10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

or

oTRANSITION 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	06-1047163
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
500 Kendall Street Cambridge, Massachusetts	02142
(Address of principal executive offices)	(Zip Code)

(617) 252-7500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Genzyme Common Stock, $0.01 Par Value (“Genzyme Stock”)

Genzyme Stock Purchase Rights

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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 x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x   Accelerated filer o   Non-accelerated filer 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 x

Aggregate market value of voting stock held by non-affiliates of the Registrant as of June 30, 2006: $15,863,517,409

Number of shares of Genzyme Stock outstanding as of January 31, 2007: 263,453,092

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s 2006 Annual Report are incorporated by reference into Parts I, II and IV of this Form 10-K. Portions of the Registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 24, 2007, are incorporated by reference into Part III of this Form 10-K.

NOTE REGARDING REFERENCES TO OUR COMMON STOCK

Throughout this Form 10-K, 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. Genzyme Corporation has one outstanding series of common stock, which we refer to as “Genzyme Stock.”

NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

·projected timetables for the preclinical and clinical development of, regulatory submissions and approvals for, and market introduction of, our products and services in various jurisdictions, including Renvela, tolevamer, GENZ-112638, TGF-beta antagonists, hylastan, tasidotin, and Mozobil and to seek marketing approvals in additional jurisdictions, including Thyrogen, Myozyme, Thymoglobulin and Synvisc;

·our plans and our anticipated timing for pursuing additional indications and uses for our products and services, including Thyrogen, Thymoglobulin, Sepra products, Synvisc and Campath;

·the timing of, and availability of data from, clinical trials;

·estimates of the potential markets for our products and services;

·the anticipated drivers for future growth of our products, including Renagel, Myozyme, Hectorol and Thymoglobulin;

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

·estimates of the capacity of, and the projected timetable of approvals for, manufacturing and other facilities to support our products and services, including Cerezyme, Myozyme, Renvela, Hectorol and Thymoglobulin;

·our assessment of the outcome, timetables and financial impact of litigation and other governmental proceedings and the potential impact of unasserted claims;

·the sufficiency of our cash, short-term investments and cash flows from operations;

·U.S. and foreign income tax audits, including our provision for liabilities and assessment of the impact of settlement of the Internal Revenue Service, commonly referred to as the IRS, and foreign tax disputes;

·estimates of cost to complete and estimated commercialization dates for in-process research and development, or IPR&D, programs;

·expected future revenues, operations and expenditures;

·projected future earnings and earnings per share;

·our assessment of the impact of recent accounting pronouncements, including Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards No., or FAS, 157, regarding fair value measurements and FASB Interpretation No., or FIN, 48, regarding accounting for uncertainty in income taxes;

·our sales and marketing plans;

·expected future contingent payment to Synpac; and

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·expected future payments related to our acquisitions, including milestone and royalty payments to Avigen, Inc., or Avigen, the former shareholders of Surgi.B Chirugie et Medicine SAS, or Surgi.B and Wyeth, milestone and contingent payments to Verigen AG, or Verigen, contingent payments to Equal Diagnostics, Inc., or Equal Diagnostics, and employee benefits and leased facilities acquired from Bone Care International, Inc., or Bone Care, and AnorMED Inc., or AnorMED, and the expected timing of these payments.

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 and services and to do so on the anticipated timeframes;

·the content and timing of submissions to and decisions made by the United States Food and Drug Administration, commonly referred to as the FDA, the European Agency for the Evaluation of Medicinal Products, or EMEA, and other regulatory agencies;

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

·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;

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

·our ability to obtain and maintain adequate patent and other proprietary rights protection for our products and services and successfully enforce our proprietary rights;

·the scope, validity and enforceability of patents and other proprietary rights held by third parties and their impact on our ability to commercialize our products and services;

·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 both outside and within the United States for our products and services;

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

·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;

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

·our ability to establish and maintain strategic license, collaboration and distribution arrangements and to manage our relationships with licensors, collaborators, distributors and partners;

·the continued funding and operation of our joint ventures by our partners;

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·our use of cash in business combinations or other strategic initiatives;

·the resolution of litigation related to the consolidation of our tracking stocks;

·the initiation of legal proceedings by or against us;

·the impact of changes in the exchange rate for the Euro and other currencies on our product and service revenues in future periods;

·our ability to successfully integrate the business we acquired from AnorMED;

·the number of diluted shares considered outstanding, which will depend on business combination activity, our stock price and any further changes in the accounting rules for the calculation of earnings per share;

·the estimates and input variables used in accounting for stock options and the related stock-based compensation expense;

·the outcome of our IRS and foreign tax audits; and

·the possible disruption of our operations due to terrorist activities, armed conflict, or outbreak of diseases such as severe acute respiratory syndrome (SARS) or avian influenza, including as a result of the disruption of operations of regulatory authorities, our subsidiaries, our manufacturing facilities and our customers, suppliers, distributors, couriers, collaborative partners, licensees and clinical trial sites.

We have included more detailed descriptions of these and other risks and uncertainties in Item 1A, “Risk Factors,” of this report. 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.

NOTE REGARDING INCORPORATION BY REFERENCE

The U.S. 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 or will file with them. The information that we refer you to is “incorporated by reference” into this Form 10-K. Please read that information.

NOTE REGARDING TRADEMARKS

Genzyme®, Cerezyme®, Ceredase® , Fabrazyme®, Thyrogen®, Myozyme®, Renagel®, Campath®,, Clolar®, Synvisc®, Carticel®, Seprafilm®, Sepramesh® , Hylaform®, MACI®, GlucaMesh®, GlucaTex®, Epicel® and Hectorol® are registered trademarks, and Lymphoglobuline™, Thymoglobulin™, Sepra™, Mozobil™ and Renvela™ 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.

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TABLE OF CONTENTS

		PAGE
PART I
ITEM 1.	BUSINESS	6
	Introduction	6
	Products and Services	6
	Competition	11
	Patents, License Agreements and Trademarks	14
	Government Regulation	16
	Employees	20
	Financial Information Regarding Segment Reporting	20
	Research and Development Costs	20
	Sales by Geographic Area, Significant Customers and Products	20
	Available Information	21
ITEM 1A.	RISK FACTORS	21
ITEM 1B.	UNRESOLVED STAFF COMMENTS	21
ITEM 2.	PROPERTIES	21
ITEM 3.	LEGAL PROCEEDINGS	23
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	24
	Executive Officers of the Registrant	24
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	27
	Issuer Purchases of Equity Securities	27
	Stock Performance Graph	28
ITEM 6.	SELECTED FINANCIAL DATA	28
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	28
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	28
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	29
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	29
ITEM 9A.	CONTROLS AND PROCEDURES	29
	Evaluation of Disclosure Controls and Procedures	29
	Management’s Report on Internal Control Over Financial Reporting	29
	Attestation Report of Independent Registered Public Accounting Firm	29
ITEM 9B.	OTHER INFORMATION	29
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	29
ITEM 11.	EXECUTIVE COMPENSATION	30
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	30
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	30
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	30
PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	31
	15(a)(1) Financial Statements	31
	15(a)(2) Financial Statement Schedules	32
	15(a)(3) Exhibits	32
	15(b) Exhibits	32

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PART I

ITEM 1.BUSINESS

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, and diagnostic and predictive testing. We are organized into five 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 (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 and Thyrogen;

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

·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; and

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

We report the activities of our diagnostic products, oncology, 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.”

Products and Services

Renal

Renagel (sevelamer hydrochloride).   Renagel is a non-absorbed, calcium-free, metal-free phosphate binder indicated for the control of serum phosphorus in patients with chronic kidney disease (CKD) on hemodialysis. Three formulations of the product have been approved for sale in the U.S.—the 403 mg. capsules were launched in the fourth quarter of 1998, and the 400 and 800 mg. tablets were launched in September 2000. We ceased marketing the 403 mg. capsules in 2004. Renagel was approved for sale in Israel in 1999, the European Union and Canada in 2000, Brazil in 2002, Japan in 2003, Argentina and Australia in 2005, and Chile and Peru in 2006. In the U.S., there are an estimated 371,000 end-stage renal disease patients, approximately 95% of whom receive a phosphate control product. There are also an estimated 324,000 end-stage renal disease patients in Europe, 65,000 in Brazil, 30,000 in Canada and 238,000 in Japan. We are now marketing the product in over 50 countries.

We market Renagel tablets in the U.S., the European Union and Brazil directly to nephrologists through a dedicated sales force. In the U.S., approximately 85%–90% of our Renagel sales are made to three large wholesalers. These wholesalers distribute Renagel to retail pharmacies, hospitals and other providers of medication to patients. Chugai Pharmaceutical Co., Ltd. and its partner, Kirin Brewery Co., Ltd., have rights to develop and market Renagel in Japan, China and other Pacific Rim countries. Our

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sales of Renagel (including sales of bulk sevelamer), totaled $515.1 million or 18% of our consolidated product revenues in 2006, $417.5 million, or 17% of our consolidated product revenues in 2005, and $363.7 million, or 18% of our consolidated product revenues in 2004.

We conducted the largest prospective dialysis outcomes study, a 2,100-patient post-marketing study of Renagel to evaluate the ability of the product to improve patient morbidity and mortality. The Dialysis Clinical Outcomes Revisited, or DCOR, trial compared Renagel to calcium-based phosphate binders with respect to overall morbidity and mortality. We presented the data from this trial at the American Society of Nephrology (ASN) meeting in November 2005. The study did not meet its primary end point of a statistically significant reduction in all cause mortality. However, in a pre-specified sub-group analysis, Renagel demonstrated a significant reduction in all cause mortality in patients 65 years of age or older. The DCOR study included morbidity data from the Centers for Medicare and Medicaid Services (CMS), which were presented at the 2006 ASN meeting. This data showed patients receiving Renagel experienced lower rates of hospitalization, fewer days in the hospital, and reduced overall health care expenditures compared to patients treated with calcium-based phosphate binders. In early 2007, Kidney International published findings from the Renagel in New Dialysis, or RIND, study that show a significantly lower rate of death among patients treated with Renagel from the time they began dialysis compared with those using calcium-based phosphate binders.

On December 21, 2006, we filed a New Drug Application (NDA) with the FDA seeking approval of sevelamer carbonate for the control of serum phosphorus in patients with CKD on dialysis. If approved, we expect sevelamer carbonate will be marketed under the trade name RenvelaTM. In addition, we are advancing a clinical program investigating the use of Renvela for hyperphosphatemic patients with CKD who have not progressed to dialysis. Enrollment is also complete in a study comparing a powder form of sevelamer carbonate dosed once a day to Renagel tablets dosed three times a day. We believe development of the powder form of the product would offer a more convenient option to patients, thereby improving compliance.

Hectorol (doxercalciferol).   We added Hectorol to our product portfolio in July 2005 through our acquisition of Bone Care. Hectorol is a line of vitamin D2 pro-hormone products that are indicated for the treatment of secondary hyperparathyroidism in patients with stages 3 and 4 CKD (0.5 mcg and 2.5 mcg capsules) and in patients with stage 5 CKD on dialysis (2.5 mcg capsules and injection). Hectorol provides significant parathyroid hormone (PTH) reductions with minimal impact on calcium and phosphorus levels. Three formulations of the product have been approved for commercial sale in the U.S.—the 2.5 mcg capsules were approved in 1999, the 0.5 mcg capsules were approved in 2004 and the intravenous formulation was approved in 2000. The 2.5 mcg formulation also is approved in Canada, where it is marketed and sold by Shire BioChem, a Canadian subsidiary of Shire plc, or Shire.

We market Hectorol in the U.S. through a direct sales force focused on nephrologists. Approximately 85%–90% of our U.S. Hectorol capsule sales are made to three large wholesalers, who then sell and distribute the product to retail pharmacies, hospitals and other providers of medication to patients. For Hectorol IV, approximately 85%–90% of our sales are made to three primary wholesalers who then sell and distribute the product to dialysis chains and hospitals. In the U.S., approximately 65% of end-stage renal disease patients receive Vitamin D. We estimate that there are more than 2.5 million patients in the U.S. with stage 3 and stage 4 CKD who have elevated PTH levels, although only a much smaller number of patients are being treated for the condition. In December 2006, Dr. Francesca Tentori et al published data in Kidney International distinguishing vitamin D analogs. These findings suggest that treatment with vitamin D analogs provides a significant advantage for dialysis patients and that the newer generation of D2 analogs, such as Hectorol, appear to have survival advantages over older analogs such as calcitriol.

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Therapeutics

Our Therapeutics segment currently has five therapeutic products on the market and several other therapeutic products in varying stages of development. The chart set forth below provides summary information on these five products, one of which we sell on behalf of a joint venture, as of February 28, 2007.

Product	Indication	Status
Cerezyme/Ceredase	Type 1 Gaucher disease; Type 3 Gaucher disease (Cerezyme/European Union only)	Ceredase sold commercially since 1991; Cerezyme marketed since 1994; marketing approval received and commercial sales in 55 countries
Fabrazyme	Fabry disease	Marketed in the European Union since 2001, the U.S. since 2003, and Japan since 2004; marketing approval received in 45 countries and commercial sales in 35 countries; several post-marketing commitments ongoing
Thyrogen	Adjunctive diagnostic agent in the follow-up of patients with well-differentiated thyroid cancer	Marketed in the U.S. since 1998, Brazil since 2000 and the European Union since 2001; marketing approval received and commercial sales in 44 countries
	Combination therapy in ablation of remnant thyroid tissue	Marketing approval received in the European Union and Australia in March 2005 and Brazil in December 2006
Myozyme	Pompe disease	Received marketing approval in the European Union in March 2006, in the U.S. in April 2006 and in Canada in August 2006; marketing approval received in 28 countries and commercial sales in 23 countries; several post-marketing commitments to be initiated in 2007; regulatory submissions filed and under review in Japan, Switzerland, Brazil, Argentina and Colombia with several more planned for submission in 2007
Aldurazyme	MPS I	Marketed in the U.S. and the European Union since 2003; marketing approval received in 50 countries and commercial sales in 36 countries; several post-marketing commitments on-going

Cerezyme, Fabrazyme, Myozyme and Aldurazyme are each aimed at treating LSDs with patient populations of less than 10,000 worldwide. Additional details on our Therapeutic products are set forth below.

Cerezyme (imiglucerase).   We are marketing Cerezyme as an enzyme replacement therapy for the treatment of Gaucher disease, an LSD that is caused by a deficiency in the enzyme glucocerebrosidase, which causes fatty deposits to build up in certain organs and bones leading to a wide variety of symptoms, including anemia, spleen and liver enlargement and bone deterioration. Treatment with Cerezyme enzyme replacement therapy currently represents the only safe and effective enzyme replacement therapy approved for treatment of Type 1 Gaucher disease. In the European Union, Cerezyme is also approved for the

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treatment of patients who exhibit clinically significant, non-neurological manifestations of the disease (Type 3 Gaucher disease).

We market Cerezyme directly to physicians, hospitals and treatment centers worldwide through a highly specialized sales force. Our results of operations are highly dependent on sales of this product, although our dependence is lessening as we diversify our product portfolio. Sales of Cerezyme totaled $1.0 billion, or 35% of our consolidated product revenues in 2006, $932.3 million, or 38% of our consolidated product revenues in 2005, and $839.4 million, or 42% of our consolidated product revenues in 2004.

Fabrazyme (agalsidase beta).   We have developed Fabrazyme, a recombinant form of the human enzyme alpha-galactosidase, as a treatment for Fabry disease. Fabry disease is an LSD that is caused by a deficiency of the enzyme alpha-galactosidase A, which leads to the progressive accumulation of lipids within cells of the kidneys, heart and other organs. In agreement with the FDA, we undertook a number of post-marketing commitments, and have completed a phase 4, multi-national, multi-center, double-blind placebo-controlled study. In January 2007, the results of this trial were published in the Annals of Internal Medicine. In mid-2005, the EMEA approved new labeling for Fabrazyme based largely on the results from the phase 4 study. Because kidney failure is associated with Fabry disease, Fabrazyme is sold by our existing LSD and Renal sales forces.

Thyrogen (thyrotropin alfa).   Thyrogen is an adjunctive diagnostic agent used in the follow-up of patients with well-differentiated thyroid cancer. We developed this product to allow patients to continue taking their thyroid hormone supplements while they are being screened for residual or recurring thyroid cancer. This helps patients avoid the debilitating effects of hypothyroidism, increasing the likelihood that they will seek follow-up treatment, and ultimately improve the likelihood of early detection of any recurrent disease, which can improve the success rate of subsequent treatment. In the U.S. and the European Union, physicians order over 200,000 thyroid cancer screening tests per year. Thyrogen is promoted by a dedicated sales force, and sold to hospitals and doctors’ offices through distributors in the U.S., Brazil and the European Union.

We currently are pursuing additional indications for Thyrogen. In March 2005, we received European Union approval for use of Thyrogen in combination with radioiodine in ablation of thyroid tissue. We received an approvable letter for this indication from the FDA in August 2005 and completed a clinical study to fulfill one of the requirements in the approvable letter in the fourth quarter 2006. We expect to file the amended supplemental New Drug Application (NDA) in 2007 and anticipate approval in the U.S., Brazil and Canada in 2008. Approximately 35,000 ablation procedures are performed annually in the U.S. and European Union combined, and we believe that Thyrogen has the potential to be used in up to 80% of these procedures. We also plan to begin a phase 2 trial in 2007 of TSH, the active ingredient in Thyrogen, for use in patients with nontoxic multinodular goiter.

Myozyme (alglucosidase alfa).   We are marketing Myozyme as a therapy for Pompe disease, a progressive and often fatal muscle disease resulting from an inherited enzyme deficiency. Pompe disease manifests as a broad spectrum of clinical symptoms, with variable rates of progression ranging from rapidly progressive and often fatal within the first year of life from severe cardiac and skeletal muscle involvement to relentlessly progressive resulting in significant morbidity and premature mortality from skeletal and respiratory muscle involvement. Myozyme is the first and only treatment approved for Pompe disease and is indicated for all patients with the disorder. We are currently conducting a clinical trial of late onset patients and expect to have results in late 2007.

Aldurazyme (laronidase).   We formed a joint venture with BioMarin Pharmaceutical Inc., or BioMarin, and BioMarin Genetics, Inc. to develop and market Aldurazyme, a recombinant form of the human enzyme alpha-L-iduronidase, to treat an LSD known as mucopolysaccharidosis I, or MPS I. MPS I is a progressive, debilitating, and often life-threatening disease, which encompasses a wide and continuous

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spectrum of clinical presentations, historically classified as “Hurler,” “Hurler-Scheie” and “Scheie” syndromes. We market Aldurazyme directly to physicians in the U.S. through our LSD sales force. In Europe, Latin America and Asia, sales of Aldurazyme are undertaken by the local sales and marketing teams and are being realized on a country-by-country basis as pricing and reimbursement approvals are obtained. The joint venture’s applications for marketing approval are currently pending in several countries in Latin America, Central and Eastern Europe, and the Asia-Pacific rim. We also completed a post-marketing clinical study investigating alternative dosing regimens in 2006. Aldurazyme revenues are recorded by the joint venture. We include our portion of the net income (loss) of BioMarin/Genzyme LLC in equity in income (loss) of equity method investments in our consolidated statements of operations.

Transplant

This business segment includes three marketed products, as well as product candidates in the research and development stages that we acquired through our acquisition of SangStat Medical Corporation, or SangStat, in the third quarter of 2003 and our acquisition of AnorMED in the fourth quarter of 2006. Set forth below is a discussion of the two marketed products that are the primary revenue drivers for the Transplant segment.

Thymoglobulin (anti-thymocyte globulin, rabbit).   Thymoglobulin is an immunosuppressive polyclonal antibody that suppresses certain types of immune cells responsible for acute organ rejection in transplant patients. Thymoglobulin was approved in the U.S. in December 1998 and we market Thymoglobulin in the U.S. for the treatment of acute rejection of renal transplants. In Canada, we have marketed Thymoglobulin since 2003 for both the prevention and treatment of acute rejection of renal transplants. More kidney transplants are performed in the U.S. than any other organ transplant, with over 17,000 transplants performed in 2006. Of this number of renal transplants, the United Network for Organ Sharing estimates that acute immunosuppressant therapies such as Thymoglobulin were used in greater than 70% of such procedures.

In the European Union, Thymoglobulin has a broader approved label which allows us to market it for a wider variety of approved uses including the prevention and treatment of rejection in solid organ transplants, the prevention and treatment of graft versus host disease, and the treatment of aplastic anemia, a disease that affects the production of mature, functional blood cells. Thymoglobulin also has a similarly broad label in several Asian and Latin American countries. We have filed for marketing approval of Thymoglobulin in Japan and the UK. We sell Thymoglobulin in 47 countries through a direct sales force or through distributors to transplant centers for use by transplant surgeons, nephrologists, hematologists and oncologists.

We completed enrollment in a phase 2 trial of Thymoglobulin in liver transplantation to prevent rejection and delay of the introduction of calcineurin inhibitors in patients with renal dysfunction prior to liver transplant. We plan to conduct phase 2 clinical trials beginning in 2007 in North America and Europe for the treatment of immune mediated bone marrow failure associated with myelodysplastic syndromes.

Lymphoglobuline (anti-thymocyte-globuline, equine).   We market Lymphoglobuline, another immunosuppressive polyclonal antibody, in Latin America, the European Union, and certain Asia Pacific countries for the treatment of aplastic anemia and for the prevention and treatment of graft rejection. This product is sold through our sales force in Europe and through distributors elsewhere.

Biosurgery

Synvisc (hylan G-F 20).   Synvisc is a biomaterial derived from hyaluronan used to treat the pain associated with osteoarthritis of the knee. An estimated 8 to 9 million of the approximately 14 million people in the U.S. with osteoarthritis of the knee may be candidates for treatment with Synvisc. Synvisc is sold commercially in over 60 countries, both directly and through marketing and distribution arrangements.

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We are investing in research and clinical trials to expand the use of Synvisc to additional joints and through next-generation approaches. In the European Union and Canada, Synvisc is approved for the treatment of pain associated with osteoarthritis of the hip, and in the European Union, we launched Synvisc for the treatment of pain associated with osteoarthritis of the ankle and shoulder in December 2006.

In December 2006 we completed a pivotal trial evaluating a single-injection regimen of Synvisc. We anticipate filing for approval of single-injection Synvisc in the European Union and in the U.S. in the first half of 2007, and we expect to launch this product in the European Union by the end of 2007 and in the United States in the first half of 2008.

Sepra Products.   The Sepra family of products is aimed primarily at preventing adhesions (internal scar tissue) following various surgical procedures in areas of the body such as the abdomen and pelvis. These products are produced from biomaterials derived from hyaluronan. We market the Sepra products primarily through a direct sales force in the U.S., France and Australia, and primarily through distribution arrangements in Japan and the rest of the world.

Seprafilm, the first marketed product and largest by sales volume of the Sepra family, is the only FDA-approved product clinically proven to reduce the incidence, extent and severity of postsurgical adhesions in both the abdomen and pelvis. There are approximately 2 million applicable abdominal and pelvic procedures performed annually in the U.S., including 1.1 million Caesarean sections, a largely untapped market. During 2005, we launched Sepramesh IP, a second generation product for hernia repair to replace Sepramesh, which has been on the market since 2000.

Genetics

We develop and provide high quality, sophisticated and complex reproductive testing services primarily in the U.S. and Japan. In the U.S., we also offer diagnostic services for oncology and genetic counseling services focused on pre-natal and post-natal care, reproductive and fertility medicine. We offer several types of testing—the most significant are cytogenetic testing, molecular genetic (DNA) testing, immunohistochemistry testing, flow cytometry testing and biochemical testing. These services are promoted through a direct sales force in the U.S., with testing performed in our nine clinical laboratories located throughout the U.S. We service the Japanese market through a direct sales force and distributors, with testing primarily performed in our clinical laboratory in Santa Fe, New Mexico.

Competition

We are engaged in segments of the human healthcare products and services industry that are extremely competitive. Our competitors in the U.S. and elsewhere include major pharmaceutical, biotechnology, diagnostic testing and medical device companies. Some of these competitors may have more extensive research and development, regulatory, manufacturing, production, and sales and marketing capabilities. Some competitors may have greater financial resources. These companies may succeed in developing products and services that are more effective than any that we have or may develop and may also prove to be more successful than we are in manufacturing, marketing and selling products and services. In addition, technological advances or different approaches developed by one or more of our competitors may render our products and services obsolete, less effective or uneconomical. Each of our products and services faces different competitive challenges, and we describe many of them below.

Renal

Renagel.   Renagel is a phosphate binder for the treatment of hyperphosphatemia and is the most prescribed phosphate binder in the U.S. Phosphate binders, such as Renagel, are currently the only available treatment for hyperphosphatemia, or elevated serum phosphorus levels in CKD patients on dialysis. There are several phosphate binders options available, including PhosLo®, a prescription calcium

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acetate preparation sold by Fresenius Medical Care, and Fosrenol® (lanthanum carbonate), a prescription lanthanum carbonate sold by Shire. Other products used as phosphate binders include over-the-counter calcium-based antacids such as TUMS®  and metal-based options such as aluminum and magnesium. The doses necessary for calcium products to achieve adequate reductions in phosphate absorption can lead to harmful side effects such as hypercalcemia. Evidence suggests that increasing doses of calcium-based binders may lead to cardiac calcification. Aluminum hydroxide, a metal-based treatment option, is more effective at lowering phosphorus, but it is infrequently used because aluminum absorbed from the intestinal tract accumulates in the tissues of patients with chronic kidney failure, causing aluminum-related osteomalacia, anemia and dementia. Another metal-based option, Shire’s Fosrenol, marketed in the U.S. and some European countries, is an effective phosphate binder but with limited long-term safety data. Several animal studies suggest lanthanum absorption may lead to harmful toxicities.

Hectorol.   Dialysis providers typically select which therapy a CKD patient receives to treat secondary hyperparathyroidism based on safety, efficacy and cost. Abbott Laboratories, Inc., or Abbott, markets intravenous calcitriol (brand name Calcijex®) and intravenous paricalcitol (brand name Zemplar® ) for end-stage renal disease patients. Current intravenous versions of these drugs are approved to manage secondary hyperparathyroidism in end-stage renal disease patients in the U.S. and in European countries. A number of companies have launched or are planning to launch generic intravenous calcitriol in the U.S. In 2005, Abbott received approval to market oral paricalcitol (Zemplar) in the U.S. for patients with stages 3 and 4 CKD. Since 2004, Amgen, Inc. has been marketing in the U.S. an oral calcimimetic agent for the treatment of secondary hyperparathyroidism in patients with CKD on dialysis. The majority of patients studied on this calcimimetic agent were also taking vitamin D hormone to treat secondary hyperparathyroidism. Roche Pharmaceuticals, a division of F. Hoffman-LaRoche Ltd. (Roche), markets oral calcitriol (brand name Rocaltrol®) and Teva Pharmaceuticals Industries Ltd., or Teva, markets generic oral calcitriol in the U.S. to manage secondary hyperparathyroidism in CKD patients. These two products are approved in the U.S. for the treatment of elevated parathyroid hormone in both end-stage renal disease and pre-dialysis CKD.

Therapeutics

Cerezyme.   Zavesca® is currently the only other marketed product aimed at treating Gaucher disease, however, we are aware of other on-going development efforts directed towards the treatment of the disease. Zavesca is a small molecule oral therapy developed by CellTech Group plc, which was acquired by UCB S.A. in 2004, and marketed by Teva in Israel and Actelion Ltd. in the U.S. and the European Union. Zavesca has been approved for use in patients with mild to moderate Type 1 Gaucher disease for whom enzyme replacement therapy is unsuitable. To date, virtually all Gaucher disease patients who have received enzyme therapy have experienced strong clinical benefits with few side effects, so we do not expect the competition from Zavesca to have a significant impact on our sales of Cerezyme. Shire has conducted a phase 1/2 clinical trial for its gene-activated human glucocerebrosidase (GA-GCB) product. Shire reported top-line data from this study and announced the initiation of a phase 3 study in the first quarter of 2007. In addition, Protalix Biotherapeutics Ltd. reported that a phase 1 trial with their plant-derived human glucocerebrosidase (prGCB) therapy (expressed and purified in a bioreactor system from transformed carrot cells) indicated its short term safety in healthy normal volunteers. A phase 3 trial is expected to begin in 2007. Amicus Therapeutics, Inc. also has announced plans to begin a phase 1 trial using an experimental pharmacological chaperone (AT-2101) in the first half of 2007. Other competitors could develop competitive products based on protein replacement therapy, small molecule or gene therapy approaches. Orphan drug status for Cerezyme, which provided us with exclusive marketing rights for Cerezyme in the U.S. for seven years, expired in 2001. However, we continue to have patents protecting our method of manufacturing Cerezyme until 2010 and the composition of Cerezyme as made by that process until 2013.

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Fabrazyme.   Fabrazyme has marketing exclusivity in the U.S. until 2010 due to its orphan drug status. Replagal®, Shire’s enzyme replacement therapy for Fabry disease, competes with Fabrazyme in the European Union, Australia, Canada, Iceland, Israel, New Zealand, Norway, Romania, Switzerland, Brazil and Taiwan. Transkaryotic Therapies, Inc., prior to its acquisition by Shire, publicly announced that it had abandoned its efforts to obtain marketing approval in the U.S. In addition, Amicus Therapeutics is conducting two phase 2 studies of a small molecule treatment for Fabry disease, one in males and another in females.

Thyrogen.   Thyrogen has no competitive product in the market. The medical alternative to Thyrogen is to withdraw the patient from thyroid hormone replacement therapy, which makes the patient hypothyroid and may cause many of the co-morbidities associated with hypothyroidism.

Myozyme.   Myozyme has marketing exclusivity in the U.S. until 2013 and in the European Union until 2016 due to its orphan drug status. Amicus Therapeutics is conducting a phase 1 study of a small molecule treatment for Pompe disease.

Aldurazyme.   Aldurazyme has marketing exclusivity in the U.S. until 2010 and in the European Union until 2013 due to its orphan drug status.

Transplant

Thymoglobulin and Lymphoglobuline.   Several companies market products used for the prevention and treatment of acute rejection in renal transplant. These products include Novartis AG’s Simulect®, Pfizer Inc.’s ATGAM® , Ortho Biotech’s Orthoclone OKT®3, Fresenius Biotech GmbH’s ATG-Fresenius S® and the Roche Group’s Zenapax®. Competition in the acute transplant rejection market is largely driven by product efficacy due to the potential for decreased long term survival of transplanted organs as the result of an acute organ rejection episode.

Biosurgery

Synvisc.   Current competition for Synvisc includes Supartz®, a product manufactured by Seikagaku Kogyo that is sold in the U.S. by Smith & Nephew Orthopaedics and in Japan by Kaken Pharmaceutical Co. under the name Artz®; Hyalgan®, produced by Fidia S.p.A. and marketed in the U.S. by Sanofi-Aventis; Orthovisc®, produced by Anika Therapeutics, Inc., marketed in the U.S. by Johnson & Johnson and marketed outside the U.S. through distributors; Euflexxa™, a product manufactured and sold by Ferring Pharmaceuticals in the U.S. and Europe; and Durolane®, manufactured by Q-Med AB and marketed outside the U.S. by Smith & Nephew Orthopedics. Durolane and Euflexxa, the most recently approved products in Europe and the U.S., respectively, are produced by bacterial fermentation, as opposed to Synvisc, which is avian-sourced. In addition, the treatment protocol for Durolane is a single-injection, as compared to Synvisc’s current three injection regimen (although it offers a shorter duration of pain relief). Production via bacterial fermentation and treatment with a reduced number of injections may represent competitive advantages for these products. 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. We are also unaware of any products that achieve our duration of efficacy with only three injections.

Sepra Products.   The Sepra products face competition from other adhesion prevention technologies. Another competitive factor affecting the adoption of Sepra products is the extent to which surgeons continue to treat patient conditions using procedures for which the Sepra products are indicated. For example, Seprafilm adhesion barrier is not indicated for use in laparoscopic procedures so adoption by surgeons of new laparoscopic procedures could have the effect of limiting Seprafilm adhesion barrier adoption.

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Seprafilm does not have significant direct competition in the area of abdominal surgery in the U.S., but does compete with other products in other indications. Innovata plc has received FDA approval of Adept®, a liquid solution for adhesion reduction, in the U.S. for gynecologic laparoscopic adhesiolysis indications and has begun marketing the product through a global distribution agreement with Baxter. The labeled indications for Seprafilm and Adept are mutually exclusive, though off-label use of each may result in limited competition. Gynecare Worldwide, a division of Ethicon, Inc., a Johnson & Johnson company, markets Interceed®, a sheet adhesion barrier similar in intended use to Seprafilm, but is indicated only for selected open gynecological indications. In Japan, Seprafilm competes only with Interceed. Outside the U.S. and Japan, Seprafilm competes with several adhesion prevention products. Innovata’s Adept solution is approved in the European Union for abdominal and gynecological surgeries. FzioMed, Inc. has received CE Mark approval in the European Union for Oxiplex®/AP Gel, an adhesion barrier for abdominal/pelvic surgery and is conducting a pivotal clinical trial in the U.S. Fziomed has announced a global distribution agreement with Ethicon for distribution of Oxiplex/AP Gel. Confluent Surgical, Inc.’s Spraygel™, an adhesion barrier used in abdominopelvic procedures, is approved for sale in Europe. MAST Biosurgery AG’s bioresorbable film product, SurgiWrap™, is also CE marked with an indication for abdominal and pelvic adhesion prevention, but holds an FDA clearance as a surgical mesh in the U.S. Life Medical Sciences, Inc. is developing several adhesion prevention products, including REPEL™ for gynecologic surgery and REPEL-CV™ for cardiovascular surgery.  In addition, FzioMed’s Oxiplex®/SP Gel, an adhesion barrier for spine surgery, is approved for sale in the European Union and in other countries outside the U.S.

Genetics

The U.S. market for genetic and complex testing is highly competitive and is divided among many laboratories, the largest of which are Quest Diagnostics and Laboratory Corporation of America Holdings (LabCorp). In addition, many hospitals provide some or all of these services through in-house laboratories. Competitive factors in the genetic and complex testing and diagnostic services business generally include reputation of the laboratory, range of services offered, pricing, managed care contracts, convenience of sample collection and pick-up, quality of analysis and reporting, timeliness of delivery of completed reports and levels of automation and information technology solutions.

Patents, License Agreements and Trademarks

In general, we pursue a policy of obtaining patent protection both in the U.S. and in selected countries outside the U.S. for subject matter we consider patentable and important to our business. Patents owned by us that we consider material include the following:

Renal

Renagel is protected by U.S. Patent Nos. 5,667,775 which expires on September 16, 2014; 5,496,545, 6,509,013 and 7,014,846 which expire August 11, 2013; 6,733,780, which expires on October 18, 2020; and corresponding international counterparts. Hectorol is protected by U.S. Patent Nos. 6,903,083 which expires on July 18, 2021; 5,602,116 which expires on February 11, 2014; 5,707,980 which expires on August 17, 2010; 5,869,473 which expires on August 2, 2008; 5,869,472 which expires on July 18, 2014, and corresponding international counterparts.

Therapeutics

Cerezyme is protected by U.S. Patent Nos. 5,236,838 which expires August 17, 2010; 5,549,892 which expires August 27, 2013; 6,451,600 which expires September 17, 2019; and corresponding international counterparts. Myozyme is protected by U.S. Patent No. 6,118,045 which expires July 31, 2016; and corresponding international counterparts. Thyrogen is protected by U.S. Patent Nos. 5,240,832 and 5,674,711 which expire on August 31, 2010; 5,602,006 which expires on August 19, 2014; and corresponding international counterparts.

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Biosurgery

Synvisc is protected by U.S. Patent Nos. 5,143,724 which expires August 8, 2011; 5,399,351 which expires March 21, 2012; and corresponding international counterparts. Seprafilm is protected by U.S. Patent Nos. 5,017,229 which expires May 21, 2008; 5,527,893 which expires June 18, 2013; 6,235,726 which expires September 18, 2007; and corresponding international counterparts.

Genetics

Genetic testing services, e.g. for Cystic Fibrosis, are protected by U.S. Patent Nos. 5,585,330 and 5,834,181 which expire July 28, 2014; 5,849,483 which expires December 15, 2015; 5,882,856 which expires March 16, 2016; 6,207,372 which expires June 6, 2016; and corresponding international counterparts.

In addition, a portion of our proprietary position is based upon patents that we have licensed from others either through collaboration or traditional license agreements, including patents relating to:

·Fabrazyme;

·Thyrogen;

·Aldurazyme;

·Myozyme; and

·genetic testing.

These collaboration and license agreements generally require us to share profits with our collaborative partners or pay royalties to our licensors upon commercialization of products covered by the licensed technology.

Generally, patents issued in the U.S. are effective for:

·the longer of 17 years from the date of issue or 20 years from the earliest effective filing date of the corresponding patent application if filed prior to June 8, 1995; and

·20 years from the earliest filing date for patent applications filed on or after June 8, 1995.

In some cases, the patent term can be extended to recapture a portion of the term lost during FDA regulatory review. The duration of foreign patents varies in accordance with local law.

We also rely on trade secrets, proprietary know-how and continuing technological innovation to develop and maintain a competitive position in our product areas. We require our employees, consultants and corporate partners who have access to our proprietary information to sign confidentiality agreements.

Our patent position and proprietary technology are subject to certain risks and uncertainties. We have included information about these risks and uncertainties in Item 1A., “Risk Factors,” of this report. We encourage you to read that discussion, which we are incorporating into this section by reference.

Our products and services are sold around the world under brand-name trademarks and service-marks. Trademark protection continues in some countries as long as the mark is used; in other countries, as long as it’s registered. Registrations generally are for fixed, but renewable, terms. We consider our registered trademarks Genzyme®, Cerezyme®, Ceredase®, Fabrazyme®, Thyrogen®, Myozyme®, Renagel®, Campath®, MabCampath®, Clolar®, Synvisc®, Carticel®, MACI®, GlucaMesh®, GlucaTex®, Seprafilm®, Sepragel®, Seprapack®, Sepramesh®, Hylaform®, Hylashield®, Hylasome®, Captique®, Epicel®, OSOM®, N-geneous®, GlyPro®, InSight®, AFP3®, AFP4®, and Hectorol®, together with our trademarks, VERIGEN™, Thymoglobulin™, Lymphoglobuline™,  Mozobil™, Cholestagel™, Renvela™,

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CF87™, Sepra™, Hylashield Nite™, SAGE™, LongSAGE™ and SPHERE™, and BioMarin/Genzyme LLC’s registered trademark, Aldurazyme®,  in the aggregate, to be of material importance to our business.

Government Regulation

Regulation by governmental authorities in the U.S. and other countries is a significant factor in the development, manufacture, commercialization, pricing and reimbursement of our products and services.

FDA Regulation

Most of our products and services require approval from the FDA and corresponding agencies in other countries before they can be marketed. In the U.S., we market products that the FDA classifies as either “drugs,” “biologics” or “devices.” The activities required before drugs or biologics may be marketed in the U.S. include:

·preclinical laboratory tests, in vitro and in vivo preclinical studies and formulation and stability studies;

·the submission to the FDA of an application for human clinical testing, which is known as an Investigational New Drug (IND) application;

·adequate and well controlled human clinical trials to demonstrate the safety and effectiveness of the drug or biologic;

·the submission of an NDA for a drug or a Biologics License Application (BLA) for a biologic; and

·the approval by the FDA of the NDA or BLA.

As part of product approval, the manufacturer of the product must undergo a pre-approval Good Manufacturing Practices inspection (for a drug or biologic) from the FDA. Since any approval granted by the FDA is both site and process specific, any material change by a company in the manufacturing process, equipment or location may necessitate additional FDA review and approval.

In addition, the FDA may grant accelerated approval for drugs and biologics on the basis of a surrogate endpoint reasonably likely to predict clinical benefit. In such cases, we are required to conduct post-approval clinical studies to confirm the clinical benefit of the surrogate endpoint that was the basis of the accelerated approval. These clinical studies require the collection of additional data before full approval will be given and can often be long-term commitments. Although the FDA has not historically invoked its authority to withdraw an accelerated approval, it may do so. We currently have a number of products approved under the accelerated approval mechanism.

Products that are classified as devices also require some form of FDA approval prior to marketing. Devices are classified as Class I, II or III, depending upon the information available to assure their safety and effectiveness. In general, Class I and Class II devices are devices whose safety and effectiveness can reasonably be assured through general or specific controls, respectively. Class III devices are life sustaining, life supporting, are of substantial importance in preventing impairment to health or pose an unreasonable risk of adverse effect. They are implantable devices or new devices which have been found not to be substantially equivalent to legally marketed devices. The steps required for approval of a Class III device include:

·preclinical laboratory tests and in vitro and in vivo preclinical studies;

·the submission to the FDA and approval of an Investigational Device Exemption (IDE) application to allow initiation of clinical testing;

·human clinical studies to prove safety and effectiveness of the device;

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·the submission of a Pre-Marketing Approval application (PMA); and

·the approval by the FDA of the PMA.

Typically, clinical testing of devices involves initial testing to evaluate safety and feasibility and expanded trials to collect sufficient data to prove safety and effectiveness. In addition, the procedures and the facilities used to manufacture the device are subject to review and approval by the FDA.

A device (other than a Class III device) that is proven to be substantially equivalent to a device marketed prior to May 28, 1976, when government regulations for devices were first introduced, can be marketed after clearance of a 510(k) application rather than the filing of an IDE application and a PMA. The 510(k) application must contain a description of the device, its methods of manufacture and quality control procedures and the results of testing to demonstrate that the device is substantially equivalent to the device already marketed.

The time and expense required to perform the clinical testing necessary to obtain FDA approval for regulated products can frequently exceed the time and expense of the research and development initially required to create the product. Even after initial FDA approval has been obtained, we could be required to conduct further studies to provide additional data on safety or efficacy or, should we desire, to gain approval for the use of a product as a treatment for additional clinical indications. In addition, use of these products during testing and after marketing approval has been obtained could reveal side effects which, if serious, could limit uses, or in the most serious cases, result in a market withdrawal of the product or expose us to product liability claims.

Regulation Outside of the U.S.

For marketing outside the U.S., we are subject to foreign regulatory requirements governing human clinical testing and marketing approval for our products. These requirements vary by jurisdiction, differ from those in the U.S. and may require us to perform additional pre-clinical or clinical testing regardless of whether FDA approval has been obtained. The amount of time required to obtain necessary approvals may be longer or shorter than that required for FDA approval. In many countries outside of the U.S., coverage, pricing and reimbursement approvals are also required.

Our initial focus for obtaining marketing approval outside the U.S. is typically the European Union. European Union regulations and directives generally classify health care products either as medicinal products, medical devices or in vitro diagnostics. For medicinal products, marketing approval may be sought using either the centralized procedure of the EMEA or the decentralized, mutual recognition process. The centralized procedure, which is mandatory for biotechnology derived products, results in a recommendation in all member states, while the European Union mutual recognition process involves country-by-country approval.

European Union regulations for products classified as medical devices have been implemented. Devices, such as our Sepra products, must receive market approval through a centralized procedure in which the device receives a CE Mark allowing distribution to all member states of the European Union. The CE Mark certification requires us to receive International Standards Organization certification for each facility involved in the manufacture or distribution of the device. This certification comes only after the development of an all inclusive quality system, which is reviewed for compliance to International Quality Standards by a licensed “Notified Body” working within the European Union. After certification is received, a product dossier is reviewed that attests to the product’s compliance with European Union directive 93/42 EEC for medical devices. Only after this point is a CE Mark granted.

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Other Government Regulation

Good Manufacturing Practices.   All facilities and manufacturing techniques used for the manufacture of Genzyme’s products must comply with applicable FDA regulations governing the production of pharmaceutical products known as “Good Manufacturing Practices.”

Orphan Drug Act.   The Orphan Drug Act provides incentives to manufacturers to develop and market drugs for rare diseases and conditions affecting fewer than 200,000 persons in the U.S. at the time of application for orphan drug designation. The first developer to receive FDA marketing approval for an orphan drug is entitled to a seven year exclusive marketing period in the U.S. for that product. However, a drug that the FDA considers to be clinically superior to, or different from, another approved orphan drug, even though for the same indication, may also obtain approval in the U.S. during the seven year exclusive marketing period. We believe that the commercial success of our orphan drug products depends more significantly on the associated safety and efficacy profile and on the price relative to competitive or alternative treatments and other marketing characteristics of each product than on the exclusivity afforded by the Orphan Drug Act. Additionally, these products may be protected by patents and other means.

Legislation similar to the Orphan Drug Act has been enacted in other countries outside of the U.S., including the European Union. The orphan legislation in the European Union is available for therapies addressing conditions that affect five or fewer out of 10,000 persons. The market exclusivity period is for ten years, although that period can be reduced to six years if, at the end of the fifth year, available evidence establishes that the product is sufficiently profitable not to justify maintenance of market exclusivity.

Regulation of Diagnostic Testing Services.   The Clinical Laboratories Improvement Act of 1967, as amended in 1988 (CLIA) provides for the regulation of clinical laboratories by the U.S. Department of Health and Human Services (HHS). All of our clinical laboratories are CLIA approved, licensed by the College of American Pathologists and certified by the appropriate state agencies. CLIA regulates virtually all clinical laboratories by requiring they be certified by the federal government and comply with various operational, personnel and quality requirements intended to ensure that their clinical laboratory testing services are accurate, reliable and timely. CLIA does not preempt state laws that are more stringent than federal law. For example, state laws may require additional personnel qualifications, quality control, record maintenance and/or proficiency testing.

In the past, the FDA has claimed regulatory authority over laboratory-developed tests, but has exercised enforcement discretion in not regulating most laboratory-developed tests performed by high complexity CLIA-certified laboratories. In December 2000, the HHS’s Secretary’s Advisory Committee on Genetic Testing recommended that the FDA be the lead federal agency to regulate genetic testing. In late 2002, a new HHS Secretary’s Advisory Committee on Genetics, Health and Society was appointed to replace the prior Advisory Committee, but it has not yet made any final recommendations. In the meantime, the FDA is considering revising its regulations on analyte specific reagents, which are used in laboratory-developed tests, including laboratory-developed genetic testing, and establishing new regulatory guidelines for certain laboratory-developed tests. The latter potentially could bring under the scope of FDA regulation some tests that currently can be used without FDA approval. Increased FDA regulation of the reagents used in laboratory-developed testing could lead to increased costs and delays in introducing new tests, including genetic tests. In addition, the Medicare and Medicaid programs provide a substantial portion of reimbursement for our diagnostic products. Whether these programs pay for any particular test, and the amounts that they pay, may be unilaterally changed at any time.

Regulation of Diagnostic Products.   The FDA has regulatory responsibility over instruments, test kits, reagents and other devices used to perform diagnostic testing by clinical laboratories. Like other medical devices, in vitro diagnostic (IVD) products are divided into three classes according to the level of regulatory control needed to assure safety and effectiveness. Genzyme’s current IVD products are either Class I or Class II, and are either exempt from pre-market notification or require a 510(k) submission.

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Regulation of Gene Therapy Products.   In addition to FDA requirements, the National Institutes of Health have established guidelines providing that transfers of recombinant DNA into human subjects at NIH laboratories or with NIH funds must be approved by the NIH Director. The NIH has established the Recombinant DNA Advisory Committee to review gene therapy protocols. We expect that many of our gene therapy protocols will be subject to review by the Recombinant DNA Advisory Committee. In the United Kingdom, our gene therapy protocols will be subject to review by the Gene Therapy Advisory Committee and in Germany, these protocols will be subject to review by the Commission for Somatic Cell Therapy. Greater government regulation of gene therapy products may lead to regulatory delays, increased development costs, and negative public perception of the gene therapy products we are developing.

Other Laws and Regulations.   Our operations are or may be subject to various federal, state and local laws, regulations and recommendations relating to the marketing of products and relationships with treating physicians, data protection, safe working conditions, laboratory and manufacturing practices, the export of products to certain countries, and the purchase, storage, movement, use and disposal of hazardous or potentially hazardous substances used in connection with our research work and manufacturing operations, including radioactive compounds and infectious disease agents. Although we believe that our safety procedures comply with the standards prescribed by federal, state and local regulations, the risk of contamination, injury or other accidental harm cannot be eliminated completely. In the event of an accident, we could be held liable for any damages that result and any liabilities could exceed our resources.

