8-K

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UNITED STATES
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):
October 24, 2002

GENZYME CORPORATION
(Exact name of registrant as specified in its charter)

Massachusetts (State or other jurisdiction of incorporation or organization)	0-14680 (Commission file number)	06-1047163 (IRS employer identification number)
One Kendall Square, Cambridge, Massachusetts 02139 (Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code:
(617)252-7500

NOTE REGARDING REFERENCES TO GENZYME DIVISIONS

        Throughout this Form 8-K, the words "we," "us," "our" and "Genzyme" refer to Genzyme Corporation and all of its operating divisions taken as a whole, and "our board of directors" refers to the board of directors of Genzyme Corporation. In addition, we refer to our three operating divisions as follows:

•

Genzyme General Division = "Genzyme General;"



•

Genzyme Biosurgery Division = "Genzyme Biosurgery;" and



•

Genzyme Molecular Oncology Division = "Genzyme Molecular Oncology."

ITEM 5.    OTHER EVENTS.

        Effective January 1, 2002, we adopted Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards, or SFAS, No. 142, "Goodwill and Other Intangible Assets." This current report on Form 8-K is being filed to include selected financial data and related notes thereto, including the transitional disclosures required by SFAS No. 142, set forth in Exhibits 99.1 hereto which describe the impact that the standard would have had on our consolidated financial statements and the combined financial statements of Genzyme General, Genzyme Biosurgery and Genzyme Molecular Oncology had the standard been adopted January 1, 2001, 2000 and 1999.

ITEM 7.    FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.

(c)

Exhibits:

99.1 Selected financial data tables and related notes thereto, including the transitional disclosures required by SFAS No. 142, which describe the impact that the standard would have had on our consolidated financial statements and the combined financial statements of Genzyme General, Genzyme Biosurgery and Genzyme Molecular Oncology had the standard been adopted on January 1, 2001, 2000 and 1999.

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.

	GENZYME CORPORATION
DATE: October 24, 2002	By:	/s/  MICHAEL S. WYZGA Michael S. Wyzga Senior Vice President, Finance, Chief Financial Officer, and Chief Accounting Officer

EXHIBIT INDEX

EXHIBIT NO.	DESCRIPTION
99.1	Selected financial data tables and related notes thereto, including the transitional disclosures required by SFAS No. 142, which describe the impact that the standard would have had on our consolidated financial statements and the combined financial statements of Genzyme General, Genzyme Biosurgery and Genzyme Molecular Oncology had the standard been adopted on January 1, 2001, 2000 and 1999.

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SIGNATURES
EXHIBIT INDEX

EX-99.1

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Exhibit 99.1

GENZYME CORPORATION

CONSOLIDATED SELECTED FINANCIAL DATA

INTRODUCTION

        The table below represents our selected historical consolidated statements of operations data and consolidated balance sheet data. The statements of operations and balance sheet data for the years ended December 31, 1997 through 2001 have been derived from our audited, consolidated financial statements for those periods. The statements of operations data for the six months ended June 30, 2001 and 2002 and the balance sheet data as of June 30, 2002 are derived from our unaudited, consolidated financial statements for those periods. In the opinion of our management, our unaudited, consolidated financial statements include all normal and recurring adjustments that we consider necessary for a fair presentation of our financial position and results of operations for these periods. The operating results for the six months ended June 30, 2002 are not necessarily indicative of the results that may be expected for the entire fiscal year. This information is only a summary. You should read it in conjunction with our historical financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our annual reports, quarterly reports and other information on file with the Securities and Exchange Commission, commonly referred to as the SEC.

        We have three series of common stock—Genzyme General Division common stock, which we refer to as "Genzyme General Stock," Genzyme Biosurgery Division common stock, which we refer to as "Biosurgery Stock," and Genzyme Molecular Oncology Division common stock, which we refer to as "Molecular Oncology Stock." We also refer to our series of stock as "tracking stock." Unlike typical common stock, each of our tracking stocks is designed to track the financial performance of a specified subset of our business operations and its allocated assets, rather than operations and assets of our entire company. The chief mechanisms intended to cause each tracking stock to "track" the financial performance of each division are provisions in our charter governing dividends and distributions. Under these provisions, our charter:

•

factors the assets and liabilities and income or losses attributable to a division into the determination of the amount available to pay dividends on the associated tracking stock; and



•

requires us to exchange, redeem or distribute a dividend to the holders of Biosurgery Stock or Molecular Oncology Stock if all or substantially all of the assets allocated to those corresponding divisions are sold to a third party. A dividend or redemption payment must equal in value the net after-tax proceeds from the sale. An exchange must be for Genzyme General Stock at a 10% premium to the average market price of the exchanged stock calculated over a ten day period beginning on the first business day following the announcement of the sale.

        Shares of Biosurgery Stock and Molecular Oncology Stock are subject to certain exchange and redemption provisions as set forth in our charter. One of the exchange provisions allows our board of directors to exchange, at any time, shares of Biosurgery Stock and/or Molecular Oncology Stock for cash, shares of Genzyme General Stock, or a combination of both, valued at a 30% premium to the fair market value (as defined in our charter) of the series of stock being exchanged. We encourage you to read our charter for a more complete discussion of the mandatory and optional exchange and redemption provisions of our common stock.

        To determine earnings per share, we allocate our earnings to each series of our common stock based on the earnings attributable to that series of stock. The earnings attributable to each series of stock is defined in our charter as the net income or loss of the corresponding division determined in

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accordance with accounting principles generally accepted in the United States of America, or U.S. and as adjusted for tax benefits allocated to or from that division in accordance with our management and accounting policies. Our charter also requires that all of our income and expenses be allocated among our divisions in a reasonable and consistent manner. Our board of directors, however, retains considerable discretion in interpreting and changing the methods of allocating earnings to each series of common stock without shareholder approval. As market or competitive conditions warrant, we may create a new series of tracking stock or change our earnings allocation methodology. However, at the present time, we have no plans to do so. Because the earnings allocated to each series of stock are based on the income or losses attributable to each corresponding division, we provide financial statements and management's discussion and analysis for the corporation and each of our divisions to aid investors in evaluating our performance and the performance of each of our divisions.

        While each tracking stock is designed to reflect a division's performance, it is common stock of Genzyme Corporation and not of a division. Our divisions are not separate companies or legal entities, and therefore do not and cannot issue stock. Holders of tracking stock have no specific rights to assets allocated to the corresponding division. We continue to hold title to all of the assets allocated to the corresponding division and are responsible for all of its liabilities, regardless of what we deem for financial statement presentation purposes as allocated to any division. Holders of each tracking stock, as common stockholders are, therefore, subject to the risks of investing in the businesses, assets and liabilities of Genzyme as a whole. For instance, the assets allocated to each division are subject to company-wide claims of creditors, product liability plaintiffs and stockholder litigation. Also, in the event of a Genzyme liquidation, insolvency or similar event, holders of each tracking stock would only have the rights of common stockholders in the combined assets of Genzyme.

DISPOSITION

        In November 2001, we sold the Snowden-Pencer line of surgical instruments, consisting of reusable surgical instruments for open and endoscopic surgery, including general, plastic, gynecological and open cardiovascular surgery, for $15.9 million in net cash. The purchaser acquired all of the assets directly associated with Snowden-Pencer products, and is subleasing from us a manufacturing facility that we lease in Tucker, Georgia. The assets sold had a carrying value of approximately $41.0 million net cash at the time of the sale. We recorded a loss of $25.0 million in our consolidated financial statements and in the combined financial statements of Genzyme Biosurgery in connection with this sale. We also recorded a related tax benefit of $4.7 million in our consolidated financial statements.

ACQUISITIONS

        On September 26, 2001, we acquired all of the outstanding capital stock of Novazyme Pharmaceuticals, Inc., a privately-held company engaged in the development of biotherapies for the treatment of lysosomal storage disorders, or LSDs, for an initial payment of approximately 2.6 million shares of Genzyme General Stock valued at $110.6 million. Novazyme shareholders received 0.5714 of a share of Genzyme General Stock for each share of Novazyme common stock they held. We will be obligated to make two additional payments totaling $87.5 million, payable in shares of Genzyme General Stock, if we receive U.S. marketing approval for two products for the treatment of LSDs that employ certain of Novazyme's technologies. In connection with the merger, we also assumed all of the outstanding options, warrants and rights to purchase Novazyme common stock on an as-converted basis. We allocated the acquisition to Genzyme General and accounted for the acquisition as a purchase. Accordingly, the results of operations of Novazyme are included in our consolidated financial statements and the combined financial statements of Genzyme General from the date of acquisition.

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        The staff of the U.S. Federal Trade Commission, which is known as the FTC, is investigating our acquisition of Novazyme. The FTC is one of the agencies responsible for enforcing federal antitrust laws, and, in this investigation, it is evaluating whether there are anti-competitive aspects of the Novazyme transaction that the government should seek to negate. While we do not believe that the acquisition should be deemed to contravene antitrust laws, we have been cooperating in the FTC investigation. At this stage, we cannot predict with precision the likely outcome of the investigation or how that outcome will impact our business. As with any litigation or investigation, there will be costs associated with responding to the investigation, both in terms of management time and out-of-pocket expenses.

