Prepared by MERRILL CORPORATION

Part 1- Item 1- Condensed Consolidated Financial Statements

Transkaryotic Therapies, Inc.

(unaudited)

(in thousands, except par values)	September 30,			December 31,
	2001			2000
Assets
Current assets:
Cash and cash equivalents	$	199,253		$	49,445
Marketable securities	75,633			196,011
Inventory	3,421			-
Prepaid expenses and other current assets	2,599			1,842
Total current assets	280,906			247,298
Property and equipment, net	38,850			23,597
Other assets	2,170			1,498
Total assets	$	321,926		$	272,393

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	7,288		$	3,986
Accrued expenses	9,480			8,550
Current maturities of long-term debt	2,000			2,500
Total current liabilities	18,768			15,036

Long-term debt, less current maturities	8,000			9,500

Stockholders' equity:
Series A convertible preferred stock, $.01 par value,10 shares authorized; 10 shares issued and outstandingat September 30, 2001 and December 31, 2000, respectively	1			1
Series B preferred stock, $.01 par value, 1,000 shares authorized; no shares issued and outstanding at September 30, 2001 and December 31, 2000, respectively	-			-
Common stock, $.01 par value; 100,000 shares authorized; 26,427 and 22,700 shares issued and outstanding at September 30, 2001 and December 31, 2000, respectively	264			227
Additional paid-in capital	510,476			413,242
Accumulated deficit	(216,394		)	(165,429		)
Deferred compensation	(257		)	(860		)
Accumulated other comprehensive income	1,068			676
Total stockholders' equity	295,158			247,857
Total liabilities and stockholders' equity	$	321,926		$	272,393

See accompanying Notes to Condensed Consolidated Financial Statements.

Transkaryotic Therapies, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share amounts)	Three Months Ended September 30,						Nine Months Ended September 30,
	2001			2000			2001			2000
Revenues:
Product sales	$	537		$	-		$	834		$	-
License and research revenues	294			5,357			1,922			6,871
	831			5,357			2,756			6,871
Operating expenses:
Research and development	14,139			13,373			49,450			39,700
Selling, general and administrative	5,507			3,723			16,297			9,772
	19,646			17,096			65,747			49,472
Loss from operations	(18,815		)	(11,739		)	(62,991		)	(42,601		)
Other income:
Interest income, net	2,947			4,233			9,241			9,776
Gain on sale of investment	-			-			2,785			-
	2,947			4,233			12,026			9,776
Net loss	$	(15,868	)	$	(7,506	)	$	(50,965	)	$	(32,825	)

Basic and diluted net loss per share	$	(0.60	)	$	(0.33	)	$	(2.12	)	$	(1.45	)
Shares used to compute basic and diluted net loss per share	26,408			22,688			24,009			22,668

See accompanying Notes to Condensed Consolidated Financial Statements.

Transkaryotic Therapies, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)	Nine Months Ended
	September 30,
	2001			2000
Operating activities:
Net loss	$	(50,965	)	$	(32,825	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization	4,304			1,777
Compensation expense related to equity issuances	513			561
Changes in operating assets and liabilities	39			681
Net cash used for operating activities	(46,109		)	(29,806		)

Investing activities:
Proceeds from maturities of marketable securities	184,977			86,815
Purchases of marketable securities	(64,126		)	(223,106		)
Purchases of property and equipment	(19,557		)	(3,629		)
Changes in other assets	(672		)	(723		)

Net cash provided by (used for) investing activities	100,622			(140,643		)

Financing Activities:
Issuance of common stock	97,361			1,519
Repayment of long-term debt	(2,000		)	(1,000		)
Issuance of convertible preferred stock	-			99,787

Net cash provided by financing activities	95,361			100,306

Net increase (decrease) in cash and cash equivalents	149,874			(70,143		)

Effect of exchange rate changes on cash and cash equivalents	(66		)	-

Cash and cash equivalents at January 1	49,445			151,202

Cash and cash equivalents at September 30	$	199,253		$	81,059

See accompanying Notes to Condensed Consolidated Financial Statements.

Transkaryotic Therapies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

September 30, 2001 and 2000

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10–Q and Article 10 of Regulation S–X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. The results of operations for the interim period ended September 30, 2001 are not necessarily indicative of the results to be expected for the year ending December 31, 2001.

These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto for the year ended December 31, 2000 included in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission.

Niche Protein®, Gene-Activated®, and the TKT® logo are registered trademarks of Transkaryotic Therapies, Inc. Replagal™ and Transkaryotic Therapy™, are trademarks of Transkaryotic Therapies, Inc. Dynepo™ is a trademark of Aventis Pharmaceuticals, Inc. (“Aventis”).

2. BASIC AND DILUTED NET LOSS PER SHARE

The Company calculates net loss per share in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 128, “Earnings Per Share.” Basic earnings per share is computed using the weighted average shares outstanding.

Basic net loss per share was equivalent to diluted net loss per share for the three and nine months ended September 30, 2001 and 2000 since common equivalent shares from convertible preferred stock and stock options have been excluded as their effect is antidilutive.

3. COMPREHENSIVE INCOME

The Company had total comprehensive loss of $15,940,000 and $7,211,000 for the three months ended September 30, 2001 and 2000, respectively. For the nine months ended September 30, 2001 and 2000, total comprehensive loss was $50,573,000 and $32,463,000, respectively. The items of comprehensive income consist primarily of changes in unrealized gains on marketable securities.

4. INVENTORY

The Company capitalized $3,421,000 of Replagal production costs as inventory during the third quarter of 2001. At September 30, 2001, inventory primarily consisted of work in process manufacturing costs incurred subsequent to the European Agency for the Evaluation of Medecinal Products (the "EMEA") approval of Replagal. Replagal produced before approval was included in research and development expenses. Inventory is stated at the lower of cost or market.