Sales, Marketing and Product Pricing

We are subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback and false claims statutes. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription of a particular drug. The federal government has published regulations that identify “safe harbors” or exemptions for certain payment arrangements that do not violate the anti-kickback statutes. Genzyme seeks to comply with the safe harbors where possible. Due to the breadth of the statutory provisions, and the lack of guidance in the form of regulations or court decisions addressing some industry activities, it is possible that our practices might be challenged under anti-kickback or related laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment to third-party payors, including Medicare and Medicaid, claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Promotion of drugs for uses outside their labeled indications, so called “off-label” promotion, recently has led to several financially significant settlement agreements under the False Claims Act.

Our activities relating to the sale and marketing of, and price reporting for, our products are subject to scrutiny under these fraud and abuse laws. Violations of these laws may result in criminal and/or civil sanctions, including fines and civil monetary penalties, as well as possible exclusion from federal health care programs, including Medicare and Medicaid. Federal and state authorities are paying increased attention to the pharmaceutical and biotechnology industries in enforcement of these laws, and we have been named in several legal proceedings alleging violations.

We participate in the Medicaid rebate program. Participation in this program has included extending comparable discounts under the Public Health Service (PHS) pharmaceutical pricing program. Under the Medicaid rebate program, we pay a rebate for each unit of drug product that is reimbursed by Medicaid. The amount of the rebate for each product is set by law as a minimum 15.1% of the average manufacturer price (AMP) of that product, or if it is greater, the difference between AMP and the best price available from Genzyme to any customer. The rebate amount also includes an inflation adjustment if AMP increases greater than inflation. The PHS pricing program extends discounts comparable to the Medicaid rebate to a variety of community health clinics and other entities that receive health services grants from the PHS, as

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well as hospitals that serve a disproportionate share of poor Medicare and Medicaid beneficiaries. The rebate amount is recomputed each quarter based on our reports of our current AMP and best price for each of our products. The terms of our participation in the Medicaid program impose an obligation to correct the prices reported in previous quarters, if necessary. Any such corrections could result in an overage or underage in our rebate liability for past quarters, depending on the nature of the correction. In addition to retroactive rebates (and interest, if any), if we were found to have knowingly submitted false information to the government, in addition to other penalties available to the government, the statute provides for civil monetary penalties for each claim containing false information. In addition, the minimum discount of 15.1% could be increased in the future, thereby increasing our discounts to the Medicaid program and to other entities that receive discounts comparable to the Medicaid rebate.

Part D of the Medicaid Prescription Drug, Improvement and Modernization Act, or Medicare Part D, also has made Medicare coverage available for the first time for a number of drugs, including Renagel and oral Hectorol beginning in 2006. Medicare Part D is administered by private vendors under contract with the U.S. government. Each vendor establishes its own Medicare Part D formulary for prescription drug coverage and pricing, which the vendor may modify from time-to-time. Renagel and Hectorol currently are well-positioned on the majority of formularies of nation-wide prescription drug plans participating in the Medicare Part D program as well as many of the large regional plans. The U.S. Congress could also significantly change the Medicare Part D program in the future, including requiring the federal government to negotiate discounts for our drugs or matching mandatory discounts to those required in other federal programs.

Employees

As of December 31, 2006, we, together with all of our consolidated subsidiaries, had approximately 9,000 employees worldwide.

Financial Information Regarding Segment Reporting

We have provided the information required by Item 101(b) of Regulation S-K in Note Q., “Segment Information,” to our Consolidated Financial Statements in the 2006 Genzyme Corporation Annual Report set forth in Exhibit 13 to this Annual Report on Form 10-K. We are incorporating that information into this section by reference.

Research and Development Costs

We have provided the information required by Item 101(c)(1)(xi) of Regulation S-K in Part II, Item 8, “Financial Statements and Supplementary Data,” and specifically in the Genzyme Corporation and Subsidiaries Consolidated Statements of Operations and Comprehensive Income and in Note I., “Investments in Marketable Securities and Strategic Equity Investments” to our Consolidated Financial Statements in the 2006 Genzyme Corporation Annual Report set forth in Exhibit 13 to this Annual Report on Form 10-K. We are incorporating that information into this section by reference.

Sales by Geographic Area, Significant Customers and Products

We have provided the information required by Items 101(c)(1)(i) and (vii) and 101(d) of Regulation S-K in the 2006 Genzyme Corporation Annual Report under the heading “Management’s Discussion and Analysis of Genzyme Corporation and Subsidiaries’ Financial Condition and Results of Operations” and in Note Q., “Segment Information,” to our Consolidated Financial Statements set forth in Exhibit 13 to this Annual Report on Form 10-K. We are incorporating that information into this section by reference.

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Available Information

We file electronically with the SEC our annual report on Form 10-K, our quarterly reports on Form 10-Q, and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. You may read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information about issuers that file reports electronically with the SEC. The address of that site is http://www.sec.gov.

You may obtain a free copy of our annual report on Form 10-K, our quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports, as soon as reasonably practicable after we file them with the SEC, on our website at http://www.genzyme.com or by contacting our Investor Relations department at 1-617-252-7570. The reference to our website is not intended to incorporate information on our website into this document by reference.

ITEM 1A. RISK FACTORS

We incorporate our disclosure related to risk factors into this section by reference from the 2006 Genzyme Corporation Annual Report under the heading “Management’s Discussion and Analysis of Genzyme Corporation and Subsidiaries’ Financial Condition and Results of Operations—Risk Factors,” which is included in Exhibit 13 to this Annual Report on Form 10-K.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our operations are conducted in manufacturing, warehousing, development/clinical plant, clinical laboratories, and research and office facilities that are located principally in: the U.S.; the United Kingdom; the Republic of Ireland; The Netherlands; Belgium; France; Canada; Switzerland; Germany; and Australia.

We lease all of our facilities except for certain facilities in:

·Geel, Belgium (land subject to 99 year leasehold);

·Haverhill and Maidstone, England;

·Allston (land subject to 65 year leasehold), Framingham and Waltham, Massachusetts; Ridgefield, New Jersey; and Santa Fe, New Mexico in the U.S.; and

·Waterford, Ireland (land subject to 999 year leasehold).

Our principal manufacturing facilities are used for the large-scale production of therapeutic proteins and enzymes, including Cerezyme, Fabrazyme, Myozyme and Thyrogen; renal products, including Renagel; and immunosuppressive agents, including Thymoglobulin and Lymphoglobuline, biomaterials, including Synvisc and the Sepra family of anti-adhesion products, bulk hyaluronic acid, cell processing services, including Carticel, MACI, and Epicel and genetic testing services. The facilities also are used for the receipt of contract manufactured products and materials for Hectorol, Renagel, Campath, and Clolar.

Our administrative activities are concentrated at facilities we have leased in Cambridge and Framingham, Massachusetts and San Antonio, Texas in the U.S.; Naarden, The Netherlands; and Tokyo, Japan. Our sales and marketing activities are principally located in Cambridge, Massachusetts and in sales offices located in major cities throughout the world. We conduct our product research and development activities primarily at our laboratory facilities in Framingham and Waltham, Massachusetts; San Antonio, Texas; and San Diego, California in the U.S. and at our Cambridge, U.K. facility. Leases for our facilities

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contain typical commercial lease provisions, including renewal options, rent escalators and tenant responsibility for operating expenses. We believe that we have, or are in the process of developing or acquiring, adequate manufacturing capacity to support our requirements for the next several years.

Renal

We manufacture the majority of our supply requirements for sevelamer hydrochloride, the active ingredient in Renagel, at our facilities in Haverhill, England. We also operate a manufacturing facility in Waterford, Ireland for use in manufacturing the tablet formulation of Renagel. All of our Renagel manufacturing facilities are operational, and have received all European and U.S. approvals material to such operations. A second tablet formulation facility is under construction in Waterford to provide additional capacity and security of supply. We are currently converting one of the bulk Renagel plants in Haverhill, England to enable it to also produce Renvela which is anticipated to receive approval in 2008.

We contract out the manufacturing and fill-finish work for the capsule formulation of Hectorol. We are in the process of evaluating options to obtain regulatory approval and secure the supply of Hectorol filled in vials instead of ampules. In addition, we are in the process of constructing our own manufacturing capacity for filling Hectorol in vials in Ridgefield, NJ.

Therapeutics

We manufacture Cerezyme, Fabrazyme and Myozyme at our multi-product manufacturing facility in Allston, Massachusetts. This facility, which we own and which contains extensive sterile filling capacity, is built on land that we hold under a 65-year lease, which expires in May 2057. We manufacture Thyrogen, Fabrazyme and Myozyme in our small-scale manufacturing facility in Framingham, Massachusetts and final drug product at our Allston facility. In 2005, we commenced the design and build-out of perfusion capacity at our Geel, Belgium facility to provide back-up and expansion to our Allston bulk capacity and purification systems.

At our Waterford, Ireland facility, we have installed new fill-finish capabilities for therapeutic proteins. We completed the qualification batches for the first product to be manufactured at the facility and received approval for manufacture of the first product, Thymoglobulin, from the FDA in 2006. We are in the process of transferring and qualifying additional products with additional approvals for Cerezyme and Myozyme anticipated in 2007.

Transplant

We manufacture Thymoglobulin and Lymphoglobuline at a leased facility in Lyon, France, and maintain administrative offices nearby. The majority of our fill-finish of Thymoglobulin is done at our Waterford facility. We plan to shift the remaining fill-finish work from Sanofi-Pasteur in France to our Waterford facility in 2007. We plan to complete acquisition of land in Lyon and to seek governmental approval to commence the construction of a new Thymoglobulin manufacturing facility with increased capacity in 2007.

Biosurgery

We produce Synvisc and other hyaluronan-based products in a manufacturing facility located in Ridgefield, New Jersey. We produce bulk hyaluronic acid and the Sepra family of products at commercial scale in our manufacturing facility in Framingham, Massachusetts.

Genetics

Our genetic and oncology testing business primarily conducts operations in clinical laboratory and administrative facilities we own in Santa Fe, New Mexico and lease in Westborough, Massachusetts; New York, New York; Tampa, Florida; Phoenix, Arizona; and Los Angeles, Orange, and Monrovia, California.

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ITEM 3. LEGAL PROCEEDINGS

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

Four lawsuits have been filed against us regarding the exchange of all of the outstanding shares of Biosurgery Stock for shares of Genzyme Stock in connection with the elimination of our tracking stocks in July 2003. Each of the lawsuits is a purported class action on behalf of holders of Biosurgery Stock. The first case, filed in Massachusetts Superior Court (MSC) in May 2003, alleged a breach of the implied covenant of good faith and fair dealing in our charter and a breach of our board of directors’ fiduciary duties. The plaintiff in this case sought an injunction to adjust the exchange ratio for the tracking stock exchange. The MSC dismissed the complaint in its entirety in November 2003. Upon appeal, the Massachusetts Appeals Court upheld the dismissal by the MSC of the fiduciary duty claim, but reversed the earlier decision to dismiss the implied covenant claim. The Massachusetts Supreme Judicial Court (SJC) has granted our petition for further appellate review of the Appeals Court decision reversing the dismissal of the implied covenant claim. The SJC heard oral arguments on December 4, 2006. A ruling on the appeal is anticipated in the first half of 2007. Two substantially similar cases were filed in the MSC in August and October 2003. These cases were consolidated in January 2004, and in July 2004, the consolidated case was stayed pending disposition of a fourth case, which was filed in the U.S. District Court for the Southern District of New York in June 2003. The complaint initially alleged violations of federal securities laws, common law fraud, and a breach of the merger agreement with Biomatrix, Inc., or Biomatrix, in addition to the state law claims contained in the other cases. The plaintiffs initially sought an adjustment to the exchange ratio, the rescission of the acquisition of Biomatrix, and unspecified compensatory damages. In December 2005, the plaintiffs in this case filed an amended complaint in which they dropped all of the claims alleged in the initial complaint relating to the initial issuance of Biosurgery Stock and the acquisition of Biomatrix, and narrowed the putative class to include only those individuals who held Biosurgery Stock on May 8, 2003. We filed a motion to dismiss the amended complaint and to oppose the class certification. The Court denied our motion to dismiss the amended complaint and certified this case as a class action on behalf of all shareholders who held Biosurgery Stock on May 8, 2003. We filed a petition asking the U.S. Court of Appeals for the Second Circuit to review the class certification decision, which has been denied. Discovery in this action is currently ongoing. We believe each of these cases is without merit and continue to defend against them vigorously.

On March 27, 2003, the Office of Fair Trading, or OFT, in the United Kingdom issued a decision against our wholly-owned subsidiary, Genzyme Limited, finding that Genzyme Limited held a dominant position and abused that dominant position with no objective justification by pricing Cerezyme in a way that excludes other delivery/homecare service providers from the market for the supply of home delivery and homecare services to Gaucher patients being treated with Cerezyme. In conjunction with this decision, the OFT imposed a fine on Genzyme Limited and required modification to its list price for Cerezyme in the United Kingdom. Genzyme Limited appealed this decision to the Competition Appeal Tribunal. On May 6, 2003, the Tribunal issued an order that stayed the OFT’s decision, but required Genzyme Limited to provide a homecare distributor a discount of 3% per unit during the appeal process. The Tribunal issued its judgment on Genzyme Limited’s appeal on March 11, 2004, rejecting portions of the OFT’s decision and upholding others. The Tribunal found that the list price of Cerezyme should not be reduced, but that Genzyme Limited must negotiate a price for Cerezyme that will allow homecare distributors an appropriate margin. The Tribunal also reduced the fine imposed by the OFT. In response to the Tribunal’s decision, we recorded an initial liability of approximately $11 million in our 2003 financial statements and additional liabilities totaling approximately $1 million during 2004 and 2005, of which approximately $6 million were paid in 2005. Genzyme Limited and the OFT were unable to negotiate a price for Cerezyme for homecare distributors and, as a result, on September 29, 2005, the Tribunal issued a ruling establishing the discount to be provided by Genzyme Limited to homecare distributors at 7.2%, which approximates the figure used to calculate the initial liability of approximately $11 million we recorded in

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2003, and the additional liabilities totaling approximately $1 million we recorded in 2004 and 2005. Genzyme Limited decided not to appeal this decision. Arising out of the OFT decision, on April 5, 2006, Genzyme Limited received a damage claim from Genzyme Limited’s former distributor, Healthcare at Home. In the fourth quarter of 2006, Genzyme Limited paid Healthcare at Home approximately $14 million, inclusive of interest and legal costs in full and final settlement of all claims, of which approximately $6 million had been previously accrued and approximately $8 million was recorded as a charge to selling, general and administrative expenses, or SG&A, in our consolidated statements of operations in December 2006.

We are not able to predict the outcome of the pending legal proceeding listed here, or other legal proceedings, to which we may become subject in the normal course of business or estimate the amount or range of any reasonably possible loss we might incur if we do not prevail in the final, non-appealable determinations of such matters. Therefore, we have no current accruals for these potential contingencies. We cannot provide you with assurance that the legal proceedings listed here, or other legal proceedings, will not have a material adverse impact on our financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Executive Officers of the Registrant

Set forth below is a list of individuals that are currently serving as our executive officers, or who served in such capacity during the fiscal year ended December 31, 2006:

Name	Age	Title
Henri A. Termeer	61	Chairman of the Board of Directors; President and Chief Executive Officer
Earl M. Collier, Jr.	59	Executive Vice President, Cardiovascular and Oncology
Zoltan A. Csimma	65	Chief Human Resources Officer; Senior Vice President
Georges Gemayel, Ph.D.	46	Executive Vice President, Therapeutics
Richard A. Moscicki, M.D.	55	Chief Medical Officer; Senior Vice President, Clinical, Medical and Regulatory Affairs
Alan E. Smith, Ph.D.	61	Chief Scientific Officer; Senior Vice President, Research
Sandford D. Smith	59	Executive Vice President; President, International Group
Peter Wirth	56	Chief Legal Officer; Executive Vice President, Legal and Corporate Development; Secretary
Michael S. Wyzga	51	Chief Financial and Accounting Officer; Executive Vice President, Finance

Mr. Termeer has served as our President and a Director since October 1983, as Chief Executive Officer since December 1985 and as Chairman of the Board of Directors since May 1988. For ten years prior to joining Genzyme, Mr. Termeer worked for Baxter International Laboratories, Inc., a manufacturer of human health care products. Mr. Termeer is a director of ABIOMED, Inc. and the Federal Reserve Bank of Boston and a trustee of Hambrecht & Quist Healthcare Investors and Hambrecht & Quist Life Sciences Investors.

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Mr. Collier has served as Executive Vice President since July 1997, with responsibility for our Oncology and Cardiovascular businesses since August 2003 and our Genetics business since January 2007. He joined Genzyme in January 1997 as Senior Vice President, Health Systems, and served as Executive Vice President, Surgical Products and Health Systems from July 1997 until June 1999. He served as President of our former Genzyme Surgical Products division from June 1999 until December 2000. Mr. Collier was also responsible for our former Genzyme Tissue Repair division from December 1999 to December 2000. From December 2000 until August 2003, Mr. Collier served as President of our Genzyme Biosurgery business unit. Prior to joining us, Mr. Collier was President of Vitas HealthCare Corporation (formerly Hospice Care Incorporated), a provider of health care services, from October 1991 until August 1995. Prior to that, Mr. Collier was a partner in the Washington, D.C. law firm of Hogan & Hartson, which he joined in 1981. Mr. Collier is a director of Encorium Group, Inc., a contract research organization which provides independent clinical trial and product development services to the pharmaceutical, biotechnology and medical devices industries. He also serves on the board of deCODE genetics, a biotechnology company that applies gene discovery to the development of drugs and diagnostics for common diseases.

Mr. Csimma has held the title Senior Vice President and Chief Human Resources Officer since March 1, 2006. He joined us in July 2000 as Senior Vice President, Human Resources. Prior to joining Genzyme, he served as Vice President, Human Resources of Wyeth Ayerst Research, a pharmaceutical research organization, from August 1998 to July 2000. During that time, Mr. Csimma also served as Site Head, Genetics Institute, for Wyeth Ayerst. From May 1988 to August 1998, he served as Vice President, Human Resources and Operations of Genetics Institute, Inc., a biotechnology company, which was integrated into Wyeth Ayerst in March 1998.

Dr. Gemayel serves as Executive Vice President with responsibility for our Renal, Therapeutics (excluding our lysosomal storage disorders business unit), Transplant and Biosurgery business units.  He joined us in August 2003 and served until February 2007 as Executive Vice President with responsibility for our Renal, Therapeutics (including our lysosomal storage disorders business unit) and Transplant business units. For sixteen years prior to joining Genzyme, Dr. Gemayel worked for Hoffmann-LaRoche, a leading healthcare company, where he served most recently from July 2000 until August 2003 as Vice President of the United States Specialty Care unit, and from January 1998 until July 2000 as General Manager of Hoffmann-LaRoche Portugal.

Dr. Moscicki joined us in March 1992 as Medical Director, became Vice President, Medical Affairs in early 1993 and was named Vice President, Clinical, Medical and Regulatory Affairs in December 1993. In September 1996 he became Senior Vice President, Clinical, Medical and Regulatory Affairs and Chief Medical Officer. Since 1979, he has also been a physician staff member at the Massachusetts General Hospital and a faculty member at the Harvard Medical School.

Dr. Alan Smith joined us in August 1989 as Senior Vice President, Research and became Chief Scientific Officer in September 1996. Prior to joining Genzyme, he served as Vice President—Scientific Director of Integrated Genetics, Inc., from November 1984 until its acquisition by us in August 1989. From October 1980 to October 1984, Dr. Smith was head of the Biochemistry Division of the National Institute for Medical Research, Mill Hill, London, England and from 1972 to October 1980, he was a member of the scientific staff at the Imperial Cancer Research Fund in London, England.

Mr. Sandford Smith has held the title as Executive Vice President since June 2006, Senior Vice President since January 2003 and President of our International Group since January 2000, with responsibility for the commercial activities for our lysosomal storage disorders, renal, transplant and biosurgery products outside of the United States, including in the Europe, Middle East, Asia Pacific and Latin America regions, as well as Canada. He joined us in April 1996 and served as Vice President and General Manager of our International Group and President of our Therapeutics business. Prior to joining

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Genzyme, Mr. Smith served as President and Chief Executive Officer of Repligen Corporation. Before joining Repligen Corporation, Mr. Smith also served as Vice President of Business Development and Strategic Planning for Bristol-Myers Squibb Company.

Mr. Wirth joined us in January 1996 and has served as Executive Vice President and Chief Legal Officer since September 1996 with responsibility for our corporate development and legal activities. From 2001 through October 2005, Mr. Wirth had responsibility for our drug discovery and development business. In addition, from September 1996 until June 2003, Mr. Wirth was responsible for our Oncology business.

Mr. Wyzga has served as Executive Vice President, Finance since May 2003, as Chief Accounting Officer since January 1999 and as Chief Financial Officer since July 1999. He joined us in February 1998 as Vice President and Corporate Controller and served as Senior Vice President, Corporate Controller from January 1999 until July 1999. He served as Senior Vice President, Finance from July 1999 until May 2003. From February 1997 to February 1998 Mr. Wyzga served as Chief Financial Officer of Sovereign Hill Software, Inc., a software company, and from 1991 to 1997 held various senior management positions with CACHELINK Corporation and Lotus Development Corporation. Mr. Wyzga is also director of Altus Pharmaceuticals Inc., a developer of protein therapeutics.

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PART II

ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock, which we refer to as Genzyme Stock, is traded on The Nasdaq Stock Market, Inc. (“NASDAQ®”) system under the symbol “GENZ”.

As of February 28, 2007, there were 3,474 stockholders of record of Genzyme Stock.

The following table sets forth, for the periods indicated, the high and low sale price of Genzyme Stock as reported by NASDAQ.

	High		Low
2006:
First Quarter	$	75.34	$	65.49
Second Quarter	68.47		54.64
Third Quarter	70.31		57.74
Fourth Quarter	70.50		59.71
2005:
First Quarter	$	61.40	$	55.15
Second Quarter	65.13		55.51
Third Quarter	76.17		58.61
Fourth Quarter	77.82		66.62

We have never paid any cash dividends on any series of our common stock and we do not anticipate paying cash dividends in the foreseeable future.

We incorporate information regarding the securities authorized for issuance under our equity compensation plans into this section by reference from the section entitled “Equity Plans” in the proxy statement for our 2007 annual meeting of shareholders.

Issuer Purchases of Equity Securities

We did not make any purchases of our common stock during the three months ended December 31, 2006, which is the fourth quarter of our fiscal year.

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Stock Performance Graph

The graph below compares the five-year cumulative total shareholder returns for our common stock to that of the S&P 500 Composite Index and the NASDAQ® Pharmaceutical Index. The cumulative returns are based on a $100 investment on January 1, 2002, with all dividends being reinvested. The comparisons shown in the graph are based upon historical data and we caution that the stock price performance shown in the graph is not indicative of, nor intended to forecast, the potential future performance of our stock. Prior to December 31, 2003, the Genzyme Stock prices used in this table reflect Genzyme General Stock before the elimination of our tracking stock structure. Information used in the graph was obtained from Standard and Poor’s  and the Nasdaq Global Select Stock Market®, sources we believe to be reliable, but we are not responsible for errors or omissions in such information.

Comparison of 5 Year Cumulative Total Return

ITEM 6.   SELECTED FINANCIAL DATA

We incorporate our Selected Financial Data into this section by reference from the 2006 Genzyme Corporation Annual Report under the heading “Genzyme Corporation and Subsidiaries—Consolidated Selected Financial Data,” which is included in Exhibit 13 to this Annual Report.

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We incorporate our Management’s Discussion and Analysis of Financial Condition and Results of Operations into this section by reference from the 2006 Genzyme Corporation Annual Report under the heading “Management’s Discussion and Analysis of Genzyme Corporation and Subsidiaries’ Financial Condition and Results of Operations,” which is included in Exhibit 13 to this Annual Report on Form 10-K.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We incorporate our disclosure related to market risk into this section by reference from the 2006 Genzyme Corporation Annual Report under the headings “Management’s Discussion and Analysis of Genzyme Corporation and Subsidiaries’ Financial Condition and Results of Operations—Market Risk,” “—Interest Rate Risk,” “—Foreign Exchange Risk” and “—Equity Price Risk,” which is included in Exhibit 13 to this Annual Report on Form 10-K.

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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

We incorporate the financial statements filed as part of this Annual Report on Form 10-K into this section by reference from the Genzyme Corporation and Subsidiaries Consolidated Financial Statements and notes thereto included in Exhibit 13 to this Annual Report on Form 10-K.

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

At the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that: (1) our disclosure controls and procedures were effective as of December 31, 2006; and (2) no change in internal control over financial reporting occurred during the quarter ended December 31, 2006 that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

The full disclosure of our management’s assessment of the effectiveness of our internal controls over financial reporting as of December 31, 2006 is set forth in the 2006 Genzyme Corporation Annual Report under the heading “Management’s Report on Internal Controls Over Financial Reporting,” which is included in Exhibit 13 to this Annual Report on Form 10-K.

Attestation Report of Independent Registered Public Accounting Firm

Our management’s assessment of the effectiveness of our internal controls over financial reporting as of December 31, 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm. The attestation report of PricewaterhouseCoopers LLP is set forth in the 2006 Genzyme Corporation Annual Report under the heading “Report of Independent Registered Public Accounting Firm,” which is included in Exhibit 13 to this Annual Report on Form 10-K.

ITEM 9B.OTHER INFORMATION

None.

PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We have adopted a Corporate Code of Conduct, which applies to our directors and all of our employees, including our principal executive officer, principal financial officer and accounting officer, and controller. A copy is available to you, free of charge, upon written request to the legal department at our corporate offices located at Genzyme Center, 500 Kendall Street, Cambridge, Massachusetts 02142. We intend to make all required disclosures concerning amendments to, or waivers from, this code on the governance page of our website, www.genzyme.com. Information contained on our website is not part of this document or the documents incorporated by reference into this document.

We incorporate information regarding our directors and executive officers into this section by reference from the section entitled “Executive Officers of the Registrant” in Part I of this Annual Report on Form 10-K and the sections entitled “Election of Directors,” “Board Meetings and Committees” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the proxy statement for our 2007 annual meeting of shareholders.

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ITEM 11.EXECUTIVE COMPENSATION

We incorporate information regarding the compensation of our directors and executive officers into this section by reference from the sections entitled “Election of Directors,” “Director Compensation,” “Compensation Discussion and Analysis” and related tables and narratives in the proxy statement for our 2007 annual meeting of shareholders.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

We incorporate information regarding the ownership of our securities by our directors, executive officers and 5% stockholders into this section by reference from the sections entitled “Stock Ownership” and “Equity Plans” in the proxy statement for our 2007 annual meeting of shareholders.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

We incorporate information regarding transactions with related parties into this section by reference from the section entitled “Certain Relationships and Related Transactions” in the proxy statement for our 2007 annual meeting of shareholders.

ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES

We incorporate information regarding our audit committee’s pre-approval policies and procedures and the fees paid to our auditors from the section entitled “Independent Auditors” in the proxy statement for our 2007 annual meeting of shareholders.

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PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1). FINANCIAL STATEMENTS

We are incorporating the following financial statements (and related notes) of Genzyme Corporation and Subsidiaries into this section by reference from the 2006 Genzyme Corporation Annual Report:

	Page*
Report of Independent Registered Public Accounting Firm	F-69
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2006, 2005 and 2004	F-71
Consolidated Balance Sheets as of December 31, 2006 and 2005	F-72
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004	F-73
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2006, 2005 and 2004	F-75
Notes to Consolidated Financial Statements	F-76

*References are to page numbers in the 2006 Genzyme Corporation Annual Report, which is included in Exhibit 13 to this Annual Report on Form 10-K.

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(a)(2). FINANCIAL STATEMENT SCHEDULES

The schedule listed below for Genzyme Corporation and Subsidiaries is filed as part of Exhibit 13 to this Annual Report on Form 10-K and is incorporated into this section by reference:

	Page*
Report of Independent Registered Public Accounting Firm	F-69
Schedule II—Valuation and Qualifying Accounts	F-141

*References are to page numbers in the 2006 Genzyme Corporation Annual Report, which is included in Exhibit 13 to this Annual Report on Form 10-K.

All other schedules are omitted as the information required is inapplicable or the information is presented in the Genzyme Corporation and Subsidiaries’ Consolidated Financial Statements or notes thereto.

(a)(3). EXHIBITS

The exhibits are listed below under Part IV, Item 15(b) of this Annual Report on Form 10-K.

(b). EXHIBITS

All other schedules are omitted as the information required is inapplicable or the information is presented in the Genzyme Corporation and Subsidiaries’ Consolidated Financial Statements or notes thereto. The exhibits are listed below under Part IV, Item 15(b) of this Annual Report on Form 10-K.

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 July 1, 2004.
*4.1	Fourth Amended and Restated Renewed Rights Agreement dated May 28, 2004 between Genzyme and American Stock Transfer & Trust Company, as Rights Agent. Filed as Exhibit 4.1 to Genzyme’s Registration Statement on Form 8-A/A filed on May 28, 2004.
*4.2	Securities Purchase Agreement, dated as of April 17, 2001 and amended on September 26, 2001, by and among Novazyme Pharmaceuticals, Inc. and several purchasers. Filed as Exhibit 4.2 to Genzyme’s Form 10-Q for the quarter ended September 30, 2001.
*4.3	Indenture, dated December 9, 2003, between Genzyme and U.S. Bank National Association. Filed as Exhibit 4.1 to Genzyme’s Form 8-K filed December 10, 2003.
*4.3.1	First Supplemental Indenture, dated as of May 28, 2004, to Indenture relating to our 1.25% Senior Convertible Notes, dated as of December 9, 2003, between Genzyme and U.S. Bank National Association, as Trustee. Filed as Exhibit 4.1 to Genzyme’s Form 8-K filed June 18, 2004.
*4.4	Registration Rights Agreement, dated December 9, 2003, between Genzyme and UBS Securities LLC on behalf of itself and several other Initial Purchasers. Filed as Exhibit 10.1 to Genzyme’s Form 8-K filed December 10, 2003.
*10.1	Lease, dated April 30, 1990, for 64 Sidney Street, Cambridge, Massachusetts between BioSurface Technology, Inc. and Forest City 64 Sidney Street, Inc. Filed as Exhibit 10.22 to BioSurface’s Registration Statement on Form S-1 (File No. 33-55874).
*10.1.1	Amendment to Lease, dated September 11, 1995, to the Lease Agreement dated April 30, 1990 by and between Forest City 64 Sidney Street, Inc. and Genzyme. Filed as Exhibit 10.1.1 to Genzyme’s Form 10-K for 2003.

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*10.1.2	Second Amendment to Lease, dated March 1, 1996, to the Lease Agreement dated April 30, 1990 by and between Forest City 64 Sidney Street, Inc. and Genzyme. Filed as Exhibit 10.1.2 to Genzyme’s Form 10-K for 2003.
*10.1.3	Letter Amendment, dated December 30, 1999, to the Lease Agreement dated April 30, 1990, by and between Forest City 64 Sidney Street, Inc. and Genzyme. Filed as Exhibit 10.1.3 to Genzyme’s Form 10-K for 2003.
*10.1.4	Fourth Amendment to Lease, dated March 23, 2001, to the Lease Agreement dated April 30, 1990, by and between Forest City 64 Sidney Street, Inc. and Genzyme. Filed as Exhibit 10.1.4 to Genzyme’s Form 10-K for 2003.
10.1.5	Lease Agreement dated November 30, 2005, by and between Forest City 64 Sidney Street, Inc. and Genzyme. Filed herewith.
*10.2	Lease, dated June 1, 1992, for land at Allston Landing, Allston, Massachusetts, between Allston Landing Limited Partnership and the Massachusetts Turnpike Authority. Filed as Exhibit 10.9 to Genzyme’s Form 10-K for 1993.
*10.2.1	First Amendment to Lease, dated July 26, 1995, to Lease dated June 1, 1992, between Allston Landing Limited Partnership and the Massachusetts Turnpike Authority. Filed as Exhibit 10.1 to Genzyme’s Form 10-Q for the quarter ended June 30, 2005.
*10.2.2	Second Amendment to Lease, dated December 22, 1997, to Lease dated June 1, 1992, between Allston Landing Limited Partnership and the Massachusetts Turnpike Authority. Filed as Exhibit 10.2 to Genzyme’s Form 10-Q for the quarter ended June 30, 2005.
*10.3	Commercial Lease, dated December 24, 1998, by and between Aventis Pasteur SA and Imtix-SangStat S.A.S. for Building C5 located at Marcy L’Etoile, Lyon, France. Filed as Exhibit 10.4 to Genzyme’s Form 10-K for 2003.
*10.3.1	Amendment to Commercial Lease, dated September 30, 2000, to the Lease dated December 24, 1998, by and between Aventis Pasteur SA and Imtix-SangStat S.A.S. Filed as Exhibit 10.4.1 to Genzyme’s Form 10-K for 2003.
*10.4	Lease, dated August 28, 2000, for Building D, Cambridge Research Park, Cambridge, Massachusetts, between Genzyme and Kendall Square LLC. Filed as Exhibit 10.4 to Genzyme’s Form 10-K for 2005.
*10.4.1	First Amendment to Lease, dated August 1, 2003, to the Lease dated August 28, 2000, by and between Genzyme and Kendall Square LLC. Filed as Exhibit 10.5.1 to Genzyme’s Form 10-K for 2004.
*10.5	Underlease of 50 Gibson Drive, Kings Hill Business Park, West Malling, Kent, U.K., dated January 19, 2001, by and among Genzyme Limited, Liberty Property Limited Partnership and Kings Hill Estate Management Company Limited. Filed as Exhibit 10.1 to Genzyme’s Form 10-Q for the quarter ended September 30, 2005.
*10.5.1	Deed of Variation of Underlease dated January 19, 2001, and Agreement for Lease, each dated August 22, 2005, by and between Genzyme Limited and Kent City Council (successors to Liberty Property Limited Partnership). Filed as Exhibit 10.2 to Genzyme’s Form 10-Q for the quarter ended September 30, 2005.
*10.6	Lease, dated September 3, 1990, for the land located at the Industrial Development Authority Industrial Park, County Waterford, Ireland (comprised in folio 4917 & 324IF County Waterford), by and between the Industrial Development Authority and Bausch & Lomb Ireland. Filed as Exhibit 10.2 to Genzyme’s Form 10-Q for the quarter ended September 30, 2001.

33

*10.7	Contract for Sale, dated June 25, 2001, for the premises located at the Industrial Development Authority Industrial Park, County Waterford, Ireland, (comprised in folio 4141L County Waterford) by and between Luxottica Ireland Limited and Genzyme Ireland Limited (f/k/a Gosfend Limited). Filed as Exhibit 10.1 to Genzyme’s Form 10-Q for the quarter ended September 30, 2001.
*10.8	Deed of Transfer, dated July 2, 2001, between Luxottica Ireland Limited and Genzyme Ireland Limited, related to the Lease dated September 3, 1990 for the premises located at the Industrial Development Authority Industrial Park, County Waterford, Ireland (comprised in folio 4141L County Waterford). Filed as Exhibit 10.3 to Genzyme’s Form 10-Q for the quarter ended September 30, 2001.
*10.9	Contract for Sale, dated August 2, 2001, for the land located at the Industrial Development Authority Industrial Park, County Waterford, Ireland (comprised in folio 4917 County Waterford), by and between the Industrial Development Authority and Genzyme Ireland Limited. Filed as Exhibit 10.4 to Genzyme’s Form 10-Q for the quarter ended September 30, 2001.
*10.10	Lease, dated August 24, 2001, for the land located at the Industrial Development Authority Industrial Park, County Waterford, Ireland (comprised in folio 4917 County Waterford) by the Industrial Development Authority and Genzyme Ireland Limited. Filed as Exhibit 10.5 to Genzyme’s Form 10-Q for the quarter ended September 30, 2001.
10.11.1	Amendment of Leases dated as of December 17, 2004, between One Kendall Square Associates, LLC and Genzyme. Filed herewith.
10.11.2	Second Amendment of Leases dated as of July 25, 2005, between One Kendall Square Associates, LLC and Genzyme. Filed herewith.
10.11.3	Third Amendment of Leases dated as of January 4, 2007, between RB Kendall Fee, LLC, successor to One Kendall Square Associates, LLC, and Genzyme. Filed herewith.
10.12	1997 Equity Incentive Plan, as amended. Filed herewith.
*10.13	1998 Director Stock Option Plan, as amended. Filed as Exhibit 10.2 to Genzyme’s Form 10-Q for the quarter ended June 30, 2006.
*10.13.1	Form of Nonstatutory Stock Option for grants under Genzyme’s 1998 Director Stock Option Plan. Filed as Exhibit 10.5 to Genzyme’s Form 10-Q for the quarter ended June 30, 2005.
10.14	2001 Equity Incentive Plan, as amended. Filed herewith.
10.14.1	Form of Incentive Stock Option for grants to executive officers under Genzyme’s 2001 Equity Incentive Plan. Filed herewith.
10.14.2	Form of Nonstatutory Stock Option for grants to executive officers under Genzyme’s 2001 Equity Incentive Plan. Filed herewith.
*10.15	2004 Equity Incentive Plan, as amended. Filed as Exhibit 10.1 to Genzyme’s Form 10-Q for the quarter ended June 30, 2006.
10.15.1	Form of Incentive Stock Option for grants to executive officers under Genzyme’s 2004 Equity Incentive Plan. Filed herewith.
10.15.2	Form of Nonstatutory Stock Option for grants to executive officers under Genzyme’s 2004 Equity Incentive Plan. Filed herewith.
*10.16	1999 Employee Stock Purchase Plan, as amended. Filed as Exhibit 10.11 to Genzyme’s Form 10-Q for the quarter ended June 30, 2005.
*10.17	1996 Directors’ Deferred Compensation Plan, as amended. Filed as Exhibit 10.20 to Genzyme’s Form 10-K for 2004.
*10.18	Executive Employment Agreement, dated January 1, 1990, between Genzyme and Henri A. Termeer. Filed as Exhibit 10.32 to Genzyme’s Form 10-K for 1990.

34

*10.19	Executive Employment Agreement, dated January 1, 1996, between Genzyme and Peter Wirth. Filed as Exhibit 10.1 to Genzyme’s Form 10-Q for the quarter ended March 31, 1996.
*10.20	Form of Indemnification Agreement between Genzyme and its executive officers. Filed as Exhibit 10.1 to Genzyme’s Form 10-Q for the quarter ended September 30, 2004.
*10.21	Form of Severance Agreement between Genzyme and its executive officers. Filed as Exhibit 10.2 to Genzyme’s Form 10-Q for the quarter ended June 30, 2002.
*10.22	Information regarding certain executive compensation matters, including 2007 salaries and incentive bonus targets for Genzyme’s named executive officers. Filed with Genzyme’s Form 8-K filed on December 8, 2006.
*10.22.1	Information regarding certain executive compensation matters, including actual 2006 salaries and incentive bonuses for Genzyme’s named executive officers. Filed with Genzyme’s Form 8-K filed on February 28, 2007.
*10.23	Collaboration Agreement, dated September 4, 1998, among Genzyme, BioMarin and BioMarin/Genzyme LLC. Filed as Exhibit 10.24 to BioMarin’s Registration Statement on Form S-1 (File No. 333-77701).**
*10.24	Supply Agreement, dated January 24, 2006, by and between Cambrex Charles City, Inc. and Genzyme. Filed as Exhibit 10.1 to Genzyme’s Form 10-Q for the quarter ended September 30, 2006.**
*10.25	Contract Manufacturing Agreement dated September 14, 2001, as amended, between GelTex and The Dow Chemical Company. Filed as Exhibit 10.35 to Genzyme’s Form 10-K for 2002.**
*10.25.1	Second Amendment, dated October 9, 2002, to Contract Manufacturing Agreement dated September 14, 2001, between GelTex and The Dow Chemical Company. Filed as Exhibit 10.34.1 to Genzyme’s Form 10-K for 2003.**
*10.25.2	Third Amendment, dated December 8, 2003, to Contract Manufacturing Agreement dated September 14, 2001, between GelTex and The Dow Chemical Company. Filed as Exhibit 10.34.2 to Genzyme’s Form 10-K for 2003.**
*10.25.3	Fourth Amendment, dated July 1, 2004, to Contract Manufacturing Agreement dated September 14, 2001, between GelTex and The Dow Chemical Company. Filed as Exhibit 10.29.3 to Genzyme’s Form 10-K for 2004.**
*10.25.4	Amended and Restated Contract Manufacturing Agreement signed as of December 15, 2006, between Genzyme (as successor to GelTex) and The Dow Chemical Company. Filed with Genzyme’s Form 8-K filed on December 15, 2006.**
*10.26	Credit Agreement, dated July 14, 2006, among Genzyme and those of its subsidiaries party thereto, the lenders listed therein, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent, ABN AMRO Bank N.V., Citizens Bank of Massachusetts and Wachovia Bank, National Association, as co-documentation agents. Filed with Genzyme’s Form 8-K filed on July 19, 2006.
*10.27	North American Termination and Transition Agreement, dated November 3, 2004, by and between Genzyme and Wyeth. Filed as Exhibit 10.31 to Genzyme’s Form 10-K for 2004.**
*10.28	Purchase and Supply Agreement, effective as of January 1, 2005, by and between Genzyme and Invitrogen Corporation. Filed as Exhibit 10.3 to Genzyme’s Form 10-Q for the quarter ended June 30, 2005.**
13	Portions of the 2006 Genzyme Corporation Annual Report incorporated by reference into Parts I, II and IV of this Form 10-K. Furnished herewith.
21	Subsidiaries of Genzyme. Filed herewith.
23	Consent of PricewaterhouseCoopers LLP. Filed herewith.

35

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.
99	Financial statements and notes thereto of BioMarin/Genzyme LLC as of December 31, 2006 and 2005, and for the years ended December 31, 2006, 2005 and 2004 (unaudited). Filed 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, 8-B or Schedule 14A of Genzyme Corporation were filed under Commission File No. 0-14680.

**Confidential treatment has been requested or granted for the deleted portions of Exhibits 10.23 through 10.25.4, 10.27 and 10.28.

EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

Exhibits 10.13 through 10.22.1 above are management contracts or compensatory plans or arrangements in which our executive officers or directors participate.

36

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: March 1, 2007	By:	/s/ MICHAEL S. WYZGA
		Michael S. Wyzga Executive Vice President, Finance, Chief Financial Officer, and Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

	Name		Title		Date
/s/ HENRI A. TERMEER		Director and Principal Executive		March 1, 2007
Henri A. Termeer		Officer
/s/ MICHAEL S. WYZGA		Principal Financial and Accounting		March 1, 2007
Michael S. Wyzga		Officer
/s/ DOUGLAS A. BERTHIAUME		Director		March 1, 2007
Douglas A. Berthiaume
		Director
Henry E. Blair
/s/ GAIL K. BOUDREAUX		Director		March 1, 2007
Gail K. Boudreaux
/s/ ROBERT J. CARPENTER		Director		March 1, 2007
Robert J. Carpenter
/s/ CHARLES L. COONEY		Director		March 1, 2007
Charles L. Cooney
/s/ VICTOR J. DZAU		Director		March 1, 2007
Victor J. Dzau
/s/ CONNIE MACK III		Director		March 1, 2007
Connie Mack III
/s/ RICHARD F. SYRON		Director		March 1, 2007
Richard F. Syron

37

EX-10.1.5

Exhibit 10.1.5

64 Sidney Street

Cambridge, Massachusetts

LANDLORD

FC 64 SIDNEY, INC.

TENANT

GENZYME CORPORATION

Table of Contents
ARTICLE I - RECITALS AND DEFINITIONS
Section 1.1	Recitals
Section 1.2	Definitions
Section 1.3	Exhibits
ARTICLE II - PREMISES AND TERM
Section 2.1	Premises
Section 2.2	Appurtenant Rights
Section 2.3	Landlord’s Reservations
Section 2.4	Parking
Section 2.5	Commencement Date
Section 2.6	Extension Options
ARTICLE III - RENT AND OTHER PAYMENTS
Section 3.1	Annual Fixed Rent Section
Section 3.2	Real Estate Taxes
Section 3.3	Operating Expenses
Section 3.4	Other Utility Charges
Section 3.5	Above-standard Services
Section 3.6	No Offsets
ARTICLE IV – ALTERATIONS
Section 4.1	Consent Required for Tenant’s Alterations
Section 4.2	Ownership of Alterations
Section 4.3	Construction Requirements for Alterations
Section 4.4	Payment for Tenant Alterations
ARTICLE V - RESPONSIBILITY FOR CONDITION OF BUILDING AND PREMISES
Section 5.1	Maintenance of Building and Common Areas by Landlord
Section 5.2	Maintenance of Premises by Tenant
Section 5.3	Delays in Landlord’s Services
ARTICLE VI - TENANT COVENANTS
Section 6.1	Permitted Us
Section 6.2	Laws and Regulations
Section 6.3	Rules and Regulations; Signs
Section 6.4	Safety Compliance

Section 6.5	Landlord’s Entry
Section 6.6	Floor Load
Section 6.7	Personal Property tax
Section 6.8	Assignment and Subleases
ARTICLE VII - INDEMNITY AND INSURANCE
Section 7.1	Indemnity
Section 7.2	Liability Insurance
Section 7.3	Alterations, Improvements and Betterments; Personal Property at Risk
Section 7.4	Landlord’s Insurance
Section 7.5	Waiver of Subrogation
ARTICLE VIII - CASUALTY AND EMINENT DOMAIN
Section 8.1	Restoration Following Casualties
Section 8.2	Landlord’s Termination Election
Section 8.3	Tenant’s Termination Election
Section 8.4	Casualty at Expiration of Lease
Section 8.5	Eminent Domain
Section 8.6	Rent After Casualty or Taking
Section 8.7	Taking Award
ARTICLE IX – DEFAULT
Section 9.1	Tenant’s Default
Section 9.2	Damages
Section 9.3	Cumulative Rights
Section 9.4	Landlord’s Self-Help
Section 9.5	Enforcement Expenses
Section 9.6	Late Charges and Interest on Overdue Payments
Section 9.7	Landlord’s Right to Notice and Cure
ARTICLE X – MORTGAGEES’ AND GROUND LESSORS’ RIGHTS
Section 10.1	Subordination
Section 10.2	Prepayment of Rent Not to Bind Mortgagee
Section 10.3	Tenant’s Duty to Notify Mortgagee; Mortgagee’s Ability to Cure
Section 10.4	Estoppel Certificates
ARTICLE XI – MISCELLANEOUS
Section 11.1	Notice of Lease
Section 11.2	Notices
Section 11.3	Successors and Limitation on Liability on the Landlord
Section 11.4	Waivers by the Landlord or Tenant

Section 11.5	Acceptance of Partial Payments of Rent
Section 11.6	Interpretation and Partial Invalidity
Section 11.7	Quiet Enjoyment
Section 11.8	Brokerage
Section 11.9	Surrender of Premises and Holding Over
Section 11.10	Ground Lease
Section 11.11	Security Deposit
Section 11.12	Financial Reporting
Section 11.13	Cambridge Employment Plan
Section 11.14	Parking and Transportation Demand Management

LEASE

ARTICLE I

RECITALS AND DEFINITIONS

Section 1.1  -  Recitals.

This Lease (this “Lease”) is entered into as of November 30, 2005, by and between FC64 SIDNEY, INC., an Ohio corporation, (the “Landlord”), and GENZYME CORPORATION, a Massachusetts Corporation (the “Tenant”).

In consideration of the mutual covenants herein set forth, the Landlord and the Tenant do hereby agree to the terms and conditions set forth in this Lease.

Section 1.2 - Definitions.

