene therapy. The Company believes that these differences will
allow for physiologic levels of protein expression in patients for extended
periods, a goal that historically has represented a major obstacle in
alternative gene therapy systems. The major alternative to TKT's system is based
on the use of genetically-modified retroviruses and adenoviruses to infect
patients' cells. The Company believes that such viral EX VIVO approaches present
a significant safety

                                       9

risk due to the possibility of causing new viral infections in patients. In
addition, such approaches have not allowed long-term production of the
therapeutic protein in animal models or patients.

    To the best of the Company's knowledge, neither viral nor non-viral IN VIVO
gene therapy technologies have allowed long-term or high level protein
expression in the patient. Accordingly, these technologies may be best-suited
for non-chronic applications, such as immunotherapy. TKT believes Transkaryotic
Therapy is well-suited to allow safe and long-term delivery of therapeutic
proteins for the treatment of chronic protein deficiency states as demonstrated
by the long-term delivery of therapeutic proteins in animal models.

    In order to develop a safe, effective, non-viral, EX VIVO gene therapy
system, the Company believes that it was necessary for several major tasks to
have been accomplished in basic research and preclinical testing. Each of the
steps must be carried out to allow the ultimate product to be manufactured
efficiently, reproducibly, and cost-effectively, to be subjected to rigorous
quality control to ensure safety and to direct the long-term production and
delivery of the therapeutic protein in the patient. The first step involves the
development of techniques for obtaining and propagating the cell types of
interest. Next, non-viral methodologies must be developed that allow DNA
fragments to be stably introduced into these cells. DNA fragments containing the
appropriate DNA regulatory sequences fused to the desired protein encoding
sequences, for example, must be constructed and introduced into cells to
generate genetically-engineered cells which express the therapeutic protein at
clinically relevant levels. After the DNA fragments have been successfully
introduced into human cells, methodologies must then be developed which allow
the engineered cells to properly process the therapeutic protein. The final step
involves the development of methods and formulations for the implantation of the
engineered cells.

       TABLE II. TKT'S GENE THERAPY SYSTEM: SUMMARY OF SELECTED TECHNICAL
                                ACCOMPLISHMENTS



              TASKS                         ACHIEVEMENT                             COMMENTS
              -----                         -----------                             --------
                                                                
    Cell types propagated      Fibroblasts, myoblasts, mammary        Cells retain normal properties
                               epithelial cells

    Proteins expressed         Factor VIII, Factor IX, Growth         All expressed at levels of at least 1
                               Hormone, Insulin, Interleukin-2, LDL   microng million cells/day
                               receptor, alpha-gal

    Transfection               Electroporation, microinjection,       All with efficiencies greater than
    methodologies applied      polybrene, and calcium phosphate       one stably transfected cell per
                               precipitation                          thousand treated cells

    Proteins characterized     Factor VIII, Factor IX, Growth         All with natural post-translational
                               Hormone, alpha-gal                     modifications

    IN VIVO expression         Factor VIII, Factor IX, Growth         All at physiologic levels in animal
    observed                   Hormone, Insulin                       models


    TKT scientists have successfully accomplished all of the tasks set forth in
Table II and, in model systems, have successfully delivered therapeutic proteins
for the lifetime of the experimental animals. Much of TKT's work has focused on
gene therapy using fibroblasts, a cell type present in the skin (and throughout
the body) that is readily obtained from patients and propagated in culture. The
Company has developed a variety of methodologies for the stable transfection of
normal human cells. "Stable transfection" means that the introduced DNA fragment
becomes part of a chromosome in the treated cell. One such methodology is
electroporation, a technique based on subjecting cells to a brief electrical
pulse. The pulse transiently opens small pores in the cell membrane that allow
the DNA fragments of interest to enter the cell. The technique is simple,
reproducible (it works for a variety of cell types and for cells

                                       10

derived from newborns to the elderly), efficient (one electroporation provides
many more transfected cells than required for treatment), and cost-effective
(less than one dollar per reaction).

    The Company believes it has developed the basic technologies required for a
safe and effective gene therapy approach which can be refined and optimized for
patient use. In patients, TKT envisions that, in general, the system would
function as follows:

    1.  The clinician would identify the patient to be treated and perform a
       small skin biopsy;

    2.  In TKT's manufacturing facility, patient cells would be harvested from
       the biopsy specimen;

    3.  The DNA fragment containing DNA regulatory sequences and protein coding
       sequences would be introduced into the harvested cells by
       electroporation. The DNA fragment and the electroporation methodology
       would be the same for all patients with a given disease;

    4.  A genetically engineered cell expressing the therapeutic protein would
       be identified, propagated, subjected to appropriate characterization and
       quality control tests, and formulated in a syringe. The syringe would
       then be returned to the physician; and

    5.  The physician would then inject the engineered cells under the patient's
       skin as an outpatient procedure.

    These patient techniques have been successfully carried out in an ongoing
Phase I clinical trial of growth hormone as a treatment for cachexia (described
below). The procedures might vary based on the disease to be treated. For
example, different cell types, sites of implantation, and genes of interest
could be advantageous for a given disease.