5. COMMON STOCK OFFERING

In June 2001, the Company agreed to sell 3,565,000 shares of its common stock at $28.50 per share. Proceeds from the offering were approximately $96,184,000.

6. TKT EUROPE - 5S AB

In April 2000, the Company entered into an agreement with certain stockholders of TKT Europe –5S AB (“TKT Europe”) to establish the foundation for the Company’s European operations. These stockholders are the principal managers of TKT Europe and hold a 20% ownership interest in it, while the Company holds the remaining 80% interest. The agreement includes provisions entitling the Company to purchase the entire 20% minority interest in TKT Europe in August 2004, under a specified formula. Should the Company not exercise that right, the stockholders of TKT Europe can require the Company to purchase its interest sixty days thereafter. The buyout price cannot be determined at this time.

7. LEGAL PROCEEDINGS

The Company cannot provide assurance as to the outcome of any legal proceeding. A decision by a court in the U.S. or in any other jurisdiction in a manner adverse to the Company could have a material adverse effect on the Company’s business, financial position, or results of operations.

Replagal™ Patent Litigation

In July 2000, Genzyme Corporation (“Genzyme”) and Mount Sinai School of Medicine of New York University (“Mt. Sinai”) filed a patent infringement suit against the Company in the U.S. District Court for the District of Delaware, alleging that the manufacture, use, intended sale, and/or intended offer for sale of the Company’s Replagal product infringes one or more claims of its U.S. Patent No. 5,356,804. Genzyme and Mt. Sinai seek injunctive relief and an accounting for damages. Discovery proceedings commenced in February 2001, and the District Court has scheduled a jury trial in this action to begin in March 2002.

Dynepo™ Patent Litigation

The Company and Aventis, its collaborative partner in the development of Dynepo (Gene-Activated erythropoietin), are involved in patent infringement actions with respect to Dynepo with Amgen Inc. (“Amgen”) in the United States and Kirin-Amgen, Inc. (“Kirin Amgen”) in the United Kingdom.

In January 2001, the U.S. District Court for the District of Massachusetts ruled that eight of eighteen patent claims asserted by Amgen were infringed by the Company and Aventis. In particular, the District Court ruled that the asserted claims of U.S. Patent No. 5,547,933 were not infringed (and, if this finding is in error, that the asserted claims were invalid); that the asserted claims of U.S. Patent 5,618,698 were not infringed; that Claims 2, 3 and 4 of U.S. Patent No. 5,621,080 were valid, enforceable and infringed under the doctrine of equivalents; that Claims 1, 3, 4 and 6 of U.S. Patent No. 5,756,349 were valid, enforceable and literally infringed, but that Claim 7 of the ’349 patent was not infringed; and that Claim 1 of U.S. Patent No. 5,955,422 was valid, enforceable and literally infringed. Amgen did not seek and was not awarded monetary damages.

In January 2001, TKT and Aventis filed a Notice of Appeal from the Judgment of the District Court with the U.S. Court of Appeals for the Federal Circuit in this case. The Company believes it has strong grounds for appeal. Amgen filed a Notice of Cross-Appeal in February 2001.

In April 2001, the English High Court of Justice ruled that one of four claims of a patent asserted by Kirin-Amgen was infringed by the Company and Aventis. The Company believes it has strong grounds for appeal and filed a Notice of Appeal in April 2001.

Pursuant to an Amended and Restated License Agreement, dated March 1995, between Aventis and the Company, Aventis has assumed the legal costs of the Amgen and Kirin-Amgen litigation. The Company will reimburse Aventis for the Company’s share of the litigation expenses, as defined, from future royalties, if any, received from the sale of Dynepo and in certain other circumstances.

PART I - Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Since its inception in 1988, the Company has been primarily engaged in the development and commercialization of products based on the Company’s three proprietary development platforms: Niche Protein® products, Gene-Activated® proteins and gene therapy. Replagal™ (agalsidase alfa) - the Company’s enzyme replacement therapy for long-term treatment of patients with Fabry disease - is currently approved in the fifteen countries of the European Union, as well as Norway, Iceland, and New Zealand. Replagal received co-exclusive orphan drug status in the European Union in August 2001. Since approval, the Company has been working with European authorities to obtain reimbursement and pricing for Replagal on a country by country basis. As of October 2001, reimbursement has been established in three countries- Germany, Sweden, and Norway. The timing of establishing reimbursement in each remaining country in Europe is uncertain and will influence sales for 2001 and 2002. To date, the Company has not recorded significant revenues from the sale of products. The Company has incurred substantial annual operating losses since inception and expects to incur significant operating losses until substantial product sales are generated. Until such time, the Company is dependent upon existing cash resources, interest income, external financing from equity offerings, debt financings or collaborative research and development arrangements with corporate sponsors to finance its operations. At September 30, 2001, the Company’s accumulated deficit was $216,394,000.

Results of operations may vary significantly from period to period depending on, among other factors, product sales of Replagal and the costs of manufacturing, marketing and selling Replagal, the timing of approvals, if granted, to market the Company’s products either in the U.S. or abroad, the progress of the Company’s research and development efforts, the timing of additional license fees and milestone payments, if any, the timing of certain expenses, and the establishment of additional collaborative research agreements.

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the accompanying condensed consolidated financial statements and the related footnotes thereto.

RESULTS OF OPERATIONS

For the Three Months Ended September 30, 2001 and 2000

In the third quarter of 2001, the Company recorded product sales of Replagal primarily under compassionate use programs in Europe. Sales for the quarter totaled $537,000. The Company recorded no sales in 2000.