The following terms shall have the meanings indicated or referred to below:

                “Additional Rent” means all charges payable by the Tenant pursuant to this Lease other than Annual Fixed Rent, including without implied limitation, the Tenant’s parking charges as provided in Section 2.4 and Exhibit A; the Tenant’s Tax Expense Allocable to the Premises as provided in Section 3.2; the Tenant’s Operating Expenses Allocable to the Premises in accordance with Section 3.3; amounts payable for special services pursuant to Section 3.5; the Landlord’s share of any sublease or assignment proceeds pursuant to Section 6.8.

“Annual Fixed Rent” - - See Exhibit A and Section 3.1.

“Building” means the Richards Building containing office space located at 64 Sidney Street, Cambridge, Massachusetts.

“Commencement Date” - - See Section 2.5.

“Common Building Areas” means those portions of the Building which are not part of the Premises and to which the Tenant has appurtenant rights pursuant to Section 2.2.

“External Causes” means, collectively, (i) Acts of God, war, civil commotion, fire, flood or other casualty, strikes or other extraordinary labor difficulties, shortages of labor or materials or equipment in the ordinary course of trade, government orders or regulations enacted or promulgated after the date of this Lease, or other cause not reasonably within the Landlord’s or Tenant’s control and not due to the fault or neglect of the Landlord or Tenant, and (ii) any act, failure to act or neglect of the Tenant or Landlord or the Tenant’s or Landlord’s servants, agents, employees, licensees or any person claiming by, through or under the Tenant or Landlord, as the case may be, which delays the Landlord or Tenant, as the case may be, in the performance of any act required to be performed by the Landlord or Tenant, as the case may be, under this Lease.

“Initial Term” - See Exhibit A.

“Land” means the parcel of land situated in Cambridge. Massachusetts described in Exhibit B.

“Landlord’s Original Address” - See Exhibit A.

“Lease Year” means each period of one year during the Term commencing on the Commencement Date or on any anniversary thereof.

“Permitted Uses” - See Exhibit A.

“Premises” - See Exhibit A and Section 2.1.

“Property” means the Land and the Building.

“Tenant’s Original Address” - See Exhibit A.

“Term” means the Initial Term (as defined in Exhibit A.)

“University Park” means the area in Cambridge, Massachusetts, bounded on the North side by Massachusetts Avenue, Green and Blanche Streets, on the East side by Landsdowne, Cross and Purrington Streets, on the South side by Pacific Street and on the West side by Brookline Street, as shown on Exhibit B-1.

Section 1.3 - Exhibits.

The Exhibits to this Lease which are listed herein below, are incorporated herein by this reference and are to be treated as a part of this Lease for all purposes. Undertakings contained in such Exhibits, including any Exhibits not attached but separately delivered to Tenant, are agreements on the part of Landlord and Tenant, as the case may be, to perform the obligations stipulated therein.

EXHIBIT A -	Basic Lease Terms
EXHIBIT B -	Legal Description
EXHIBIT B-1	Map of University Park
EXHIBIT B-2	Depiction of Premises
EXHIBIT C -	Work Letter
EXHIBIT D -	Standard Services
EXHIBIT E -	Rules and Regulations
EXHIBIT F -	Roof Equipment
EXHIBIT G -	Removable Items

ARTICLE II

PREMISES AND TERM

Section 2.1 – Premises.

The Landlord hereby leases to the Tenant, and the Tenant hereby leases from the Landlord, for the Term, the Premises. The Premises shall exclude the office entry and office lobby of the Building, first floor elevator lobby, first floor mall room, atrium, bridges and walkways, the common stairways and stairwells, elevators and elevator wells, boiler room, sprinklers, sprinkler rooms, elevator rooms, mechanical rooms, loading and receiving areas,

electric and telephone closets, janitor closets, loading docks and bays, rooftop mechanical penthouses to the extent they house Building equipment, and pipes, ducts, conduits, wires and appurtenant fixtures and equipment serving exclusively or in common other parts, of the Building.  If the Premises at any time includes less than the entire rentable floor area of any floor of the Building, the Premises shall also exclude the common corridors, vestibules, elevator lobby and toilets located on such floor. The Tenant acknowledges that, except as expressly set forth in this Lease, there have been no representations or warranties made by or on behalf of the Landlord with respect to the Premises, the Building or the Property or with respect to the suitability of any of them for the conduct of the Tenant’s business. The taking of possession of the Premises by the Tenant shall conclusively establish that the Premises and the Building were at such time in satisfactory condition, order and repair, latent defects only, excepted.  Landlord hereby represents that to the best of Landlord’s knowledge, the Building is in compliance with the Americans with Disabilities Act of 1990 (“ADA”).

Section 2.2 - Appurtenant Rights.

The tenant shall have, as appurtenant to the Premises, the nonexclusive right to use in common with others, subject to reasonable rules of general applicability to occupants of the Building from time to time made by the Landlord of which the Tenant is given notice:  (i) the office entry, office vestibules and office lobby of the Building, first floor mailroom, the common stairways, elevators, elevator wells, boiler room, elevator rooms, sprinkler rooms, mechanical rooms, electric and telephone closets, janitor closets, loading docks and bays, rooftop mechanical penthouses to the extent they house Building equipment, and the pipes, sprinklers, ducts, conduits, wires and appurtenant fixtures and equipment serving the Premises in common with others, (ii) common walkways and driveways necessary or reasonably convenient for access to the Building, (iii) access to loading area and freight elevator subject to Landlord’s reasonable rules and regulations in effect from time to time and applicable to all occupants of the Building and of which the Tenant is given notice, (iv) if the Premises at any time include less than the entire rentable floor area of any floor, the common toilets, corridors, vestibules, and elevator lobby of such floor, and (v) such other common areas and facilities of the Building and the Land necessary for access to or beneficial use of the Premises.  Additionally Tenant shall have the right to locate equipment on the roof of the Building, as designated on Exhibit F (“Equipment”), subject to Landlord’s approval, which shall not be unreasonably withheld.  Landlord hereby approves and consents to Tenant’s use of the roof for the operation, maintenance and replacement of Tenant’s existing equipment on the roof of the Building and the location of such existing equipment.

Section 2.3 - Landlord’s Reservations.

The Landlord reserves the right from time to time, at reasonable times and upon prior written notice to Tenant (except in emergency situations), without unreasonable interference with the Tenant’s use: (i) to install, use, maintain, repair, replace and relocate for service to the Premises and/or other parts of the Building, pipes, ducts, conduits, wires and appurtenant fixtures and equipment, wherever located in the Premises or the Building, and (ii) to alter or any other common facility, provided that substitutions are substantially equivalent or better.  Landlord

acknowledges that Tenant has or will have so-called “clean rooms” located within the Premises, and Landlord shall not enter Tenant’s “clean rooms” without Tenant’s prior consent and without accompaniment by a representative of Tenant, except in case of emergency.

Section 2.4 - Parking

The Landlord shall provide and the Tenant shall pay for parking privileges for use by the Tenant’s employees, business invitees and visitors in accordance with Exhibit A. The Landlord shall operate, or cause to be operated, a parking garage known as the 80 Landsdowne Street Garage (the “Garage”) to serve the Building and other buildings in University Park. The Tenant’s parking privileges shall be initially located in the Garage and shall be on a nonexclusive basis (i.e., no reserved spaces); provided, however, Landlord agrees that the Garage shall be operated so as to maintain therein sufficient spaces to accommodate Tenant’s parking privileges described in Exhibit A. However, Tenant’s parking privileges may be relocated by Landlord, upon reasonable prior notice to Tenant from Landlord, to another parking garage within University Park. All monthly users will have unlimited access to the Garage twenty-four (24) hours per day, seven days per week.

The Tenant agrees that it and all persons claiming by, through and under it, shall at all times abide by the reasonable rules and regulations promulgated by the Landlord, of which Tenant is given written notice, with respect to the use of the parking facilities provided by the Landlord pursuant to this Lease. If there are any conflicts between the provisions of such rules and regulations and any provisions of this Lease, the provisions of this Lease shall govern.

Charges for Tenant’s parking privileges hereunder shall be at the current monthly rate applicable for such spaces and shall constitute Additional Rent and shall be payable monthly to Landlord, during the Term, from and after the Commencement Date at the time and in the fashion in which Annual Fixed Rent under this Lease is payable.

At any time during the Term Landlord shall have the right to assign Landlord’s obligations to provide parking, as herein set forth, together with Landlord’s right to receive Additional Rent for such parking spaces as herein provided, to a separate entity created for the purpose of providing the parking privileges set forth herein. In such event, Landlord and Tenant agree to execute and deliver appropriate documentation, including documentation with the new entity, reasonably necessary to provide for the new entity to assume Landlord’s obligations to provide the parking privileges to Tenant as specified herein and for the Tenant to pay the Additional Rent attributable to the parking privileges directly to the new entity. Notwithstanding the foregoing, any failure of such assignee to provide to Tenant the parking privileges set forth herein shall be a Landlord default under this Lease.

Section 2.5 - Commencement Date.

“Commencement Date” means February 8, 2006.

Section 2.6 - Extension Options.

Provided that there has been no Event of Default which is uncured and continuing on the part of the Tenant and the Tenant is, as of the date of exercise and as of the commencement date of the Extension Term (as such term is defined below), actually occupying sixty percent (60%) or more of the Premises for its own business purposes, the Tenant shall have the right to extend the Term hereof for two (2) successive periods of three (3) years each (each such three (3) year period an “Extension Term”).

(a)           Such right to extend the Term shall be exercised by the giving of notice by Tenant to Landlord at least nine (9) months prior to the expiration of the then current Term. Upon the giving of such notice, this Lease and the Term hereof shall be extended for an additional term of three (3) years without the necessity for the execution of any additional documents except a document evidencing the Annual Fixed Rent for the Extension Term to be determined as set forth below. Time shall be of the essence with respect to the Tenant’s giving notice to extend the Term. In no event shall the Term hereof be extended for more than six (6) years after the expiration of the Initial Term.

(b)  Each Extension Term shall be upon all the terms, conditions and provisions of this Lease except the Annual Fixed Rent during each such three (3) year Extension Term shall be the then Extension Fair Rental Value of the Premises for such Extension Term to be determined under this Section 2.6.

(c)  For purposes of each Extension Term described in this Section 2.6, the Extension Fair Rental Value of the Premises shall mean ninety-five percent (95%) of the then current fair market annual rent for leases of other space similarly improved, taking into account the condition to which such premises have been improved (excluding Removable Alterations) and the economic terms and conditions specified in this Lease that will be applicable thereto, including the savings, if any, due to the absence or reduction of brokerage commissions; provided, however, in no event shall the Extension Fair Rental Value bean amount that is less than the Annual Fixed Rent due during the period immediately preceding such extension. The Landlord and Tenant shall endeavor to agree upon the Extension Fair Rental Value of the Premises within thirty (30) days after the Tenant has exercised an option for an Extension Term. If the Extension Fair Rental Value of the Premises is not agreed upon by the Landlord and the Tenant within this time frame, each of the Landlord and the Tenant shall retain a real estate professional with at least ten (10) years continuous experience in the business of appraising or marketing (including brokering) similar commercial real estate in the Cambridge, Massachusetts area who shall, within thirty (30) days of his or her selection,  prepare a written report summarizing his or her conclusion as to the Extension Fair Rental Value.  The Landlord and the Tenant shall simultaneously exchange such reports; provided, however, if either party has not obtained such a report within forty-five (45) days after the last day of the thirty (30) day period referred to above in this Section 2.6, then the determination set forth ( in the Other party’s report shall be final and binding upon the parties. If both parties receive reports within such time and the lower determination is within ten percent (10%) of the higher determination, then the average of these determinations shall be deemed to be the Extension Fair Rental Value for the Premises. If these determinations differ by more than ten percent (10%), then the Landlord and the tenant shall mutually select a person with the qualifications stated above (the “Final Professional”) to resolve the dispute as to the Extension Fair Rental Value for the Premises. If the Landlord and the Tenant cannot  agree upon the designation of the Final Professional within ten (10) days of the exchange of the first valuation reports, either party may apply to the American Arbitration

Association, the Greater Boston Real Estate Board, or any successor thereto, for the designation of a Final Professional. Within ten (10) days of the selection of the Final Professional, the Landlord and the tenant shall each submit to the Final Professional a copy of their respective real estate professional’s determination of the Extension Fair Rental Value for the Premises. The Final Professional shall then, within thirty (30) days of his or her selection, prepare a written report summarizing his or her conclusion as to the Extension Fair Rental Value (the “Final Professional’s Valuation”). The Final professional shall give notice of the Final Professional’s Valuation to the Landlord and the Tenant and such decision shall be final and binding upon the Landlord and the Tenant, unless Landlord or Tenant provide written notice of disapproval to the other party within ten (10) days of its receipt of the Final Professional’s Valuation.  In the event that Landlord or Tenant disapproves of the Final Professional’s Valuation, (i) the disapproving party shall be responsible for payment to all third party appraisers utilized in connection with the process set forth in this Section 2.6, and (ii) the Lease shall be terminated effective three (3) months following the end of the original term (Tenant shall pay rent at the Annual Fixed Rent during such three (3) month period). In the event that Landlord and Tenant do not terminate this Lease pursuant to the preceding sentence and the term of the Lease is extended, each party shall pay the fees and expenses of its real estate professional and counsel, if any, in connection with any proceeding under this paragraph, and one-half of the fees and expenses of the Final Professional. In the event that the commencement of the Extension Term occurs prior to a final determination of the Extension Fair Rental Value therefor (the “Extension Rent Determination Date”), then the Tenant shall pay the Annual Fixed Rent at the greater of (i) the rate specified by the Landlord in its proposed Extension Fair Rental Value or (ii) the then applicable Fixed Rental Rate (such greater amount being referred to as the “Interim Rent”). If the Annual Fixed Rent as finally determined for the Extension Term is determined to be greater than the Interim Rent, then the Tenant shall pay to the Landlord the amount of the underpayment for the period from the end of the initial term of this Lease until the Extension Rent Determination Date within thirty (30) days of the Extension Rent Determination Date If the Annual Fixed Rent as finally determined for the Extension Term is determined to be less than the Interim Rent, then the Landlord shall credit the amount of such overpayment against the monthly installments of Annual Fixed Rent coming due after the Extension Rent Determination Date.

ARTICLE III

RENT AND OTHER PAYMENTS

Section 3.1 - Annual Fixed Rent.

From and after the Commencement Date, the Tenant shall pay, without notice or demand, monthly installments of one-twelfth (of the Annual Fixed Rent in effect and applicable to the Premises, in advance, on the first day of each calendar month of the Term and of the corresponding fraction of said one (for any fraction of a calendar month at the Commencement Date or end of the Term. The Annual Fixed Rent applicable to the Premises during the Term shall be as set forth in Exhibit A.

Section 3.2 – Real Estate Taxes.

From and after the Commencement Date, during the Term, the Tenant shall pay to the Landlord, as Additional Rent, the Tenant’s Tax Expenses Allocable to the premises (as such term is hereinafter defined) in accordance with this Section 3.2. The following terms shall have the meanings indicated or referred to below:

(a) “Tax Year” means the 12-month period beginning July 1 each year or if the appropriate governmental tax fiscal period shall begin on any date other than July 1, such other date.

(b) “The Tenant’s Tax Expense Allocable to the Premises” means that portion of the Landlord’s Tax Expenses for a Tax Year which bears the same proportion thereto as the rentable floor area of the Premises (from time to time) bears to the total rentable floor area of the Building; provided, however, in the event that retail space in the Building is valued by the assessing authorities differently than the office space in the Building due solely on the basis of its use as retail space, the Tenant’s Tax Expense Allocable to the Premises with respect to any Tax Year will be adjusted as is appropriate so that the Tenant is responsible for the portion of the Real Estate Taxes which are properly allocable to the Premises, as reasonably determined by Landlord based on information with respect to the assessment process made available by the assessing authorities.

(c) “The Landlord’s Tax Expenses” with respect to any Tax Year means the aggregate Real Estate Taxes on the Property with respect to that Tax Year, reduced by any abatement or other tax refunds or credits received with respect to that Tax Year, plus any fees paid to third party consultants used by Landlord in connection with the calculation, abatement or refunding of Real Estate Taxes.

(d) “Real Estate Taxes” means (1) all taxes and special assessments of every kind and nature assessed by any governmental authority on the Property; and (ii) reasonable expenses of any proceedings for abatement of such taxes or special assessments. Any special assessments to be included within the definition of “Real Estate Taxes” for any Tax Year shall be limited to the amount of the installment (plus any interest thereon) of such special assessment (which shall be payable over the longest period permitted by law) required to be paid during such Tax Year. There shall be excluded from Real Estate Taxes all income, estate, succession, inheritance, excess profit, franchise and transfer taxes; provided, however, that if at anytime during the Term the present system of ad valorem taxation of real property shall be changed so that in lieu of the whole or any part of the ad valorem tax on real property, there shall be assessed on the Landlord a capital levy or other tax on the gross rents received with respect to the Property, or a federal, state, county, municipal or other local income, franchise, excise or similar tax assessment, levy or charge (distinct from any now in effect), based, in whole or in part, upon any such gross rents, then any and all of such taxes assessments, levies or charges, to the extent so based, shall be deemed to be included within the term “Real Estate Taxes.”

Payments by the Tenant on account of the Tenant’s Tax Expenses Allocable to the Premises shall be made monthly at the time and in the fashion herein provided for the payment of Annual Fixed Rent and shall be in the amount of one-twelfth (1/12th of the Tenant’s Tax Expenses Allocable to the Premises for the current Tax Year as reasonably estimated by the Landlord.

Not later than one hundred twenty (120) days after the end of each Tax Year, the Landlord shall render the Tenant a statement in reasonable detail showing for the preceding Tax Year or fraction thereof, as the case may be, Real Estate Taxes for such Tax Year, and any abatements or refunds of such Real Estate Taxes.  Expenses incurred in obtaining any tax abatement or refund may be charged against such tax abatement or refund before the adjustments are made for the Tax Year. If at the time such statement is rendered it is determined with respect to any Tax Year, that the Tenant has paid (i) less than the Tenant’s Tax Expenses Allocable to the Premises or (ii) more than the Tenant’s Tax Expenses Allocable to the Premises, then, in the case of clause “(i)” the Tenant shall pay to the Landlord, as Additional Rent, within thirty (30) days of such statement the amount of such underpayment and, in the case of clause “(ii)” the Landlord shall credit the amount of such Overpayment against the next monthly installments of the Tenant’s Tax Expenses Allocable to the Premises next thereafter coming due (or refund such overpayment if the Term has expired or earlier terminated within thirty (30) days after such expiration or termination).

To the extent that Real Estate Taxes shall be payable to the taxing authority in installments with respect to periods other than a Tax Year, the statement to be furnished by the Landlord shall be rendered and payments made on account of such installments.  Notwithstanding the foregoing provisions, no decrease in Landlord’s Tax Expenses with respect to any Tax Year shall result in a reduction of the amount otherwise payable by Tenant if and to the extent any such decrease is attributed by the assessing authority solely to the vacant space in the Building based on information with respect to the assessment process made available by the assessing authorities to Landlord; provided, however, that in no event shall Landlord collect more than one hundred percent (100%) of the Landlord’s lax Expenses for the tenants of the Building.

Section 3.3 - Operating Expenses.

From and after the Commencement Date, during the Term, the Tenant shall pay to the Landlord, as Additional Rent, the Tenant’s Operating Expenses Allocable, to the Premises, as hereinafter defined, in accordance with this Section 3.3. The following terms shall have the meanings indicated or referred to below:

(a) “The Tenant’s Operating Expenses Allocable to the Premises” means that portion of the Operating Expenses for the Property which bears the same proportion thereto as the rentable floor area of the Premises bears to the total rentable floor area of the Building.

(b) “Operating Expenses for the Property” means Landlord’s cost of operating, cleaning, maintaining and repairing the Property, the roads, driveways and walkways for providing access to the Building, and shall include without limitation the cost of services on Exhibit D; premiums for insurance carried pursuant to Section 7.4; the amount deductible from any fire or other casualty Insurance claim of the Landlord (which amount is currently $10,000.00, and which amount may be increased during the Term and any Extension Term provided such increase is reasonable and customary); reasonable compensation and all fringe benefits, worker’s compensation insurance premiums and payroll taxes paid to, for or with respect to all persons (University Park/Building general manager and below) directly engaged in the managing, operating, maintaining or cleaning of the Property; interior landscaping and maintenance; steam, water, sewer, gas, oil, electricity, telephone and other utility charges (excluding such utility

charges which are either separately metered or separately chargeable to Tenant or other Building tenants); cost of building and cleaning supplies used in cleaning the common areas of the Property; the costs of providing conditioned air for HVAC purposes (excluding such costs which are either separately metered or separately chargeable to tenants for additional or special services and those charges related to the cost of operating base Building equipment not used by Tenant)); the costs of routine environmental management programs operated by Landlord (including, but not limited to, periodic testing of air quality, temperature and humidity and the proper operation of the HVAC system): rental costs for equipment used in the operating, cleaning, maintaining or repairing of the cotillion areas of the Property, or the applicable fair market rental charges in the case of equipment owned by Landlord; cost of cleaning; cost of maintenance, repairs and replacements (other than repairs and replacements reimbursed from contractors under guarantees or made by  the Landlord pursuant to the Work Letter, reimbursed from any tenant of the Property or for which Landlord otherwise receives reimbursement); cost of snow removal; cost of landscape, streetscape, graphics, signage and banner maintenance; security services (security shall be building standard security; Tenant shall be responsible for the cost of any additional security services it may require due to its business operations); payments under service contracts with independent contractors; management fees at reasonable rates consistent with the type of occupancy and the service rendered, which such fees are currently $1.07 per rentable square foot; the cost of any capital improvement either required by law or regulation or which reduces the Operating Expenses for the Property or which improves the management and operation of the Property in a manner acceptable to Tenant, which cost shall be amortized in accordance with generally accepted accounting principles, together with interest on the unamortized balance at the base lending rate announced by a major commercial bank designated by the Landlord (the “Prime Rate”), or such higher rate (not to exceed the Prime Rate plus three percent [3%]) as may have been paid by the Landlord on funds actually borrowed for the purpose of constructing such capital improvements; charges reasonably allocated to the Building on a prorata basis for the cost of operating, cleaning, maintaining and repairing of University Park common areas, facilities, amenities and open spaces; and all other reasonable and necessary expenses paid in connection with the Operation, cleaning, maintenance, repair and administration of the Property.  If for any reason, portions of the rentable area of the Building not included in the Premises were not occupied by tenants or any tenants in the Building were supplied with a different level of standard services than those supplied to the Tenant under this Lease. Landlord’s Operating Expenses for the Property shall include the amounts reasonably determined by Landlord which would have been incurred if all of the rentable area in the Building were occupied and were supplied with the sane level of standard services as supplied to the Tenant under this Lease. Additionally, if certain services or facilities supplied under this Lease by Landlord do not from time to time, in (Landlord’s reasonable judgment, serve all of the users in the Building (i.e.,  office, retail, banking, restaurant, etc.) then the costs associated therewith shall be equitably allocated by Landlord, in its reasonable judgment, exclusively or proportionately to and among only those portions of the total rentable floor area of the Building that are benefiting from such services or facilities.

Operating Expenses for the Property shall not include the following: the Landlord’s Tax Expense; cost of repairs or replacements (i) resulting from eminent domain takings, (ii) to the extent reimbursed by insurance, (iii) resulting from correcting defects in the work for which the Landlord is obligated pursuant to the Work Letter or pursuant to agreement with any other tenant in the Building, or those covered by builder’s or contractor’s warranties or guaranties, (iv)

required, above and beyond ordinary periodic maintenance, to maintain in serviceable condition the major structural elements of the Building, including the roof, exterior walls and floor slabs; replacement or contingency reserves; cost of capital improvements except to the extent permitted in the preceding paragraph; ground lease rents or payment of debt obligations; accounting, legal and other professional fees for matters not relating to the normal administration and operation of the Property; promotional, advertising, public relations or brokerage fees and commissions paid in connection with services rendered for securing or renewing leases; services provided for the exclusive use or benefit of retail tenants in the Building; costs of renovating or otherwise improving space for tenants or other occupants of the Building; any cost of reconstruction or other work occasioned by fire, windstorm, or by any other casualty except as specifically permitted in the preceding paragraph; or by the exercise of the right of eminent domain; interest and principal payments on loans or any rental payments on any ground leases or legal fees or other costs of defending or prosecuting any lawsuits or disputes with any mortgagee or ground lessor; advertising expenses and leasing commissions and any other cost in connection with leasing of space in the Building; any cost or expenditure for which the Landlord is reimbursed, whether by insurance proceeds or otherwise; the cost of constructing and maintaining the 20 Sidney Street Garage or any temporary parking area provided to the Tenant pursuant to Section 2.4. The Landlord’s Operating Expenses shall be reduced by the amount of any proceeds, payments, credits or reimbursements which the Landlord receives from sources other than tenants and which are applicable to such Operating Expenses for the Property.

Payments by the Tenant for its share of the Operating Expenses for the Property shall be made monthly at the time and in the fashion herein provided for the payment of Annual Fixed Rent. The amount so to be paid to the Landlord shall be an amount from time to time reasonably estimated by the Landlord to be sufficient to aggregate a sum equal to the Tenant’s share of the operating Expenses for the Property for each fiscal year of Landlord.

Not later than ninety (90) days after the end of each fiscal year of Landlord or fraction thereof during the Term or fraction thereof at the end of the Term the Landlord shall render the Tenant a statement (“Landlord’s Statement”) in reasonable detail and according to usual accounting practices certified by a representative of the Landlord, showing for the preceding fiscal year of Landlord or fraction thereof, as the case may be the Operating Expenses for the Property and the Tenant’s Operating Expenses Allocable to the Premises. Said statement to be rendered to the tenant also shall show for the preceding fiscal year of Landlord or fraction thereof, as the case may be, the amounts of Operating Expenses already paid by the Tenant.  If at the time such statement is rendered it is determined with respect to any fiscal year, that the tenant has paid (i) less than the Tenant’s Operating Expenses Allocable to the premises or (ii) more than the Tenant’s Operating Expenses Allocable to the Premises, then, in the case of clause “(i)” the Tenant shall pay to the Landlord, as Additional Rent, within thirty (30) days of such statement the amounts of such underpayment and, in the case of clause “(ii)” the Landlord shall credit the amount of such overpayment against the next monthly installment of the Tenant’s Additional Rent (or refund such overpayment it the Term has expired or earlier terminated within thirty (30) days alter such expiration or termination).

Section 3.4 - Other Utility Charges.

During the Term, the tenant shall pay directly to the provider of the service all separately metered charges for electrical service in the Premises (including but not limited to, lights, electrical outlets, VAV boxes and any other special equipment exclusively servicing the Premises, whether located within or outside of the Premises), and shall pay to Landlord as Additional Rent its allocable share of the actual costs charged to Landlord by the providers of water, sewer and other services and Utilities which are based on submetered usage.

Section 3.5 - Above-standard Services.

If the Tenant requests and the Landlord elects to provide any services to the Tenant in addition to those described in Exhibit D, the Tenant shall ( pay to the Landlord, as Additional Rent, the amount billed by Landlord for such services at Landlord’s rates as are from time to time in effect, which rates shall reflect the actual cost to Landlord of providing such services, including reasonable actual out-of-pocket costs to third parties and reasonable costs associated with the use of internal staff of either Landlord or affiliated entities of Landlord (but only to the extent such costs are not included in Operating Expenses by Landlord). If the Tenant has requested that such services be provided on a regular basis, the Tenant shall, if requested by the Landlord, pay for such services at the time and in the fashion in which Annual Fixed Rent under this Lease is payable.  Otherwise, the Tenant shall pay for such additional services within thirty (30) days after receipt of an invoice from the Landlord. Landlord shall have the right from time to time to inspect Tenant’s utility meters and to install timers or submeters thereon for purposes of monitoring above-standard service usage.

Section 3.6 - No Offsets.

Annual Fixed Rent and Additional Rent shall be paid by the Tenant without offset, abatement or deduction except as specifically permitted herein.

Section 3.7 - Tenant’s Audit Rights.

Landlord agrees to make its books and records relating to the Operating Expenses for the Property and the Landlord Tax Expenses available for examination during normal business hours at Landlord’s principal office in Cleveland, Ohio upon reasonable notice by Tenant and its representatives; provided that any such examination or audit shall be by an employee of Tenant or an accounting firm or property management firm, the fees of which are not determined on a contingent basis, shall be at Tenant’s sole cost and expense, arid may be conducted only if a notice is sent by Tenant requesting the same not later than ninety (90) days following delivery of Landlords Statement.  If Tenant’s audit discloses a discrepancy which involves an overcharge of Tenant’s Operating Expenses Allocable to the Premises or the Tenant Tax Expense Allocable to the Premises for the period covered by such Landlord Statement, Landlord shall provide Tenant with a credit against the next installment(s) of Tenant Additional Rent in the amount of the overpayment by Tenant.  If such discrepancy as so agreed upon or determined involves an overcharge to Tenant of more than five percent (5%) in the aggregate for such year Landlord shall be responsible for the reasonable hourly fees of the accounting firm or auditing firm conducting the audit.

ARTICLE IV

ALTERATIONS

Section 4.1 – Consent Required for Tenant’s Alterations.

The Tenant may make interior alterations and additions of a decorative or cosmetic nature (as defined below), the cost of which does not exceed $50,000 in the aggregate in any twelve (12) month period, without the need of any approval from Landlord (“Cosmetic Alterations”). The Tenant shall not make alterations or additions to the Premises except in accordance with the University Park Tenant Design and Construction Manual and the plans and specifications therefor first approved by the Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Tenant shall be responsible for Landlord’s reasonable out-of-pocket costs for any third party architectural, engineering or other consulting services reasonably required by Landlord in connection with Landlord’s review and approval of Tenant’s plans and specifications, provided, however, there shall be no charge in connection with Landlord’s review of Tenant’s plans for the initial alteration to the Premises. The Landlord shall not be deemed unreasonable for withholding approval of any alterations or additions which (i) would adversely affect any structural or exterior element of the Building, any area or element outside of the Premises, or any facility serving any area of the Building outside of the Premises or any publicly accessible major interior features of the Building. (ii) will require unusual expense to readapt the Premises to normal use unless the Tenant first gives assurance reasonably acceptable to the Landlord that such readaptation will be made prior to the expiration of the Term without expense to the Landlord, or (iii) which would not be compatible with existing mechanical or electrical, plumbing, HVAC or other systems in the Building, or use more than Tenants prorata share of Building capacities, in each case, as reasonably determined by the Landlord.

Section 4.2 - Ownership of Alterations.

All alterations and additions shall be part of the Building and owned by the Landlord except for the items listed on Exhibit G (the “Removable Items”), as such Exhibit G may be amended upon the written agreement of Landlord and Tenant. The Removable Items may be removed by Tenant at its option upon the expiration or earlier termination of this Lease, provided, however Landlord may require such removal by Tenant provided Landlord advised Tenant in writing of such requirement prior to the installation of the alteration or addition by Tenant.  If Tenant fails to inform Landlord, in writing, at least ten (10) days prior to the installation of the alteration or addition, thereby preventing Landlord from making a determination as to whether it will want such addition or alteration removed from the Premises prior to its installation, then Landlord may require such removal without exception. All movable equipment and furnishings not attached to the Premises shall remain the property of the Tenant and shall be removed by the Tenant upon termination or expiration of this Lease. The Tenant shall repair any damage caused by the removal of any alterations, additions or personal property from the Premises, including the Removable Items. Additionally, Tenant shall be responsible for  decommissioning all lab space in the Premises including the removal of all chemical, radioactive and/or biohazardous materials upon termination or expiration of this Lease.

Section 4.3 - Construction Requirements for Alterations.

All construction work by the Tenant shall be done in a good and workmanlike manner employing only first-class materials and in compliance with Landlord’s construction rules and regulations then in effect and with all applicable laws and all lawful ordinances, regulations and orders of governmental authority and insurers of the Building. The Landlord or Landlord’s authorized agent may (but without any implied obligation to do so) inspect the work of the Tenant at reasonable times and shall give notice of observed defects. All of the Tenant alterations and additions and installation of furnishings shall be coordinated with any work being performed by the Landlord and In such manner as to maintain harmonious labor relations and not to damage the Building or interfere with Building construction or operation and, except for installation of furnishings, shall be performed by contractors or workmen first approved by the Landlord, which approval the Landlord agrees not to unreasonably withhold or delay.  The Tenant, before starting any work, shall receive and comply with Landlord’s construction rules and regulations and shall cause Tenant’s contractors to comply therewith shall secure all licenses and permits necessary therefore, shall deliver to the Landlord a statement of the names of all its contractors and subcontractors and the estimated cost of all labor and material to be furnished by them, and shall deliver to Landlord security satisfactory to the Landlord protecting the Landlord against liens arising out of the furnishing of such labor and material; and cause each contractor to carry worker’s compensation insurance in statutory amounts covering all the contractors and subcontractors’ employees and comprehensive general public liability insurance with such limits as the Landlord may require reasonably, but in no event less than $1,000,000 (individual) /$3,000,000 (aggregate) or in such other amounts as Landlord may reasonably require covering personal injury and death and property damage (all such insurance to be written in companies approved reasonably by the Landlord and insuring the Landlord. Landlord’s managing agent, ground lessor and first mortgagee, and the Tenant as well as the contractors and to contain a requirement for at least thirty (30) days’ notice to the Landlord prior to cancellation, non renewal or material change), and to deliver to the Landlord certificates of all such insurance.

Section 4.4 - Payment for Tenant Alterations.

The Tenant agrees to pay promptly when due the entire cost of any work done on the Premises by the Tenant, its agents, employees or independent contractors, and not to cause or permit any liens for labor or materials performed or furnished in connection therewith to attach to the Premises or the Property and promptly to discharge any such liens which may so attach. If any such lien shall be filed against the Premises or the Property as a result of any work done on the Premises by Tenant, its agents, employees or independent contractors, and the Tenant shall fail to cause such lien to be discharged within ten (10) days after the filing thereof, the Landlord may cause such lien to be discharged by payment, bond or otherwise without investigation as to the validity thereof or as to any offsets or defenses which the Tenant may have with respect to the amount claimed. The Tenant shall, reimburse the Landlord, as Additional Rent, for any reasonable cost so incurred and shall indemnify and hold harmless the Landlord from and against any and all claims, costs, damages, liabilities and expenses (including reasonable attorneys’ fees) which may be incurred or suffered by the Landlord by reason of any such lien or its discharge.

ARTICLE V

RESPONSIBILITY FOR CONDITION OF BUILDING AND PREMISES

Section 5.1 - Maintenance of Building and Common Areas by Landlord.

Except as otherwise provided in Article VIII, the Landlord shall make such repairs to all structural elements of the Building, including without limitation, the roof, exterior and other load-bearing walls and floor and floor slabs as may be necessary to keep and maintain the same in good order, condition and repair, and maintain and make, or cause to be maintained and made, such repairs to the Common Building Areas as may be necessary to keep them in good order, condition and repair, including without limitation, the glass in the exterior walls of the Building, and all mechanical systems and equipment serving the Building and not exclusively serving the Premises. The Landlord shall further perform the services set forth on Exhibit D attached hereto. The Landlord shall in no event be responsible to the Tenant for any condition in the Premises or the Building to the extent caused by an act or neglect of the Tenant, or any invitee or contractor of the Tenant. Tenant, its employees, agents and contractors, shall reasonably cooperate in the ongoing conduct of any environmental management programs conducted by Landlord, and shall participate and comply with the reasonable requirements of such programs to the extent Tenant is notified of same in writing and such requirements and recommendations pertain to the operations or maintenance responsibilities of the Tenant under this Lease, such requirements do not unreasonably interfere with Tenant’s use of the Premises. Except as otherwise provided in this Lease, Landlord’s costs in performing the obligations contained in this Section 5.1 shall be reimbursed by the Tenant to the extent provided in Section 3.3.

Landlord covenants that it shall use reasonable efforts to operate, clean, repair, maintain and manage the Property efficiently and economically.

Section 5.2 - Maintenance of Premises by Tenant.

The Tenant shall keep neat and clean and maintain in good order, condition and repair the Premises and every part thereof, including mechanical equipment and other systems exclusively serving the Premises, reasonable wear and tear excepted, and further excepting those repairs for which the Landlord is responsible pursuant to Section 5.1 and damage by fire or other casualty and as a consequence of the exercise of the power of eminent domain, and shall surrender the Premises at the end of the Term in such condition, first removing all goods and effects of the Tenant and, to the extent specified by the Landlord by notice to the Tenant pursuant to Section 4.2, all alterations and additions made by the Tenant, and repairing any damage caused by such removal and restoring the Premises and leaving them clean and neat. The Tenant shall be responsible for the cost of repairs which may be made necessary by reason of damages to common areas in the Building by the Tenant, or any of the contractors or invitees of the Tenant. All of Tenant’s data, networking, security and other systems and equipment, shall be maintained by Tenant. Tenant shall, upon request, provide evidence reasonably satisfactory to Landlord that it has available the necessary expertise to properly conduct and carry out the responsibility, either through persons employed by the Tenant or through contracts with Independent service organizations, or a combination thereof.

Section 5.3 - Delays in Landlord’s Services.

The Landlord shall not be liable to the Tenant for any compensation or reduction of rent by reason or inconvenience or annoyance or for loss of business arising from the necessity of the Landlord or its agents entering the Premises in accordance with Section 2.3 hereof for any purposes authorized in this Lease, or for repairing the Premises as required or permitted herein or any portion of the Building. In case the Landlord is prevented or delayed from making any repairs, alterations or improvements, or furnishing any services or performing any other covenant or duty to be performed on the Landlord’s part, by reason of any External Cause, the Landlord shall not be liable to the Tenant therefor, nor, except as expressly otherwise provided in this Lease, shall the Tenant be entitled to any abatement or reduction of rent by reason thereof, nor shall the same give rise to a claim in the Tenant’s favor that such failure constitutes actual or constructive, total or partial, eviction from the Premises provided, however, Landlord shall use reasonable, good faith efforts not to interfere with Tenants conduct of its business on the Premises.

The Landlord reserves the right to stop any service or utility system when necessary by reason of accident or emergency, until necessary repairs have been completed; provided, however that in each instance of stoppage, the Landlord shall exercise diligent efforts to eliminate the cause thereof. Except in case of emergency repairs, the Landlord will give the Tenant reasonable advance notice of any contemplated stoppage and will use diligent efforts to avoid unnecessary inconvenience to the Tenant by reason thereof. In no event shall the Landlord have any liability to the Tenant for the unavailability of heat, light or any utility or service to be provided by the Landlord to the extent that such unavailability is caused by external Causes, provided, however, that the Landlord is obligated to exercise diligent efforts to restore the services or utility systems’ operation.

Notwithstanding anything contained herein to the contrary, in the event Landlord shall fail to provide the services it is required to provide to Tenant hereunder (a “Service Failure”) other than as a result of Tenant’s acts or omissions or External Causes, and as a result thereof, Tenant is reasonably (unable to use or conduct its operations on part or all of the Premises for more than three (3) business days, Tenant shall be entitled to proportionate abatement of rent for the period Tenant is reasonably unable to use or conduct its operations in part or all of the Premises.  If a Service Failure is a result of any cause other than Tenant’s acts or omissions, and results in a loss of service to the Premises and to more than fifty percent (50%) of the Building, Tenant shall have the right to terminate this Lease if Landlord fails or is unable to restore such services within six (6) months from the date of interruption and Tenant is reasonably unable to use or conduct its operations in a substantial part or all of the Premises.  If a Service Failure is a result of any cause other than Tenant acts or omissions, and results in a loss of service to the Premises but to less than Fifty percent (50%) of the Building. Tenant shall have the right to terminate this Lease if Landlord tails or is unable to restore such services within three (3) months from the date of interruption and Tenant is reasonably unable to use or conduct its operations in a substantial part or all of the Premises. Tenant shall have the right to terminate this Lease as aforesaid by written notice to Landlord at any time after the expiration of such six (6) month period, and such termination shall be effective as of the date of Tenant notice.

ARTICLE VI

TENANT COVENANTS

The Tenant covenants during the Term and for such further time as the Tenant occupies any part of the Premises:

Section 6.1 - Permitted Uses.

The Tenant shall occupy the Premises only for the Permitted Uses, and shall not injure or deface the Premises or the Property, nor permit in the Premises any auction sale. The Tenant shall give written notice to the Landlord of any materials on OSHA’s right to know list or which are subject to regulation by any other federal, state, municipal or other governmental authority and which the Tenant intends to have present at the Premises. The Tenant shall comply with all requirements of public authorities and of the Board of Fire Underwriters in connection with methods of storage, use and disposal thereof. The Tenant shall not permit in the Premises any nuisance or the emission from the Premises of any objectionable noise, odor or vibration, nor use or devote the Premises or any part thereof for any purpose which is contrary to law or ordinance or liable to invalidate or increase premiums for any insurance on the Building or its contents or liable to render necessary any alteration or addition to the Building, nor commit or permit any waste in or with respect to the Premises, nor generate, store or dispose of any oil, toxic substances, hazardous wastes, or hazardous materials (each a, “Hazardous Material”), or permit the same in or on the Premises or any parking areas provided for under this Lease, unless first giving Landlord notice thereof. The Tenant may use radioactive materials and experiment with laboratory animals on the Premises so long as Tenant complies, at all times during the Term, with any and all applicable laws, regulations, ordinances, orders and the like. The Tenant shall not dump, or in any way introduce any Hazardous Materials into septic, sewage or other waste disposal systems serving the Premises or any parking areas provided for under this Lease, except in accordance with all applicable laws, regulations, ordinances, orders and the like or as permitted by government license or permit obtained by the Tenant. The Tenant will indemnify the Landlord and its successors and assigns against all claims, loss, cost and expense, including reasonable attorneys’ fees, incurred as a result of any contamination of the Building or any other portion of University Park with Hazardous Materials by the Tenant or Tenant’s contractors, licensees, invitees, agents, servants or employees. With respect to any Permitted Use, Tenant shall provide to Landlord certified copies of all regulatory filings, licenses and permits Tenant has been required by law to obtain prior to handling any such Hazardous Materials, together with evidence reasonably satisfactory to Landlord that such licenses and/or permits are valid and in full force and effect. Tenant shall have received all such licenses and/or permits prior to commencement of its operations in the Premises.  From time to time hereafter, upon thirty (30) days advance notice from Landlord, Tenant will provide Landlord with such updated certified copies of licenses and/or permits as the Landlord may reasonably request. Upon written request by the Landlord. Tenant shall immediately remove any material or substances which are not in compliance with this Section 6.1.

Section 6.2 - Laws and Regulations.

The Tenant shall comply with all federal, state and local laws, regulations, ordinances, executive orders, federal guidelines, and similar requirements in effect from time to time, including, without limitation, any such requirements pertaining to employment opportunity, anti-discrimination, affirmative action and traffic mitigation.

Section 6.3 - Rules and Regulations; Signs.

The Tenant shall not obstruct in any manner any portion of the Property not hereby leased; shall not permit the placing of any signs, curtains, blinds, shades, awnings, aerials or flagpoles, or the like, visible from outside the Premises; and shall comply with all reasonable rules and regulations of uniform application to all occupants of the Building now or hereafter made by the Landlord, of which the Tenant has been given notice, for the care and use of the Property and the parking facilities relating thereto.  The Landlord shall not be liable to the Tenant for the failure of other occupants of the Building to conform to any such rules and regulations, but Landlord shall make reasonable efforts to enforce such rules and regulations on a uniform basis.

The Landlord shall provide a Building directory in the office lobby with Tenant’s name, and floor locations within the Building listed therein and Building standard signage at the entry of the Premises.

Section 6.4 - Safety Compliance.

The Tenant shall keep the Premises equipped with all safety appliances required by law or ordinance or any other regulations of any public authority because of any non-office use made by the Tenant (as opposed to major safety appliances required generally for the Property and the Building, for which the Landlord shall be responsible) and to procure all licenses and permits so required because of such use and, if requested by the Landlord, do any work so required because of such use, it being understood that the foregoing provisions shall not be construed to broaden in any way the Tenant’s Permitted Uses. Tenant shall conduct such periodic tests, evaluations or certifications of safety appliances and equipment as are required or recommended in accordance with generally accepted standards to ensure that such safety appliances and equipment remain in good working order, and shall provide to Landlord copies of such reports, evaluations and certifications as requested by Landlord.

Section 6.5 - Landlord’s Entry.

The Tenant shall permit the Landlord and its agents, after reasonable notice (except in the case of emergencies) and with accompaniment by a representative of Tenant to enter the Premises at all reasonable hours for the purpose of inspecting or of making repairs as required or permitted to be made herein to the same, and for the purpose of showing the Premises to prospective purchasers and mortgagees at all reasonable times after reasonable prior notice to Tenant and to prospective tenants during the last twelve (12) months of the Term provided that in connection with such entry.  Tenant may provide procedures reasonably designed so as not to jeopardize Tenant’s trade secrets proprietary technology or critical business operations. Except in

case of an emergency, Landlord shall not enter Tenant’s so-called “clean rooms” without Tenant’s prior consent and without accompaniment by a representative of Tenant.

Section 6.6 - Floor Load.

The Tenant shall not place a load upon any floor in the Premises exceeding the floor load per square foot of area which such floor was designed to carry and which is allowed by law. Further, Tenant shall not move any safe, vault or other heavy equipment in about or out of the Premises except in such manner, in such areas and at such time as the Landlord shall in each instance reasonably authorize The Tenant’s machines and mechanical equipment shall be placed and maintained by the Tenant at the Tenant’s expense in settings sufficient to absorb or prevent vibration or noise that may be transmitted to the Building structure or to any other space in the Building.

Section 6.7 - Personal Property Tax.

The Tenant shall pay promptly when due all taxes which may be imposed upon personal property (including, without limitation, fixtures and equipment) in the Premises to whomever assessed. Tenant shall have the right to contest the validity or amount of any such taxes by appropriate proceedings diligently conducted in good faith.

Section 6.8 - Assignment and Subleases.

The Tenant shall not assign, mortgage, pledge, hypothecate or otherwise transfer this Lease, or sublet (which term, without limitation, shall include granting of concessions, licenses and the like) the whole or any part of the Premises without, in each instance, having first received the consent of the Landlord which consent shall not be unreasonably withheld or delayed. Except as specifically permitted herein, any assignment or sublease made without such consent shall be void. Notwithstanding anything to the contrary contained in this Section, Tenant shall have the right to assign or otherwise transfer this Lease or the Premises, or part of the Premises, without obtaining the prior consent of Landlord, (a) to its parent corporation or to wholly owned subsidiary or to a corporation which is wholly owned by the same corporation which wholly owns Tenant, provided that (i) the transferee shall, prior to the effective date of the transfer, deliver to Landlord instruments evidencing such transfer and its agreement to assume and be bound by all the terms, conditions and covenants of this Lease to be performed by Tenant, all in form reasonably acceptable to Landlord, and (ii) at the time of such transfer there shall not be an uncured Event of Default under this Lease; or (b) to the purchaser of all or substantially all of its assets or to any entity into which the Tenant may be merged or consolidated (along with all or substantially all of its assets) (the “Acquiring Company”), provided that (i) the net assets of the Acquiring Company at the time of the transfer or merger shall not be less than the net assets of Tenant at the time of the signing of this Lease, (ii) the Acquiring Company continues to operate the business conducted in the Premises consistent with the Permitted Uses described in Exhibit A hereto (iii) the Acquiring Company shall assume in writing, in form acceptable to Landlord, all of Tenant’s obligations under this Lease (iv) Tenant shall provide to Landlord such additional information regarding the Acquiring Company as Landlord shall reasonably request, and (v) Tenant shall pay Landlord’s reasonable expenses actually incurred in connection

therewith. Unless Landlord shall have objected to such assignment or transfer by Tenant within ten (10) business days following Landlord’s receipt of the information or items described in (b)(i) and (iii) above, Landlord shall be deemed to have waived its right to object thereto. The transfers described in this paragraph are referred to hereinafter as “Permitted Transfers.”