        In January 2001, Focal, Inc. exercised its option to require us to purchase $5.0 million in Focal common stock. After that purchase we held approximately 22% of the outstanding shares of Focal common stock and began accounting for our investment under the equity method of accounting. On June 30, 2001, we acquired the remaining 78% of the outstanding shares of Focal common stock that we had not previously acquired. Focal shareholders received 0.1545 of a share of Biosurgery Stock for each share of Focal common stock they held. We issued approximately 2.1 million shares of Biosurgery Stock, valued at approximately $9.5 million, as consideration. We also assumed all of the outstanding options to purchase Focal common stock and exchanged them for options to purchase Biosurgery Stock on an as-converted basis. We accounted for the acquisition as a purchase and allocated it to Genzyme Biosurgery. Accordingly, the results of operations of Focal are included in our consolidated financial statements and the combined financial statements of Genzyme Biosurgery from the date of acquisition.

        On June 1, 2001, we acquired all of the outstanding capital stock of privately-held Wyntek Diagnostics, Inc., for $65.0 million of cash. Wyntek is a provider of high quality point of care rapid diagnostic tests for pregnancy and infectious diseases. We allocated the acquisition to Genzyme General and accounted for the acquisition as a purchase. Accordingly, the results of operations of Wyntek are included in our consolidated financial statements and the combined financial statements of Genzyme General from the date of acquisition.

        In January 2001, we acquired the outstanding Class A limited partnership interests in Genzyme Development Partners, L.P., which we refer to as GDP, a limited partnership engaged in developing, producing and commercializing Sepra products, for an aggregate of $25.7 million plus royalties on sales of certain Sepra products for ten years. In August 2001, we purchased the remaining outstanding GDP limited partnership interests, consisting of two Class B interests, for an aggregate of $180,000 plus additional royalties on sales of certain Sepra products for ten years. We accounted for the acquisitions as purchases and allocated them to Genzyme Biosurgery. Accordingly, the results of operations of GDP are included in our consolidated financial statements and the combined financial statements of Genzyme Biosurgery from January 9, 2001, the date of acquisition of the Class A interests.

        On December 18, 2000, we acquired Biomatrix, Inc., a publicly-held company engaged in the development and manufacture of viscoelastic biomaterials for use in orthopaedic and other medical applications, for an aggregate purchase price of $482.4 million. At the time of the merger, we created Genzyme Biosurgery as a new division. We re-allocated the businesses of two of our then-existing divisions—Genzyme Surgical Products and Genzyme Tissue Repair—to Genzyme Biosurgery and allocated the acquired businesses of Biomatrix to Genzyme Biosurgery. As a result of this transaction, we amended our charter to create Biosurgery Stock and eliminate Genzyme Surgical Products Division common stock, which we refer to as "Surgical Products Stock" and Genzyme Tissue Repair Division common stock, which we refer to as "Tissue Repair Stock." Each outstanding share of, or option to purchase, Surgical Products Stock was converted into the right to receive 0.6060 of a share of, or option to purchase, Biosurgery Stock and each outstanding share of, or option to purchase, Tissue

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Repair Stock was converted into the right to receive 0.3352 of a share of, or option to purchase, Biosurgery Stock. We accounted for the acquisition as a purchase and, accordingly, the results of operations of Biomatrix are included in our consolidated financial statements and the combined financial statements of Genzyme Biosurgery from the date of acquisition.

        On December 14, 2000, we acquired GelTex Pharmaceuticals, Inc., a publicly-held company engaged in developing therapeutic products based on polymer technology, for an aggregate purchase price of approximately $1.1 billion, of which we paid $515.2 million in cash and approximately 15.8 million in shares of Genzyme General Stock valued at $491.2 million. We accounted for the acquisition as a purchase and allocated it to Genzyme General. Accordingly, the results of operations of GelTex are included in our consolidated financial statements and the combined financial statements of Genzyme General from the date of acquisition. As part of the acquisition of GelTex, we acquired all of GelTex's ownership interest in RenaGel LLC, our joint venture with GelTex. Prior to the acquisition of GelTex, we accounted for our investment in RenaGel LLC under the equity method of accounting. These summary financial statements reflect the consolidation of RenaGel LLC into our financial statements and account for our purchase of GelTex's 50% interest in the joint venture using the purchase method of accounting.

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CONSOLIDATED STATEMENTS OF OPERATIONS DATA

				Six Months Ended June 30,						For the Years Ended December 31,
				2002			2001			2001			2000			1999			1998			1997
				(Unaudited)
				(Amounts in thousands)
Revenues:
	Net product sales			$	566,606		$	524,303		$	1,110,254		$	811,897		$	683,482		$	613,685		$	529,927
	Net service sales				54,707			47,995			98,370			84,482			79,448			74,682			67,158
	Revenues from research and development contracts:
		Related parties			1,396			1,632			3,279			509			2,012			5,745			8,356
		Other			7,423			4,972			11,727			6,432			7,346			15,223			3,400
			Total revenues		630,132			578,902			1,223,630			903,320			772,288			709,335			608,841
Operating costs and expenses:
	Cost of products sold				148,676			156,132			307,425			232,383			182,337			211,076			206,028
	Cost of services sold				31,457			26,849			56,173			50,177			49,444			48,586			47,289
	Selling, general and administrative(1)				213,840			194,780			424,640			264,551			242,797			215,203			200,133
	Research and development (including research and development related to contracts)				158,075			119,524			264,004			169,478			150,516			119,005			89,558
	Amortization of intangibles(2)				35,183			59,165			121,124			22,974			24,674			24,334			17,245
	Purchase of in-process research and development(3)				—			8,768			95,568			200,191			5,436			—			7,000
	Charge for impaired asset(4)				—			—			—			4,321			—			—			—
		Total operating costs and expenses			587,231			565,218			1,268,934			944,075			655,204			618,204			567,253
Operating income (loss)					42,901			13,684			(45,304	)		(40,755	)		117,084			91,131			41,588
Other income (expenses):
	Equity in net loss of unconsolidated affiliates				(8,042	)		(20,811	)		(35,681	)		(44,965	)		(42,696	)		(29,006	)		(12,837	)
	Gain (loss) on affiliate sale of stock(5)				(125	)		—			212			22,689			6,683			2,369			—
	Gain (loss) on investments in equity securities(6)				509			(1,532	)		(25,996	)		15,873			(3,749	)		(6	)		—
	Minority interest				—			1,999			2,259			4,625			3,674			4,285			—
	Gain (loss) on sale of product line(7)				—			—			(24,999	)		—			8,018			31,202			—
	Other(8)				1,088			(3,843	)		(2,205	)		5,188			14,527			—			(1,764	)
	Investment income				26,061			22,641			50,504			45,593			36,158			25,055			11,409
	Interest expense				(13,865	)		(22,136	)		(37,133	)		(15,710	)		(21,771	)		(22,593	)		(12,667	)
		Total other income (expenses)			5,626			(23,682	)		(73,039	)		33,293			844			11,306			(15,859	)

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CONSOLIDATED STATEMENTS OF OPERATIONS DATA (Continued)

		Six Months Ended June 30,						For the Years Ended December 31,
		2002			2001			2001			2000			1999			1998			1997
		(Unaudited)
		(Amounts in thousands, except per share amounts)
Income (loss) before income taxes			48,527			(9,998	)		(118,343	)		(7,462	)		117,928			102,437			25,729
Benefit from (provision for) income taxes			(13,431	)		2,734			2,020			(55,478	)		(46,947	)		(39,870	)		(12,100	)
Net income (loss) before cumulative effect of change in accounting for derivative financial instruments and goodwill		$	35,096		$	(7,264	)	$	(116,323	)	$	(62,940	)	$	70,981		$	62,567		$	13,629
Cumulative effect of change in accounting for derivative financial instruments, net of tax(9)			—			4,167			4,167			—			—			—			—
Cumulative effect of change in accounting for goodwill(2)			(98,270	)		—			—			—			—			—			—
Net income (loss)(2,9)		$	(63,174	)	$	(3,097	)	$	(112,156	)	$	(62,940	)	$	70,981		$	62,567		$	13,629
Net income (loss) per share:
Allocated to Genzyme General Stock(2,10,11,12,14,15):
	Net income before cumulative effect of change in accounting for derivative financial instruments	$	68,720		$	46,863		$	3,879		$	85,956		$	142,077		$	133,052		$	76,642
	Cumulative effect of change in accounting for derivative financial instruments, net of tax(9)		—			4,167			4,167			—			—			—			—
	Genzyme General net income		68,720			51,030			8,046			85,956			142,077			133,052			76,642
	Genzyme Surgical Products net loss		—			—			—			—			(27,523	)		(49,856	)		(29,740	)
	Tax benefit allocated from Genzyme Biosurgery		7,293			17,743			24,593			28,023			26,994			34,330			27,778
	Tax benefit allocated from Genzyme Molecular Oncology		4,365			6,680			11,904			7,476			7,812			3,527			2,755
	Net income allocated to Genzyme General Stock	$	80,378		$	75,453		$	44,543		$	121,455		$	149,360		$	121,053		$	77,435
Net income per share of Genzyme General Stock:
	Basic:
	Net income per share before cumulative effect of change in accounting for derivative financial instruments	$	0.38		$	0.37		$	0.20		$	0.71		$	0.90		$	0.77		$	0.51
	Per share cumulative effect of change in accounting for derivative financial instruments, net of tax(9)		—			0.02			0.02			—			—			—			—
	Net income per share allocated to Genzyme General Stock	$	0.38		$	0.39		$	0.22		$	0.71		$	0.90		$	0.77		$	0.51
	Diluted:
	Net income per share before cumulative effect of change in accounting for derivative financial instruments	$	0.36		$	0.35		$	0.19		$	0.68		$	0.85		$	0.74		$	0.49
	Per share cumulative effect of change in accounting for derivative financial instruments, net of tax(9)		—			0.02			0.02			—			—			—			—
	Net income per share allocated to Genzyme General Stock	$	0.36		$	0.37		$	0.21		$	0.68		$	0.85		$	0.74		$	0.49