In the third quarter of 2001, there were no costs of sales because, prior to approval by the EMEA, the costs of producing Replagal were included in research and development expenses. Costs associated with product produced before approval, which will be sold in future periods, have been previously expensed and, as a result, sales margins will not reflect full production costs until some time in 2002.

License and research revenues totaled $294,000 and $5,357,000 for the three months ended September 30, 2001 and 2000, respectively. License and research revenues in the third quarter of 2001 were earned through the Company’s collaborative agreement with Genetics Institute, Inc., relating to the Company’s Factor VIII gene therapy program for the treatment of hemophilia A. Revenues for the third quarter of 2000 included a $3,500,000 milestone payment from Aventis relating to the submission of a Biologics License Application (“BLA”) to the U.S. Food and Drug Administration (the “FDA”) for Dynepo (Gene-Activated erythropoietin) for the treatment of anemia, as well as payments earned from collaborative agreements with Sumitomo Pharmaceutical Co., Ltd. (“Sumitomo”) and Genetics Institute, Inc.

Research and development expenses totaled $14,139,000 in the third quarter of 2001, as compared to $13,373,000 during the same period in 2000. The increase in 2001 of $766,000, or 6%, was principally due to expected increases in external development services and research and development staffing as the Company’s product development platforms continue to expand and mature. In addition, the Company capitalized $3,421,000 of Replagal production costs as inventory during the third quarter that, prior to product approval, would have been included in research and development expenses.

Selling, general and administrative expenses were $5,507,000 in the quarter ended September 30, 2001, compared with $3,723,000 during the same period in 2000. The increase in 2001 of $1,784,000, or 48%, was principally due to costs incurred in preparation of the launch of Replagal in Europe and the creation of a global commercial infrastructure. During the remainder of 2001, selling, general and administrative costs will increase as these activities expand.

Net interest income was $2,947,000 and $4,233,000 for the three months ended September 30, 2001 and 2000, respectively. The average cash and marketable securities balances were $285,671,000 and $263,297,000 for the quarter ended September 30, 2001 and 2000, respectively. The decrease in interest income of $1,286,000 resulted primarily from significantly lower rates of return on average cash and marketable securities balances.

The Company had a net loss of $15,868,000 and $7,506,000 for the three months ended September 30, 2001 and 2000, respectively. Basic and diluted net loss per share was $0.60 for the three months ended September 30, 2001, as compared to a basic and diluted net loss per share of $0.33 for the corresponding period in 2000. For the three months ended September 30, 2001 and 2000, weighted average shares outstanding were 26,408,000 and 22,688,000, respectively. The significant increase reflects the sale of 3,565,000 common shares from the Company’s offering in June 2001.

For the Nine Months Ended September 30, 2001 and 2000

For the nine months ended September 30, 2001, the Company had product sales of $834,000 primarily from compassionate use sales of Replagal in Europe. There were no sales in 2000.

For the nine months ended September 30, 2001, there were no costs of sales because, prior to approval by the EMEA, the costs of producing Replagal were included in research and development expenses.

License and research revenues totaled $1,922,000 and $6,871,000 for the nine months ended September 30, 2001 and 2000, respectively. License and research revenues for the nine months ended September 30, 2001 and 2000, respectively, were earned under the Company’s agreements with Genetics Institute and Sumitomo. In addition, for the nine months ended September 30, 2000, revenues included a $3,500,000 milestone payment from Aventis relating to the submission of a BLA to the FDA for Dynepo for the treatment of anemia.

Research and development expenses totaled $49,450,000 in the first nine months of 2001, as compared to $39,700,000 during the same period in 2000. The increase in the first three quarters of 2001 of $9,750,000, or 25%, was principally due to increases in external development services and research and development staffing as the Company’s three product development platforms continue to expand and mature. In addition, the Company capitalized $3,421,000 of Replagal production costs as inventory during the third quarter of 2001 that, prior to product approval, would have been included in research and development expenses.

Selling, general and administrative expenses were $16,297,000 for the nine months ended September 30, 2001, compared with $9,772,000 during the same period in 2000. The increase in 2001 of $6,525,000, or 67%, was principally due to costs incurred in preparation for the launch of Replagal in Europe and the creation of a global commercial infrastructure.

Net interest income was $9,241,000 and $9,776,000 for the nine months ended September 30, 2001 and 2000, respectively. The average cash and marketable securities balances were $249,855,000 and $214,669,000 for the nine months ended September 30, 2001 and 2000, respectively. The decrease in interest income of $535,000 resulted primarily from significantly lower interest rate yields in 2001 on average cash and marketable securities balances as compared to 2000.

In 1996, TKT made a strategic investment of $300,000 in a European biotechnology company. In June 2001, TKT sold substantially all of its investment resulting in a gain of $2,785,000. The remaining portion of this investment was sold in October 2001 resulting in a gain of approximately $446,000.

The Company had a net loss of $50,965,000 and $32,825,000 for the nine months ended September 30, 2001 and 2000, respectively. Basic and diluted net loss per share was $2.12 for the nine months ended September 30, 2001, as compared to a basic and diluted net loss per share of $1.45 for the corresponding period in 2000. For the nine months ended September 30, 2001 and 2000, weighted average shares outstanding were 24,009,000 and 22,668,000, respectively. The significant increase reflects the sale of 3,565,000 common shares from the Company’s offering in June 2001.

LIQUIDITY AND SOURCES OF CAPITAL

Since its inception, the Company has financed its operations through the sale of common and preferred stock, borrowings under debt agreements, revenues from collaborative agreements, and interest income.

The Company had cash, cash equivalents, and marketable securities totaling $274,886,000 at September 30, 2001, including marketable securities collateralizing letters of credit totaling $8,643,000. Cash equivalents and marketable securities are invested in U.S. government and agency obligations and money market funds.

In June 2001, the Company announced the sale of 3,565,000 shares of its common stock at $28.50 per share. Proceeds to the Company totaled approximately $96,184,000.