    The Company believes that Transkaryotic Therapy-TM- offers several clinical
and commercial advantages over conventional treatments and other gene therapies
for targeted diseases, including:

    - SAFETY. Transkaryotic Therapy does not use infectious agents such as
      retroviruses to genetically engineer the patient's cells. TKT's non-viral
      method of producing genetically engineered cells allows for extensive
      safety testing prior to implantation of such cells in the patient. In
      studies of TKT's gene therapy system involving over 5,000 animals, no side
      effects have been observed;

    - LONG-TERM EXPRESSION. Transkaryotic Therapy is designed to produce
      long-term results with a single treatment. In preclinical studies, the
      Company has produced target proteins at therapeutic levels for the
      lifetime of the animals, suggesting the possibility of long-term
      effectiveness in humans;

    - CONTROLLABILITY. Transkaryotic Therapy is designed to deliver therapeutic
      proteins at levels which meet a patient's specific needs. The Company
      believes that its gene therapy system will allow the physiologic and
      pharmacologic regulation of expression. Further, the Company believes that
      the treatment afforded by Transkaryotic Therapy will be readily reversible
      so that therapy can be discontinued if no longer required;

    - FLEXIBILITY. The Company has focused on genetically engineering a wide
      variety of human cell types because, although certain cell types are
      useful in the gene therapy of particular diseases, no single cell type is
      appropriate for the gene therapy of all diseases;

    - EASE OF ADMINISTRATION. Transkaryotic Therapy will allow for the
      administration of its products by a single injection under the patient's
      skin on an out-patient basis. Furthermore, the potential long-term
      effectiveness of the treatment could eliminate problems of patient
      compliance; and

    - COST-EFFECTIVENESS. Transkaryotic Therapy takes advantage of the patient's
      natural ability to synthesize therapeutic proteins for extended periods.
      The potential benefits of Transkaryotic Therapy include improved
      therapeutic outcome, the elimination of frequent painful injections and
      patient compliance problems, a reduction of side effects due to overdosing
      and underdosing of conventional proteins, and significant reductions in
      cost. Accordingly, the Company believes that its

                                       11

      therapy may be less costly than therapy using conventional protein
      pharmaceuticals which require frequent administration.

TKT'S GENE THERAPY DEVELOPMENT PROGRAMS AND COMMERCIALIZATION STRATEGY

    The Company is focusing its development efforts on gene therapy products for
the treatment of chronic diseases with straightforward and well-characterized
etiologies. For certain of these diseases, such as hemophilia A, effectiveness,
dose ranges, and safety have been clearly established in the context of
currently approved and marketed products. For other diseases, preliminary IN
VITRO and animal model data strongly suggest that the long-term delivery of
appropriate therapeutic proteins will effectively treat the disease. The Company
believes that this initial focus will provide strategic advantages by allowing
evaluation of Transkaryotic Therapy based on well understood clinical
parameters, thereby facilitating the regulatory approval process. Furthermore,
the Company believes that when administered as part of its proprietary gene
therapy system, these proteins may provide therapeutic benefits not achievable
using conventional methods of delivery.

    Since October 1994, the Company has been conducting a clinical trial to
assess the safety of its gene therapy technology in humans. This Phase I
clinical trial is based on the implantation of genetically modified skin
fibroblasts to express growth hormone in cancer patients at risk for cachexia.
The principal purpose of this study is to determine the safety of the Company's
gene therapy in humans. A total of 21 patients have been enrolled in the study.
Community physicians have injected the modified cells under the skin of
subjects; all patient procedures have been performed on an out-patient basis.
Preliminary data from this study suggests that the administration of the
genetically-engineered cells appears to be well-tolerated. Prior to proceeding
with additional clinical trials (beyond Phase I) for this product, the Company
intends to seek a collaborative partner.

    HEMOPHILIA A

    TKT's principal gene therapy program currently is directed at hemophilia A.
When a blood vessel ruptures, an intricate series of events allows the rapid
formation of a clot in normal individuals. One of the best-studied coagulation
disorders is hemophilia A, caused by a deficiency or defect in protein
coagulation Factor VIII. Patients with the disease experience acute,
debilitating, and often life-threatening bleeding episodes. Depending on the
severity of the disease, bleeding may occur spontaneously or after minor trauma.
Conventional treatment consists of temporarily increasing the patient's Factor
VIII levels through infusions of plasma-derived or recombinantly-produced Factor
VIII. Factor VIII levels typically rise to therapeutic levels for only two to
three days following intravenous administration, then return to the baseline
subtherapeutic level, once again placing the patient at risk for a serious
bleeding episode. It is estimated that there are approximately 50,000 hemophilia
A patients worldwide. In the U.S., an adult suffering from the disease receives
Factor VIII protein treatment only during bleeding crises at an average annual
cost of approximately $65,000.