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CONSOLIDATED STATEMENTS OF OPERATIONS DATA (Continued)

		Six Months Ended June 30,						For the Years Ended December 31,
		2002			2001			2001			2000			1999			1998			1997
		(Unaudited)
		(Amounts in thousands, except per share amounts)
Weighted average shares outstanding(12):
	Basic		213,624			194,086			202,221			172,263			166,185			158,127			153,061
	Diluted		220,349			203,290			211,176			179,366			186,456			171,643			157,850
Allocated to Biosurgery Stock(2,11,13):
	Genzyme Biosurgery net loss before cumulative effect of change in accounting for goodwill	$	(37,904	)	$	(72,935	)	$	(145,170	)	$	(87,636	)
	Cumulative effect of change in accounting for goodwill		(98,270	)		—			—			—
	Genzyme Biosurgery net loss		(136,174	)		(72,935	)		(145,170	)		(87,636	)
	Allocated tax benefit		4,890			8,990			18,189			448
	Net loss allocated to Biosurgery Stock	$	(131,284	)	$	(63,945	)	$	(126,981	)	$	(87,188	)
	Net loss per share of Biosurgery Stock—basic and diluted:
	Genzyme Biosurgery net loss before cumulative affect of change in accounting for goodwill	$	(0.83	)	$	(1.75	)	$	(3.34	)	$	(2.40	)
	Per share cumulative effect of change in accounting for goodwill		(2.48	)		—			—			—
	Net loss per share of Biosurgery Stock—basic and diluted	$	(3.31	)	$	(1.75	)	$	(3.34	)	$	(2.40	)
	Weighted average shares outstanding		39,600			36,531			37,982			36,359
Allocated to Molecular Oncology Stock(2,11,14):
	Net loss allocated to Molecular Oncology Stock	$	(12,268	)	$	(14,605	)	$	(29,718	)	$	(23,096	)	$	(28,832	)	$	(19,107	)	$	(18,238	)
	Net loss per share of Molecular Oncology Stock—basic and diluted	$	(0.73	)	$	(0.91	)	$	(1.82	)	$	(1.60	)	$	(2.25	)	$	(3.81	)	$	(4.64	)
	Weighted average shares outstanding		16,782			15,998			16,350			14,446			12,826			5,019			3,929
Allocated to Surgical Products Stock (2,11,13,15):
	Net loss										$	(54,748	)	$	(20,514	)
	Net loss per share of Surgical Products Stock—basic and diluted										$	(3.67	)	$	(1.38	)
	Weighted average shares outstanding											14,900			14,835
Allocated to Tissue Repair Stock(2,11,13):
	Net loss										$	(19,833	)	$	(30,040	)	$	(40,386	)	$	(45,984	)
	Net loss per share of Tissue Repair Stock—basic and diluted										$	(0.69	)	$	(1.26	)	$	(1.99	)	$	(3.07	)
	Weighted average shares outstanding											28,716			23,807			20,277			14,976

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CONSOLIDATED BALANCE SHEET DATA

			December 31,
	June 30, 2002		2001		2000		1999		1998		1997
	(Unaudited)
	(Amounts in thousands)
Cash and investments	$	1,132,977	$	1,121,258	$	639,640	$	652,990	$	575,729	$	246,341
Working capital		669,319		566,798		559,652		592,249		417,116		350,822
Total assets		3,911,859		3,935,745		3,318,100		1,787,282		1,688,854		1,295,453
Long-term debt, capital lease obligations and convertible debt(16)		869,381		852,555		685,137		295,702		387,993		171,181
Stockholders' equity		2,584,566		2,609,189		2,175,141		1,356,392		1,172,535		1,012,050

There were no cash dividends paid.

(1)

Selling, general and administrative expenses for 2001 include $27.0 million of charges resulting from Pharming Group N.V.'s decision to file for and operate under a court supervised receivership.

(2)

In connection with the adoption of Statement of Financial Accounting Standards, or SFAS, No. 142, "Goodwill and Other Intangible Assets," on January 1, 2002, we tested the goodwill of our cardiothoracic reporting unit for impairment and, as a result, reduced goodwill by recording a cumulative effect impairment charge of $98.3 million in our unaudited, consolidated statements of operations and the unaudited, combined statements of Genzyme Biosurgery for the three months ended March 31, 2002.

The following table presents the impact that SFAS No. 142 would have had on our amortization of intangibles expense, net income (loss) and net income (loss) per share had the standard been in effect for the six months ended June 30, 2001 and for the years ended December 31, 2001, 2000 and 1999 (amounts in thousands, except per share amounts):

			Six Months Ended June 30, 2001								Year Ended December 31, 2001
			As Reported			Goodwill Amortization Adjustment			As Adjusted		As Reported			Goodwill Amortization Adjustment			As Adjusted
						(Unaudited)								(Unaudited)
Amortization of intangibles			$	59,165		$	(25,868	)	$	33,297	$	121,124		$	(52,541	)	$	68,583
Net income (loss) before cumulative effect of change in accounting for derivative financial instruments			$	(7,264	)	$	25,868		$	18,604	$	(116,323	)	$	52,541		$	(63,782	)
Cumulative effect of change in accounting for derivative financial instruments, net of tax				4,167			—			4,167		4,167			—			4,167
Net income (loss)			$	(3,097	)	$	25,868		$	22,771	$	(112,156	)	$	52,541		$	(59,615	)
Net income allocated to Genzyme General Stock:
	Net income allocated to Genzyme General Stock before cumulative effect of accounting for derivative financial instruments		$	71,286		$	18,012		$	89,298	$	40,376		$	37,020		$	77,396
	Cumulative effect of change in accounting for derivative financial instruments, net of tax			4,167			—			4,167		4,167			—			4,167
	Net income allocated to Genzyme General Stock		$	75,453		$	18,012		$	93,465	$	44,543		$	37,020		$	81,563
Net income (loss) per share of Genzyme General Stock:
	Basic:
		Net income per share before cumulative effect of change in accounting for derivative financial instruments	$	0.37		$	0.09		$	0.46	$	0.20		$	0.18		$	0.38
		Cumulative effect of change in accounting for derivative financial instruments, net of tax		0.02			—			0.02		0.02			—			0.02
		Net income allocated to Genzyme General Stock	$	0.39		$	0.09		$	0.48	$	0.22		$	0.18		$	0.40

8

	Diluted:
		Net income per share before cumulative effect of change in accounting for derivative financial instruments	$	0.35		$	0.09	$	0.44		$	0.19		$	0.18	$	0.37
		Cumulative effect of change in accounting for derivative financial instruments, net of tax		0.02			—		0.02			0.02			—		0.02
		Net income allocated to Genzyme General Stock	$	0.37		$	0.09	$	0.46		$	0.21		$	0.18	$	0.39
Net income (loss) allocated to Biosurgery Stock			$	(63,945	)	$	7,856	$	(56,089	)	$	(126,981	)	$	15,521	$	(111,460	)
Net income (loss) per share of Biosurgery Stock—basic and diluted			$	(1.75	)	$	0.21	$	(1.54	)	$	(3.34	)	$	0.41	$	(2.93	)
Net income (loss) allocated to Molecular Oncology Stock			$	(14,605	)	$	—	$	(14,605	)	$	(29,718	)	$	—	$	(29,718	)
Net income (loss) per share of Molecular Oncology Stock—basic and diluted			$	(0.91	)	$	—	$	(0.91	)	$	(1.82	)	$	—	$	(1.82	)