In June 2000, the Company sold 10,000 shares of Series A Convertible Preferred Stock to investment funds affiliated with E. M. Warburg, Pincus & Co., L.L.C., resulting in net proceeds to the Company of $99,797,000.

In December 1998, the Company obtained an unsecured term loan facility for up to $14,000,000 to finance the capital costs related to leased space. At September 30, 2001, $10,000,000 was outstanding under the loan. In October 2001, this loan was repaid in full.

In August 2000, the Company entered into a ten-year lease for a new corporate headquarters and research and development facility in Cambridge, Massachusetts. The lease requires a security deposit of $7,680,000, of which $680,000 was paid in cash and the balance provided in the form of a letter of credit. An investment with a value of $8,070,000 collateralizes the letter of credit. The Company expects to spend up to $35,000,000 for leasehold improvements and related equipment through December 2002.

In January 2001, the Company purchased a 45,000 square foot manufacturing facility for $8,800,000. In addition, it leased an adjoining 44,000 square foot facility under the terms of a ten-year lease. The Company is in the process of designing capital improvements of these facilities and may make substantial investments in the next two years.

The Company may seek financing for all or a significant portion of the cost of the leasehold improvements described above. There can be no guarantee that financing will be available on favorable terms, if at all.

At September 30, 2001, the Company had committed to pay, under certain conditions, approximately $25,000,000 to third parties for certain product development activities through 2004.

At December 31, 2000, the Company had net operating loss carryforwards of approximately $144,264,000, which expire at various times through 2020. Due to the degree of uncertainty related to the ultimate use of loss carryforwards and tax credits, the Company has fully reserved against any potential tax benefit. The future utilization of net operating loss carryforwards and tax credits may be subject to limitation under the changes in stock ownership rules of the Internal Revenue Code. Because of this limitation, it is possible that taxable income in future years, which would otherwise be offset by net operating losses, will not be offset and, therefore, will be subject to tax.

Substantial additional funds will be required to support the Company’s research and development programs, acquisition of technologies, preclinical and clinical testing of its products, pursuit of regulatory approvals, acquisition of capital equipment, expansion of laboratory and office facilities, establishment of manufacturing capabilities, and selling, general and administrative expenses. Until such time, if any, as the Company’s operations generate significant revenues from product sales, the Company will be required to fund operations with cash resources, interest income, proceeds from equity offerings and debt financings, and funding from collaborative arrangements.

The Company expects to pursue opportunities to obtain additional financing in the future through equity financings, debt financings, lease arrangements related to facilities and capital equipment, and collaborative research agreements. The source, timing and availability of any future financing will depend principally upon equity and debt market conditions, interest rates and, more specifically, on the Company’s continued progress in its exploratory, preclinical, and clinical development programs, and the extent of its commercial success. There can be no assurance that such funds will be available on favorable terms, if at all.

The Company expects that its existing capital resources, together with revenues from collaborative agreements, product sales, and interest income, will be sufficient to fund its operations through 2003. The Company’s cash requirements may vary depending on numerous factors. Lack of necessary funds may require the Company to delay, scale back or eliminate some or all of its research and product development programs or to license its potential products or technologies to third parties.

The Company has been engaged in litigation with Amgen and Kirin-Amgen with respect to the development of Dynepo and with Genzyme and Mt. Sinai with respect to the development of Replagal. Pursuant to the Amended and Restated License Agreement, dated March 1995, between Aventis and the Company, Aventis has assumed the legal cost of the Amgen and Kirin-Amgen litigation. The Company is required to reimburse Aventis for the Company’s share of litigation expenses, as defined, from future royalties, if any, received from the sale of Dynepo and in certain other circumstances.

FORWARD-LOOKING STATEMENTS

Statements that are not historical facts, including statements about the Company’s confidence and strategies and its expectations about future products, technologies and opportunities, market demand or acceptance of future products are forward-looking statements. Without limiting the foregoing, the words “believes,” “projects,” “anticipates,” “plans,” “expects,” “estimates,” “intends,” “should,” “could,” “will,” “may,” and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the Company’s actual results to differ materially from those indicated by such forward-looking statements. These include, without limitation, the following: (1) whether any of the Company’s Niche Protein product, Gene-Activated protein or gene therapy product candidates will advance in the clinical trial process, (2) whether such clinical trials will proceed in a timely manner, (3) whether the Company’s clinical trial results will warrant continued product development, (4) whether the required regulatory filings, such as Investigational New Drug applications and Biologics License Applications, are made in a timely manner, (5) whether the Company’s products will receive approval from the U.S. Food and Drug Administration, EMEA, or equivalent foreign regulatory agencies, (6) if such products receive approval, whether they will be successfully manufactured, distributed and marketed, (7) whether patent litigation or orphan drug issues in which the Company is involved or may become involved are resolved in a manner adverse to the Company, (8) the effects of competition on the Company’s products, (9) the Company’s dependence on third parties, including collaborators, manufacturers and distributors, (10) market acceptance of our products upon their introduction, including Replagal, and (11) the other risks set forth under the caption “Risk Factors” which are filed with this Quarterly Report on Form 10-Q as Exhibit 99.1, which “Risk Factors” are incorporated herein by reference. In addition, any forward-looking statements represent the Company’s estimates only as of the date this Quarterly Report was filed with the Securities and Exchange Commission and should not be relied upon as representing the Company’s estimates as of any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so, even if its estimates change.

PART II - Other Information

Item 1. Legal Proceedings

The Company can provide no assurance as to the outcome of any legal proceedings. A decision by a court in the U.S. or in any other jurisdiction in a manner adverse to the Company could have a material adverse effect on the Company’s business, financial position, and results of operations.

