10-Q

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

FORM 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2008
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                               to

Commission File No. 0-14680

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

Massachusetts (State or other jurisdiction of incorporation or organization)	06-1047163 (I.R.S. Employer Identification No.)
500 Kendall Street Cambridge, Massachusetts (Address of principal executive offices)	02142 (Zip Code)
(617) 252-7500 (Registrant's telephone number, including area code)

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

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý Accelerated filer o Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o    No ý

        Number of shares of Genzyme Stock outstanding as of October 31, 2008: 270,519,673

NOTE REGARDING REFERENCES TO OUR COMMON STOCK

        Throughout this Form 10-Q, the words "we," "us," "our" and "Genzyme" refer to Genzyme Corporation as a whole, and "our board of directors" refers to the board of directors of Genzyme Corporation. We have one outstanding series of common stock, which we refer to as "Genzyme Stock" or "our common stock."

NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This Form 10-Q contains forward-looking statements, including statements regarding:

•

our plans to seek marketing approvals for our products in new territories, including Renvela, Myozyme, Aldurazyme and Synvisc-One;

•

our expectations for United States Food and Drug Administration, or FDA, marketing approval of alglucosidase alfa produced at the 2000 liter bioreactor, or 2000L, scale and the timing of this anticipated approval and our expectations for the timing to begin providing U.S. patients with commercial 2000L product;

•

our intention to seek marketing approval from the European Agency for the Evaluation of Medicinal Products, or EMEA, for Myozyme produced at the 4000 liter bioreactor, or 4000L, scale, our expectations regarding the anticipated receipt of approval and the timing thereof;

•

our expectations for Myozyme revenue and costs for the remainder of 2008 and for sales growth, and our assessment of the Myozyme supply;

•

our plans and the anticipated timing for pursuing marketing approvals for additional indications and uses for our products and services, including Renvela and clofarabine, and for regulatory action on our marketing application for Synvisc-One in the United States;

•

our expectations for sales of Renagel/Renvela and Hectorol and the anticipated drivers for the future growth of these products;

•

our expectations for Thymoglobulin inventory levels for the remainder of 2008 and long-term sales growth, as well as the timing for receipt of regulatory approvals and the commencement of production at our manufacturing facility in Lyon, France;

•

our estimated timetable for regulatory approvals and subsequent launches of Mozobil in the United States and Europe;

•

our assessment of competitors and potential competitors and the anticipated impact of potentially competitive products and services on our revenues;

•

Cerezyme's future contribution to our revenues and our expectations regarding its current growth trends;

•

our intention to pursue our rights with respect to insurance coverage for our settlement of a class action lawsuit under a director and officer liability insurance program;

•

our assessment of the financial impact of legal proceedings and claims on our financial position and results of operations;

•

the sufficiency of our cash, investments and cash flows from operations;

•

the redemption of all $690.0 million in principal outstanding under our 1.25% convertible senior notes on December 1, 2008;

•

our U.S. and foreign income tax audits, including our provision for potential liabilities;

2

•

our estimates of the cost to complete and estimated commercialization dates for our in-process research and development programs;

•

our assessment of the deductibility of the amounts allocated to goodwill for our acquisition of Bioenvision, Inc., or Bioenvision; and

•

our expectations regarding the amortization of intangible assets related to our expected future contingent payments due to Synpac (North Carolina), Inc. and Wyeth.

        These statements are subject to risks and uncertainties, and our actual results may differ materially from those that are described in this report. These risks and uncertainties include:

•

our ability to successfully complete preclinical and clinical development of our products and services;

•

our ability to secure regulatory approvals for our products, services and manufacturing facilities and processes, and to do so in the anticipated timeframes, including our ability to obtain and maintain regulatory approvals for alglucosidase alfa produced at the 2000L scale in the United States and 4000L scale in Europe and the timing of these anticipated approvals;

•

regulatory authority views regarding the safety, efficacy and risk-benefit profiles of our products;

•

the content and timing of submissions to and decisions made by the FDA, the EMEA and other regulatory agencies related to our products and services and the facilities and processes used to manufacture our products;

•

our ability to accurately forecast the impact of regulatory delays on our revenues, costs and earnings;

•

our ability to manufacture sufficient amounts of our products for development and commercialization activities and to do so in a timely and cost-effective manner, including our ability to manufacture Thymoglobulin that meets our product specifications and in quantities sufficient to meet projected market demand and our ability to manufacture alglucosidase alfa at the 2000L and 4000L scales;

•

our ability to satisfy the post-marketing commitments made to regulatory agencies as a condition of the marketing approvals of Fabrazyme, Aldurazyme, Myozyme and Clolar;

•

our reliance on third parties to provide us with materials and services in connection with the manufacture of our products;

•

the accuracy of our estimates of the size and characteristics of the markets to be addressed by our products and services, including growth projections;

•

market acceptance of our products and services in expanded areas of use and new markets;

•

our ability to identify new patients for our products and services;

•

our ability to increase market penetration of our products and services both outside and within the United States;

•

the accuracy of our information regarding the products and resources of our competitors and potential competitors;

•

competition from lower cost generic or follow-on products;

•

the availability of reimbursement for our products and services from third party payors, the extent of such coverage and the accuracy of our estimates of the payor mix for our products;

3

•

our ability to effectively manage wholesaler inventories of our products and the levels of their compliance with our inventory management programs;

•

our ability to continue to generate cash from operations and to effectively use our cash resources to grow our business;

•

the resolution of our dispute with our insurance carriers regarding our claim for coverage under a director and officer liability insurance program;

•

the outcome of legal proceedings by or against us;

•

our ability to successfully integrate the business we acquired from Bioenvision;

•

the outcome of our IRS and foreign tax audits;

•

general economic conditions; and

•

the possible disruption of our operations due to terrorist activities, armed conflict, severe climate change or outbreak of diseases, including as a result of the disruption of operations of regulatory authorities, our subsidiaries, manufacturing facilities, customers, suppliers, distributors, couriers, collaborative partners, licensees or clinical trial sites.

        We have included more detailed descriptions of these and other risks and uncertainties under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors," in Part I., Item 2. of this Quarterly Report on Form 10-Q. We encourage you to read those descriptions carefully. We caution investors not to place substantial reliance on the forward-looking statements contained in this report. These statements, like all statements in this report, speak only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments.

NOTE REGARDING INCORPORATION BY REFERENCE

        The United States Securities and Exchange Commission, commonly referred to as the SEC, allows us to disclose important information to you by referring you to other documents we have filed with them. The information that we refer you to is "incorporated by reference" into this Form 10-Q. Please read that information.

NOTE REGARDING TRADEMARKS

        Genzyme®, Cerezyme®, Ceredase®, Fabrazyme®, Thyrogen®, Myozyme®, Renagel®, Renvela®, Campath®, Clolar®, Evoltra®, Thymoglobulin®, Synvisc®, Sepra®, Seprafilm®, Carticel®, Epicel®, MACI®, Hylaform® and Hectorol® are registered trademarks, and Cholestagel™, Mozobil™, Lymphoglobuline™ and Synvisc-One™ are trademarks, of Genzyme or its subsidiaries. WelChol® is a registered trademark of Sankyo Pharma, Inc. Aldurazyme® is a registered trademark of BioMarin/Genzyme LLC. All rights reserved.

4

GENZYME CORPORATION AND SUBSIDIARIES

FORM 10-Q, SEPTEMBER 30, 2008

TABLE OF CONTENTS

		PAGE NO.
PART I.	FINANCIAL INFORMATION		6
ITEM 1.	Financial Statements		6
	Unaudited, Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2008 and 2007		6
	Unaudited, Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007		7
	Unaudited, Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007		8
	Notes to Unaudited, Consolidated Financial Statements		9
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		31
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		75
ITEM 4.	Controls and Procedures		76
PART II.	OTHER INFORMATION		76
ITEM 1.	Legal Proceedings		76
ITEM 1A.	Risk Factors		76
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		77
ITEM 6.	Exhibits		77
Signatures			78

5

PART I.    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited, amounts in thousands, except per share amounts)

				Three Months Ended September 30,						Nine Months Ended September 30,
				2008			2007			2008			2007
Revenues:
	Net product sales			$	1,058,296		$	867,682		$	3,136,365		$	2,511,354
	Net service sales				92,586			83,177			269,072			241,533
	Research and development revenue				9,402			9,300			26,042			23,874
		Total revenues			1,160,284			960,159			3,431,479			2,776,761
Operating costs and expenses:
	Cost of products sold				225,691			190,475			683,773			508,451
	Cost of services sold				59,517			54,137			174,078			156,222
	Selling, general and administrative				331,170			270,306			996,861			878,807
	Research and development				305,242			175,800			949,900			540,362
	Amortization of intangibles				55,295			49,819			166,558			149,301
		Total operating costs and expenses			976,915			740,537			2,971,170			2,233,143
Operating income					183,369			219,622			460,309			543,618
Other income (expenses):
	Equity in income (loss) of equity method investments				—			(12,648	)		188			(1,091	)
	Minority interest				566			5			1,592			3,932
	Gain (loss) on investments in equity securities, net				(14,129	)		1,105			(4,201	)		14,036
	Other				(699	)		913			(840	)		110
	Investment income				11,793			18,222			40,015			51,687
	Interest expense				(792	)		(1,474	)		(3,596	)		(9,283	)
		Total other income (expenses)			(3,261	)		6,123			33,158			59,391
Income before income taxes					180,108			225,745			493,467			603,009
Provision for income taxes					(60,512	)		(66,432	)		(159,036	)		(201,715	)
Net income				$	119,596		$	159,313		$	334,431		$	401,294
Net income per share:
	Basic			$	0.44		$	0.61		$	1.25		$	1.52
	Diluted			$	0.42		$	0.58		$	1.19		$	1.45
Weighted average shares outstanding:
	Basic				269,176			262,775			267,767			263,387
	Diluted				288,179			279,206			286,003			279,898
Comprehensive income (loss), net of tax:
Net income				$	119,596		$	159,313		$	334,431		$	401,294
Other comprehensive income (loss):
	Foreign currency translation adjustments				(172,636	)		76,836			(66,963	)		98,082
	Pension liability adjustments, net of tax				2,019			(274	)		2,090			(540	)
	Unrealized gains (losses) on securities, net of tax:
		Unrealized gains (losses) arising during the period			475			7,450			5,186			12,812
		Reclassification adjustments for losses included in net income			(141	)		(991	)		(6,039	)		(8,839	)
			Unrealized gains (losses) on securities, net of tax		334			6,459			(853	)		3,973
	Other comprehensive income (loss)				(170,283	)		83,021			(65,726	)		101,515
Comprehensive income (loss)				$	(50,687	)	$	242,334		$	268,705		$	502,809

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

6

GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited, amounts in thousands, except par value amounts)

			September 30, 2008			December 31, 2007
ASSETS
Current assets:
	Cash and cash equivalents		$	918,736		$	867,012
	Short-term investments			76,570			80,445
	Accounts receivable, net			1,013,534			904,101
	Inventories			442,899			439,115
	Prepaid expenses and other current assets			200,666			154,183
	Deferred tax assets			157,701			164,341
		Total current assets		2,810,106			2,609,197
Property, plant and equipment, net				2,268,854			1,968,402
Long-term investments				477,943			512,937
Goodwill				1,403,570			1,403,828
Other intangible assets, net				1,935,034			1,555,652
Deferred tax assets				331,370			95,664
Investments in equity securities				169,678			89,181
Other noncurrent assets				19,030			66,880
		Total assets	$	9,415,585		$	8,301,741
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	120,729		$	128,380
	Accrued expenses			640,023			645,645
	Income taxes payable			—			18,479
	Deferred revenue			17,850			13,277
	Current portion of long-term debt and capital lease obligations			697,426			696,625
		Total current liabilities		1,476,028			1,502,406
Long-term debt and capital lease obligations				125,348			113,748
Deferred revenue—noncurrent				14,312			16,662
Other noncurrent liabilities				564,013			55,988
		Total liabilities		2,179,701			1,688,804
Commitments and contingencies
Stockholders' equity:
	Preferred stock, $0.01 par value			—			—
	Common stock, $0.01 par value			2,703			2,660
	Additional paid-in capital			5,736,675			5,385,154
	Notes receivable from stockholders			(12,992	)		(15,670	)
	Accumulated earnings			1,161,146			826,715
	Accumulated other comprehensive income			348,352			414,078
		Total stockholders' equity		7,235,884			6,612,937
		Total liabilities and stockholders' equity	$	9,415,585		$	8,301,741

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

7

GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)

					Nine Months Ended September 30,
					2008			2007
Cash Flows from Operating Activities:
	Net income				$	334,431		$	401,294
	Reconciliation of net income to cash flows from operating activities:
		Depreciation and amortization				276,042			246,556
		Stock-based compensation				143,141			146,441
		Provision for bad debts				9,065			7,045
		Equity in (income) loss of equity method investments				(188	)		1,091
		Minority interest				(1,592	)		(3,932	)
		(Gains) losses on investments in equity securities, net				4,201			(14,036	)
		Deferred income tax benefit				(236,307	)		(81,629	)
		Tax benefit from employee stock-based compensation				57,149			12,459
		Excess tax benefits from stock-based compensation				(17,470	)		(1,229	)
		Other				4,716			5,585
		Increase (decrease) in cash from working capital changes (excluding impact of acquired assets and assumed liabilities):
			Accounts receivable			(99,579	)		(103,285	)
			Inventories			(12,651	)		(32,559	)
			Prepaid expenses and other current assets			(7,107	)		(16,790	)
			Income taxes payable			(20,061	)		(17,419	)
			Accounts payable, accrued expenses and deferred revenue			275			61,235
				Cash flows from operating activities		434,065			610,827
Cash Flows from Investing Activities:
	Purchases of investments					(382,954	)		(602,451	)
	Sales and maturities of investments					412,690			796,612
	Purchases of equity securities					(87,695	)		(20,362	)
	Proceeds from sales of investments in equity securities					16,519			20,712
	Purchases of property, plant and equipment					(433,987	)		(281,309	)
	Acquisition of Bioenvision					(16,561	)		(72,229	)
	Distributions from equity method investments, net					5,995			17,100
	Payment of note receivable from Dyax Corp.					—			7,771
	Purchases of other intangible assets					(82,898	)		(45,821	)
	Other					5,161			658
				Cash flows from investing activities		(563,730	)		(179,319	)
Cash Flows from Financing Activities:
	Proceeds from issuance of our common stock					294,603			100,276
	Repurchases of our common stock					(143,012	)		(181,210	)
	Excess tax benefits from stock-based compensation					17,470			1,229
	Payments of debt and capital lease obligations					(5,281	)		(4,606	)
	Increase in bank overdrafts					20,889			19,259
	Payments of notes receivable from stockholders					2,770			—
	Minority interest contributions					1,244			4,136
	Other					(1,160	)		3,525
				Cash flows from financing activities		187,523			(57,391	)
Effect of exchange rate changes on cash						(6,134	)		(16,423	)
Increase in cash and cash equivalents						51,724			357,694
Cash and cash equivalents at beginning of period						867,012			492,170
Cash and cash equivalents at end of period					$	918,736		$	849,864
Supplemental disclosures of non-cash transactions:
	Long-Term Debt—Note 11

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

8

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements

1.    Description of Business

        We are a global biotechnology company dedicated to making a major impact on the lives of people with serious diseases. Our broad product and service portfolio is focused on rare disorders, renal diseases, orthopaedics, organ transplant, diagnostic and predictive testing, and cancer. We are organized into six financial reporting units, which we also consider to be our reporting segments:

•

Renal, which develops, manufactures and distributes products that treat patients suffering from renal diseases, including chronic renal failure. The unit derives substantially all of its revenue from sales of Renagel/Renvela (including sales of bulk sevelamer) and Hectorol;

•

Therapeutics, which develops, manufactures and distributes 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 lysosomal storage disorders, or LSDs, and other specialty therapeutics, such as Thyrogen. The unit derives substantially all of its revenue from sales of Cerezyme, Fabrazyme, Myozyme, Aldurazyme and Thyrogen;

•

Transplant, which develops, manufactures and distributes therapeutic products that address pre-transplantation, prevention and treatment of graft rejection in organ transplantation as well as other hematologic and auto-immune disorders. The unit derives substantially all of its revenue from sales of Thymoglobulin;

•

Biosurgery, which develops, manufactures and distributes biotherapeutics and biomaterial-based products, with an emphasis on products that meet medical needs in the orthopaedics and broader surgical areas. The unit derives substantially all of its revenue from sales of Synvisc, the Sepra line of products, Carticel and Matrix-induced Autologous Chondrocyte Implantation, or MACI;

•

Genetics, which provides testing services for the oncology, prenatal and reproductive markets; and

•

Oncology, which develops, manufactures and distributes products for the treatment of cancer, with a focus on antibody- and small molecule-based therapies. The unit derives substantially all of its revenue from sales and royalties received on sales of Campath and clofarabine and from the reimbursement of Campath development expenses. Clofarabine is marketed under the name Clolar in North and South America and as Evoltra elsewhere in the world.

        We report the activities of our diagnostic products, bulk pharmaceuticals and cardiovascular business units under the caption "Other." We report our corporate, general and administrative operations and corporate science activities under the caption "Corporate."

        Effective January 1, 2008, as a result of changes in how we review our business, certain general and administrative expenses, which were formerly allocated amongst our reporting segments and Other, are now allocated to Corporate.

        As a result of our acquisition of Bioenvision in October 2007, our Oncology business unit, which was formerly reported combined with Other, now meets the criteria for disclosure as a separate reporting segment. We have revised our 2007 segment disclosures to conform to our 2008 presentation.

9

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

2.    Basis of Presentation and Significant Accounting Policies

Basis of Presentation

        Our unaudited, consolidated financial statements for each period include the statements of operations and comprehensive income (loss), balance sheets and statements of cash flows for our operations taken as a whole. We have eliminated all intercompany items and transactions in consolidation. We prepare our unaudited, consolidated financial statements following the requirements of the SEC for interim reporting. As permitted under these rules, we condense or omit certain footnotes and other financial information that are normally required by accounting principles generally accepted in the United States.

        These financial statements include all normal and recurring adjustments that we consider necessary for the fair presentation of our financial condition and results of operations. Since these are interim financial statements, you should also read our audited, consolidated financial statements and notes included in our 2007 Form 10-K. Revenues, expenses, assets and liabilities can vary from quarter to quarter. Therefore, the results and trends in these interim financial statements may not be indicative of results for future periods.

        Our unaudited, consolidated financial statements for each period include the accounts of our wholly owned and majority owned subsidiaries. As a result of our adoption of Financial Accounting Standards Board, or FASB, Interpretation No., or FIN, 46R, "Consolidation of Variable Interest Entities," we also consolidate certain variable interest entities for which we are the primary beneficiary. For consolidated subsidiaries in which we have less than a 100% interest, we record minority interest in our consolidated statements of operations for the ownership interest of the minority owner. We use the equity method of accounting to account for our investments in entities in which we have a substantial ownership interest (20% to 50%) which do not fall in the scope of FIN 46R, or over which we exercise significant influence. Our consolidated net income includes our share of the earnings or losses of these entities.

Recent Accounting Pronouncements

Adopted in 2008

         FASB Statement of Financial Accounting Standards No., or FAS, 159, "The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115."    Effective January 1, 2008, we adopted FAS 159, which permits, but does not require, entities to irrevocably elect to measure certain financial instruments and other assets and liabilities at fair value on an instrument-by-instrument basis, with subsequent unrealized gains and losses recognized in earnings as changes in fair value occur. In adopting FAS 159, we did not elect to measure any new assets or liabilities at their respective fair values and, therefore, the adoption of FAS 159 did not have an impact on our results of operations or financial position.

         Emerging Issues Task Force, or EITF, Issue No. 07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities."    In June 2007, the FASB ratified EITF Issue No. 07-3, which requires that nonrefundable advanced payments for goods or services that will be used or rendered for future research and development activities should be deferred and capitalized. Such amounts should be recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered. EITF Issue No. 07-3 was effective for us beginning

10

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

2.    Basis of Presentation and Significant Accounting Policies (Continued)

January 1, 2008 and we applied it prospectively to new contracts we entered into on or after that date. The implementation of EITF Issue No. 07-3 did not have a material impact on our financial position, results of operations or cash flows.

         FASB Staff Position No., or FSP, 157-3, "Determining Fair Value of a Financial Asset in a Market That Is Not Active."    In October 2008, the FASB issued FSP 157-3, which clarified how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP 157-3 was effective upon issuance, including for prior periods for which financial statements had not been issued. The implementation of FSP 157-3 did not have a material impact on our results of operations or financial position.

Effective in 2009

         EITF Issue No. 07-1, "Accounting for Collaborative Arrangements."    In December 2007, the FASB ratified EITF Issue No. 07-1, which defines collaborative arrangements and establishes reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties, including the appropriate income statement presentation and classification of, and the required disclosures related to, these arrangements. EITF Issue No. 07-1 is effective January 1, 2009 and we will apply it retrospectively to all periods presented for all collaborative arrangements existing as of the effective date. We are evaluating the impact, if any, that EITF Issue No. 07-1 will have on our consolidated financial statements.

         FAS 141(revised 2007), or FAS 141R, "Business Combinations."    In December 2007, the FASB issued FAS 141R, which replaces FAS 141, "Business Combinations." FAS 141R retains the fundamental concept of the purchase method of accounting and introduces new requirements for the recognition and measurement of assets acquired, liabilities assumed, and noncontrolling interests. Under FAS 141R, acquisition costs will generally be expensed as incurred and restructuring costs will be expensed subsequent to the acquisition date. IPR&D will be capitalized as an indefinite-lived intangible asset at the acquisition date and will either be amortized over the life of the related product or written off as a charge to earnings if the project is subsequently abandoned or becomes impaired. FAS 141R is effective for all business combinations occurring on or after January 1, 2009. Early adoption is not permitted. We are currently evaluating the effects that FAS 141R will have on our consolidated financial statements.

         FAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51."    In December 2007, the FASB issued FAS 160, which establishes new accounting and reporting standards for noncontrolling interests, formerly known as minority interests, including the amount of net income attributable to the parent and to the noncontrolling interest, changes in parent's ownership interest and the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated. FAS 160 requires noncontrolling interests to be reclassified from the liabilities section or the mezzanine section between liabilities and equity to the equity section of the consolidated balance sheet and to be reported separately from the parent's equity. In addition, FAS 160 requires the results from operations attributed to the noncontrolling interest to be disclosed separately from those of the parent on the face of the consolidated statement of operations. FAS 160 is effective for us January 1, 2009 and adoption is prospective only. However, upon adoption, presentation and disclosure requirements described above must be applied retrospectively for all periods presented in our

11

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

2.    Basis of Presentation and Significant Accounting Policies (Continued)

consolidated financial statements. We are currently evaluating the effects, if any, that FAS 160 will have on our consolidated financial statements.

         FSP 157-2, "Effective Date of FASB Statement No. 157."    In February 2008, the FASB issued FSP 157-2, which allowed us to defer the implementation of FAS 157, "Fair Value Measurements," as it relates to our non-financial assets and non-financial liabilities that are recognized and disclosed at fair value in our consolidated financial statements on a nonrecurring basis, until January 1, 2009. We are evaluating the impact, if any, the adoption of FAS 157, for those assets and liabilities within the scope of FSP 157-2, will have on our financial position, results of operations and liquidity. We did not have any non-financial assets or non-financial liabilities that would be recognized or disclosed on a recurring basis as of September 30, 2008.

         FAS No. 161, "Disclosures About Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133."    In March 2008, the FASB issued FAS 161, which amends and expands the disclosure requirements for derivative instruments and hedging activities. FAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. FAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We are currently evaluating the effects, if any, that FAS 161 will have on our consolidated financial statements.