					Year Ended December 31, 2000									Year Ended December 31, 1999
		As Reported			Goodwill Amortization Adjustment			As Adjusted			As Reported			Goodwill Amortization Adjustment			As Adjusted
					(Unaudited)									(Unaudited)
Amortization of intangibles		$	22,974		$	(12,259	)	$	10,715		$	24,674		$	(12,375	)	$	12,299
Net income (loss)		$	(62,940	)	$	12,259		$	(50,681	)	$	70,981		$	12,375		$	83,356
Net income allocated to Genzyme General Stock:		$	121,455		$	6,608		$	128,063		$	149,360		$	5,261		$	154,621
Net income (loss) per share of Genzyme General Stock:
	Basic	$	0.71		$	0.03		$	0.74		$	0.90		$	0.03		$	0.93
	Diluted	$	0.68		$	0.03		$	0.71		$	0.85		$	0.03		$	0.88
Net income (loss) allocated to Biosurgery Stock		$	(87,188	)	$	555		$	(86,633	)
Net income (loss) per share of Biosurgery Stock—basic and diluted		$	(2.40	)	$	0.02		$	(2.38	)
Net income (loss) allocated to Molecular Oncology Stock		$	(23,096	)	$	2,227		$	(20,869	)	$	(28,832	)	$	4,858		$	(23,974	)
Net income (loss) per share of Molecular Oncology Stock—basic and diluted		$	(1.60	)	$	0.16		$	(1.44	)	$	(2.25	)	$	0.38		$	(1.87	)
Net income (loss) allocated to Surgical Products Stock		$	(54,748	)	$	3,339		$	(51,409	)	$	(20,514	)	$	3,263		$	(17,251	)
Net income (loss) per share of Surgical Products Stock—basic and diluted		$	(3.67	)	$	0.22		$	(3.45	)	$	(1.38	)	$	0.22		$	(1.16	)
Net income (loss) allocated to Tissue Repair Stock		$	(19,833	)	$	—		$	(19,833	)	$	(30,040	)	$	—		$	(30,040	)
Net income (loss) per share of Tissue Repair Stock—basic and diluted		$	(0.69	)	$	—		$	(0.69	)	$	(1.26	)	$	—		$	(1.26	)

(3)

Charges for in-process research and development were incurred in connection with the following acquisitions:

•

2001—$86.8 million from the acquisition of Novazyme and $8.8 million from the acquisition of Wyntek;

•

2000—$118.0 million from the acquisition of GelTex and $82.1 million from the acquisition of Biomatrix;

•

1999—$5.4 million from the acquisition of Peptimmune, Inc.; and

•

1997—$7.0 million from the acquisition of PharmaGenics, Inc.

(4)

Represents a charge to write off abandoned equipment at our Springfield Mills manufacturing facility in the United Kingdom.

9

(5)

During 2000, in accordance with our policy pertaining to affiliate sales of stock, we recorded gains of $22.7 million relating to public offerings of common stock by our unconsolidated affiliate, GTC Biotherapeutics, Inc. (formerly Genzyme Transgenics Corporation), which we refer to as GTC. In the six months ended June 30, 2002 and the years ended December 31, 2001, 1999 and 1998, our gain (loss) on affiliate sale of stock represents the gain (loss) on our investment in GTC as a result of GTC's various issuances of additional shares of its common stock.

(6)

Gain (loss) on investments in equity securities in 2001 includes a charge of $8.5 million to write off our investment in Pharming Group, N.V., a charge of $11.8 million to write down our investment in Cambridge Antibody Technology Group plc and a $4.5 million charge to write down our investment in Targeted Genetics Corporation. We wrote down these investments because we considered the decline in their fair value to be other than temporary. Gain (loss) on investments in equity securities in 2000 includes gains of $16.4 million upon the sale of a portion of our investment in GTC common stock and $7.6 million relating to our investment in Celtrix Pharmaceuticals, Inc. when it was acquired in a stock-for-stock transaction. In 2000, we also recorded a charge of $7.3 million to write down our investment in Focal common stock.

(7)

Loss on sale of product line of $25.0 million in 2001 represents the loss related to the sale of our Snowden-Pencer line of surgical instruments in the fourth quarter of 2001. Gain on sale of product line in 1999 includes $7.5 million for the payment of a note receivable that we received as partial consideration for the sale of Genetic Design, Inc. to Laboratory Corporation of America in 1996, and $0.5 million relating to the sale of our immunochemistry business assets to an operating unit of Sybron Laboratory Products Corp. Gain on sale of product line of $31.2 million in 1998 relates to the sale of our research products business assets to Techne Corporation.

(8)

Other income in 2000 includes a $5.1 million payment received in connection with the settlement of a lawsuit. Other income in 1999 includes the receipt of a $14.4 million payment associated with the termination of our agreement to acquire Cell Genesys, Inc., net of acquisition related expenses.

(9)

On January 1, 2001, we adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and SFAS No. 138. In accordance with the transition provisions of SFAS No. 133, we recorded a cumulative-effect adjustment of $4.2 million, net of tax, in our consolidated statements of operations to record the fair value of warrants to purchase shares of GTC common stock held on January 1, 2001.

(10)

Until the distribution of Surgical Products Stock on June 28, 1999, Genzyme Surgical Products' losses were included in the determination of income allocated to Genzyme General Stock.

(11)

To determine earnings per share, we allocate our earnings to each series of our common stock based on the earnings attributable to that series of stock. The earnings attributable to Genzyme General Stock is defined in our charter as the net income or loss of Genzyme General determined in accordance with accounting principles generally accepted within the U.S. and as adjusted for tax benefits allocated to or from Genzyme General in accordance with our management and accounting policies. Earnings attributable to Biosurgery Stock and Molecular Oncology Stock are defined similarly and, therefore, are based on the net income or loss of the corresponding division.

(12)

Reflects the two-for-one split of Genzyme General Stock on June 1, 2001.

(13)

We created Genzyme Biosurgery on December 18, 2000. Prior to this date, the operations allocated to Genzyme Biosurgery were included in the operations allocated to our then-existing divisions Genzyme Surgical Products and Genzyme Tissue Repair and as of that date, the operations of Genzyme Surgical Products and Genzyme Tissue Repair ceased. Net loss per share of Biosurgery Stock for 2000 is calculated using the net loss allocated to Biosurgery Stock for the period December 19, 2000 through December 31, 2000 and the weighted average shares of Biosurgery Stock outstanding during the same period. Loss per share data are not presented for Genzyme Biosurgery for the period from January 1, 2000 to December 18, 2000 or for the years ended December 31, 1999, 1998 and 1997 as there were no shares of Biosurgery Stock outstanding during those periods.

(14)

We created Genzyme Molecular Oncology on June 18, 1997. Prior to this date, Genzyme Molecular Oncology's losses were included in the determination of income allocated to Genzyme General. Net loss per share of Molecular Oncology Stock for 1997 is calculated using the net loss allocated to Genzyme Molecular Oncology for the period June 18, 1997 through December 31, 1997 and the weighted average shares outstanding during the same period. Loss per share data are not presented for Genzyme Molecular Oncology for the period from January 1, 1997 to June 17, 1997, as there were no shares of Molecular Oncology Stock outstanding during that period.

(15)

We created Genzyme Surgical Products on June 28, 1999. Prior to this date, the operations of Genzyme Surgical Products were included in the operations allocated to Genzyme General and, therefore, in the net income allocated to Genzyme General Stock. Loss per share data are not presented for Genzyme Surgical Products for the years ended December 31, 1997 and 1998 or for the period from January 1, 1999 to June 28, 1999, as there were no shares of Surgical Products Stock outstanding during those periods.

(16)

Long-term debt, capital lease obligations and convertible debt: at June 30, 2002, consists primarily of $575.0 million in principal of our 3% convertible subordinated debentures due May 2021, $269.0 million in principal drawn under our revolving credit facility and a $25.0 million capital lease obligation; at December 31, 2001 consists primarily of $575.0 million in principal of our 3% convertible subordinated debentures, $234.0 million in principal drawn under our revolving credit facility and a $25.0 million capital lease obligation; at December 31, 2000 consists primarily of $368.0 million in principal drawn under our revolving credit facility, $250.0 million in principal of our 5¹/4% convertible subordinated notes and a $25.0 million capital lease obligation; at December 31, 1999 and 1998 consists primarily of $250.0 million in principal of our 5¹/4% convertible subordinated notes; and at December 31, 1997 consists primarily of $118.0 million in principal drawn under our revolving credit facility.

10

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

COMBINED SELECTED FINANCIAL DATA

INTRODUCTION

        The table below represents the selected historical consolidated statements of operations data and combined balance sheet data of Genzyme General. The statements of operations and balance sheet data for the years ended December 31, 1997 through 2001 have been derived from Genzyme General's audited, combined financial statements for those periods. The statements of operations data for the six months ended June 30, 2001 and 2002 and the balance sheet data as of June 30, 2002 are derived from Genzyme General's unaudited, combined financial statements for those periods. In the opinion of our management, the unaudited, combined financial statements include all normal and recurring adjustments that we consider necessary for a fair presentation of the financial position and results of operations of Genzyme General for these periods. Genzyme General's operating results for the six months ended June 30, 2002 are not necessarily indicative of the results that may be expected for the entire fiscal year. This information is only a summary. You should read it in conjunction with the historical financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" for us and Genzyme General contained in our annual reports, quarterly reports and other information on file with the SEC.

        Genzyme General is our operating division that develops and markets:

•

therapeutic products, with an expanding focus on products to treat patients suffering from genetic diseases and other chronic debilitating diseases, including a family of diseases known as LSDs, and other specialty therapeutics;

•

diagnostic products, with a focus on in vitro diagnostics; and

•

other products and services, such as genetic testing and pharmaceutical drug materials.

        A series of our common stock, Genzyme General Stock, is designed to reflect the value and track the performance of this division. Genzyme General Stock is common stock of Genzyme Corporation, not of Genzyme General; Genzyme General is a division, not a company or legal entity, and therefore does not and cannot issue stock. The chief mechanisms intended to cause Genzyme General Stock to "track" the financial performance of Genzyme General are provisions in our charter governing dividends and distributions. Under these provisions, our charter:

•

factors the assets and liabilities and income or losses attributable to Genzyme General into the determination of the amount available to pay dividends on Genzyme General Stock; and

•

requires us to exchange, redeem or distribute a dividend to the holders of Biosurgery Stock or Molecular Oncology Stock if all or substantially all of the assets allocated to those corresponding divisions are sold to a third party. A dividend or redemption payment must equal in value the net after-tax proceeds from the sale. An exchange must be for Genzyme General Stock at a 10% premium to the average market price of the exchanged stock calculated over a ten day period beginning on the first business day following the announcement of the sale.