    TKT's approach to the treatment of hemophilia A is based on the production
and delivery of Factor VIII using Transkaryotic Therapy. The Company believes
that its Factor VIII gene therapy product has the potential to provide a
constant supply of therapeutic levels of the missing protein, effectively
eliminating the problem of rapid disappearance of the therapeutic protein. The
Company has produced clonal populations of human fibroblasts which have been
transfected to express Factor VIII IN VITRO, demonstrated that the protein is
properly processed, and achieved protein expression in animals.

    In November 1998, the Company began the first ever clinical trial evaluating
a gene therapy treatment for hemophilia A. This Phase I safety study will
include 12 patients and is being conducted at the Beth Israel Deaconess Medical
Center in Boston, Massachusetts. The trial is expected to take up to three years
to complete, including a two year follow up period following the treatment
phase.

                                       12

    In July 1993, the Company entered into a Collaboration and License Agreement
with GI relating to a joint development and marketing program for a hemophilia A
gene therapy product based on the Company's non-viral technology. The agreement
provides that the parties will collaborate to develop and commercialize a
non-viral gene therapy product for the treatment of hemophilia A using TKT's
proprietary technology and GI's patented Factor VIII genes. Under the agreement,
GI has granted TKT a non-exclusive worldwide license under GI's patents covering
truncated versions of the gene encoding Factor VIII for use in certain non-viral
gene therapy applications. GI has agreed to pay a portion of the clinical
development costs of the product in the U.S., Canada, and the European
Community. TKT retained exclusive manufacturing rights throughout the world and
exclusive marketing rights to all countries of the world except those in Europe.
Subject to certain conditions, GI received exclusive rights to market the
product in Europe.

    LONG-TERM GENE THERAPY TARGETS

    The Company's long-term gene therapy product development strategy is focused
on products for the treatment of commonly occurring diseases, including both
juvenile- and adult-onset diabetes, hypercholesterolemia, and osteoporosis.
These are diseases for which either (i) a proven therapeutic protein exists but
effective treatment of the disease requires complex patterns of regulation in
the patient (for example, insulin is widely used in the treatment of diabetes
but delivery of insulin by conventional methods is imprecise and does not
prevent the serious complications of the disease) or (ii) no protein has yet
been proven effective in treating the disease (for example, many proteins are
thought to have potential in the treatment of hypercholesterolemia, but that has
yet to be proven conclusively in patients).

    MANUFACTURING

    One of the critical aspects of any cell-based therapy is the approach to
manufacturing. The manufacturing process takes up to six weeks. It is essential
to optimize the process to allow for a commercially-viable product, and the
Company believes it has accomplished such optimization. To produce early
clinical materials, TKT has constructed a pilot manufacturing facility designed
to conform to FDA guidelines for Current Good Manufacturing Practice ("cGMP").
For Phase III clinical trials and commercialization, TKT intends to construct a
cGMP-certified facility.

    The Company intends to manufacture its gene therapy products in central
manufacturing facilities. Initially, the Company plans to construct a central
facility to serve the U.S. As the Company's product pipeline matures, the
Company believes that demand will increase, possibly requiring the Company to
construct an additional manufacturing facility in the U.S. Other gene therapy
companies have adopted a strategy based on locating a cell processing facility
in every large city or major medical center. TKT believes that the requirements
for strict quality control and the benefits of economy of scale are better
achieved using the central manufacturing strategy.

PATENTS, PROPRIETARY RIGHTS, AND LICENSES

    PATENTS AND PROPRIETARY ISSUES

    The Company believes that protection of the proprietary nature of its
products and technology is important to its business. Accordingly, it has
adopted and plans to maintain a vigorous program to secure and maintain such
protection. The Company's practice is to file patent applications with respect
to technology, inventions, and improvements that are important to its business.
The Company also relies upon trade secrets, unpatented know-how, continuing
technological innovation, and the pursuit of licensing opportunities to develop
and maintain its competitive position. There can be no assurance that others
will not independently develop substantially equivalent proprietary technology
or that the Company can meaningfully protect its proprietary position.