         FSP 142-3, "Determination of the Useful Life of Intangible Assets."    In April 2008, the FASB issued FSP 142-3, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS 142, "Goodwill and Other Intangible Assets." This change is intended to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FAS 141R and other generally accepted accounting principles. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the effects, if any, that FSP 142-3 will have on our consolidated financial statements.

         EITF Issue No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities."    In June 2008, the FASB issued EITF Issue No. 03-6-1, which clarifies that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends, whether paid or unpaid, participate in undistributed earnings with common stockholders. Awards of this nature are considered participating securities and the two-class method of computing basic and diluted earnings per share must be applied. EITF Issue No. 03-6-1 is effective for us on January 1, 2009 with retrospective application. We do not expect the implementation of EITF Issue No. 03-6-1 to have a material impact on our consolidated financial position and results of operations.

         EITF Issue No. 07-5, "Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity's Own Stock."    In June 2008, the FASB ratified EITF Issue No. 07-5, which provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument's contingent exercise

12

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

2.    Basis of Presentation and Significant Accounting Policies (Continued)

and settlement provisions. It also clarifies the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF Issue No. 07-5 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the effects, if any, that EITF Issue No. 07-5 will have on our consolidated financial statements.

3.    Fair Value Measurements

        A significant number of our financial instruments are carried at fair value. These assets and liabilities include:

•

fixed income and money market investments;

•

derivatives; and

•

investments in publicly-traded equity securities.

Fair Value Measurement—Definition and Hierarchy

        Effective January 1, 2008, we implemented FAS 157 for our financial assets and liabilities that are re-measured and reported at fair value at each reporting period. The adoption of FAS 157 for our financial assets and liabilities did not have a material impact on our consolidated financial position and results of operations.

        FAS 157 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date. In determining fair value, FAS 157 permits the use of various valuation approaches, including market, income and cost approaches. FAS 157 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available.

        The fair value hierarchy is broken down into three levels based on the reliability of inputs. We have categorized our fixed income, derivatives and equity securities within the hierarchy as follows:

•

Level 1—These valuations are based on a "market approach" using quoted prices in active markets for identical assets. Valuations of these products do not require a significant degree of judgment. Assets utilizing Level 1 inputs include money market funds, U.S. government securities, bank deposits and exchange-traded equity securities;

•

Level 2—These valuations are based primarily on a "market approach" using quoted prices in markets that are not very active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Fixed income assets utilizing Level 2 inputs include U.S. agency securities, including direct issuance bonds and mortgage-backed securities, asset-backed securities, corporate bonds and commercial paper. Derivative securities utilizing Level 2 inputs include forward foreign-exchange contracts; and

•

Level 3—These valuations are based on various approaches using inputs that are unobservable and significant to the overall fair value measurement. Certain assets are classified within Level 3 of the fair value hierarchy because they trade infrequently and, therefore, have little or no transparency. We currently have no assets or liabilities that are valued with Level 3 inputs.

13

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)

Valuation Techniques

        Fair value is a market-based measure considered from the perspective of a market participant who would buy the asset or assume the liability rather than our own specific measure. All of our fixed income securities are priced using a variety of daily data sources, largely readily-available market data and broker quotes. To validate these prices, we compare the fair market values of our fixed income investments using market data from observable and corroborated sources. We also perform the fair value calculations for our derivative and equity securities using market data from observable and corroborated sources. In periods of market inactivity, the observability of prices and inputs may be reduced for certain instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3.

        The following table sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2008 (amounts in thousands):

Description			Total		Level 1		Level 2		Level 3
Fixed income investments(1):	Cash equivalents:	Money market funds/other	$	702,745	$	702,745	$	—	$	—
	Short-term investments:	U.S. Treasury notes		3,563		3,563		—		—
		U.S. agency notes		10,605		—		10,605		—
		Corporate notes—global		62,402		—		62,402		—
		Total		76,570		3,563		73,007		—
	Long-term investments:	U.S. Treasury notes		113,684		113,684		—		—
		U.S. agency notes		148,691		—		148,691		—
		Corporate notes—global		215,568		—		215,568		—
		Total		477,943		113,684		364,259		—
	Total fixed income investments			1,257,258		819,992		437,266		—
Derivatives:	Foreign exchange contracts(2)			1,475		—		1,475		—
Equity holdings(1):	Publicly-traded equity securities			63,591		63,591		—		—
Total assets (liabilities) at fair value			$	1,322,324	$	883,583	$	438,741	$	—

(1)

Changes in the fair value of our fixed income investments and investments in publicly-traded equity securities are recorded in accumulated other comprehensive income (loss), a component of stockholders' equity, in our consolidated balance sheets. In the three months ended September 30, 2008, we recorded a charge of $5.3 million to write down our investments in certain venture capital funds, which we account for using the cost method of accounting, because we considered them to be other than temporarily impaired. Our determination of the impairment charge was made using Level 3 measurements under FAS 157. Subsequent to September 30, 2008, these investments continue to be accounted for under the cost method of accounting and are subject to our ongoing reviews for impairment.

14

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)

(2)

As of September 30, 2008, the aggregate fair value of our foreign exchange contracts was an unrealized gain of $1.5 million, which we recorded as an increase to prepaid expenses and other current assets in our consolidated balance sheets as of that date. Changes in the fair value of our foreign exchange contracts are recorded in unrealized foreign exchange gains and losses, a component of selling, general and administrative expenses, or SG&A, in our consolidated statements of operations.

        The carrying amounts reflected in our consolidated balance sheets for cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value due to their short-term maturities.

4.    Net Income Per Share

        The following table sets forth our computation of basic and diluted net income per common share (amounts in thousands, except per share amounts):

			Three Months Ended September 30,				Nine Months Ended September 30,
			2008		2007		2008		2007
Net income—basic			$	119,596	$	159,313	$	334,431	$	401,294
Effect of dilutive securities:
	Interest expense and debt fee amortization, net of tax, related to our 1.25% convertible senior notes			1,885		1,886		5,658		5,658
Net income—diluted			$	121,481	$	161,199	$	340,089	$	406,952
Shares used in computing net income per common share—basic				269,176		262,775		267,767		263,387
Effect of dilutive securities:
	Shares issuable upon the assumed conversion of our 1.25% convertible senior notes			9,686		9,686		9,686		9,686
	Stock options(1)			8,081		6,584		7,665		6,747
	Restricted stock units (RSUs)(2)			871		150		618		67
	Other			365		11		267		11
		Dilutive potential common shares		19,003		16,431		18,236		16,511
Shares used in computing net income per common share—diluted(1)				288,179		279,206		286,003		279,898
Net income per common share:
	Basic		$	0.44	$	0.61	$	1.25	$	1.52
	Diluted		$	0.42	$	0.58	$	1.19	$	1.45

(1)

We did not include the securities described in the following table in the computation of diluted earnings per share because these securities were anti-dilutive during the corresponding period (amounts in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2008		2007		2008		2007
Shares issuable upon exercise of outstanding options		3,123		17,689		3,121		15,408

(2)

In May 2008, we completed a general equity grant to eligible employees, 85% of whom received grants consisting entirely of RSUs.

15

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

5.    Mergers and Acquisitions

Bioenvision

        Effective October 23, 2007, we completed our acquisition of Bioenvision through the culmination of a two-step process consisting of a tender offer completed in July 2007, and a merger approved in October 2007. We paid gross consideration of $349.9 million in cash, including $345.4 million for the outstanding shares of Bioenvision common and preferred stock and options to purchase shares of Bioenvision common stock, and approximately $5 million for acquisition costs. The acquisition of Bioenvision provided us with the rights to clofarabine outside North America.

        In connection with the merger, holders of 2,880,000 shares of Bioenvision common stock, representing less than 5% of the outstanding shares of Bioenvision common stock on an as-converted basis immediately before the merger became effective, submitted written demands for appraisal of their shares and elected not to accept the $5.60 per share merger consideration. We referred to these holders as dissenters. In September 2008, the appraisal demand was resolved with substantially all of the dissenters for a total of $16.6 million in cash, consisting of the merger price paid to all other Bioenvision stockholders, plus interest accrued.

        The purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed amounted to $85.3 million, which was allocated to goodwill. We anticipate that substantially all of the amount allocated to goodwill will be deductible for tax purposes.

        The allocation of purchase price remains subject to potential adjustments, including adjustments for liabilities associated with certain exit and tax restructuring activities. We recorded immaterial adjustments to the purchase price in the nine months ended September 30, 2008.

Purchase of In-Process Research and Development

        We did not complete any acquisitions in the nine months ended September 30, 2008. In connection with certain acquisitions that we completed between January 1, 2006 and December 31, 2007, we acquired various IPR&D projects. The following table sets forth the significant IPR&D projects for the companies we acquired between January 1, 2006 and December 31, 2007 (amounts in millions):

Company Acquired	Purchase Price		IPR&D		Programs Acquired	Discount Rate Used in Estimating Cash Flows			Year of Expected Launch
Bioenvision (2007)	$	349.9	$	125.5	Clolar/Evoltra (clofarabine)(1,2)		17	%		2009-2013
AnorMED Inc. (AnorMED) (2006)	$	589.2	$	526.8 26.1	Mozobil (stem cell transplant)(3) AMD070 (HIV)(4)		15 15	% %		2009-2014 —
			$	552.9

(1)

IPR&D charges totaled $125.5 million related to the acquisition of Bioenvision, of which $106.4 million was charged to IPR&D and $19.1 million was charged to equity in income (loss) of equity method investments.

(2)

Clofarabine, which is approved for the treatment of relapsed and refractory pediatric acute lymphoblastic leukemia, or ALL, is marketed under the name Clolar in North and South America and as Evoltra elsewhere in the world. The IPR&D projects for clofarabine are related to the development of the product for the treatment of other medical diseases.

16

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

5.    Mergers and Acquisitions (Continued)

(3)

In June 2008, we submitted marketing applications for Mozobil in the United States and Europe.

(4)

Year of expected launch is not provided for AMD070 at this time because we are assessing our future plans for this program.

Exit Activities

        In connection with our acquisitions of AnorMED and Bioenvision, we initiated integration plans to consolidate and restructure certain functions and operations, including the relocation and termination of certain personnel of these acquired entities and the closure of certain of the acquired entities' leased facilities. These costs have been recognized as liabilities in accordance with EITF Issue No. 95-3, "Recognition of Liabilities in Connection with a Purchase or Business Combination," and are subject to potential adjustments as certain exit activities are confirmed or refined. The following table summarizes the liabilities established for exit activities related to these acquisitions (amounts in thousands):

		Employee Related Benefits			Closure of Leased Facilities			Other Exit Activities			Total Exit Activities
Balance at December 31, 2006		$	6,105		$	24		$	—		$	6,129
	Acquisition(1)		2,601			—			70			2,671
	Revision of estimates		(931	)		2,593			—			1,662
	Payments		(5,602	)		(453	)		—			(6,055	)
Balance at December 31, 2007			2,173			2,164			70			4,407
	Revision of estimates		(182	)		—			—			(182	)
	Payments		(1,834	)		(530	)		(70	)		(2,434	)
Balance at September 30, 2008(2)		$	157		$	1,634		$	—		$	1,791

(1)

Represents amounts accrued for employee related benefits and other exit activities resulting from our acquisition of Bioenvision. We completed payment of these benefits and other exit activities in June 2008.

(2)

We expect to pay employee benefits related to our acquisition of AnorMED through 2008 and payments related to the closing of a leased facility through 2012.

Pro Forma Financial Summary

        The following pro forma financial summary is presented as if the acquisition of Bioenvision had been completed as of January 1, 2007. These pro forma combined results are not necessarily indicative of the actual results that would have occurred had the acquisition been consummated on that date, or of the future operations of the combined entities. Material nonrecurring charges related to the

17

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

5.    Mergers and Acquisitions (Continued)

acquisition of Bioenvision, such as IPR&D charges of $125.5 million, are included in the following pro forma financial summary as of January 1, 2007 (amounts in thousands, except per share amounts):

		Three Months Ended September 30, 2007		Nine Months Ended September 30, 2007
Total revenues		$	964,776	$	2,787,518
Net income		$	154,055	$	271,020
Net income per share:
	Basic	$	0.59	$	1.03
	Diluted	$	0.56	$	0.99
Weighted average shares outstanding:
	Basic		262,775		263,387
	Diluted		279,206		279,898

6.    Strategic Transactions

        We classify nonrefundable fees paid outside of a business combination for the acquisition or licensing of products that have not received regulatory approval and have no future alternative use as research and development expense.

Strategic Alliance with Osiris Therapeutics, Inc.

        In October 2008, we entered into a strategic alliance with Osiris Therapeutics, Inc., or Osiris, whereby we obtained an exclusive license to develop and commercialize Prochymal and Chondrogen, mesenchymal stem cell products, outside of the United States and Canada. Osiris will commercialize Prochymal and Chondrogen in the United States and Canada. We will pay Osiris a nonrefundable upfront payment of $75.0 million by November 21, 2008, and an additional $55.0 million nonrefundable upfront license fee on July 1, 2009, both of which will be charged to research and development expense in our consolidated statements of operations during the fourth quarter of 2008.

        Osiris will be responsible for completing, at its own expense, all clinical trials of Prochymal for the treatment of GvHD and Crohn's disease, both of which are in phase 3 trials, and clinical trials of Prochymal and Chondrogen through phase 2 for all other indications. Osiris will be responsible for 60% and we will be responsible for 40% of the clinical trial costs for phase 3 and 4 clinical trials of Prochymal (other than for the treatment of GvHD and Crohn's disease) and Chondrogen. Osiris is eligible to receive:

•

up to $500.0 million in development and regulatory milestone payments for all indications of Prochymal and up to $100.0 million for Chondrogen, unless we elect to opt out of further development of Chondrogen; and

•

up to $250.0 million in sales milestones for all indications of Prochymal and up to $400.0 million for all indications of Chondrogen for the prevention and treatment of conditions of articulating joints.

18

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6.    Strategic Transactions (Continued)

Osiris is also eligible to receive tiered, double-digit royalties from us on sales of Prochymal and Chondrogen outside of the United States and Canada.

Collaboration with PTC Therapeutics, Inc.

        On July 15, 2008, we entered into a collaboration agreement with PTC Therapeutics, Inc., or PTC, to develop and commercialize PTC124, PTC's novel oral therapy in late-stage development for the treatment of nonsense-mutation-mediated Duchenne muscular dystrophy, or DMD, and nonsense-mutation-mediated cystic fibrosis, or CF. Under the terms of the agreement, PTC will commercialize PTC124 in the United States and Canada, and we will commercialize the treatment in all other countries. In connection with the collaboration agreement, we paid PTC a nonrefundable upfront payment of $100.0 million, which we recorded as a charge to research and development expense for our Therapeutics segment in our consolidated statements of operations in July 2008. PTC will conduct and be responsible for the phase 2b trial of PTC124 in DMD, the phase 2b trial of PTC124 in CF and two proof-of-concept studies in other indications to be determined. Once these four studies have been completed, we and PTC will share research and development costs for PTC124 equally. We and PTC will each bear the sales and marketing and other costs associated with the commercialization of PTC124 in our respective territories. PTC is eligible to receive up to $337.0 million in milestone payments as follows:

•

up to $165.0 million in development and approval milestones, the majority of which would be paid upon the receipt of approvals obtained outside of the United States and Canada; and

•

up to $172.0 million in sales milestones, commencing if and when annual net sales for PTC124 outside of the United States and Canada reach $300.0 million and increasing in increments through revenues of $2.4 billion.

PTC is also eligible to receive tiered, double-digit royalties from sales of PTC124 outside of the United States and Canada.

Strategic Alliance with Isis Pharmaceuticals, Inc.

        On January 7, 2008, we entered into a strategic alliance with Isis Pharmaceuticals, Inc., or Isis, whereby we obtained an exclusive, worldwide license to develop and commercialize mipomersen, a lipid-lowering drug targeting apolipoprotein B-100, which is currently being developed for the treatment of familial hypercholesterolemia, or FH, an inherited disorder that causes exceptionally high levels of LDL-cholesterol. In February 2008, we made a nonrefundable payment to Isis of $150.0 million, of which $80.1 million was recorded as an investment in equity securities in our consolidated balance sheets based on the fair value of the five million shares of Isis common stock we acquired in connection with the transaction, and the remaining $69.9 million was allocated to the mipomersen license, which had not reached technological feasibility and did not have alternative future use. We recorded the $69.9 million license fee as a charge to research and development expense in our consolidated statements of operations for the three months ended March 31, 2008.

        In June 2008, we finalized the terms of our license and collaboration agreement with Isis and paid Isis an additional $175.0 million upfront nonrefundable license fee, which we recorded as a charge to research and development expense in our consolidated statements of operations in June 2008. Under the terms of the agreement, Isis will contribute up to the first $125.0 million in funding for the

19

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6.    Strategic Transactions (Continued)

development of mipomersen and, thereafter, we and Isis will share development costs for mipomersen equally. The initial funding commitment by Isis and shared development funding would end when the mipomersen program is profitable. In the event the research and development of mipomersen is terminated prior to Isis completing their funding obligation, we are not entitled to any refund of our $175.0 million upfront payment. Isis is eligible to receive up to $750.0 million in commercial milestone payments and up to $825.0 million in development and regulatory milestone payments.

        We will be responsible for funding sales and marketing expenses until mipomersen revenues are sufficient to cover such costs. Profits on mipomersen initially will be allocated 70% to us and 30% to Isis. The profit ratio would be adjusted on a sliding scale if and as annual revenues for mipomersen ramp up to $2.0 billion, at which point we would share profits equally with Isis. The results of our mipomersen program are included in the results of our cardiovascular business unit, which are reported under the caption "Other" in our segment disclosures.

7.    Inventories

		September 30, 2008		December 31, 2007
		(Amounts in thousands)
Raw materials		$	95,904	$	120,409
Work-in-process			135,290		130,812
Finished goods			211,705		187,894
	Total	$	442,899	$	439,115

        We capitalize inventory produced for commercial sale, which may result in the capitalization of inventory prior to regulatory approval. If a product is not approved for sale, it would result in the write off of the inventory and a charge to earnings. Our total inventories at September 30, 2008 included $9.4 million of Myozyme and $4.9 million of Campath inventory, produced at our manufacturing facility in Belgium, that have not yet been approved for sale.

8.    Goodwill and Other Intangible Assets

Goodwill

        The following table contains the change in our goodwill during the nine months ended September 30, 2008 (amounts in thousands):

	As of December 31, 2007		Adjustments			As of September 30, 2008
Renal	$	303,951	$	—		$	303,951
Therapeutics		355,494		—			355,494
Transplant		163,061		—			163,061
Biosurgery		7,585		—			7,585
Oncology		530,909		478			531,387
Other		42,828		(736	)		42,092
Goodwill	$	1,403,828	$	(258	)	$	1,403,570

20

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

8.    Goodwill and Other Intangible Assets (Continued)

        We are required to perform impairment tests related to our goodwill under FAS 142 annually and whenever events or changes in circumstances suggest that the carrying value of an intangible asset may not be recoverable. We completed the required annual impairment tests for our $1.4 billion of net goodwill in the third quarter of 2008 and determined that no impairment charges were required.

Other Intangible Assets

        The following table contains information about our other intangible assets for the periods presented (amounts in thousands):

		As of September 30, 2008							As of December 31, 2007
		Gross Other Intangible Assets		Accumulated Amortization			Net Other Intangible Assets		Gross Other Intangible Assets		Accumulated Amortization			Net Other Intangible Assets
Technology(1)		$	2,160,328	$	(666,450	)	$	1,493,878	$	1,680,190	$	(545,817	)	$	1,134,373
Patents			194,560		(117,426	)		77,134		194,560		(104,413	)		90,147
Trademarks			60,610		(40,851	)		19,759		60,634		(36,787	)		23,847
License fees			90,504		(35,432	)		55,072		90,237		(28,833	)		61,404
Distribution rights(2)			391,530		(157,929	)		233,601		307,260		(125,678	)		181,582
Customer lists(3)			87,704		(32,281	)		55,423		97,031		(33,209	)		63,822
Other			2,045		(1,878	)		167		2,050		(1,573	)		477
	Total	$	2,987,281	$	(1,052,247	)	$	1,935,034	$	2,431,962	$	(876,310	)	$	1,555,652

(1)

Effective January 1, 2008, reflects the consolidation of the results of BioMarin/Genzyme LLC at fair value in accordance with FIN 46R, including $480.5 million for the fair value of the manufacturing and commercialization rights to Aldurazyme, net of $18.0 million of related accumulated amortization. This intangible asset is being amortized on a straight-line basis over a period of 20 years.

(2)

Includes an additional $84.3 million of other intangible assets resulting from additional payments made or accrued in the nine months ended September 30, 2008 in connection with our reacquisition of the Synvisc sales and marketing rights from Wyeth, including a $60.0 million milestone payment recorded in May 2008.

(3)

Reflects the write off, during the three months ended March 31, 2008, of $8.3 million of fully amortized customer lists assigned to our Genetics reporting unit.

All of our other intangible assets are amortized over their estimated useful lives.

21

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

8.    Goodwill and Other Intangible Assets (Continued)

        The estimated future amortization expense for our other intangible assets for the remainder of fiscal year 2008, the four succeeding fiscal years and thereafter is as follows (amounts in thousands):

Year Ended December 31,	Estimated Amortization Expense(1,2)
2008 (remaining three months)	$	57,884
2009		228,887
2010		241,794
2011		259,922
2012		200,776
Thereafter		568,166

(1)

Includes estimated future amortization expense for the Synvisc distribution rights based on the forecasted respective future sales of Synvisc and the resulting future contingent payments we will be required to make to Wyeth, and for the Myozyme patent and technology rights pursuant to a license agreement with Synpac based on forecasted future sales of Myozyme and the potential milestone payments we may be required to make to Synpac. These contingent payments will be recorded as intangible assets when the payments are accrued. Estimated future amortization expense also includes estimated future amortization expense for other arrangements involving contingent payments.

(2)

Excludes future amortization expense related to the $480.5 million of technology recorded effective January 1, 2008, related to our consolidation of the results of BioMarin/Genzyme LLC, because such amortization is entirely offset by the corresponding amortization of a noncurrent liability related to the consolidation of BioMarin/Genzyme LLC.

22

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

9.    Investments in Equity Securities

        We recorded the following gains (losses) on investments in equity securities, net of charges for impairment of investments, for the periods presented (amounts in thousands):

			Three Months Ended September 30,					Nine Months Ended September 30,
			2008			2007		2008			2007
Gross gains (losses) on investments in equity securities:
	Sirtris Pharmaceuticals, Inc. (Sirtris)		$	—		$	—	$	10,304		$	—
	Therapeutic Human Polyclonals, Inc. (THP)			1,042			—		1,042			10,848
	Other			(9,861	)		1,105		(8,948	)		3,188
		Total		(8,819	)		1,105		2,398			14,036
Less: charges for impairment of investments				(5,310	)		—		(6,599	)		—
Gains (losses) on investments in equity securities, net			$	(14,129	)	$	1,105	$	(4,201	)	$	14,036

        In the fourth quarter of 2007, we purchased an exclusive option to acquire equity of a private company for $10.0 million in cash. We terminated the option agreement prior to the deadline for exercise and, as a result, we recorded a charge of $10.0 million in the third quarter of 2008 to write off the purchase price of the option. We also recorded a charge of $5.3 million in the third quarter of 2008 to write down our investments in certain venture capital funds to fair value.

        In the second quarter of 2008, we recorded a $10.3 million gain resulting from the liquidation of our investment in the common stock of Sirtris for net cash proceeds of $14.8 million.