        Shares of Biosurgery Stock and Molecular Oncology Stock are subject to certain exchange and redemption provisions as set forth in our charter. One of the exchange provisions allows our board of directors to exchange, at any time, shares of Biosurgery Stock and/or Molecular Oncology Stock for cash, shares of Genzyme General Stock, or a combination of both, valued at a 30% premium to the fair market value (as defined in our charter) of the series of stock being exchanged. We encourage you to read our charter for a more complete discussion of the mandatory and optional exchange and redemption provisions of our common stock.

11

        To determine earnings per share, we allocate our earnings to each series of our common stock based on the earnings attributable to that series of stock. The earnings attributable to Genzyme General Stock is defined in our charter as the net income or loss of Genzyme General determined in accordance with accounting principles generally accepted in the U.S. and as adjusted for tax benefits allocated to or from Genzyme General in accordance with our management and accounting policies. Our charter also requires that all of our income and expenses be allocated among our divisions in a reasonable and consistent manner. Our board of directors, however, retains considerable discretion in interpreting and changing the methods of allocating earnings to each series of common stock without shareholder approval. As market or competitive conditions warrant, we may create a new series of tracking stock or change our earnings allocation methodology. However, at the present time, we have no plans to do so. Because the earnings allocated to Genzyme General Stock are based on the income or losses attributable to Genzyme General, we provide financial statements and management's discussion and analysis of Genzyme General to aid investors in evaluating its performance.

ACQUISITIONS

        In September 2001, we acquired all of the outstanding capital stock of Novazyme, a privately-held developer of biotherapies for the treatment of LSDs, for an initial payment of approximately 2.6 million shares of Genzyme General Stock valued at $110.6 million. Novazyme shareholders received 0.5714 of a share of Genzyme General Stock for each share of Novazyme common stock they held. We will be obligated to make two additional payments totaling $87.5 million, payable in shares of Genzyme General Stock, if we receive U.S. marketing approval for two products for the treatment of LSDs that employ certain of Novazyme's technologies. In connection with the merger, we also assumed all of the outstanding options, warrants and rights to purchase Novazyme common stock on an as-converted basis. We allocated the acquisition to Genzyme General and accounted for the acquisition as a purchase. Accordingly, the results of operations of Novazyme are included in the combined financial statements of Genzyme General from September 26, 2001, the date of acquisition.

        The staff of the FTC is investigating our acquisition of Novazyme. The FTC is one of the agencies responsible for enforcing federal antitrust laws, and, in this investigation, it is evaluating whether there are anti-competitive aspects of the Novazyme transaction that the government should seek to negate. While we do not believe that the acquisition should be deemed to contravene antitrust laws, we have been cooperating in the FTC investigation. At this stage, we cannot predict with precision the likely outcome of the investigation or how that outcome will impact our business. As with any litigation or investigation, there will be costs associated with responding to the investigation, both in terms of management time and out-of-pocket expenses.

        In June 2001, we acquired all of the outstanding capital stock of privately-held Wyntek for $65.0 million in cash. Wyntek is a provider of high quality point of care rapid diagnostic tests for pregnancy and infectious diseases. We allocated the acquisition to Genzyme General and accounted for the acquisition as a purchase. Accordingly, the results of operations of Wyntek are included in the combined financial statements of Genzyme General from June 1, 2001, the date of acquisition.

        In December 2000, we acquired GelTex Pharmaceuticals, Inc., a public company engaged in developing therapeutic products based on polymer technology, for an aggregate purchase price of approximately $1.1 billion, of which we paid $515.2 million in cash and issued approximately 15.8 million in shares of Genzyme General Stock valued at $491.2 million. We accounted for the acquisition as a purchase and allocated it to Genzyme General. Accordingly, the results of operations

12

of GelTex are included in the combined financial statements of Genzyme General from December 14, 2000, the date of acquisition.

        As part of the acquisition of GelTex, we acquired GelTex's interest in RenaGel LLC, our joint venture with GelTex. The combined financial statements of Genzyme General reflect the consolidation of RenaGel LLC from the date of acquisition of GelTex. Prior to the acquisition of GelTex, we accounted for our investment in RenaGel LLC under the equity method of accounting.

COMBINED STATEMENTS OF OPERATIONS DATA

				Six Months Ended June 30,						For the Years Ended December 31,
				2002			2001			2001			2000			1999			1998			1997
				(Unaudited)
				(Amounts in thousands)
Revenues:
	Net product sales			$	461,219		$	421,246		$	898,731		$	690,027		$	571,531		$	509,727		$	429,092
	Net service sales				43,595			36,537			74,056			61,161			57,223			55,445			55,835
	Revenues from research and development contracts:
		Related parties			1,396			1,632			3,279			509			1,516			3,568			8,041
		Other			3,105			2,276			5,860			786			5,096			579			3,400
			Total revenues		509,315			461,691			981,926			752,483			635,366			569,319			496,368
Operating costs and expenses:
	Cost of products sold				98,364			95,363			194,175			162,894			115,125			138,802			146,226
	Cost of services sold				24,720			20,901			43,167			37,879			35,637			34,240			35,451
	Selling, general and administrative(1)				156,909			125,089			295,068			166,462			149,427			126,172			118,616
	Research and development (including research and development related to contracts)				120,313			82,591			187,502			112,792			97,746			73,139			62,905
	Amortization of intangibles(2)				19,441			35,852			74,296			10,928			8,106			7,610			6,887
	Purchase of in-process research and development(3)				—			8,768			95,568			118,048			5,436			—			—
			Total operating costs and expenses		419,747			368,564			889,776			609,003			411,477			379,963			370,085
Operating income					89,568			93,127			92,150			143,480			223,889			189,356			126,283
Other income (expenses):
	Equity in net loss of unconsolidated affiliates				(8,042	)		(19,495	)		(34,365	)		(44,965	)		(37,423	)		(19,739	)		(5,782	)
	Gain (loss) on affiliate sale of stock(4)				(125	)		—			212			22,689			6,683			2,369			—
	Gain (loss) on investments in equity securities(5)				509			(1,532	)		(25,996	)		23,173			(3,749	)		(6	)		—
	Minority interest				—			1,999			2,259			4,625			3,674			4,285			—
	Gain on sale of product line(6)				—			—			—			—			8,018			31,202			—
	Other(7)				977			(3,888	)		(2,329	)		5,203			14,389			—			(2,000	)
	Investment income				25,031			21,011			47,806			38,549			30,881			22,953			9,940
	Interest expense				(9,219	)		(13,680	)		(23,192	)		(14,159	)		(19,885	)		(16,994	)		(8,074	)
			Total other income (expenses)		9,131			(15,585	)		(35,605	)		35,115			2,588			24,070			(5,916	)
	Income before income taxes				98,699			77,542			56,545			178,595			226,477			213,426			120,367
	Provision for income taxes				(29,979	)		(30,679	)		(52,666	)		(92,639	)		(84,400	)		(80,374	)		(43,725	)
	Division net income before cumulative effect of change in accounting for derivative financial instruments				68,720			46,863			3,879			85,956			142,077			133,052			76,642
Cumulative effect of change in accounting for derivative financial instruments, net of tax(8)					—			4,167			4,167			—			—			—			—
	Division net income			$	68,720		$	51,030		$	8,046		$	85,956		$	142,077		$	133,052		$	76,642

13

COMBINED BALANCE SHEET DATA

			December 31,
	June 30, 2002		2001		2000		1999		1998		1997
	(Unaudited)
	(Amounts in thousands)
Cash and investments	$	1,080,332	$	1,041,500	$	531,326	$	513,905	$	556,097	$	192,222
Working capital		638,283		478,191		438,733		487,561		381,685		273,697
Total assets		3,348,856		3,225,254		2,499,053		1,399,583		1,410,391		960,490
Long-term debt, capital lease obligations and convertible debt(9)		600,044		606,926		455,684		272,702		357,214		118,713
Division equity		2,431,852		2,280,352		1,750,280		1,007,614		939,967		745,895

(1)

Selling, general and administrative expenses for 2001 includes $27.0 million of charges resulting from Pharming Group, N.V.'s decision to file for and operate under a court supervised receivership.