Replagal™ Patent Litigation

In July 2000, Genzyme and Mt. Sinai filed a patent infringement suit against the Company in the U.S. District Court for the District of Delaware, alleging that the manufacture, use, intended sale, and/or intended offer for sale of the Company’s Replagal product infringes one or more claims of its U.S. Patent No. 5,356,804. Genzyme and Mt. Sinai seek injunctive relief and an accounting for damages. Discovery proceedings commenced in February 2001, and the District Court has scheduled trial in this action to begin in March 2002.

Dynepo™ Patent Litigation

The Company and Aventis, its collaborative partner to commercialize Dynepo (a Gene-Activated erythropoietin product), are involved in patent infringement actions with Amgen in the United States and Kirin-Amgen in the United Kingdom.

In April 2001, the English High Court of Justice ruled that one of four claims of a patent asserted by Amgen and Kirin-Amgen was infringed by the Company and Aventis. The Company believes it has strong grounds for appeal and filed a Notice of Appeal in April 2001.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

99.1 Risk Factors

(b) Reports on Form 8-K

Current Report on Form 8-K, filed August 7, 2001, regarding the Company’s announcement that the European Commission had granted marketing authorization for Replagal™ (agalsidase alfa) - the Company’s enzyme replacement therapy for long-term treatment of patients with Fabry disease - for the fifteen countries of the European Union.

Current Report on Form 8-K, filed July 2, 2001, regarding the Company’s announcement of the completion of a public offering of common stock.

SIGNATURES

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 thereunto duly authorized.

	TRANSKARYOTIC THERAPIES, INC.

Date: November 14, 2001	By:	/s/ Daniel E. Geffken
		Daniel E. Geffken Senior Vice President, Finance and Chief Financial Officer (Principal and Financial and Accounting Officer)

Exhibit 99.1

REGULATORY RISKS

We May Not Be Able To Obtain Marketing Approval In The Future.

We will not be able to market any of our products in Europe, the United States or in any other jurisdiction without marketing approval from the EMEA, FDA or equivalent foreign regulatory agency. The regulatory approval process to obtain market approval for a new drug or biologic takes many years and requires the expenditure of substantial resources. We have had only limited experience in preparing applications and obtaining regulatory approvals.

In Europe, the European Commission has approved our MAA for Replagal, and the EMEA has accepted for review the MAA submitted by Aventis for Dynepo but has not yet scheduled a CPMP meeting. In the United States, the FDA issued a complete review letter with respect to our BLA for Replagal, stating that our BLA was not adequate for final approval action at the time of such letter, and did not accept for filing Aventis' BLA for Dynepo, requesting additional manufacturing data. There can be no assurance as to whether or when any of these applications for marketing authorization relating to Replagal and Dynepo, or additional applications for marketing authorization that we may make in the future as to these or other products, will be approved by the relevant regulatory authorities.

If We Fail To Comply Wit The Extensive Regulatory Requirements To Which Our Products Are Subject, We Could Be Subject To Adverse Consequences And Penalties.

The testing, manufacturing, labeling, advertising, promotion, export, and marketing, among other things, of our products are subject to extensive regulation by governmental authorities in Europe, the United States, and elsewhere throughout the world.

In general, there can be no assurance that submission of materials requesting permission to conduct clinical trials will result in authorization by the EMEA, the FDA or equivalent foreign regulatory agency to commence clinical trials, or that once clinical trials have begun, testing will be completed successfully within any specific time period, if at all, with respect to any of our products. Once trials are complete and an application has been submitted, the EMEA or the FDA may deny a MAA or a BLA if applicable regulatory criteria are not satisfied or may require additional testing or information.

If regulatory approval of a product is granted, such approval may be subject to limitations on the indicated uses for which the product may be marketed or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. As to any product for which we obtain marketing approval, the product, the facilities at which the product is manufactured, any post-approval clinical data and our promotional activities will be subject to continual review and periodic inspections by the EMEA, the FDA and other regulatory authorities.

Both before and after approval is obtained, violations of regulatory requirements may result in various adverse consequences, including the EMEA's or FDA's delay in approving or refusal to approve a product, suspension or withdrawal of an approved product from the market, operating restrictions, or the imposition of civil or criminal penalties.

We will also be subject to a variety of regulations outside the United States and Europe governing clinical trials and the sale of our products. Whether or not we have obtained EMEA or FDA approval, the comparable regulatory authorities of such foreign countries must also approve a product 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 EMEA or FDA approval.

We May Not Be Able To Obtain Orphan Drug Exclusivity For Our Niche Protein Products. If Our Competitors Are Able To Obtain Orphan Drug Exclusivity Before Us, We May Be Precluded From Marketing Our Niche Protein Products.

Some jurisdictions, including Europe and the United States, may designate drugs for relatively small patient populations as "orphan drugs". Generally, if a product which has an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to orphan drug exclusivity. Orphan drug exclusivity means that applications to market the same product for the same use may not be approved, except in very limited circumstances, for a period of up to 10 years in Europe and for a period of seven years in the United States. Obtaining orphan drug designations and orphan drug exclusivity for our Niche Protein products may be critical to our success in this area. We have received orphan drug designation in Europe and the United States for Replagal, our alpha-galactosidase A product for the treatment of Fabry disease. However, we may not be able to obtain or maintain orphan drug exclusivity for Replagal. We also may not be able to obtain orphan drug designation or exclusivity for any of our other potential products or be able to maintain such designation or exclusivity for any of these products. For example, if a competitive product is shown to be clinically superior to our product, any orphan drug exclusivity we have obtained will not apply to such competitive product.