        In March 2007, we recorded a $10.8 million gain in connection with the sale of our entire investment in the capital stock of THP, which had a zero cost basis, for net cash proceeds of $10.8 million.

        At September 30, 2008, our stockholders' equity includes $32.7 million of unrealized gains and $0.1 million of unrealized losses related to our strategic investments in equity securities.

10.    Joint Venture with BioMarin

        In 1998, we and BioMarin Pharmaceutical Inc., or BioMarin, formed BioMarin/Genzyme LLC to develop and commercialize Aldurazyme, a recombinant form of the human enzyme alpha-L-iduronidase, used to treat an LSD known as mucopolysaccharidosis I, or MPS I. Prior to January 1, 2008, we recorded our portion of the results of BioMarin/Genzyme LLC in equity in income (loss) of equity method investments in our consolidated statements of operations. Our portion of BioMarin/Genzyme LLC's net income was $8.2 million for the three months ended September 30, 2007 and $20.8 million for the nine months ended September 30, 2007.

23

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

10.    Joint Venture with BioMarin (Continued)

        Condensed financial information for BioMarin/Genzyme LLC is summarized below for the three and nine months ended September 30, 2007 (amounts in thousands):

	Three Months Ended September 30, 2007			Nine Months Ended September 30, 2007
Revenue	$	32,322		$	88,270
Gross margin		25,284			68,241
Operating expenses		(8,709	)		(26,743	)
Net income		16,793			42,029

        Effective January 1, 2008, we restructured our relationship with BioMarin/Genzyme LLC regarding the manufacturing and commercialization of Aldurazyme by entering into several new agreements. BioMarin/Genzyme LLC no longer engages in commercial activities related to Aldurazyme and solely:

•

holds the intellectual property relating to Aldurazyme and other future collaboration products; and

•

will engage in research and development activities that are mutually selected and funded by BioMarin and us, the costs of which we will share equally.

Under the restructured relationship, BioMarin/Genzyme LLC has licensed all intellectual property related to Aldurazyme and other collaboration products on a royalty-free basis to BioMarin and us. BioMarin holds the manufacturing rights and we hold the global marketing rights. We are required to pay BioMarin a tiered payment ranging from 39.5% to 50% of worldwide net product sales of Aldurazyme.

        As a result of the restructuring of our relationship with BioMarin/Genzyme LLC, effective January 1, 2008, in accordance with the provisions of FIN 46R, we began consolidating the results of BioMarin/Genzyme LLC. Upon consolidation of BioMarin/Genzyme LLC, we recorded the assets and liabilities of the joint venture in our consolidated balance sheets at fair value. The value of the intellectual property of the joint venture of approximately $480.5 million was recorded as an intangible asset in our consolidated balance sheets and will be amortized over a useful life of 20 years. As this intellectual property has been outlicensed from the joint venture to BioMarin and us for no consideration, a noncurrent liability was recorded for an amount equal to the negative value of these licenses. The noncurrent liability is being amortized over a period of 20 years. We recorded BioMarin's portion of the joint venture's losses, the amount of which was not significant for the three and nine months ended September 30, 2008, as minority interest in our consolidated statements of operations.

11.    Long-Term Debt

1.25% Convertible Senior Notes

        In October 2008, we notified the holders of our $690.0 million in principal of 1.25% convertible senior notes that we plan to redeem the notes on December 1, 2008 using available cash. The notes will be redeemed for cash at 100% of the principal amount of the notes plus accrued interest unless they are converted, at the option of the noteholders, into shares of our common stock on or before November 25, 2008, at a conversion price of $71.24 per share.

24

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

11.    Long-Term Debt (Continued)

Revolving Credit Facility

        As of September 30, 2008, no amounts were outstanding under our five-year $350.0 million senior unsecured revolving credit facility, which matures on July 14, 2011. The terms of this credit facility include various covenants, including financial covenants, that require us to meet minimum interest coverage ratios and maximum leverage ratios. As of September 30, 2008, we were in compliance with these covenants.

Mortgage

        In July 2008, we purchased land and a manufacturing facility we formerly leased in Framingham, Massachusetts, for an aggregate purchase price of $38.9 million, including fees. We paid $20.8 million in cash and assumed the remaining $18.1 million in principal outstanding under the existing mortgage for the facility, which bears interest at 5.57% annually and is due in May 2020. We allocated the purchase price to the fair value of the acquired land and buildings in our consolidated balance sheets in July 2008, of which $20.6 million was allocated to land and $18.3 million was allocated to buildings.

12.    Stockholders' Equity

Stock Repurchase

        During the three months ended September 30, 2008, we did not repurchase any shares of our common stock under our stock repurchase program. Since June 2007, when we first began repurchasing shares of our common stock under this program, we have repurchased a cumulative total of 5,500,000 shares of our common stock at an average price of $68.09 per share for a total of $374.6 million in cash, including fees. We recorded the repurchases in our consolidated balance sheets as a reduction to our common stock account for the par value of the repurchased shares and as a reduction to our additional paid-in capital account.

25

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

12.    Stockholders' Equity (Continued)

Stock-Based Compensation Expense, Net of Estimated Forfeitures

        We allocated pre-tax stock-based compensation expense, net of estimated forfeitures, based on the functional cost center of each employee as follows (amounts in thousands, except per share amounts):

			Three Months Ended September 30,						Nine Months Ended September 30,
			2008			2007			2008			2007
Pre-tax stock-based compensation expense, net of estimated forfeitures, charged to:
	Cost of products and services sold(1)		$	(6,926	)	$	(5,779	)	$	(19,751	)	$	(18,540	)
	Selling, general and administrative expense			(24,222	)		(25,091	)		(79,015	)		(82,838	)
	Research and development expense			(14,645	)		(13,518	)		(43,322	)		(44,973	)
		Total		(45,793	)		(44,388	)		(142,088	)		(146,351	)
Less: tax benefit from stock options				14,025			14,093			43,396			45,228
		Total stock-based compensation expense, net of tax	$	(31,768	)	$	(30,295	)	$	(98,692	)	$	(101,123	)
Effect per common share:
	Basic		$	(0.12	)	$	(0.12	)	$	(0.37	)	$	(0.38	)
	Diluted		$	(0.11	)	$	(0.11	)	$	(0.35	)	$	(0.36	)

(1)

We also capitalized the following amounts of stock-based compensation expense to inventory, all of which is attributable to participating employees that support our manufacturing operations (amounts in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2008		2007		2008		2007
Stock-based compensation expense capitalized to inventory	$	3,486	$	2,484	$	10,482	$	10,323

        We amortize stock-based compensation expense capitalized to inventory based on inventory turns.

        At September 30, 2008, there was $289.5 million of pre-tax stock-based compensation expense, net of estimated forfeitures, related to unvested awards not yet recognized that is expected to be recognized over a weighted average period of 2.2 years.

Notes Receivable from Stockholders

        In connection with our acquisition of Biomatrix, we assumed notes receivable from five former employees, directors and consultants of Biomatrix, who we refer to as the Makers of the notes. The notes are full-recourse promissory notes that accrue interest at rates ranging from 5.30% to 7.18% and mature at various dates from May 2007 through September 2009. We record the amount of principal and interest outstanding under the notes in stockholders' equity because the notes were originally received in exchange for the issuance of Biomatrix common stock, which was subsequently converted into Genzyme Stock.

26

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

12.    Stockholders' Equity (Continued)

        As of September 30, 2008, there was a total of $13.0 million of principal and interest outstanding for these notes, of which a total of $12.8 was attributable to one Maker, the majority of which was past due.

        In October 2008, we received a total of $10.1 million of cash from this Maker, including $0.3 million for the reimbursement of collection costs, and shares of Genzyme Stock valued at $1.7 million as payment in full of the past due amounts. Two notes remain outstanding, both of which mature in 2009. The amount of principal and accrued interest for the remaining notes is not material.

13.    Commitments and Contingencies

Legal Proceedings

        We periodically become subject to legal proceedings and claims arising in connection with our business.

        In April 2005, Church & Dwight Co., Inc., or Church & Dwight, filed a suit in U.S. District Court for the District of New Jersey against Abbott Laboratories, or Abbott, claiming that certain over-the-counter pregnancy tests distributed by Abbott between 1999 and 2003 infringed upon patents owned by Church & Dwight. During part of this period, a portion of the test kits distributed by Abbott were manufactured by Wyntek Diagnostics, Inc., or Wyntek, which had agreed to indemnify Abbott for patent infringement related costs and damages for these products. In 2002, we acquired Wyntek and assumed the obligations under this agreement. In June 2008, the court issued a ruling awarding Church & Dwight approximately $29 million in damages based on a jury finding of willful infringement by Abbott. This award has not yet been entered as a final ruling. Abbott will have 60 days from the final entry of this award to file an appeal. Because multiple parties, including Abbott, manufactured infringing product for Abbott during this period, any responsibility that we may have for indemnifying Abbott is only for a portion of its costs and damages related to this case. We currently are disputing with Abbott the percentage of infringing product that was supplied by us and may in the future assert additional claims that, if successful, would reduce or relieve us of any liability.

        Through June 30, 2003, we had three outstanding series of common stock, which we referred to as tracking stocks; Genzyme General Stock (which we now refer to as Genzyme Stock), Biosurgery Stock and Molecular Oncology Stock. On August 6, 2007, we reached an agreement in principle to settle for $64.0 million, lawsuits related to our 2003 exchange of Genzyme Stock for Biosurgery Stock. As a result, we recorded a liability for the settlement payment of $64.0 million as a charge to SG&A in our consolidated statements of operations in June 2007, which we subsequently paid in August 2007. The court approved the settlement in October 2007. We have submitted claims to our insurers for reimbursement of portions of the expenses incurred in connection with these cases; the insurers have purported to deny coverage, and therefore, we have not recorded a receivable for any potential recovery from our insurers. We intend to vigorously pursue our rights with respect to insurance coverage and to the extent we are successful, we will record the recovery in our consolidated statements of operations.

        We periodically become subject to legal proceedings and claims arising in connection with our business. Although we cannot predict the outcome of these additional proceedings and claims, we do not believe the ultimate resolution of any of these existing matters would have a material adverse affect on our consolidated financial position or results of operations.

27

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

14.    Provision for Income Taxes

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
	(Amounts in thousands)
Provision for income taxes	$	60,512		$	66,432		$	159,036		$	201,715
Effective tax rate		34	%		29	%		32	%		33	%

        Our effective tax rate for all periods presented varies from the U.S. statutory tax rate as a result of:

•

our provision for state income taxes;

•

the tax benefits from manufacturing activities;

•

benefits related to tax credits;

•

income and expenses taxed at rates other than the U.S. statutory tax rate; and

•

non-deductible stock-based compensation expenses totaling $8.8 million for the three months ended and $25.6 million for the nine months ended September 30, 2008, as compared to $7.3 million for the three months ended and $22.7 million for the nine months ended September 30, 2007.

        In addition, during the three months ended September 30, 2008, we recorded net tax benefits of $10.1 million, principally related to a change in our estimate of the amount of foreign production income for the prior year. Our effective tax rate for the three and nine months ended September 30, 2008 was also impacted by the settlement of IRS audits for the tax years 2004 to 2005. During the first half of 2008, we recorded a total of $5.1 million of tax benefits to our income tax provision reflecting the settlement of various issues. In conjunction with those settlements, we reduced our tax reserves by $4.9 million and recorded current and deferred tax benefits for the remaining portion of the settlement amounts.

        We are currently under IRS audit for the tax years 2006 to 2007 and various states for the tax years 1999 to 2005. We believe that we have provided sufficiently for all audit exposures. Settlement of these audits or the expiration of the statute of limitations on the assessment of income taxes for any tax year may result in an adjustment of future tax provisions. Any such adjustment would be recorded upon the effective settlement of the audit or expiration of the applicable statute of limitations.

15.    Segment Information

        In accordance with FAS 131, "Disclosures about Segments of an Enterprise and Related Information," we present segment information in a manner consistent with the method we use to report this information to our management. Applying FAS 131, we have six reporting segments as described above in Note 1, "Description of Business," to these consolidated financial statements. Effective January 1, 2008, as a result of changes in how we review our business, certain general and administrative expenses, which were formerly allocated amongst our reporting segments and Other, are now allocated to Corporate. We have revised our 2007 segment presentation to conform to our 2008 presentation.

28

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

15.    Segment Information (Continued)

        We have provided information concerning the operations of these reportable segments in the following tables (amounts in thousands):

			Three Months Ended September 30,						Nine Months Ended September 30,
			2008			2007			2008			2007
Revenues:
	Renal		$	204,817		$	184,424		$	602,006		$	522,350
	Therapeutics(1)			599,329			471,351			1,779,957			1,365,617
	Transplant			47,860			42,881			141,633			127,582
	Biosurgery			122,962			106,146			365,839			312,428
	Genetics			82,058			73,050			234,921			212,922
	Oncology			33,978			22,730			96,350			62,609
	Other			68,895			59,111			209,548			172,084
	Corporate			385			466			1,225			1,169
		Total	$	1,160,284		$	960,159		$	3,431,479		$	2,776,761
Income (loss) before income taxes:
	Renal		$	91,398		$	81,171		$	272,843		$	218,931
	Therapeutics(1,2)			271,878			315,098			1,015,287			905,096
	Transplant			(14,360	)		(18,211	)		(33,770	)		(28,536	)
	Biosurgery			23,454			18,991			70,910			50,826
	Genetics			3,025			4,371			10,754			20,140
	Oncology(3)			(24,694	)		(33,728	)		(76,345	)		(53,440	)
	Other(4)			4,010			1,620			(236,568	)		3,035
	Corporate(5)			(174,603	)		(143,567	)		(529,644	)		(513,043	)
		Total	$	180,108		$	225,745		$	493,467		$	603,009

(1)

Effective January 1, 2008, as a result of our restructured relationship with BioMarin/Genzyme LLC, instead of sharing all costs and profits of Aldurazyme equally with BioMarin, we began to record all sales of, and cost of sales and SG&A related to, Aldurazyme.

(2)

Includes a charge of $100.0 million recorded in July 2008 for a nonrefundable upfront fee we paid to PTC related to our collaboration agreement with PTC to develop and commercialize PTC124 for the treatment of nonsense-mutation-mediated DMD and nonsense-mutation-mediated CF.

(3)

The results of operations of acquired companies and assets and the amortization expense related to acquired intangible assets are included in segment results beginning on the date of acquisition.

(4)

Includes charges of $175.0 million recorded in June 2008 and $69.9 million recorded in February 2008 representing license fees paid to Isis for the exclusive, worldwide rights to mipomersen, which we recorded to research and development expense in our consolidated statements of operations. These charges were incurred by our cardiovascular business unit which had minimal revenues and expenses excluding this charge.

(5)

Includes our corporate, general and administrative and corporate science activities, all of our stock-based compensation expense, as well as gains (losses) on investments in equity securities, net

29

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

15.    Segment Information (Continued)

of charges for impairment of investments, interest income, interest expense and other income and expense items that we do not specifically allocate to a particular reporting segment.

Segment Assets

        We provide information concerning the assets of our reportable segments in the following table (amounts in thousands):

			September 30, 2008		December 31, 2007
Segment Assets(1):
	Renal		$	1,387,762	$	1,468,428
	Therapeutics(2)			1,772,381		1,230,128
	Transplant			424,746		415,903
	Biosurgery			506,203		458,412
	Genetics			184,429		148,787
	Oncology			925,792		940,097
	Other			232,539		246,496
	Corporate(3)			3,981,733		3,393,490
		Total	$	9,415,585	$	8,301,741

(1)

Assets for our six reporting segments and Other include primarily accounts receivable, inventory and certain fixed and intangible assets, including goodwill.

(2)

Includes the consolidation of the results of BioMarin/Genzyme LLC at fair value, including $480.5 million of additional technology recorded in the first quarter of 2008 for the fair value of BioMarin/Genzyme LLC's manufacturing and commercialization rights to Aldurazyme, net of $18.0 million of related accumulated amortization.

(3)

Includes the assets related to our corporate, general and administrative operations, and corporate science activities that we do not allocate to a particular segment. Segment assets for Corporate consist of the following (amounts in thousands):

		September 30, 2008		December 31, 2007
Cash, cash equivalents, short- and long-term investments in debt securities		$	1,473,249	$	1,460,394
Deferred tax assets, net			489,071		260,005
Property, plant & equipment, net			1,484,523		1,240,992
Investments in equity securities			169,678		89,181
Other assets			365,212		342,918
	Total	$	3,981,733	$	3,393,490

30

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that characterize our business. In particular, we encourage you to review the risks and uncertainties described under the heading "Risk Factors" below. These risks and uncertainties could cause actual results to differ materially from those forecasted in forward-looking statements or implied by past results and trends. Forward-looking statements are statements that attempt to project or anticipate future developments in our business; we encourage you to review the examples of forward-looking statements under "Note Regarding Forward-Looking Statements" at the beginning of this report. These statements, like all statements in this report, speak only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments.

INTRODUCTION

        We are a global biotechnology company dedicated to making a major impact on the lives of people with serious diseases. Our broad product and service portfolio is focused on rare disorders, renal diseases, orthopaedics, organ transplant, diagnostic and predictive testing, and cancer. We are organized into six financial reporting units, which we also consider to be our reporting segments:

•

Renal, which develops, manufactures and distributes products that treat patients suffering from renal diseases, including chronic renal failure. The unit derives substantially all of its revenue from sales of Renagel/Renvela (including sales of bulk sevelamer) and Hectorol;

•

Therapeutics, which develops, manufactures and distributes 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, such as Thyrogen. The unit derives substantially all of its revenue from sales of Cerezyme, Fabrazyme, Myozyme, Aldurazyme and Thyrogen;

•

Transplant, which develops, manufactures and distributes therapeutic products that address pre-transplantation, prevention and treatment of graft rejection in organ transplantation as well as other hematologic and auto-immune disorders. The unit derives substantially all of its revenue from sales of Thymoglobulin;

•

Biosurgery, which develops, manufactures and distributes biotherapeutics and biomaterial-based products, with an emphasis on products that meet medical needs in the orthopaedics and broader surgical areas. The unit derives substantially all of its revenue from sales of Synvisc, the Sepra line of products, Carticel and MACI;

•

Genetics, which provides testing services for the oncology, prenatal and reproductive markets; and

•

Oncology, which develops, manufactures and distributes products for the treatment of cancer, with a focus on antibody- and small molecule-based therapies. The unit derives substantially all of its revenue from sales and royalties received on sales of Campath and clofarabine and from the reimbursement of Campath development expenses. Clofarabine is marketed under the name Clolar in North and South America and as Evoltra elsewhere in the world

        We report the activities of our diagnostic products, bulk pharmaceuticals and cardiovascular business units under the caption "Other." We report our corporate, general and administrative operations and corporate science activities under the caption "Corporate."

31

        Effective January 1, 2008, as a result of a change in how we review our business, certain general and administrative expenses which were formerly allocated amongst our reporting segments and Other, are now allocated to Corporate.

        As a result of our acquisition of Bioenvision in October 2007, our Oncology business unit, which was formerly reported combined with "Other," now meets the criteria for disclosure as a separate reporting segment. We have revised our 2007 segment disclosures to conform to our 2008 presentation.

MERGERS AND ACQUISITIONS

        The following acquisitions were accounted for as business combinations and, accordingly, we have included their results of operations in our consolidated statements of operations from the date of acquisition.

Diagnostic Assets of Diagnostic Chemicals Limited

        On December 3, 2007, we acquired certain diagnostic assets from Diagnostic Chemicals Limited, or DCL, a privately-held diagnostics and biopharmaceutical company, including DCL's line of over 50 formulated clinical chemistry reagents and their diagnostics operations in Prince Edward Island, Canada and Connecticut. We paid consideration of $53.8 million in cash.

Bioenvision

        Effective October 23, 2007, we completed our acquisition of Bioenvision through the culmination of a two-step process consisting of a tender offer completed in July 2007, and a merger approved in October 2007. We paid gross consideration of $349.9 million in cash, including $345.4 million for the outstanding shares of Bioenvision common and preferred stock and options to purchase shares of Bioenvision common stock, and approximately $5 million for acquisition costs. Net consideration was $304.7 million as we acquired Bioenvision's cash and cash equivalents totaling $45.2 million.

        Bioenvision was focused on the acquisition, development and marketing of compounds and technologies for the treatment of cancer, autoimmune disease and infection. The acquisition of Bioenvision provided us with the rights to clofarabine outside North America. Clofarabine, which is approved for the treatment of relapsed and refractory pediatric ALL, is marketed under the name Clolar in North and South America and as Evoltra elsewhere in the world. We are developing clofarabine for diseases with significantly larger patient populations, including use as a first-line therapy for the treatment of acute myelogenous leukemia, or AML, in adults. Clofarabine has been granted orphan drug status for the treatment of ALL and AML in both the United States and the European Union.

STRATEGIC TRANSACTIONS

        We classify nonrefundable fees paid outside of a business combination for the acquisition or licensing of products that have not received regulatory approval and have no future alternative use as research and development expense.

Strategic Alliance with Osiris

        In October 2008, we entered into a strategic alliance with Osiris, whereby we obtained an exclusive license to develop and commercialize Prochymal and Chondrogen, mesenchymal stem cell products, outside of the United States and Canada. Osiris will commercialize Prochymal and Chondrogen in the United States and Canada. We will pay Osiris a nonrefundable upfront payment of $75.0 million by November 21, 2008 and an additional $55.0 million nonrefundable upfront license fee on July 1, 2009,

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both of which will be charged to research and development expense in our consolidated statements of operations during the fourth quarter of 2008.

        Osiris will be responsible for completing, at its own expense, all clinical trials of Prochymal for the treatment of GvHD and Crohn's disease, both of which are in phase 3 trials, and clinical trials of Prochymal and Chondrogen through phase 2 for all other indications. Osiris will be responsible for 60% and we will be responsible for 40% of the clinical trial costs for phase 3 and 4 clinical trials of Prochymal (other than for the treatment of GvHD and Crohn's disease) and Chondrogen. Osiris is eligible to receive:

•

up to $500.0 million in development and regulatory milestone payments for all indications of Prochymal and up to $100.0 million for Chondrogen, unless we elect to opt out of further development of Chondrogen; and

•

up to $250.0 million in sales milestones for all indications of Prochymal and up to $400.0 million for all indications of Chondrogen for the prevention and treatment of conditions of articulating joints.

Osiris is also eligible to receive tiered, double-digit royalties from sales of Prochymal and Chondrogen outside of the United States and Canada.

Collaboration with PTC

        On July 15, 2008, we entered into a collaboration agreement with PTC to develop and commercialize PTC124, PTC's novel oral therapy in late-stage development for the treatment of nonsense-mutation-mediated DMD and nonsense-mutation-mediated CF. Under the terms of the agreement, PTC will commercialize PTC124 in the United States and Canada, and we will commercialize the treatment in all other countries. In connection with the collaboration agreement, we paid PTC a nonrefundable upfront payment of $100.0 million, which we recorded as a charge to research and development expense for our Therapeutics segment in our consolidated statements of operations in July 2008. PTC will conduct and be responsible for the phase 2b trial of PTC124 in DMD, the phase 2b trial of PTC124 in CF and two proof-of-concept studies in other indications to be determined. Once these four studies have been completed, we and PTC will share research and development costs for PTC124 equally. We and PTC will each bear the sales and marketing and other costs associated with the commercialization of PTC124 in our respective territories. PTC is eligible to receive up to $337.0 million in milestone payments as follows:

•

up to $165.0 million in development and approval milestones, the majority of which would be paid upon the receipt of approvals obtained outside of the United States and Canada; and

•

up to $172.0 million in sales milestones, commencing if and when annual net sales for PTC124 outside of the United States and Canada reach $300.0 million and increasing in increments through revenues of $2.4 billion.