(2)

Effective January 1, 2002, in accordance with the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets," we ceased amortizing goodwill. The following table presents the impact that SFAS No. 142 would have had on Genzyme General's amortization of intangibles expense and division net income had the standard been in effect for the six months ended June 30, 2001 and for the years ended December 31, 2001, 2000 and 1999 (amounts in thousands):

	Six Months Ended June 30, 2001							Year Ended December 31, 2001
	As Reported		Goodwill Amortization Adjustment			As Adjusted		As Reported		Goodwill Amortization Adjustment			As Adjusted
			(Unaudited)							(Unaudited)
Amortization of intangibles	$	35,852	$	(18,012	)	$	17,840	$	74,296	$	(37,020	)	$	37,276
Genzyme General's net income before cumulative effect of change in accounting for derivative financial instruments	$	46,863	$	18,012		$	64,875	$	3,879	$	37,020		$	40,899
Division net income	$	51,030	$	18,012		$	69,042	$	8,046	$	37,020		$	45,066

	Year Ended December 31, 2000							Year Ended December 31, 1999
	As Reported		Goodwill Amortization Adjustment			As Adjusted		As Reported		Goodwill Amortization Adjustment			As Adjusted
			(Unaudited)							(Unaudited)
Amortization of intangibles	$	10,928	$	(6,608	)	$	4,320	$	8,106	$	(5,261	)	$	2,845
Division net income	$	85,956	$	6,608		$	92,564	$	142,077	$	5,261		$	147,338

14

(3)

Charges for in-process research and development were incurred in connection with the following acquisitions:

•

2001—$86.8 million from the acquisition of Novazyme and $8.8 million from the acquisition of Wyntek;

•

2000—$118.0 million from the acquisition of GelTex; and

•

1999—$5.4 million from the acquisition of Peptimmune, Inc.

(4)

During 2000, in accordance with our policy pertaining to affiliate sales of stock, we recorded gains of $22.7 million relating to public offerings of common stock by our unconsolidated affiliate, GTC. In 2001, 1999 and 1998, our gain on affiliate sale of stock represents the gain on our investment in GTC as a result of GTC's various issuances of additional shares of its common stock.

(5)

Gain (loss) on investments in equity securities for 2001 includes a charge of $8.5 million to write off our investment in Pharming Group, N.V., a charge of $11.8 million to write down our investment in Cambridge Antibody Technology Group plc and a $4.5 million charge to write down our investment in Targeted Genetics Corporation. We wrote down these investments because we considered the decline in the fair value to be other than temporary. Gain (loss) on investments in equity securities in 2000 includes gains of $16.4 million upon the sale of a portion of our investment in GTC common stock and $7.6 million relating to our investment in Celtrix Pharmaceuticals, Inc. when it was acquired in a stock-for-stock transaction.

(6)

Gain on sale of product line in 1999 includes $7.5 million for the payment of a note receivable that we received as partial consideration for the sale of Genetic Design, Inc. to Laboratory Corporation of America in 1996, and $0.5 million relating to the sale of our immunochemistry business assets to an operating unit of Sybron Laboratory Products Corp. Gain on sale of product line of $31.2 million in 1998 relates to the sale of our research products business assets to Techne Corporation.

(7)

Other income in 2000 includes a $5.1 million payment received in connection with the settlement of a lawsuit. Other income in 1999 includes the receipt of a $14.4 million payment associated with the termination of our agreement to acquire Cell Genesys, Inc., net of acquisition related expenses.

(8)

On January 1, 2001, we adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and SFAS No. 138. In accordance with the transition provisions of SFAS No. 133, Genzyme General recorded a cumulative-effect adjustment of $4.2 million, net of tax, in its combined statement of operations to record the fair value of warrants to purchase shares of GTC common stock held on January 1, 2001.

(9)

Long-term debt, capital lease obligations and convertible debt: at June 30, 2002 and December 31, 2001 consists primarily of $575.0 million in principal of our 3% convertible subordinated debentures due May 2021 and a $25.0 million capital lease obligation; at December 31, 2000 consists primarily of $250.0 million in principal of our 5¹/4% convertible subordinated notes, $150.0 million in principal drawn under our revolving credit facility, and a $25.0 million capital lease obligation; at December 31, 1999 and 1998 consists primarily of $250.0 million in principal of 5¹/4% convertible subordinated notes; and at December 31, 1997 consists primarily of $100.0 million in principal drawn under our revolving credit facility.

15

GENZYME BIOSURGERY
A DIVISION OF GENZYME CORPORATION

COMBINED SELECTED FINANCIAL DATA

INTRODUCTION

        The table below represents the selected historical consolidated statements of operations data and combined balance sheet data of Genzyme Biosurgery. We formed Genzyme Biosurgery as a separate division of Genzyme on December 18, 2000 by combining two of our divisions, Genzyme Surgical Products and Genzyme Tissue Repair and simultaneously acquiring Biomatrix, Inc. These data reflect the financial position, results of operations and cash flows attributable to Genzyme Biosurgery as if it had been accounted for as a separate division of the corporation for all periods presented as it relates to Genzyme Surgical Products and Genzyme Tissue Repair. The results of operations of Biomatrix are included in Genzyme Biosurgery's results from the date of acquisition, December 18, 2000. The statements of operations and balance sheet data for the years ended December 31, 1997 through 2001 have been derived from Genzyme Biosurgery's audited, combined financial statements for those periods. The statements of operations data for the six months ended June 30, 2001 and 2002 and the balance sheet data as of June 30, 2002 are derived from Genzyme Biosurgery's unaudited, combined financial statements for those periods. In the opinion of our management, the unaudited, combined financial statements include all normal and recurring adjustments that we consider necessary for a fair presentation of the financial position and results of operations of Genzyme Biosurgery for these periods. Genzyme Biosurgery's operating results for the six months ended June 30, 2002 are not necessarily indicative of the results that may be expected for the entire fiscal year. This information is only a summary. You should read it in conjunction with the historical financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" for us and Genzyme Biosurgery contained in our annual reports, quarterly reports and other information on file with the SEC.

        Genzyme Biosurgery is our operating division that develops and markets implantable biotherapeutic products, biomaterials and medical devices to improve or replace surgery, with an emphasis on the orthopaedic and cardiothoracic markets.

        A series of our common stock, Genzyme Biosurgery Division common stock, which we refer to as "Biosurgery Stock" is designed to reflect the value and track the financial performance of this division. Biosurgery Stock is common stock of Genzyme Corporation, not of Genzyme Biosurgery; Genzyme Biosurgery is a division, not a company or legal entity, and therefore does not and cannot issue stock. The chief mechanisms intended to cause Biosurgery Stock to "track" the performance of Genzyme Biosurgery are provisions in our charter governing dividends and distributions. Under these provisions, our charter:

•

factors the assets and liabilities and income or losses attributable to Genzyme Biosurgery into the determination of the amount available to pay dividends on Biosurgery Stock; and



•

requires us to exchange, redeem or distribute a dividend to the holders of Biosurgery Stock if all or substantially all of the assets allocated to Genzyme Biosurgery are sold to a third party. A dividend or redemption payment must equal in value the net after-tax proceeds from the sale. An exchange must be for Genzyme General Stock at 10% premium to the average market price of the exchanged stock calculated over a ten day period beginning on the first business day following the announcement of the sale.

        Shares of Biosurgery Stock and Molecular Oncology Stock are subject to certain exchange and redemption provisions as set forth in our charter. One of the exchange provisions allows our board of directors to exchange, at any time, shares of Biosurgery Stock and/or Molecular Oncology Stock for

16

cash, shares of Genzyme General Stock, or a combination of both, valued at a 30% premium to the fair market value (as defined in our charter) of the series of stock being exchanged. We encourage you to read our charter for a more complete discussion of the mandatory and optional exchange and redemption provisions of our common stock.

        To determine earnings per share, we allocate our earnings to each series of our common stock based on the earnings attributable to that series of stock. The earnings attributable to Biosurgery Stock is defined in our charter as the net income or loss of Genzyme Biosurgery determined in accordance with accounting principles generally accepted in the U.S. and as adjusted for tax benefits allocated to or from Genzyme Biosurgery in accordance with our management and accounting policies. Our charter also requires that all of our income and expenses be allocated among the divisions in a reasonable and consistent manner. Our board of directors, however, retains considerable discretion in interpreting and changing the methods of allocating earnings to each series of common stock without shareholder approval. As market or competitive conditions warrant, we may create new series of tracking stock or change our earnings allocation methodology. However, at the present time, we have no plans to do so. Because the earnings allocated to Biosurgery Stock are based on the income or losses attributable to Genzyme Biosurgery, we provide financial statements and management's discussion and analysis of Genzyme Biosurgery to aid investors in evaluating its performance.

DISPOSITION

        In November 2001, we sold the Snowden-Pencer line of surgical instruments, consisting of reusable surgical instruments for open and endoscopic surgery, including general, plastic, gynecological and open cardiovascular surgery, for $15.9 million in net cash. The purchaser acquired all of the assets directly associated with Snowden-Pencer products, and is subleasing from us a manufacturing facility that we lease in Tucker, Georgia. The assets sold had a carrying value of approximately $41.0 million at the time of the sale. We recorded a loss of $25.0 million in our consolidated financial statements and the combined statements of Genzyme Biosurgery in connection with this sale.

ACQUISITIONS

        In January 2001, Focal exercised its option to require us to purchase $5.0 million in Focal common stock. After that purchase, we held approximately 22% of the outstanding shares of Focal common stock and began accounting for our investment under the equity method of accounting. On June 30, 2001, we acquired the remaining outstanding shares of Focal common stock that we had not previously acquired. Focal shareholders received 0.1545 of a share of Biosurgery Stock for each share of Focal common stock they held. We issued approximately 2.1 million shares of Biosurgery Stock, valued at approximately $9.5 million, as consideration. We also assumed all of the outstanding options to purchase Focal common stock and exchanged them for options to purchase Biosurgery Stock on an as-converted basis. We accounted for the acquisition as a purchase and allocated it to Genzyme Biosurgery. Accordingly, the results of operations of Focal are included in our consolidated financial statements and in the combined financial statements of Genzyme Biosurgery from the date of acquisition.