Whether or not the Landlord consents, or is required to consent, to any assignment or subletting, and except for Permitted Transfers, the Tenant named herein shall remain fully and primarily liable for the obligations of the tenant hereunder, including, without limitation, the obligation to pay Annual Fixed Rent and Additional Rent provided under this Lease. The Tenant shall give the Landlord notice of any proposed sublease or assignment, whether or not the Landlord’s consent is required hereunder, specifying the provisions of the proposed subletting or assignment, including (i) the name and address of the proposed subtenant or assignee, (ii) a copy of the proposed subtenant’s or assignee’s, most recent annual financial statement, (iii) all of the terms and provisions upon which the proposed subletting or assignment is to be made and such other information concerning the proposed subletting or assignment is to be made and such other information concerning the proposed subtenant or assignee as the Tenant has obtained in connection with the proposed subletting or assignment. The Tenant shall reimburse the Landlord promptly after receiving a written invoice thereof for reasonable legal and other expenses actually incurred by the Landlord in connection with any request by the Tenant for consent to any assignment or subletting.  If this Lease is assigned, and Tenant is in default beyond any grace or cure period under the Lease, the Landlord may, upon prior written notice to Tenant, at any time arid from time to time, collect rent and other charges from the assignee, sublessee or occupant and apply the net amount collected to the rent and other charges herein reserved, but no such assignment, subletting, occupancy or collection shall be deemed a waiver of the prohibitions contained in this Section 6.8 or the acceptance of the assignee, sublessee or occupant as a tenant, or a release of the Tenant from the further performance by the Tenant of covenants on the part of the Tenant herein contained. The Tenant shall pay to the Landlord fifty percent (50%) of any amounts the Tenant actually receives from any subtenant or assignee as rent, additional rent or other forms of compensation or reimbursement for the sublease, assignment or occupancy of the Premises, after deducting therefrom (i) the then due and payable proportionate monthly share of Annual Fixed Rent Additional Rent and all other monies due to Landlord pursuant to this Lease (allocable in the case of a sublease to that portion of the Premises being subleased), and (ii) all reasonable and customary sublease expenses (including but not limited to bonafide brokerage fees, fit up expenses, free rent periods, marketing costs and attorney’s fees) incurred by Tenant. The preceding sentence shall not apply to any Permitted Transfers. The consent by the Landlord to an assignment or subletting shall not be construed to relieve the Tenant from obtaining the express consent in writing of the Landlord to any further assignment or subletting.

ARTICLE VI

INDEMNITY AND INSURANCE

Section 7.1 – Indemnity.

To the maximum extent this agreement may be made effective according to law, the Tenant agrees to defend, indemnify and save harmless the Landlord from and against all claims, loss, or damage of whatever nature arising from any breach by Tenant of any obligation of Tenant under this Lease beyond applicable notice and cure periods or from any act, omission or

negligence of the Tenant, or the Tenant’s contractors, licensees, invitees, agents, servants or employees, or arising from any accident, injury or damage whatsoever caused to any person or property, occurring after the date that possession of the Premises is first delivered to the Tenant and until the end of the Term and thereafter, so long as the Tenant is in occupancy of any part of the Premises, in or about the Premises or arising from any accident, injury or damage occurring outside the Premises but within the Building, on the Land, on the access roads and ways, in the parking facilities provided pursuant to the Lease, within University Park or any adjacent area maintained by Landlord or any individual or entity affiliated with Landlord, where such accident, injury or damage results from an act or omission on the part of the Tenant or the Tenant agents or employees, licensees, invitees, servants or contractors provided that the foregoing Indemnity shall not include any cost or damage arising from any act, omission or negligence of the Landlord, or the Landlord’s contractors, licensees, invites, agents, servants or employees.

Landlord agrees to defend, indemnify and save harmless Tenant from legal action, damages, loss, liability and any other expense in connection with loss of life, bodily or personal injury or property damage, arising from or out of the intentional or willful misconduct or gross negligence of Landlord, its agents, employees, licensees, servants, invitees or contractors, which occur in or about the Premises, outside the Premises but within the Building, on the Land, on the access roads and ways, in the parking facilities provided pursuant to the Lease, within University Park or any adjacent area maintained by Landlord, except to the extent that such loss of life, bodily or personal injury or property damage is due to the willful misconduct or act, omission or neglect of Tenant, its agents, contractors, employees, licensees, invitees or servants.

The foregoing indemnities and hold harmless agreements shall include indemnity against reasonable attorneys’ fees and all other costs, expenses and liabilities incurred in connection with any such claim or proceeding brought thereon, and the defense thereof.

Section 7.2 - Liability Insurance.

The Tenant agrees to maintain in full force from the date upon which the Tenant first enters the Premises for any reason, throughout the Term, and thereafter, so long as the Tenant is in occupancy of any part of the Premises, a policy of commercial general liability insurance under which the Landlord (and the Building’s managing agent, any ground lessor and any holder of a first mortgage on the Property of whom the Tenant is notified in writing by the Landlord, collectively, the “Additional Named Insureds”) and the Tenant are named as insureds and under which the insurer provides a contractual liability endorsement insuring against all cost, expense and liability arising out of or based upon any and all claims, accidents, injuries and damages described in Section 7.1, in the broadest form of such coverage from time to time available, each such policy shall be noncancellable and nonamendable (to the extent that any proposed amendment reduces the limits or the scope of the insurance required in this Lease) with respect to the Landlord and such ground lessor and first mortgagee without thirty (30) days’ prior notice to the Landlord and the Additional Named Insureds and a certificate of insurance shall be delivered to the Landlord. The minimum limits of liability of such insurance as of the Commencement Date shall be Three Million Dollars ($3,000,000.00) per occurrence and Three Million Dollars ($3,000,000.00) in the aggregate for combined bodily injury (or death) and damage to property, and from time to time during the Term such limits of liability shall be

increased to reflect such higher limits as are customarily required pursuant to new leases of space in the Boston/Cambridge area with respect to similar properties and similar uses.

Section 7.3 – Alterations, Improvement and Betterments; Personal Property at Risk.

The Tenant agrees to maintain in full force at all times throughout the Term, policy(s) of all risk property damage insurance, naming Landlord (and the Additional Named Insureds) and the Tenant as insureds as their interests may appear covering all of Tenant’s leasehold improvements and alterations to the extent of their full replacement costs as updated from tine to time during the Term.

The Tenant agrees that all of the furnishings, fixtures, equipment effects and property of every kind, nature and description of the Tenant and of all persons claiming by through or under the Tenant which, during the continuance of this Lease or any occupancy of the Premises by the Tenant or anyone claiming under the Tenant which, during the continuance of this Lease or any occupancy of the Premises by the Tenant or anyone claiming under the Tenant, may be on the Premises or elsewhere in the Building or on the Land or parking facilities provided hereby shall be at the sole risk and hazard of the Tenant, and if the whole or any part thereof shall be destroyed or damaged by fire, water or otherwise, or by the leakage or bursting of water pipes, steam pipes, or other pipes, by theft or from any other cause, no part of said loss or damage is to be charged to or be borne by the Landlord, except that the Landlord shall in no event be exonerated from any liability to the Tenant (subject to Section 7.5 hereof) for any injury, loss, damage or liability to the extent same is caused by Landlord’s, or its agents’, employees’, servants’ or contractors’, negligence or willful misconduct.

Section 7.4 - Landlord’s Insurance.

The Landlord shall carry, or cause to be carried, such casualty and liability insurance upon and with respect to operations at the Building as may from time to time be deemed reasonably prudent by the Landlord or required by any mortgagee holding a mortgage thereon or any ground lessor of the Land, and in any event, insurance against loss by fire and the risks now covered by extended coverage endorsement No. 4 in an amount at least equal to the full replacement cost of the Building, exclusive of foundations, excavations and footings.

Section 7.5 - Waiver of Subrogation.

Any insurance carried by either party, or caused to be carried by either party, with respect to the Building, Land, Premises, parking facilities or any property therein or occurrences thereon shall, without further request by either party, include a clause or endorsement denying to the Insurer rights of subrogation against the other party to the extent rights have been waived by the insured prior to occurrence of any claim, damage, injury or loss.  Each party, notwithstanding any provisions of this Lease to the contrary, hereby waives any claims or rights of recovery against the other for injury or loss, including, without limitation, injury or loss caused by negligence of such other party to the extent covered by insurance actually carried or required to be carried hereunder.

ARTICLE VIII

CASUALTY AND EMINENT DOMAIN

Section 8.1 - Restoration Following Casualties.

If, during the Term, the Building or the Premises shall be damaged by fire or casualty, subject to the exceptions and limitations provided below, the Landlord shall proceed promptly to exercise diligent efforts to restore, or cause to be restored, the Building or the Premises, as the case may be, to substantially the condition thereof just prior to time of such damage, but the Landlord shall not be responsible for delay in such restoration which may result from External Causes or due to any act, failure to act or neglect of Tenant or Tenant’s servants, agents, employees or licensees. The Landlord shall have no obligation to expend in the reconstruction of the Building more than the actual amount of insurance proceeds made available to the Landlord by its insurer and not retained by the Landlord’s mortgagee or ground lessor. Any restoration of the Building or the Premises shall be altered to the extent necessary to comply with then current laws and applicable codes.

Section 8.2 - Landlord’s Termination Election.

If the Landlord reasonably determines that the amount of insurance proceeds available to the Landlord is insufficient to cover the cost of restoring the Building or if in the reasonable opinion of the Landlord the Building has been so damaged that it is appropriate for the Landlord to raze or substantially alter the Building, then the Landlord may terminate this Lease by giving notice to the Tenant within ninety (90) days after the date of the casualty or such later date as is required to allow the Landlord a reasonable time to make either such determination, but in no event later than one hundred twenty (120) days from the date of the casualty. Any such termination shall be effective on the date designated in such notice from the Landlord, but in any event, not later than ninety (90) days after such notice, and if no date is specified, effective upon the delivery of such notice.

Section 8.3 - Tenant’s Termination Election.

After any casualty which materially impairs the use of a material portion of the Premises, unless the Landlord has earlier advised the Tenant of the Landlord’s election to terminate this Lease pursuant to Section 8.2, or to restore the Premises and maintain this Lease in effect pursuant to Section 8.1, the Tenant shall have the right, after the expiration of the ninety (90) day period provided in Section 8.2 above, to give a written notice to the Landlord requiring the Landlord within ten (10) days thereafter to exercise or waive any right of the Landlord to terminate this Lease pursuant to Section 8.2 as a result of such casualty and if the Landlord fails to give timely notice to the Tenant waiving any right under Section 8.2 to terminate this Lease based on such casualty, the Tenant shall be entitled, at any time until the Landlord has given notice to the Tenant waiving such termination right, to give notice to the Landlord terminating this Lease. Where the Landlord is obligated to restore the Premises, unless such restoration is completed within nine (9) months from the date of the casualty or taking, such period to be subject, however, to extension where the delay in completion of such work is due to External

Causes or due to any act, failure to act or neglect of Tenant or Tenant’s servants, agents, employees or licensees (but in no event beyond twelve (12) months from the date of the casualty or taking), the Tenant shall have the right to terminate this Lease at any time after the expiration of such 9 -month or 12 -month period, as the case may be, until the restoration is substantially completed, such termination to take effect as of the date of the Tenant’s notice.

Section 8.4 - Casualty at Expiration of Lease.

If the Premises shall be damaged by fire or casualty in such a manner that the Premises cannot, in the ordinary course, reasonably be expected to be repaired within one hundred twenty (120) days from the commencement of repair work and such damage occurs within the last two (2) years of the Term (as the same may have been extended prior to such fire or casualty), either party shall have the right, by giving notice to the other not later than sixty (60) days after such damage, to terminate this Lease, whereupon this Lease shall terminate as of the date of such notice.

Section 8.5 - Eminent Domain.

Except as hereinafter provided, if the Premises, or such portion thereof as to render the balance (if reconstructed to the maximum extent practicable in the circumstances) unsuitable for the Tenant’s purposes, shall be taken by condemnation or right of eminent domain, the Landlord or the Tenant shall have the right to terminate this Lease by notice to the other of its desire to do so, provided that such notice is given not later than thirty (30) days after the effective date of such taking. If so much of the Building shall be so taken that the Landlord reasonably determines that it would be appropriate to raze or substantially alter the Building, the Landlord shall have the right to terminate this Lease by giving notice to the Tenant of the Landlord’s desire to do so not later than thirty (30) days after the effective date of such taking.

Should any part of the Premises be so taken or condemned during the Term, and should this Lease be not terminated in accordance with the foregoing provisions, the Landlord agrees to use reasonable efforts to put what may remain of the Premises into proper condition for use and occupation as nearly like the condition of the Premises prior to such taking as shall be practicable, subject, however, to applicable laws and codes then in existence and to the availability of sufficient proceeds from the eminent domain taking not retained by any mortgagee or ground lessor.

Section 8.6 - Rent After Casualty or Taking.

If the Premises shall be damaged by fire or other casualty, the Annual Fixed Rent and Additional Rent shall be justly and equitably abated and reduced according to the nature and extent of the loss of use thereof suffered by the Tenant. In the event of a taking which reduces the area of the Premises, a just proportion of the Annual Fixed Rent shall be abated for the period of such taking.

Section 8.7 - Taking Award.

The Landlord shall have and hereby reserves and accepts, and the Tenant hereby grants and assigns to the Landlord, all rights to recover for damages to the Building and the Land, and the leasehold interest hereby created and to compensation accrued or hereafter to accrue by reason of such taking, damage or destruction, as aforesaid, and by way of confirming the foregoing, the Tenant hereby grants and assigns to the Landlord, all rights to such damages or compensation.  Nothing contained herein shall be construed to prevent the tenant from prosecuting in any condemnation proceedings a claim for relocation expenses, improvements made by Tenant in the Premises, and Tenant trade fixtures and equipment in the Premises, provided that such action shall not affect the amount of compensation on otherwise recoverable by the Landlord from the taking authority pursuant to the preceding sentence.

ARTICLE IX

DEFAULT

Section 9.1. - Tenants Default.

Each of the following shall constitute an Event of Default:

(a) Failure on the part of the Tenant to pay the Annual Fixed Rent, Additional Rent or other charges for which provision is made herein on or before the date on which the same become due and payable, if such condition continues for ten (10) days after written notice from the Landlord that the same are past due; provided, however, an Event of Default shall occur hereunder without any obligation of Landlord to give any notice if Landlord has given Tenant written notice under this Section 9.1 on more than two (2) occasions during the twelve (12) month interval preceding such failure to pay by Tenant.

(b) Failure on the part of the Tenant to perform or observe any other term or condition contained in this Lease if the Tenant shall not cure such failure within thirty (30) days after notice from the Landlord to the Tenant thereof, provided that in the case of breaches of obligations under this Lease which cannot be cured within thirty (30) days through the exercise of due diligence, so long as the Tenant commences such cure within thirty (30) days, and the Tenant diligently pursues such cure, such breach shall not be deemed to create an Event of Default.

(c) The taking of the estate hereby created on execution or by other process of law; or a judicial declaration that the Tenant is bankrupt or insolvent according to law: or any assignment of the property of the Tenant for the benefit of creditors or the appointment of a receiver, guardian, conservator, trust in bankruptcy or other similar officer to take charge all or any substantial part of the Tenant’s property by a court of competent jurisdiction; or the filing of an involuntary petition against the Tenant under any provisions of the bankruptcy act now or hereafter enacted if the same is not dismissed within ninety (90) days; the filing by the Tenant of any voluntary petition for relief under provisions of any bankruptcy law now or hereafter enacted.

If an Event of Default shall occur, then, in any such case, whether or not the Term shall have begun, the Landlord lawfully may. immediately or at any time thereafter, give notice to the Tenant specifying the Event of Default and this Lease shall come to an end on the date specified

therein as fully and completely as if such date were the date herein originally fixed for the expiration of the Lease Term, and the Tenant will then quit and surrender the Premises to the Landlord, but the Tenant shall remain liable as hereinafter provided.

Section 9.2 - Damages.

In the event that this Lease is terminated pursuant to Section 9.1 above, Tenant covenants to pay punctually to Landlord all the sums (“Periodic Payments”) and perform all the obligations which Tenant covenants in this Lease to pay and to perform in the same manner and to the same extent and at the same time as if this Lease had not been terminated. In calculating the amounts to be paid by Tenant under the foregoing covenant, Tenant shall be credited with the net proceeds of any rent obtained by reletting the Premises, after deducting all of Landlord’s reasonable expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, fees for legal services and expenses for preparing the Premises for reletting.  The Landlord may (i) relet the Premises, or any part or parts thereof, for a term or terms which may, at the Landlord’s option, exceed or be equal to or less than the period which would otherwise have constituted the balance of the Term, and may grant such concessions and free rent as the Landlord in its reasonable commercial judgment considers advisable or necessary to relet the same, and (ii) make such alterations, repairs and improvements in the Premises as the Landlord in its reasonable commercial judgment considers advisable or necessary to relet the same. The Landlord agrees to use diligent, good faith efforts to relet the Premises, but the Landlord may, at its option, seek to rent other properties of the Landlord prior to reletting the Premises. Subject to the obligations of Landlord in the preceding sentence, no action of the Landlord or failure to relet in  accordance with the foregoing shall operate to release or reduce the Tenant’s liability hereunder.

At any time following the termination of this Lease, Landlord may elect to receive, in lieu of receiving further Periodic Payments, an amount (the “Lump Sum Payment’) equal to the excess, if any, of the discounted present value of the total rent reserved for the remainder of the Term after such election over the then discounted present fair rental value of the Premises for the remainder of the Term after such election. In calculating the rent reserved, there shall be included, in addition to the Annual Fixed Rent and all Additional Rent (assuming that Real Estate Taxes and Operating Expenses for the Property will increase annually by a reasonable amount), the value of all other considerations agreed to be paid or performed by Tenant over the remainder of the Term.

Section 9.3 - Cumulative Rights.

The specific remedies to which the Landlord may resort under the terms of this Lease are cumulative and are not intended to be exclusive of any other remedies or means of redress to which it may be lawfully entitled in case of any breach or threatened breach by the Tenant of any provisions of this Lease. In addition to the other remedies provided in this Lease, the Landlord shall be entitled to the restraint by injunction of the violation or attempted or threatened violation of any of the covenants, conditions or provisions of this Lease or to a decree compelling specific performance of any such covenants, conditions or provisions. Nothing contained in this Lease, shall limit or prejudice the right of the Landlord to prove for and obtain in proceedings for

bankruptcy, insolvency or like proceedings by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law In effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater, equal to, or less than the amount of the loss or damages referred to above.

Section 9.4 - Landlords Self-help.

If the Tenant shall at any time default in the performance of any obligation under this Lease, the Landlord shall have the right, but not the obligation, after expiration of any applicable notice and grace period, upon reasonable, but in no event more than ten (10) days’ notice to the Tenant (except in case of emergency in which case no notice need be given), to perform such obligation. The Landlord may exercise its rights under this Section without waiving any other of its rights or releasing the Tenant from any of its obligations under this Lease.

Section 9.5 - Enforcement Expenses.

Each party hereto shall promptly reimburse the other for all costs and expenses, Including without limitation reasonable legal fees, incurred by such party In exercising and enforcing its rights under this Lease following the other party’s failure to comply with its obligations hereunder, whether or not such failure constitutes an Event of Default pursuant to Sections 9.1 or 9.7 hereof.  If either party hereto be made or becomes a party to any litigation commenced by or against the other party by or against a third party, or incurs costs or expenses related to such litigation, involving any part of the Property and the enforcement of any of the rights.  Obligations or remedies of such party, then the party becoming involved in any such litigation because of a claim against such other party hereto shall receive from such other party, hereto all costs and reasonable attorneys’ fees incurred by such party in such litigation.

Section 9.6 - Late Charges and Interest on Overdue Payments.

In the event that any payment of Annual Fixed Rent or Additional Rent shall remain unpaid for a period of ten (10) days after the same are due, there shall become due to the Landlord from the Tenant as Additional Rent and as compensation for the Landlords extra administrative costs in investigating the circumstances of late rent, a late charge of two percent (2%) of the amount overdue. In addition, any Annual Fixed Rent and Additional Rent not paid when due shall bear interest from the date due to the Landlord until paid at the variable rate (the “Default Interest Rate”) equal to the higher of (i) the rate at which interest accrues on amounts not paid when due under the terms of the Landlord’s financing for the Building, as from time to time in effect, and ( one hundred and twenty-five percent (125%) of the Prime Rate (as defined in Section 3.3(b) hereof).

Section 9.7 - Landlord’s Right to Notice and Cure.

The Landlord shall in no event be in default in the performance of any of the Landlord’s obligations hereunder unless and until the Landlord shall have failed to perform such obligations within thirty (30) days, or such additional time as is reasonably required to correct any such

default, after notice by the Tenant to the Landlord expressly specifying wherein the Landlord has failed to perform any such obligation.

ARTICLE X

MORTGAGEES’ AND GROUND LESSORS’ RIGHTS

Section 10.1 - Subordination and Attornment.

This Lease shall, at the election of the holder of any mortgage or ground lease on the Property, be subject and subordinate to any and all mortgages or ground leases on the Property, so that the lien of any such mortgage or ground lease shall be superior to all rights hereby or hereafter vested in the Tenant, provided that such mortgagee or ground lessor shall have entered into a non-disturbance and attornment agreement with Tenant, the form of which shall be furnished by the mortgagee or ground lessor, as the case may be, with such reasonable modifications as Tenant shall request within a reasonable time period. Tenant hereby agrees that Tenant will recognize as its landlord under, this Lease and shall attorn to any person succeeding to the interest of Landlord in respect of the land and the buildings on or in which the Premises is contained, upon any foreclosure of any mortgage upon such land or buildings or upon the execution of any deed in lieu of such foreclosure in respect of such mortgage.  If requested, Tenant shall execute and deliver an instrument or instruments confirming its attornment as provided herein; provided, however, that no successor-in-interest shall be bound by any payment of rent for more than one (1) month in advance, or any amendment or modification of this lease made without the express written consent to the mortgagee under such mortgage. Any action for the foreclosure of an existing mortgage on the Property shall not terminate this Lease or cause this Lease to be terminable, by Tenant by reason of the termination of any such ground lease unless Tenant is specifically named and joined in any such action and unless a judgment is obtained therein against Tenant resulting in a termination of this Lease.

Section 10.2 - Prepayment of Rent not to Bind Mortgagee.

No Annual Fixed Rent, Additional Rent, or any other charge payable to the Landlord shall be paid more than thirty (30) days prior to the due date thereof under the terms of this Lease and payments made in violation of this provision shall (except to the extent that such payments are actually received by a mortgagee or ground lessor) be a nullity as against such mortgagee or ground lessor and the Tenant shall be liable for the amount of such payments to such mortgagee or ground lessor.

Section 10.3 - Tenant’s Duty to Notify Mortgagee; Mortgagee’s Ability to Cure.

No act or failure to act on the part of the Landlord which would entitle the Tenant under the terms of this Lease, or by law, to be relieved of the Tenant’s obligations to pay Annual Fixed Rent or Additional Rent hereunder or to terminate this Lease, shall result in a release or termination of such obligations of the Tenant or a termination of this Lease unless (i) the Tenant shall have first given written notice of the Landlord’s act or failure to act to the Landlord’s

mortgagees and ground lessors of record, if any, of whose identity and address the Tenant shall have been given notice, specifying the act or failure to act on the part of the Landlord which would give basis to the Tenant’s rights: and (ii) such mortgagees and ground lessors, after receipt of such notice, have failed or refused to correct or cure the condition complained of within a reasonable time thereafter, which shall include a reasonable time for such mortgagee and ground lessor, (but in no event more than thirty (30) days after receipt of such notice) to obtain possession of the Property if possession is necessary for the mortgagee or ground lessor to correct or cure the condition and if the mortgagee or ground lessor notifies the Tenant of its intention to take possession of the Property and correct or cure such condition.

Section 10.4 - Estoppel Certificates.

The Tenant shall from time to time, upon not less than fifteen (15) days’ prior written request by the Landlord, which such request shall include a copy of such estoppel certificate, execute, acknowledge and deliver to the Landlord a statement in writing certifying to the Landlord or an independent third party, with a true and correct copy of this Lease attached thereto, to the extent such statements continue to be true and accurate, (i) that this Lease is unmodified and in full force and effect (or, if there have been any modifications, that the same is in full force and effect as modified and stating the modifications); (ii) that the Tenant has no knowledge of any defenses, offsets or counterclaims against its obligations to pay the Annual Fixed Rent and Additional Rent and to perform its other covenants under this Lease (or if there are any defenses, offsets, or counterclaims, setting them forth in reasonable detail): (iii) that there are no known uncured defaults of the Landlord or the Tenant under this Lease (or if there are known defaults. setting them forth in reasonable detail); (iv) the dates to which the Annual Fixed Rent, Additional Rent and other charges have been paid; (v) that the Tenant has accepted, is satisfied with, and is in full possession of the Premises, including all improvements, additions, and alterations thereto required to be made by Landlord under the Lease; (vi) that the Landlord has satisfactorily complied with all of the requirements and conditions precedent to the commencement of the Term of the Lease as specified in the Lease; (vii) the Term, the Commencement Date, and any other relevant dates, and that the Tenant has been in occupancy since the Commencement Date and paying rent since the specified dates; (viii) that no monetary or other considerations, including, but not limited to rental concessions for Landlord, special tenant improvements or Landlord’s assumption of prior lease obligations of Tenant have been granted to Tenant by Landlord for entering into Lease, except as specified; (ix) that Tenant has no notice of a prior assignment, hypothecation, or pledge of rents or of the Lease; (x) that the Lease (as same may be amended) represents the entire agreement between Landlord and Tenant; and (xi) such other matters with respect to the Tenant and this Lease as the Landlord may reasonably request in writing. On the Commencement Date, the Tenant shall, at the request of the Landlord, promptly execute, acknowledge and deliver to the Landlord a statement in writing that the Commencement Date has occurred, that the Annual Fixed Rent has begun to accrue and that the Tenant has taken occupancy of the Premises. Any statement delivered pursuant to this Section may be relied upon by any prospective, purchaser, mortgagee or ground lessor of the premises and shall be binding on the Tenant, but any such statement shall not amend this Lease and shall not be binding on the Tenant against Landlord. Landlord shall from time to time, upon not less than fifteen (15) days’ prior written request by the Tenant, execute, acknowledge and, deliver to the Tenant a statement in writing certifying to the Tenant or an independent third

party, with a true and correct copy of this Lease attached thereto, to the extent such statements continue to be true and accurate (i) that this Lease is unmodified and in full force and effect (or, if there have been any modifications, that the same is in full force and effect as modified and stating the modifications); (ii) that the Landlord has no knowledge of any defenses, offsets or counterclaims against its obligations to perform its covenants under this Lease (or if there are any defenses, offsets, or counterclaims, setting them forth in reasonable detail); (iii) that there are no known uncured defaults of the Tenant or the Landlord under this Lease (or if there are known defaults, setting them forth in reasonable detail); (iv) the dates to which the Annual Fixed Rent, Additional Rent and other charges have been paid, (v) that the Tenant is in full possession of the Premises, including all improvements, additions and alterations thereto required to be made by Landlord under the Lease; (vi) that the Tenant has satisfactorily complied with all of the requirements and conditions precedent to the commencement of the term of the Lease as specified in the Lease; (vii) that the Tenant has been in occupancy since the Commencement Date and paying rent since the specified dates; (viii) that no monetary or other considerations, including, but not limited to, rental concessions for Landlord, special tenant improvements or Landlord’s assumption of prior lease obligations of Tenant have been granted to Tenant by Landlord for entering into the Lease, except as specified: (ix) that Landlord has no notice of a prior assignment, hypothecation, or pledge of rents or of the Lease; (x) that the Lease represents the entire agreement between Landlord and Tenant; and (xi) such other matters with respect to the Tenant and this Lease as the Tenant may reasonably request. Any statement delivered pursuant to this Section may be relied upon by any prospective lender of Tenant and shall be binding on the Landlord.

ARTICLE XI

MISCELLANEOUS

Section 11.1 - Notice of Lease.

The Tenant agrees not to record this Lease, but upon request of either party, both parties shall execute and deliver, a Notice of Lease in form appropriate for recording or registration acknowledging the Commencement Date, and if this Lease is terminated before the Term expires, an instrument in such form acknowledging the date of termination.

Section 11.2 - Notices.

Whenever any notice, approval, consent, request, election, offer or acceptance is given or made pursuant to this Lease, it shall be in writing.  Communications and payments shall be addressed, if to the Landlord, at the Landlord’s Address for Notices as set forth, in Exhibit A or at such other address as may have been specified by prior notice to the Tenant; and if to the Tenant, at the Tenant’s Address for Notices as set forth in Exhibit A or at such other address as may have been specified by prior notice to the Landlord.  Any communication so addressed shall be deemed duly given on the earlier of (i) the date received if hand-delivered by either party or mailed by a reputable same-day delivery service, (ii) the day following the day of mailing if mailed by a reputable overnight delivery service, or (iii) on the third business day following the day of mailing if mailed by registered or certified mail, return receipt requested. If the Landlord by notice to the Tenant at any time designates some other person to receive payments or notices,

all payments or notices thereafter by the Tenant shall be paid or given to the agent designated until notice to the contrary is received by the Tenant from the Landlord.

Section 11.3 - Successors and Limitation on Liability on the Landlord.

The obligations of this Lease shall run with the land, and this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the original Landlord named herein and each successor Landlord shall be liable only for obligations accruing during the period of its ownership. The obligations of the Landlord shall be binding upon the assets of the Landlord consisting of an equity ownership of the Property (and including any proceeds realized from the sale of such Property) but not upon other assets of the Landlord and neither the Tenant, nor anyone claiming by under or through the Tenant, shall be entitled to obtain any judgments creating personal liability on the part of the Landlord or enforcing any obligations of the Landlord against any assets of the Landlord other than an equity interest in the Property.

Section 11.4 - Waivers by the Landlord or Tenant.

The failure of the Landlord or the Tenant to seek redress for violation of, or to insist upon strict performance of, any covenant or condition of this Lease, shall not be deemed a waiver of such violation nor prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. The receipt by the Landlord of Annual Fixed Rent or Additional Rent with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach. No provision of this Lease shall be deemed to have been waived by the Landlord or the Tenant, unless such waiver be in writing signed by the waiving party. No consent or waiver, express or implied by the Landlord or the Tenant to or of any breach of any agreement or duty shall be construed as a waiver or consent to or of any other breach of the same or any other agreement or duty.

Section 11.5 - Acceptance of Partial Payments of Rent.

No acceptance by the Landlord of a lesser sum than the Annual Fixed Rent and Additional Rent then due shall be deemed to be other than a partial installment of such rent due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and the Landlord may accept such check or payment without prejudice to the Landlord’s right to recover the balance of such installment or pursue any other remedy in this Lease provided. The delivery of keys to any employee of the Landlord or to the Landlord’s agent or any employee thereof shall not operate as a termination of this Lease or a surrender of the Premises.

Section 11.6 - Interpretation and Partial Invalidity.

If any term of this Lease, or the application thereof to any person or circumstances, shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such term to persons or circumstances other than those as to which it is invalid or unenforceable, shall

not be affected thereby, and each term of this Lease shall be valid and enforceable to the fullest extent permitted by law. The titles of the Articles are for convenience only and not to be considered in construing this Lease. This Lease contains all of the agreements of the parties with respect to the subject matter thereof and supersedes all prior dealings between them with respect to such subject matter.

Section 11.7 - Quiet Enjoyment.

So long as the Tenant pays Annual Fixed Rent and Additional Rent performs all other Tenant covenants of this Lease and observes all conditions hereof, the Tenant shall peaceably and quietly have, hold and enjoy the Premises free of any claims by, through or under the Landlord.

Section 11.8 - Brokerage.

Each party represents and warrants to the other that it has had no dealings with any broker or agent in connection with this Lease other than Meredith & Grew and Trammell Crow Company and shall indemnify and hold harmless the other from claims for any brokerage commission by any other broker or agent claiming same by, through or under the indemnifying party.

Section 11.9 - Surrender of Premises and Holding Over.

The Tenant shall surrender possession of the Premises on the last day of the Term and the Tenant waives the right to any notice of termination or notice to quit. The Tenant covenants that upon the expiration or sooner termination of this Lease, it shall without notice, deliver up and surrender possession of the Premises in the same condition in which the Tenant has agreed to keep the same during the continuance of this Lease and in accordance with the terms hereof, reasonable wear and tear and damage by fire or other casualty or eminent domain taking and damage by the negligence or willful misconduct of Landlord or its agents, contractors or employees excepted, first removing therefrom all goods and effects of the Tenant and any leasehold improvements Landlord specified for removal pursuant to Section 4.2, and repairing all damage caused by such removal. Upon the expiration of this Lease or if the Premises should be abandoned by the Tenant, or this Lease should terminate for any cause, and at the time of such expiration, vacation, abandonment or termination, the Tenant or Tenants agents, subtenants or any other person should leave any property of any kind or character on or in the Premises, the fact of such leaving of property on or in the Premises shall be conclusive evidence of intent by the Tenant, and individuals and entitles deriving their rights through the Tenant, to abandon such property so left in or upon the premises, and such leaving shall constitute abandonment of the property. Landlord shall have the right and authority without notice to the Tenant or anyone else, to remove and destroy, or to sell or authorize disposal of such property, or any part thereof, without being in any way liable to the Tenant therefor and the proceeds thereof shall belong to the Landlord as compensation for the removal and disposition of such property.

If the Tenant tails to surrender possession of the Premises upon the expiration or sooner termination of this Lease, the Tenant shall pay to Landlord, as rent for any period after the

expiration or sooner termination of this Lease an amount equal to one hundred fifty percent (150%) of the Annual Fixed Rent and the Additional Rent required to be paid under this Lease as applied to any period in which the Tenant shall remain in possession. Acceptance by the Landlord of such payments shall not constitute a consent to a holdover hereunder or result in a renewal or extension of the Tenant’s rights of occupancy. Such payments shall be in addition to and shall not affect or limit the Landlord’s right of re-entry. Landlord’s right to collect (such damages as may be available at law, or any other rights of the Landlord under this Lease or as provided by law.

Section 11.10 - Ground Lease.

This Lease is in all respects subject to the ground lease (the “Ground Lease”) between the Landlord’s predecessor in interest as lessee and the Massachusetts Institute of Technology (“M1T”) as lessor dated April 20, 1986, as amended by that certain First Amendment to Construction and Lease Agreement dated “as of December 16, 1997, and that certain Second Amendment to Construction and Lease Agreement dated as of June 12, 2000. If the Ground Lease shall terminate during the Term for any reason whatsoever, except as may otherwise be agreed in the Non-Disturbance Agreement, this Lease shall be terminable by Landlord in its sole discretion with the same force and effect as if such termination date had been named herein as the date of expiration hereof.

Section 11.11 - Security Deposit.

INTENTIONALLY OMITTED

Section 11.12 - Financial Reporting.

Tenant shall from time to time (but at least annually) on the anniversary of the Lease provide Landlord with financial statements of Tenant together with related statements of Tenant’s operations for Tenant’s most recent fiscal year then ended, certified by an independent certified public accounting firm.

Section 11.13 - Cambridge Employment Plan.

The Tenant agrees to sign an agreement with the Employment and Training Agency designated by the City Manager of the City of Cambridge as provided in subsections (a) - (g) of Section 24-4 of Ordinance Number 1005 of the City of Cambridge, adopted April 23, 1984.

Section 11.14 - Parking and Transportation Demand Management.

Tenant covenants and agrees to work cooperatively with Landlord to develop a parking and transportation demand management (“PTDM”) program that comprises part of a comprehensive PTDM for University Park. In connection therewith, the use of single occupant vehicle commuting will be discouraged and the use of alternative modes of transportation and/or alternative work hours will be promoted. Without limitation of the foregoing, Tenant agrees that

its PTDM program (and Tenant will require in any sublease or occupancy agreement permitting occupancy in the Premises that such occupant’s PTDM program) will include offering a subsidized MBTA transit pass, either constituting a full subsidy or a subsidy in an amount equal to the maximum deductible amount therefore allowed under the federal tax code, to any employee working in the Premises requesting one. Tenant agrees to comply with the traffic mitigation measures required by the City of Cambridge, and Tenant shall otherwise comply with all legal requirements of the City of Cambridge pertaining thereto.

IN WITNESS WHEREOF, this Lease has been executed and delivered as of the date first above written as a sealed instrument.

LANDLORD:	FC 64 SIDNEY, INC.,
	a Massachusetts corporation
	By:	/s/ Michael Farley
		Vice President
TENANT:	GENZYME CORPORATION
	a Massachusetts corporation
	By:	/s/ Michael S. Wyzga
		Chief Financial Officer

EXHIBIT A

Basic Lease Terms

Annual Fixed Rent
for the Term:	$35.00 per rentable square foot.
Security Deposit:	$
Initial Term:	Sixty (60) months, commencing on the
	Commencement Date (as set forth in section 2.5),
	and expiring on February 8, 2011.
Landlords Original	FC 64 Sidney Street, Inc
Address:	Terminal Tower
	50 Public Square, Suite 1100
	Cleveland, Ohio 44113-2267
	Attention: James Ratner
Landlord’s Address for Notices:	Landlord’s Original Address with copies in like manner to:
	Forest City Commercial Management
	64 Sidney Street
	Cambridge, Massachusetts 02139-4234
	Attention: Michael Farley
Tenants Address for Notices:	Genzyme Corporation
	Metro West Place
	15 Pleasant Street Connector
	Framingham, MA 01701
	Attn: Evan Lebson
	With copies in like manner to:
	Genzyme Corporation
	500 Kendall Street
	Cambridge, MA 02142
	Attn: Bob Hesslein, Esq.

	and
	Palmer & Dodge LLP
	111 Huntington Avenue at Prudential Center
	Boston, MA 02199-1613
	Attn: Thomas G. Schnorr. Esq.
Premises:	45,161 total rentable square feet (rsf)
	comprising that portion of the 1st, 2nd and 3rd floors of the Building depicted on Exhibit B - 2 to the Lease.
Parking Privileges:	During the Term, Landlord shall provide, and Tenant shall pay for, sixty-eight (68) parking passes. During the Term the Tenant shall pay the market rate from time to time in effect for parking passes provided by Landlord’s aforesaid. Market rate shall be reasonably determined by Landlord based on comparable parking spaces and usage rights available in the Kendall Square/Cambridge Center area. Tenant shall have the right to lease additional parking passes, as available, on a month to month basis. Visitor parking will also be available within the parking garage at standard hourly rates. Should Tenant expand the Premises in the future, the Parking Privileges shall be increased on the basis of one and one-half parking passes per each one thousand square feet of space leased.
Permitted Uses:	Research and development and general office use.

EXHIBIT B

Legal Description

A parcel of land situated in the City of Cambridge, Middlesex County Commonwealth of Massachusetts, being more particularly bounded and described as follows:

Beginning at the intersection of the relocated southeasterly street line of Sidney Street and the southwesterly street line of a private way (formerly Auburn Street);

Thence running S 51° 25’ 00” E along said southwesterly line of a private way, a distance of 131.51 feet, to a point;

Thence running along the line of a private way on the following three (3) courses:

S 38° 25’ 13” W, a distance of 176.99 feet to a point;

Westerly on a curve to the left having a radius of 60.00 feet, an arc length of 62.88 feet to a point;

and N 51° 34’47” W, a distance of 91.97 feet to a point on the aforesaid relocated southeasterly street line of Sidney Street;

Thence running N 38° 25’ 13” E, along said southeasterly l a distance of 17.52 feet, to a point;

Thence running S 51° 34 47” E, along a jog in said southeasterly line, a distance of 4.00 feet, to a point;

Thence running N 38° 25’ 13” E, along said southeasterly line, a distance of 201.18 feet, to the point of beginning.

The above-described parcel contains 27,580 square feet, more or less, or 0.6332 acres, more or less and is shown as Lot 4(A) on a plan entitled “Plan of Land in Cambridge, Massachusetts, 64 Sidney Street” prepared by Cullinan Engineering Co., Inc., which plan is recorded with the Middlesex S.D. Registry of Deeds in Book 19753, Page 54.

Included within the above-described property are the following parcels of registered land:

a. That parcel of land shown on Land Court Plan 7631A;

b. A portion or the land shown as Lot B1 or, Land Court Plan 3993C; and

c. A portion of the land shown as Lot C on Land Court Plan 3993B.

Together with the benefit of the Parking Easement and the Pedestrian Bridge Easement.

EXHIBIT B-1.

Map of University Park

EXHIBIT B-2

Depiction of Premises

EXIBIT C

Work Letter

1.Landlord shall provide to Tenant an allowance (the “Leasehold Improvements Allowance”) equal to (i) the product of Five and 00/100 Dollars ($5.00) times (ii) the rentable square footage of the Premises (for a total of Two Hundred Twenty-Five Thousand Eight Hundred Five and 00/100 Dollars ($225,805.00)), for application to the costs and expenses, more particularly set forth below, incurred by or on behalf of Tenant. If Tenant incurs costs in excess of the Leasehold Improvements Allowance, then all such costs shall be born solely by Tenant. Any unused Leasehold Improvements Allowance may be applied as rent credit(s) at the beginning of the Term.

2. The application of the Leasehold Improvement Allowance by Landlord shall be limited to payment of the following costs and expenses incurred by or on behalf of Tenant in connection with leasehold improvements to the Premises:  the actual documented and verified cost pursuant to Tenant’s design and construction contracts, including without limitation the associated contractor’s overhead and profit and general conditions, incurred in the construction of the leasehold improvements to the Premises, except for the (making of improvements, installation of items which are moveable rather than permanent improvements, (but excluding cabling), examples of which may include furniture, telephone communications and security equipment, and bench-top laboratory equipment items such as microscopes.

3. During the construction of any leasehold improvements with respect to which Tenant desires to have the Leasehold Improvements Allowance applied, and in accordance with the commercially reasonable terms and conditions typically imposed upon a landlord pursuant to a construction loan agreement, such as, without limitation, retainage, lien waiver, and other requisition conditions, Tenant shall, on a monthly basis (as the Tenant’s contractor submits to Tenant its application for payment), deliver to Landlord a requisition for payment showing the costs of the leasehold improvements in question and the amount of the current payment requested from Landlord for disbursement from the Leasehold Improvements Allowance within thirty (30) days after receipt of Tenant’s requisition. Payments made on account of Tenant’s requisitions shall be made from the Leasehold Improvement Allowance. Following the completion of any such leasehold improvements, Tenant shall deliver to the Landlord, within ninety (90) days before completion, a statement showing the final costs of such leasehold improvements, the amounts paid to date, or on behalf of the Tenant, and any amounts available for release of retainage.

EXHIBIT D

STANDARD SERVICES

Landlord shall provide, or cause to be provided, the following standard services throughout the Term which services may be modified from time to time by Landlord:

A. Regular maintenance of interior plants and exterior landscaping of the Building and all University Park common areas.

B. Regular maintenance, sweeping and snow removal of exterior areas around the Building, parking areas and throughout University Park.

C. Complete interior and exterior cleaning of all windows two times per year.

D. Daily, weekday maintenance of hallways, passenger elevators, common area bathrooms, lobby areas and vestibules.

E.Periodic cleaning of stairwells, freight elevators, and back of house areas.

F. Daily, weekday rubbish removal of all common area trash receptacles.

G. Daily, weekday cleaning of tenant space in a manner comparable to similar first-class office space in the Cambridge area.

H. Maintenance and repair of all base Building mechanical, electrical, plumbing and life safety systems and all other building systems serving the common areas.

I.Operation and maintenance of Building surveillance and alarm systems, links to the University Park command center, and security Officer services in the Building and throughout University Park as appropriate in Landlord’s reasonable determination.

J.Conditioned air for HVAC purposes shall be provided to the Premises from central mechanical equipment and shall be available 24 hours per day, 7 days per week; provided, however, Landlord reserves the right, pursuant to Section 3.5 of this Lease, to charge for conditioned air provided after normal business hours (8am - 6pm) if Landlord reasonably determines that demand for such conditioned air is not consistently needed throughout the Building during such non-business hours. Any charges for conditioned air shall include Landlord’s reasonable estimate of the cost of energy, additional equipment maintenance and wear and tear associated with such after hours use, but shall not include a surcharge or profit to Landlord.

K. All utilities for all interior common areas and exterior building lighting.

L. Regular maintenance of banners, building directories and other building standard directional signage and amenities.

M. Reasonably adequate water and sewer service to the Premises.

EXHIBIT E

RULES AND REGULATIONS

DEFINITIONS

Wherever in these Rules and Regulations the word “Tenant” is used, it shall be taken to apply to and include the Tenant and its agents, employees, invitees, licensees, contractors, any subtenants and is to be deemed of such number and gender as the circumstances require. The word “Premises” is to be taken to include the space covered by the Lease.  The word “Landlord” shall be taken to include the employees and agents of Landlord. Other capitalized terms used but not defined herein shall have the meanings set forth in the Lease. Any consents or approvals required of Landlord herein shall not be unreasonably withheld or delayed.

GENERAL USE OF BUILDING

A. Space for admitting natural light into any public area or tenanted space of the Building shall not be covered or obstructed by Tenant except in a manner reasonably approved by Landlord.

B. Toilets, showers and other like apparatus shall be used only for the purpose for which they were constructed.

C.Intentionally omitted.

D. No sign, advertisement, notice or the like, shall be used in the Building by Tenant (other than at its office or as permitted in the Lease).  If Tenant violates the foregoing, Landlord may remove the violation without liability and may charge all costs and expenses incurred in so doing to Tenant.

E. Tenant shall not throw or permit to be thrown anything out of windows or doors or down passages or elsewhere in the Building, or bring or keep any pets therein, or commit or make any indecent or improper acts or noises. In addition, Tenant shall not do or permit anything which will obstruct, injure, annoy or interfere with other tenants or those having business with them, or affect any insurance rate on the Building or violate any provision of any insurance policy on the Building.

F.Unless expressly permitted by the Landlord in writing:

(1) No additional locks or similar devices shall be attached to any door or window and no keys other than those provided by the Landlord shall be made for any door. If more than two keys for one lock are desired by the Tenant, the Landlord may provide the same upon payment by the Tenant. Upon termination of this lease or of the Tenant’s, possession, the Lessee shall surrender all keys to the Premises and shall explain to the Landlord all combination locks on safes, cabinets and vaults.

(2) In order to insure proper use and care of the Premises Tenant shall not install any shades, blinds, or awnings or any interior window treatment without consent of Landlord. Blinds must be building standard.

(3) All doors to the Premises are to be kept closed at all times except when in actual use for entrance door exit from such Premises. The Tenant shall be responsible for the locking of

doors and the closing of any transoms and windows in and to the Premises. Any damage or loss resulting from violation of this rule shall be paid for by the Tenant.

(4) The Tenant shall not install or operate any steam or internal combustion engine, boiler, machinery in or about the Premises, or carry on any mechanical business therein. All equipment of any electrical or mechanical nature shall be placed in settings which absorb and prevent any vibration, noise or annoyance;

G.Landlord shall designate the time when and the method whereby freight, small office equipment, furniture, safes and other like articles may be brought into, moved or removed from the Building or Premises, and to designate the location for temporary disposition of such items.

H. In order to insure proper use and care of the Premises Tenant shall not allow anyone other than Landlord’s employees or contractors to clean the Premises without Landlord’s permission.

I. The Premises shall not be defaced in any way. No changes in the HVAC electrical fixtures or other appurtenances of said Premises shall be made without the prior approval of Landlord and in accordance with Landlord’s construction rules and regulations.

J. For the general welfare of all tenants and the security of the Building, Landlord may require all persons entering and/or leaving the Building on weekends and holidays and between the hours of 6:00 p.m. and 8:00 a.m. to register with the Building attendant or custodian by signing his name and writing his destination in the Building, and the time of entry and actual or anticipated departure, or other procedures deemed necessary by Lessor, Landlord may deny entry during such hours to any person who fails to provide satisfactory identification.

K. No animals, birds, pets, and no bicycles or vehicles of any kind shall be brought into or kept in or about said Premises or the lobby or halls of the Building. Tenant shall not cause or permit any unusual or objectionable odors, noises or vibrations to be produced upon or emanate from said Premises.