PTC is also eligible to receive tiered, double-digit royalties from sales of PTC124 outside of the United States and Canada.

Strategic Alliance with Isis

        On January 7, 2008, we entered into a strategic alliance with Isis, whereby we obtained an exclusive, worldwide license to develop and commercialize mipomersen, a lipid-lowering drug targeting apolipoprotein B-100, which is currently being developed for the treatment of FH, an inherited disorder that causes exceptionally high levels of LDL-cholesterol. In February 2008, we made a nonrefundable payment to Isis of $150.0 million, of which $80.1 million was recorded as an investment in equity securities in our consolidated balance sheets based on the fair value of the five million shares

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of Isis common stock we acquired in connection with the transaction and the remaining $69.9 million was allocated to the mipomersen license, which had not reached technological feasibility and did not have alternative future use. We recorded the $69.9 million license fee as a charge to research and development expense in our consolidated statements of operations in the first quarter of 2008.

        In June 2008, we finalized the terms of our license and collaboration agreement with Isis and paid Isis an additional $175.0 million upfront nonrefundable license fee, which we recorded as a charge to research and development expense in our consolidated statements of operations in June 2008. Under the terms of the agreement, Isis will contribute up to the first $125.0 million in funding for the development of mipomersen and, thereafter, we and Isis will share development costs for mipomersen equally. The initial funding commitment by Isis and shared development funding would end when the mipomersen program is profitable. In the event the research and development of mipomersen is terminated prior to Isis completing their funding obligation, we are not entitled to any refund of our $175.0 million upfront payment. Accordingly, the $175.0 million was recorded as research and development expense in June 2008. Isis is eligible to receive up to $750.0 million in commercial milestone payments and up to $825.0 million in development and regulatory milestone payments.

        We will be responsible for funding sales and marketing expenses until mipomersen revenues are sufficient to cover such costs. Profits on mipomersen initially will be allocated 70% to us and 30% to Isis. The profit ratio would be adjusted on a sliding scale if and as annual revenues for mipomersen ramp up to $2.0 billion, at which point we would share profits equally with Isis. The results of our mipomersen program will be included in the results of our cardiovascular business unit, which are reported under the caption "Other" in our segment disclosures.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

        Our critical accounting policies and significant judgments and estimates are set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates" in Exhibit 13 to our 2007 Form 10-K. There have been no significant changes to our critical accounting policies or significant judgments and estimates since December 31, 2007.

        During the third quarter of 2008, we completed the required annual impairment tests for our $1.4 billion of net goodwill and determined that no impairment charge was required.

        Additional information regarding our provisions and estimates for our product sales allowances, sales allowance reserves and accruals, and distributor fees, and the key assumptions we use to determine the fair value assigned to IPR&D are included below.

Revenue Recognition

Product Sales Allowances

        Sales of many biotechnology products in the United States are subject to increased pricing pressure from managed care groups, institutions, government agencies, and other groups seeking discounts. We and other biotechnology companies in the U.S. market are also required to provide statutorily defined rebates and discounts to various U.S. government agencies in order to participate in the Medicaid program and other government-funded programs. In most international markets, we operate in an environment where governments may, and in some cases have, mandated cost-containment programs, placed restrictions on physician prescription levels and patient reimbursements, emphasized greater use of generic drugs and enacted across-the-board price cuts as methods to control costs. The sensitivity of our estimates can vary by program, type of customer and geographic location. Estimates associated with Medicaid and other government allowances may become subject to adjustment in a subsequent period.

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        We record product sales net of the following significant categories of product sales allowances:

•

Contractual adjustments—We offer chargebacks and contractual discounts and rebates, which we collectively refer to as contractual adjustments, to certain private institutions and various government agencies in both the United States and international markets. We record chargebacks and contractual discounts as allowances against accounts receivable in our consolidated balance sheets. We account for rebates by establishing an accrual for the amounts payable by us to these agencies and institutions, which is included in accrued liabilities in our consolidated balance sheets. We estimate the allowances and accruals for our contractual adjustments based on historical experience and current contract prices, using both internal data as well as information obtained from external sources, such as independent market research agencies and data from wholesalers. We continually monitor the adequacy of these estimates and adjust the allowances and accruals periodically throughout each quarter to reflect our actual experience. In evaluating these allowances and accruals, we consider several factors, including significant changes in the sales performance of our products subject to contractual adjustments, inventory in the distribution channel, changes in U.S. and foreign healthcare legislation impacting rebate or allowance rates, changes in contractual discount rates and the estimated lag time between a sale and payment of the corresponding rebate;

•

Discounts—In some countries, we offer cash discounts for certain products as an incentive for prompt payment, which are generally a stated percentage off the sales price. We account for cash discounts by reducing accounts receivable by the full amounts of the discounts. We consider payment performance and adjust the accrual to reflect actual experience; and

•

Sales returns—We record allowances for product returns at the time product sales are recorded. The product returns reserve is estimated based on the returns policies for our individual products and our experience of returns for each of our products. If the price of a product changes or if the history of product returns changes, the reserve is adjusted accordingly. We determine our estimates of the sales return accrual for new products primarily based on the historical sales returns experience of similar products, or those within the same or similar therapeutic category.

        Our provisions for product sales allowances reduced gross product sales as follows (amounts in thousands):

			Three Months Ended September 30,									Nine Months Ended September 30,
									Increase/ (Decrease) % Change									Increase/ (Decrease) % Change
			2008			2007						2008			2007
Product sales allowances:
	Contractual adjustments		$	153,799		$	106,807			44	%	$	362,813		$	292,998			24	%
	Discounts			5,655			5,296			7	%		16,663			14,489			15	%
	Sales returns			8,434			1,826			>100	%		20,102			9,248			>100	%
		Total product sales allowances	$	167,888		$	113,929			47	%	$	399,578		$	316,735			26	%
Total gross product sales			$	1,226,184		$	981,611			25	%	$	3,535,943		$	2,828,089			25	%
Total product sales allowances as a percent of total gross product sales				14	%		12	%					11	%		11	%

        Total product sales allowances increased $54.0 million, or 47%, for the three months ended September 30, 2008, as compared to the same period of 2007, and $82.8 million, or 26%, for the nine months ended September 30, 2008, as compared to the same period of 2007, primarily due to an increase in overall gross product sales and changes in rebate rates and product mix. The increase in sales returns allowances for the three months ended September 30, 2008, as compared to the same

35

period of 2007, is primarily due to increased sales returns allowances for our Renal segment due to a Renagel price increase in August 2008 and revisions to our estimates of the volume of product returns for Hectorol. The increase in sales returns allowances for the nine months ended September 30, 2008, as compared to the same period of 2007, is primarily due to price increases and increased estimates for the volume of product returns for our Renal, Transplant and Biosurgery segments.

        Total estimated product sales allowance reserves and accruals in our consolidated balance sheets increased 27% to approximately $198 million as of September 30, 2008, as compared to approximately $155 million as of December 31, 2007, primarily due to increased product sales and changes in the timing of certain payments. Our actual results have not differed materially from amounts recorded. The annual variation has been less than 0.5% of total product sales for each of the last three years.

Distributor Fees

        EITF Issue No. 01-9, "Accounting for Consideration given by a Vendor to a Customer (including a Reseller of a Vendor's Products)" specifies that cash consideration (including a sales incentive) given by a vendor to a customer is presumed to be a reduction of the selling prices of the vendor's products or services and, therefore, should be characterized as a reduction of revenue. We include such fees in contractual adjustments, which are recorded as a reduction to product sales. That presumption is overcome and the consideration should be characterized as a cost incurred if, and to the extent that, both of the following conditions are met:

•

the vendor receives, or will receive, an identifiable benefit (goods or services) in exchange for the consideration; and

•

the vendor can reasonably estimate the fair value of the benefit received.

        We record fees paid to our distributors for services as a charge to SG&A, a component of operating expenses, only if the criteria set forth above are met. The following table sets forth the distributor fees recorded as a reduction to product sales and charged to SG&A (amounts in thousands):

			Three Months Ended September 30,				Nine Months Ended September 30,
			2008		2007		2008		2007
Distributor fees:
	Included in contractual adjustments and recorded as a reduction to product sales		$	3,437	$	2,948	$	9,723	$	9,238
	Charged to SG&A			3,519		3,210		10,039		9,644
		Total distributor fees	$	6,956	$	6,158	$	19,762	$	18,882

In-Process Research and Development

        In-process research and development represents the fair value assigned to incomplete technologies that we acquire, which at the time of acquisition have not reached technological feasibility and have no alternative future use. The fair value of such technologies is expensed upon acquisition. A technology is considered to have an alternative future use if it is probable that the acquirer will use the asset in its current, incomplete state as it existed at the acquisition date, the asset will be used in another research and development project that has not yet commenced, and economic benefit is anticipated from that use. If a technology is determined to have an alternative future use, then the fair value of the program would be recorded as an asset on the balance sheet rather than expensed. None of the incomplete technology programs we have acquired through our business combinations have reached technological feasibility nor had an alternative future use and, therefore, the fair value of those programs was

36

expensed on the acquisition date. Substantial additional research and development will be required before any of our acquired programs reach technological feasibility. In addition, once research is completed, each underlying product candidate will need to complete a series of clinical trials and receive regulatory approvals prior to commercialization.

        Charges for in-process research and development acquired through business combinations, which we refer to as IPR&D, are classified in our consolidated statements of operations within the line item Purchase of In-Process Research and Development. Conversely, nonrefundable fees paid outside of a business combination for the acquisition or licensing of products that have not received regulatory approval and have no future alternative use are classified in our consolidated statements of operations within the line item Research and Development.

        Management assumes responsibility for determining the valuation of the acquired IPR&D programs. The fair value assigned to IPR&D for each acquisition is estimated by discounting, to present value, the future cash flows expected from the programs since the date of our acquisition. Accordingly, such cash flows reflect our estimates of revenues, costs of sales, operating expenses and income taxes from the acquired IPR&D programs based on the following factors:

•

relevant market sizes and market growth factors;

•

current and expected trends in technology and product life cycles;

•

the time and investment that will be required to develop products and technologies;

•

the ability to obtain marketing authorization and regulatory approvals;

•

the ability to manufacture and commercialize the products;

•

the extent and timing of potential new product introductions by our competitors that may be deemed more efficacious, more convenient to use, or more cost effective;

•

the amount of revenues that could be derived from the products; and

•

the appropriate discount rates to use in the analysis.

        The discount rates used are commensurate with the uncertainties associated with the economic estimates described above. The resulting discounted future cash flows are then probability-adjusted to reflect the different stages of development, the time and resources needed to complete the development of the product and the risks of advancement through the product approval process. In estimating the future cash flows, we also consider the tangible and intangible assets required for successful exploitation of the technology resulting from the purchased IPR&D programs and adjust future cash flows for a charge reflecting the contribution to value of these assets. Such contributory tangible and intangible assets may include, but are not limited to, working capital, fixed assets, assembled workforce, customer relationships, patents, trademarks, and core technology.

        Use of different estimates and judgments could yield materially different results in our analysis and could result in materially different asset values and IPR&D expense. There can be no assurance that we will be able to successfully develop and complete the acquired IPR&D programs and profitably commercialize the underlying product candidates before our competitors develop and commercialize products for the same indications. Moreover, if certain of the acquired IPR&D programs fail, are abandoned during development, or do not receive regulatory approval, then we may not realize the future cash flows we have estimated and recorded as IPR&D on the acquisition date, and we may also not recover the research and development investment made since the acquisition to further develop that program. If such circumstances were to occur, our future operating results could be materially adversely impacted.

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        We have included additional information on the nature, timing and estimated costs necessary to complete our acquired IPR&D programs and the key assumptions used to determine the fair value of specific IPR&D programs under the caption "Purchase of In-Process Research and Development" in this "Management's Discussion and Analysis of Financial Condition and Results of Operations."

RESULTS OF OPERATIONS

        The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial statements.

REVENUES

        The components of our total revenues are described in the following table (amounts in thousands):

		Three Months Ended September 30,							Nine Months Ended September 30,
						Increase/ (Decrease) % Change							Increase/ (Decrease) % Change
		2008		2007					2008		2007
Product revenue		$	1,058,296	$	867,682		22	%	$	3,136,365	$	2,511,354		25	%
Service revenue			92,586		83,177		11	%		269,072		241,533		11	%
	Total product and service revenue		1,150,882		950,859		21	%		3,405,437		2,752,887		24	%
Research and development revenue			9,402		9,300		1	%		26,042		23,874		9	%
	Total revenues	$	1,160,284	$	960,159		21	%	$	3,431,479	$	2,776,761		24	%

Product Revenue

        We derive product revenue from sales of:

•

Renal products, including Renagel/Renvela (including sales of bulk sevelamer) and Hectorol;

•

Therapeutics products, including Cerezyme, Fabrazyme, Myozyme, Aldurazyme and Thyrogen;

•

Transplant products, primarily Thymoglobulin;

•

Biosurgery products, including orthopaedic products, such as Synvisc, and the Sepra line of products, such as Seprafilm;

•

Oncology products, including Campath and Clolar/Evoltra; and

•

Other products, including:

•

diagnostic products, including infectious disease and cholesterol testing products; and

•

bulk pharmaceuticals and WelChol.

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        The following table sets forth our product revenue on a reporting segment basis (amounts in thousands):

			Three Months Ended September 30,							Nine Months Ended September 30,
							Increase/ (Decrease) % Change							Increase/ (Decrease) % Change
			2008		2007					2008		2007
Renal:
	Renagel/Renvela (including sales of bulk sevelamer)		$	170,992	$	154,159		11	%	$	508,253	$	436,497		16	%
	Hectorol			33,825		30,265		12	%		93,753		85,853		9	%
		Total Renal		204,817		184,424		11	%		602,006		522,350		15	%
Therapeutics:
	Cerezyme			309,280		286,071		8	%		932,943		832,841		12	%
	Fabrazyme			125,619		104,610		20	%		368,702		309,623		19	%
	Thyrogen			38,153		26,828		42	%		111,386		82,706		35	%
	Myozyme			76,663		53,568		43	%		221,209		138,232		60	%
	Aldurazyme			38,236		—		N/A			113,742		—		N/A
	Other Therapeutics			11,367		153		>100	%		31,576		1,025		>100	%
		Total Therapeutics		599,318		471,230		27	%		1,779,558		1,364,427		30	%
Transplant:
	Thymoglobulin/Lymphoglobuline			45,492		41,036		11	%		134,757		121,854		11	%
	Other Transplant			2,368		1,845		28	%		6,876		5,548		24	%
		Total Transplant		47,860		42,881		12	%		141,633		127,402		11	%
Biosurgery:
	Synvisc/Synvisc-One			67,513		61,175		10	%		194,582		179,634		8	%
	Sepra products			33,001		26,381		25	%		98,385		74,572		32	%
	Other Biosurgery			11,859		7,107		67	%		38,832		26,065		49	%
		Total Biosurgery		112,373		94,663		19	%		331,799		280,271		18	%
Oncology				25,828		16,131		60	%		74,048		47,402		56	%
Other product revenue				68,100		58,353		17	%		207,321		169,502		22	%
		Total product revenues	$	1,058,296	$	867,682		22	%	$	3,136,365	$	2,511,354		25	%

Renal

        On October 22, 2007, the FDA granted marketing approval for Renvela, a second generation buffered form of Renagel for the control of serum phosphorus in patients with chronic kidney disease, or CKD, on dialysis. In March 2008, we launched Renvela for dialysis patients in the United States and the product is now included in most U.S. health plan formularies. We are currently pursuing regulatory approvals for Renvela in Europe, South America and other international markets.

        Sales of Renagel/Renvela, including sales of bulk sevelamer, increased 11% to $171.0 million for the three months ended September 30, 2008, as compared to the same period of 2007, primarily due to the addition of $9.1 million of revenue from sales of Renvela in the United States, for which there was no similar amount in the same period of 2007, and a $7.7 million increase in sales of Renagel, including sales of bulk sevelamer. The strengthening of foreign currencies, primarily the Euro, against the U.S. dollar, positively impacted Renagel revenue by $5.5 million and increased end-user demand accounted for an additional $2.9 million of revenue. A Renagel price increase in the United States in August 2008 did not have a material impact on Renagel revenue for the period. Sales of Renagel/

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Renvela, including sales of bulk sevelamer, were 15% of our total revenues for the three months ended September 30, 2008, as compared to 16% for the same period of 2007.

        Sales of Renagel/Renvela, including sales of bulk sevelamer, increased 16% to $508.3 million for the nine months ended September 30, 2008, as compared to the same period of 2007, primarily due to the addition of $14.5 million of revenue from sales of Renvela in the United States, for which there was no similar amount in the same period of 2007, and a $57.3 million increase in sales of Renagel, including sales of bulk sevelamer. Increased end-user demand accounted for $26.1 million of the additional revenue and a Renagel price increase in the United States in April 2007 accounted for $9.9 million of the additional Renagel revenue. The strengthening of foreign currencies, primarily the Euro, against the U.S. dollar, positively impacted Renagel revenue by $23.2 million. Sales of Renagel/Renvela, including sales of bulk sevelamer, were 15% of our total revenues for the three months ended September 30, 2008, as compared to 16% for the same period of 2007.

        In October 2007, an FDA advisory committee voted to recommend that the agency extend the indications for phosphate binders to include pre-dialysis patients with hyperphosphatemia. In June 2008, we and two other companies submitted a position paper to the FDA regarding the expanded use of phosphate binders. We received a written response from the FDA and we are in the process of providing the additional information requested. We anticipate that this indication will be added to Renvela's label by the middle of 2009. In addition, we expect to file for approval of a powder form of Renvela that may make it easier for patients to comply with their prescribed treatment program. While Renagel will remain available for a period of time, our long-term goal is to transition all patients to Renvela.

        Sales of Hectorol increased 12% to $33.8 million for the three months ended and 9% to $93.8 million for the nine months ended September 30, 2008, as compared to the same periods of 2007, primarily due to Hectorol price increases in the third quarter of 2007 and second quarter of 2008, which accounted for $3.1 million for the three months ended and $6.7 million for the nine months ended September 30, 2008 of the additional revenue.

        We expect sales of Renagel/Renvela and Hectorol to continue to increase, driven primarily by growing patient access to these products, including through the Medicare Part D program in the United States, and the continued adoption of the products by nephrologists worldwide. Adoption rates for Renagel/Renvela are expected to trend favorably as a result of the recent introduction of Renvela in the U.S. market, the potential label expansion to include hyperphosphatemic patients who are not on dialysis, and the introduction of a powder formulation expected in the first half of 2009. Adoption rates for Hectorol are expected to trend favorably as a result of growth in the CKD market and the anticipated launch of a 1 mg capsule form of Hectorol in the first half of 2009. In addition, we expect adoption rates to increase for both Renagel/Renvela and Hectorol as a result of our recent expansion and redeployment of our Renal sales force.

        Renagel/Renvela and Hectorol compete with several other marketed products and our future sales may be impacted negatively by these products. Both Renagel and Hectorol are also subjects of Abbreviated New Drug Applications, or ANDAs, containing "Paragraph IV certifications," which is the filing a generic drug manufacturer uses to challenge one or more patents in order to seek U.S. regulatory approval to market a generic version of a drug prior to the expiration date of those patents.

        In the case of Renagel, the ANDA Paragraph IV certification relates only to one of our Renagel patents, namely our patent that covers features of our tablet dosage form. This patent expires in 2020, and the ANDA applicant alleged that its proposed product would not infringe that patent. We reviewed the Paragraph IV certification and did not initiate patent infringement litigation within the 45-day statutory period. The ANDA does not contain a Paragraph IV certification with respect to our Renagel pharmaceutical composition and medical use patent estate, which protect the product and its approved indications until 2014.

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        In the case of Hectorol, the ANDA applicant has submitted a Paragraph IV certification alleging the invalidity of our patent related to the use of Hectorol to treat hyperparathyroidism secondary to end-stage renal disease (which patent expires in 2014), and alleging non-infringement of our patent covering our highly purified form of Hectorol (which patent expires in 2021). We initiated patent infringement litigation in February 2008. We believe that our patents are valid, and are currently assessing the merits of the ANDA applicant's non-infringement positions.

        If either of the ANDA filers or any other generic drug manufacturer were to receive approval to sell a generic version of Renagel or Hectorol, our revenues from those products would be adversely affected. In addition, our ability to continue to increase sales of Renagel/Renvela and Hectorol will depend on many other factors, including our ability to optimize dosing and improve patient compliance with Renagel/Renvela dosing, the availability of reimbursement from third-party payors and the extent of coverage, including under the Medicare Part D program. Also, the accuracy of our estimates of fluctuations in the payor mix and our ability to effectively manage wholesaler inventories and the levels of compliance with the inventory management programs we implemented for Renagel/Renvela and Hectorol with our wholesalers could impact the revenue from our Renal reporting segment that we record from period to period.

Therapeutics

        Therapeutics product revenue increased 27% to $599.3 million for the three months ended and 30% to $1.8 billion for the nine months ended September 30, 2008, as compared to the same periods of 2007, due to continued growth in sales of Cerezyme, Fabrazyme and Myozyme and the inclusion of Aldurazyme sales in our results of operations beginning on January 1, 2008. As a result of our restructured relationship with BioMarin and BioMarin/Genzyme LLC regarding the manufacturing, marketing and sale of Aldurazyme, effective January 1, 2008, we began to record all sales of Aldurazyme.

        Sales of Cerezyme increased 8% to $309.3 million for the three months ended and 12% to $932.9 million for the nine months ended September 30, 2008, as compared to the same periods of 2007. This is primarily attributable to our continued identification of new Gaucher disease patients, particularly in international markets. We implemented a 3% price increase for Cerezyme in the United States in November 2007 and a 4% price increase for Cerezyme in the United States in August 2008. These price increases accounted for $1.9 million for the three months ended and $9.9 million for the nine months ended September 30, 2008 of the additional Cerezyme revenue. Although we expect Cerezyme to continue to be a substantial contributor to our total revenues in the future, it is a mature product and we do not expect the current new patient growth trend to continue. The strengthening of foreign currencies, primarily the Euro, against the U.S. dollar, positively impacted Cerezyme revenue by $11.9 million for the three months ended and $48.3 million for the nine months ended September 30, 2008, as compared to the same periods of 2007.

        Sales of Fabrazyme increased 20% to $125.6 million for the three months ended and 19% to $368.7 million for the nine months ended September 30, 2008, as compared to the same periods of 2007, primarily due to increased patient identification worldwide as Fabrazyme is introduced into new markets. We implemented a 3% price increase for Fabrazyme in the United States in November 2007 and a 4% price increase for Fabrazyme in the United States in August 2008. These price increases accounted for $2.2 million for the three months ended and $4.1 million for the nine months ended September 30, 2008 of the additional Fabrazyme revenue. The strengthening of foreign currencies, primarily the Euro, against the U.S. dollar, positively impacted Fabrazyme revenue by $4.4 million for the three months ended and by $20.3 million for the nine months ended September 30, 2008, as compared to the same periods of 2007.

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        Sales of Myozyme increased 43% to $76.7 million for the three months ended and 60% to $221.2 million for the nine months ended September 30, 2008, as compared to $53.6 million and $138.2 million for the same periods of 2007. We launched Myozyme in the United States in May 2006, in Europe a month later and in Canada in September 2006. We are introducing Myozyme on a country-by-country basis in the European Union, as pricing and reimbursement approvals are obtained. Myozyme has received orphan drug designation in both the United States, which provides seven years of market exclusivity, and in the European Union, which provides ten years of market exclusivity. In June 2007, we launched the product in Japan after receipt of marketing and reimbursement approvals. We expect to file for approval in several additional countries by the end of 2008. The strengthening of foreign currencies, primarily the Euro, against the U.S. dollar, positively impacted Myozyme revenue by $3.4 million for the three months ended and $11.4 million for the nine months ended September 30, 2008, as compared to the same periods of 2007.