                                       13

    At September 30, 1999, the Company owned or licensed 11 issued U.S. patents
and had 44 pending patent applications in the U.S. to protect its proprietary
methods and processes. It has also filed corresponding foreign patent
applications for certain of these U.S. patent applications. The issued U.S.
patents and patent applications relate to the gene activation platform in
general, DNA sequences required for gene activation, cells modified by gene
activation to produce Gene-Activated proteins, corresponding gene activation
methods, the Transkaryotic Therapy platform in general, the Niche Protein
product platform in general, methods of propagating and transfecting cells,
methods for obtaining expression of therapeutic proteins and homologous
recombination in cells, and cells modified by the preceding methods. The U.S.
patents owned or licensed by TKT expire at various dates ranging from 2011 to
2016.

    As a general matter, patent positions in the fields of biotechnology and
biopharmacology are highly uncertain and involve complex legal, scientific, and
factual matters. To date, there has emerged no consistent policy regarding the
breadth of claims allowed in biotechnology patents. Consequently, although TKT
plans to prosecute aggressively its applications and defend its patents against
third parties, there can be no assurance that any of the Company's patent
applications relating to the technology used by the Company will result in the
issuance of patents or that, if issued, such patents or the Company's existing
patents will not be challenged, invalidated, or circumvented or will afford the
Company protection against competitors with similar technology. Any litigation
or interference proceedings regarding patent or other proprietary rights may
result in substantial cost to the Company, regardless of outcome, and, further,
may adversely affect TKT's ability to develop, manufacture, and market its
products and to form strategic alliances.

    The Company's technologies and potential products may conflict with patents
which have been or may be granted to competitors, universities, or others. As
the biotechnology industry expands and more patents are issued, the risk
increases that the Company's technologies and potential products may give rise
to claims that they infringe the patents of others. Such other persons could
bring legal actions against the Company claiming damages and seeking to enjoin
commercialization of a product or use of a technology. If any such actions are
successful, in addition to any potential liability for damages, the Company
could be required to obtain a license in order to continue to use such
technology or to manufacture or market such product, or could be required to
cease using such product or technology. There can be no assurance that the
Company would prevail in any such action or that any license required under any
such patent would be made available or would be made available on acceptable
terms. The Company believes that there may be significant litigation regarding
patent and other intellectual property rights in the fields of all three of its
product platforms.

    GENE ACTIVATION TECHNOLOGY PATENTS AND GA-EPO LITIGATION

    For many currently marketed proteins, the product manufactured using
conventional genetic engineering techniques does not represent the first time
the protein was isolated and purified. As such, it was generally not possible to
obtain a broad composition of matter patent for many of the currently marketed
proteins. In contrast, the isolated and purified DNA sequences encoding these
proteins, various vectors used to insert such DNA sequences into production cell
lines, cell lines modified by the insertion of such DNA sequences, and
corresponding methods (including methods of producing proteins using this
approach) led to issued patents in many cases. TKT believes that, by completely
avoiding the use of isolated and purified DNA sequences encoding proteins of
commercial interest, the Company's technology does not infringe claims based on
isolated and purified DNA sequences encoding such proteins. Furthermore, the
Company intends to avoid the use of technologies (such as specific protein
purification procedures) that are the subject of patents that are not limited to
protein products manufactured using conventional genetic engineering techniques.

    In April 1997, Amgen, Inc. ("Amgen") filed a civil action in the U.S.
District Court of Massachusetts against the Company and HMRI relating to
GA-EPO and the processes for producing GA-EPO.

                                       14



In the litigation, Amgen is asserting, among other things, that GA-EPO
and the processes for producing GA-EPO infringe certain of Amgen's U.S.
patents. In addition, TKT and HMRI have launched judicial proceedings against
Kirin-Amgen, Inc. ("Kirin-Amgen"), a joint venture of Amgen and Kirin Brewery
Co., Ltd. ("Kirin"), in the U.K.


    GENE THERAPY PATENT INTERFERENCE

    Over the past decade, there has been a dramatic increase in the number of
approaches to gene therapy under development in both academic and industrial
laboratories. A large number of patent applications have been filed in the
U.S. and worldwide relating to this work, and a number of gene therapy
patents have issued to date. The Company requested, and the U.S. Patent and
Trademark Office ("PTO") declared in January 1996, an interference regarding
an issued patent with broad claims to EX VIVO gene therapy. The participants
in the interference are TKT, Genetic Therapy, Inc., which is a wholly-owned
subsidiary of Novartis AG, Syntex (U.S.A.), which is a wholly-owned
subsidiary of Roche Holdings, Inc., and Somatix Therapy Corporation, which
has been merged into Cell Genesys, Inc. With the possible exception of the
patent involved in the interference, the Company believes its Transkaryotic
Therapy technology does not infringe on patents issued to date.