L. Unless specifically authorized by Landlord, employees or agents of Landlord shall not perform for nor be asked by Tenant to perform work other than their regularly assigned duties.

M.Landlord shall have the right to prohibit any advertising by Tenant which, in Landlord’s reasonable opinion tends to impair the reputation of the Building or its desirability as an office building and, upon written notice from Landlord, Tenant shall promptly discontinue such advertising.

N. Canvassing, soliciting and peddling in the Building is prohibited and Tenant shall cooperate to prevent the same from occurring.

O. All parking, Building operation, or construction rules and regulations which may be established from time to time by Landlord on a uniform basis shall be obeyed.

P. Tenant shall not place a load on any floor of said Premises exceeding the floor load limits for the Building. Landlord reserves the right to prescribe the weight and position of all safes and heavy equipment.

Q. Tenant shall not install or use any air conditioning or heating device or system other than those approved by Landlord.

R. Landlord shall have the right to make such other and further reasonable rules and regulations s in the judgment of Landlord, may from time to time be needful for the safety,

appearance, care and cleanliness of the Building and for the preservation of good order therein, and Tenant shall be given reasonable notice of same.

S. The access road and loading areas, parking areas, sidewalks, entrances, lobbies, halls, walkways, elevators, stairways and other common area provided by Landlord shall not be obstructed by Tenant, or used for other purpose than for ingress and egress.

T. In order to insure proper use and care of the Premises Tenant shall not install any call boxes or communication systems or wiring of any kind without Landlord’s permission and direction.

U. In order to insure proper use and care of the Premises Tenant shall not manufacture any commodity, or prepare or dispense for sale, except through vending machines for the benefit of employees and invitees of Tenant, any foods or beverages, tobacco, flowers, or other commodities or articles without the written consent of Landlord.

V. In order to insure use and care of the Premises Tenant shall not enter any janitors’ closets, mechanical or electrical areas, telephone closets, loading areas, roof, or Building storage areas without the written consent of Landlord.

W. In order to insure proper use and care of the Premises Tenant shall not place doormats in public corridors without consent of Landlord.

EXHIBIT G

Removable Items

Within the First Floor Spaces:

Property of Landlord: All built-in work surfaces, material lift, piping and instrumentation for medical gas manifold, work bench, and any built-in storage racking.

Property of Tenant: All movable shelving and racks, all carts, all medical gas tanks, all movable office furniture, telecom and computer racks and hubs, all freezers, refrigerators, environmental chambers and Cobalt 60 Irradiator.

Within the Second Floor Spaces:

Property of Landlord:All built-in work surfaces, elevators, dumbwaiters, lifts, piping and instrumentation for utilities Autoclave, Depyrogenation oven, HVAC equipment, biological safety cabinets, cold rooms, biological neutralization tank.

Property of Tenant: All movable shelving and racks, all carts, all medical gas tanks, all movable office furniture, all modular cubicles, all freezers, refrigerators, cryostorage equipment, incubators, centrifuges, microscopes, balances, glasswashers, computers, telephone and computer racks and hubs.

Within the Third Floor Spaces:

Property of Landlord:All built-in surfaces, lab benches, built-in wooden cubicles, elevators, dumbwaiters, lifts piping and instrumentation for utilities, autoclaves, HVAC equipment, biological safety cabinets, fume hoods, cold rooms, utility generation equipment including RO/DI water, plant steam boiler, hot water boilers, vacuum pump skid, compressed air skid, and hot water circulation pumps.

Property of Tenant:All movable shelving and racks, all carts, all medical gas tanks, all movable office furniture, all modular cubicles, all freezers, refrigerators, cryostorage equipment, incubators, centrifuges, microscopes, balances, glasswashers, analytical equipment, computers, telephone and computer racks and hubs.

EX-10.11.1

Exhibit 10.11.1

AMENDMENT OF LEASES

This Amendment of Leases (this “Amendment”) is made as of this 17th day of December 2004 by and between One Kendall Square Associates, LLC (“Landlord”) and Genzyme Corporation (“Tenant”).

1.             BACKGROUND.

Reference is made to the following:

1.1           Building 600 Lease

·A lease dated December 20, 1988 by and between One Kendall Square Associates, successor-in-interest to One Kendall Realty Trust, as Lessor, with respect to premises located at Building 600/650/700, One Kendall Square, Cambridge, Massachusetts (“Building 600”), as amended and affected by those instruments referenced on Exhibit A-1 (collectively the “Building 600 Lease”).

·The term of the Building 600 Lease expires as of July 24, 2005.

·The premises (“Building 600 Premises”) presently demised under the Building 600 Lease consist of 103,760 rentable square feet, are shown on Exhibit B-1, Amendment of Leases, Sheets 1, 2 and 3, as follows:

(1)           A portion of the fourth (4th) floor of Building 600, containing 20,898 square feet

(2)           A portion of the basement level of Building 600, containing 4,914 rentable square feet

(3)           A portion of the fourth (4th) floor of Building 600, containing 14,076 rentable square feet

(4)           Portions of the fourth (4th) and fifth (5th) floors of Building 600, containing in the aggregate, 63,872 rentable square feet

·Tenant has the right to use 104 parking spaces in the parking garage (“Garage”) based upon its demise of the Building 600 Lease.

1.2           Building 1400 Lease.

·A lease dated December 20, 1988 by and between One Kendall Square Associates, successor-in-interest to One Kendall Realty Trust, as Lessor, with respect to premises located at Building 1400, One Kendall Square, Cambridge, Massachusetts (“Building 1400”), as amended and affected by those instruments referenced on Exhibit A-2 (collectively the “Building 1400 Lease”).  The Building 600 Lease and the Building 1400 Lease are sometimes collectively hereinafter referred to as the “Leases”.

·The term of the Building 1400 Lease expires as of July 24, 2005.

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·The premises (“Building 1400 Premises”) presently demised under the Building 1400 Lease consist of 100,802 rentable square feet, as follows:

Suite 501:

A portion of the fifth (5th) floor of Building 1400, containing 16,556 rentable square feet, known as Suite 501, as outlined on Exhibit B-2, Sheet 5, Amendment of Leases, a copy of which is attached hereto and incorporated by reference herein.   Tenant has the right to use 16 parking spaces in the Garage based upon its demise of Suite 501.

Premises B:

Areas containing 38,320 rentable square feet, as shown on Exhibit B-2, Sheets 1, 2, 3, 4, 5, 6 and 7, Amendment of Leases, as follows:

(1)           A portion of the lower level of Building 1400, containing 3,869 square feet of space

(2)           A portion of the second (2nd) floor of Building 1400, containing 10,614 square feet of space

(3)           A portion of the third (3rd) floor of Building 1400, containing 18,604 square feet of space

(4)           A portion of the fourth (4th) floor of Building 1400, containing 5,233 square feet of space

Tenant has the right to use 39 parking spaces in the Garage based upon its demise of Premises B.

Premises C:

Areas containing 45,926 rentable square feet, as shown on Exhibit B-2, Sheets 1, 2, 3, 4, 5, 6 and 7, Amendment of Leases, as follows:

(1)           A portion of the first (1st) floor of Building 1400, containing 4,703 square feet of space

(2)           A portion of the second (2nd) floor of Building 1400, containing 3,605 square feet of space

(3)           A portion of the third (3rd) floor of Building 1400, containing 7,501 square feet of space

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(4)           A portion of the fourth (4th) floor of Building 1400, containing 20,640 square feet of space

(5)           A portion of the fifth (5th) floor of Building 1400, containing 9,477 square feet of space

Tenant has the right to use 44 parking spaces in the Garage based upon its demise of Premises C, i.e., 1 parking space per 1,000 rentable square feet of Premises C (“Parking Ratio”)

1.3           Premises A.  Premises A consists of the Building 600 Premises and Suite 501.  The parties desire to extend the term of the Leases, so far as they relate to Premises A for an additional term commencing as of July 25, 2005 and expiring as of December 24, 2006.

1.4           Premises B.  The parties desire to extend the term of the Building 1400 Lease, so far as it relates to Premises B for an additional term commencing as of July 25, 2005 and expiring as of December 24, 2006.

1.5           Premises C.  Tenant desires that it be granted an option to extend the term of the Building 1400 Lease, so far is relates to Premises C (or a portion thereof) for an additional term commencing as of July 25, 2005 and expiring as of July 24, 2012.

1.6           Complex: “Complex”, as used in this Amendment of Leases, shall be defined as all of Building 600, all of Building 1400, all of the other buildings, and the Common Areas serving such buildings, all located on the land (“Land”) shown outlined on Exhibit E.

NOW THEREFORE, the parties hereby agree that the above-referenced leases, as previously amended (collectively, the “Leases”), are hereby further amended as follows:

2.PREMISES A

2.1           Extension of Term of Lease in respect of Premises A.  The terms of the Leases in respect of Premises A are hereby extended for an additional period commencing as of July 25, 2005 and terminating as of December 24, 2006.  Said additional term shall be upon the terms and conditions of the Leases applicable to Premises A in effect immediately preceding the commencement of such additional term (including, without limitation, Tenant’s obligation to pay Tenant’s Proportionate CAO Lot Shares, Tenant’s Proportionate Building Shares, Tenant’s Proportionate Shares of Taxes and Tenant’s obligation to pay for utilities), except as follows:

(1)           The annual Base Rent during the Premises A shall be Three Million Six Hundred Nine Thousand Four Hundred and 00/100 ($3,609,480.00) Dollars (i.e., a monthly payment of $300,790.00) based upon an annual rental rate of $30.00 per rentable

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square foot of Premises A), plus the annual fair rental value of Tenant’s parking spaces (i.e. 104 spaces) in respect of Premises A, as the same may be adjusted from time to time.  The parties hereby acknowledge and agree that, as of the Execution Date of this Amendment of Leases, the monthly parking rate is $20,800.00 (i.e. based upon a monthly rate of $200.00 per space per month)

(2)           In the event that any of the provisions of the Leases are inconsistent with this Amendment or the state of facts contemplated hereby, the provisions of this Amendment shall control.

2.2           Tenant’s Extension Options in respect of Premises A.

(1)           Tenant’s Options.   On the condition, which condition Landlord may waive, at its election, by written notice to Tenant at any time, that Tenant is not in material default of its covenants and obligations under the Leases beyond any applicable notice and cure period, both at the time that Tenant gives an Premises A Extension Exercise Notice, as hereinafter defined, to Landlord, and as of the commencement of the Extension Term in question, Tenant shall have the following options to extend the term of the Leases in respect of Premises A: (x) one (1) additional term (“First Extended Term”) with respect to all of Premises A of three (3) months (the First Additional Term commencing as of December 25, 2006 and expiring as of March 24, 2007), (y) if Tenant timely and properly exercises its option to extend the term of the Lease in respect of Premises A for the First Extended Term, then Tenant shall have the right to extend the term of the Leases in respect of a second additional term (“Second Extended Term”) with respect to all of Premises A of three (3) months (the Second Additional Term commencing as of March 25, 2007 and expiring as of June 24, 2007), and (z) if Tenant timely and properly exercises its option to extend the term of the Lease in respect of Premises A for both the First Extended Term and the Second Extended Term, then Tenant shall have the right to extend the term of the Building 1400 Lease with respect to Suite 501 only for an additional term (“Third Extended Term”) of five (5) years (the Third Extended Term commencing as of June 25, 2007 and expiring as of June 24, 2012.  Tenant shall have no right to extend the terms of the Leases in respect of all or a portion of Premises A, except as provided in this Section 2.2(1).

(2)           Option Exercise Procedures.   Tenant may exercise its right to extend the term of the Leases in respect of Premises A for the First Extended Term by giving written notice (“Premises A Exercise Notice”) to Landlord on or before June 24, 2006.  If Tenant has timely and properly exercised its option to extend the term of the Leases in respect of Premises A for the First Extended Term, Tenant may exercise its right to extend the term of the Leases in respect of Premises A for the Second Extended Term by giving a Premises A Exercise Notice to Landlord on or before September 24, 2006.  If Tenant has timely and properly exercises its option to extend the term of the Leases in respect of Premises A for the First Extended Term and the Second Extended Term, then Tenant may exercise its right to extend the term of the Building 1400 Lease in respect of Suite 501 only for the Third Extended Term by giving Landlord Premises A Exercise Notice on or

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before December 24, 2006. Tenant may, at Tenant’s sole election, exercise its option to extend the term of the Leases in respect of Premises A for the First Extended Term and the Second Extended Term simultaneously and provide Landlord with written notice thereof in a single Premises A Exercise Notice.  Tenant may exercise its right to extend the term of the Building 1400 Lease in respect of Suite 501 only for the Third Extended Term by giving Landlord Premises A Exercise Notice on or before December 24, 2006.   If Tenant fails timely to give a Premises A Exercise Notice as provided herein, Tenant shall have no further right to extend the term of the Leases in respect of any portion of Premises A, time being of the essence of Tenant’s rights under this Section 2.2.

(3)           Terms Applicable to Extended Terms.  Upon the timely giving of a Premises A Exercise Notice, the term of the Leases (or the term of the Building 1400 Lease only, as the case may be) in respect of Premises A (or with respect to Suite 501 only) shall be deemed extended for the Extended Term in question upon all of the terms and conditions of the Leases applicable to Premises A (or those terms and conditions of the Building 1400 Lease as are applicable to Suite 501, as applicable) in effect immediately preceding the commencement of such Extended Term (including, without limitation, Tenant’s obligations to pay  Tenant’s Proportionate CAO Lot Share, Tenant’s Proportionate Building Shares, Tenant’s Proportionate Shares of Taxes and Tenant’s obligation to pay for utilities), except as follows:

(a)           First Extended Term Base Rent.  The annual Base Rent payable by Tenant in respect of Premises A for the First Extended Term shall be $300,790.00 per month (i.e., based upon an annual rental rate of $30.00 per rentable square foot of Premises A); plus the fair rental value of Tenant’s parking spaces in respect of Premises A in the parking garage as reasonably determined by Landlord.

(b)           Second Extended Term Base Rent.  The annual Base Rent payable by Tenant in respect of Premises A for the Second Extended Term shall be $313,323.00 per month (i.e., based upon annual rental rate of $31.25 per rentable square foot in respect of Premises A); plus the fair rental value of Tenant’s parking spaces in respect of Premises A in the parking garage as reasonably determined by Landlord.

(c)           Third Extended Term Base Rent.  The annual Base Rent payable by Tenant in respect of Suite 501 during the Suite 501 Additional Extension Term shall be Four Hundred Ninety-Six Thousand Six Hundred Eighty and 00/100 ($496,680.00) Dollars (i.e., $41,390.00 per month), based upon an annual rental rate of $30.00 per rentable square foot in respect of Suite 501; plus the fair rental value of Tenant’s parking spaces in respect of Suite 501 in the parking garage as reasonably determined by Landlord.

(4)           Independent Options.  Tenant’s extension option under this Section 2.2 with respect to Premises A is independent of Tenant’s extension option with respect to

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Premises B, as set forth in Section 3.2, and is independent of Tenant’s extension option with respect to Premises C, as set forth in Section 5.

(5)           Confirmatory Amendment to Leases.  Notwithstanding the fact that upon Tenant’s exercise of any of its options to extend the term of the Leases in respect of Premises A, such extension shall be self-executing, as aforesaid, the parties shall promptly execute a lease amendment reflecting the exercise of such option.  The execution of such lease amendment shall not be deemed to waive any of the conditions to Tenant’s exercise of its rights under this Section 2.2, unless otherwise specifically provided in such lease amendment.

3.PREMISES B

3.1           Extension of Term of Lease in respect of Premises B.  The term of the Building 1400 Lease in respect of Premises B is hereby extended for an additional period commencing as of July 25, 2005 and terminating as of December 24, 2006.  Said additional term shall be upon the terms and conditions of the Lease in effect immediately preceding the commencement of such additional term (including, without limitation, Tenant’s obligation to pay Tenant’s Proportionate CAO Lot Shares, Tenant’s Proportionate Building Shares, Tenant’s Proportionate Shares of Taxes and Tenant’s obligation to pay for utilities), except as follows:

(1)           The annual Base Rent during the Premises B shall be Nine Hundred Fifty-Eight Thousand and 00/100 ($958,000.00) Dollars (i.e., a monthly payment of $79,833.33), based upon an annual rental rate of  $25.00 per rentable square foot of Premises B, plus the annual fair rental value of Tenant’s parking spaces (i.e. 39 spaces) in respect of Premises B, as the same may be adjusted from time to time.  The parties hereby acknowledge and agree that, as of the Execution Date of this Amendment of Leases, the monthly parking rate is $7,800.00 (i.e. based upon a monthly rate of $200.00 per space per month).

(2)           In the event that any of the provisions of the Building 1400 Lease are inconsistent with this Amendment or the state of facts contemplated hereby, the provisions of this Amendment shall control.

3.2           Tenant’s Extension Options in respect of Premises B.

(1)           Tenant’s Options.   On the condition, which condition Landlord may waive, at its election, by written notice to Tenant at any time, that Tenant is not in material default of its covenants and obligations under the Leases beyond any applicable notice and cure period, both at the time that Tenant gives an Premises B Extension Exercise Notice, as hereinafter defined, to Landlord, and as of the commencement of the Extension Term in question, Tenant shall have the following option to extend the term of the Building 1400 Lease in respect of Premises B only: (x) the First Extended Term, as defined in Section 2.2(1) above, (y) if Tenant timely and properly exercises its option to

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extend the term of the Building 1400 Lease in respect of Premises B for the First Extended Term, then Tenant shall have the right to extend the term of the Building 1400 Lease in respect of Premises B for the Second Extended Term, as defined in Section 2.2(1) above, and (z) if Tenant timely and properly exercises its option to extend the term of the Building 1400 Lease in respect of Premises B for both the First Extended Term and the Second Extended Term, then Tenant shall have the right to extend the term of the Building 1400 Lease with respect to Premises B for the Third Extended Term, as defined in Section 2.2(1) above. Tenant shall have no right to extend the term of the Building 1400 Lease in respect of Premises B, except as provided in this Section 3.2(1).

(2)           Option Exercise Procedures.   Tenant may exercise its right to extend the term of the Building 1400 Lease in respect of Premises B for the First Extended Term by giving Landlord written notice (“Premises B Exercise Notice”) to Landlord on or before June 24, 2006.  If Tenant has timely and properly exercised its option to extend the term of the Building 1400 Lease in respect of Premises B for the First Extended Term, Tenant may exercise its right to extend the term of the Building 1400 Lease in respect of Premises B for the Second Extended Term by giving a Premises B Exercise Notice to Landlord on or before September 24, 2006.  If Tenant has timely and properly exercises its option to extend the term of the Building 1400 Lease in respect of Premises B for the First Extended Term and the Second Extended Term, then Tenant may exercise its right to extend the term of the Building 1400 Lease in respect of Premises B for the Third Extended Term by giving Landlord Premises B Exercise Notice on or before December 24, 2006.  Tenant may, at Tenant’s sole election, exercise its option to extend the term of the Leases in respect of Premises B for the First Extended Term and the Second Extended Term simultaneously and provide Landlord with written notice thereof in a single Premises B Exercise Notice.  If Tenant fails timely to give a Premises B Exercise Notice as provided herein, Tenant shall have no further right to extend the term of the Leases in respect of any portion of Premises B, time being of the essence of Tenant’s rights under this Section 3.2.

(3)           Terms Applicable to Extended Terms.  Upon the timely giving of a Premises B Exercise Notice, the term of the Building 1400 Lease in respect of Premises B shall be deemed extended for the Extended Term in question upon all of the terms and conditions of the Building 1400 Lease applicable to Premises B in effect immediately preceding the commencement of such Extended Term (including, without limitation, Tenant’s obligations to pay Tenant’s Proportionate CAO Lot Share, Tenant’s Proportionate Building Shares, Tenant’s Proportionate Shares of Taxes and Tenant’s obligation to pay for utilities), except as follows:

(a)           First Extended Term Base Rent.  The annual Base Rent payable by Tenant in respect of Premises B for the First Extended Term shall be $79,833.33 per month (i.e., based upon an annual rental rate of $25.00 per rentable square foot of Premises B); plus the fair rental value of Tenant’s parking spaces in respect of Premises B in the parking garage as reasonably determined by Landlord.

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(b)           Second Extended Term Base Rent.  The annual Base Rent payable by Tenant in respect of Premises B for the Second Extended Term shall be $79,833.33 per month (i.e., based upon an annual rental rate of $25.00 per rentable square foot of Premises B); plus the fair rental value of Tenant’s parking spaces in respect of Premises B in the parking garage as reasonably determined by Landlord.

(c)           Third Extended Term Base Rent.  The annual Base Rent payable by Tenant in respect of Premises B during the Third Extension Term shall be as follows:

·For the period from June 25, 2007 through June 24, 2010, the Base Rent payable in respect of Premises B shall be $79,833.33 per month (i.e. based upon an annual rental rate of $25.00 per rentable square foot of Premises B); plus the fair rental value of Tenant’s parking spaces in respect of Premises B in the parking garage as reasonably determined by Landlord.

·For the period from June 25, 2010 through June 24, 2012, the Base Rent payable in respect of Premises B shall be $87,816.67 per month (i.e. based upon an annual rental rate of $27.50 per rentable square foot of Premises B); plus the fair rental value of Tenant’s parking spaces in respect of Premises B in the parking garage as reasonably determined by Landlord.

(4)           Independent Options.  Tenant’s extension option under this Section 3.2 with respect to Premises B is independent of Tenant’s extension option with respect to Premises A, as set forth in Section 2.2, and is independent of Tenant’s extension option with respect to Premises C, as set forth in Section 5.

(5)           Confirmatory Amendment to Building 1400 Lease.  Notwithstanding the fact that upon Tenant’s exercise of any of its options to extend the term of the Building 1400 Lease in respect of Premises B, such extension shall be self-executing, as aforesaid, the parties shall promptly execute a lease amendment reflecting the exercise of such option.  The execution of such lease amendment shall not be deemed to waive any of the conditions to Tenant’s exercise of its rights under this Section 3.2, unless otherwise specifically provided in such lease amendment.

(6)           Tenant’s Right to Terminate Building 1400 Lease in respect of Premises B as of June 24, 2010

(a)           Early Termination Option.  If Tenant timely and properly exercises its right to extend the term of the Building 1400 Lease in respect of Premises B for the Third Extended Term, then, on the conditions (which conditions Landlord may waive by written notice to Tenant at any time) that Tenant is not in material default of its covenants and obligations under the Building 1400 Lease, both at the

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time that Tenant gives Tenant’s Premises B Termination Notice, as hereinafter defined, and as of the Premises B Effective Termination Date, as hereinafter defined, then Tenant shall have the right (“Premises B Termination Right”) to terminate the term of the Building 1400 Lease in respect of Premises B as of June 24, 2010 (“Premises B Effective Termination Date”).

(b)           Exercise Procedures.  Tenant may exercise its early termination right under this Section 3.2(6) by giving Landlord written notice (“Premises B Termination Notice”) on or before June 24, 2009 and by paying to Landlord the Premises B Termination Fee, as hereinafter defined, on or before March 25, 2010.  If Tenant timely and properly exercises its Premises B Termination Right and pays to Landlord the Premises B Termination Fee, then the term of the Building 1400 Lease in respect of Premises B shall automatically terminate as of the Premises B Effective Termination Date, and annual Base Rent and other charges in respect of Premises B shall be apportioned as of said Premises B Effective Termination Date.  If Tenant fails timely to give the Premises B Termination Notice, then Tenant shall have no further right to terminate the Building 1400 Lease pursuant to this Section 3.2(6), time being of the essence of this Section 3.2(6).  It is the intention of Landlord and Tenant to avoid forfeiture of Tenant’s right to terminate the Building 1400 Lease based upon Tenant’s inadvertent failure to pay the Premises B Termination Fee on a timely basis.  Accordingly, if Tenant timely gives the Premises B Termination Notice, but Tenant does not timely pay the Premises B Termination Fee, then the time to pay the Premises B Termination Fee shall be deemed extended for an additional period commencing on the last day on which the Premises B Termination Fee may be timely given as set forth above and ending fifteen (15) days after the date Landlord gives Tenant written notice of Tenant’s failure to pay the Premises B Termination Fee.  If Tenant fails to pay the Premises B Termination Fee within such fifteen (15) day period, then, at Landlord’s election, either: (i) Tenant’s exercise shall be valid, in which event Tenant’s failure to pay the Premises B Termination Payment shall be deemed to be a default by Tenant in its obligations under the Building 1400 Lease, or (ii) Tenant’s exercise shall be void and without further force or effect, in which event Tenant shall have no further right to terminate the Building 1400 Lease in respect of Premises B effective as of June 24, 2010.

(c)           Definition of Premises B Termination Fee.  For the purposes hereof, the “Premises B Termination Fee” shall be the sum of: (i) $114,960.00, plus (ii) the amount (if any) of the First Refusal Space Termination Fee, as hereinafter defined, provided however, that there shall be no First Refusal Space Termination Fee payable by Tenant with respect to any First Refusal Space unless Tenant exercises its right, pursuant to Section 3.3, to lease such First Refusal Space.  The “First Refusal Space Termination Fee” shall be defined as the Unamortized Portion, as hereinafter defined, of First Refusal Space Transaction Costs, as hereinafter defined.   The “Unamortized Portion” shall be calculated, with respect to each First Refusal Space, by amortizing the First Refusal Space Transaction Costs

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incurred by Landlord with respect to such First Refusal Space, on a straight-time basis, over the period commencing as of the rent commencement date in respect of such First Refusal Space and expiring as of June 24, 2012.  For the purposes hereof, “First Refusal Space Transaction Costs”, with respect to a First Refusal Space shall be equal to the sum of all costs and expenses incurred by Landlord in connection with Landlord’s demise of such Refusal Space to Tenant, including without limitation:

·Brokerage commissions; and

·The costs of Landlord’s Work (if any) described in Section 3.3(6) below in respect of such First Refusal Space.

Landlord shall, upon written request of Tenant, promptly after Landlord’s Premises B Transaction Costs have been determined, provide to Tenant verification of such costs.

3.3           Rights of First Refusal. Tenant shall, during the term of the Building 1400 Lease in respect of Premises B and any extension terms thereof, have the following rights of first refusal (the “Rights of First Refusal”): (x) with respect to approximately 3,535 rentable square feet of space known as Suite No. 103 on the loading dock space of Building 1400, shown on the demising plan attached hereto as Exhibit B-2, Sheet 1 (“Loading Dock First Refusal Space”), and (y) approximately 10,396 rentable square feet of space known as Suite No. 201 on the second (2nd) floor of Building 1400, shown on the demising plan attached hereto as Exhibit B-2, Sheet 4 (the “Microbia First Refusal Space”).  Each of the Loading Dock First Refusal Space and the Microbia First Refusal Space is hereinafter referred to as a “First Refusal Space”.

(1)           Procedures for Exercising Rights of First Refusal.  Tenant’s Rights of First Refusal shall be exercised as follows: when Landlord has a prospective tenant, other than the existing tenant in the First Refusal Space, (the “Prospect”) interested in leasing the First Refusal Space, Landlord shall advise Tenant in writing (the “Advice”) of the terms under which Landlord is prepared to lease the First Refusal Space to such Prospect and Tenant may lease the First Refusal Space, under such terms, by providing Landlord with written notice of exercise (the “Notice of Exercise”) within ten (10) business days after the date Tenant receives from Landlord the Advice, except that Tenant shall have no such Right of First Refusal and Landlord need not provide Tenant with an Advice if:

(a)           Tenant is in material default under the Building 1400 Lease beyond any applicable cure periods at the time that Landlord would otherwise deliver the Advice; or

(b)           Premises B, or any portion thereof, is sublet at the time Landlord would otherwise deliver the Advice; or

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(c)           the entire Building 1400 Lease has been assigned to a third party, excluding affiliates of Tenant, prior to the date Landlord would otherwise deliver the Advice; or

(d)           the First Refusal Space is not intended for the exclusive use of Tenant or affiliates of Tenant during the term of the Lease; or

(e)           the Tenant is not occupying at least fifty (50%) percent of the rentable floor area of Premises B on the date Landlord would otherwise deliver the Advice.

(2)Terms for First Refusal Space.

(a)           The term for the First Refusal Space shall commence upon the commencement date stated in the Advice and thereupon such First Refusal Space shall be considered a part of the Premises, provided that all of the terms stated in the Advice, including the termination date set forth in the Advice, shall govern Tenant’s leasing of the First Refusal Space and only to the extent that they do not conflict with the Advice, the terms and conditions of the Lease shall apply to the First Refusal Space.  Tenant shall pay Base Rent and escalation charges for the First Refusal Space in accordance with the terms and conditions of the Advice.

(b)           The First Refusal Space (including improvements and personalty, if any) shall be accepted by Tenant in its condition and as-built configuration existing on the earlier of the date Tenant takes possession of the First Refusal Space or the date the term for such First Refusal Space commences, unless the Advice specifies work to be performed by Landlord in the First Refusal Space, in which case Landlord shall perform such work in the First Refusal Space.  If Landlord is delayed delivering possession of the First Refusal Space due to the holdover or unlawful possession of such space by any party, Landlord shall use reasonable efforts to obtain possession of the space, and the commencement of the term for the First Refusal Space shall be postponed until the date Landlord delivers possession of the First Refusal Space to Tenant free from occupancy by any party.  In the event Landlord is delayed in delivering possession to Tenant for a period of sixty (60) days or more (except that such period shall be ninety (90) days or more if the reason for delay in delivery is the hold over in the First Refusal Space in question by the prior tenant of such space), then Tenant may at any time thereafter, at Tenant’s sole election and upon written notice to Landlord, rescind Tenant’s exercise of its First Refusal Rights, and thereafter Tenant shall have no obligation with respect to the First Refusal Space and any Refusal Space Amendment (as defined below) entered into by Landlord and Tenant shall be automatically void and of no further force or effect.

(3)           Termination of First Right of First Refusal.  The rights of Tenant hereunder with respect to each First Refusal Space shall terminate on the earlier to occur of: (i) Tenant’s failure to exercise its Right of First Refusal with respect to such First Refusal Space within the ten (10) business day period provided in Section 3.3(1) above; and (ii) the date Landlord would have provided Tenant an Advice if Tenant had not been

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in violation of one or more of the conditions set forth in Section 3.3(1) above, and Landlord shall be free to enter into a lease of the First Refusal Space with a third party on terms and conditions, including but not limited to, rent, term of the lease, tenant allowance, the premises leased, which are not materially different than those which are set forth in the Advice; provided however, that if the rights of Tenant with respect to a First Refusal Space terminated hereunder based upon Tenant’s failure to timely exercise its Right of First Refusal, and if Landlord is unable to enter into a lease with the Prospect on terms and conditions which are materially the same as the terms and conditions described in the Advice given by Landlord to Tenant with respect to such First Refusal Space, then Landlord shall deliver to Tenant a new Advice with respect to such First Refusal Space, and Tenant shall again have a Right of First Refusal with respect to such First Refusal Space in accordance with this Section 3.3.

(4)           First Refusal Space Amendment.   If Tenant exercises its First Right of First Refusal, Landlord shall prepare an amendment to the Building 1400 Lease (the “Refusal Space Amendment”) adding the First Refusal Space to Premises B on the terms set forth in the Advice and reflecting the changes in the Base Rent, Rentable Square Footage of Premises B, Tenant’s Proportionate Share and other appropriate terms.  A copy of the First Refusal Space Amendment shall be sent to Tenant within a reasonable time after Landlord’s receipt of the Notice of Exercise executed by Tenant, and Landlord and Tenant shall use reasonably efforts to enter into a First Refusal Space Amendment to Landlord within thirty (30) days thereafter.

(5)           Subordination.  Notwithstanding anything herein to the contrary, Tenant’s First Right of First Refusal is subject and subordinate to the renewal or extension rights of any tenant leasing all or any portion of the First Refusal Space.

(6)           Landlord’s Work if Tenant Exercises Rights of First Refusal.

(a)           Loading Dock First Refusal Space.  Provided Tenant timely and properly exercises its Right of First Refusal with respect to the Loading Dock First Refusal Space, pursuant to this Section 3.3, and provided further that there are four (4) or more years remaining during the then current term of the Building 1400 Lease in respect of Premises B, then Landlord shall, at Landlord’s cost, perform the following work (“Landlord’s Work”) in the Loading Dock First Refusal Space:

(i)Install a scissor lift;

(ii)Install secure overhead doors, of framed or masonry construction, so the loading dock area is not exposed to weather;

(iii)Install overhead lighting in the existing loading dock area for a minimum of 70 footcandles inside and outside the loading dock area;

 (iv)Enclose the existing loading dock area so that Tenant’s distribution personnel are not exposed to the weather; and

(v)Provide Tenant with a secure and segregated holding area off of the existing loading dock that is large enough to store five (5) pallets at any

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one time and has sufficient lay down and sorting space for incoming and outgoing finished goods.

Such Landlord’s Work shall be performed on or before the commencement date in respect of the Loading Dock First Refusal Space and shall be performed in accordance with the provisions of the Building 1400 Lease, including without limitation, Section 11 of the Building 1400 Lease.

(b)           Microbia First Refusal Space.  Provided Tenant timely and properly exercises its Right of First Refusal with respect to the Microbia First Refusal Space, pursuant to this Section 3.3, and provided further that there are four (4) or more years remaining during the then current term of the Building 1400 Lease in respect of Premises B, then Landlord shall, at Landlord’s cost, perform the following work (“Landlord’s Work”) in the Microbia First Refusal Space:

(i)Segregate the first (1st) and second (2nd) floor mechanical systems that are presently tied together;

(ii)Widen the passageway adjacent to the freight elevator on the second (2nd) floor so the such corridor is six feet wide.  Landlord shall pay for the first $10,000.00 of such work, and the parties shall equally share any cost of widening such corridor in excess of $10,000.00

(iii) Upgrade the physical condition and appearance of the second (2nd) floor elevator lobby area reference in Exhibit B-2, Sheet 4 to the current building standard and condition as the 1st floor West elevator lobby in the 1400 Building.

Such Landlord’s Work shall be performed on or before the commencement date in respect of the Microbia First Refusal Space and shall be performed in accordance with the provisions of the Building 1400 Lease, including without limitation, Section 11 of the Building 1400 Lease.

(c)           All of Landlord’s Work shall be performed in a good and workmanlike manner, using new and good materials in accordance with plans and specifications mutually agreed upon by Landlord and Tenant in the applicable Refusal Space Amendment.  The parties shall work in good faith to agree upon mutually acceptable plans and specifications for such Landlord’s Work.

(7)           Independent Rights.  Tenant’s Right of First Refusal with respect to the Loading Dock First Refusal Space and Tenant’s Right of First Refusal with respect to the Microbia First Refusal are independent rights and are not contingent or conditioned upon one another.  Furthermore, Tenant’s Rights of First Refusal are independent of Tenant’s extension options and termination rights set forth in this Amendment.

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4.             RENT REDUCTION IN RESPECT OF PREMISES C FOR BALANCE OF CURRENT TERM; LANDLORD’S EARLY TERMINATION RIGHT AS TO PREMISES C

4.1           Base Rent Reduction in respect of the Period April 1, 2005 through July 24, 2005.  In consideration of Tenant’s agreements herein contained, the Base Rent payable by Tenant in respect of Premises C for the period from April 1, 2005 through the balance of the current term of the Building 1400 Lease (i.e. through July 24, 2005) shall (subject to further possible reduction in accordance with Section 4.2 below) be reduced from $85,457.17 per month to $46,976.00 per month (i.e. $12.00 per rentable square foot of rentable floor of Premises C.

4.2           Landlord’s Early Termination Right as to Premises C.  If Tenant does not timely exercise its right to extend the term of the Building 1400 Lease for the First Premises C Extended Term in respect of the Premises C Extended Term Portion, as set forth in Section 5 below and Tenant is not then in occupancy of any or all of Premises C, then Landlord shall have the right to market all or any portion of Premises C for lease to third parties from and after January 1, 2005, and Landlord shall have the right, at Landlord’s sole election, to terminate the term of the Building 1400 Lease in respect of all or any portion or portions of Premises C (“Terminated Portions”) prior to July 24, 2005, as follows.  Landlord may exercise such election by giving Tenant a written notice (“Premises C Termination Notice”) at any time after Landlord enters into a lease (“New Lease”) with a third party for any Terminated Portion.  If Landlord gives any Premises C Termination Notice, then the term of the Building 1400 Lease shall automatically terminate with respect to the applicable Terminated Portion and Tenant shall be relieved of all obligations with respect thereto (except as provided in the subsequent sentence and except for those obligations which are intended to survive the termination of the Lease, e.g. with respect to the true-up of Operating Costs and Taxes and indemnity obligations) effective as of a date specified in the applicable Premises C Termination Notice (the “Termination Date”), which Termination Date shall not be earlier than the date fourteen (14) days after Tenant receives such Premises C Termination Notice.  If Landlord exercises is right to terminate the term of the Building 1400 Lease in respect of any Terminated Portion, Tenant shall, notwithstanding such early termination of the Building 1400 Lease with respect to such Terminated Portion, continue to pay Base Rent and all other charges due under the Building 1400 Lease in respect of such Terminated Portion as if the term of the Building 1400 Lease did not terminate until July 24, 2005, except that, from and after the Termination Date, the amount of Base Rent payable by Tenant in respect of such Terminated Portion shall be reduced by fifty (50%) percent.

5.             TENANT’S EXTENSION OPTIONS IN RESPECT OF PREMISES C

5.1           Tenant’s Options.  On the condition, which condition Landlord may waive, at its election, by written notice to Tenant at any time, that Tenant is not in material default of its covenants and obligations under the Building 1400 Lease beyond any applicable notice and cure period, both at the time that Tenant gives a Premises C Exercise Notice, as

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hereinafter defined, to Landlord, and as of the commencement of the applicable Premises C Extension Term, as hereinafter defined, Tenant shall have the options (“Premises C Extension Options”) to extend the term of the Building 1400 Lease as follows: (x) in respect of all or a portion of Premises C (“Premises C Extended Term Portion”), as set forth in Section 5.3, for one (1) additional term (“First Premises C Extended Term”) of seven (7) years, commencing as of July 25, 2005 and expiring as of July 24, 2012, and (y) provided that Tenant exercises its right to extend the term of the Building 1400 Lease for the First Premises C Extended Term and Tenant does not exercise its early termination right with respect to the Premises C Extended Term Portion, as set forth in Section 5.5, Tenant shall have the right to extend the term of the Building 1400 Lease with respect to the Premises C Extended Term Portion for one (1) additional term (“Second Premises C Extended Term”) of five years, commencing as of July 25, 2012 and expiring as of July 24, 2017.  Tenant shall have no right to extend the term of the Building 1400 Lease in respect of Premises C, except as provided in this Section 5.1(1).

5.2           Option Exercise Procedures.  Tenant may exercise its Premises C Extension Option with respect to the First Premises C Extension Term by giving Landlord written notice (“Premises C Exercise Notice”) to Landlord on or before December 31, 2004.  If Tenant timely and properly exercises its option to extend the term of the Building 1400 Lease with respect to the Premises C Extended Term Portion for the First Premises C Extension Term, then Tenant may exercises its right to extend the term of the Building 1400 Lease in respect of the Second Premises C Extended Term by giving Landlord a written Premises C Exercise Notice on or before November 25, 2011; provided, however, in the event Landlord fails to deliver to Tenant a written statement of Landlord’s reasonable, good faith estimate of the Fair Market Rental Value for Premises C on or before October 25, 2011, then the date on which the Premises C Exercise Notice for the Second Premises C Extended Term is due shall be extended for an additional period commencing on the November 25, 2011 and ending thirty (30) days after the date Landlord delivers to Tenant the written statement of Landlord’s reasonable, good faith estimate of the Fair Market Rental Value for Premises C.  If Tenant fails to timely give a Premises C Exercise Notice, Tenant shall have no further right to extend the term of the Lease in respect of Premises C, time being of the essence of Tenant’s rights under this Section 5.  Upon the timely giving of the Premises C Exercise Notice, the term of the Lease in respect of the Premises C Extended Term Portion shall be deemed extended for the applicable Premises C Extended Term upon all of the terms and conditions of the Building 1400 Lease applicable to the Premises C Extended Term Portion in effect immediately preceding the commencement of the Premises C Extended Term, except as hereinafter set forth.

5.3           Premises C Extended Term Portion.  Tenant shall designate the size of the Premises C Extended Term Portion in the Premises C Exercise Notice, subject to Landlord’s approval, which approval shall not be unreasonably withheld based upon the whether both the Premises C Extended Term Portion and the balance of Premises C are each of marketable configuration with a proportionate amount of fenestration; provided however, that: (x) the Premises C Extended Term Portion shall have both stairway and

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elevator access; (y) in no event shall the Premises C Extended Term Portion contain less than 35,232 rentable square feet; and (z) if Tenant fails to advise Landlord in the Premises C Exercise Notice of the size and the exact location of the Premises C Extended Term Portion, then Tenant shall be deemed to have elected that the Premises C Extended Term Portion consists of the entirety of Premises C.  If Tenant elects that the Premises C Extended Term Portion shall consist of less than the entirety of Premises C but Tenant fails to identify the exact location of the Premises C Extended Term Portion in the Premises C Exercise Notice, then Landlord may, by written notice given to Tenant on or before January 15, 2005 identifying the exact location of the Premises C Extended Term Portion.  At Tenant’s sole cost and expense, Tenant shall, on or before July 25, 2005, perform such work as is reasonably necessary to separately demise the Premises C Extended Term Portion and to allow the remaining portion of Premises C to be used as an independent premises (including, without limitation, construction of building standard demising walls, 50% of the cost of the construction of building standard common elevator lobbies, installation of separate metering serving the remaining portion of Premises C, and separating of Building systems).  All such work shall be performed by Tenant in accordance with the provisions of the Building 1400 Lease.  Without limiting the foregoing, such work shall be performed in good and workmanlike manner, and in compliance with all applicable laws, ordinances and regulations.  The Parking Ratio applicable to the Premises C Extended Term Portion shall be one parking space per 1,000 rentable square feet of the Premises C Extended Term Portion.

5.4           Terms Applicable to Premises C Extended Term

(1)           Base Rental.

(a)           First Premises C Extended Term.  Subject to Section 5.4(b), the Base Rental payable in respect of Premises C Extended Term Portion during the Premises C Extended Term shall be as follows:

·For the period July 25, 2005 through July 24, 2007, the Base Rent payable in respect of Premises C Extended Term Portion shall be based upon an annual rental rate of $21.00 per rentable square foot of the Premises C Extended Term Portion; plus the fair rental value of Tenant’s parking spaces in respect of Premises  in the parking garage as reasonably determined by Landlord

·For the period from July 25, 2007 through July 24, 2010, the Base Rent payable in respect of the Premises C Extended Term Portion shall be based upon an annual rental rate of $22.00 per rentable square foot of the Premises C Extended Term Portion

·For the period from July 25, 2010 through July 24, 2012, the Base Rent payable in respect of the Premises C Extended Term Portion shall

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be based upon an annual rental rate of $23.00 per rentable square foot of the Premises C Extended Term Portion

(b)           Second Premises C Extended Term. The Base Rent during the Second Premises C Extended Term shall be based upon ninety-five (95%) percent of the Fair Market Rental Value, as defined in Section 5.6, as of July 25, 2012, provided however, that in no event shall the sum of Base Rent, Operating Expense Excess, as hereinafter defined, and Tax Excess, as hereinafter defined, payable by Tenant in respect of the Premises C Extended Term Portion for any twelve-(12)- month period during the Premises C Additional Extension Term be less than the sum of Base Rent, Operating Expense Excess and Tax Excess payable by Tenant in respect of the Premises C Extended Term Portion for the twelve-(12)-month period immediately preceding the commencement of the Premises C Additional Extension Term.

(c)           Rent Abatement Periods.   Tenant shall have no obligation to pay Base Rent in respect of the Premises C Extended Term Portion for the following periods during the Premises C Extended Term: (i) July 25, 2005 — August 24, 2005; (ii) July 25, 2006 — August 24, 2006; (iii) July 25, 2007 — August 24, 2007; and (iv) July 25, 2008 — August 24, 2008.

(2)           Operating Expenses.   Reference is made to the fact that, pursuant to Sections 5.1 and 5.2 of the Building 1400 Lease, Tenant is required to pay, for each calendar year during the term of the Building 1400 Lease, and in respect of all premises demised to Tenant (including the Premises C Extended Term Portion): (i)  Lessee’s Proportionate Share of CAO Lot Share of all costs and expenses incurred by Landlord in connection with the maintenance, repair, upkeep and cleaning of common areas and facilities of the Lot, as defined in said Section 5.1 (“Tenant’s Common Area Operating Expense Share”), and (ii) Lessee’s Proportionate Building share of operating expenses attributable to the Building (“Tenant’s Building Operating Expense Share”).  The parties hereby agree that if Tenant exercises its right to extend the term of the Building 1400 Lease in respect of the Premises C Extended Term Portion for the First Premises C Extended Term, then:

(a)           Apportionment of Tenant’s Common Area Operating Expense Share and Tenant’s Building Operating Expense Share in respect of Premises C for the Period Prior to July 24, 2005.   Tenant’s obligation to pay Tenant’s Common Area Operating Expense Share and Tenant’s Building Operating Expense Share in respect of Premises C for the period from January 1, 2005 through July 24, 2005 shall be apportioned based upon the actual amount of Tenant’s Common Area Operating Expense Share and Tenant’s Building Operating Expense Share in respect of Premises C multiplied by a fraction, the numerator of which shall be 205 days and the denominator of which shall be 365 days.

(b)           First Premises C Extended Term.  With respect to the First Premises C Extended Term, in lieu of paying Tenant’s Common Area Operating Expense Share and Tenant’s Building Operating Expense Share, Tenant shall, (i) for the period from July 25,

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2005 through December 31, 2005, be relieved of any obligation to pay Tenant’s Common Areas Operating Expense Share and Tenant’s Building Operating Expense Share in respect of Premises C, and (ii) commencing as of January 1, 2006 and continuing with respect to each calendar year thereafter during the First Premises C Extended Term, pay to Landlord the amount (“Operating Expense Excess”), if any, by which the sum of Tenant’s Common Area Operating Expense Share and Tenant’s Building Operating Expense Share for such calendar year exceeds the amount (“Operating Expense Base”) of Tenant’s Common Area Operating Expense Share and Tenant’s Building Operating Expense Share payable for calendar year 2005 (“Operating Expense Base Year”).  Operating Expense Excess shall be payable at the same time, and in the same manner that Tenant’s Common Area Operating Expense Share and Tenant’s Building Operating Expense Share are paid by Tenant.  Operating Expense Excess payable with respect to the calendar year in which the First Premises C Extended Term terminates shall be apportioned based upon the portion of such calendar year which occurs during the First Premises C Extended Term.

(c)           Second Premises C Extended Term. With respect to the Second Premises C Extended Term, in lieu of paying Tenant’s Common Area Operating Expense Share and Tenant’s Building Operating Expense Share, Tenant shall, commencing as of January 1, 2013 and continuing with respect to each calendar year thereafter during the Second Premises C Extended Term, pay Operating Expense Excess to Landlord, except that the Operating Expense Base shall be based upon an Operating Expense Base Year of calendar year 2012.  Operating Expense Excess payable with respect to the calendar year in which the Second Premises C Extended Term terminates shall be apportioned based upon the portion of such calendar year which occurs during the Second Premises C Extended Term.

(3)           Tax Excess.  Reference is made to the fact that, pursuant to Section 5.4.2 of the Building 1400 Lease, Tenant is required to pay, for each calendar year during the term of the Building 1400 Lease, and in respect of all premises demised to Tenant (including the Premises C Extended Term Portion): (i)  Lessee’s Proportionate CAO Lot Share of Taxes attributable to the Building (“Tenant’s Common Area Tax Share”), and (ii) Lessee’s Proportionate Building share of Taxes attributable to the Building (“Tenant’s Building Tax Share”).  The parties hereby agree that if Tenant exercises its right to extend the term of the Building 1400 Lease in respect of the Premises C Extended Term Portion for the First Premises C Extended Term, then:

(a)           Apportionment of Tenant’s Common Area Tax Share and Tenant’s Building Tax Share in respect of Premises C for the Tax Fiscal Year Prior to July 24, 2005.   Tenant’s obligation to pay Tenant’s Common Area Tax Share and Tenant’s Building Tax Share in respect of Premises C for the period from July 1, 2005 through July 24, 2005 shall be apportioned based the actual amount of Tenant’s Common Area Tax Share and Tenant’s Building Tax Share in respect of Premises C for fiscal tax year 2006 (i.e., July 1, 2005-June 30, 2006), multiplied by a fraction, the numerator of which shall be 24 days and the denominator of which shall be 365 days.