        We currently manufacture Myozyme (alglucosidase alfa) in the United States at the 160 liter bioreactor, or 160L, scale at our manufacturing facility in Framingham, Massachusetts and at the 2000L scale at our manufacturing facility in Allston, Massachusetts. We have begun Myozyme fill-finish at our 2000L facility in Waterford, Ireland. We have approval to sell Myozyme manufactured at the 160L scale in the United States and Myozyme produced at the 2000L scale has been approved for sale in more than 40 countries outside the United States.

        In October 2007, we submitted an application to the FDA seeking approval of alglucosidase alfa produced at the 2000L scale to meet the expected demand for the product in the U.S. market going forward. In April 2008, the FDA concluded that alglucosidase alfa produced at the 160L scale and at the 2000L scale should be classified as two different products because of differences in the carbohydrate structures of the molecules. As a result, the FDA required us to submit a separate Biologics License Application, or BLA, to gain U.S. approval for alglucosidase alfa produced at the 2000L scale. In May 2008, we submitted the BLA for alglucosidase alfa produced at the 2000L scale to the FDA. In October 2008, the Endocrinologic and Metabolic Drugs Advisory Committee affirmed by a vote of 16 to 1 that our Late Onset Treatment Study, or LOTS study, established the clinical effectiveness of alglucosidase alfa produced at the 2000L scale. We expect the FDA to act on the BLA by November 29, 2008. We anticipate that this process will culminate in the availability of two commercial versions of alglucosidase alfa in the United States: one produced at the 160L scale and the other produced at the 2000L scale. The decision by the FDA to treat alglucosidase alfa produced using the 160L and 2000L scale processes as separate products will negatively impact our anticipated 2008 Myozyme revenue growth by approximately $45 million and since we will continue to provide Myozyme at no cost to some patients through a clinical access program, we anticipate that costs related to Myozyme in 2008 will be approximately $8 to $10 million more than originally expected. We expect demand for Myozyme to continue to grow and expect to begin providing U.S. patients with commercial 2000L product during the first quarter of 2009.

        To meet the global demand for Myozyme, we are working to secure approval from the EMEA to produce Myozyme at our 4000L scale manufacturing facility in Belgium. We have successfully completed the required three consecutive process validation runs for Myozyme produced at the 4000L scale and we expect to file for EMEA approval of the 4000L production in January 2009. We anticipate EMEA approval during the first half of 2009. Approval of 4000L scale production will be necessary to meet the anticipated global demand for Myozyme. Product supply of Myozyme is expected to remain tight until the 4000L process is approved.

        Effective January 1, 2008, we, BioMarin and BioMarin/Genzyme LLC restructured our relationship regarding the manufacturing, marketing and sale of Aldurazyme and entered into several new agreements. BioMarin continues to manufacture Aldurazyme. We continue to purchase Aldurazyme exclusively from BioMarin and globally market and sell the product. Effective January 1, 2008, instead of sharing all costs and profits of Aldurazyme equally, we began to record all sales of Aldurazyme and

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began paying BioMarin a tiered payment ranging from approximately 39.5% to 50% of worldwide net product sales of Aldurazyme. Aldurazyme product revenue was $38.2 million for the three months ended and $113.7 million for the nine months ended September 30, 2008. Prior to January 1, 2008, we were commercializing Aldurazyme on behalf of BioMarin/Genzyme LLC in the United States, Canada, the European Union, Latin America and the Asia-Pacific regions and continuing to launch Aldurazyme on a country-by-country basis as pricing and reimbursement approvals were obtained. BioMarin/Genzyme LLC's Aldurazyme product revenue recorded by BioMarin/Genzyme LLC was $32.3 million for the three months ended and $88.3 million for the nine months ended September 30, 2007. We implemented a 3% price increase for Aldurazyme in the United States in November 2007 and a 4% price increase for Aldurazyme in the United States in August 2008, which did not have a significant impact on Aldurazyme revenue for the three and nine months ended September 30, 2008. The increases in Aldurazyme sales of $5.9 million for the three months ended and $25.5 million for the nine months ended September 30, 2008, as compared to the same periods of 2007, are primarily attributable to increased patient identification worldwide as Aldurazyme was introduced into new markets. We have applications for marketing approval for Aldurazyme currently pending in several countries in Latin America, Central and Eastern Europe and the Asia-Pacific region. The strengthening of foreign currencies, primarily the Euro, against the U.S. dollar, positively impacted Aldurazyme revenue by $1.7 million for the three months ended and $6.6 million for the nine months ended September 30, 2008, as compared to the same periods of 2007.

        Sales of Thyrogen increased 42% to $38.2 million for the three months ended and 35% to $111.4 million for the nine months ended September 30, 2008, as compared to the same periods of 2007. We implemented a 9.7% price increase for Thyrogen in the United States in April 2007 and a 15% price increase for Thyrogen in the United States in March 2008. These price increases accounted for $3.1 million for the three months ended and $7.3 million for the nine months ended September 30, 2008 of additional Thyrogen revenue. In addition, worldwide volume growth, driven by a significant increase in the use of the product in thyroid remnant ablation procedures, positively impacted Thyrogen revenue by $8.3 million for the three months ended and $18.3 million for the nine months ended September 30, 2008. The strengthening of foreign currencies, primarily the Euro, against the U.S. dollar, positively impacted Thyrogen revenue by $0.9 million for the three months ended and by $4.8 million for the nine months ended September 30, 2008, as compared to the same periods of 2007.

Transplant

        Transplant product revenue increased 12% to $47.9 million for the three months ended and 11% to $141.6 million for the nine months ended September 30, 2008, as compared to the same periods of 2007. This was primarily due to a $2.1 million increase for the three months ended and a $13.7 million increase for the nine months ended September 30, 2008 in Thymoglobulin revenue as a result of an 11% increase in the worldwide average sales price of Thymoglobulin. In addition, sales of Thymoglobulin increased $2.8 million for the three months ended and $4.9 million for the nine months ended September 30, 2008, as compared to the same periods of 2007, due to an increase in sales volume resulting from increased utilization of Thymoglobulin in transplant procedures worldwide. The strengthening of foreign currencies, primarily the Euro, against the U.S. dollar, positively impacted Transplant product revenue by $1.1 million for the three months ended and $5.5 million for the nine months ended September 30, 2008, as compared to the same periods of 2007.

        In March 2008 we recalled one lot, in April 2008 we recalled an additional three lots, and in September 2008 we recalled one other lot of Thymoglobulin that no longer met our specifications for product appearance. The value of the product returned as a result of these recalls was not significant. In July 2008, we wrote off one lot of Thymoglobulin, valued at approximately $5 million, due to a filter failure at our fill-finish facility in Waterford, Ireland. We will continue to closely monitor our Thymoglobulin inventory levels and have increased production in an effort to maintain adequate supply

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levels throughout the remainder of 2008. Construction is underway on a new manufacturing plant for Thymoglobulin in Lyon, France to support the anticipated long-term demand for the product. Regulatory approvals of the facility are expected beginning in 2010, and production at this plant is expected to commence in 2011.

Biosurgery

        Biosurgery product revenue increased 19% to $112.4 million for the three months ended and 18% to $331.8 million for the nine months ended September 30, 2008, as compared to the same periods of 2007. Seprafilm revenue increased $6.7 million for the three months ended and $21.6 million for the nine months ended September 30, 2008, as compared to the same periods of 2007, primarily due to greater penetration of the product into the United States, Japanese and European markets and expanded use of Seprafilm in C-sections and gynecological procedures. The strengthening of foreign currencies, primarily the Euro, against the U.S. dollar, positively impacted Biosurgery product revenue by $1.5 million for the three months ended and $6.8 million for the nine months ended September 30, 2008, as compared to the same periods of 2007.

        We received approval to market Synvisc-One, a single injection regimen, in the European Union in December 2007. In November 2007, we received a letter from the FDA requesting additional analysis and data regarding our marketing application for Synvisc-One in the United States. We responded to the FDA's letter in June 2008 and our marketing application will be the subject of an FDA advisory committee meeting in December when the panel is expected to discuss the clinical data we submitted to support the approval and labeling of the product. The FDA is expected to act on the application by December 23, 2008. We also plan on pursuing marketing approvals for Synvisc-One in Canada, Asia and Latin America.

        The combined revenues of Synvisc/Synvisc-One increased 10% to $67.5 million for the three months ended and 8% to $194.6 million for the nine months ended September 30, 2008, as compared to the same periods of 2007, primarily due to an expanded sales and marketing investment and the initiation of direct sales of the product in Latin America.

        Other Biosurgery product revenue increased 67% to $11.9 million for the three months ended and 49% to $38.8 million for the nine months ended September 30, 2008, as compared to the same periods of 2007, primarily due to $2.0 million of revenue for the three months ended and $8.3 million of revenue for the nine months ended September 30, 2008, related to a dermal filler we are developing with and manufacturing for sale to Mentor Corporation for which there were no comparable amounts in the same periods of 2007.

Oncology

        Oncology product revenue increased 60% to $25.8 million for the three months ended and 56% to $74.0 million for the nine months ended September 30, 2008, as compared to the same periods of 2007, primarily due to the addition of sales of clofarabine outside of North America, which rights we acquired in connection with our acquisition of Bioenvision in October 2007. Clofarabine, which is approved for the treatment of relapsed or refractory pediatric ALL, is marketed under the name Clolar in North and South America and as Evoltra elsewhere in the world.

        We are developing the intravenous formulation of clofarabine for new indications, including first-line and relapsed or refractory adult AML. We expect to submit a supplemental BLA this year to expand Clolar's U.S. labeling to include adult AML. FDA action is expected by the middle of 2009. A similar submission in Europe is expected during the first half of 2009. We are also developing an oral formulation of clofarabine and have initiated clinical trials for the treatment of myelodysplastic syndrome, or MDS. Clofarabine has been granted orphan drug status for the treatment of ALL and AML in both the United States and the European Union.

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        In September 2007, the FDA approved expanded labeling for Campath to include first-line treatment of patients with B-cell chronic lymphocytic leukemia, or B-CLL, significantly increasing the number of patients eligible to receive the product. In December 2007, we received European approval for this expanded indication as well.

Other Product Revenue

        Other product revenue increased 17% to $68.1 million for the three months ended and 22% to $207.3 million for the nine months ended September 30, 2008, as compared to the same periods of 2007, primarily due to:

•

a 33% increase to $39.0 million for the three months ended and a 32% increase to $117.8 million for the nine months ended September 30, 2008, in sales of diagnostic products, due to the acquisition of certain diagnostic assets from DCL in December 2007 and the strengthening of foreign currencies, primarily the Euro, against the U.S. dollar, which positively impacted diagnostic products revenue by $0.3 million for the three months ended and $2.2 million for the nine months ended September 30, 2008; and

•

a 12% increase in sales of WelChol to $18.1 million for the three months ended and a 17% increase to $48.3 million for the nine months ended September 30, 2008, due to bulk sales and royalties earned as a result of increased demand from our U.S. marketing partner, Sankyo Pharma, Inc., or Sankyo.

Service Revenue

        We derive service revenue primarily from the following sources:

•

sales of MACI, our proprietary cell therapy product for cartilage repair, in Europe and Australia, Carticel for the treatment of cartilage damage, and Epicel for the treatment of severe burns, all of which are included in our Biosurgery reporting segment; and

•

reproductive/genetics and pathology/oncology diagnostic testing services, which are included in our Genetics reporting segment.

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        The following table sets forth our service revenue on a segment basis (amounts in thousands):

		Three Months Ended September 30,							Nine Months Ended September 30,
						Increase/ (Decrease) % Change							Increase/ (Decrease) % Change
		2008		2007					2008		2007
Therapeutics		$	—	$	—		N/A		$	343	$	—		N/A
Biosurgery			9,928		9,786		1	%		31,958		27,486		16	%
Genetics			82,058		73,050		12	%		234,921		212,922		10	%
Oncology			424		269		58	%		1,258		897		40	%
Other			176		72		>100	%		592		228		>100	%
	Total service revenue	$	92,586	$	83,177		11	%	$	269,072	$	241,533		11	%

        Service revenue attributable to our Biosurgery reporting segment increased 1% to $9.9 million for the three months ended and 16% to $32.0 million for the nine months ended September 30, 2008, as compared to the same periods of 2007. The increases were primarily due to higher demand for Epicel and MACI.

        Service revenue attributable to our Genetics reporting segment increased 12% to $82.1 million for the three months ended and 10% to $234.9 million for the nine months ended September 30, 2008, as compared to the same periods of 2007. The increases were primarily attributable to continued growth in revenue from our genetic testing and prenatal screening services and the increase in demand for certain testing services for patients diagnosed with cancer.

        The strengthening of foreign currencies against the U.S. dollar for the three and nine months ended September 30, 2008, as compared to the same periods of 2007, did not have a significant impact on service revenue.

International Product and Service Revenue

        A substantial portion of our revenue is generated outside of the United States. The following table provides information regarding the change in international product and service revenue as a percentage of total product and service revenue during the periods presented (amounts in thousands):

	Three Months Ended September 30,									Nine Months Ended September 30,
							Increase/ (Decrease) % Change									Increase/ (Decrease) % Change
	2008			2007						2008			2007
International product and service revenue	$	578,744		$	451,881			28	%	$	1,770,426		$	1,302,797			36	%
% of total product and service revenue		50	%		48	%					52	%		47	%

        The 28% increase, to $578.7 million, in international product and service revenue for the three months ended and the 36% increase, to $1.8 billion, for the nine months ended September 30, 2008, as compared to the same periods of 2007, is primarily due to a $68.5 million increase for the three months ended and a $265.7 million increase for the nine months ended September 30, 2008 in the combined international sales of Renagel, Cerezyme, Fabrazyme and Myozyme, primarily due to an increase in the number of patients using these products in the European Union, South America and the Asia-Pacific rim. In addition, in 2008 we began to record worldwide Aldurazyme revenue and revenue for clofarabine sold outside North America. Due to the restructured relationship with BioMarin/Genzyme LLC, we began to record Aldurazyme revenue effective January 1, 2008. Revenue generated outside the United States for Aldurazyme was $30.3 million for the three months ended and $91.5 million for the nine months ended September 30, 2008, which had been recorded as joint venture revenue by

46

BioMarin/Genzyme LLC in 2007. In October 2007, as a result of our acquisition of Bioenvision, we began selling Clolar/Evoltra for the treatment of relapsed or refractory pediatric ALL outside of North America. Revenue generated outside the United States for Clolar/Evoltra was $8.5 million for the three months ended and $21.6 million for the nine months ended September 30, 2008. There were no comparable amounts for the same periods of 2007.

        International product and service revenue as a percentage of total product and service revenue increased due primarily to the addition of revenue generated outside the United States for Aldurazyme and clofarabine.

        The strengthening of foreign currencies, primarily the Euro, against the U.S. dollar, positively impacted total product and service revenue by $30.7 million for the three months ended and $129.2 million for the nine months ended September 30, 2008, as compared to the same periods of 2007.

Research and Development Revenue

        The following table sets forth our research and development revenue on a segment basis (amounts in thousands):

		Three Months Ended September 30,							Nine Months Ended September 30,
						Increase/ (Decrease) % Change							Increase/ (Decrease) % Change
		2008		2007					2008		2007
Therapeutics		$	11	$	121		(91	)%	$	56	$	1,190		(95	)%
Transplant			—		—		N/A			—		180		(100	)%
Biosurgery			661		1,697		(61	)%		2,082		4,671		(55	)%
Oncology			7,726		6,330		22	%		21,044		14,310		47	%
Other			625		686		(9	)%		1,656		2,355		(30	)%
Corporate			379		466		(19	)%		1,204		1,168		3	%
	Total research and development revenue	$	9,402	$	9,300		1	%	$	26,042	$	23,874		9	%

        Total research and development revenue increased by $0.1 million for the three months ended and $2.2 million for the nine months ended September 30, 2008, as compared to the same periods of 2007, primarily due to increases in revenue recognized by our Oncology reporting segment due to higher development activity for alemtuzumab under our collaboration with Bayer, particularly in the multiple sclerosis development program.

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MARGINS

        The components of our total margins are described in the following table (amounts in thousands):

	Three Months Ended September 30,									Nine Months Ended September 30,
							Increase/ (Decrease) % Change									Increase/ (Decrease) % Change
	2008			2007						2008			2007
Product margin	$	832,605		$	677,207			23	%	$	2,452,592		$	2,002,903			22	%
% of total product revenue		79	%		78	%					78	%		80	%
Service margin	$	33,069		$	29,040			14	%	$	94,994		$	85,311			11	%
% of total service revenue		36	%		35	%					35	%		35	%
Total product and service margin	$	865,674		$	706,247			23	%	$	2,547,586		$	2,088,214			22	%
% of total product and service revenue		75	%		74	%					75	%		76	%

Product Margin

        Our overall product margin increased $155.4 million, or 23%, for the three months ended and $449.7 million, or 22%, for the nine months ended September 30, 2008, as compared to the same periods of 2007. This is primarily due to:

•

improved margins for Renagel and Hectorol due to increased unit volumes and price increases;

•

the addition of sales of Renvela, which was launched for dialysis patients in the United States in March 2008;

•

increased margins for Cerezyme, Fabrazyme, Thyrogen and Myozyme due to increased sales volume;

•

an increase in product margin for Seprafilm due to increased sales;

•

an increase in product margin for Hylaform due to milestone payments received in 2008 for which there were no comparable amounts received in 2007;

•

an increase in product margin for diagnostic products due to our acquisition of certain diagnostic assets from DCL in December 2007; and

•

an increase in product margin for our Oncology business due to higher demand for Campath worldwide, and an increase in worldwide sales of Clolar/Evoltra due to our acquisition of Bioenvision in October 2007.

        There was also a $31.9 million favorable effect of exchange rates for the three months ended and $110.6 million for the nine months ended September 30, 2008, as compared to the same periods of 2007, due to the strengthening of foreign currencies, primarily the Euro, against the U.S. dollar.

        Total product margin as a percentage of product revenue increased for the three months ended September 30, 2008, as compared to the same period of 2007, due to a decrease in manufacturing-related charges recorded to write off finished lots of Thymoglobulin that did not meet product specifications for saleable product from $11.8 million recorded in September 2007 to $4.8 million recorded in September 2008. Total product margin as a percentage of product revenue decreased for the nine months ended September 30, 2008, as compared to the same period of 2007, due to the increase in sales of Myozyme and the addition of Aldurazyme to the results, both of which have lower than average margins, and to higher unit costs for Cerezyme and Fabrazyme, offset by the decrease in manufacturing-related charges recorded.

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        For purposes of this discussion, the amortization of product related intangible assets is included in amortization expense and, as a result, is excluded from cost of products sold and the determination of product margins.

Service Margin

        Our overall service margin increased $4.0 million, or 14%, for the three months ended and $9.7 million, or 11%, for the nine months ended September 30, 2008, as compared to the same periods of 2007. The increases were primarily attributable to increases in revenue from our genetic testing and prenatal screening services and the increase in demand for certain testing services for patients diagnosed with cancer.

        Total service margin as a percent of total service revenue increased by 1% for the three months ended September 30, 2008, as compared to the same period of 2007, due to an increase in MACI and Carticel revenue. Total service margin as a percent of total service revenue was consistent for the nine months ended September 30, 2008 and 2007.

OPERATING EXPENSES

Selling, General and Administrative Expenses

        Effective January 1, 2008, as a result of changes in how we review our business, certain general and administrative expenses which were formerly allocated amongst our reporting segments and Other, are now allocated to Corporate. We have revised our 2007 segment disclosures to conform to our 2008 presentation.

        The following table provides information regarding the change in SG&A during the periods presented (amounts in thousands):

	Three Months Ended September 30,									Nine Months Ended September 30,
							Increase/ (Decrease) % Change									Increase/ (Decrease) % Change
	2008			2007						2008			2007
Selling, general and administrative expenses	$	331,170		$	270,306			23	%	$	996,861		$	878,807			13	%
% of total revenue		29	%		28	%					29	%		32	%

        SG&A increased by $60.9 million for the three months ended and $118.1 million for the nine months ended September 30, 2008, as compared to the same periods of 2007, primarily due to spending increases of:

•

$4.6 million for the three months ended and $14.0 million for the nine months ended September 30, 2008 for Renal, primarily due to sales force expansion to support the Renvela launch;

•

$12.8 million for the three months ended and $43.0 million for the nine months ended September 30, 2008 for Therapeutics, primarily due to costs incurred related to Aldurazyme, which were recorded by BioMarin/Genzyme LLC in the same period of 2007, combined with expanded marketing activities for Cerezyme, Fabrazyme and Myozyme;

•

$2.0 million for the three months ended and $5.9 million for the nine months ended September 30, 2008 for Transplant, primarily due to our investment in international programs, personnel and to costs related to the preparation of the anticipated launch of Mozobil in 2009;

•

$7.5 million for the three months ended and $20.7 million for the nine months ended September 30, 2008 for Biosurgery, primarily due to the expansion of our Sepra sales force combined with additional marketing activities;

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•

$4.4 million for the three months ended and $16.4 million for the nine months ended September 30, 2008 for Genetics, primarily due to a favorable adjustment of $6.1 million that we recorded in June 2007 related to our acquisition of the Physician Services and Analytical Services business units of IMPATH Inc. in May 2004, for which there was no comparable amount in the same period of 2008, and to personnel additions;

•

$3.7 million for the three months ended and $12.9 million for the nine months ended September 30, 2008 for Oncology, primarily due to the inclusion of Bioenvision activities and increased domestic marketing expenses for Clolar;

•

$3.1 million for the three months ended and $13.2 million for the nine months ended September 30, 2008 for Other, primarily due to the continued Cholestagel commercial infrastructure build out combined with our acquisition of certain diagnostic assets from DCL in December 2007; and

•

$22.9 million for the three months ended and $55.9 million for the nine months ended September 30, 2008 for Corporate, primarily due to the strengthening of foreign currencies, primarily the Euro, against the U.S. dollar and increased spending for information technology and legal expenses.

        These increases were partially offset by a decrease in SG&A for the three and nine months ended September 30, 2008 for Corporate because we recorded a $64.0 million charge in June 2007 for the settlement of the litigation related to the consolidation of our former tracking stocks for which there was no comparable amount recorded in 2008.

Research and Development Expenses

        The following table provides information regarding the change in research and development expenses during the periods presented (amounts in thousands):

	Three Months Ended September 30,									Nine Months Ended September 30,
							Increase/ (Decrease) % Change									Increase/ (Decrease) % Change
	2008			2007						2008			2007
Research and development expenses	$	305,242		$	175,800			74	%	$	949,900		$	540,362			76	%
% of total revenue		26	%		18	%					28	%		19	%

        Research and development expenses increased $129.4 million for the three months ended and $409.5 million for the nine months ended September 30, 2008, as compared to the same periods of 2007, primarily due to:

•

spending increases of $114.5 million for the three months ended and $142.6 million for the nine months ended September 30, 2008 on certain Therapeutics research and development programs, including a charge of $100.0 million recorded in July 2008 for a nonrefundable upfront fee paid to PTC related to our collaboration agreement with PTC to develop and commercialize PTC124 and the addition of Aldurazyme expenses as a result of the restructuring of our relationship with BioMarin/Genzyme LLC effective January 1, 2008;

•

a spending increase of $5.1 million for the nine months ended September 30, 2008 on Transplant research and development programs, primarily on Mozobil, due to new drug application filing activity as preparations continue for the planned 2009 launch of Mozobil in the United States and Europe. We expect FDA action on Mozobil by December 16, 2008 and European approval in the first half of 2009;

•

spending increases of $12.2 million for the three months ended and $46.6 million for the nine months ended September 30, 2008 on Oncology research and development programs, primarily

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on the development of alemtuzumab for the treatment of multiple sclerosis and the addition of Bioenvision expenses for the development of Clolar for adult AML;

•

charges of $175.0 million recorded in June 2008 and $69.9 million recorded in February 2008 for license fees paid to Isis for exclusive, worldwide rights to mipomersen; and

•

increases of $1.8 million for the three months ended and $12.6 million for the nine months ended September 30, 2008 due to the strengthening of foreign currencies against the U.S. dollar, primarily the Euro.