    The PTO proceeding will determine the patentability of the subject matter of
the interference and which of the parties first developed this subject matter.
The process to resolve the interference can take many years. The outcome of
interferences can be quite variable: for example, none of the four parties may
receive the desired claims, one party may prevail, or a settlement involving two
or more of the parties may be reached. There can be no assurance that TKT will
prevail in this interference or that, even if it does prevail, the Company can
meaningfully protect its proprietary position.
    If TKT does not prevail, a March 1997 Federal Trade Commission (the
"FTC") consent order may be relevant to TKT. The FTC entered this consent
order to resolve anti-competitive concerns raised by the merger of Ciba-Geigy
Limited and Sandoz Limited into Novartis AG. As part of the consent order,
the constituent entities of Novartis are required to provide all gene therapy
researchers and developers with nonexclusive, royalty-bearing licenses to the
Novartis patent which is involved in the interference. In addition, the
Company has entered into an agreement with Cell Genesys under which the
Company would be permitted to market its non-viral gene therapy products
pursuant to a royalty-free license agreement if Cell Genesys wins the
interference. Thus, the Company believes that it will only be materially
adversely affected if Syntex prevails in this proceeding.



    TRADE SECRETS

    To further protect its trade secrets and other proprietary property, the
Company requires all employees, Scientific Advisory Board members, consultants,
and collaborators having access to such proprietary property to execute
confidentiality and invention rights agreements in favor of the Company before
beginning their relationship with the Company. While such arrangements are
intended to enable the Company to better control the use and disclosure of its
proprietary property and provide for the Company's ownership of proprietary
technology developed on its behalf, they may not provide meaningful protection
for such property and technology in the event of unauthorized use or disclosure.

    LICENSING

    The Company has entered into several licensing agreements under which it has
acquired certain worldwide rights to use proprietary genes and related
technology in its non-viral gene therapy products. In particular, the Company
has a non-exclusive license for certain non-viral gene therapy applications from
GI with respect to GI's patented Factor VIII genes and a non-exclusive
sublicense for non-viral gene therapy applications from British Technology Group
plc ("BTG") with respect to BTG's patented Factor IX gene. In addition, the
Company has an exclusive license to certain pending and issued patents from

                                       15

Women's and Children's Hospital, North Adelaide, Australia related to certain
mucopolysaccharidoses (MPS), including Hurler and Scheie syndrome (MPS I),
Hunter syndrome (MPS II), and Sanfilippo syndrome (MPS III), TKT's rights under
these gene licenses and sublicenses are for the term of the last to expire
patent included in the licensed patent rights.

COMPETITION

    The Company believes that the primary competitive factors relating to the
products that it is developing include safety, efficacy, reliability,
distribution channels, price, and disease management services. In addition, the
length of time required for products to be developed and to obtain regulatory
and, in some cases, reimbursement approval are important competitive factors.
The biotechnology industry is characterized by rapid and significant
technological change. Accordingly, the Company's success will depend in part on
its ability to respond quickly to medical and technological changes through the
development and introduction of new products. The Company believes it competes
favorably with respect to the competitive factors affecting its business,
although there can be no assurance that it will be able to continue to do so.

    Many of the Company's competitors have substantially greater financial and
other resources than the Company, including larger research and development
staffs and more experience and capabilities in conducting research and
development activities, testing products in clinical trials, obtaining
regulatory approvals, and manufacturing, marketing, and distributing products.
Smaller companies may obtain access to such skills and resources through
collaborative arrangements with pharmaceutical companies or academic
institutions.

    There can be no assurance that TKT will succeed in developing and marketing
technologies and products that are more clinically efficacious and
cost-effective than existing established treatments or new approaches and
products developed and marketed by competitors. The development by others of
alternative or superior treatment methods could render the Company's products
obsolete or noncompetitive with respect to some or all of the competitive
factors described above. In addition, treatment methods not clearly superior to
the Company's could achieve greater market penetration through competitors'
superior sales, marketing, or distribution capabilities.

    The Company's competitive position also depends upon its ability to attract
and retain qualified personnel, obtain patent protection, secure licenses of
necessary genes and technology from third parties, or otherwise develop
proprietary products, or processes, and secure sufficient capital resources for
the typically substantial expenditures and period of time prior to commercial
sales of each product.

    GENE-ACTIVATED-TM- PROTEIN PRODUCTS

    In its Gene-Activated protein program, TKT is developing versions of
proteins that are currently marketed. For instance, in the case of GA-EPO,
erythropoietin is marketed by Amgen and J&J in the U.S.; F. Hoffmann-La
Roche Ltd. (Boehringer Mannheim GmbH) and J&J (Janssen-Cilag) in Europe; and by
Sankyo Company Ltd., Chugai Pharmaceutical Co., Ltd., and Kirin in Japan.