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(b)           First Premises C Extended Term.  With respect to the First Premises C Extended Term, in lieu of paying Tenant’s Common Area Tax Share and Tenant’s Building Tax Share, Tenant shall (i) for the period from July 25, 2005 through December 31, 2005, be relieved of any obligation to pay Tenant’s Common Areas Operating Expense Share and Tenant’s Building Operating Expense Share in respect of Premises C, and (ii) commencing as of July 1, 2006 and continuing with respect to each fiscal tax year thereafter during the First Premises C Extended Term, pay to Landlord the amount (“Tax Excess”), if any, by which the sum of Tenant’s Common Area Tax Share and Tenant’s Building Tax Share for such fiscal tax year exceeds the amount (“Tax Base”) of Tenant’s Common Area Tax Share and Tenant’s Building Tax Share payable for fiscal tax year 2006 (“Tax Base Year”).  Tax Excess shall be payable at the same time, and in the same manner that Tenant’s Common Area Tax Share and Tenant’s Building Tax Share are paid by Tenant. Tax Excess payable with respect to the fiscal tax year in which the First Premises C Extended Term terminates shall be apportioned based upon the portion of such fiscal tax year which occurs during the First Premises C Extended Term.

(c)           Second Premises C Extended Term. With respect to the Second Premises C Extended Term, in lieu of paying Tenant’s Common Area Tax Share and Tenant’s Building Tax Share, Tenant shall, commencing as of July 1, 2013 and continuing with respect to each fiscal tax year thereafter during the Second Premises C Extended Term, pay Tax Excess to Landlord, except that the Tax Base shall be based upon the Tax Base Year of fiscal tax year 2013 (i.e. July 1, 2012-June 30, 2013).  Tax Excess payable with respect to the fiscal tax year in which the Second Premises C Extended Term terminates shall be apportioned based upon the portion of such fiscal tax year which occurs during the Second Premises C Extended Term.

(d)           Adjustment of Tax Base.  Notwithstanding the foregoing, if a fiscal tax period during an Extended Term contains fewer than twelve (12) months, then the Tax Base for such fiscal period shall be reduced pro rata.

(4)           Landlord’s Contribution.

(a)           Amount of Contribution; Permitted Costs.  If Tenant timely and properly exercises its right to extend the term of the Building 1400 Lease in respect of the Premises C Extended Term Portion, then Landlord shall, in the manner hereinafter set forth, contribute: (i) up to $12.00 per square foot of rentable area of the Premises C Extended Term Portion towards the cost (“Permitted Costs”) of leasehold improvements which may be installed by Tenant in Premises A, Premises B or Premises C (“Tenant Work”).  Permitted Costs shall included, without limitation, the costs of: construction of leasehold improvements, materials, supplies, overhead, general conditions, computer wiring and cabling and architectural and engineering fees.  Tenant’s Work shall be subject to the prior written approval of Landlord, which shall not be unreasonably withheld, conditioned or delayed, and shall be performed in accordance with the Leases.

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(b)           Requisition Procedures.   Provided that Tenant is not in default of its obligations under the Building 1400 Lease at the time that Tenant requests any requisition on account of Landlord’s Contribution, Landlord shall pay the cost of the work shown on each requisition (as hereinafter defined) submitted by Tenant to Landlord within thirty (30) days of submission thereof by Tenant to Landlord.  Notwithstanding the foregoing, if Landlord rejects a requisition on the basis that Tenant is in default of its obligations under the Building 1400 Lease, Tenant shall have the right to resubmit such requisition after Tenant has cured such default, so long as the Building 1400 Lease is then full force and effect and Tenant is not then otherwise in default of its obligations under the Building 1400 Lease.  For the purposes hereof, a “requisition” shall mean written documentation evidencing the Permitted Costs in reasonable detail.  Each requisition shall be accompanied by evidence reasonably satisfactory to Landlord that all work covered by previous requisitions has been fully paid by Tenant.  Landlord shall have the right, upon reasonable advance written notice to Tenant, to inspect Tenant’s books and records relating to each requisition in order to verify the amount thereof.  Tenant shall submit requisition(s) no more often than monthly.

(c)           Notwithstanding anything to the contrary herein contained:

(i)            Landlord shall have no obligation to advance funds on account of Landlord’s Contribution unless and until Landlord has received the requisition in question, together with certifications from Tenant’s architect, certifying that the work shown on the requisition has been performed in accordance with applicable law and in accordance with Tenant’s approved plans, if such work is the type for which architects typically provide certification and for which plans are typically drawn.

(ii)           Except with respect to work and/or materials previously paid for by Tenant, as evidenced by paid invoices provided to Landlord, Landlord shall have the right to have Landlord’s Contribution paid to both Tenant and Tenant’s contractor(s) and vendor(s) jointly, or directly to Tenant’s contractor if: (x) Landlord has reason to believe there are or may be outstanding claims by such contractor(s) or vendor(s), (y) Landlord has provided written notice thereof to Tenant and (z) within ten (10) business days of such written notice, Tenant has failed to provide Landlord with evidence that such amounts have been paid.

(iii)          Landlord shall have no obligation to pay Landlord’s Contribution in respect of any requisition submitted after December 31, 2005.

(iv)          Tenant shall not be entitled to any unused portion of Landlord’s Contribution.

(d)           Except for Landlord’s Contribution, Tenant shall bear all other costs of Tenant’s Work.  Landlord shall have no liability or responsibility for any claim, injury or damage alleged to have been caused by the particular materials, whether building standard or non-building standard, selected by Tenant in connection with Tenant’s Work.

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(5)           Independent Options.  Tenant’s extension option under this Section 5.5 with respect to the Premises C Extended Term Portion is independent of Tenant’s extension option with respect to Premises A, as set forth in Section 2.2, and is independent of Tenant’s extension option with respect to Premises B, as set forth in Section 3.2.

(6)           Confirmatory Amendment to Leases.  Notwithstanding the fact that upon Tenant’s exercise of any of its options to extend the term of the Building 1400 Lease in respect of the Premises C Extended Term Portion, such extension shall be self-executing, as aforesaid, the parties shall promptly execute a lease amendment reflecting the exercise of such option, except that, with respect to the Second Premises C Extended Term, the Base Rent payable by Tenant may not be set forth in such amendment.  Promptly after such Base Rent is determined, the parties shall confirm such rent in writing.  The execution of such lease amendment shall not be deemed to waive any of the conditions to Tenant’s exercise of its rights under this Section 5, unless otherwise specifically provided in such lease amendment.

5.5Tenant’s Right to Terminate Building 1400 Lease in respect of Premises C as of July 24, 2010

(a)           Early Termination Option.  If Tenant timely and properly exercises its right to extend the term of the Building 1400 Lease in respect of the Premises C Extended Portion for the First Premises C Extended Term, then Tenant shall have the right (“Premises C Termination Right”) to terminate the term of the Building 1400 Lease in respect of The Premises C Extended Term Portion as of July 24, 2010 (“Premises C Effective Termination Date”).

(b)           Exercise Procedures.  Tenant may exercise its Premises C Termination Right under this Section 5.5 by giving Landlord written notice (“Premises C Termination Notice”) on or before July 24, 2009 and by paying to Landlord the Premises C Termination Fee, as hereinafter defined, on or before April 25, 2010. If Tenant timely and properly exercises its Premises C Termination Right and pays to Landlord the Premises C Termination Fee, then the term of the Building 1400 Lease in respect of the Premises C Extended Term Portion shall automatically terminate as of the Premises C Effective Termination Date, and annual Base Rent and other charges in respect of the Premises C Extended Term Portion shall be apportioned as of said Premises C Effective Termination Date.  If Tenant fails timely to give the Premises C Termination Notice, then Tenant shall have no further right to terminate the Building 1400 Lease pursuant to this Section 5.5, time being of the essence of this Section 5.5.  It is the intention of Landlord and Tenant to avoid forfeiture of Tenant’s Premises C Termination Right based upon Tenant’s inadvertent failure to pay the Premises B Termination Fee on a timely basis.  Accordingly, if Tenant timely gives the Premises C Termination Notice, but Tenant does not timely pay the Premises C Termination Fee, then the time to pay the Premises C Termination Fee shall be deemed extended for an

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additional period commencing on the last day on which the Premises C Termination Fee may be timely given as set forth above and ending fifteen (15) days after the date Landlord gives Tenant written notice of Tenant’s failure to pay the Premises C Termination Fee. If Tenant fails to pay the Premises B Termination Fee within such fifteen (15) day period, then, at Landlord’s election, either: (i) Tenant’s exercise shall be valid, in which event Tenant’s failure to pay the Premises C Termination Payment shall be deemed to be a default by Tenant in its obligations under the Building 1400 Lease, or (ii) Tenant’s exercise shall be void and without further force or effect, in which event Tenant shall have no further right to terminate the Building 1400 Lease in respect of Premises C effective as of June 24, 2010.

(c)           Definition of Premises C Termination Fee.   For the purposes hereof, the “Premises C Termination Fee” shall be equal to $288,677.62.

5.6           Fair Market Rental Value               

(1)           Definition.  “Fair Market Rental Value” shall be computed as of the date in question at the then current annual rental charge (i.e., the sum of Base Rent plus escalation and other charges), including provisions for subsequent increases and other adjustments for leases or agreements to lease then currently being negotiated, or executed in comparable space located in comparable first-class office buildings located in East Cambridge, Massachusetts.  In determining Fair Market Rental Value, the following factors, among others, shall be taken into account and given effect: size, location of premises, lease term, condition of building, and services provided by the Landlord.

(2)           Dispute as to Fair Market Rental Value.  Landlord shall in good faith initially designate Fair Market Rental Value in writing and Landlord shall furnish data in support of such designation.  If Tenant disagrees with Landlord’s designation of a Fair Market Rental Value, Tenant shall have the right, by written notice given within thirty (30) days after Tenant received written notice of Landlord’s designation, to submit such Fair Market Rental Value to arbitration.  Fair Market Rental Value shall be submitted to arbitration as follows:  Fair Market Rental Value shall be determined by impartial arbitrators, one to be chosen by the Landlord, one to be chosen by Tenant, and a third to be selected, if necessary, as below provided.  The unanimous written decision of the two first chosen, without selection and participation of a third arbitrator, or otherwise, the written decision of a majority of three arbitrators chosen and selected as aforesaid, shall be conclusive and binding upon Landlord and Tenant.  Landlord and Tenants hall each notify the other of its chosen arbitrator within ten (10) days following the call for arbitration and, unless such two arbitrators shall have reached a unanimous decision within thirty (30) days after their designation, they shall so notify the President of the Boston Bar Association (or such organization as may succeed to said Boston Bar Association) and request him to select an impartial third arbitrator, who shall be an office building owner or a real estate broker dealing with like types of properties, to determine Fair Market Rental Value as herein defined.  Such third arbitrator and the first two chosen shall, subject to commercial

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arbitration rules of the American Arbitration Association, hear the parties and their evidence and render their decision within thirty (30) days following the conclusion of such hearing and notify Landlord and Tenant thereof.  Landlord and Tenant shall bear the expense of the third arbitrator (if any) equally. The decision of the arbitrator shall be binding and conclusive, and judgment upon the award or decision of the arbitrator may be entered in Superior Court for Middlesex County; and the parties consent to the jurisdiction of such court and further agree that any process or notice of motion or other application to the Court or a Judge thereof may be served outside Massachusetts by mail, by recognized overnight delivery service, or by personal service, provided a reasonable time for appearance is allowed.  If the dispute between the parties as to a Fair Market Rental Value has not been resolved before the commencement of Tenant’s obligation to pay rent based upon such Fair Market Rental Value, then Tenant shall pay Base Rent and other charges under the Lease in respect of the premises in question based upon the Fair Market Rental Value designated by Landlord until either the agreement of the parties as to the Fair Market Rental Value, or the decision of the arbitrators, as the Base may be, at which time Tenant shall pay any underpayment of rent and other charges to Landlord, or Landlord shall refund any overpayment of rent and other charges to Tenant.

6.             SIGNAGE

6.1           Tenant’s Rights if Tenant fails to Extend the Term of the Building 1400 Lease in respect of the Premises C Extended Term Premises.   If Tenant fails to timely exercise its right to extend the term of the Building 1400 Lease in respect of the Premises C Extended Term Premises, pursuant to Section 5, then, commencing on July 25, 2005, Tenant shall have the right to attach two (2) signs (collectively, “Building 600 Signage”) to Building 700 (which is connected to Building 600) at such locations to be mutually agreed upon by both Tenant and Landlord, which agreement shall not be unreasonably withheld, conditioned or delayed.  The first sign shall be attached flush against the façade of Building 700.  The second sign shall be “blade-styled” that protrudes at a perpendicular angle from the façade of the Building 700.  Such Building 600 Signage shall be lit or backlit at Tenant’s discretion.  Tenant shall be responsible for all costs in connection with the Building 600 Signage, including, without limitation, the design, manufacture, installation, maintenance and removal of such Building 600 Signage.  In addition, Tenant shall be responsible for obtaining all necessary permits required by the City of Cambridge in connection with the installation of such Building 600 Signage.  Such Building 600 Signage is subject to the final review and approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Without limiting the foregoing, Landlord hereby agrees to respond to Tenant’s request for approval within thirty (30) days from receiving a reasonably detailed description thereof from Tenant.

6.2           Tenant’s Rights if Tenant Extends the Term of the Building 1400 Lease in respect of the Premises C Extended Term Premises.  Alternatively, if Tenant exercises its right to extend the term of the Building 1400 Lease in respect of the Premises C Extended Term Premises, pursuant to Section 5, then Tenant shall have the right to install one (1) sign on the façade of Building 1400 facing Cardinal Medieros and one (1) sign on

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the façade of Building 1400 facing Binney Street (“Building 1400 Façade Signage”), both in a location to be designated by Tenant, subject to the prior approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed.  Such Building 1400 Façade Signage shall be lit or backlit at Tenant’s discretion.  Tenant shall be responsible for all costs in connection with the Building 1400 Façade Signage, including, without limitation, the design, manufacture, installation, maintenance and removal of such Building 1400 Façade Signage.  In addition, Tenant shall be responsible for obtaining all necessary permits required by the City of Cambridge in connection with the installation of such Building 1400 Façade Signage.  Such Building 1400 Façade Signage is subject to the final review and approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed.  Without limiting the foregoing, Landlord hereby agrees to respond to Tenant’s request for approval within twenty (20) days from receiving a reasonably detailed description thereof from Tenant.

7.             ROOFTOP GENERATOR

7.1           So long as either Lease is in force and effect, Tenant shall have the right to install, maintain and replace on the rooftop of Building 700 an 80 kilowatt supplemental generator (the “Generator”) and an above ground fuel tank (the “Tank”) to provide emergency additional electrical capacity to the Premises during the term of either of the Leases.  Tenant shall have the right to connect the Generator to Tenant’s premises located in Building 1400, provided that such work is performed in accordance with the provisions of the Leases.  The Generator and the Tank shall be placed at a mutually agreed upon location.  Notwithstanding the foregoing, Tenant’s right to install the Generator and the Tank shall be subject to Landlord’s approval, which shall not be unreasonably withheld, conditioned or delays, of the manner in which the Generator and the Tank is installed, the manner in which any fuel pipe is installed, the manner in which any ventilation and exhaust systems are installed, the manner in which any cables are run to and from the Generator to the Premises and the measures that will be taken to eliminate any vibrations or sound disturbances from the operation of the Generator, including, without limitation, any necessary 2 hour rated enclosures or sound installation.  Landlord shall have the right to require an acceptable enclosure to hide or disguise the existence of the Generator and the Tank and to minimize any adverse effect that the installation of the Generator and the Tank may have on the appearance of the Building and Complex.  Tenant shall be solely responsible for obtaining all necessary governmental and regulatory approvals and for the cost of installing, operating, maintaining and removing the Generator and the Tank.  Tenant shall not install or operate the Generator or the Tank until Tenant has obtained and submitted to Landlord copies of all required governmental permits, licenses and authorizations necessary for the installation and operation of the Generator and the Tank. In addition to, and without limiting Tenant’s obligations under the Lease, Tenant shall comply with all applicable environmental and fire prevention Laws pertaining to Tenant’s use of the Generator Area. Tenant shall also be responsible for the cost of all utilities consumed in the operation of the Generator and the Tank.  Landlord hereby approves of the Generator currently installed and maintained by Tenant on the roof of Building 700 in the location outlined on Exhibit B-2, Sheet 8, attached hereto and made a part hereof. 

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Landlord acknowledges and agrees that the existing Generator complies with the requirements of this Section 7.

7.2           Tenant shall be responsible for assuring that the installation, maintenance, operation and removal of the Generator and the Tank shall in no way damage any portion of the Building or Complex.  To the maximum extent permitted by applicable law, the Generator and the Tank and all appurtenances in the Generator Area shall be at the sole risk of Tenant, and Landlord shall have no liability to Tenant if the Generator, the Tank or any appurtenances installations are damaged for any reason, except, subject to Section 9A of both the Building 600 Lease and of the Building 1400 Lease, to the extent such liability has resulted from Landlord’s negligent act or omission.  Tenant agrees to be responsible for any damage caused to the Building or Complex in connection with the installation, maintenance, operation or removal of the Generator and, in accordance with the terms of the provisions of the Leases, to indemnify, defend and hold Landlord and Landlord Related Parties, as hereinafter defined, harmless from all liabilities, obligations, damages, penalties, claims, costs, charges and expenses, including, without limitation, reasonable architects’ and reasonable attorneys’ fees (if and to the extent permitted by applicable law), which may be imposed upon, incurred by, or asserted against Landlord or any of the Landlord Related Parties, as hereinafter defined, in connection with the installation, maintenance, operation or removal of the Generator and the Tank, including, without limitation, any environmental and hazardous materials claims, except, subject to Section 9A of both the Building 600 Lease and of the Building 1400 Lease, to the extent such liabilities, obligations, damages, penalties, claims, costs, charges and expenses have resulted from Landlord’s or Landlord Related Parties’ negligent act or omission.  In addition to, and without limiting Tenant’s obligations under the Lease, Tenant covenants and agrees that the installation and use of the Generator and the Tank and appurtenances shall not adversely affect the insurance coverage for the Building.  If for any reason, the installation or use of the Generator, the Tank and/or the appurtenances shall result in an increase in the amount of the premiums for such coverage, then Tenant shall be liable for the full amount of any such increase. Landlord Related Parties shall mean its trustees, principals, beneficiaries, partners, officers, directors, employees, mortgagee and agents.

7.3.          Tenant shall be responsible for the installation, operation, cleanliness, maintenance and removal of the Generator and the Tank and the appurtenances, all of which shall remain the personal property of Tenant, and shall be removed by Tenant at its own expense at the expiration or earlier termination of the Lease.  Tenant shall repair any damage caused by such removal, including the patching of any holes to match, as closely as possible, the color surrounding the area where the Generator, Tank and appurtenances were attached. Such maintenance and operation shall be performed in a manner to avoid any unreasonable interference with any other tenants or Landlord.  Tenant shall take the Generator Area “as is” in the condition in which the Generator Area is in as of the commencement date in respect of the Generator Area, without any obligation on the part of Landlord to prepare or construct the Generator Area for Tenant’s use or occupancy. Without limiting the foregoing, Landlord makes no warranties or representations to Tenant as to the suitability of the Generator Area for the installation and operation of the

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Generator or the Tank.  Tenant shall have no right to make any changes, alterations, additions, decorations or other improvements to the Generator Area without Landlord’s prior written consent. Tenant agrees to maintain the Generator and the Tank, including without limitation, any enclosure installed around the Generator and the Tank in good condition and repair and Tenant shall operate the Generator and the Tank in a manner which does not interfere with the use or occupancy of the other tenants in the Building or the Complex.  Tenant shall be responsible for performing any maintenance and improvements to any enclosure surrounding the Generator and the Tank so as to keep such enclosure in good condition.

7.4           Tenant, upon prior notice to Landlord and subject to the rules and regulations enacted by Landlord, shall have access to the Generator and the Tank and its surrounding area for the purpose of installing, repairing, maintaining and removing said Generator and the Tank.

7.5           Tenant shall only test the Generator before or after normal business hours and at a time mutually agreed to in writing by Landlord and Tenant in advance. Tenant shall be permitted to use the Generator Area solely for the maintenance and operation of the Generator and the Tank, and the Generator, Tank and Generator Area are solely for the benefit of Tenant, its successors, assigns, subtenants and/or assignees. All electricity generated by the Generator may only be consumed by Tenant, its successors, assigns, subtenants and assignees in the Premises.

7.6           Landlord shall have no obligation to provide any services, including, without limitation, electric current, to the Generator Area.

7.7           Tenant shall have no right to sublet the Generator Area or to assign its interest hereunder, except to affiliates of Tenant or in connection with an assignment of either of the Leases.

7.8.          During the term of the Lease, Tenant shall have no obligation to pay annual Base Rent in respect of the Generator, the Tank or the Generator Area.

8.BROKER

Landlord and Tenant each represent and warrant to the other that each has had no dealings with any brokers concerning this Amendment of Leases, except Trammell Crow Company and Lincoln Property Company and each party agrees to indemnify and hold the other harmless for any damages occasioned to the other by reason of a breach of this representation and warranty.

9.             LANDLORD’S DEFAULT

9.1           Cure Period.  Landlord shall not be deemed to be in default of its obligations under the Lease unless Tenant has given Landlord written notice of such default, and

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Landlord has failed to cure said monetary default within five (5) days or said non-monetary default within thirty (30) days after Landlord receives such notice or such longer period of time as Landlord may reasonably require to cure said non-monetary default.

9.2           No Termination or Abatement Rights.  Except as otherwise expressly provided in the Lease as amended by this Amendment, in no event shall Tenant have the right to terminate the Lease nor shall Tenant’s obligation to pay annual Base Rent or other charges under the Lease abate based upon any default by Landlord of its obligations under the Lease.

10.           NO FURTHER EXPANSION RIGHTS

Tenant shall have no further right to lease additional premises in the Building or elsewhere in the Complex pursuant to the Lease.  Without limiting the foregoing, Section 24 of the Building 600 Lease and Section 24 of the Building 1400 Lease and the Letter Agreement dated July 9, 1997 shall be void and without further force or effect.

11.           NO FURTHER EXTENSION RIGHTS

Tenant shall have no further extension rights other than the extension rights set forth in this Amendment to Lease.  Without limiting the foregoing, Section 25 of the Building 600 Lease and Section 25 of the Building 1400 Lease shall be void and without further force or effect.

12.           CROSS DEFAULT

Any default by Tenant under the Building 600 Lease shall be deemed to be a default by Tenant under the Building 1400 Lease, and any default by Tenant under the Building 1400 Lease shall be deemed to be a default by Tenant under the Building 600 Lease.

13.           As herein amended, the Lease is ratified, approved and confirmed in all respects.

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EXECUTED under seal as of the date first above written.

	LANDLORD: ONE KENDALL SQUARE ASSOCIATES, LLC,  a Delaware limited liability company		TENANT: GENZYME CORPORATION
By:	One Kendall Square Mezzanine, LLC, its sole member
By:	One Kendall Square Investors, LLC its sole member
By:	Lincoln-One Kendall Square, LLC its administrative member
By:	/s/ W. Frank Cofer	By:	/s/ Michael S. Wyzga
	Name:W. Frank Cofer		(Name)         Chief Financial Officer
	Title:Senior Vice President		Hereunto Duly Authorized
Date Signed:	12 - 17 - 2004	Date Signed:	12 - 16 - 04

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EXHIBIT A-1, AMENDMENT OF LEASES

AMENDMENTS TO BUILDING 600 LEASE

Letter Agreement dated December 20, 1988
Lease Modification dated January 6, 1989
Letter Agreement dated January 31, 1989
Lease Modification dated February 10, 1989
Addendum to Building 700 Lease dated August 2, 1990
First Amendment to Lease dated December 12, 1995(1)
Second Amendment to Lease dated August 24, 1995(2)
Third Amendment to Lease dated March 8, 1996 (Letter attaching Third amendment
refers to Third Amendment dated January 1, 1989)
Letter Agreement dated July 9, 1997

(1) The First Amendment to Lease is incorrectly dated as December 12, 1995; the letter attaching the First Amendment to Lease is dated March 9, 1996, which is the correct date of the First Amendment to Lease.

(2) The Second Amendment to Lease is incorrectly dated as January 1, 1989; the letter attaching the Second Amendment to Lease is dated August 24, 1995, which is the correct date of the Second  Amendment to Lease.

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EXHIBIT A-2, AMENDMENT OF LEASES

AMENDMENTS TO BUILDING 1400 LEASE

Letter Agreement dated December 20, 1988
Letter Agreement dated December 20, 1988
Letter Agreement dated January 19, 1989
Letter Agreement dated January 31, 1989
Addendum to Building 1400 Lease dated August 2, 1990
Addendum to Building 1400 Lease dated September 20, 1991
Third Addendum to Building 1400 Lease dated April 6, 1993
Fourth Addendum to Building 1400 Lease dated August 24, 1995
Letter Agreement dated July 9, 1997

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EXHIBIT B-1, AMENDMENT OF LEASES, SHEET 1

BUILDING 600 PREMISES (Basement Level)

31

EXHIBIT B-1, AMENDMENT OF LEASES, SHEET 2

BUILDING 600 PREMISES (Fourth Floor)

32

EXHIBIT B-1, AMENDMENT OF LEASES, SHEET 3

BUILDING 600 PREMISES (Fifth Floor)

33

EXHIBIT B-2, AMENDMENT OF LEASES, SHEET 1

BUILDING 1400 PREMISES (Loading Dock)

34

EXHIBIT B-2, AMENDMENT OF LEASES, SHEET 2

BUILDING 1400 PREMISES (Lower Level)

35

EXHIBIT B-2, AMENDMENT OF LEASES, SHEET 3

BUILDING 1400 PREMISES (First Floor)

36

EXHIBIT B-2, AMENDMENT OF LEASES, SHEET 4

BUILDING 1400 PREMISES (Second Floor)

37

EXHIBIT B-2, AMENDMENT OF LEASES, SHEET 5

BUILDING 1400 PREMISES (Third Floor)

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EXHIBIT B-2, AMENDMENT OF LEASES, SHEET 6

BUILDING 1400 PREMISES (Fourth Floor)

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EXHIBIT B-2, AMENDMENT OF LEASES, SHEET 7

BUILDING 1400 PREMISES (Fifth Floor - Suite 501)

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EXHIBIT C, AMENDMENT OF LEASES

INTENTIONALLY OMITTED

41

EXHIBIT D, AMENDMENT OF LEASES

INTENTIONALLY OMITTED

42

EXHIBIT E, AMENDMENT OF LEASES

COMPLEX

43

EX-10.11.2

Exhibit 10.11.2

SECOND AMENDMENT OF LEASES

This Second Amendment of Leases (this “Amendment”) is made as of this 25th day of July, 2005 by and between One Kendall Square Associates, LLC (“Landlord”) and Genzyme Corporation (“Tenant”).

1.             BACKGROUND

Reference is made to the following:

1.1           Amendment of Leases:  An Amendment of Leases dated December 17, 2004 by and between Landlord and Tenant (“Amendment of Leases”).  The Amendment of Leases amends two leases (collectively “Leases”) between the parties, one of the Leases (“Building 600 Lease”) relating to premises located in Building 600/650/700 (“Building 600”), One Kendall Square, Cambridge, Massachusetts, and the other of the Leases (“Building 1400 Lease”) relating to premises located in Building 1400 (“Building 1400”), One Kendall Square, Cambridge, Massachusetts.  Any capitalized terms used in this Second Amendment of Leases shall have the same definitions as set forth in the Amendment of Leases, except to the extent otherwise expressly set forth herein.

1.2           Premises A:  Premises A consists of the Building 600 Premises, as defined in the Amendment of Leases, and Suite 501 located on the fifth (5th) floor of Building 1400, as defined in the Amendment of Leases.   The terms of the Leases in respect of Premises A and Suite 501 expire as of December 24, 2006, unless Tenant exercises its option to extend the term thereof in accordance with the Amendment of Leases.

1.3           Premises B:  Premises B consists of portions of the lower level, the second (2nd) floor, the third (3rd) floor and the fourth (4th) floor of Building 1400, all as more particularly defined in the Amendment of Leases.  For the purposes of this Second Amendment of Leases, the Premises B defined in the Amendment of Leases are hereinafter referred to as “Existing Premises B”.  The term of the Building 1400 Lease in respect of  Existing Premises B expires as of December 24, 2006, unless Tenant exercises its option to extend the term thereof in accordance with the Amendment of Leases.

1.4           Premises C:  Premises C consists of portions of the first (1st), second (2nd), third (3rd), fourth (4th), and fifth (5th) floors of Building 1400, all as more particularly defined in the Amendment of Leases.  The term of the Building 1400 Lease in respect of Premises C expires as of July 24, 2005.

1.5           Extended Term Portions of Premises C:  Notwithstanding the fact that the term of the Building 1400 Lease in respect of Premises C expires as of July 24, 2005, Tenant desires to extend the term of the Building 1400 Lease in respect of the following portions (“Extended Term Portions of Premises C”) for an additional period commencing as of July 25, 2005 and expiring as of December 24, 2006:

1

·An area on the second (2nd) floor of Building 1400, containing 3,605 rentable square feet, substantially as shown on Exhibit A, Sheet 1 attached hereto

·An area on the fourth (4th) floor of Building 1400, containing 669 rentable square feet, substantially as shown on Exhibit A, Sheet 2 attached hereto

·An area on the second (5th) floor of Building 1400, containing 74 rentable square feet, substantially as shown on Exhibit A, Sheet 3 attached hereto.

1.6           Deleted Portion of Premises B:  Notwithstanding the fact that the term of the Building 1400 Lease in respect of Premises B was, pursuant to the Amendment of Leases, extended for a period commencing as of July 25, 2005 and expiring as of December 24, 2006, Tenant desires to terminate the term of the Building 1400 Lease in respect of the portion (“Deleted Portion of Premises B”) containing 3,605 rentable square feet and shown on Exhibit A, Sheet 2 effective as of July 24, 2005.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree that the Building 1400 Lease, as previously amended, is hereby further amended as follows:

2.             EXTENSION OF TERM OF BUILDING 1400 LEASE IN RESPECT OF THE EXTENDED TERM PORTIONS OF PREMISES C

The term of the Building 1400 Lease in respect of the Extended Term Portions of Premises C are hereby extended for an additional term commencing as of July 25, 2005 and ending as of December 24, 2006.  The demise of the Extended Term Portions of Premises C shall be upon all of the same terms and conditions of the Building 1400 Lease applicable to Premises B.  The Extended Term Portions of Premises C are hereby incorporated into and made a part of Premises B, and Tenant shall have the same rights and obligations with respect to the Extended Term Portions of Premises C as Tenant has with respect to Premises B, including but not limited to, extension options, termination right and rights of first refusal.  The Base Rent payable in respect of the Extended Portions of Premises C is included in the Base Rent payable in respect of Premises B, as set forth in Section 4 below.  Except as provided herein, the Building 1400 Lease in respect of Premises C terminated as of July 24, 2005.

3.             TERMINATION OF TERM OF BUILDING 1400 LEASE IN RESPECT OF DELETED PORTION OF PREMISES B

The Building 1400 Lease in respect of the Deleted Portion of Premises B is hereby terminated effective as of July 24, 2005.  Annual Base Rent and other charges payable in respect of the Deleted Portion of Premises B shall be apportioned as of July 24, 2005.

4.             REVISED DEFINITION OF PREMISES B

4.1           Definition.  Giving effect to the extension of the term of the Building 1400 Lease in respect of the Extended Term Portions of Premises C, the termination of

2

the Building 1400 Lease in respect of the Deleted Portion of Premises B, and the incorporation of the Extended Term Portions of Premises C into Premises B, the parties hereby agree that, for all purposes under the Leases and Amendment of Leases, Tenant has the right to use 39 parking spaces, and Premises B shall consist of areas containing 37,435 rentable square feet, as follows:

(1)           A portion of the lower level of Building 1400, containing 3,869 square feet of space, as shown on Exhibit B-2, Sheet 1 attached to the Amendment of Leases.

(2)           A portion of the second (2nd) floor of Building 1400, containing 14,219 square feet of space, as shown on Exhibit A, Sheet 1 attached to this Second Amendment of Leases.

(3)           A portion of the third (3rd) floor of Building 1400, containing 18,604 square feet of space, as shown on Exhibit B-2, Sheet 5 attached to this Second Amendment of Leases.

(4)           A portion of the fourth (4th) floor of Building 1400, containing 669 square feet of space, as shown on Exhibit A, Sheet 2 attached to this Second Amendment of Leases.

(5)           A portion of the fifth (5th) floor of Building 1400 containing 74 square feet of space, as shown on Exhibit A, Sheet 3 attached to this Second Amendment of Leases.

4.2           Annual Base Rent.  During the period commencing as of July 25, 2005 and expiring as of December 24, 2006, the annual Base Rent in respect of Premises B (as defined in this Section 4 shall be Nine Hundred Thirty-Five Thousand Eight Hundred Seventy-Five and 00/100 ($935,875.00) Dollars (i.e., a monthly payment of $77,989.58).

5.Tenant’s Proportionate CAO Lot Share and Tenant’s Proportionate Building Share

For purposes of determining Tenant’s Proportionate CAO Lot Share and Tenant’s Proportionate Building Shares the parties hereby confirm and agree that the square footage of space included in the Complex and each of the Buildings is as follows:

Building 600:	224,803 square feet
Building 1400:	133,077 square feet
Complex:	650,681 square feet

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As herein amended, the Leases are ratified, approved and confirmed in all respects.

EXECUTED under seal as of the date first above written.

LANDLORD:	TENANT:
ONE KENDALL SQUARE	GENZYME CORPORATION, a
ASSOCIATES, LLC,	Massachusetts Corporation
a Delaware limited liability company

By:One Kendall Square
Mezzanine, LLC,
its sole member

By:One Kendall Square Investors, LLC
its sole member

By:Lincoln-One Kendall Square, LLC
its administrative member

By:	/s/ W. Frank Cofer		By:	/s/ Michael S. Wyzga
	Name:  W. Frank Cofer			Name:  Michael S. Wyzga
	Title:  Vice President			Title:  Chief Financial Officer
	Hereunto Duly Authorized			Hereunto Duly Authorized
Date Signed:		12/28/05	Date Signed:		12/20/05

4

SECOND AMENDMENT OF LEASES
EXHIBIT A, SHEET 1

SECOND FLOOR
(EXISTING PREMISES B AND
EXTENDED TERM PORTION OF PREMISES C)

5

SECOND AMENDMENT OF LEASES
EXHIBIT A, SHEET 2

FOURTH FLOOR
(EXTENDED TERM PORTION OF EXHIBIT C
AND
DELETED PORTION OF PREMISES B

6

SECOND AMENDMENT OF LEASES
EXHIBIT A, SHEET 3

FIFTH FLOOR
EXTENDED TERM PORTION OF PREMISES C

7

EX-10.11.3

  Exhibit 10.11.3

THIRD AMENDMENT OF LEASES

THIS THIRD AMENDMENT OF LEASES (the “Third Amendment”) is made this 4th day of January, 2007, by and between RB KENDALL FEE, LLC (“Landlord”) and GENZYME CORPORATION, having a mailing address at 500 Kendall Street, Cambridge, Massachusetts 02139 (“Tenant”).

R E C I T A L S:

Reference is made to the following:

A.            One Kendall Realty Trust, predecessor-in-interest to Landlord, and Tenant entered into those certain leases (collectively, the “Leases”) described in the Amendment of Leases, dated December 17, 2004, between Landlord’s predecessor-in-interest and Tenant (the “First Amendment”) and the Second Amendment of Leases, dated July 25, 2005 (the “Second Amendment”), by and between Landlord’s predecessor in title and Tenant  (collectively, the “Amendments”).  One of the Leases (the “Building 600 Lease”) relates to premises located in Building 600/650/700  (“Building 600”), One Kendall Square, Cambridge, Massachusetts (the “Complex”) and the other Lease relates to premises located in Building 1400 (the “Building 1400 Lease”) in the Complex.  Capitalized terms used but not defined herein shall have the same meaning as in the Lease or Amendments.

B.            Landlord and Tenant are the current holders, respectively, of the lessor’s and lessee’s interests in the Lease.

C.            The term of the Leases with respect to Premises A and Premises B (all as defined in the Second Amendment), as extended in accordance with the terms of the First Amendment by notices from Tenant to Landlord dated May 31, 2006 and September 22, 2006, is set to expire on June 24, 2007.

D.            Landlord and Tenant want to extend the term of the Leases with respect to certain portions of the demised premises, confirm the annual Base Rent payable during such extended term and further revise the Leases as set forth in this Third Amendment.

E.             Landlord and Tenant now desire to amend the Leases as set forth herein.

A G R E E M E N T S:

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree to amend the Leases as follows:

1.             Premises B.  The term of the Building 1400 Lease with respect to Premises B, which contains 37,435 square feet, is hereby extended for an additional term commencing June 25, 2007 and expiring on February 28, 2008 (the “Premises B Extended Term”).  From the date hereof until the expiration of the Premises B Extended Term, the annual Base Rent in respect of Premises B shall be $935,875.00, payable in monthly amounts of $77,989.58 in accordance with the terms of the Building 1400 Lease.

2.             Revised Definition of Premises A.  The parties agrees that, for all purposes under this Third Amendment, the demised premises comprising Premises A (as defined in the Amendments) shall be redefined as follows:

                “Premises A 2007” shall consist of a portion of the premises currently demised under the Building 600 Lease and the Building 1400 Lease, as amended by the Amendments, containing, in the aggregate, 84,280 rentable square feet, as shown on Exhibit A, Sheets 1, 2 and 3, attached hereto, as follows:

a)A portion of the lower level of Building 600 containing 4,914 square feet of space;

b)A portion of the fourth (4th) and fifth (5th) floors (including a portion of the fourth (4th) floor mezzanine) of Building 600 containing 62,810 square feet of space; and

c)A portion of the fifth (5th) floor of Building 1400 containing 16,556 square feet of space.

“Premises A 2008” shall consist of a portion of the premises currently demised under the Building 600 Lease, as amended by the Amendments, containing, in the aggregate, 36,036 rentable square feet in Building 600, as shown on Exhibit B, Sheets 1, 2 and 3 attached hereto as follows:

a)A portion of the fourth (4th) floor containing 25,324 square feet of space;

b)A portion of the fourth (4th) floor containing 4,441 square feet of space;

c)A portion of the fourth (4th) floor mezzanine containing 1,841 square feet of space;

d)A portion of the fifth (5th) floor containing 4,329 square feet of space;

e)A portion of the fifth (5th) floor containing 101 square feet of space; and

f)The Security & IT Closets as shown on Sheet 3 of Exhibit B.

3.             Premises A 2007.  The term of the Leases with respect to Premises A 2007 is hereby extended for an additional term commencing June 25, 2007 and expiring on September 30, 2007.    During the period commencing on the date hereof and expiring on March 24, 2007, the annual Base Rent in respect of Premises A 2007 shall be $2,528,400.00, payable in monthly amounts of $210,700.00.  During the period commencing March 25, 2007 and expiring September 30, 2007, the annual Base Rent in respect of Premises 2007 A shall be $2,633,750.00, payable in monthly amounts of $219,479.16.

4.             Premises A 2008.  The term of the Building 600 Lease with respect to Premises A 2008 is hereby extended for an additional term commencing June 25, 2007 and expiring on February 28, 2008.  During the period commencing on the date hereof and expiring on March 24, 2007, the annual Base Rent in respect of Premises A 2008 shall be $1,081,080.00, payable in monthly amounts of $90,090.00.  During the period commencing March 25, 2007 and expiring February 28, 2008, the annual Base Rent in respect of Premises A 2008 shall be $1,126,125.00, payable in monthly amounts of $93,843.75.

5.             No Further Extension Rights or Rights of First Refusal.  Tenant acknowledges and agrees that it shall have no further right to extend the term of the Leases beyond the dates set forth in this Third Amendment and no rights of first refusal on any space within the Complex.  Without limiting the foregoing, Sections 2.2, 3.2 and 3.3 of the First Amendment shall be void and without further force or effect.

6.             Tenant’s Proportionate Shares.  Throughout the term of the Leases, as extended herein, Tenant shall continue to pay Lessee’s Proportionate CAO Lot Share, Lessee’s Proportionate Building Share and Tenant’s pro rata share of real estate taxes, with the calculation of said payment being adjusted

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to reflect any decrease in rentable square footage leased by Tenant as Tenant surrenders space in accordance with the provisions of this Third Amendment.  After the Tenant surrenders Premises A 2007 to Landlord in accordance with the terms of the Building 600 Lease, Building 1400 Lease, Amendments and this Third Amendment, the Lessee’s Proportionate CAO Lot Share under the Building 600 Lease shall be 5.54%, Lessee’s Proportionate Building Share under the Building 600 Lease shall be 16.03%, Lessee’s Proportionate CAO Lot Share under the Building 1400 Lease shall be 5.75%, Lessee’s Proportionate Building Share under the Building 1400 Lease shall be 28.13% and Tenant’s pro rata share of real estate taxes under each of the Leases shall be the same percentages as set forth above.

7.             Utilities.  Tenant’s obligation to pay for utilities, as set forth in the Leases, shall continue throughout the term with any pro rata payments being adjusted to reflect any decrease in rentable square footage leased by Tenant as Tenant surrenders space in accordance with the provisions of this Third Amendment.  The parties acknowledge that Landlord is unaware of the specifics of how electrical service is distributed by the utility company to the various premises leased by Tenant.  Tenant agrees, however, that if the entirety of Premises A 2007 is not separately metered from Premises B and Premises A 2008, then after expiration of the term for Premises A 2007, and no later than October 31, 2007, Tenant shall, at Tenant’s sole cost and expense, furnish and install any necessary metering equipment to measure the consumption of electric current in Premises A 2007 separately from Premises B and Premises A 2008.  If Landlord elects to take back the Surrendered Space (as defined below), then Tenant shall, at Tenant’s sole cost and expense and within thirty (30) days after the Surrender Date (as defined below) (or such longer period as is reasonably necessary to complete the hereinafter described work, provided that Tenant has commenced and is diligently pursuing the completion of such work and; further provided, that such period shall not extend beyond ninety (90) days after the Surrender Date) furnish and install any necessary metering equipment to measure the consumption of electric current in the Surrendered Space separately from the remaining portion of Premises A 2007 occupied by Tenant and separately from Premises B and Premises A 2008.

8.             No Interior Cleaning Service.  Landlord and Tenant acknowledge and agree that Landlord does not provide, and is not obligated to provide, any interior cleaning services for the Premises B, Premises A 2007 or Premises A 2008.  Landlord shall not charge Tenant for any interior cleaning services and such charges shall not be included in Lessee’s Proportionate CAO Lot Share or Lessee’s Proportionate Building.

9.             Take Back Option.  Commencing January 1, 2007, Landlord has the option, exercisable on thirty (30) days prior written notice to Tenant, to take back the portion of Premises A 2007 consisting of 16,556 rentable square feet on the fifth (5th) floor of Building 1400 as shown on Exhibit A, Sheet 3 (the “Surrendered Space”).  Landlord’s notice shall set forth the date by which Tenant must yield up the Surrendered Space to Landlord in the condition required under the Leases, Amendments and this Third Amendment (the “Surrender Date”).  In no event shall the Surrender Date be earlier than thirty (30) days after the date of Landlord’s notice.  If Tenant needs additional time to decommission the Surrendered Space, as required under this Third Amendment,  Tenant may extend the Surrender Date on a day-to day basis in order to complete its decommissioning work provided Tenant has commenced such work prior to the original Surrender Date and is working diligently to complete such work.  As of the Surrender Date, Lessee’s Proportionate CAO Lot Share under the Building 600 Lease shall be 15.95%, Lessee’s Proportionate Building Share under the Building 600 Lease shall be 46.16%, Lessee’s Proportionate CAO Lot Share under the Building 1400 Lease shall be 5.75%, Lessee’s Proportionate Building Share under the Building 1400 Lease shall be 28.13% and Tenant’s pro rata share of real estate taxes under each of the Leases shall be the same percentages as set forth above.  As of the Surrender Date, the Leases shall automatically terminate with respect only to the Surrendered Space as if the Leases had expired by its

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terms with respect to the Surrendered Space and Tenant shall be automatically relieved from all further obligations with respect to the Surrendered Space as of the Surrender Date, except as to those obligations in the Leases that expressly survive termination.

10.           Parking.  Throughout the term of the Leases, the Landlord will make available to Tenant one monthly parking pass for each 1,000 rentable square feet of space currently leased by Tenant pursuant to the Leases for use in the One Kendall Square Garage (the “Garage”).  As of the date hereof, Tenant shall have the right to use 158 parking spaces in the Garage based on the square footage for Premises B, Premises A 2007 and Premises A 2008.  Tenant shall have no right to sublet, assign, or otherwise transfer said parking passes except in connection with an assignment of the Leases or sublease of the premises permitted pursuant to the provisions of the Leases.  Said parking passes shall be paid for by Tenant at the then current prevailing rate in the Garage, as such rate may vary from time to time.  The current rate for such passes, as of the date of this Third Amendment, is $200.00 per month.  If, for any reason, Tenant shall fail timely to pay the charge for said parking passes, Landlord shall have the same rights against Tenant as Landlord has with respect to the timely payment of Base Rent hereunder.  Said parking passes will be on an unassigned, non-reserved basis, and shall be subject to reasonable rules and regulations from time to time in force.  Tenant shall have the right, from time to time, upon at least thirty (30) days prior written notice to Landlord, to surrender one or more of such parking passes, and upon such surrender, Tenant shall have no further rights or obligations with respect to such surrendered passes.  As Tenant surrenders portions of the demised premises in accordance with this Third Amendment, Tenant shall also surrender the corresponding parking passes.   During the term of the Leases Landlord agrees to notify Tenant when additional parking spaces become available in the Garage and Tenant shall have the option to utilize such spaces on a month-to-month basis at the then current prevailing rate in the Garage.  The provisions of this Paragraph 10 shall replace all others in the Leases relating to parking spaces in the Garage.

11.           Removal of Signage.  Upon execution of this Third Amendment, Tenant shall commence, at its sole cost and expense,  the removal of any of its signage, if any, from the front entrance, glass awning entrance and the clock tower on Building 1400.  At the expiration of the term of the Leases, Tenant shall remove, at its sole cost and expense, all of its exterior signage, if any, from Building 600.  The removal of such signage shall not damage the premises or Building 1400 or Building 600, as the case may be, and the cost of repairing any damage to the premises or said buildings arising from such removal shall be paid by Tenant.

12.           Decommissioning of Premises.  On or before the date of the expiration of the term for Premises B, Premises A 2007 or Premises A 2008 or the Surrender Date if Landlord exercises its termination option in Paragraph 9 of this Third Amendment, Tenant shall:

a)             Cause those portions of Premises B, Premises A 2007, Premises A 2008 or the Surrendered Space, as the case may be, used for laboratory purposes to be decommissioned in accordance with the regulations of the U.S. Nuclear Regulatory Commission and/or the Massachusetts Department of Public Health for the control of radiation, cause such premises to be released for unrestricted use by the Radiation Control Program of the Massachusetts Department of Public Health for the control of radiation, and deliver to Landlord the report of a certified industrial hygienist or a certified health physicist, as the case may be, stating that he or she has examined such premises (including visual inspection, Geiger counter evaluation and airborne and surface monitoring) and found no evidence that such portion of such premises contains Hazardous Materials, as defined in this Third Amendment, or is otherwise in violation of any Environmental Law, as also defined in this Third Amendment hereof.