        These increases were partially offset by spending decreases of:

•

$0.3 million for the three months ended and $33.9 million for the nine months ended September 30, 2008 on certain Therapeutics research and development programs, including a $25.0 million upfront payment to Ceregene in June 2007 in connection with a collaboration agreement for the development and commercialization of CERE-120, a gene therapy product for the treatment of Parkinson's disease, for which there was no comparable amount paid in 2008, and an $8.3 million decrease in spending for the nine months ended September 30, 2008 due to the termination in February 2007 of our joint venture with Dyax for the development of DX-88 for the treatment of hereditary angioedema, or HAE; and

•

$0.7 million for the three months ended and $8.9 million for the nine months ended September 30, 2008 on our Renal programs due to the termination of our late stage clinical trial for tolevamer and a decrease in clinical expenses related to Hectorol.

Amortization of Intangibles

        The following table provides information regarding the change in amortization of intangibles expense during the periods presented (amounts in thousands):

	Three Months Ended September 30,									Nine Months Ended September 30,
							Increase/ (Decrease) % Change									Increase/ (Decrease) % Change
	2008			2007						2008			2007
Amortization of intangibles	$	55,295		$	49,819			11	%	$	166,558		$	149,301			12	%
% of total revenue		5	%		5	%					5	%		5	%

        Amortization of intangibles expense increased by $5.5 million for the three months ended and $17.3 million for the nine months ended September 30, 2008, as compared to the same periods of 2007, primarily due to the acquisition of technology in connection with our acquisition of Bioenvision in October 2007 and the acquisition of customer lists and trademarks in connection with our acquisition of certain diagnostic assets from DCL in December 2007.

        As discussed in Note 8., "Goodwill and Other Intangible Assets," to our consolidated financial statements included in this report, we calculate amortization expense for the Synvisc sales and marketing rights we reacquired from Wyeth and the Myozyme patent and technology rights pursuant to a licensing agreement with Synpac by taking into account forecasted future sales of the products, and the resulting estimated future contingent payments we will be required to make. As a result, we expect amortization of intangibles expense to fluctuate over the next five years based on these future contingent payments.

Purchase of In-Process Research and Development

        We did not complete any acquisitions in the nine months ended September 30, 2008. In connection with certain of our acquisitions we completed between January 1, 2006 and December 31, 2007, we

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have acquired various IPR&D projects. The following table sets forth IPR&D projects for companies we have acquired between January 1, 2006 and December 31, 2007 (amounts in millions):

Company Acquired	Purchase Price		IPR&D		Programs Acquired	Discount Rate Used in Estimating Cash Flows			Year of Expected Launch		Estimated Cost to Complete
Bioenvision (2007)	$	349.9	$	125.5	Clolar/Evoltra (clofarabine)(1,2)		17	%		2009-2013	$	35.3
AnorMED (2006)	$	589.2	$	526.8	Mozobil (stem cell transplant)(3)		15	%		2009-2014	$	125
				26.1	AMD070 (HIV)(4)		15	%		—	$	—
			$	552.9

(1)

IPR&D charges totaled $125.5 million related to the acquisition of Bioenvision, of which $106.4 million was charged to IPR&D and $19.1 million was charged to equity in income (loss) of equity method investments.

(2)

Clofarabine, which is approved for the treatment of relapsed and refractory pediatric ALL, is marketed under the name Clolar in North and South America and as Evoltra elsewhere in the world. The IPR&D projects for clofarabine are related to the development of the product for the treatment of other medical diseases.

(3)

In June 2008, we submitted marketing applications for Mozobil in the United States and Europe.

(4)

Year of expected launch and estimated cost to complete data is not provided for AMD070 at this time because we are assessing our future plans for this program.

OTHER INCOME AND EXPENSES

		Three Months Ended September 30,									Nine Months Ended September 30,
								Increase/ (Decrease) % Change									Increase/ (Decrease) % Change
		2008			2007						2008			2007
		(Amounts in thousands)
Equity in income (loss) of equity method investments		$	—		$	(12,648	)		(100)	%	$	188		$	(1,091	)		>(100)	%
Minority interest			566			5			>100	%		1,592			3,932			(60)	%
Gains (losses) on investments in equity securities, net			(14,129	)		1,105			>(100)	%		(4,201	)		14,036			>(100)	%
Other			(699	)		913			>(100)	%		(840	)		110			>(100)	%
Investment income			11,793			18,222			(35)	%		40,015			51,687			(23)	%
Interest expense			(792	)		(1,474	)		(46)	%		(3,596	)		(9,283	)		(61)	%
	Total other income (expenses)	$	(3,261	)	$	6,123			>(100)	%	$	33,158		$	59,391			(44)	%

Equity in Income (Loss) of Equity Method Investments

        Under this caption, we record our portion of the results of our joint venture with Medtronic, Inc., and our investment in Peptimmune, Inc. and for the three and nine months ended September 30, 2007, our portion of the results of BioMarin/Genzyme LLC. Also under this caption, for the period from July 10, 2007 through September 30, 2007, we recorded our portion of the results of our investment in Bioenvision, which we subsequently acquired in October 2007.

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        Equity in loss of equity method investments decreased by $12.6 million, or 100%, for the three months ended and $1.3 million, or more than 100%, for the nine months ended September 30, 2008, as compared to the same periods of 2007. These decreases are primarily due to $20.5 million of charges in the three months ended September 30, 2007 related to our investment in Bioenvision common stock, including a $19.1 million charge for IPR&D, representing our proportionate share of the fair value of the IPR&D programs of Bioenvision for which there are no comparable amounts in the same periods of 2008 because we completed our acquisition of Bioenvision in October 2007. These charges were offset in part by our portion of the net income from BioMarin/Genzyme LLC of $8.2 million for the three months ended and $20.8 million for the nine months ended September 30, 2007, for which there are no comparable amounts in the same periods of 2008, since, beginning January 1, 2008, as a result of our restructured relationship with BioMarin, we no longer account for BioMarin/Genzyme LLC using the equity method of accounting.

Minority Interest

        As a result of the restructuring of our relationship with BioMarin/Genzyme LLC, effective January 1, 2008, in accordance with the provisions of FIN 46R, we began consolidating the results of BioMarin/Genzyme LLC. We recorded BioMarin's portion of this joint venture's income for the three and nine months ended September 30, 2008 as minority interest in our consolidated statements of operations, the amounts of which were not significant.

        As a result of our application of FIN 46R, prior to October 15, 2007, we consolidated the results of Excigen Inc., or Excigen, and, prior to February 20, 2007, Dyax-Genzyme LLC. On February 20, 2007, we agreed with Dyax to terminate our participation and interest in Dyax-Genzyme LLC. We recorded Dyax's portion of this joint venture's losses as minority interest in our consolidated statements of operations through February 20, 2007. The results of Excigen were not significant for the three and nine months ended September 30, 2007.

Gains (Losses) on Investments in Equity Securities, Net

        We recorded the following gains (losses) on investments in equity securities, net of charges for impairment of investments, for the periods presented (amounts in thousands):

			Three Months Ended September 30,					Nine Months Ended September 30,
			2008			2007		2008			2007
Gross gains (losses) on investments in equity securities:
	Sirtris		$	—		$	—	$	10,304		$	—
	THP			1,042			—		1,042			10,848
	Other			(9,861	)		1,105		(8,948	)		3,188
		Total		(8,819	)		1,105		2,398			14,036
Less: charges for impairment of investments				(5,310	)		—		(6,599	)		—
Gains (losses) on investments in equity securities, net			$	(14,129	)	$	1,105	$	(4,201	)	$	14,036

        In the fourth quarter of 2007, we purchased an exclusive option to acquire equity of a private company for $10.0 million in cash. We terminated the option agreement prior to the deadline for exercise and, as a result, we recorded a charge of $10.0 million in the third quarter of 2008 to write off the purchase price of the option. We also recorded a charge of $5.3 million in the third quarter of 2008 to write down our investments in certain venture capital funds to fair value.

        In the second quarter of 2008, we recorded a $10.3 million gain resulting from the liquidation of our investment in the common stock of Sirtris for net cash proceeds of $14.8 million.

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        In March 2007, we recorded a $10.8 million gain in connection with the sale of our entire investment in the capital stock of THP, which had a zero cost basis, for net cash proceeds of $10.8 million.

        At September 30, 2008, our stockholders' equity includes $32.7 million of unrealized gains and $0.1 million of unrealized losses related to our strategic investments in equity securities.

Investment Income

        Our investment income decreased 35% to $11.8 million for the three months ended and 23% to $40.0 million for the nine months ended September 30, 2008, as compared to $18.2 million and $51.7 million for the same periods of 2007, primarily due to a decrease in our average portfolio yield in each period.

Interest Expense

        Our interest expense decreased 46% to $0.8 million for the three months ended and 61% to $3.6 million for the nine months ended September 30, 2008, as compared to $1.5 million and $9.3 million for the same periods of 2007, primarily due to a $1.5 million increase in capitalized interest for the three months ended and $3.9 million for the nine months ended September 30, 2008. In addition, there was a $1.7 million decrease in interest expense related to asset retirement obligations in the nine months ended September 30, 2008, as compared to the same period of 2007.

Provision for Income Taxes

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
	(Amounts in thousands)
Provision for income taxes	$	60,512		$	66,432		$	159,036		$	201,715
Effective tax rate		34	%		29	%		32	%		33	%

        Our effective tax rate for all periods presented varies from the U.S. statutory tax rate as a result of:

•

our provision for state income taxes;

•

the tax benefits from manufacturing activities;

•

benefits related to tax credits;

•

income and expenses taxed at rates other than the U.S. statutory tax rate; and

•

non-deductible stock-based compensation expenses totaling $8.8 million for the three months ended and $25.6 million for the nine months ended September 30, 2008, as compared to $7.3 million for the three months ended and $22.7 million for the nine months ended September 30, 2007.

        In addition, during the three months ended September 30, 2008, we recorded net tax benefits of $10.1 million, principally related to a change in our estimate of the amount of foreign production income in the prior year. Our effective tax rate for the three and nine months ended September 30, 2008 was also impacted by the settlement of IRS audits for the tax years 2004 to 2005. During the first half of 2008, we recorded a total of $5.1 million of tax benefits to our income tax provision reflecting the settlement of various issues. In conjunction with those settlements, we reduced our tax reserves by $4.9 million and recorded current and deferred tax benefits for the remaining portion of the settlement amounts.

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        We are currently under IRS audit for the tax years 2006 to 2007 and various states for the tax years 1999 to 2005. We believe that we have provided sufficiently for all audit exposures. Settlement of these audits or the expiration of the statute of limitations on the assessment of income taxes for any tax year may result in an adjustment of future tax provisions. Any such adjustment would be recorded upon the effective settlement of the audit or expiration of the applicable statute of limitations.

LIQUIDITY AND CAPITAL RESOURCES

        We continue to generate cash from operations. We had cash, cash equivalents and short- and long-term investments of $1.47 billion at both September 30, 2008 and December 31, 2007.

        The following is a summary of our statements of cash flows for the nine months ended September 30, 2008 and 2007.

Cash Flows from Operating Activities

        Cash flows from operating activities are as follows (amounts in thousands):

		Nine Months Ended September 30,
		2008			2007
Cash flows from operating activities:
Net income		$	334,431		$	401,294
Non-cash charges			238,757			318,351
Decrease in cash from working capital changes (excluding impact of acquired assets and assumed liabilities)			(139,123	)		(108,818	)
	Cash flows from operating activities	$	434,065		$	610,827

        Cash provided by operating activities decreased by $176.8 million for the nine months ended September 30, 2008, as compared to the same period of 2007, primarily driven by:

•

a $66.9 million decrease in net income, which was impacted by a $197.7 million charge, net of tax, for license fees paid to Isis in exchange for the exclusive, worldwide rights to mipomersen and a $91.3 million charge, net of tax, for the nonrefundable upfront fee we paid to PTC related to our collaboration agreement with PTC for the development and commercialization of PTC124;

•

a $30.3 million increase in cash used for working capital; and

•

a net decrease of $79.6 million in non-cash charges.

        The net decrease in non-cash charges for the nine months ended September 30, 2008, as compared to the same period of 2007, is primarily attributable to an increase in deferred income tax benefits of $154.7 million, offset by:

•

a $29.5 million increase in depreciation and amortization; and

•

a $44.7 million increase in the tax benefit from employee stock-based compensation.

Cash Flows from Investing Activities

        For the nine months ended September 30, 2008, net purchases of investments in equity securities, purchases of other intangible assets, capital expenditures and settlement of the appraisal demand with

55

substantially all of the Bioenvision dissenters accounted for significant cash outlays for investing activities. During the nine months ended September 30, 2008, we used:

•

$80.1 million in cash to purchase five million shares of Isis common stock in February 2008;

•

$434.0 million in cash to fund the purchase of property, plant and equipment, primarily related to the ongoing expansion of our manufacturing capacity in Ridgefield, New Jersey, the Republic of Ireland, the United Kingdom, Belgium and France, completion of construction of a new research and development facility in Framingham, Massachusetts, planned improvements at our manufacturing facility in Allston, Massachusetts and capitalized costs of an internally developed enterprise software system for our Genetics business;

•

$60.0 million in cash for a milestone payment to Wyeth in May 2008; and

•

$16.6 million in cash to settle the appraisal demand with substantially all of the Bioenvision dissenters in September 2008.

These cash outlays were partially offset by $16.5 million of net cash proceeds from the sale of investments in equity securities.

Cash Flows from Financing Activities

        Cash flows from financing activities are as follows (amounts in thousands):

		Nine Months Ended September 30,
		2008			2007
Cash flows from financing activities:
Proceeds from issuance of our common stock		$	294,603		$	100,276
Repurchases of our common stock			(143,012	)		(181,210	)
Excess tax benefits from stock-based compensation			17,470			1,229
Payments of debt and capital lease obligations			(5,281	)		(4,606	)
Increase in bank overdrafts			20,889			19,259
Payments of notes receivable from stockholders			2,770			—
Minority interest contributions			1,244			4,136
Other financing activities			(1,160	)		3,525
	Cash flows from financing activities	$	187,523		$	(57,391	)

        In May 2007, our board of directors authorized a stock repurchase program to repurchase up to an aggregate maximum amount of $1.5 billion or 20,000,000 shares of our outstanding common stock over three years, beginning in June 2007. The repurchases are being made from time to time and can be effectuated through open market purchases, privately negotiated transactions, transactions structured through investment banking institutions, or by other means, subject to management's discretion and as permitted by securities laws and other legal requirements. During the three months ended September 30, 2008, we did not repurchase any shares of our common stock under our stock repurchase program. During the nine months ended September 30, 2008, we repurchased an additional 2,000,000 shares of our common stock at an average price of $71.49 per share for a total of $143.0 million in cash, including fees. As of September 30, 2008, we have repurchased a cumulative total of 5,500,000 shares of our common stock at an average price of $68.09 per share for a total of $374.6 million in cash, including fees.

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Revolving Credit Facility

        As of September 30, 2008, no amounts were outstanding under our five year, $350.0 million senior unsecured revolving credit facility, which expires on July 14, 2011. The terms of this credit facility include various covenants, including financial covenants that require us to meet minimum interest coverage ratios and maximum leverage ratios. As of September 30, 2008, we were in compliance with these covenants.

Contractual Obligations

        The disclosure of payments we have committed to make under our contractual obligations is set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" in Exhibit 13 to our 2007 Form 10-K. As of September 30, 2008, there have been no material changes to our contractual obligations since December 31, 2007 except the following:

•

the contingent payments to Osiris, PTC and Isis as described above under the heading "Strategic Transactions;" and

•

the remaining $18.1 million in principal outstanding under the existing mortgage for a manufacturing facility we formerly leased and then acquired in July 2008, which bears interest at 5.57% annually and is due in May 2020 with a balloon payment of $11.1 million in principal.

Financial Position

        We believe that our available cash, investments and cash flows from operations will be sufficient to fund our planned operations and capital requirements for the foreseeable future. Although we currently have substantial cash resources and positive cash flow, we have used or intend to use substantial portions of our available cash and may make additional borrowings for:

•

product development and marketing;

•

business combinations and strategic business initiatives;

•

the remaining $1.1 billion approved for our ongoing stock repurchase program over approximately the next 20 months;

•

expanding existing and constructing new manufacturing facilities;

•

upgrading our information technology systems;

•

contingent payments under license and other agreements, including payments related to our license of mipomersen from Isis, PTC124 from PTC and Prochymal and Chondrogen from Osiris;

•

expanding staff; and

•

working capital and satisfaction of our obligations under capital and operating leases.

        Our cash reserves may be further reduced to pay principal and interest on the $690.0 million in principal under our 1.25% convertible senior notes due December 1, 2023. We plan to redeem all $690.0 million in principal of these notes on December 1, 2008 using available cash. The notes will be redeemed for cash at 100% of the principal amount of the notes plus accrued interest unless they are converted, at the option of the noteholders, into shares of our common stock on or before November 25, 2008, at a conversion price of $71.24 per share. If our common stock is trading below the conversion price on and before November 25, 2008, we expect that the noteholders will choose to redeem their notes for cash.

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        In addition, we have several outstanding legal proceedings. Involvement in investigations and litigation can be expensive and a court may ultimately require that we pay expenses and damages. As a result of legal proceedings, we may also be required to pay fees to a holder of proprietary rights in order to continue certain operations.

        Recently, the general economic, global capital and credit market conditions in the United States and other parts of the world have deteriorated significantly and have adversely affected access to capital and increased the cost of capital. However, we continue to believe that our available cash, investments and cash flow from operations, together with our revolving credit facility and other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future. We currently do not rely on short-term borrowing to fund our operations and, as a result, we do not believe that existing global capital and credit market conditions will have a significant impact on our near-term liquidity. We are closely monitoring our liquidity as well as the condition of these markets. If these conditions continue or become worse, our future cost of debt and equity capital and our future access to capital markets could be adversely affected. We cannot guarantee that we will be able to obtain any additional financing in the future or extend any existing financing arrangements on favorable terms or at all.

Off-Balance Sheet Arrangements

        We do not use special purpose entities or other off-balance sheet financing arrangements. We enter into guarantees in the ordinary course of business related to the guarantee of our own performance and the performance of our subsidiaries. In addition, we have joint ventures and certain other arrangements that are focused on the research, development and commercialization of products. Entities falling within the scope of FIN 46R are included in our consolidated statements of operations if we qualify as the primary beneficiary. Entities not subject to consolidation under FIN 46R are accounted for under the equity method of accounting if our ownership percent exceeds 20% or if we exercise significant influence over the entity. We account for our portion of the results of these entities in the line item "Equity in income of equity method investments" in our consolidated statements of operations. We also acquire companies in which we agree to pay contingent consideration based on attaining certain thresholds.

Recent Accounting Pronouncements

Adopted in 2008

         FAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115."    Effective January 1, 2008, we adopted FAS 159, which permits, but does not require, entities to irrevocably elect to measure certain financial instruments and other assets and liabilities at fair value on an instrument-by-instrument basis, with subsequent unrealized gains and losses recognized in earnings as changes in fair value occur. In adopting FAS 159, we did not elect to measure any new assets or liabilities at their respective fair values and, therefore, the adoption of FAS 159 did not have an impact on our results of operations or financial position.

         EITF Issue No. 07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities."    In June 2007, the FASB ratified EITF Issue No. 07-3, which requires that nonrefundable advanced payments for goods or services that will be used or rendered for future research and development activities should be deferred and capitalized. Such amounts should be recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered. EITF Issue No. 07-3 was effective for us beginning January 1, 2008 and we applied it prospectively to new contracts we entered into on or after that date. The implementation of EITF Issue No. 07-3 did not have a material impact on our financial position, results of operations or cash flows.

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         FSP 157-3, "Determining Fair Value of a Financial Asset in a Market That Is Not Active."    In October 2008, the FASB issued FSP 157-3, which clarified how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP 157-3 was effective upon issuance, including for prior periods for which financial statements had not been issued. The implementation of FSP 157-3 did not have a material impact on our results of operations or financial position.

Effective in 2009

         EITF Issue No. 07-1, "Accounting for Collaborative Arrangements."    In December 2007, the FASB ratified EITF Issue No. 07-1, which defines collaborative arrangements and establishes reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties, including the appropriate income statement presentation and classification of, and the required disclosures related to, these arrangements. EITF Issue No. 07-1 is effective January 1, 2009 and we will apply it retrospectively to all periods presented for all collaborative arrangements existing as of the effective date. We are evaluating the impact, if any, that EITF Issue No. 07-1 will have on our consolidated financial statements.

         FAS 141R, "Business Combinations."    In December 2007, the FASB issued FAS 141R, which replaces FAS 141. FAS 141R retains the fundamental concept of the purchase method of accounting and introduces new requirements for the recognition and measurement of assets acquired, liabilities assumed, and noncontrolling interests. Under FAS 141R, acquisition costs will generally be expensed as incurred and restructuring costs will be expensed subsequent to the acquisition date. IPR&D will be capitalized as an indefinite-lived intangible asset at the acquisition date and will either be amortized over the life of the related product or written off as a charge to earnings if the project is subsequently abandoned or becomes impaired. FAS 141R is effective for all business combinations occurring on or after January 1, 2009. Early adoption is not permitted. We are currently evaluating the effects that FAS 141R will have on our consolidated financial statements.

         FAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51."    In December 2007, the FASB issued FAS 160, which establishes new accounting and reporting standards for noncontrolling interests, formerly known as minority interests, including the amount of net income attributable to the parent and to the noncontrolling interest, changes in parent's ownership interest and the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated. FAS 160 requires noncontrolling interests to be reclassified from the liabilities section or the mezzanine section between liabilities and equity to the equity section of the consolidated balance sheet and to be reported separately from the parent's equity. In addition, FAS 160 requires the results from operations attributed to the noncontrolling interest to be disclosed separately from those of the parent on the face of the consolidated statement of operations. FAS 160 is effective for us January 1, 2009 and adoption is prospective only. However, upon adoption, presentation and disclosure requirements described above must be applied retrospectively for all periods presented in our consolidated financial statements. We are currently evaluating the effects, if any, that FAS 160 will have on our consolidated financial statements.

         FSP 157-2, "Effective Date of FASB Statement No. 157."    In February 2008, the FASB issued FSP 157-2, which allowed us to defer the implementation of FAS 157 as it relates to our non-financial assets and non-financial liabilities that are recognized and disclosed at fair value in our consolidated financial statements on a nonrecurring basis, until January 1, 2009. We are evaluating the impact, if any, the adoption of FAS 157, for those assets and liabilities within the scope of FSP 157-2, will have on our financial position, results of operations and liquidity. We did not have any non-financial assets or non-financial liabilities that would be recognized or disclosed on a recurring basis as of September 30, 2008.

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         FAS No. 161, "Disclosures About Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133."    In March 2008, the FASB issued FAS 161, which amends and expands the disclosure requirements for derivative instruments and hedging activities. FAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. FAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We are currently evaluating the effects, if any, that FAS 161 will have on our consolidated financial statements.