    Many of the protein products against which the Company's Gene-Activated
protein products would compete have well known brand names, have been promoted
extensively and have achieved market acceptance by third party payors,
hospitals, physicians, and patients. In addition, many of the companies that
produce these protein products have patents covering techniques used to produce
these products, which have served as effective barriers to entry in the
therapeutic proteins market. As with Amgen and its erythropoietin product, these
companies may seek to block TKT's entry into the market by asserting that the
Company's Gene-Activated protein products infringe their patents. Many of these
companies are also seeking to develop and commercialize new or potentially
improved versions of their proteins.

                                       16

    NICHE PROTEIN-TM- PRODUCTS

    For many of the disease targets of the Company's Niche Protein product
program, there is currently no cure or effective treatment. Treatments are
generally focused on the management of the disease's clinical symptoms,
particularly pain. In general, the Company believes that these diseases may
represent markets too small to attract the resources of larger pharmaceutical
companies, but provide attractive commercial opportunities to smaller companies,
such as TKT. The Company believes its major competition with respect to Fabry
disease and Gaucher disease is Genzyme. Genzyme is conducting late stage
clinical trials of a protein product for the treatment of Fabry disease and has
marketed a product for the treatment of Gaucher disease since 1991. Genzyme owns
or controls issued patents related to the production of protein products to
treat Fabry disease and Gaucher disease.

    The Orphan Drug Act generally provides incentives to manufacturers to
undertake development and marketing of products to treat relatively rare
diseases or diseases that affect fewer than 200,000 individuals in the U.S. The
Company believes that many of the potential products in its Niche Protein
program will qualify as orphan drugs and intends to pursue orphan drug
designations, where appropriate. If a product which has an orphan drug
designation from the FDA subsequently receives the first marketing approval for
the indication for which it has such designation, the FDA may not approve any
other applications to market the same product for the same indication, except in
limited circumstances, for a period of seven years.

    There can be no assurance that other companies will not seek an orphan drug
designation and obtain FDA marketing approval for a product competitive with a
Niche Protein product before the Company obtains such approval. If another
company obtains orphan drug marketing approval and receives seven year marketing
exclusivity, the Company would not be permitted by the FDA to market the same
product for the same indication in the U.S. during the exclusivity period,
except in limited circumstances.

    GENE THERAPY

    The Company's gene therapy system will have to compete with other gene
therapy systems, as well as with conventional methods of treating the diseases
and conditions targeted. In addition, new non-gene therapy treatments may be
developed in the future. A number of companies, including major biotechnology
and pharmaceutical companies, as well as development stage companies, are
actively involved in this field.

MANUFACTURING

    TKT is currently using, and plans in the future to use, a combination of
internal manufacturing and contract manufacturing by third parties to meet its
requirements for preclinical testing, clinical trials, and commercialization of
its products.

    Under TKT's collaboration with HMRI, HMRI is required to manufacture GA-EPO
and GA-II required for clinical trials and commercial sale. TKT is manufacturing
the Gene-Activated proteins required for its other development programs. TKT
expects that in the future it may employ third party contract manufacturers for
the production of Gene-Activated proteins for clinical development and
commercial sale.

    TKT has entered into a contract manufacturing arrangement with a third party
for the production of the Niche Protein product that TKT is developing for the
treatment of Fabry disease. TKT expects that it will also rely on third party
contract manufacturers for the production of this product for commercial sale.

    TKT is manufacturing its gene therapy products that are undergoing clinical
trials. TKT also plans to manufacture its gene therapy products for commercial
sale. See "--TKT's Gene Therapy Programs and Commercialization Strategy."

                                       17

GOVERNMENT REGULATION

    The testing, manufacturing, labeling, advertising, promotion, export, and
marketing, among other things, of the Company's products are subject to
extensive regulation by governmental authorities in the U.S. and other
countries. In the U.S., pharmaceutical products are regulated by the FDA under
the Federal Food, Drug, and Cosmetic Act and other laws, including, in the case
of biologics, the Public Health Service Act. The Company believes that most of
its products will be regulated by the FDA as biologics. Biologics require the
submission of a BLA and approval by the FDA prior to being marketed in the U.S.
Manufacturers of biologics may also be subject to state regulation.

    The steps required before a product may be approved for marketing in the
U.S. generally include (i) preclinical laboratory tests and animal tests,
(ii) the submission to the FDA of an IND for human clinical testing, which must
become effective before human clinical trials may commence, (iii) adequate and
well-controlled human clinical trials to establish the efficacy of the product,
and appropriate testing to establish the safety of the product, (iv) the
submission to the FDA of a BLA, (v) FDA review of the BLA, and
(vi) satisfactory completion of an FDA inspection of the manufacturing facility
or facilities at which the product is made to assess compliance with cGMP.