Our competitors may also seek and obtain orphan drug exclusivity for products competitive with our products before we obtain marketing approval. Genzyme is seeking marketing authorization in both Europe and the United States for an alpha-galactosidase A product for the treatment of Fabry disease for which it has orphan drug designations. Concurrently with the approval of Replagal by the European Commission, the European Commission approved Genzyme's Fabry disease product and both drugs received co-orphan drug exclusivity in the European Union for a period of up to 10 years. Depending on whether Replagal or Genzyme's Fabry product receives marketing approval in the United States first, we or Genzyme could prevent the other from obtaining marketing approval of the other's Fabry product through the orphan drug exclusivity.

Because Gene Therapy Is A Relatively New Technology And Gene Therapy Products Have Not Been Extensively Tested In Humans, We May Face Delays And Incur Increased Costs In The Regulatory Process Related To Our Gene Therapy Products.

We are developing gene therapy products. Because gene therapy is a relatively new technology and products for gene therapy have not been extensively tested in humans, the regulatory requirements governing gene therapy products may be more uncertain than for other types of products. This uncertainty may cause delays in the regulatory process relating to our gene therapy products, including delays in our initiating clinical trials of these products. This uncertainty may also increase the cost of obtaining regulatory approvals of our gene therapy products.

If Our Clinical Trials Are Not Successful, We May Not Be Able To Develop And Commercialize Our Products.

In order to obtain regulatory approvals for the commercial sale of our potential products, we and our collaborators will be required to complete extensive clinical trials in humans to demonstrate the safety and efficacy of our products. We may not be able to obtain authority from the EMEA, the FDA or other regulatory agencies to commence or complete these clinical trials.

The results from preclinical testing of a product that is under development may not be predictive of results that will be obtained in human clinical trials. In addition, the results of early human clinical trials may not be predictive of results that will be obtained in larger scale, advanced stage clinical trials. Furthermore, we, one of our collaborators, or the EMEA or FDA, may suspend clinical trials at any time if the subjects or patients participating in such trials are being exposed to unacceptable health risks, or for other reasons.

The rate of completion of clinical trials is dependent in part upon the rate of enrollment of patients. Patient accrual is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the study, the existence of competitive clinical trials, and the availability of alternative treatments. In particular, the patient populations for some of our Niche Protein products is small. Delays in planned patient enrollment may result in increased costs and prolonged clinical development.

We and our collaborators may not be able to successfully complete any clinical trial of a potential product within any specified time period. In some cases, we may not be able to complete the trial at all. Moreover, clinical trials may not show our potential product to be both safe and efficacious. Thus, the EMEA, the FDA and other regulatory authorities may not approve any of our potential products for any indication.

PATENT LITIGATION AND INTELLECTUAL PROPERTY RISKS

We Are Party To Litigation With Amgen And Kirin-Amgen Involving Dynepo Which Could Preclude Us From Manufacturing Or Selling Dynepo.

We and Aventis are involved in patent litigation relating to Dynepo with Amgen in the United States and with Kirin-Amgen, an affiliate of Amgen, in the United Kingdom. In January 2001, the U.S. District Court for the District of Massachusetts concluded that Dynepo infringed eight of the 18 claims of patents asserted by Amgen. In April 2001, the English High Court of Justice ruled that Dynepo infringed one of four claims of a patent asserted by Kirin-Amgen. We and Aventis have filed appeals of both decisions. We can provide no assurance as to the outcome of either litigation. If we and Aventis are not successful in connection with the appeals of these court decisions, we and Aventis may be precluded from manufacturing or selling Dynepo. In addition, this litigation is costly, and we are required to reimburse Aventis, which is paying the litigation expenses, for our share of the expenses from future royalties and in certain other circumstances.

We Are a Party To Litigation With Genzyme And Mount Sinai Involving Replagal Which Could Preclude Us From Manufacturing Or Selling Replagal.

In July 2000, Genzyme and Mount Sinai filed a patent infringement suit against us in the U.S. District Court for the District of Delaware, alleging that the manufacture, use, intended sale, and/or intended offer for sale of our Replagal product infringes one or more claims of a U.S. patent held by Genzyme and Mount Sinai. Genzyme and Mount Sinai seek injunctive relief and an accounting for damages. The court has currently scheduled a jury trial in this action to begin in March 2002. If we are not successful in this litigation, we may be precluded from manufacturing or selling Replagal. We can provide no assurance as to the outcome of this litigation.

We Are Involved And May Become Involved In Further Expensive Patent Litigation Or Other Intellectual Property Proceedings Related To Our Transkaryotic Therapy(TM) Technology Which Could Result In Liability For Damages Or Stop Our Development And Commercialization Efforts.

We are a party to a proceeding before the U.S. Patent and Trademark Office to determine the patentability of our gene therapy technology, known as Transkaryotic 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 Cell Genesys, Inc. This proceeding will determine which of the parties first developed this technology. If the technology is patentable, the party that first developed the technology will be awarded the U.S. patent rights.

The process to resolve an interference can take many years. We may not prevail in this interference. Even if we do prevail, the decision in this proceeding may not enable us meaningfully to protect our proprietary position in the field of ex vivo non-viral gene therapy.

If we do not prevail in this proceeding, a consent order issued by the Federal Trade Commission in March 1997 may be relevant to us. The Federal Trade Commission 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 proceeding described above. In addition, we have entered into an agreement with Cell Genesys under which we would be permitted to market our non-viral gene therapy products pursuant to a royalty-free license agreement if Cell Genesys wins the interference.

We May Become Involved In Additional And Expensive Patent Litigation Or Other Proceedings.

The biotechnology industry has been characterized by significant litigation and interference and other proceedings regarding patents, patent applications, and other intellectual property rights. We may become a party to additional patent litigation and other proceedings with respect to our Niche Protein products, Gene-Activated proteins or Gene Therapy technology. Such litigation could result in liability for damages, stop our development and commercialization efforts, or divert management's attention and resources.