         FSP 142-3, "Determination of the Useful Life of Intangible Assets."    In April 2008, the FASB issued FSP 142-3, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS 142. This change is intended to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FAS 141R and other generally accepted accounting principles. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the effects, if any, that FSP 142-3 will have on our consolidated financial statements.

         EITF Issue No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities."    In June 2008, the FASB issued EITF Issue No. 03-6-1, which clarifies that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends, whether paid or unpaid, participate in undistributed earnings with common stockholders. Awards of this nature are considered participating securities and the two-class method of computing basic and diluted earnings per share must be applied. EITF Issue No. 03-6-1 is effective for us on January 1, 2009 with retrospective application. We do not expect the implementation of EITF Issue No. 03-6-1 to have a material impact on our consolidated financial position and results of operations.

         EITF Issue No. 07-5, "Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity's Own Stock."    In June 2008, the FASB ratified EITF Issue No. 07-5, which provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument's contingent exercise and settlement provisions. It also clarifies the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF Issue No. 07-5 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the effects, if any, that EITF Issue No. 07-5 will have on our consolidated financial statements.

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RISK FACTORS

        Our future operating results could differ materially from the results described in this report due to the risks and uncertainties related to our business, including those discussed below.

If we fail to increase sales of several existing products and services, we will not meet our financial goals.

        Over the next few years, our success will depend substantially on our ability to increase revenue from our existing products and services. These products and services include Renagel/Renvela, Synvisc, Synvisc-One, Fabrazyme, Myozyme, Aldurazyme, Hectorol, Thymoglobulin, Thyrogen, Clolar/Evoltra, Campath, and diagnostic testing services. Our ability to increase sales will depend on a number of factors, including:

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acceptance by the medical community of each product or service;

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the availability of competing treatments that are deemed safer, more efficacious, more convenient to use, or more cost effective;

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our ability, and the ability of our collaborators, to efficiently manufacture sufficient quantities of each product to meet demand and to do so in a timely and cost efficient manner;

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regulation by the U.S. Food and Drug Administration, commonly referred to as the FDA, and the European Agency for the Evaluation of Medicinal Products, or EMEA, and other regulatory authorities of these products and services and the facilities and processes used to manufacture these products;

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the scope of the labeling approved by regulatory authorities for each product and competitive products;

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the effectiveness of our sales force;

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the availability and extent of coverage, pricing and level of reimbursement from governmental agencies and third party payors; and

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the size of the patient population for each product or service and our ability to identify new patients.

        Part of our growth strategy involves conducting additional clinical trials to support approval of expanded uses of some of our products, including Clolar/Evoltra and alemtuzumab, pursuing marketing approval for our products in new jurisdictions and developing next generation products, such as Genz-112638. The success of this component of our growth strategy will depend on the outcome of these additional clinical trials, the content and timing of our submissions to regulatory authorities and whether and when those authorities determine to grant approvals.

        Because the healthcare industry is extremely competitive and regulatory requirements are rigorous, we spend substantial funds marketing our products and attempting to expand approved uses for them. These expenditures depress near-term profitability with no assurance that the expenditures will generate future profits that justify the expenditures.

Our future success will depend on our ability to effectively develop and market our products and services against those of our competitors.

        The human healthcare products and services industry is extremely competitive. Other organizations, including pharmaceutical, biotechnology, device and diagnostic testing companies, have developed and are developing products and services to compete with our products, services, and product candidates. If healthcare providers, patients or payors prefer these competitive products or services or these competitive

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products or services have superior safety, efficacy, pricing or reimbursement characteristics, we will have difficulty maintaining or increasing the sales of our products and services.

        Renagel/Renvela primarily competes with two other products approved in the United States for the control of elevated phosphorus levels in patients with chronic kidney failure on hemodialysis. Fresenius Medical Care markets PhosLo®, a calcium-based phosphate binder. Shire plc, or Shire, markets Fosrenol®, a non-calcium based phosphate binder. In 2007, Amgen, Inc. acquired Ilypsa and its product candidate, ILY101 (now AMG 223), a polymeric phosphate binder that completed a phase 2 trial in CKD patients on dialysis. Amgen is currently conducting a phase 2b study. Outside the United States, Renagel/Renvela also compete with calcium-based phosphate binders and Fosrenol. Renagel also competes with over-the-counter calcium carbonate products such as TUMS® and metal-based options such as aluminum and magnesium.

        UCB S.A. has developed Zavesca®, a small molecule drug for the treatment of Gaucher disease, the disease addressed by Cerezyme. Zavesca, sold by Actelion Ltd., has been approved in the United States, European Union and Israel as an oral therapy for use in patients with mild to moderate Type 1 Gaucher disease for whom enzyme replacement therapy is unsuitable. In addition, Shire reported top-line data from a phase 1/2 clinical trial for its gene-activated glucocerebrosidase program, also to treat Gaucher disease, and initiated phase 3 studies in July 2007. Protalix Biotherapeutics Ltd. initiated a phase 3 trial for a plant-derived enzyme replacement therapy to treat Gaucher disease in the third quarter of 2007. Amicus Therapeutics, Inc., or Amicus, is conducting phase 2 trials for oral chaperone medication to treat Gaucher disease. We are also aware of other development efforts aimed at treating Gaucher disease.

        Outside the United States, Shire is marketing Replagal™, a competitive enzyme replacement therapy for Fabry disease which is the disease addressed by Fabrazyme. In addition, while Fabrazyme has received orphan drug designation, which provides us with seven years of market exclusivity for the product in the United States, other companies may seek to overcome our market exclusivity and, if successful, compete with Fabrazyme in the United States. Amicus has completed phase 2 trials for an oral chaperone medication to treat Fabry disease and is in discussions with the FDA and EMEA regarding the conduct of phase 3 clinical trials. We are aware of other development efforts aimed at treating Fabry disease.

        Current competition for Synvisc and Synvisc-One includes Supartz®, a product manufactured by Seikagaku Corporation that is sold in the United States by Smith & Nephew Orthopaedics and in Japan by Kaken Pharmaceutical Co. under the name Artz®; Hyalgan®, produced by Fidia Farmaceutici S.p.A. and marketed in the United States by Sanofi-Aventis; Orthovisc®, produced by Anika Therapeutics, Inc., and marketed in the United States by Johnson & Johnson's Mitek division and marketed outside the United States through distributors; Euflexxa™, a product manufactured and sold by Ferring Pharmaceuticals and marketed by Ferring in the United States and Europe; and Durolane®, manufactured by Q-Med AB and distributed outside the United States by Smith & Nephew Orthopedics. Durolane and Euflexxa are produced by bacterial fermentation, which may provide these products a competitive advantage over avian-sourced Synvisc and Synvisc-One. We are aware of various viscosupplementation products on the market or in development, but are unaware of any products that have physical properties of viscosity, elasticity or molecular weight comparable to those of Synvisc and Synvisc-One. Furthermore, several companies market products that are not viscosupplementation products but which are designed to relieve the pain associated with osteoarthritis. Synvisc and Synvisc-One will have difficulty competing with any of these products to the extent the competitive products have a similar safety profile and are considered more efficacious, less burdensome to administer or more cost-effective.

        Myozyme has marketing exclusivity in the United States until 2013 and in the European Union until 2016 due to its orphan drug status, although companies may seek to overcome the associated

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marketing exclusivity. Amicus Therapeutics has completed two phase 1 clinical studies for a small molecule treatment for Pompe disease and initiated a phase 2 clinical trial in June 2008.

        Several companies market products that, like Thymoglobulin, are used for the prevention and treatment of acute rejection in renal transplant. These products include Novartis' Simulect® and Roche's ZENAPAX®. Competition in the acute transplant rejection market is driven largely by product efficacy due to the potential decreased long-term survival of transplanted organs as the result of an acute organ rejection episode.

        The examples above are illustrative and not exhaustive. Almost all of our products and services face competition. Furthermore, the field of biotechnology is characterized by significant and rapid technological change. Discoveries by others may make our products or services obsolete. For example, competitors may develop approaches to treating LSDs that are more effective, convenient or less expensive than our products and product candidates. Because a significant portion of our revenue is derived from products that address this class of diseases and a substantial portion of our expenditures is devoted to developing new therapies for this class of diseases, such a development would have a material negative impact on our results of operations.

If we fail to obtain and maintain adequate levels of reimbursement for our products and services from third party payors, the commercial potential of our products and services will be significantly limited.

        A substantial portion of our domestic and international revenue comes from payments by third party payors, including government health administration authorities and private health insurers. Governments and other third party payors may not provide adequate insurance coverage or reimbursement for our products and services, which could impair our financial results.

        Third party payors are increasingly scrutinizing pharmaceutical budgets and healthcare expenses and are attempting to contain healthcare costs by:

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challenging the prices charged for healthcare products and services;

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limiting both the coverage and the amount of reimbursement for new therapeutic products;

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reducing existing reimbursement rates for commercialized products and services;

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limiting coverage for the treatment of a particular patient to a maximum dollar amount or specified period of time;

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denying or limiting coverage for products that are approved by the FDA or other governmental regulatory bodies but are considered experimental or investigational by third party payors; and

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refusing in some cases to provide coverage when an approved product is used for disease indications in a way that has not received FDA or other applicable marketing approval.

        Efforts by third party payors to reduce costs could decrease demand for our products and services. In addition, in certain countries, including countries in the European Union and Canada, the coverage of prescription drugs, pricing and levels of reimbursement are subject to governmental control. Therefore, we may be unable to negotiate coverage, pricing and/or reimbursement on terms that are favorable to us. Government health administration authorities may also rely on analyses of the cost-effectiveness of certain therapeutic products in determining whether to provide reimbursement for such products. Our ability to obtain satisfactory pricing and reimbursement may depend in part on whether our products, the cost of some of which is high in comparison to other therapeutic products, are viewed as cost-effective.

        Furthermore, governmental regulatory bodies, such as the Centers for Medicare and Medicaid Services (CMS), may from time-to-time make unilateral changes to reimbursement rates for our products and services. These changes could reduce our revenue by causing healthcare providers to be

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less willing to use our products and services. Although we actively seek to assure that any initiatives that are undertaken by regulatory agencies involving reimbursement for our products and services do not have an adverse impact on us, we may not always be successful in these efforts.

The development of new biotechnology products involves a lengthy and complex process, and we may be unable to commercialize any of the products we are currently developing.

        We have numerous products under development and devote considerable resources to research and development, including clinical trials.

        Before we can commercialize our development-stage product candidates, we will need to:

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conduct substantial research and development;

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undertake preclinical and clinical testing;

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develop and scale-up manufacturing processes; and

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pursue marketing approvals and, in some jurisdictions, pricing and reimbursement approvals.

        This process involves a high degree of risk and takes many years. Our product development efforts with respect to a product candidate may fail for many reasons, including:

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failure of the product candidate in preclinical studies;

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difficulty enrolling patients in clinical trials, particularly for disease indications with small patient populations;

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patients exhibiting adverse reactions to the product candidate or indications of other safety concerns;

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insufficient clinical trial data to support the effectiveness of the product candidate;

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our inability to manufacture sufficient quantities of the product candidate for development or commercialization activities in a timely and cost-efficient manner;

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our failure to obtain, or delays in obtaining, the required regulatory approvals for the product candidate, the facilities or the process used to manufacture the product candidate; or

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changes in the regulatory environment, including pricing and reimbursement, that make development of a new product or indication no longer desirable.

        Few research and development projects result in commercial products, and success in preclinical studies or early clinical trials often is not replicated in later studies. For example, in our phase 3 trial known as the Polymer Alternative for CDAD Treatment (PACT) study, tolevamer did not meet its primary endpoint. In our pivotal study of hylastan for treatment of patients with osteoarthritis of the knee, hylastan did not meet its primary endpoint. We may decide to abandon development of a product or service candidate at any time or we may be required to expend considerable resources repeating clinical trials or conducting additional trials, either of which would increase costs of development and delay any revenue from those programs.

        Our efforts to expand the approved indications for our products, gain marketing approval in new jurisdictions and develop next generation products also may fail. These expansion efforts are subject to many of the risks associated with completely new products and, accordingly, we may fail to recoup the investments we make pursuing these strategies.

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Our financial results are dependent on sales of Cerezyme.

        Sales of Cerezyme, our enzyme-replacement product for patients with Gaucher disease, totaled $932.9 million for the nine months ended September 30, 2008, representing approximately 27% of our total revenue. Because our business is dependent on Cerezyme, negative trends in revenue from this product could have an adverse effect on our results of operations and cause the value of our securities to decline. We will lose revenue if alternative treatments gain commercial acceptance, if our marketing activities are restricted, or if coverage, pricing or reimbursement is limited. In addition, the patient population with Gaucher disease is not large. Because a significant percentage of that population already uses Cerezyme, opportunities for future sales growth are constrained. Furthermore, changes in the methods for treating patients with Gaucher disease, including treatment protocols that combine Cerezyme with other therapeutic products or reduce the amount of Cerezyme prescribed, could limit growth, or result in a decline, in Cerezyme sales.

We may encounter substantial difficulties managing our growth.

        Several risks are inherent to our plans to grow our business. Achieving our goals will require substantial investments in research and development, sales and marketing, and facilities. For example, we have spent considerable resources building and seeking regulatory approvals for our manufacturing plants. We cannot assure you that these facilities will prove sufficient to meet demand for our products or that we will not have excess capacity at these facilities. In addition, building our facilities is expensive, and our ability to recover these costs will depend on increased revenue from the products produced at the facilities.

        We produce relatively small amounts of material for research and development activities and pre-clinical trials. Even if a product candidate receives all necessary approvals for commercialization, we may not be able to successfully scale-up production of the product material at a reasonable cost or at all and we may not receive manufacturing approvals in sufficient time to meet product demand. For example, the FDA has concluded that alglucosidase alfa produced in our 2000 liter bioreactors is a different product than alglucosidase alfa produced in our 160 liter bioreactors and therefore required us to submit a separate BLA for the 2000 liter product. This delay in receipt of FDA approval has had an adverse effect on our revenues and earnings and will continue to have an adverse effect until we receive regulatory approval. In addition, to meet the global demand for Myozyme, we are working to secure EMEA approval of Myozyme produced at our 4000 liter bioreactor scale manufacturing plant in Belgium. Product supply of Myozyme is expected to remain tight until the 4000 liter process is approved, and delay in securing approval would have an adverse effect on our revenues and earnings.

        If we are able to increase sales of our products, we may have difficulty managing inventory levels. Marketing new therapies is a complicated process, and gauging future demand is difficult. With Renagel, for example, we have encountered problems in the past managing inventory levels at wholesalers. Comparable problems may arise with any of our products, particularly during market introduction.

        Growth in our business may also contribute to fluctuations in our operating results, which may cause the price of our securities to decline. Our revenue may fluctuate due to many factors, including changes in:

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wholesaler buying patterns;

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reimbursement rates;

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physician prescribing habits;

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the availability or pricing of competitive products; and

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currency exchange rates.

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        We may also experience fluctuations in our quarterly results due to price changes and sales incentives. For example, purchasers of our products, particularly wholesalers, may increase purchase orders in anticipation of a price increase and reduce order levels following the price increase. We occasionally offer sales incentives and promotional discounts on some of our products and services that could have a similar impact. In addition, some of our products, including Synvisc, are subject to seasonal fluctuation in demand.

Our operating results and financial position may be negatively impacted when we attempt to grow through business combination transactions.

        We may encounter problems assimilating operations acquired in business combination transactions. These transactions often entail the assumption of unknown liabilities, the loss of key employees, and the diversion of management attention. Furthermore, in any business combination, including our acquisition of Bioenvision, there is a substantial risk that we will fail to realize the benefits we anticipated when we decided to undertake the transaction. We have in the past taken significant charges for impaired goodwill and for impaired assets acquired in business combination transactions. We may be required to take similar charges in the future. We enter into most such transactions with an expectation that an acquired business will enhance the long-term strength of our business. These transactions, however, often depress our earnings in the near-term and the expected long-term benefits may never be realized. Business combination transactions also deplete cash resources and some may require us to issue substantial equity or incur significant debt.

Manufacturing problems may cause product launch delays, inventory shortages, recalls and unanticipated costs.

        In order to generate revenue from our approved products, we must be able to produce sufficient quantities of the products. Many of our products are difficult to manufacture. Our products that are biologics, for example, require product characterization steps that are more onerous than those required for most chemical pharmaceuticals. Accordingly, we employ multiple steps to attempt to control the manufacturing processes. Minor deviations in these manufacturing processes could result in unacceptable changes in the products that result in lot failures, product recalls, product liability claims and insufficient inventory. For example, we have experienced manufacturing issues with Thymoglobulin that resulted in write-offs or recalls of lots that went out of specification prior to expiry.

        Certain of the raw materials required in the commercial manufacturing and the formulation of our products are derived from biological sources, including mammalian sources and human plasma. Such raw materials may be difficult to procure and subject to contamination or recall. Also, some countries in which we market our products may restrict the use of certain biologically derived substances in the manufacture of drugs. A material shortage, contamination, recall, or restriction on the use of certain biologically derived substances in the manufacture of our products could adversely impact or disrupt our commercial manufacturing of our products or could result in a withdrawal of our products from markets. This too, in turn, could adversely affect our ability to satisfy demand for our products, which could materially and adversely affect our operating results.

        In addition, we may only be able to produce some of our products at a very limited number of facilities and, in some cases, we rely on third parties to formulate and manufacture our products. For example, we manufacture all of our Cerezyme and a portion of our Fabrazyme and Myozyme products at our facility in Allston, Massachusetts. A number of factors could cause production interruptions at our facilities or the facilities of our third party providers, including equipment malfunctions, labor problems, raw material shortages, natural disasters, power outages, terrorist activities, or disruptions in the operations of our suppliers.

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        Manufacturing is also subject to extensive government regulation. Regulatory authorities must approve the facilities in which human healthcare products are produced and those facilities are subject to ongoing inspections. In addition, changes in manufacturing processes may require additional regulatory approvals. Obtaining and maintaining these regulatory approvals could cause us to incur significant additional costs and lose revenue. Furthermore, any third party we use to manufacture, fill-finish or package our products to be sold must also be licensed by the applicable regulatory authorities. As a result, alternative third party providers may not be readily available on a timely basis.

Our international sales and operating expenses are subject to fluctuations in currency exchange rates.

        A significant portion of our business is conducted in currencies other than our reporting currency, the U.S. dollar. We recognize foreign currency gains or losses arising from our operations in the period in which we incur those gains or losses. As a result, currency fluctuations among the U.S. dollar and the currencies in which we do business have caused foreign currency translation gains and losses in the past and will likely do so in the future. Because of the number of currencies involved, the variability of currency exposures and the potential volatility of currency exchange rates, we may suffer significant foreign currency translation losses in the future due to the effect of exchange rate fluctuations.

Guidelines and recommendations published by various organizations can reduce the use of our products.

        Professional societies, practice management groups, private health/science foundations, and organizations involved in various diseases may publish guidelines or recommendations to the healthcare and patient communities from time to time. Recommendations of government agencies or these other groups/organizations may relate to such matters as usage, dosage, route of administration, cost-effectiveness, and use of related therapies. Organizations like these have in the past made recommendations about our products and products of our competitors. Recommendations or guidelines that are followed by patients and healthcare providers could result in decreased use of our products. The perception by the investment community or stockholders that recommendations or guidelines will result in decreased use of our products could adversely affect prevailing market price for our common stock. In addition, our success also depends on our ability to educate patients and healthcare providers about our products and their uses. If these education efforts are not effective, then we may not be able to increase the sales of our existing products or successfully introduce new products to the market.

We rely on third parties to provide us with materials and services in connection with the manufacture of our products and the performance of our services.

        Some materials necessary for commercial production of our products, including specialty chemicals and components necessary for manufacture, fill-finish and packaging, are provided by unaffiliated third party suppliers. In some cases, such materials are specifically cited in our marketing applications with regulatory authorities so that they must be obtained from that specific source unless and until the applicable authority approves another supplier. In addition, there may only be one available source for a particular chemical or component. For example, we acquire polyalylamine (PAA), used in the manufacture of Renagel, Renvela, Cholestagel and WelChol, from Cambrex Charles City, Inc., the only source for this material currently qualified in our FDA drug applications for these products. Our suppliers also may be subject to FDA regulations or the regulations of other governmental agencies outside the United States regarding manufacturing practices. We may be unable to manufacture our products or to perform our services in a timely manner or at all if these third party suppliers were to cease or interrupt production or otherwise fail to supply sufficient quantities of these materials or products to us for any reason, including due to regulatory requirements or actions, adverse financial developments at or affecting the supplier, or labor shortages or disputes.

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        We also source some of our manufacturing, fill-finish, packaging and distribution operations to third party contractors. The manufacture of products, fill-finish, packaging and distribution of our products requires successful coordination among these third party providers and Genzyme. Our inability to coordinate these efforts, the inability of a third party contractor to secure sufficient source materials, the lack of capacity available at a third party contractor or any other problems with the operations of a third party contractor could require us to delay shipment of saleable products, recall products previously shipped or impair our ability to supply products at all. This could increase our costs, cause us to lose revenue or market share and damage our reputation.

Government regulation imposes significant costs and restrictions on the development and commercialization of our products and services.

        Our success will depend on our ability to satisfy regulatory requirements. We may not receive required regulatory approvals on a timely basis or at all. Government agencies heavily regulate the production and sale of healthcare products and the provision of healthcare services. In particular, the FDA and comparable regulatory agencies in foreign jurisdictions must approve human therapeutic and diagnostic products before they are marketed, as well as the facilities in which they are made. This approval process can involve lengthy and detailed laboratory and clinical testing, sampling activities and other costly and time-consuming procedures. Several biotechnology companies have failed to obtain regulatory approvals because regulatory agencies were not satisfied with the structure or conduct of clinical trials. Similar problems could delay or prevent us from obtaining approvals. Furthermore, regulatory authorities, including the FDA, may not agree with our interpretations of our clinical trial data, which could delay, limit or prevent regulatory approvals.

        Therapies that have received regulatory approval for commercial sale may continue to face regulatory difficulties. If we fail to comply with applicable regulatory requirements, regulatory authorities could take actions against us, including:

•

issuing warning letters;

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issuing fines and other civil penalties;

•

suspending regulatory approvals;

•

refusing to approve pending applications or supplements to approved applications;

•

suspending product sales, imports and/or exports;

•

requiring us to communicate with physicians and other customers about concerns related to actual or potential safety, efficacy, and other issues involving our products;

•

mandating product recalls; and

•

seizing products.

        Furthermore, the FDA and comparable foreign regulatory agencies may require post-marketing clinical trials or patient outcome studies. We have agreed with the FDA, for example, to a number of post-marketing commitments as a condition to U.S. marketing approval for Fabrazyme, Aldurazyme, Myozyme and Clolar. In addition, regulatory agencies subject a marketed therapy, its manufacturer and the manufacturer's facilities to continual review and periodic inspections. The discovery of previously unknown problems with a therapy or the facility or process used to produce the therapy could prompt a regulatory authority to impose restrictions on us, or could cause us to voluntarily adopt such restrictions, including withdrawal of one or more of our products or services from the market. For example, we received a warning letter from the FDA in September 2007 that addressed certain of our manufacturing procedures in our Thymoglobulin production facility in Lyon, France. The FDA has

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accepted our response to the warning letter and we continue to work to optimize our processes at this plant.

If regulatory authorities fail to approve pending applications in a timely matter, our results of operations will suffer.

        We expect regulatory action on several matters during the next 12 months. We, for example, anticipate regulatory action on our marketing applications for alglucosidase alfa produced at the 2000L scale in the United States and for Myozyme produced at the 4000L scale in Europe; our marketing applications for Mozobil in the United States and Europe; the expansion of labeling for clofarabine to include the treatment of adults with AML in the United States and Europe; our marketing application for Renvela in Europe and a label expansion of Renvela in the United States to include the treatment of CKD; and our marketing application for Synvisc-One in the United States.