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b)            Provide to Landlord a copy of its most current chemical waste removal manifest and a certification from Tenant executed by an officer of Tenant that to the knowledge of such officer, after due investigation, no Hazardous Materials or other potentially dangerous or harmful chemicals brought onto such premises from and after the date that Tenant first took occupancy of the premises remain in such premises.

13.           Defined Terms.  As used herein the term “Environmental Law” means collectively all laws, statutes, ordinances, rules and regulations of any local, state or federal governmental authority having jurisdiction concerning environmental, health and safety matters, including, but not limited to, any discharge into the air, surface, water, sewers, soil or groundwater of any Hazardous Materials.  As used herein, the term “Hazardous Materials” means any hazardous or toxic substance, material or waste or petroleum derivative which is or becomes regulated by any Environmental Law, specifically including live organisms, viruses and fungi, medical waste, and so-called “biohazard” materials.  The term “Hazardous Materials” includes, without limitation, any material or substance which is (i) designated as a “hazardous substance” pursuant to Section 1311 of the Federal Water Pollution Control Act (33 U.S.C. Section 1317), (ii) defined as a “hazardous waste” pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903), (iii) defined as a “hazardous substance” pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. (42 U.S.C. Section 9601), (iv) defined as “hazardous substance” or “oil” under Chapter 21E of the General Laws of Massachusetts, or (v) a so-called “biohazard” or medical waste, or is contaminated with blood or other bodily fluids; and “Environmental Law” includes, without limitation, the laws listed in the preceding clauses (i) through (iv).

14.           Systems.  Upon the expiration of the term of the Leases, Tenant shall ensure that all mechanical systems remaining in Premises B, Premises A 2007 and Premises A 2008, including, without limitation, Tenant’s emergency medical and fire systems shall be in good, working order, normal wear and tear excepted as of such premises’ respective term expiration dates..

15.           Segregation of Premises.  In the event Landlord leases any portion of Premises A 2007 after such premises are vacated by Tenant, Tenant and Landlord shall cooperate (a) in separating the vacated premises from the remaining premises still occupied by Tenant with separate demising walls; (b) in ensuring that the tenants leasing such premises have all necessary ingress and egress in and out of the premises as may be required by applicable laws and (c) in ensuring that the vacant space meets applicable code requirements.  Any work required to be completed in Premises A 2007, or in the adjacent premises still occupied by Tenant after vacating Premises A 2007, in order to ensure such compliance and to segregate the vacant space from the occupied space shall be performed by Landlord, at Landlord’s cost, during normal business hours; provided, however, that Landlord shall use reasonable efforts to minimize any disruption to Tenant’s use of its premises.  Subject to the provisions hereof, Tenant agrees to provide Landlord and its contractors with ready access to the remaining premises occupied by Tenant, during normal business hours, to complete such work; provided, however, that Landlord shall use reasonable efforts to minimize any disruption to Tenant’s use of its premises.  Tenant acknowledges and agrees that the operation of the plumbing and electric systems and the furnishing of heating and air conditioning services to the premises still occupied by the Tenant may be temporarily interrupted as a result of the work contemplated in this paragraph.  Landlord shall exercise reasonable diligence to minimize any such interruption, and provided that Landlord exercises such efforts, there shall be no diminution or abatement of rent or other compensation due from Landlord to Tenant as a result of such interruption, nor shall the Leases be affected or any of Tenant’s obligations under the Leases be reduced, and Landlord shall have

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no responsibility or liability for any such interruption of services or systems provided that Landlord is acting with reasonable diligence as set forth herein.  Landlord, at Landlord’s sole cost and expense, shall be responsible for any damage to Tenant’s property or the premises caused in whole or in part by Landlord’s negligent act or omission relative to the segregation of the premises as contemplated by this paragraph 15.  Notwithstanding any provision to the contrary contained herein, Tenant shall have the right at all times to have an agent or representative of Tenant accompany Landlord, Landlord’s contractors, licensees, agents, servants, employees, invitees or visitors or anyone entering any portion of Premises B, Premises A 2007 or Premises A 2008 at Landlord’s discretion or on Landlord’s behalf.

16.           Removal of Tenant’s Wiring.  Tenant agrees to reimburse Landlord for one-half of the actual cost reasonably incurred by Landlord for the removal of all telecommunications lines and cabling installed by Tenant in Premises B, Premises A 2007 or Premises A 2008, including, without limitation, any such lines and cabling installed in the plenum or risers of Building 600 and/or Building 1400 (“Tenant’s Wiring”).  Landlord shall deliver a written statement to Tenant, providing reasonable detail of the work performed and the costs incurred by Landlord.  In no event shall Tenant’s reimbursement obligation exceed $100,000 in the aggregate.  Landlord shall not commence the removal of Tenant’s Wiring in a particular portion of the premises until after the expiration of the term for the respective portion of the premises.  However, in the event Tenant vacates any portion of Premises B, Premises A 2007 or Premises A 2008 prior to the scheduled expiration date of the term as set forth in this Third Amendment, Landlord shall be permitted to remove Tenant’s Wiring from the vacated space immediately upon Tenant’s surrender of said space to Landlord provided Landlord can complete such removal without unreasonably interfering with Tenant’s business operations in the remaining space occupied by Tenant.

17.           Notices.  For all purposes of the Leases, the notice address for Landlord shall hereafter be as follows: RB Kendall Fee, LLC, One Kendall Square, Cambridge, Massachusetts 02139.  Any notices given to Landlord shall be delivered in accordance with the terms of the Leases to the foregoing address with copies to be delivered in like manner to Landlord, c/o The Beal Companies, LLP, 177 Milk Street, Boston, Massachusetts, Attention: Stephen N. Faber, Vice President and to Sherin and Lodgen, LLP, 101 Federal Street, Boston, Massachusetts 02110, Attention: Peter A. Spellios, Esquire.

For all purposes of the Leases, the notice address for Tenant shall hereafter be as follows:  Genzyme Corporation, MetroWest Summit, 11 Pleasant Street Connector, Framingham, Massachusetts 01701, Attn: Henry Fitzgerald.  Any notices given to Tenant shall be delivered in accordance with the terms of the Leases to the foregoing address with copies to be delivered in like manner to:  Genzyme Corporation, 500 Kendall Street, Cambridge, Massachusetts 02142, Attn: Bob Hesslein, Esq., and to Edwards Angell Palmer & Dodge, 111 Huntington Avenue, Boston, Massachusetts 02199, Attn: Thomas G. Schnorr, Esq.

Notwithstanding any provision in the Leases to the contrary, any notices or other communications under the Leases may be delivered in person, by nationally recognized commercial delivery service, next business day delivery, certified mail with return receipt requested or by registered mail, postage prepaid.

18.           Brokers.  Landlord and Tenant each warrant and represent to the other that they have dealt with no brokers in connection with the negotiation or consummation of this Third Amendment other than Lincoln Property Company and Trammell Crow Company (the “Brokers”) and in the event of any brokerage claim against either party by any person claiming to have dealt with either Landlord or Tenant in connection with this Third Amendment, other than the Brokers, the party with whom such person claims to have dealt shall defend and indemnify the other party against such claim.  Landlord shall pay any commission due the Brokers pursuant to a separate agreement.

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19.           In all other respects the Leases shall remain unmodified and shall continue in full force and effect, as amended hereby.  The parties hereby ratify, confirm, and reaffirm all of the terms and conditions of the Leases, as amended hereby.

[Signatures appear on next page]

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IN WITNESS WHEREOF the parties hereto have executed this Third Amendment of Leases on the date first written above in multiple copies, each to be considered an original hereof, as a sealed instrument.

LANDLORD:		TENANT:
RB KENDALL FEE, LLC		GENZYME CORPORATION
By:	Beal Kendall LLC, its authorized signatory
By:	/s/ Robert L. Beal	By:	/s/ Mark Bamforth
	Robert L. Beal, its manager	Name:	Mark Bamforth
		Title:	Senior Vice President

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EX-10.12

Exhibit 10.12

GENZYME CORPORATION

1997 EQUITY INCENTIVE PLAN

1.     Purpose

The purpose of the Genzyme Corporation 1997 Equity Incentive Plan (the “Plan”) is to attract and retain key employees and consultants of the Company and its Affiliates, to provide an incentive for them to achieve long-range performance goals, and to enable them to participate in the long-term growth of the Company by granting them Awards with respect to the Company’s Common Stock.  Certain capitalized terms used herein are defined in section 7 below.

2. Administration

The Plan shall be administered by the Committee.   The Committee shall determine the terms and conditions of the Awards.  The Committee shall have authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time to time consider advisable, and to interpret the provisions of the Plan.  The Committee’s decisions shall be final and binding.  To the extent permitted by applicable law, the Committee may delegate to one or more executive officers of the Company the power to make Awards to Participants and all determinations under the Plan with respect thereto, provided that the Committee shall fix the maximum amount of such Awards for all such Participants and a maximum for any one Participant.

3. Eligibility

All employees and consultants of the Company or any Affiliate capable of contributing significantly to the successful performance of the Company are eligible to be Participants in the Plan, other than persons deemed to be officers or directors of the Company within the meaning of the corporate governance rules for Nasdaq National Market companies.  The Committee, in its sole discretion, shall determine from the group of eligible persons whether an individual shall be a Participant under the Plan.

4. Stock Available for Awards

(a)     Amount.  Subject to adjustment under subsection (b), Awards may be made under the Plan for up to 27,664,300 shares of Genzyme General Stock.  If any Award expires or is terminated unexercised or is forfeited or settled in a manner that results in fewer shares outstanding than were awarded, the shares subject to such Award, to the extent of such expiration, termination, forfeiture or decrease, shall again be available for award under the Plan.  Common Stock issued through the assumption or substitution of outstanding grants from an acquired company shall not reduce the shares available for Awards under the Plan.  Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.

(b)     Adjustment.  In the event of any stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares or other transaction that affects the Common Stock such that an adjustment is required in order to preserve the benefits intended to be provided by the Plan, then the Committee shall equitably adjust any or all of (i) the number and kind of shares in respect of which Awards may be made under the Plan, (ii) the number and kind of shares subject to outstanding Awards and (iii) the exercise price with respect to any of the foregoing, provided that the number of shares subject to any Award shall always be a whole number, and if considered appropriate, the Committee may make provision for a cash payment with respect to an outstanding Award.  Notwithstanding the foregoing, unless otherwise determined by the Committee, no adjustment will be made for dividends of one series of Common Stock paid on another series of Common Stock.

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5.     Stock Options

(a)     Grant of Options.  Subject to the provisions of the Plan, the Committee may grant Options to purchase shares of Common Stock.  The Committee shall determine the number of shares subject to each Option and the exercise price therefor, which shall not be less than 100% of the Fair Market Value of the Common Stock as of the Pricing Date.  The Plan does not provide for the granting of incentive stock options meeting the requirements of Section 422 of the Code.

(b)     Terms and Conditions.  Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may specify in the applicable grant or thereafter.  The Committee may impose such conditions with respect to the exercise of Options, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable.

(c)     Payment.  No shares shall be delivered pursuant to any exercise of an Option until payment in full of the exercise price therefor is received by the Company.  Such payment may be made in whole or in part in cash or, to the extent permitted by the Committee at or after the grant of the Option, by delivery of a note or other commitment satisfactory to the Committee or shares of Common Stock owned by the optionee, including Restricted Stock, or by retaining shares otherwise issuable pursuant to the Option, in each case valued at their Fair Market Value on the date of delivery or retention, or such other lawful  consideration, including a payment commitment of a financial or brokerage institution, as the Committee may determine.

6. General Provisions Applicable to Awards

(a)     Documentation.  Each Award under the Plan shall be evidenced by a writing delivered to the Participant specifying the terms and conditions thereof and containing such other terms and conditions not inconsistent with the provisions of the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or to comply with applicable tax and regulatory laws and accounting principles.

(b)     Committee Discretion.  The terms of each Award need not be identical, and the Committee need not treat Participants uniformly.  Except as otherwise provided by the Plan or a particular Award, any determination with respect to an Award may be made by the Committee at the time of grant or at any time thereafter.

(c)     Dividends and Cash Awards.  In the discretion of the Committee, any Award under the Plan may provide the Participant with (i) dividends or dividend equivalents payable (in cash or in the form of Awards under the Plan) currently or deferred with or without interest and (ii) cash payments in lieu of or in addition to an Award.

(d)     Termination of Employment.  The Committee shall determine the effect on an Award of the disability, death, retirement or other termination of employment of a Participant and the extent to which, and the period during which, the Participant’s legal representative, guardian or Designated Beneficiary may receive payment of an Award or exercise rights thereunder.

(e)     Change in Control.  In order to preserve a Participant’s rights under an Award in the event of a change in control of the Company (as defined by the Committee), the Committee in its discretion may, at the time an Award is made or at any time thereafter, take one or more of the following actions: (i) provide for  the acceleration of any time period relating to the exercise or payment of the Award, (ii) provide for payment to the Participant of cash or other property with a Fair Market Value equal to the amount that would have been received upon the exercise or payment of the Award had the Award been exercised or paid upon the change in control, (iii) adjust the terms of the Award in a manner determined by the Committee to reflect the change in control, (iv) cause the Award to be assumed, or new rights substituted therefor, by

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another entity, or (v) make such other provision as the Committee may consider equitable to Participants and in the best interests of the Company.

(f)     Transferability.  In the discretion of the Committee, any Award may be made transferable upon such terms and conditions and to such extent as the Committee determines.  The Committee may in its discretion waive any restriction on transferability.

(g)     Loans.  The Committee may authorize the making of loans or cash payments to Participants in connection with the grant or exercise of any Award under the Plan, which loans may be secured by any security, including Common Stock, underlying or related to such Award (provided that the loan shall not exceed the Fair Market Value of the security subject to such Award), and which may be forgiven upon such terms and conditions as the Committee may establish at the time of such loan or at any time thereafter.

(h)     Withholding Taxes.  The Participant shall pay to the Company, or make provision satisfactory to the Committee for payment of, any taxes required by law to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability.  The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Participant.  In the Committee’s discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value on the date of  delivery.

(i)     Foreign Nationals.  Awards may be made to Participants who are foreign nationals or employed outside the United States on such terms and conditions different from those specified in the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or to comply with applicable laws.

(j)     Amendment of Award.  The Committee may amend, modify or terminate any outstanding Award, including substituting therefor another Award of the same or a different type, changing the date of exercise or realization, provided that the Participant’s consent to such action shall be required unless the Committee determines that the action, taking into account any related action, would not materially and adversely affect the Participant.

7. Certain Definitions

“Affiliate” means any business entity in which the Company owns directly or indirectly 50% or more of the total voting power or has a significant financial interest as determined by the Committee.

“Award” means any Stock Option granted under the Plan.

“Board” means the Board of Directors of the Company.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor law.

“Committee” means one or more committees each comprised of not less than two members of the Board appointed by the Board to administer the Plan or a specified portion thereof.

“Common Stock” or “Stock” means the common stock, $.01 par value, of the Company.

“Company” means Genzyme Corporation.

“Designated Beneficiary” means the beneficiary designated by a Participant, in a manner determined by the Committee, to receive amounts due or exercise rights of the Participant in the event of the Participant’s death.  In the absence of an effective designation by a Participant, “Designated Beneficiary” means the Participant’s estate.

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“Fair Market Value” means, with respect to Common Stock or any other property, the fair market value of such property as determined by the Committee in good faith or in the manner established by the Committee from time to time.

 “Participant” means a person selected by the Committee to receive an Award under the Plan.

“Pricing Date” means the date on which the Award is granted, except that the Committee may provide that the Pricing Date for an Award granted to a new employee or consultant shall be the date on which the recipient is hired or engaged if the grant of the Award occurs within 90 days of the date such employment or engagement commences.

“Stock Option” or “Option” means an option to purchase shares of Common Stock awarded to a Participant under Section 5.

8.     Miscellaneous

(a)     Rights Limited.  Any Award made under the Plan shall be made in the sole discretion of the Committee, or its delegate as appointed in accordance with the Plan, and no prior Award shall entitle a person to any future Award.  In no event shall the Plan, or any Award made under the Plan, form a part of an employee’s or consultant’s contract of employment or service, if any.  Neither the Plan, nor any Award made under the Plan, shall confer upon any employee or consultant of the Company or its Affiliate any right with respect to the continuance of his or her employment by, or other service with, the Company or its Affiliate, nor shall they limit the right of the Company or its Affiliate to terminate the employee or consultant or otherwise change the terms of service.  The loss of existing or potential profit in an Award shall not constitute an element of damages in the event of termination of employment or service for any reason, even if the termination is in violation of an obligation of the Company or its Affiliate to the Participant.

(b)     No Rights as Stockholder.  Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed under the Plan until he or she becomes the holder thereof.  A Participant to whom Common Stock is awarded shall be considered the holder of the Stock at the time of the Award except as otherwise provided in the applicable Award.

(c)     Effective Date.  The Plan shall be effective on October 16, 1997.

(d)     Amendment of Plan.  The Board may amend, suspend or terminate the Plan or any portion thereof at any time.

(e)     Governing Law.  The provisions of the Plan shall be governed by and interpreted in accordance with the laws of Massachusetts.

Approved by the Board of Directors on October 16,1997.

Amended by the Board of Directors on March 24, 1999.

Amended by the Board of Directors on August 26, 1999.

Amended by the Compensation Committee on March 2, 2000.

Amended by the Compensation Committee on February 9, 2001.

Amended by the Compensation Committee on May 30, 2001.

2-for-1 stock split on 6/1/01.

Amended by the Compensation Committee on May 29, 2002.

Amended by the Compensation Committee on February 26, 2003.

Amended by the Board of Directors on June 30, 2003.

Amended by the Board of Directors on March 14, 2005.

Amended by the Board of Directors on December 4, 2006

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EX-10.14

Exhibit 10.14

GENZYME CORPORATION

2001 EQUITY INCENTIVE PLAN

1.             Purpose.

The purpose of the Genzyme Corporation 2001 Equity Incentive Plan (the “Plan”) is to attract and retain key employees and consultants of the Company and its Affiliates, to provide an incentive for them to achieve long-range performance goals, and to enable them to participate in the long-term growth of the Company by granting stock options (“Options”) with respect to the Company’s Common Stock. Certain capitalized terms used herein are defined in Section 6 below.

The Plan constitutes an amendment and restatement of the Company’s 1990 Equity Incentive Plan (the “Prior Plan”), which is hereby merged with and into the Plan, and the separate existence of the Prior Plan shall terminate on the effective date of the Plan. The rights and privileges of holders of outstanding options and rights under the Prior Plan shall not be adversely affected by the foregoing action.

2.             Administration.

The Plan shall be administered by the Committee; provided, that the Board may in any instance perform any of the functions of the Committee hereunder.  The Committee shall determine the terms and conditions of the Options.  The Committee shall have authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time to time consider advisable, and to interpret the provisions of the Plan.  The Committee’s decisions shall be final and binding.  To the extent permitted by applicable law, the Committee may delegate to one or more executive officers of the Company the power to grant Options to Participants who are not Reporting Persons or Covered Employees and all determinations under the Plan with respect thereto, provided that the Committee shall fix the maximum amount of such Options for all such Participants and a maximum for any one Participant.

3.             Eligibility.

All employees and consultants of the Company or any Affiliate capable of contributing significantly to the successful performance of the Company, other than a person who has irrevocably elected not to be eligible, are eligible to be Participants in the Plan.  Incentive Stock Options may be granted only to persons eligible to receive such Options under the Code.  The Committee, in its sole discretion, shall determine from the group of eligible persons whether an individual shall be a Participant under the Plan.

4.             Stock Available for Grant.

(a)           Amount.   Subject to adjustment under subsection (b), Options may be granted under the Plan for a maximum of 21,364,320 shares of Common Stock.  If any Options (including any Options under the Prior Plan) expire or are terminated unexercised or are forfeited or settled in a manner that results in fewer shares outstanding than were granted, the shares subject to such Options, to the extent of such expiration, termination, forfeiture or decrease, shall again be available for grant under the Plan.  Common Stock issued through the assumption or substitution of outstanding grants from an acquired company shall not reduce the shares available for Option grants under the Plan.  Shares issued under the Plan may consist of authorized but unissued shares or treasury shares.

(b)           Adjustment.   In the event of any stock dividend, extraordinary cash dividend, re-capitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of

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shares or other transaction that affects the Common Stock such that an adjustment is required in order to preserve the benefits intended to be provided by the Plan, then the Committee (subject in the case of Incentive Stock Options to any limitation required under the Code) shall equitably adjust any or all of (i) the number and kind of shares in respect of which Option grants may be made under the Plan, (ii) the number and kind of shares subject to outstanding Options and (iii) the exercise price with respect to any of the foregoing, provided that the number of shares subject to any Option grant shall always be a whole number, and if considered appropriate, the Committee may make provision for a cash payment with respect to an outstanding Option.  No adjustment to decrease the exercise price of outstanding stock options granted under the plan with respect to a re-pricing program will be made without shareholder approval.

(c)           Limit on Individual Grants.   Subject to adjustment under subsection (b), the maximum number of shares subject to Options that may be granted to any Participant in the aggregate in any calendar year shall not exceed 1,000,000 shares of Common Stock.

5.             General Provisions.

(a)           Grant of Options.   Subject to the provisions of the Plan, the Committee may grant Options to purchase shares of Common Stock (i) complying with the requirements of Section 422 of the Code or any successor provision and any regulations thereunder (“Incentive Stock Options”) and (ii) not intended to comply with such requirements (“Nonstatutory Stock Options”).  The Committee shall determine the number of shares subject to each Option and the exercise price therefor, which shall not be less than 100% of the Fair Market Value of the Common Stock on the date of Grant, provided that a Nonstatutory Stock Option granted to a new employee or consultant in connection with the hiring of such person may have a lower exercise price so long as it is not less than 100% of Fair Market Value on the date the person accepts the Company’s offer of employment or the date employment commences, whichever is lower.  No Options may be granted hereunder more than ten years after the effective date of the Plan.

(b)           Terms and Conditions.   Each Option shall be exercisable at such times and subject to terms and conditions as the Committee may specify in the applicable grant or thereafter.  The Committee may impose such conditions with respect to the exercise of Options, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable.

(c)           Payment.   No shares shall be delivered pursuant to any exercise of an Option until payment in full of the exercise price therefor is received by the Company.  Such payment may be made in whole or in part in cash or, to the extent permitted by the Committee at or after the grant of the Option, by delivery of a note or other commitment satisfactory to the Committee or shares of Common Stock owned by the optionee (which shares must be owned for at least six months) valued at their Fair Market Value on the date of delivery, or such other lawful consideration, including a payment commitment of a financial or brokerage institution, as the Committee may determine.

(d)           Documentation.   Options granted under the Plan shall be evidenced by a writing delivered to the Participant or agreement executed by the Participant specifying the terms and conditions thereof and containing such other terms and conditions not inconsistent with the provisions of the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or to comply with applicable tax and regulatory laws and accounting principles.

(e)           Committee Discretion.   Each Option grant may be made alone, in addition to or in relation to any other Option grant.  The terms of each Option grant need not be identical, and the Committee need not treat Participants uniformly.  Except as otherwise provided by the Plan or a particular Option grant, any determination with respect to an Option grant may be made by the Committee at the time of grant or at any time thereafter.

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(f)            Dividends and Cash Awards.   In the discretion of the Committee, any Option grant under the Plan may provide the Participant with (i) dividends or dividend equivalents payable (in cash or in the form of Options under the Plan) currently or deferred with or without interest and (ii) cash payments in lieu of or in addition to an Option grant.

(g)           Termination of Service.   The Committee shall determine the effect on an Option of the disability, death, retirement or other termination of service of a Participant and the extent to which, and the period during which, the Participant’s legal representative, guardian or Designated Beneficiary may exercise rights thereunder.

(h)           Change in Control.   In order to preserve a Participant’s rights under an Option in the event of a change in control of the Company (as defined by the Committee), the Committee in its discretion may, at the time an Option is granted or at any time thereafter, take one or more of the following actions:  (i) provide for the acceleration of any time period relating to the exercise of the Options, (ii) provide for payment to the Participant of cash or other property with a Fair Market Value equal to the amount that would have been received upon the exercise of the Options had the Options been exercised upon the change in control, (iii) adjust the terms of the Options in a manner determined by the Committee to reflect the change in control, (iv) cause the Options to be assumed, or new rights substituted therefor, by another entity, or (v) make such other provision as the Committee may consider equitable to Participants and in the best interests of the Company.

(i)            Transferability.   In the discretion of the Committee, any Options may be made transferable upon such terms and conditions and to such extent as the Committee determines, provided that Incentive Stock Options may be transferable only to the extent permitted by the Code.  The Committee may in its discretion waive any restriction on transferability.

(j)            Withholding Taxes.   The Participant shall pay to the Company, or make provision satisfactory to the Committee for payment of, any taxes required by law to be withheld in respect of Options under the Plan no later than the date of the event creating the tax liability.  The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind due to the Participant hereunder or otherwise.  In the Committee’s discretion, the minimum tax obligations required by law to be withheld in respect of Options may be paid in whole or in part in shares of Common Stock, including shares retained from the Options creating the tax obligation, valued at their Fair Market Value on the date of retention or delivery.

(k)           Foreign Nationals.   Options may be granted to Participants who are foreign nationals or employed outside the United States on such terms and conditions different from those specified in the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or to comply with applicable laws.

(l)            Amendments.   The Committee may amend, modify or terminate any outstanding Option, including substituting therefor another Option of the same or a different type, changing the date of exercise or realization and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant’s consent to such action shall be required (a) if such action would terminate, or reduce the number of shares issuable under an Option, unless any time period relating to the exercise of such Option or the eliminated portion, as the case may be, is accelerated before such termination or reduction, in which case the Committee may provide for the Participant to receive cash or other property equal to the net value that would be received upon exercise of the terminated Option or the eliminated portion, as the case may be, and (b) in any other case, unless the Committee determines that the action, taking into account any related action, would not materially and adversely affect the Participant.  No adjustment to decrease the exercise price of outstanding stock options granted under the plan with respect to a re-pricing program will be made without shareholder approval.

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6.             Certain Definitions.

“Affiliate” means any business entity in which the Company owns directly or indirectly 50% or more of the total voting power or has a significant financial interest as determined by the Committee.

“Board” means the Board of Directors of the Company.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor law.

“Committee” means one or more committees each comprised of not less than two members of the Board appointed by the Board to administer the Plan or a specified portion thereof.  Unless otherwise determined by the Board, if a Committee is authorized to grant Options to a Reporting Person or a Covered Employee, each member shall be a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act or an “outside director” within the meaning of Section 162(m) of the Code, respectively.

“Common Stock” or “Stock” means the Common Stock, $.01 par value, of the Company.

“Company” means Genzyme Corporation.

“Covered Employee” means a “covered employee” within the meaning of Section 162(m) of the code.

“Designated Beneficiary” means the beneficiary designated by a Participant, in a manner determined by the Committee, to receive amounts due or exercise rights of the Participant in the event of the Participant’s death.  In the absence of an effective designation by a Participant, “Designated Beneficiary” means the Participant’s estate.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor law.

“Fair Market Value” means, with respect to Common Stock or any other property, the Fair Market Value of such property as determined by the Committee in good faith or in the manner established by the Committee from time to time.

“Participant” means a person selected by the Committee to receive an Option Grant under the Plan.

“Reporting Person” means a person subject to Section 16 of the Exchange Act.

7.             Miscellaneous.

(a)           Rights Limited.  Any Option grant made under the Plan shall be made in the sole discretion of the Committee, or its delegate as appointed in accordance with the Plan, and no prior Option grant shall entitle a person to any future Option grant.  In no event shall the Plan, or any Option grant made under the Plan, form a part of an employee’s or consultant’s contract of employment or service, if any.  Neither the Plan, nor any Option grant made under the Plan, shall confer upon any employee or consultant of the Company or its Affiliate any right with respect to the continuance of his or her employment by, or other service with, the Company or its Affiliate, nor shall they limit the rights of the Company or its Affiliate to terminate the employee or consultant or otherwise change the terms of service.  The loss of existing or potential profit in an Option grant shall not constitute an element of damages in the event of termination of employment or service for any reason, even if the termination is in violation of an obligation of the Company or its Affiliate to the Participant.

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(b)           No Rights As Shareholder.   Subject to the provisions of the applicable Option grant, no Participant or Designated Beneficiary shall have any rights as a shareholder with respect to any shares of Common Stock to be issued under the Plan until he or she becomes the holder thereof.

(c)           Effective Date.   The Plan shall be effective on the date it is approved by the shareholders.

(d)           Amendment of Plan.   The Board may amend, suspend or terminate the Plan or any portion thereof at any time, subject to such shareholder approval as the Board determines to be necessary or advisable to comply with any tax or regulatory requirement.

(e)           Governing Law.   The provisions of the Plan shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts.

Adopted by the Board of Directors on March 1, 2001

Approved by Shareholders on May 31, 2001

Amended by the Board of Directors on February 28, 2002

Approved by Shareholders on May 30, 2002

Amended by the Board of Directors on June 30, 2003

Amended by the Board of Directors on December 2, 2003

Amended by the Board of Directors on February 26, 2004

Amended by the Board of Directors on March 14, 2005

Amended by the Board of Directors on December 4, 2006

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EX-10.14.1

Exhibit 10.14.1

GENZYME CORPORATION

NOTICE OF GRANT OF STOCK OPTIONS	ID:  06-1047163
AND OPTION AGREEMENT	500 Kendall Street
	Cambridge, MA 02142
OPTIONEE NAME	OPTION NUMBER:
OPTIONEE ADDRESS	PLAN:
	ID:

Effective                     , you have been granted a(n) Incentive Stock Option to buy                 shares of GENZYME CORPORATION (the Company) stock at $              per share.

The total option price of the shares granted is $             .

Shares in each period will become fully vested on the date shown.

Shares Vest Type Full Vest Expiration

MAINTAIN THIS COPY FOR YOUR RECORDS.

These options are granted under and governed by the terms and conditions of the Company’s Stock Option plan as amended and the Option Agreement, all of which are attached and made a part of this document.

Date:

Time:

GENZYME CORPORATION 2001 EQUITY INCENTIVE PLAN
OFFICER (TIER I/II)
INCENTIVE STOCK OPTION TERMS AND CONDITIONS

1.  Plan Incorporated by Reference. This Option is issued pursuant to the terms of the Plan and may be amended as provided in the Plan. Capitalized terms used and not otherwise defined in this certificate have the meanings given to them in the Plan. This certificate does not set forth all of the terms and conditions of the Plan, which are incorporated herein by reference. The Committee administers the Plan and its determinations regarding the operation of the Plan are final and binding. Copies of the Plan may be obtained upon written request without charge from the Shareholder Relations Department of the Company.

2.  Option Price. The price to be paid for each share of Common Stock issued upon exercise of the whole or any part of this Option is the option price set forth on the face of this certificate (the “Option Price”).

3.  Exercisability Schedule. This Option may be exercised at any time and from time to time up to the number of shares and in accordance with the exercisability schedule set forth on the face of this certificate, but only for the purchase of whole shares. This Option may not be exercised as to any shares after the date of expiration set forth on the face of this certificate (the “Expiration Date”).

4.  Method of Exercise. To exercise this Option, the Participant shall deliver written notice of exercise to the Company specifying the number of shares with respect to which the Option is being exercised accompanied by payment of the Option Price for such shares in cash, by certified check or in such other form, including shares of Common Stock of the Company valued at their Fair Market Value on the date of delivery, as the Committee may approve. Promptly following such notice, the Company will deliver to the Participant a certificate representing the number of shares with respect to which the Option is being exercised.

5.  Recapitalization, Mergers, Etc. In the event of a consolidation or merger of the Company with another entity, the sale or exchange of all or substantially all of the assets of the Company or a reorganization or liquidation of the Company, the Committee may upon written notice to the Participant provide that this Option shall terminate on a date not less than 20 days after the date of such notice unless theretofore exercised. In connection with such notice, the Committee may in its discretion accelerate or waive any deferred exercise period.  Notwithstanding the foregoing, in the event of a change in control of the Company (as defined in a vote of the Compensation Committee adopted May 29, 2002), this Option shall become exercisable as to all shares without regard to any deferred exercisability schedule or deferred exercise period.

6.  Option Not Transferable. This Option is not transferable by the Participant otherwise than by will or the laws of descent and distribution, and is exercisable, during the Participant’s lifetime, only by the Participant. The naming of a Designated Beneficiary does not constitute a transfer.

7.  Exercise of Option After Termination of Employment. If the Participant’s employment with (a) the Company, (b) an Affiliate, or (c) a corporation (or parent or subsidiary corporation of such corporation) issuing or assuming a stock option in a transaction to which section 424(a) of the Code applies, is terminated for any reason other than by disability (within the meaning of section 22(e)(3) of the Code) death or retirement, the Participant may exercise the rights which were available to the Participant at the time of such termination only within three months from the date of termination. If Participant’s employment is terminated as a result of disability, such rights may be exercised within twelve months from the date of termination.  If Participant’s employment is terminated as a result of retirement (which is defined as a minimum of age 60 plus a minimum of five years of service provided employment is not terminated for cause), this Stock Option shall become exercisable as to all shares without regard to any deferred exercise period, and such rights may be exercised within three years from the date of termination.  Upon the death of the Participant, his or her Designated Beneficiary shall have the right, at any time within twelve months after the date of death, to exercise in whole or in part any rights that were available to the Participant at the time of death.  If the Participant’s employment is terminated for cause, the Participant may exercise the rights which were available to the Participant at the time of such termination only within three months from the date of termination.  Termination by the Company of the Participant’s employment for “cause” shall mean termination upon (A) the willful and continued failure by him or her to substantially perform his or her duties with the Company (other than any such failure resulting from his or her incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Participant by the Company, which demand specifically identifies the manner in which the Company believes that he or she has not substantially performed his or her duties, or (B) the willful engaging by the Participant in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise.  No act, or failure to act, on the Participant’s part shall be deemed “willful” unless done, or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company.  In the case of any Participant who is a corporate officer of the Company, determination for purposes of this section of whether termination of such Participant’s employment is for “cause” shall be made by the Committee.  In the case of any Participant who is not a corporate officer of the Company, determination for purposes of this section of whether termination of such Participant’s employment is for “cause” shall be made by the Senior Vice President, Chief Human Resources Officer, in his sole discretion, whose decision shall be final. Notwithstanding any of the foregoing, no rights under this Stock Option may be exercised after the Expiration Date.

8.  Compliance with Securities Laws. It shall be a condition to the Participant’s right to purchase shares of Common Stock hereunder that the Company may, in its discretion, require (a) that the shares of Common Stock reserved for issue upon the exercise of this Option shall have been duly listed, upon official notice of issuance, upon any national securities exchange or automated quotation system on which the Company’s Common Stock may then be listed or quoted, (b) that either (i) a registration statement under the Securities Act of 1933 with respect to the shares shall be in effect, or (ii) in the opinion of counsel for the Company, the proposed purchase shall be exempt from registration under that Act and the Participant shall have made such undertakings and agreements with the Company as the Company may reasonably require, and (c) that such other steps, if any, as counsel for the Company shall consider necessary to comply with any law applicable to the issue of such shares by the Company shall have been taken by the Company or the Participant, or both. The certificates representing the shares purchased under this Option may contain such legends as counsel for the Company shall consider necessary to comply with any applicable law.

9.  Payment of Taxes. The Participant shall pay to the Company, or make provision satisfactory to the Company for payment of any taxes required by law to be withheld with respect to the exercise of this Option. The Committee may, in its discretion, require any other federal or state taxes imposed on the sale of the shares to be paid by the Participant.  In the Committee’s discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the exercise of this Option, valued at their Fair Market Value on the date of delivery.  The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Participant.

10. Notice of Sale of Shares Required.  The Participant agrees to notify the Company in writing within 30 days of the disposition of any shares purchased upon exercise of this Option if such disposition occurs within two years of the date of the grant of this Option or within one year after such purchase.

11.  Rights Limited.  The Committee, in its sole discretion, shall determine from the group of eligible persons whether an individual shall be a Participant under the Plan.  Any Option grant made under the Plan shall be made in the sole discretion of the Committee, or its delegate as appointed in accordance with the Plan, and no prior Option grant shall entitle a person to any future Award.  In no event shall the Plan, or any Option grant made under the Plan, form a part of an employee’s or consultant’s contract of employment or service, if any.  Neither the Plan, nor any Option grant made under the Plan, shall confer upon any employee or consultant of the Company or its Affiliate any right with respect to the continuance of his or her employment by, or other service with, the Company or its Affiliate, nor shall they limit the rights of the Company or its Affiliate to terminate the employee or consultant or otherwise change the terms of service.  No Participant or Designated Beneficiary shall have any rights as a shareholder with respect to any shares of Common Stock to be issued under the Plan or any Option until he or she becomes the holder thereof.  The loss of existing

or potential profit in an Option grant shall not constitute an element of damages in the event of termination of employment or service for any reason, even if the termination is in violation of an obligation of the Company or its Affiliate to the Participant.

12.  Acceptance.  Failure of the Participant to accept the terms and conditions of this Option in accordance with the requirements of the Committee or its delegate, as applicable, can result in adverse consequences to the Participant, including cancellation of the Option.

ACKNOWLEDGED AND AGREED:

Participant Signature

Participant Name (Print)

Date

Revised 12/4/06

EX-10.14.2

Exhibit 10.14.2

GENZYME CORPORATION

NOTICE OF GRANT OF STOCK OPTIONS	ID: 06-1047163
AND OPTION AGREEMENT	500 Kendall Street
	Cambridge, MA 02142
OPTIONEE NAME	OPTION NUMBER:
OPTIONEE ADDRESS	PLAN:
	ID:

Effective                           , you have been granted a(n) Non-Qualified Stock Option to buy                    shares of GENZYME CORPORATION (the Company) stock at $                   per share.

The total option price of the shares granted is $                  .

Shares in each period will become ful ly vested on the date shown.

Shares Vest Type Full Vest Expiration

MAINTAIN THIS COPY FOR YOUR RECORDS.

These options are granted under and governed by the terms and conditions of the Company’s Stock Option plan as amended and the Option Agreement, all of which are attached and made a part of this document.

Date:

Time:

GENZYME CORPORATION 2001 EQUITY INCENTIVE PLAN

OFFICER (TIER I/II)

NONSTATUTORY STOCK OPTION TERMS AND CONDITIONS

1.     Plan Incorporated by Reference. This Option is issued pursuant to the terms of the Plan and may be amended as provided in the Plan. Capitalized terms used and not otherwise defined in this certificate have the meanings given to them in the Plan. This certificate does not set forth all of the terms and conditions of the Plan, which are incorporated herein by reference. The Committee administers the Plan and its determinations regarding the operation of the Plan are final and binding. Copies of the Plan may be obtained upon written request without charge from the Shareholder Relations Department of the Company.

2.     Option Price. The price to be paid for each share of Common Stock issued upon exercise of the whole or any part of this Option is the option price set forth on the face of this certificate (the “Option Price”).

3.     Exercisability Schedule. This Option may be exercised at any time and from time to time up to the number of shares and in accordance with the exercisability schedule set forth on the face of this certificate, but only for the purchase of whole shares. This Option may not be exercised as to any shares after the date of expiration set forth on the face of this certificate (the “Expiration Date”).

4.     Method of Exercise. To exercise this Option, the Participant shall deliver written notice of exercise to the Company specifying the number of shares with respect to which the Option is being exercised accompanied by payment of the Option Price for such shares in cash, by certified check or in such other form, including shares of Common Stock of the Company valued at their Fair Market Value on the date of delivery, as the Committee may approve. Promptly following such notice, the Company will deliver to the Participant a certificate representing the number of shares with respect to which the Option is being exercised.

5.     Recapitalization, Mergers, Etc. In the event of a consolidation or merger of the Company with another entity, the sale or exchange of all or substantially all of the assets of the Company or a reorganization or liquidation of the Company, the Committee may upon written notice to the Participant provide that this Option shall terminate on a date not less than 20 days after the date of such notice unless theretofore exercised. In connection with such notice, the Committee may in its discretion accelerate or waive any deferred exercise period. Notwithstanding the foregoing, in the event of a change in control of the Company (as defined in a vote of the Compensation Committee adopted May 29, 2002), this Option shall become exercisable as to all shares without regard to any deferred exercisability schedule or deferred exercise period.

6.     Transferability. This Option may be transferred without consideration (or for such consideration as the Committee may from time to time deem appropriate) by the holder thereof to any Family Member; provided, however, that no subsequent transfer of such option shall be permitted except for transfers: (i) to a Family Member; (ii) back to the Participant; or (iii) pursuant to the applicable laws of descent and distribution.  For this purpose, “Family Member” shall mean (i) any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including any adoptive relationships, and any other person sharing the Participant’s household (other than as a tenant or employee); (ii) any trust in which any of the persons described in clause (i) holds a greater than 50% beneficial interest; (iii) any foundation in which any of the persons described in clause (i) or the Participant controls the management of assets; or (iv) any other entity in which any of the persons described in clause (i) or the Participant holds more than 50% of the voting interests.

7.     Exercise of Option After Termination of Employment. If the Participant’s employment with (a) the Company, (b) an Affiliate, or (c) a corporation (or parent or subsidiary corporation of such corporation) issuing or assuming a stock option in a transaction to which section 424(a) of the Code applies, is terminated for any reason other than by disability (within the meaning of section 22(e)(3) of the Code) death or retirement, the Participant may exercise the rights which were available to the Participant at the time of such termination only within three months from the date of termination. If Participant’s employment is terminated as a result of disability, such rights may be exercised within twelve months from the date of termination.  If Participant’s employment is terminated as a result of retirement (which is defined as a minimum of age 60 plus a minimum of five years of service provided employment is not terminated for cause), this Stock Option shall become exercisable as to all shares without regard to any deferred exercise period, and such rights may be exercised within three years from the date of termination.  Upon the death of the Participant, his or her Designated Beneficiary shall have the right, at any time within twelve months after the date of death, to exercise in whole or in part any rights that were available to the Participant at the time of death.  If the Participant’s employment is terminated for cause, the Participant may exercise the rights which were available to the Participant at the time of such termination only within three months from the date of termination.  Termination by the Company of the Participant’s employment for “cause” shall mean termination upon (A) the willful and continued failure by him or her to substantially perform his or her duties with the Company (other than any such failure resulting from his or her incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Participant by the Company, which demand specifically identifies the manner in which the Company believes that he or she has not substantially performed his or her duties, or (B) the willful engaging by the Participant in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise.  No act, or failure to act, on the Participant’s part shall be deemed “willful” unless done, or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company.  In the case of any Participant who is a corporate officer of the Company, determination for purposes of this section of whether termination of such Participant’s employment is for “cause” shall be made by the Committee.  In the case of any Participant who is not a corporate officer of the Company, determination for purposes of this section of whether termination of such Participant’s employment is for “cause” shall be made by the Senior Vice President, Chief Human Resources Officer, in his sole discretion, whose decision shall be final. Notwithstanding any of the foregoing, no rights under this Stock Option may be exercised after the Expiration Date.

8.     Compliance with Securities Laws. It shall be a condition to the Participant’s right to purchase shares of Common Stock hereunder that the Company may, in its discretion, require (a) that the shares of Common Stock reserved for issue upon the exercise of this Option shall have been duly listed, upon official notice of issuance, upon any national securities exchange or automated quotation system on which the Company’s Common Stock may then be listed or quoted, (b) that either (i) a registration statement under the Securities Act of 1933 with respect to the shares shall be in effect, or (ii) in the opinion of counsel for the Company, the proposed purchase shall be exempt from registration under that Act and the Participant shall have made such undertakings and agreements with the Company as the Company may reasonably require, and (c) that such other steps, if any, as counsel for the Company shall consider necessary to comply with any law applicable to the issue of such shares by the Company shall have been taken by the Company or the Participant, or both. The certificates representing the shares purchased under this Option may contain such legends as counsel for the Company shall consider necessary to comply with any applicable law.

9.     Payment of Taxes. The Participant shall pay to the Company, or make provision satisfactory to the Company for payment of any taxes required by law to be withheld with respect to the exercise of this Option. The Committee may, in its discretion, require any other federal or state taxes imposed on the sale of the shares to be paid by the Participant.  In the Committee’s discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the exercise of this Option, valued at their Fair Market Value on the date of delivery.  The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Participant.

10.   Rights Limited.  The Committee, in its sole discretion, shall determine from the group of eligible persons whether an individual shall be a Participant under the Plan.  Any Option grant made under the Plan shall be made in the sole discretion of the Committee, or its delegate as appointed in accordance with the Plan, and no prior Option grant shall entitle a person to any future Award.  In no event shall the Plan, or any Option grant made under the Plan, form a part of an employee’s or consultant’s contract of employment or service, if any.  Neither the Plan, nor any Option grant made under the Plan, shall confer upon any employee or consultant of the Company or its Affiliate any right with respect to the continuance of his or her employment by, or other service with, the Company or its Affiliate, nor shall they limit the rights of the Company or its Affiliate to terminate the

employee or consultant or otherwise change the terms of service.  No Participant or Designated Beneficiary shall have any rights as a shareholder with respect to any shares of Common Stock to be issued under the Plan or any Option until he or she becomes the holder thereof.  The loss of existing or potential profit in an Option grant shall not constitute an element of damages in the event of termination of employment or service for any reason, even if the termination is in violation of an obligation of the Company or its Affiliate to the Participant.

11.   Acceptance.  Failure of the Participant to accept the terms and conditions of this Option in accordance with the requirements of the Committee or its delegate, as applicable, can result in adverse consequences to the Participant, including cancellation of the Option.

ACKNOWLEDGED AND AGREED:
Participant Signature
Participant Name (Print)	Date
Revised 12/4/06

EX-10.15.1

Exhibit 10.15.1

	GENZYME CORPORATION
NOTICE OF GRANT OF STOCK OPTIONS	ID: 06-1047163
AND OPTION AGREEMENT	500 Kendall Street
	Cambridge, MA 02142
OPTIONEE NAME	OPTION NUMBER:
OPTIONEE ADDRESS	PLAN:
	ID:

Effective                                   , you have been granted a(n) Incentive Stock Option to buy                 shares of GENZYME CORPORATION (the Company) stock at $                per share.

The total option price of the shares granted is $               .

Shares in each period will become fully vested on the date shown.

Shares Vest Type Full Vest Expiration

MAINTAIN THIS COPY FOR YOUR RECORDS.

These options are granted under and governed by the terms and conditions of the Company’s Stock Option plan as amended and the Option Agreement, all of which are attached and made a part of this document.

Date:

Time:

GENZYME CORPORATION 2004 EQUITY INCENTIVE PLAN

Officer (Tier I/II)

Incentive Stock Option Terms And Conditions

1.  Plan Incorporated by Reference. This Stock Option is issued pursuant to the terms of the Plan and may be amended as provided in the Plan. Capitalized terms used and not otherwise defined in this certificate have the meanings given to them in the Plan. This certificate does not set forth all of the terms and conditions of the Plan, which are incorporated herein by reference. Copies of the Plan may be obtained upon written request without charge from the Shareholder Relations Department of the Company.

2.  Option Price. The price to be paid for each share of Stock issued upon exercise of the whole or any part of this Stock Option is the option price set forth on the face of this certificate (the “Option Price”).

3.  Exercisability Schedule. This Stock Option may be exercised at any time and from time to time up to the number of shares and in accordance with the exercisability schedule set forth on the face of this certificate, but only for the purchase of whole shares. This Stock Option may not be exercised as to any shares after the date of expiration set forth on the face of this certificate (the “Expiration Date”).

4.  Method of Exercise. To exercise this Stock Option, the Participant shall deliver written notice of exercise to the Company specifying the number of shares with respect to which the Stock Option is being exercised accompanied by payment of the Option Price for such shares in cash, by certified check or in such other form, including shares of Stock of the Company valued at their Fair Market Value on the date of delivery, as the Administrator may approve. Promptly following such notice, the Company will deliver to the Participant a certificate representing the number of shares with respect to which the Stock Option is being exercised.