An adverse outcome in any patent litigation or other proceeding involving patents could subject us to significant liabilities to third parties and require us to cease using the technology or product that is at issue or to license the technology or product from third parties. We may not be able to obtain any required licenses on commercially acceptable terms or at all.

The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain these costs more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

If We Are Unable To Obtain Patent Protection For Our Discoveries, The Value Of Our Technology And Products May Be Adversely Affected.

Our success will depend in large part on our ability to obtain patent protection for our processes and products in the United States and other countries. The patent situation in the field of biotechnology generally is highly uncertain and involves complex legal and scientific questions. We may not be issued patents relating to our technology. Even if issued, patents may be challenged, invalidated, or circumvented. Our patents also may not afford us protection against competitors with similar technology. Because patent applications in the United States are maintained in secrecy until patents issue, third parties may have filed or maintained patent applications for technology used by us or covered by our pending patent applications without our being aware of these applications.

We may not hold proprietary rights to certain product patents, process patents, and use patents related to our products or their methods of manufacture. In some cases, these patents may be owned or controlled by third parties. As a result, we may be required to obtain licenses under third party patents to market certain of our potential products. If licenses are not available to us on acceptable terms, we may not be able to market these products.

If We Are Unable To Protect The Confidentiality Of Our Proprietary Information And Know-How, The Value Of Our Technology And Products Will Be Adversely Affected.

We rely upon unpatented proprietary technology, processes, and know-how. We seek to protect this information in part by confidentiality agreements with our employees, consultants, and other third party contractors. These agreements may be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently developed by competitors.

If We Fail To Comply With Any Of Our Obligations Under Any Of The Agreements Under Which We License Commercialization Rights To Products Or Technology From Third Parties, We Could Lose License Rights That Are Important To Our Business.

We are a party to a number of patent licenses that are important to our business and expect to enter into additional patent licenses in the future. These licenses impose various commercialization, sublicensing, royalty, insurance, and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license and we may not be able to market products that were covered by the license.

OUR INDUSTRY AND BUSINESS RISKS

The Market May Not Be Receptive To Our Products Upon Their Introducation.

The commercial success of any of our products for which we obtain marketing approval from the EMEA, the FDA, and other regulatory authorities will depend upon their acceptance by the medical community and third party payors as clinically useful, cost-effective, and safe. It may be difficult for us to achieve market acceptance of our products.

Other factors that we believe will materially affect market acceptance of our products include:

• the timing of the receipt of marketing approvals;

• the countries in which such approvals are obtained; and

• the safety, efficacy, convenience, and cost-effectiveness of the product as compared to competitive products.

We Have Limited Experience And Resources In Manufacturing And Will Incur Significant Costs To Develop This Experience Or Rely On Third Parties To Manufacture Our Products On Our Behalf.

We have limited manufacturing experience and in order to continue to develop products, apply for regulatory approvals, and commercialize our products, we will need to develop, contract for, or otherwise arrange for the necessary manufacturing capabilities.

We expect to manufacture certain of our products in our own manufacturing facilities. We will require substantial additional funds and need to recruit qualified personnel in order to build or lease and operate any manufacturing facilities.

We also rely upon third parties for the production of certain of our products and we expect to continue to do so in the future. To the extent that we enter into manufacturing arrangements with third parties, we will be dependent upon these third parties to perform their obligations in a timely manner and in accordance with applicable government regulations. There are a limited number of such third party manufacturers capable of manufacturing our protein products with a limited amount of production capacity. As a result, we may experience difficulty in obtaining adequate manufacturing capacity for our needs. If we are unable to obtain or maintain contract manufacturing of these products, or to do so on commercially reasonable terms, we may not be able to complete development of these products or market them.

If We Fail To Obtain An Adequate Level Of Reimbursement By Third Party Payors For Our Products, We May Not Have Commercially Viable Markets For Our Products.

In certain countries, particularly the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In the United States, the availability of reimbursement by governmental and other third party payors affects the market for any pharmaceutical product. These third party payors continually attempt to contain or reduce the costs of health care by challenging the prices charged for medical products and services.

The Health Care Financing Administration of the U.S. Department of Health and Human Services has considered proposals from time to time to reduce the reimbursement rate with respect to erythropoietin. Adoption by the Health Care Financing Administration of any such proposal might have an adverse effect on the pricing of Dynepo.

If we or our collaborators obtain marketing approvals for our products, we may experience pricing pressure due to the trend toward managed health care, the increasing influence of health maintenance organizations, and additional legislative proposals. We may not be able to sell our products profitably if reimbursement is unavailable or limited in scope or amount.

We Face Significant Competition, Which May Result In Others Discovering, Developing or Commercializing Products Before Or More Successfully Than We Do.

The biotechnology industry is highly competitive and characterized by rapid and significant technological change. Our competitors include pharmaceutical companies, biotechnology firms, universities, and other research institutions. Many of these competitors have substantially greater financial and other resources than we do and are conducting extensive research and development activities on technologies and products similar to or competitive with ours.

We may be unable to develop technologies and products that are more clinically efficacious or cost-effective than products developed by our competitors. Even if we obtain marketing approval for our product candidates, many of our competitors have more extensive and established sales, marketing, and distribution capabilities than we do. Litigation with third parties, including our litigation with Amgen and Genzyme, could delay our time to market or preclude us from reaching the market for certain products and enable our competitors to more quickly and effectively penetrate certain markets.

Niche Proteins. We believe that the primary competition with respect to our Niche Protein product program is from biotechnology and smaller pharmaceutical companies. Our competitors with respect to our Niche Protein product program include BioMarin Pharmaceutical Inc., Genzyme, Novazyme Pharmaceuticals, Inc., Orphan Medical, Inc., Oxford GlycoSciences Plc, Pharming Group, N.V., and Synpac Pharmaceuticals, Ltd. The markets for some of our potential Niche Protein products are quite small. As a result, if competitive products exist, we may not be able to successfully commercialize our products.