    Preclinical tests include laboratory evaluation of the product, as well as
animal studies to assess the potential safety and efficacy of the product. The
results of the preclinical tests, together with manufacturing information and
analytical data, are submitted to the FDA as part of an IND, which must become
effective before human clinical trials may be commenced. The IND will
automatically become effective 30 days after receipt by the FDA, unless the FDA
before that time raises concerns or questions about the conduct of the trials as
outlined in the IND. In such a case, the IND sponsor and the FDA must resolve
any outstanding concerns before clinical trials can proceed. There can be no
assurance that submission of an IND will result in FDA authorization to commence
clinical trials.

    Clinical trials typically are conducted in three sequential phases, but the
phases may overlap, and certain phases may be eliminated. In Phase I, the
initial introduction of the drug into human subjects, the drug is usually tested
for safety (adverse effects), dosage tolerance, and pharmacodynamics. Phase II
usually involves studies in a limited patient population to (i) evaluate
preliminarily the efficacy of the drug for specific, targeted indications, (ii)
determine dosage tolerance and optimal dosage, and (iii) identify possible
adverse effects and safety risks. Phase III trials generally further evaluate
clinical efficacy and test further for safety within an expanded patient
population.

    In the case of products for severe or life-threatening diseases, the initial
human testing is sometimes done in patients rather than in healthy volunteers.
Since these patients are already afflicted with the target disease, it is
possible that such studies may provide preliminary evidence of efficacy
traditionally obtained in Phase II trials. These trials are frequently referred
to as "Phase I/II" trials. There can be no assurance that Phase I, Phase II, or
Phase III testing will be completed successfully within any specific time
period, if at all, with respect to any of the Company's product candidates.
Furthermore, the Company or FDA may suspend clinical trials at any time on
various grounds, including a finding that the subjects or patients are being
exposed to an unacceptable health risk.

    The results of the preclinical studies and clinical studies, together with
other detailed information, including information on the manufacture and
composition of the product, are submitted to the FDA in the form of a BLA
requesting approval to market the product. Before approving a BLA, the FDA will
inspect the facilities at which the product is manufactured, and will not
approve the product unless cGMP compliance is satisfactory. The FDA may deny a
BLA if applicable regulatory criteria are not satisfied, require additional
testing or information, and/or require postmarketing testing and surveillance to
monitor the safety or efficacy of a product. The testing and approval process
require substantial time, effort, and financial resources and there can be no
assurance that any approval will be granted on a timely basis, if at all.

                                       18

    Both before and after approval is obtained, violations of regulatory
requirements may result in various adverse consequences, including the FDA's
delay in approving or refusal to approve a product, withdrawal of an approved
product from the market, and/or the imposition of criminal penalties against the
manufacturer and/or BLA holder. For example, BLA holders are required to report
certain adverse reactions to the FDA, and to comply with certain requirements
concerning advertising and promotional labeling for their products. Also,
quality control and manufacturing procedures must continue to conform to cGMP
regulations after approval, and the FDA periodically inspects manufacturing
facilities to assess compliance with cGMP. Accordingly, manufacturers must
continue to expend time, monies, and effort in the area of production and
quality control to maintain cGMP compliance. In addition, discovery of problems
may result in restrictions on a product, manufacturer, or BLA holder, including
withdrawal of the product from the market. Also, new government requirements may
be established that could delay or prevent regulatory approval of the Company's
products under development.

    The Company will also be subject to a variety of foreign regulations
governing clinical trials and sales of its products. Whether or not FDA approval
has been obtained, approval of a product by the comparable regulatory
authorities of foreign countries must be obtained prior to the commencement of
marketing of the product in those countries. The approval process varies from
country to country and the time may be longer or shorter than that required for
FDA approval.

    In addition to regulations enforced by the FDA, the Company is also subject
to regulation under the Occupational Safety and Health Act, the Toxic Substances
Control Act, the Resource Conservation and Recovery Act, and other present and
potential future federal, state, or local regulations. The Company's research
and development activities involve the controlled use of hazardous materials,
chemicals, biological materials, and various radioactive compounds. Although the
Company believes that its safety procedures for handling and disposing of such
materials comply with the standards prescribed by state and federal regulations,
the risk of accidential contamination or injury from these materials cannot be
completely eliminated. In the event of such an accident, the Company could be
held liable for any damages that result and any such liability could exceed the
resources of the Company.

    For marketing outside the U.S., the Company also is subject to foreign
regulatory requirements governing human clinical trials and marketing approval
for products. The requirements governing the conduct of clinical trials, product
licensing, pricing, and reimbursement vary greatly from country to country.

EMPLOYEES

    As of September 30, 1999, the Company had 230 full-time employees, including
182 in research and development. The Company's employees are not covered by any
collective bargaining agreement. TKT considers relations with its employees to
be good.