        In January 2001, we acquired the outstanding Class A limited partnership interests in GDP, a limited partnership engaged in developing, producing and commercializing Sepra products, for an aggregate of $25.7 million plus royalties on sales of certain Sepra products for ten years. In August 2001, we purchased the remaining outstanding GDP partnership interests, consisting of two Class B interests, for an aggregate of $180,000 plus additional royalties on sales of certain Sepra

17

products for ten years. We accounted for the acquisitions as purchases and allocated them to Genzyme Biosurgery. Accordingly, the results of operations of GDP are included in our consolidated financial statements and the combined financial statements of Genzyme Biosurgery from January 9, 2001, the date of acquisition of the Class A interests.

        On December 18, 2000, we acquired Biomatrix, Inc., a publicly-held company engaged in the development and manufacture of viscoelastic biomaterials for use in orthopaedic and other medical applications, for an aggregate purchase price of $482.4 million. We accounted for the acquisition as a purchase and allocated it to Genzyme Biosurgery. Immediately prior to the acquisition, we combined two of our operating divisions, Genzyme Surgical Products and Genzyme Tissue Repair, to form a new division called Genzyme Biosurgery. We allocated the acquired assets and liabilities of Biomatrix to Genzyme Biosurgery. The combination of Genzyme Surgical Products and Genzyme Tissue Repair to form Genzyme Biosurgery did not result in any adjustments to the book values of the net assets of the divisions because they remained divisions of the same corporation. We present the financial statements of Genzyme Biosurgery as though the divisions had been combined for all periods presented, and include the operations of Biomatrix from December 18, 2000, the date of acquisition.

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COMBINED STATEMENTS OF OPERATIONS DATA(1)

			Six Months Ended June 30,						For the Years Ended December 31,
			2002			2001			2001			2000			1999			1998			1997
			(Unaudited)
			(Amounts in thousands)
Revenues:
	Net product sales		$	105,387		$	103,057		$	211,523		$	121,870		$	111,951		$	103,958		$	100,835
	Net service sales			10,812			11,458			23,614			23,321			20,305			17,008			10,856
	Revenues from research and development contracts			35			5			5			23			97			109			—
		Total revenues		116,234			114,520			235,142			145,214			132,353			121,075			111,691
Operating costs and expenses:
	Cost of products sold(2)			50,312			60,769			113,250			69,489			67,212			72,274			59,802
	Cost of services sold			6,618			5,948			12,733			12,298			13,237			13,438			11,788
	Selling, general and administrative			52,738			65,989			122,020			92,238			87,841			81,876			79,632
	Research and development			24,856			22,675			47,159			37,000			36,075			29,050			22,132
	Amortization of intangibles(3)			15,742			23,313			46,828			7,096			5,750			5,748			5,647
	Purchase of in-process research and development(4)			—			—			—			82,143			—			—			—
	Charge for impaired asset(5)			—			—			—			4,321			—			—			—
		Total operating costs and expenses		150,266			178,694			341,990			304,585			210,115			202,386			179,001
Operating loss				(34,032	)		(64,174	)		(106,848	)		(159,371	)		(77,762	)		(81,311	)		(67,310	)
Other income (expenses):
	Equity in net loss of unconsolidated affiliates(6,7)			—			(1,316	)		(1,316	)		—			(3,403	)		(7,680	)		(6,797	)
	Loss on investments in equity securities(8)			—			—			—			(7,300	)		—			—			—
	Loss on sale of product line(9)			—			—			(24,999	)		—			—			—			—
	Other			111			45			124			(15	)		138			60			236
	Investment income			623			939			1,753			5,833			4,808			1,320			1,077
	Interest expense			(4,606	)		(8,429	)		(13,884	)		(1,364	)		(1,858	)		(2,631	)		(2,930	)
		Total other income (expenses)		(3,872	)		(8,761	)		(38,322	)		(2,846	)		(315	)		(8,931	)		(8,414	)
Division net loss before cumulative effect of change in accounting for goodwill				(37,904	)		(72,935	)	$	(145,170	)	$	(162,217	)	$	(78,077	)	$	(90,242	)	$	(75,724	)
Cumulative effect of change in accounting for goodwill, net of tax(3)				(98,270	)		—			—			—			—			—			—
Division net loss(3)			$	(136,174	)	$	(72,935	)	$	(145,170	)	$	(162,217	)	$	(78,077	)	$	(90,242	)	$	(75,724	)

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COMBINED BALANCE SHEET DATA (1,10)

			December 31,
	June 30, 2002
			2001		2000		1999		1998		1997
	(Unaudited)
	(Amounts in thousands)
Cash and investments	$	27,168	$	38,623	$	78,163	$	135,498	$	7,732	$	32,890
Working capital		31,307		59,800		98,819		110,577		26,253		65,902
Total assets		574,206		704,671		811,600		390,572		253,170		299,792
Long-term debt, capital lease obligations and convertible debt(11)		269,337		245,629		229,453		18,000		12,579		31,089
Division equity		224,857		394,454		511,106		350,463		210,692		255,172

There were no cash dividends paid.

(1)

We formed Genzyme Biosurgery as a separate division of Genzyme on December 18, 2000 by combining two of our divisions, Genzyme Surgical Products and Genzyme Tissue Repair and simultaneously acquiring Biomatrix, Inc. These data reflect the financial position, results of operations and cash flows attributable to Genzyme Biosurgery as if it had been accounted for as a separate division of the corporation for all periods presented as it relates to Genzyme Surgical Products and Genzyme Tissue Repair. The results of operations of Biomatrix are included in Genzyme Biosurgery's results from the date of acquisition, December 18, 2000.

(2)

Cost of products sold for 1998 includes a $10.4 million charge to write-down our Sepra products inventory to net realizable value.

(3)

In connection with the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets," on January 1, 2002, we tested the goodwill of Genzyme Biosurgery's cardiothoracic reporting unit for impairment and, as a result, reduced goodwill by recording a cumulative effect impairment charge of $98.3 million in our unaudited, consolidated statements of operations and the unaudited, combined statements of operations of Genzyme Biosurgery for the three months ended March 31, 2002.

The following table presents the impact that SFAS No. 142 would have had on Genzyme Biosurgery's amortization of intangibles expense and division net loss had the standard been in effect for the six months ended June 30, 2001 and for the years ended December 31, 2001, 2000 and 1999 (amounts in thousands):

	Six Months Ended June 30, 2001									Year Ended December 31, 2001
	As Reported			Goodwill Amortization Adjustment			As Adjusted			As Reported			Goodwill Amortization Adjustment			As Adjusted
				(Unaudited)									(Unaudited)
Amortization of intangibles	$	23,313		$	(7,856	)	$	15,457		$	46,828		$	(15,521	)	$	31,307
Division net income (loss)	$	(72,935	)	$	7,856		$	(65,079	)	$	(145,170	)	$	15,521		$	(129,649	)

	Year Ended December 31, 2000									Year Ended December 31, 1999
	As Reported			Goodwill Amortization Adjustment			As Adjusted			As Reported			Goodwill Amortization Adjustment			As Adjusted
				(Unaudited)									(Unaudited)
Amortization of intangibles	$	7,096		$	(3,894	)	$	3,202		$	5,750		$	(3,263	)	$	2,487
Division net income (loss)	$	(162,217	)	$	3,894		$	(158,323	)	$	(78,077	)	$	3,263		$	(74,814	)

(4)

Charges for in-process research and development were incurred in connection with the acquisition of Biomatrix in 2000.

(5)

Represents a charge to write off abandoned equipment at our Springfield Mills manufacturing facility in the United Kingdom.

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(6)

Operations of Diacrin/Genzyme LLC, our joint venture with Diacrin, Inc., commenced in October 1996. In May 1999, we reallocated our ownership interest in the joint venture from Genzyme Biosurgery to Genzyme General.

(7)

In January 2001, Focal, Inc. exercised its option to require us to purchase $5.0 million in Focal common stock at a price of $2.06 per share. After that purchase we held approximately 22% of the outstanding shares of Focal common stock and began accounting for our investment under the equity method of accounting. We recorded our portion of the results of Focal in equity in net loss of unconsolidated affiliate. We allocated this investment to Genzyme Biosurgery. On June 30, 2001, we acquired the remaining 78% of the outstanding shares of Focal common stock and have included Focal's results in Genzyme Biosurgery's results of operations since that date. We allocated the acquired assets and liabilities to Genzyme Biosurgery and accounted for the acquisition as a purchase.

(8)

Represents a charge for the write down of our investment in Focal common stock because we considered its decline in fair value to be other than temporary.

(9)

Represents the loss from the sale of the Snowden-Pencer line of surgical instruments in the fourth quarter of 2001.

(10)

In January 2001, we purchased all of the outstanding Class A limited partnership interests of GDP for a payment of approximately $25.7 million in cash plus royalties payable over ten years on sales of certain Sepra products.