        Regulatory authorities denying or delaying these approvals would adversely impact our projected revenue and income growth. A regulatory authority may deny or delay an approval due to its assessment of the data we supply. A regulatory authority, for instance, may not believe that we have adequately established a product's risk-benefit profile or adequately addressed negative safety signals. Clinical data are subject to varied interpretations, and regulatory authorities may disagree with our assessments of our data. In any such case, a regulatory authority could insist that we provide additional data, which could substantially delay or even prevent commercialization efforts, particularly if we are required to conduct additional pre-approval clinical studies. In addition, the FDA has failed to respond to companies by their Prescription Drug User Fee Act response dates, which failure causes a delay in the approval process. We have confronted delays in marketing in the United States for alglucosidase alfa produced at the 2000L scale, which has harmed our financial results, and we could face additional delays with this product or other products. Adverse events in clinical trials have resulted in regulatory problems for several drug candidates and our product candidates are susceptible to similar risks.

We may incur substantial costs as a result of litigation or other proceedings.

        A third party may sue us or one of our strategic collaborators for infringing the third party's patent or other intellectual property rights. Likewise, we or one of our strategic collaborators may sue to enforce intellectual property rights or to determine the scope and validity of third party proprietary rights. If we do not prevail in this type of litigation, we or our strategic collaborators may be required to:

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pay monetary damages;

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stop commercial activities relating to the affected products or services;

•

obtain a license in order to continue manufacturing or marketing the affected products or services; or

•

compete in the market with a different product.

        We are also currently involved in litigation matters and investigations that do not involve intellectual property claims and may be subject to additional actions in the future. For example, the federal government, state governments and private payors are investigating and have begun to file actions against numerous pharmaceutical and biotechnology companies, including Genzyme, alleging that the companies have overstated prices in order to inflate reimbursement rates. Domestic and international enforcement authorities also have instituted actions under healthcare "fraud and abuse" laws, including anti-kickback and false claims statutes. Moreover, individuals who use our products or services, including our diagnostic products and genetic testing services, sometimes bring product and professional liability claims against us or our subsidiaries.

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        Some of our products are prescribed by physicians for uses not approved by the FDA or comparable regulatory agencies outside the United States. Although physicians may lawfully prescribe our products for off-label uses, any promotion by us of off-label uses would be unlawful. Some of our practices intended to make physicians aware of off-label uses of our products without engaging in off-label promotion could nonetheless be construed as off-label promotion. Although we have policies and procedures in place designed to help assure ongoing compliance with regulatory requirements regarding off-label promotion, some non-compliant actions may nonetheless occur. Regulatory authorities could take enforcement action against us if they believe we are promoting, or have promoted, our products for off-label use.

        We have only limited amounts of insurance, which may not provide coverage to offset a negative judgment or a settlement payment. We may be unable to obtain additional insurance in the future, or we may be unable to do so on favorable terms. Our insurers may dispute our claims for coverage. For example, we have submitted claims to our insurers for reimbursement of portions of the expenses incurred in connection with the litigation and settlement related to the consolidation of our tracking stock and are seeking coverage for the settlement. The insurers have purported to deny coverage. Any additional insurance we do obtain may not provide adequate coverage against any asserted claims.

        Regardless of merit or eventual outcome, investigations and litigation can result in:

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the diversion of management's time and attention;

•

the expenditure of large amounts of cash on legal fees, expenses, and payment of damages;

•

limitations on our ability to continue some of our operations;

•

decreased demand for our products and services; and

•

injury to our reputation.

Our international sales, clinical activities, manufacturing and other operations are subject to the economic, political, legal and business environments of the countries in which we do business, and our failure to operate successfully or adapt to changes in these environments could cause our international sales and operations to be limited or disrupted.

        Our international operations accounted for approximately 52% of our consolidated product and service revenues for the nine months ended September 30, 2008. We expect that international product and service sales will continue to account for a significant percentage of our revenues for the foreseeable future. In addition, we have direct investments in a number of subsidiaries outside of the United States. Our international sales and operations could be limited or disrupted, and the value of our direct investments may be diminished, by any of the following:

•

economic problems that disrupt foreign healthcare payment systems;

•

the imposition of governmental controls, including foreign exchange and currency restrictions;

•

less favorable intellectual property or other applicable laws;

•

the inability to obtain any necessary foreign regulatory or pricing approvals of products in a timely manner;

•

the inability to obtain third party reimbursement support for products;

•

product counterfeiting and intellectual property piracy;

•

parallel imports;

•

anti-competitive trade practices;

•

import and export license requirements;

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•

political instability;

•

terrorist activities, armed conflict, or a pandemic;

•

restrictions on direct investments by foreign entities and trade restrictions;

•

changes in tax laws and tariffs;

•

difficulties in staffing and managing international operations; and

•

longer payment cycles.

        Our operations and marketing practices are also subject to regulation and scrutiny by the governments of the countries in which we operate. In addition, the United States Foreign Corrupt Practices Act prohibits U.S. companies and their representatives from offering, promising, authorizing or making payments to foreign officials for the purpose of obtaining or retaining business abroad. Failure to comply with domestic or foreign laws could result in various adverse consequences, including possible delay in the approval or refusal to approve a product, recalls, seizures, withdrawal of an approved product from the market, and/or the imposition of civil or criminal sanctions.

We may fail to adequately protect our proprietary technology, which would allow competitors or others to take advantage of our research and development efforts.

        Our long-term success largely depends on our ability to market technologically competitive products. If we fail to obtain or maintain adequate intellectual property protection in the United States or abroad, we may not be able to prevent third parties from using our proprietary technologies. Our currently pending or future patent applications may not result in issued patents. Patent applications are confidential for 18 months following their filing, and because third parties may have filed patent applications for technology covered by our pending patent applications without us being aware of those applications, our patent applications may not have priority over patent applications of others. In addition, our issued patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products, or provide us with any competitive advantage. If a third party initiates litigation regarding our patents, our collaborators' patents, or those patents for which we have license rights, and is successful, a court could declare our patents invalid or unenforceable or limit the scope of coverage of those patents. Governmental patent offices and courts have not consistently treated the breadth of claims allowed in biotechnology patents. If patent offices or the courts begin to allow or interpret claims more broadly, the incidence and cost of patent interference proceedings and the risk of infringement litigation will likely increase. On the other hand, if patent offices or the courts begin to allow or interpret claims more narrowly, the value of our proprietary rights may be reduced. Any changes in, or unexpected interpretations of, the patent laws may adversely affect our ability to enforce our patent position.

        We also rely upon trade secrets, proprietary know-how, and continuing technological innovation to remain competitive. We attempt to protect this information with security measures, including the use of confidentiality agreements with employees, consultants, and corporate collaborators. These individuals may breach these agreements and any remedies available to us may be insufficient to compensate for our damages. Furthermore, our trade secrets, know-how and other technology may otherwise become known or be independently discovered by our competitors.

Some of our products may face competition from lower cost generic or follow-on products.

        Some of our drug products, for example Renagel, Renvela, Clolar and Hectorol, are approved under the provisions of the United States Food, Drug and Cosmetic Act that render them susceptible to potential competition from generic manufacturers via the Abbreviated New Drug Application (ANDA) procedure. Generic manufacturers pursuing ANDA approval are not required to conduct

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costly and time-consuming clinical trials to establish the safety and efficacy of their products; rather, they are permitted to rely on the innovator's data regarding safety and efficacy. Thus, generic manufacturers can sell their products at prices much lower than those charged by the innovative pharmaceutical or biotechnology companies who have incurred substantial expenses associated with the research and development of the drug product.

        The ANDA procedure includes provisions allowing generic manufacturers to challenge the effectiveness of the innovator's patent protection long prior to the generic manufacturer actually commercializing their products—the so-called "Paragraph IV" certification procedure. In recent years, generic manufacturers have used Paragraph IV certifications extensively to challenge patents on a wide array of innovative pharmaceuticals, and we expect this trend to continue and to implicate drug products with even relatively modest revenues.

        Both Renagel and Hectorol are subjects of ANDAs containing Paragraph IV certifications. In the case of Renagel, the ANDA Paragraph IV certification relates only to one of our Renagel patents, namely our patent that covers features of our tablet dosage form. This patent expires in 2020, and the ANDA applicant alleged that its proposed product would not infringe that patent. We reviewed the Paragraph IV certification and did not initiate patent litigation within the 45-day statutory period. The ANDA does not contain a Paragraph IV certification with respect to our Renagel pharmaceutical composition and medical use patent estate, which protect the product and its approved indications until 2014. Because the last of our composition of matter patents expire in 2014, we would expect Renagel to be subject to competition beginning in 2014.

        In the case of Hectorol, the ANDA applicant has submitted a Paragraph IV certification alleging the invalidity of our patent related to the use of Hectorol to treat hyperparathyroidism secondary to end-stage renal disease (which patent expires in 2014), and alleging non-infringement of our patent claiming our highly purified form of Hectorol (which patent expires in 2021). We initiated patent infringement litigation in February 2008. We believe that our patents are valid and are currently assessing the merits of the ANDA applicant's non-infringement positions.

        Other of our products, including Cerezyme, Fabrazyme, Aldurazyme, Myozyme and Campath (so-called "biotech drugs") are not currently considered susceptible to an abbreviated approval procedure, either due to current United States law or FDA practice in approving biologic products. However, the United States Congress is expected to continue to explore, and ultimately enact, legislation that would establish a procedure for the FDA to accept ANDA-like abbreviated applications for the approval of "follow-on," "biosimilar" or "comparable" biotech drugs. Such legislation has already been adopted in the European Union.

        If either of the ANDA filers or any other generic manufacturer were to receive approval to sell a generic or follow-on version of one of our products, that product would become subject to increased competition and our revenues for that product would be adversely affected.

We may be required to license technology from competitors or others in order to develop and commercialize some of our products and services, and it is uncertain whether these licenses would be available.

        Third party patents may cover some of the products or services that we or our strategic partners are developing or producing. A patent is entitled to a presumption of validity and accordingly, we face significant hurdles in any challenge to a patent. In addition, even if we are successful in challenging the validity of a patent, the challenge itself may be expensive and require significant management attention.

        To the extent valid third party patent rights cover our products or services, we or our strategic collaborators would be required to seek licenses from the holders of these patents in order to manufacture, use or sell these products and services, and payments under them would reduce our

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profits from these products and services. We may not be able to obtain these licenses on favorable terms, or at all. If we fail to obtain a required license or are unable to alter the design of our technology to fall outside the scope of a third party patent, we may be unable to market some of our products and services, which would limit our profitability.

Importation of products may lower the prices we receive for our products.

        In the United States and abroad, many of our products are subject to competition from lower-priced versions of our products and competing products from other countries where government price controls or other market dynamics result in lower prices for such products. Our products that require a prescription in the United States may be available to consumers in markets such as Canada, Mexico, Taiwan and the Middle East without a prescription, which may cause consumers to seek out these products in these lower priced markets. The ability of patients and other customers to obtain these lower priced imports has grown significantly as a result of the Internet, an expansion of pharmacies in Canada and elsewhere that target American purchasers, an increase in U.S.-based businesses affiliated with these Canadian pharmacies and other factors. Most of these foreign imports are illegal under current United States law. However, the volume of imports continues to rise due to the limited enforcement resources of the FDA and the United States Customs Service, and there is increased political pressure to permit such imports as a mechanism for expanding access to lower-priced medicines. The importation of lower-priced versions of our products into the United States and other markets adversely affects our profitability. This impact could become more significant in the future.

Legislative or regulatory changes may adversely impact our business.

        The United States government and other governments have shown significant interest in pursuing healthcare reform. Any government-adopted reform measures could adversely impact:

•

the pricing of healthcare products in the United States or internationally; and

•

the amount of reimbursement available from governmental agencies or other third party payors.

        New laws, regulations and judicial decisions, or new interpretations of existing laws, regulations and decisions, that relate to healthcare availability, methods of delivery or payment for products and services, or sales, marketing or pricing may cause our revenue to decline, and we may need to revise our research and development programs.

        On September 27, 2007, the Food and Drug Administration Amendments Act of 2007 was enacted, giving the FDA enhanced post-market authority, including the authority to require post-marketing studies and clinical trials, labeling changes based on new safety information, and compliance with risk evaluations and mitigation strategies approved by the FDA. The FDA's exercise of its new authority could result in delays or increased costs during the period of product development, clinical trials and regulatory review and approval, increased costs to assure compliance with new post-approval regulatory requirements, and potential restrictions on the sale of approved products.

If our strategic alliances are unsuccessful, our operating results will be negatively impacted.

        Several of our strategic initiatives involve alliances with other biotechnology and pharmaceutical companies. The success of these arrangements is largely dependent on technology and other intellectual property contributed by our strategic partners or the resources, efforts, and skills of our partners. Disputes and difficulties in such relationships are common, often due to conflicting priorities or conflicts of interest. Merger and acquisition activity may exacerbate these conflicts. The benefits of these alliances are reduced or eliminated when strategic partners:

•

terminate the agreements covering the strategic alliance or limit our access to the underlying intellectual property;

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•

fail to devote financial or other resources to the alliances and thereby hinder or delay development, manufacturing or commercialization activities;

•

fail to successfully develop, manufacture or commercialize any products; or

•

fail to maintain the financial resources necessary to continue financing their portion of the development, manufacturing, or commercialization costs of their own operations.

        Furthermore, payments we make under these arrangements may exacerbate fluctuations in our financial results. In addition, under some of our strategic alliances, we make upfront and milestone payments well in advance of commercialization of products with no assurance that we will ever recoup these payments. We also may make equity investments in our strategic partners, as we did with Isis Pharmaceuticals, Inc. in February 2008 and RenaMed Biologics, Inc., or RenaMed, in June 2005. Our strategic equity investments are subject to market fluctuations, access to capital and other business events, such as initial public offerings, the completion of clinical trials and regulatory approvals, which can impact the value of these investments. For example, in October 2006, RenaMed suspended clinical trials of its renal assist device which was being developed to treat patients with acute renal failure, causing us to write off our entire investment in RenaMed. If other strategic equity investments decline in value and remain below cost for an extended duration, we may incur additional charges.

We may require significant additional financing, which may not be available to us on favorable terms, if at all.

        As of September 30, 2008, we had $1.5 billion in cash, cash equivalents and short- and long-term investments, excluding our investments in equity securities.

        We intend to use substantial portions of our available cash for:

•

product development and marketing;

•

business combinations and strategic business initiatives;

•

the remaining $1.1 billion available under our ongoing stock repurchase program over approximately the next 20 months;

•

upgrading our information technology systems;

•

expanding existing and constructing new manufacturing facilities;

•

contingent payments under license and other agreements, including payments related to our license of mipomersen from Isis, PTC124 from PTC and Prochymal and Chondrogen from Osiris;

•

expanding staff; and

•

working capital and satisfaction of our obligations under capital and operating leases.

        Our cash reserves may likely be further reduced to pay principal and interest on the $690.0 million in principal under our 1.25% convertible senior notes due December 1, 2023. We plan to redeem all $690.0 million in principal of these notes on December 1, 2008 using available cash. The notes will be redeemed for cash at 100% of the principal amount of the notes plus accrued interest unless they are converted, at the option of the noteholders, into shares of our common stock on or before November 25, 2008, at a conversion price of $71.24 per share. If our common stock is trading below the conversion price on and before November 25, 2008, we expect that the noteholders will choose to redeem their notes for cash.

        In addition, we have several outstanding legal proceedings. Involvement in investigations and litigation can be expensive and a court may ultimately require that we pay expenses and damages. As a

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result of legal proceedings, we may also be required to pay fees to a holder of proprietary rights in order to continue certain operations.

        Recently, the general economic, global capital and credit market conditions in the United States and other parts of the world have deteriorated significantly and have adversely affected access to capital and increased the cost of capital. However, we continue to believe that our available cash, investments and cash flow from operations, together with our revolving credit facility and other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future. We currently do not rely on short-term borrowing to fund our operations and, as a result, we do not believe that existing global capital and credit market conditions will have a significant impact on our near-term liquidity. We are closely monitoring our liquidity as well as the condition of these markets. If these conditions continue or become worse, our future cost of debt and equity capital and our future access to capital markets could be adversely affected. We cannot guarantee that we will be able to obtain any additional financing in the future or extend any existing financing arrangements on favorable terms, or at all.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

        We are exposed to potential loss from exposure to market risks represented principally by changes in foreign exchange rates, interest rates and equity prices. At September 30, 2008, we held derivative contracts in the form of foreign exchange forward contracts. We also held a number of other financial instruments, including investments in marketable securities and we had debt securities outstanding. We do not hold derivatives or other financial instruments for speculative purposes.

Equity Price Risk

        We hold investments in a limited number of U.S. and European equity securities. We estimated the potential loss in fair value due to a 10% decrease in the equity prices of each marketable security held at September 30, 2008 to be $5.7 million, as compared to $6.5 million at December 31, 2007. This estimate assumes no change in foreign exchange rates from quarter-end spot rates and excludes any potential risk associated with securities that do not have a readily determinable market value.

Interest Rate Risk

        We are exposed to potential loss due to changes in interest rates. Our principal interest rate exposure is to changes in U.S. interest rates. Instruments with interest rate risk include short- and long-term investments in fixed income securities. Other exposures to interest rate risk include the fair value of fixed rate convertible debt and other fixed rate debt. To estimate the potential loss due to changes in interest rates, we performed a sensitivity analysis using the instantaneous adverse change in interest rates of 100 basis points across the yield curve.

        We used the following assumptions in preparing the sensitivity analysis for our convertible bonds:

•

convertible notes that are "in-the-money" at September 30, 2008 are considered equity securities and are excluded;

•

convertible notes that are "out-of-the-money" at September 30, 2008 are analyzed by taking into account both fixed income and equity components; and

•

convertible notes will mature on the first available put or call date.

        On this basis, we estimate the potential loss in fair value that would result from a hypothetical 1% (100 basis points) decrease in interest rates to be $1.4 million as of September 30, 2008, as compared to $3.3 million as of December 31, 2007.

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Foreign Exchange Risk

        As a result of our worldwide operations, we may face exposure to adverse movements in foreign currency exchange rates, primarily to the Euro, British Pound and Japanese Yen. Exposures to currency fluctuations that result from sales of our products in foreign markets are partially offset by the impact of currency fluctuations on our international expenses. We use forward foreign exchange contracts to further reduce our exposure to changes in exchange rates, primarily to offset the earnings effect from intercompany short-term foreign currency assets and liabilities. We also hold a limited amount of foreign currency denominated equity securities.

        As of September 30, 2008, we estimated the potential loss in fair value of our foreign currency contracts and foreign equity holdings that would result from a hypothetical 10% adverse change in exchange rates to be $23.8 million, as compared to $36.2 million as of December 31, 2007. The change from the prior period is due to a decrease in our net foreign currency contracts. Since the contracts hedge mainly transactional exchange exposures, any changes in the fair values of the contracts would be offset by changes in the underlying values of the hedged items.

ITEM 4.    CONTROLS AND PROCEDURES

        As of September 30, 2008, we evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2008.

        There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

        We periodically become subject to legal proceedings and claims arising in connection with our business. Although we cannot predict the outcome of these additional proceedings and claims, we do not believe the ultimate resolution of any of these existing matters would have a material adverse effect on our consolidated financial position or results of operations.

ITEM 1A.    RISK FACTORS

        We incorporate by reference our disclosure related to risk factors which is set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors" in Part I., Item 2. of this Quarterly Report on Form 10-Q.

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ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

        The following table provides information about our repurchases of our equity securities during the quarter ended September 30, 2008:

Period	Total Number of Shares Purchased			Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2008-July 31, 2008		2,336	(1)	$	78.97		—	$	1,125,521,738.47
August 1, 2008-August 31, 2008		—			—		—		1,125,521,738.47
September 1, 2008-September 30, 2008		—			—		—		1,125,521,738.47
Total		2,336		$	78.97		—

(1)

Represents shares surrendered to us by employees who used Genzyme Stock that they otherwise owned to pay the exercise price of their stock options. The shares used to satisfy the exercise price of stock options are not considered part of the publicly announced stock repurchase program approved by our board of directors in May 2007.

ITEM 6.    EXHIBITS

(a)

Exhibits

        See the Exhibit Index following the signature page to this report on Form 10-Q.

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) 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
Dated: November 7, 2008	By:	/s/ MICHAEL S. WYZGA
		Michael S. Wyzga Executive Vice President, Finance, Chief Financial Officer, and Chief Accounting Officer

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GENZYME CORPORATION AND SUBSIDIARIES

FORM 10-Q, SEPTEMBER 30, 2008

EXHIBIT INDEX

EXHIBIT NO.	DESCRIPTION
*3.1	Restated Articles of Organization of Genzyme, as amended. Filed as Exhibit 3.1 to Genzyme's Form 10-Q for the quarter ended June 30, 2006.
*3.2	By-laws of Genzyme, as amended. Filed as Exhibit 3.1 to Genzyme's Form 8-K filed May 25, 2007.
31.1	Certification of the Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
31.2	Certification of the Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
32.1	Certification of the Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
32.2	Certification of the Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

*

Indicates exhibit previously filed with the SEC and incorporated herein by reference. Exhibits filed with Forms 10-K, 10-Q, 8-K, 8-A or Schedule 14A of Genzyme Corporation were filed under Commission File No. 0-14680.

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GENZYME CORPORATION AND SUBSIDIARIES FORM 10-Q, SEPTEMBER 30, 2008 TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

GENZYME CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited, amounts in thousands, except per share amounts)
GENZYME CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited, amounts in thousands, except par value amounts)
GENZYME CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited, amounts in thousands)
GENZYME CORPORATION AND SUBSIDIARIES Notes to Unaudited, Consolidated Financial Statements

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RISK FACTORS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES
ITEM 1. LEGAL PROCEEDINGS
ITEM 1A. RISK FACTORS
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 6. EXHIBITS

SIGNATURES
EXHIBIT INDEX

EX-31.1

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Exhibit 31.1

Certification Pursuant To
Rules 13a-14(a) And 15d-14(a) Under The Securities Exchange Act Of 1934, As Amended

I, Henri A. Termeer, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Genzyme Corporation (the "Registrant");

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.

The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5.

The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

(a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls over financial reporting.

Date: November 7, 2008 /s/ HENRI A. TERMEER
Henri A. Termeer
Chief Executive Officer

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Exhibit 31.1

EX-31.2

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Exhibit 31.2

Certification Pursuant To
Rules 13a-14(a) And 15d-14(a) Under The Securities Exchange Act Of 1934, As Amended

I, Michael S. Wyzga, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Genzyme Corporation (the "Registrant");

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.

The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5.

The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

(a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls over financial reporting.

Date: November 7, 2008 /s/ MICHAEL S. WYZGA
Michael S. Wyzga
Chief Financial Officer

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Exhibit 31.2

EX-32.1

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Exhibit 32.1

Certification by the Chief Executive Officer Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

        Pursuant to 18 U.S.C. Section 1350, I, the undersigned Chief Executive Officer of Genzyme Corporation (the "Company"), hereby certify that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2008 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ HENRI A. TERMEER
Henri A. Termeer
Chief Executive Officer
November 7, 2008

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Exhibit 32.1

EX-32.2

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Exhibit 32.2

Certification by the Chief Financial Officer Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

        Pursuant to 18 U.S.C. Section 1350, I, the undersigned Chief Financial Officer of Genzyme Corporation (the "Company"), hereby certify that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2008 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ MICHAEL S. WYZGA
Michael S. Wyzga
Chief Financial Officer
November 7, 2008

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Exhibit 32.2