FACILITIES

    The Company leases a total of approximately 112,000 square feet of
laboratory and office space in buildings located in Cambridge, Massachusetts.
These facilities include pilot facilities for gene therapy and protein product
manufacturing.

    The Company believes that its current facilities will be adequate to
accommodate its needs through 2000. The Company currently expects to meet any
additional facilities requirements through development of a new facility or
conversion of an existing building. The Company expects to seek financing for
all or a significant portion of the cost of any additional facilities. There can
be no assurance that financing will be available on favorable terms, if at all.

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LEGAL PROCEEDINGS

    In April 1997, Amgen filed a civil action in the U.S. District Court of
Massachusetts against the Company and HMRI, the Company's collaborative partner.
The complaint in the action alleges that GA-EPO and the processes for producing
GA-EPO infringe certain of Amgen's U.S. patents and requests that TKT and HMRI
be enjoined from making, using, or selling GA-EPO and that the Court award Amgen
monetary damages. In November 1997, TKT and HMRI filed a Motion for Summary
Judgment of Non-Infringement. On the same date, Amgen filed a Motion for Summary
Judgment of Infringement. TKT and HMRI opposed that motion, stating that there
had been no infringement.

    In April 1998, the Court granted TKT and HMRI's Motion for Summary Judgment
of Non-Infringement and denied Amgen's Motion for Summary Judgment of
Infringement on the ground that all of TKT and HMRI's GA-EPO related activities
through that date had been conducted solely for uses reasonably related to the
production of information for submission to the FDA as part of seeking
regulatory approval to market GA-EPO. According to the Court, such activities
are not acts of patent infringement under the Waxman-Hatch Act. The Court did
not address the issue of whether TKT and HMRI's activities that were challenged
by Amgen infringed Amgen's patents. The Court ordered Amgen's remaining claim
for declaratory judgment of future infringement administratively closed, to be
reopened upon motion of either party for good cause shown. The Court also stated
that issuance by the FDA of a product license presumably would constitute good
cause to reopen that claim.

    In June 1999, TKT and HMRI filed a motion to reopen the case with the Court,
which was granted. The Court scheduled the trial to commence in April 2000. In
addition, in July 1999, the Company commenced legal proceedings in the U.K.
against Kirin-Amgen seeking a declaration that a U.K. patent held by Kirin-Amgen
will not be infringed by the sale of GA-EPO and that numerous claims of Kirin-
Amgen's U.K. patent are invalid. The trial is scheduled to commence in November
2000.

    In September 1999, the Court in the Massachusetts proceeding granted Amgen's
motion to amend its complaint to include two additional patents that issued in
May 1998 and September 1999.

    The Company can provide no assurance as to the outcome of either the U.S. or
U.K. proceedings. A decision by a court in Amgen's or Kirin-Amgen's favor,
including the issuance of an injunction against the making, using, or selling of
GA-EPO by the Company and HMRI in the U.S. or the U.K., or any other conclusion
of either litigation in a manner adverse to the Company and HMRI, would have a
material adverse effect on the Company's business, financial condition, and
results of operations.

    Pursuant to the Amended and Restated License Agreement, dated March 1995, by
and between HMRI and the Company, HMRI has assumed the cost of the Amgen and
Kirin-Amgen litigations. The Company is required to reimburse HMRI for the
Company's share of litigation expenses, as defined, from future royalties, if
any, payable by HMRI as to the sale of GA-EPO and in certain other
circumstances.

    There can be no assurance that the Company will not in the future become
subject, in the U.S. or any other country, to additional patent infringement
claims, interferences, and other litigation involving patents, or any patents
that may issue on any pending patent applications, including Amgen patent
applications.

    The Company is currently involved in a patent interference proceeding before
the PTO involving a patent and several patent applications in the gene therapy
field.

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     This Report on Form 8-K contains or incorporates forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933,
as amended and Section 21E of the Exchange Act of 1934, as amended. You can
identify these forward-looking statements by TKT's use of the words
"believes," "anticipates," "plans," "expects," "intends," and similar
expressions, whether in the negative or the affirmative. TKT cannot guarantee
that it actually will achieve the plans, intentions or expectations discussed
in these forward-looking statements. TKT's actual results could differ
materially from, including without limitation, those forward-looking
statements set forth under the caption "Certain Factors That May Affect
Future Results" in the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999 which is on file with the Securities and Exchange
Commission and incorporated herein by reference and any forward-looking
statements set forth in any future filings the Company makes with the
Commission. The Company does not assume any obligation to update and
forward-looking statements the Company makes.

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                                   SIGNATURE


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Date: November 5, 1999                TRANSKARYOTIC THERAPIES, INC.
                                            (Registrant)



                                       By: /s/ Richard F Selden
                                          ------------------------------
                                       Richard F Selden
                                       President and Chief Executive Officer


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