Gene-Activated Proteins. Under our Gene-Activated protein program, some of the products we are developing are fully human versions of proteins that are currently marketed by third parties. For instance, in the case of Dynepo, erythropoietin is marketed by Amgen and Johnson & Johnson in the U.S.; Amgen, F. Hoffmann-La Roche Ltd. (Boehringer Mannheim GmbH) and Johnson & Johnson (Janssen-Cilag) in Europe; and Sankyo Company Ltd., Chugai Pharmaceutical Co., Ltd., and Kirin in Japan.

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

Gene Therapy. Our gene therapy system will have to compete with other gene therapy systems, as well as with conventional methods of treating targeted diseases and conditions. 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.

Competition For Technical, Commercial And Administrative Personnel Is Intense In Our Industry And We May Not Be Able To Sustain Our Operations or Grow If We Are Unable to Attract and Retain Key Personnel.

Our success is highly dependent on the retention of principal members of our technical, commercial, and administrative staff. Furthermore, our future growth will require hiring a significant number of qualified technical, commercial and administrative personnel. Accordingly, recruiting and retaining such personnel in the future will be critical to our success. There is intense competition from other companies and research and academic institutions for qualified personnel in the areas of our activities. If we are not able to continue to attract and retain, on acceptable terms, the qualified personnel necessary for the continued development of our business, we may not be able to sustain our operations or grow.

We Have Limited Sales And Marketing Experience And Capabilities And Will Need To Develop This Expertise Or Depend On Third Parties To Successfully Sell And Market Our Products On Our Behalf.

We have limited sales and marketing experience and capabilities. In order to market our products, including Replagal, we will need to develop this experience and these capabilities or rely upon third parties, such as our collaborators, to perform these functions. If we rely on third parties to sell, market, or distribute our products, our success will be dependent upon the efforts of these third parties in performing these functions. In many instances, we may have little or no control over the activities of these third parties in selling, marketing, and distributing our products. If we choose to conduct these activities directly, as we plan to do with respect to some of our potential products, we may not be able to recruit and maintain an effective sales force.

We Depend On Our Collaborators To Develop, Conduct Clinical Trials, Obtain Regulatory Approvals For, And Manufacture, Market And Sell Our Principal Products On Our Behalf And None Of Their Efforts May Be Scientifically Or Commercially Successful.

We are parties to collaborative agreements with third parties relating to certain of our principal products. We are relying on Aventis to develop, conduct clinical trials, obtain regulatory approvals for, and manufacture, market, and sell Dynepo; Sumitomo Pharmaceuticals Co., Ltd. to develop and commercialize Replagal for Fabry disease in Japan and other Asian countries; and Genetics Institute, Inc. to co-develop and commercialize Factor VIII gene therapy for hemophilia A in Europe. Our collaborators may not devote the resources necessary or may otherwise be unable to complete development and commercialization of these potential products. Our existing collaborations are subject to termination without cause on short notice under specified circumstances.

Our existing collaborations and any future collaborative arrangements with third parties may not be scientifically or commercially successful. Factors that may affect the success of our collaborations include the following:

• our collaborators may be pursuing alternative technologies or developing alternative products, either on their own or in collaboration with others, that may be competitive with the product as to which they are collaborating with us or which could affect our collaborative partners' commitment to the collaboration with us;

• reductions in marketing or sales efforts or a discontinuation of marketing or sales of our products by our collaborators would reduce our revenues, which will be based on a percentage of net sales by the collaborator;

• our collaborators may terminate their collaborations with us, which could make it difficult for us to attract new collaborators or adversely affect the perception of us in the business and financial communities; and

• our collaborators may pursue higher priority programs or change the focus of their development programs, which could affect the collaborator's commitment to us.

Some Gene Therapy Clinical Trials Have Been Suspended And Ethical And Social Issues Relating To Genetic Testing May Cause Regulatory Authorities To Increase The Regulation Of Gene Therapy Clinical Trials.

Due to recent adverse events that have occurred during gene therapy clinical trials conducted by other biotechnology and pharmaceutical companies and institutions, the Federal government, the EMEA, the FDA, industry organizations, and institutions conducting gene therapy clinical trials have grown increasingly concerned about the safety of these clinical trials. An increased concern over gene therapy trials generally may lead the EMEA, the FDA or other regulatory agencies to impose further regulation on gene therapy clinical trials. If further regulations are imposed on gene therapy research generally, the delays and costs involved in complying with such regulations may impair our ability to complete clinical trials already in progress and to conduct gene therapy clinical trials in the future.

We May Be Exposed To Product Liability Claims And May Not Be Able To Obtain Adequate Product Liability Insurance.

Our business exposes us to the risk of product liability claims that is inherent in the manufacturing, testing, and marketing of human therapeutic products. Our clinical trial liability insurance is subject to deductibles and coverage limitations. We do not currently have any product liability insurance. We may not be able to obtain or maintain insurance on acceptable terms or at all. Moreover, any insurance that we do obtain may not provide adequate protection against potential liabilities. If we are unable to obtain insurance at acceptable cost or otherwise protect against potential product liability claims, we will be exposed to significant liabilities, which may materially and adversely affect our business and financial position. These liabilities could prevent or interfere with our product commercialization efforts.


Delaware		04-3027191
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


195 Albany Street Cambridge, Massachusetts		02139
(Address of principal executive offices)		(Zip Code)


Registrant's telephone number, including area code: (617) 349-0200


PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2001 and 2000

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2000

	Notes to Condensed Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings

Item 6.	Exhibits and Reports on Form 8-K

SIGNATURES