(11)

Long-term debt, capital lease obligations and convertible debt: at June 30, 2002, consists primarily of $269.0 million in principal drawn under our revolving credit facility; at December 31, 2001, consists primarily of $234.0 million in principal drawn under our revolving credit facility and $10.0 million in principal of our 6% convertible subordinated note due May 2003; at December 31, 2000, consists primarily of $218.0 million in principal drawn under our revolving credit facility and $10.0 million in principal of our 6% convertible subordinated note; at December 31, 1999, consists primarily of $18.0 million in principal drawn under our revolving credit facility; at December 31, 1998, consists primarily of $12.6 million in principal of our 5% convertible subordinated note due February 2000; and at December 31, 1997, consists primarily of $18.0 million in principal drawn under our revolving credit facility and $13.1 million in principal of our 5% convertible subordinated note.

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GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

COMBINED SELECTED FINANCIAL DATA

        The table below represents the selected historical consolidated statements of operations data and combined balance sheet data of Genzyme Molecular Oncology. The statements of operations and balance sheet data for the years ended December 31, 1997 through 2001 have been derived from Genzyme Molecular Oncology's audited, combined financial statements for those periods. The statements of operations data for the six months ended June 30, 2001 and 2002 and the balance sheet data as of June 30, 2002 are derived from Genzyme Molecular Oncology's unaudited, combined financial statements for those periods. In the opinion of our management, the unaudited, combined financial statements include all normal and recurring adjustments that we consider necessary for a fair presentation of the financial position and results of operations of Genzyme Molecular Oncology for these periods. Genzyme Molecular Oncology's operating results for the six months ended June 30, 2002 are not necessarily indicative of the results that may be expected for the entire fiscal year. This information is only a summary. You should read it in conjunction with the historical financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" for us and Genzyme Molecular Oncology contained in our annual reports, quarterly reports and other information filed with the SEC.

        Genzyme Molecular Oncology is our operating division that is developing a new generation of cancer products focused on cancer vaccines and angiogenesis inhibitors through the integration of its genomics, gene and cell therapy, small molecule drug discovery and protein therapeutic capabilities.

        A series of our common stock, Molecular Oncology Stock, is designed to reflect the value and track the performance of this division. Molecular Oncology Stock is common stock of Genzyme Corporation, not of Genzyme Molecular Oncology; Genzyme Molecular Oncology is a division, not a company or legal entity, and therefore does not and cannot issue stock. The chief mechanisms intended to cause Molecular Oncology Stock to "track" the performance of Genzyme Molecular Oncology are provisions in our charter governing dividends and distributions. Under these provisions, our charter:

•

factors the assets and liabilities and income or losses attributable to Genzyme Molecular Oncology into the determination of the amount available to pay dividends on Molecular Oncology Stock; and



•

requires us to exchange, redeem or distribute a dividend to the holders of Molecular Oncology Stock if all or substantially all of the assets allocated to Genzyme Molecular Oncology are sold to a third party. A dividend or redemption payment must equal in value the net after-tax proceeds from the sale. An exchange must be for Genzyme General Stock at a 10% premium to the average market price of the exchanged stock calculated over a ten day period beginning on the first business day following the announcement of the sale.

        Shares of Biosurgery Stock and Molecular Oncology Stock are subject to certain exchange and redemption provisions as set forth in our charter. One of the exchange provisions allows our board of directors to exchange, at any time, shares of Biosurgery Stock and/or Molecular Oncology Stock for cash, shares of Genzyme General Stock, or a combination of both, valued at a 30% premium to the fair market value (as defined in our charter) of the series of stock being exchanged. We encourage you to read our charter for a more complete discussion of the mandatory and optional exchange and redemption provisions of our common stock.

        To determine earnings per share, we allocate our earnings to each series of our common stock based on the earnings attributable to that series of stock. The earnings attributable to Molecular Oncology Stock is defined in our charter as the net income or loss of Genzyme Molecular Oncology

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determined in accordance with accounting principles generally accepted in the U.S. and as adjusted for tax benefits allocated to or from Genzyme Molecular Oncology in accordance with our management and accounting policies. Our charter also requires that all of our income and expenses be allocated among our divisions in a reasonable and consistent manner. Our board of directors, however, retains considerable discretion in interpreting and changing the methods of allocating earnings to each series of common stock without shareholder approval. As market or competitive conditions warrant, we may create a new series of common stock or change our earnings allocation methodology. However, at the present time, we have no plans to do so. Because the earnings allocated to Molecular Oncology Stock are based on the income or losses attributable to Genzyme Molecular Oncology, we provide financial statements and management's discussion and analysis of Genzyme Molecular Oncology to aid investors in evaluating its performance.

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GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

COMBINED SELECTED FINANCIAL DATA

COMBINED STATEMENTS OF OPERATIONS DATA

		Six Months Ended June 30,						For the Years Ended December 31,
		2002			2001			2001			2000			1999			1998			1997
		(Unaudited)
		(Amounts in thousands)
Revenues:
Service revenue		$	485		$	—		$	700		$	—		$	1,920		$	2,229		$	467
Service revenue—related party			—			—			—			—			50			466			—
Research and development revenue—related party			—			—			—			—			496			2,177			315
Research and development revenue			2,938			1,406			3,412			584			—			3,256			—
Licensing revenue			1,326			1,212			2,302			4,936			2,125			11,275			—
Royalty revenue			19			73			148			151			28			4			—
	Total revenues		4,768			2,691			6,562			5,671			4,619			19,407			782
Operating costs and expenses:
Cost of service revenues			287			—			273			—			620			1,374			50
Cost of research and development and licensing revenues			2,302			1,029			2,803			826			698			4,073			287
Selling, general and administrative			4,193			3,702			7,552			5,851			5,529			7,155			2,118
Research and development			10,621			13,229			26,540			18,908			15,997			12,743			5,341
Amortization of intangibles(1)			—			—			—			5,420			11,825			11,983			5,127
Purchase of in-process research and development(2)			—			—			—			—			—			—			7,000
	Total operating costs and expenses		17,403			17,960			37,168			31,005			34,669			37,328			19,923
Operating loss			(12,635	)		(15,269	)		(30,606	)		(25,334	)		(30,050	)		(17,921	)		(19,141	)
Other income (expenses):
Equity in net loss of unconsolidated affiliate(3)			—			—			—			—			(1,870	)		(1,647	)		(258	)
Interest income			407			691			945			1,211			469			782			392
Interest expense			(40	)		(27	)		(57	)		(187	)		(28	)		(2,968	)		(1,663	)
	Total other income (expenses)		367			664			888			1,024			(1,429	)		(3,833	)		(1,529	)
Loss before income taxes			(12,268	)		(14,605	)		(29,718	)		(24,310	)		(31,479	)		(21,754	)		(20,670	)
Tax benefit			—			—			—			1,214			2,647			2,647			1,092
Division net loss		$	(12,268	)	$	(14,605	)	$	(29,718	)	$	(23,096	)	$	(28,832	)	$	(19,107	)	$	(19,578	)

COMBINED BALANCE SHEET DATA

				December 31,
	June 30, 2002			2001		2000		1999			1998		1997
	(Unaudited)			(Amounts in thousands)
Cash and investments	$	25,477		$	41,135	$	30,151	$	3,587		$	11,900	$	21,229
Working capital		(271	)		28,807		22,100		(5,889	)		9,189		11,953
Total assets		26,157			42,419		30,752		9,692			35,952		53,801
Long-term debt and convertible debt		—			—		—		—			—		24,606
Division equity		14,809			26,813		19,526		(1,215	)		23,364		13,466

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(1)

SFAS No. 142, "Goodwill and Other Intangible Assets," which we adopted effective 1/1/02, requires that ratable amortization of goodwill and certain intangible assets be replaced with periodic tests of the goodwill's impairment and that other intangible assets be amortized over their useful lives unless these useful lives are determined to be indefinite The following table presents the impact that SFAS No. 142 would have had on Genzyme Molecular Oncology's amortization expense and division net loss had the standard been in effect for the years ended December 31, 2000 and 1999 (amounts in thousands):

	Year Ended December 31, 2000									Year Ended December 31, 1999
	As Reported			Goodwill Amortization Adjustment			As Adjusted			As Reported			Goodwill Amortization Adjustment			As Adjusted
				(Unaudited)									(Unaudited)
Amortization of intangibles	$	5,420		$	(2,227	)	$	3,193		$	11,825		$	(4,858	)	$	6,967
Division net income (loss)	$	(23,096	)	$	2,227		$	(20,869	)	$	(28,832	)	$	4,858		$	(23,974	)

(2)

We recorded a $7.0 million charge for the purchase of in-process research and development in connection with the acquisition of PharmaGenics, Inc. in 1997.

(3)

StressGen/Genzyme LLC was dissolved in 1999.

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GENZYME CORPORATION CONSOLIDATED SELECTED FINANCIAL DATA
GENZYME GENERAL COMBINED SELECTED FINANCIAL DATA
GENZYME BIOSURGERY COMBINED SELECTED FINANCIAL DATA
GENZYME MOLECULAR ONCOLOGY A DIVISION OF GENZYME CORPORATION COMBINED SELECTED FINANCIAL DATA
GENZYME MOLECULAR ONCOLOGY A DIVISION OF GENZYME CORPORATION COMBINED SELECTED FINANCIAL DATA