5.  Recapitalization, Mergers, Etc. In the event of a Covered Transaction, the Administrator may upon written notice to the Participant provide that this Stock Option shall terminate on a date not less than 20 days after the date of such notice unless theretofore exercised. In connection with such notice, the Administrator may in its discretion accelerate or waive any deferred exercise period.  Notwithstanding the foregoing, in the event of a change in control of the Company (as defined in a vote of the Compensation Committee adopted May 29, 2002), this Stock Option shall become exercisable as to all shares without regard to any deferred exercisability schedule or deferred exercise period.

6.  Stock Option Not Transferable. This Stock Option is not transferable by the Participant otherwise than by will or the laws of descent and distribution, and is exercisable, during the Participant’s lifetime, only by the Participant. The naming of a Designated Beneficiary does not constitute a transfer. A “Designated Beneficiary” means the beneficiary designated by the Participant, in a manner determined by the Administrator, to receive amounts due or exercise rights of the Participant in the event of the Participant’s death.  In the absence of an effective designation by the Participant, “Designated Beneficiary” means the Participant’s estate.

7.  Exercise of Stock Option After Termination of Employment. If the Participant’s employment with (a) the Company, (b) an Affiliate, or (c) a corporation (or parent or subsidiary corporation of such corporation) issuing or assuming a stock option in a transaction to which section 424(a) of the Code applies, is terminated for any reason other than by disability (within the meaning of section 22(e)(3) of the Code) death or retirement, the Participant may exercise the rights which were available to the Participant at the time of such termination only within three months from the date of termination. If Participant’s employment is terminated as a result of disability, such rights may be exercised within twelve months from the date of termination.  If Participant’s employment is terminated as a result of retirement (which is defined as a minimum of age 60 plus a minimum of five years of service provided employment is not terminated for cause), this Stock Option shall become

exercisable as to all shares without regard to any deferred exercise period, and such rights may be exercised within three years from the date of termination.  Upon the death of the Participant, his or her Designated Beneficiary shall have the right, at any time within twelve months after the date of death, to exercise in whole or in part any rights that were available to the Participant at the time of death.  If the Participant’s employment is terminated for cause, the Participant may exercise the rights which were available to the Participant at the time of such termination only within three months from the date of termination.  Termination by the Company of the Participant’s employment for “cause” shall mean termination upon (A) the willful and continued failure by him or her to substantially perform his or her duties with the Company (other than any such failure resulting from his or her incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Participant by the Company, which demand specifically identifies the manner in which the Company believes that he or she has not substantially performed his or her duties, or (B) the willful engaging by the Participant in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise.  No act, or failure to act, on the Participant’s part shall be deemed “willful” unless done, or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company.  In the case of any Participant who is a corporate officer of the Company, determination for purposes of this section of whether termination of such Participant’s employment is for “cause” shall be made by the Committee.  In the case of any Participant who is not a corporate officer of the Company, determination for purposes of this section of whether termination of such Participant’s employment is for “cause” shall be made by the Senior Vice President, Chief Human Resources Officer, in his sole discretion, whose decision shall be final. Notwithstanding any of the foregoing, no rights under this Stock Option may be exercised after the Expiration Date.

8.  Payment of Taxes. The Participant shall pay to the Company, or make provision satisfactory to the Company for payment of any taxes required by law to be withheld with respect to the exercise of this Stock Option. The Administrator may, in its discretion, require any other federal or state taxes imposed on the sale of the shares to be paid by the Participant.  In the Administrator’s discretion, such tax obligations may be paid in whole or in part in shares of Stock, including shares retained from the exercise of this Stock Option, valued at their Fair Market Value on the date of delivery.  The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Participant.

9. Notice of Sale of Shares Required.  The Participant agrees to notify the Company in writing within 30 days of the disposition of any shares purchased upon exercise of this Stock Option if such disposition occurs within two years of the date of the grant of this Stock Option or within one year after such purchase.

10. Rights Limited.  The Administrator, in its sole discretion, shall determine from the group of eligible persons whether an individual shall be a Participant under the Plan.  Any grant made under the Plan shall be made in the sole discretion of the Administrator and no prior grant shall entitle a person to any future grant.  Nothing in the Plan or any Stock Option grant will be construed as giving any person the right to continued employment or service with the Company or its Affiliates, or any rights as a shareholder except as to shares of Stock actually issued under the Plan.  In no event shall the Plan, or any grant made under the Plan, form a part of an employee’s or consultant’s contract of employment or service, if any.  The loss of existing or potential profit in Stock Options will not constitute an element of damages in the event of termination of employment or service for any reason, even if the termination is in violation of an obligation of the Company or Affiliate to the Participant.

11.  Acceptance.  Failure of the Participant to accept the terms and conditions of this Stock Option in accordance with the requirements of the Administrator can result in adverse consequences to the Participant, including cancellation of the Stock Option.

ACKNOWLEDGED AND AGREED:

Participant Signature

Participant Name (Print)

Date

Revised 12/4/06

EX-10.15.2

Exhibit 10.15.2

GENZYME CORPORATION
NOTICE OF GRANT OF STOCK OPTIONS	ID: 06-1047163
AND OPTION AGREEMENT	500 Kendall Street
	Cambridge, MA 02142
OPTIONEE NAME	OPTION NUMBER:
OPTIONEE ADDRESS	PLAN:
	ID:

Effective                   , you have been granted a(n) Non-Qualified Stock Option to buy                    shares of GENZYME CORPORATION (the Company) stock at $                   per share.

The total option price of the shares granted is $                  .

Shares in each period will become fully vested on the date shown.

Shares Vest Type Full Vest Expiration

MAINTAIN THIS COPY FOR YOUR RECORDS.

These options are granted under and governed by the terms and conditions of the Company’s Stock Option plan as amended and the Option Agreement, all of which are attached and made a part of this document.

Date:

Time:

GENZYME CORPORATION 2004 EQUITY INCENTIVE PLAN

Officer (Tier I/II)

Nonstatutory Stock Option Terms And Conditions

1.  Plan Incorporated by Reference. This Stock Option is issued pursuant to the terms of the Plan and may be amended as provided in the Plan. Capitalized terms used and not otherwise defined in this certificate have the meanings given to them in the Plan. This certificate does not set forth all of the terms and conditions of the Plan, which are incorporated herein by reference. Copies of the Plan may be obtained upon written request without charge from the Shareholder Relations Department of the Company.

2.  Option Price. The price to be paid for each share of Stock issued upon exercise of the whole or any part of this Stock Option is the option price set forth on the face of this certificate (the “Option Price”).

3.  Exercisability Schedule. This Stock Option may be exercised at any time and from time to time up to the number of shares and in accordance with the exercisability schedule set forth on the face of this certificate, but only for the purchase of whole shares. This Stock Option may not be exercised as to any shares after the date of expiration set forth on the face of this certificate (the “Expiration Date”).

4.  Method of Exercise. To exercise this Stock Option, the Participant shall deliver written notice of exercise to the Company specifying the number of shares with respect to which the Stock Option is being exercised accompanied by payment of the Option Price for such shares in cash, by certified check or in such other form, including shares of Stock of the Company valued at their Fair Market Value on the date of delivery, as the Administrator may approve. Promptly following such notice, the Company will deliver to the Participant a certificate representing the number of shares with respect to which the Stock Option is being exercised.

5.  Recapitalization, Mergers, Etc. In the event of a Covered Transaction, the Administrator may upon written notice to the Participant provide that this Stock Option shall terminate on a date not less than 20 days after the date of such notice unless theretofore exercised. In connection with such notice, the Administrator may in its discretion accelerate or waive any deferred exercise period. Notwithstanding the foregoing, in the event of a change in control of the Company (as defined in a vote of the Compensation Committee adopted May 29, 2002), this Stock Option shall become exercisable as to all shares without regard to any deferred exercisability schedule or deferred exercise period.

6.  Transferability. This Stock Option may be transferred without consideration (or for such consideration as the Administrator may from time to time deem appropriate) by the holder thereof to any Family Member; provided, however, that no subsequent transfer of such option shall be permitted except for transfers: (i) to a Family Member; (ii) back to the Participant; or (iii) pursuant to the applicable laws of descent and distribution.  For this purpose, “Family Member” shall mean (i) any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including any adoptive relationships, and any other person sharing the Participant’s household (other than as a tenant or employee); (ii) any trust in which any of the persons described in clause (i) holds a greater than 50% beneficial interest; (iii) any foundation in which any of the persons described in clause (i) or the Participant controls the management of assets; or (iv) any other entity in which any of the persons described in clause (i) or the Participant holds more than 50% of the voting interests.

7.  Exercise of Stock Option After Termination of Employment. If the Participant’s employment with (a) the Company, (b) an Affiliate, or (c) a corporation (or parent or subsidiary corporation of such corporation) issuing or assuming a stock option in a transaction to which section 424(a) of the Code applies, is terminated for

any reason other than by disability (within the meaning of section 22(e)(3) of the Code) death or retirement, the Participant may exercise the rights which were available to the Participant at the time of such termination only within three months from the date of termination. If Participant’s employment is terminated as a result of disability, such rights may be exercised within twelve months from the date of termination.  If Participant’s employment is terminated as a result of retirement (which is defined as a minimum of age 60 plus a minimum of five years of service provided employment is not terminated for cause), this Stock Option shall become exercisable as to all shares without regard to any deferred exercise period, and such rights may be exercised within three years from the date of termination.  Upon the death of the Participant, his or her Designated Beneficiary shall have the right, at any time within twelve months after the date of death, to exercise in whole or in part any rights that were available to the Participant at the time of death.  If the Participant’s employment is terminated for cause, the Participant may exercise the rights which were available to the Participant at the time of such termination only within three months from the date of termination.  Termination by the Company of the Participant’s employment for “cause” shall mean termination upon (A) the willful and continued failure by him or her to substantially perform his or her duties with the Company (other than any such failure resulting from his or her incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Participant by the Company, which demand specifically identifies the manner in which the Company believes that he or she has not substantially performed his or her duties, or (B) the willful engaging by the Participant in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise.  No act, or failure to act, on the Participant’s part shall be deemed “willful” unless done, or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company.  In the case of any Participant who is a corporate officer of the Company, determination for purposes of this section of whether termination of such Participant’s employment is for “cause” shall be made by the Committee.  In the case of any Participant who is not a corporate officer of the Company, determination for purposes of this section of whether termination of such Participant’s employment is for “cause” shall be made by the Senior Vice President, Chief Human Resources Officer, in his sole discretion, whose decision shall be final. Notwithstanding any of the foregoing, no rights under this Stock Option may be exercised after the Expiration Date.

8.  Payment of Taxes. The Participant shall pay to the Company, or make provision satisfactory to the Company for payment of any taxes required by law to be withheld with respect to the exercise of this Stock Option. The Administrator may, in its discretion, require any other federal or state taxes imposed on the sale of the shares to be paid by the Participant.  In the Administrator’s discretion, such tax obligations may be paid in whole or in part in shares of Stock, including shares retained from the exercise of this Stock Option, valued at their Fair Market Value on the date of delivery.  The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Participant.

9.  Rights Limited.  The Administrator, in its sole discretion, shall determine from the group of eligible persons whether an individual shall be a Participant under the Plan.  Any grant made under the Plan shall be made in the sole discretion of the Administrator and no prior grant shall entitle a person to any future grant.  Nothing in the Plan or any Stock Option grant will be construed as giving any person the right to continued employment or service with the Company or its Affiliates, or any rights as a shareholder except as to shares of Stock actually issued under the Plan.  In no event shall the Plan, or any grant made under the Plan, form a part of an employee’s or consultant’s contract of employment or service, if any.  The loss of existing or potential profit in Stock Options will not constitute an element of damages in the event of termination of employment or service for any reason, even if the termination is in violation of an obligation of the Company or Affiliate to the Participant.

10.  Acceptance.  Failure of the Participant to accept the terms and conditions of this Stock Option in accordance with the requirements of the Administrator can result in adverse consequences to the Participant, including cancellation of the Stock Option.

ACKNOWLEDGED AND AGREED:

Participant Signature

Participant Name (Print)

Date

Revised 12/4/06

EX-13

EXHIBIT 13

GENZYME CORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS

	Page No.
Consolidated Selected Financial Data	F-2
Management’s Discussion and Analysis of Genzyme Corporation and Subsidiaries’ Financial Condition and Results of Operations	F-7
Report of Independent Registered Public Accounting Firm	F-69
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2006, 2005 and 2004	F-71
Consolidated Balance Sheets as of December 31, 2006 and 2005	F-72
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004	F-73
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2006, 2005 and 2004	F-75
Notes to Consolidated Financial Statements	F-76

F-1

GENZYME CORPORATION AND SUBSIDIARIES
Consolidated Selected Financial Data

These selected financial data have been derived from our audited, consolidated financial statements, including the consolidated balance sheets at December 31, 2006 and 2005 and the related consolidated statements of operations and of cash flows for the three years ended December 31, 2006 and notes thereto appearing elsewhere herein. You should read the following information in conjunction with our audited, consolidated financial statements and related notes contained elsewhere in this Annual Report on Form 10-K. These selected financial data may not be indicative of our future financial condition due to the risks and uncertainties associated with operating our business, including those described under the caption “Management’s Discussion and Analysis of Genzyme Corporation and Subsidiaries’ Financial Condition and Results of Operations—Risk Factors” included in this Annual Report on Form 10-K.

CONSOLIDATED STATEMENTS OF OPERATIONS DATA

	For the Years Ended December 31,
	2006			2005			2004			2003			2002
	(Amounts in thousands)
Revenues:
Net product sales	$	2,887,409		$	2,453,303		$	1,976,191		$	1,563,509		$	1,199,617
Net service sales	282,118			261,379			212,392			130,984			114,493
Research and development revenue	17,486			20,160			12,562			19,378			15,362
Total revenues	3,187,013			2,734,842			2,201,145			1,713,871			1,329,472
Operating costs and expenses:
Cost of products sold (1)	536,388			462,177			448,442			399,961			309,634
Cost of services sold (1)	199,283			170,475			140,144			75,683			66,575
Selling, general and administrative (1)	1,010,400			787,839			599,388			519,977			438,035
Research and development (1)	649,951			502,657			391,802			335,256			308,487
Amortization of intangibles	209,355			181,632			109,473			80,257			70,278
Purchase of in-process research and development (2)	552,900			29,200			254,520			158,000			1,879
Charges for impaired goodwill (3)	219,245			—			—			102,792			—
Charges for impaired assets	—			—			4,463			10,894			22,944
Total operating costs and expenses	3,377,522			2,133,980			1,948,232			1,682,820			1,217,832
Operating income (loss)	(190,509		)	600,862			252,913			31,051			111,640
Other income (expenses):
Equity in income (loss) of equity method investments	15,705			151			(15,624		)	(16,743		)	(16,858		)
Minority interest	10,418			11,952			5,999			2,232			—
Gains (losses) on investments in equity securities, net (4)	73,230			5,698			(1,252		)	(1,201		)	(14,497		)
Loss on sale of product lines (5)	—			—			—			(27,658		)	—
Other	(2,045		)	(1,535		)	(357		)	959			40
Investment income	56,001			31,429			24,244			43,015			51,038
Interest expense	(15,478		)	(19,638		)	(38,227		)	(26,600		)	(27,152		)
Total other income (expenses)	137,831			28,057			(25,217		)	(25,996		)	(7,429		)
Income (loss) before income taxes (1)	(52,678		)	628,919			227,696			5,055			104,211
(Provision for) benefit from income taxes (1,3)	35,881			(187,430		)	(141,169		)	(72,647		)	(19,015		)
Net income (loss) before cumulative effect of changes in accounting principles	(16,797		)	441,489			86,527			(67,592		)	85,196
Cumulative effect of changes in accounting principles (6)	—			—			—			—			(98,270		)
Net income (loss) (1)	$	(16,797	)	$	441,489		$	86,527		$	(67,592	)	$	(13,074	)

F-2

GENZYME CORPORATION AND SUBSIDIARIES
Consolidated Selected Financial Data  (Continued)

CONSOLIDATED STATEMENTS OF OPERATIONS DATA (Continued)

	For the Years Ended December 31,
	2006			2005		2004		2003			2002
	(Amounts in thousands, except per share amounts)
Net income (loss) per share:
Allocated to Genzyme Stock (7):
Net income (loss) allocated to Genzyme Stock	$	(16,797	)	$	441,489	$	86,527	$	94,283		$	178,526
Net income (loss) per share of Genzyme Stock:
Basic	$	(0.06	)	$	1.73	$	0.38	$	0.43		$	0.83
Diluted (1,8)	$	(0.06	)	$	1.65	$	0.37	$	0.42		$	0.81
Weighted average shares outstanding:
Basic	261,624			254,758		228,175		219,376			214,038
Diluted (1,8)	261,624			272,224		234,318		225,976			219,388
Allocated to Biosurgery Stock (7):
Net loss allocated to Biosurgery Stock								$	(152,651	)	$	(167,886	)
Net loss per share of Biosurgery Stock—basic and diluted								$	(3.76	)	$	(4.20	)
Weighted average shares outstanding								40,630			39,965
Allocated to Molecular Oncology Stock (7):
Net loss allocated to Molecular Oncology Stock								$	(9,224	)	$	(23,714	)
Net loss per share of Molecular Oncology Stock—basic and diluted								$	(0.54	)	$	(1.41	)
Weighted average shares outstanding								16,958			16,827

F-3

GENZYME CORPORATION AND SUBSIDIARIES
Consolidated Selected Financial Data  (Continued)

CONSOLIDATED BALANCE SHEET DATA

	December 31,
	2006		2005		2004		2003		2002
	(Amounts in thousands)
Cash and investments (9)	$	1,285,604	$	1,089,102	$	1,079,454	$	1,227,460	$	1,195,004
Working capital	1,338,062		1,114,976		1,009,231		930,951		630,936
Total assets	7,191,188		6,878,865		6,069,421		5,004,528		4,093,199
Long-term debt, capital lease obligations and convertible debt, including current portion (10)	816,029		820,113		940,494		1,435,759		894,775
Stockholders’ equity	5,660,711		5,149,867		4,380,156		2,936,412		2,697,847
There were no cash dividends paid.

(1)Effective January 1, 2006, we adopted the provisions of FAS 123R, “Share-Based Payment, an amendment of FASB Statement Nos. 123 and 95,” which requires us to recognize stock-based compensation expense in our financial statements for all share-based payment awards made to employees and directors based upon the grant date fair value of those awards. For the year ended December 31, 2006, we recorded pre-tax stock-based compensation expense, net of estimated forfeitures, which were allocated based on the functional cost center of each employee as follows (amounts in thousands, except per share amounts):

	For the Year Ended December 31, 2006
Cost of products and services sold		$	(21,430	)
Selling, general and administrative		(121,822		)
Research and development		(65,248		)
Total		(208,500		)
Less: tax benefit of stock options		66,331
Stock-based compensation expense, net of tax		$(142,169		)
Net loss per share—basic and diluted		$	(0.54	)

(2) Includes charges for pre-tax IPR&D incurred in connection with the following acquisitions:

·2006—$552.9 million related to our acquisition of AnorMED;

·2005—$7.0 million related to our acquisition of gene therapy assets from Avigen, $12.7 million related to our acquisition of Bone Care and $9.5 million related to our acquisition of Verigen;

·2004—$254.5 million related to our acquisition of ILEX Oncology, Inc., or ILEX Oncology; and

·2003—$158.0 million related to our acquisition of SangStat.

(3)Charge for impaired goodwill includes the following charges recorded in accordance with FAS 142, “Goodwill and Other Intangible Assets”:

·2006—a $219.2 million pre-tax impairment charge and $69.8 million of related tax benefits to write off the goodwill of our Genetics reporting unit; and

F-4

GENZYME CORPORATION AND SUBSIDIARIES
Consolidated Selected Financial Data  (Continued)

·2003—a $102.8 million charge to write off the goodwill associated with our orthopaedics business unit.

(4)For 2006, includes a $69.4 million gain on the sale of our investment in Cambridge Antibody Technology Group plc, or CAT, a $6.4 million gain on the sale of our investment in BioMarin and $2.8 million of net gains on the sales of other investments in equity securities, offset by $5.4 million of impairment charges related to our investments in ViaCell, Inc., or ViaCell, Cortical Pty Ltd. and RenaMed Biologics, Inc., or RenaMed.

(5)Reflects a loss of $27.7 million related to the sale of substantially all of the tangible and intangible assets directly associated with our cardiac device business to Teleflex Inc.

(6)Effective January 1, 2002, in connection with the adoption of FAS 142, we tested the goodwill of our cardiothoracic business unit for impairment and as a result, reduced goodwill by recording a cumulative effect impairment charge of $98.3 million in our consolidated statements of operations for the year ended December 31, 2002.

(7)Through June 30, 2003, we had three outstanding series of common stock—Genzyme General Stock, Genzyme Biosurgery Stock and Genzyme Molecular Oncology Stock, which we refer to as “tracking stock.” Unlike typical common stock, each of our tracking stocks was designed to reflect the value and track the financial performance of a specific subset of our business operations and its allocated assets, rather than operations and assets of our entire company. Through June 30, 2003, we allocated earnings or losses to each series of tracking stock based on the net income or loss attributable to the corresponding division determined in accordance with accounting principles generally accepted in the United States, as adjusted for the allocation of tax benefits. Effective July 1, 2003, we eliminated our tracking stock capital structure and, as a result, ceased allocating earnings to Biosurgery Stock and Molecular Oncology Stock. Effective July 1, 2003, we have one outstanding series of common stock, which we refer to as Genzyme Stock, and as of that date, all of our earnings are allocated to Genzyme Stock. Earnings or losses allocated to Biosurgery Stock and Molecular Oncology Stock prior to that date remain allocated to those series of stock in the preparation of our consolidated financial statements and are not affected by the elimination of our tracking stock structure. Accordingly, earnings or losses allocated to Biosurgery Stock and Molecular Oncology Stock represent earnings allocated to those tracking stocks through June 30, 2003. Earnings or losses allocated to Genzyme Stock through June 30, 2003 represent the earnings or losses of Genzyme General, as adjusted for the allocation of tax benefits. Earnings or losses allocated to Genzyme Stock after June 30, 2003 represent the earnings or losses for the corporation as a whole.

(8)For the year ended December 31, 2006, basic and diluted earnings per share are the same due to our net loss for the period. Diluted earnings per share for the year ended December 31, 2005, reflects the retroactive restatement of diluted earnings per share and diluted weighted average shares outstanding in accordance with Emerging Issues Task Force, or EITF, Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings Per Share.” The potentially dilutive effect of the 9.7 million shares of Genzyme Stock issuable upon conversion of our $690.0 million in principal of 1.25% convertible senior notes is excluded from the calculation of diluted earnings per share for the year ended December 31, 2004 because the effect would be anti-dilutive. Diluted earnings per share for the year ended December 31, 2003 was not impacted by the adoption of EITF 04-8 because our 1.25%

F-5

GENZYME CORPORATION AND SUBSIDIARIES
Consolidated Selected Financial Data  (Continued)

convertible senior notes were issued in and only outstanding for a portion of the month of December 2003.

(9)Includes cash, cash equivalents, short- and long-term investments.

(10)Long-term debt, capital lease obligations and convertible debt, including current portions, consists of (amounts in millions):

	December 31,
	2006		2005		2004		2003		2002
1.25% convertible senior notes	$	690.0	$	690.0	$	690.0	$	690.0	$	—
Capital lease obligations	117.1		121.4		150.1		154.5		25.8
Revolving credit facility maturing in July 2011	—		—		—		—		—
Revolving credit facility terminated in July 2006	—		—		100.0		—		284.0
3% convertible subordinated debentures	—		—		—		575.0		575.0
Other	8.9		8.7		0.4		16.3		10.0
Total	$	816.0	$820.1		$	940.5	$	1,435.8	$	894.8

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF GENZYME CORPORATION
AND SUBSIDIARIES’ 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 “Factors Affecting Future Operating Results” 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, and diagnostic and predictive testing. We are organized into five 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 (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 and Thyrogen;

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

·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; and

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

We report the activities of our diagnostic products, oncology, 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, 2006, as a result of changes in how we review our business, certain general and administrative expenses, as well as research and development expenses related to our preclinical development programs, which were formerly allocated amongst our reporting segments and Other, are now allocated to Corporate.

Our diagnostic products business unit was formerly reported combined with our Genetics business unit under the caption “Diagnostics/Genetics.”  Beginning with this report, we now include our diagnostic products business unit under the caption “Other.”

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We have revised our 2005 and 2004 segment disclosures to conform to our 2006 presentation.

MERGERS AND ACQUISITIONS

Acquisition of AnorMED

In November 2006, we acquired AnorMED, a publicly-traded chemical-based biopharmaceutical company based in Langley, British Columbia, Canada with a focus on the discovery, development and commercialization of new therapeutic products in the area of hematology, oncology and human immunodeficiency virus, or HIV. We paid gross consideration of $589.2 million in cash, including $584.2 million for the shares of AnorMED’s common stock outstanding on the date of acquisition and approximately $5 million for acquisition costs. Net consideration was $569.0 million as we acquired AnorMED’s cash and short-term investments totaling $20.2 million. As part of the transaction, we acquired Mozobil, a late-stage product candidate in development for hematopoietic stem cell transplantation, which we have added to our Transplant business. Multiple earlier studies showed that Mozobil rapidly increases the number of stem cells that move out of the bone marrow and into a patient’s blood, which is an important step in preparing a patient for a stem cell transplant. We included AnorMED’s results of operations in our consolidated statements of operations from November 7, 2006, the date of acquisition.

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 $29.1 million, which was allocated to goodwill. We expect that substantially all of the amount allocated to goodwill will be deductible for tax purposes.

The allocation of the purchase price remains subject to potential adjustments, including adjustments for liabilities associated with certain exit activities and tax restructuring activities.

Acquisition of Surgi.B

In March 2006, through a series of transactions we acquired Surgi.B, a privately-held company based in Beauzelle, France, which owned the exclusive rights to manufacture and sell GlucaMesh and GlucaTex, two beta glucan-coated mesh products for use in the surgical repair of inguinal hernias, for an aggregate up-front cash payment of $5.5 million. We allocated the entire purchase price to license fees, a component of other intangible assets on our consolidated balance sheet, based on their estimated fair values as of March 30, 2006, the date of acquisition. In addition, we are obligated to make certain contingent milestone payments totaling up to approximately $6 million and contingent royalty payments based on future sales of GlucaMesh and GlucaTex. Currently, GlucaMesh is sold only in France.

Acquisition of Gene Therapy Assets from Avigen

In December 2005, we acquired certain gene therapy assets from Avigen, a publicly-traded, biopharmaceutical company based in Alameda, California with a focus on unique small molecule therapeutics and biologics to treat serious neurological disorders, in exchange for an up-front cash payment of $12.0 million. We allocated the purchase price to the intangible assets acquired based on their estimated fair values as of December 19, 2005, the date of acquisition. We allocated $5.0 million of the up-front cash payment to technology in other intangible assets on our consolidated balance sheet and recorded a charge of $7.0 million to IPR&D. In addition, we may be obligated to make up to approximately $38 million of potential milestone payments based on the development and approval of, and royalty payments based on the sale of, products developed between now and 2020 that rely on the intellectual property purchased from Avigen.

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Acquisition of Equal Diagnostics

In July 2005, we acquired Equal Diagnostics, a privately-held diagnostics company based in Exton, Pennsylvania, that formerly served as a distributor for our clinical chemistry reagents. We paid $5.0 million in initial cash payments and issued promissory notes to the three former shareholders of Equal Diagnostics totaling $10.0 million in principal and interest. These notes bear interest at 3.86% and are payable over eight years in equal annual installments commencing on March 31, 2007. In addition to these guaranteed payments, we may be obligated to make additional cash payments of up to an aggregate of approximately $8 million during the period commencing March 31, 2007 and ending March 31, 2014 based upon the gross margin of the acquired business, as defined in the purchase agreement. We included Equal Diagnostics’ results of operations in our consolidated statements of operations from July 15, 2005, the date of acquisition.

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 $5.3 million, which was allocated to goodwill. We expect that substantially all of the amount allocated to goodwill will be deductible for tax purposes.

Acquisition of Bone Care

In July 2005, we acquired Bone Care, a publicly-held specialty pharmaceutical company based in Middleton, Wisconsin with a focus on nephrology. We paid gross consideration of $712.3 million in cash, including $668.4 million for outstanding shares of Bone Care’s common stock, $39.9 million to buy out options to purchase shares of Bone Care’s common stock and restricted stock outstanding on the date of acquisition, and approximately $4 million for acquisition costs. Net consideration was $604.3 million as we acquired Bone Care’s cash and short-term investments totaling $108.0 million. As part of the transaction, we acquired Hectorol, a line of vitamin D2 pro-hormone products used to treat secondary hyperparathyroidism in patients on dialysis and those with earlier stage CKD, which we have added to our Renal business. We included Bone Care’s results of operations in our consolidated statements of operations from July 1, 2005, the date of acquisition.

In October 2004, Bone Care was one of seven companies, all of which market treatments, therapies or diagnostics for kidney disease patients, that received a subpoena from the office of the United States Attorney for the Eastern District of New York. The subpoena required Bone Care to provide a wide range of documents related to numerous aspects of its business and operations. The subpoena included specific requests for documents related to testing for parathyroid hormone levels and vitamin D therapies. Bone Care has cooperated, and we continue to cooperate, with the government’s investigation. To our knowledge, no civil or criminal proceedings have been initiated against Bone Care or Genzyme at this time, although we cannot predict when or if any proceedings might be initiated. As a result, we have not recorded any contingent liabilities related to this investigation. Any such liabilities that may arise out of this investigation in the future will be recorded as a charge in our consolidated statements of operations in the period in which such liabilities become probable and estimable.

The purchase price, as adjusted, 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 $228.8 million, which was allocated to goodwill. We expect that substantially all of the amount allocated to goodwill will not be deductible for tax purposes.

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Acquisition of Verigen

In February 2005, we acquired Verigen, a private company based in Leverkusen, Germany with a proprietary cell therapy product for cartilage repair (referred to as MACI) that is currently sold in Europe and Australia. We paid gross consideration of $12.7 million, including $0.9 million for acquisition costs, and may be obligated to make additional cash payments of up to an aggregate of approximately $38 million over the next six years, based upon the achievement of development and commercial milestones relating to regulatory approval and commercialization of MACI in the United States, as well as contingent payments on worldwide sales of that product. Net consideration was $11.8 million as we acquired Verigen’s cash totaling $0.9 million. We acquired approximately 96% of Verigen’s outstanding shares in February 2005 and acquired the remaining outstanding shares in August 2005. We included its results of operations in our consolidated statements of operations from February 8, 2005, the date of acquisition.

Acquisition of Synvisc Sales and Marketing Rights from Wyeth

In January 2005, we consummated an arrangement with Wyeth under which we reacquired the sales and marketing rights to Synvisc in the United States, as well as Germany, Poland, Greece, Portugal and the Czech Republic. In exchange for the sales and marketing rights, we paid initial payments totaling $121.0 million in cash to Wyeth and otherwise incurred $0.3 million of acquisition costs. We have also accrued contingent royalty payments to Wyeth totaling $118.3 million, of which $110.0 million had been paid as of December 31, 2006. Distribution rights (a component of other intangible assets, net) in our consolidated balance sheet as of December 31, 2006 includes a total of $239.6 million for the initial and contingent royalty payments (made and accrued) as of that date. We will make a series of additional contingent royalty and milestone payments to Wyeth based on the volume of Synvisc sales in the covered territories. These contingent royalty and milestone payments could extend out to June 2012, or could total a maximum of $293.7 million, whichever comes first.

Acquisition of ILEX Oncology

In December 2004, we acquired ILEX Oncology, an oncology drug development company, for approximately $1 billion. We included its results of operations in our consolidated statements of operations from December 20, 2004, the date of acquisition.

The purchase price was allocated to the intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. We also recorded an estimated tax liability of $47.5 million related to the integration of ILEX Oncology. The excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed amounted to $445.6 million, which was allocated to goodwill. We expect that substantially all of the amount allocated to goodwill will not be deductible for tax purposes.

Acquisition of Physician Services and Analytical Services Business Units of IMPATH, Inc.

In May 2004, we acquired substantially all of the pathology/oncology testing assets related to the Physician Services and Analytical Services business units of IMPATH, Inc., or IMPATH, a national medical testing provider, for total cash consideration of $215.3 million, including acquisition costs. At the time of the purchase, IMPATH operated these business units as “debtors-in-possession” under the United States Bankruptcy Code. The assets were sold by IMPATH by means of a sale process conducted pursuant to Section 363 of the United States Bankruptcy Code. We included the results of operations related to the acquired business units in our consolidated statements of operations from May 1, 2004, the date of acquisition. The purchase price was subject to adjustment based upon the completion of a post-closing assessment of the working capital of the acquired business units as of April 30, 2004. Pursuant to a Settlement and Release Agreement with IMPATH that was approved by the Bankruptcy Court on

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December 28, 2006, the working capital dispute was resolved  with no resulting adjustment to the purchase accounting.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

The significant accounting policies and methods used in the preparation of our consolidated financial statements are described in Note A., “Summary of Significant Accounting Policies.” The preparation of consolidated financial statements under accounting principles generally accepted in the United States requires us to make certain estimates and judgments that affect reported amounts of assets, liabilities, revenues, expenses, and disclosure of contingent assets and liabilities in our financial statements. Our actual results could differ from these estimates under different assumptions and conditions. We believe that the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements:

·Revenue Recognition;

·Stock-Based Compensation;

·Income Taxes;

·Inventories;

·Long-Lived and Intangible Assets;

·Asset Impairments;

·In-Process Research and Development; and

·Strategic Equity Investments.

Revenue Recognition

Product Sales

The timing of product shipments and receipts by the customer can have a significant impact on the amount of revenue recognized in a particular period. Also, most of our products, are sold at least in part through wholesalers and specialty distributors, along with direct sales to hospitals, homecare, government, and physicians. Inventory in the distribution channel consists of inventory held by wholesalers and specialty distributors, who are our customers, and inventory held by retailers, such as pharmacies and hospitals. Our revenue in a particular period can be impacted by increases or decreases in channel inventories. If wholesaler or retail inventories increased to excessive levels, we could experience reduced purchases in subsequent periods, or product returns from the distribution channel due to overstocking, low end-user demand or product expiration.

We use a variety of data sources to determine the amount of inventory in our channel. For most product lines with this customer base, we receive data on sales and inventory levels directly from our primary customers. For key product lines such as our Therapeutics and Renal areas, our data sources also include prescription and wholesaler data purchased from external data providers. As part of our efforts to limit inventory held by distributors and to gain improved visibility into the distribution channel, we have executed agreements to cap the amounts of inventory that they carry and provide ongoing reports to verify inventory and sales data.

Product Sales Allowances

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

·Contractual discounts and rebates—We offer rebates and discounts to various government and private institutions and account for such by establishing an accrual in an amount equal to our

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estimate of the discount or rebate. We determine our estimate primarily based on historical experience and current contract prices. We consider the sales performance of products subject to these rebates and discounts and levels of inventory in the distribution channel and adjust the accrual periodically throughout each quarter to reflect actual experience.

·Sales returns—We record allowances for product returns as a reduction of revenue at the time product sales are recorded. The product returns reserve is estimated based on our experience of returns for each of our products, or for similar products. If the history of product returns changes, the reserve is adjusted appropriately. We determine our estimates of the sales return accrual for new products primarily based on the historical sales returns experience of similar products, such as those within the same line of product or those within the same or similar therapeutic category.

·Prompt payment discounts—In some countries related to certain products, we offer cash discounts, generally as a percentage of the sales price, as an incentive for prompt payment. 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.

Distributor Fees

EITF Issue No. 01-09, “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. 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 operating expense only if the criteria set forth above are met. Fees incurred for these services, which were recorded in SG&A in our consolidated statements of operations, were $10.6 million in 2006, $14.5 million in 2005 and $12.4 million in 2004.

Collaborations

We evaluate revenue from agreements that have multiple elements to determine whether the components of the arrangement represent separate units of accounting as defined in EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” To recognize revenue for a delivered item in a multiple element arrangement, EITF Issue No. 00-21 requires that:

·  the delivered items have value to the customer on a stand-alone basis;

·  there is objective and reliable evidence of fair value of the undelivered items; and

·  delivery or performance is probable and within our control for any delivered items that have a right of return.

The determination that multiple elements in an arrangement meet the criteria for separate units of accounting requires us to exercise our judgment.

We consider the factors or indicators set forth in EITF Issue No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent,” in deciding whether to record revenue on a gross or net basis. The determination of whether we should recognize revenue on a gross or net basis involves judgment based on

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the relevant facts and circumstances which relate primarily to whether we act as a principal or agent in the process of generating revenues for the revenue transactions.

Stock-Based Compensation

Prior to January 1, 2006, we elected to:

·account for share-based payment awards under Accounting Principles Board Opinion No., or APB, 25, “Accounting for Stock Issued to Employees,” as amended by FAS 148, “Accounting for Stock-Based Compensation—Transition and Disclosures,” which we refer to collectively as APB 25; and

·disclose the pro forma impact of expensing the fair value of our employee and director stock options and purchases made under our employee stock purchase plan, or ESPP, only in the notes to our financial statements.

Effective January 1, 2006, we adopted the provisions of:

·FAS 123R, “Share-Based Payment, an amendment of FASB Statement Nos. 123 and 95,” which requires us to recognize stock-based compensation expense in our financial statements for all share-based payment awards made to employees and directors based upon the grant date fair value of those awards; and

·Staff Accounting Bulletin No., or SAB, 107, “Share-Based Payment,” which provides guidance to public companies related to the adoption of FAS 123R.

FAS 123R applies to stock options granted under our employee and director stock option plans and purchases made under our ESPP, and would also apply to any restricted stock or restricted stock units we may grant in the future.

We adopted FAS 123R using the modified prospective transition method, which requires us to apply the standard to new equity awards and to equity awards modified, repurchased or canceled after January 1, 2006, our adoption date. Additionally, compensation expense for the unvested portion of awards granted prior to our adoption date shall be:

·recognized over the requisite service period, which is generally commensurate with the vesting term; and

·based on the original grant date fair value of those awards, as calculated in our pro forma disclosures, prior to January 1, 2006, under FAS 123, “Accounting for Stock-Based Compensation,” as amended by FAS 148, “Accounting for Stock-Based Compensation—Transition and Disclosures,” which we refer to collectively as FAS 123. Changes to the grant date fair value of equity awards granted prior to our adoption date are not permitted under FAS 123R.

The modified prospective transition method does not allow for the restatement of prior periods. Accordingly, our results of operations for the year ended December 31, 2006 and future periods will not be comparable to our results of operations prior to January 1, 2006 because our historical results prior to that date do not reflect the impact of expensing the fair value of share-based payment awards.

Prior to January 1, 2006, in the pro forma disclosures regarding stock-based compensation included in the notes to our financial statements, we recognized forfeitures of stock options only as they occurred. Effective January 1, 2006, in accordance with the provisions of FAS 123R, we are now required to estimate an expected forfeiture rate for stock options, which is factored into the determination of our monthly stock-based compensation expense. As a result of the adoption of FAS 123R, we recorded pre-tax stock-based compensation expense totaling $208.5 million, net of estimated forfeitures, in our consolidated statements of operations for the year ended December 31, 2006.

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We estimate the fair value of each stock option grant using the Black-Scholes option pricing model. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. The key assumptions in the Black-Scholes model are the risk-free interest rate, the dividend yield, the expected option life (in years) and the expected volatility of the price of Genzyme Stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the date of grant. The dividend yield percentage is zero because we do not currently pay dividends nor intend to do so during the expected option life. We use historical data on exercises of our stock options and other factors to estimate the expected option life (in years), or term, of the share-based payments granted. We estimate the expected volatility rate for our stock options based on the expected term of the equity award granted. We determine separate volatility rates for each enrollment under our ESPP based on the period from the commencement date of each enrollment to each applicable purchase date. Changes in these input variables would affect the amount of expense associated with stock-based compensation. The compensation expense recognized for all share-based awards is net of estimated forfeitures. We estimate forfeiture rates based on historical analysis of option forfeitures. If actual forfeitures should vary from estimated forfeitures, adjustments to stock-based compensation expense may be required in future periods.

In connection with the adoption of FAS 123R, we were also required to change the classification, in our consolidated statements of cash flows, of any tax benefits realized upon the exercise of stock options in excess of that which is associated with the expense recognized for financial reporting purposes. These amounts are presented as a financing cash inflow rather than as a reduction of income taxes paid in our consolidated statements of cash flows for the year ended December 31, 2006.

Income Taxes

We use the asset and liability method of accounting for deferred income taxes.

Our calculation of the income tax provision includes significant estimates, including estimates of income from foreign sales, research and development credits, orphan drug credits, state and foreign income taxes and other permanent items. On a quarterly basis throughout the fiscal year, we make our best estimate of the full year impact of these items on our tax rate and adjust our estimated tax rate accordingly.

We are currently under IRS audits for tax years 2002 to 2003, 2004 to 2005, and in certain state and foreign jurisdictions. We believe that we have provided sufficiently for all audit exposures and assessments. 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 increase or reduction of future tax provisions. Through December 31, 2006, tax reserves established for uncertain tax provisions were released only upon final resolution of the audits or expiration of the applicable statute of limitations. Our assessment of the potential impact of the required adoption of FIN 48 effective January 1, 2007 is included under the heading “Recent Accounting Pronouncements—FIN 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109,” ” included in this report.

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Inventories

We value inventories at cost or, if lower, fair value. We determine cost using the first-in, first-out method. We analyze our inventory levels quarterly and write down inventory that has become obsolete, inventory that has a cost basis in excess of its expected net realizable value and inventory in excess of expected requirements. Expired inventory is disposed of and the related costs are written off. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

We capitalize inventory produced for commercial sale, which may result in the capitalization of inventory prior to regulatory approval. In no event is inventory capitalized prior to completion of a phase 3 clinical trial. 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 December 31, 2006 do not include any inventory for products that have not yet been approved for sale. Our total inventories at December 31, 2005 included $18.8 million of Myozyme inventory, primarily consisting of finished goods, which had not yet been approved for sale. We received marketing authorization for Myozyme from the European Union in March 2006 and in the United States in April 2006

Long-Lived and Intangible Assets

Property, Plant and Equipment

As of December 31, 2006, there was $1.6 billion of net property, plant and equipment on our consolidated balance sheet. We generally depreciate property, plant and equipment using the straight-line method over its estimated economic life, which ranges from 3 to 40 years. Determining the economic lives of property, plant and equipment requires us to make significant judgments that can materially impact our operating results. There can be no assurance that our estimates are accurate. If our estimates require adjustment, it could have a material impact on our reported results.

In the ordinary course of our business, we incur substantial costs to purchase and construct property, plant and equipment. The treatment of costs to purchase or construct these assets depends on the nature of the costs and the stage of construction. Costs incurred in the initial design and evaluation phase, such as the cost of performing feasibility studies and evaluating alternatives, are charged to expense. Qualifying costs incurred in the committed project planning and design phase, and in the construction and installation phase, are capitalized as part of the cost of the asset. We stop capitalizing costs when an asset is substantially complete and ready for its intended use. Determining the appropriate period during which to capitalize costs, and assessing whether particular costs qualify for capitalization, requires us to make significant judgments. These judgments can have a material impact on our reported results.

Equipment and facilities used to manufacture products subject to FDA or other governmental regulation are required to comply with standards of those regulatory agencies. The activities necessary to obtain approval from these regulatory agencies are referred to as validation costs. We capitalize the cost of validating new equipment and facilities for the underlying manufacturing process. We begin capitalization when we consider the product and manufacturing process to have demonstrated technological feasibility, and end capitalization when the asset is substantially complete and ready for its intended use. Costs capitalized include incremental labor and direct material, and incremental fixed overhead. Determining whether to capitalize validation costs requires judgment, and can have a significant impact on our reported results. Also, if we were unable to successfully validate the manufacturing process for any future product, we would have to write off to current operating expense any validation costs that had been capitalized during the unsuccessful validation process. Costs to initiate new projects in an existing facility are treated as start-up costs and expensed as incurred. To date, all of our manufacturing process validation efforts have been successful. As of December 31, 2006, capitalized validation costs, net of accumulated depreciation, were $17.2 million.

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Goodwill and Other Intangible Assets

As of December 31, 2006, there was approximately $1.3 billion of net goodwill and $1.5 billion of net other intangible assets on our consolidated balance sheet. We amortize intangible assets using the straight-line method over their estimated economic lives, which range from 1 and 15 years, or using the economic use method if that method results in significantly greater amortization than the straight-line method. Determining the economic lives of acquired intangible assets requires us to make significant judgment and estimates, and can materially impact our operating results. For certain acquired intangible assets, we may be required to make additional payments contingent upon meeting certain sales targets. We record amortization expense for these intangibles based on estimated future sales of the related products and include in the determination of amortization all contingent payments that we believe are probable of being made. We apply this amortization model to our Synvisc distribution rights (acquired from Wyeth), our license agreement with Synpac related to Myozyme patent and technology rights and our license of two products acquired from Surgi.B. We review the sales forecasts of these products on a quarterly basis and assess the impact changes in the forecasts have on the rate of amortization and the likelihood that contingent payments wil be made. Adjustments to amortization expense resulting from changes in estimated sales are reflected prospectively.

Asset Impairments

Impairment of Goodwill

FAS 142 requires periodic tests of goodwill for impairment and that other intangible assets be amortized over their useful lives unless these lives are determined to be indefinite. FAS 142 requires goodwill be tested using a two-step process. The first step compares the fair value of the reporting unit with the unit’s carrying value, including goodwill. When the carrying value of the reporting unit is greater than fair value, the unit’s goodwill may be impaired, and the second step must be completed to measure the amount of the goodwill impairment charge, if any. In the second step, the implied fair value of the reporting unit’s goodwill is compared with the carrying amount of the unit’s goodwill. If the carrying amount is greater than the implied fair value, the carrying value of the goodwill must be written down to its implied fair value. We determine the implied fair value by discounting, to present value, the estimated future cash flow of the reporting unit, which includes various analyses, assumptions and estimates including discount rates, projected results and estimated cash flows.

We are required to perform impairment tests under FAS 142 annually and whenever events or changes in circumstances suggest that the carrying value of an asset may not be recoverable. For all of our acquisitions, various analyses, assumptions and estimates were made at the time of each acquisition specifically regarding product development, market conditions and cash flows that were used to determine the valuation of goodwill and intangibles. We completed the required annual impairment tests for our $1.5 billion of net goodwill related to our reporting units during 2006, which was the balance at the time, and determined that the $219.2 million of goodwill assigned to our Genetics reporting unit was impaired.

We determined the fair value of the net assets of our Genetics reporting unit by discounting, to present value, its estimated future cash flows. Due to the reduction of reimbursement rates for certain test offerings and increased infrastructure costs, the discounted future cash flows of our Genetics reporting unit were negatively impacted causing the fair value of the net assets of our Genetics reporting unit to be lower than the carrying value. We calculated the fair value of the goodwill and determined that the goodwill assigned to our Genetics reporting unit was fully impaired and we recorded a pre-tax impairment charge of $219.2 million and $69.8 million of related tax benefits in September 2006. No additional impairment charges were required for the remaining $1.3 billion of goodwill related to our other reporting units. When we perform impairment tests in future years, the possibility exists that changes in forecasts and estimates from those used at the acquisition date could result in impairment charges.

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Impairment of Tangible and Intangible Assets, Other Than Goodwill

We periodically evaluate long-lived assets for potential impairment under FAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” We perform these evaluations whenever events or changes in circumstances suggest that the carrying value of an asset or group of assets is not recoverable. If we believe an indicator of potential impairment exists, we test to determine whether the impairment recognition criteria in FAS 144 have been met. In evaluating long-lived assets for potential impairment, we make several significant estimates and judgments, including:

·determining the appropriate grouping of assets at the lowest level for which cash flows are available;

·estimating future cash flows associated with the asset or group of assets; and

·determining an appropriate discount rate to use in the analysis.

Use of different estimates and judgments could yield significantly different results in this analysis and could result in materially different asset impairment charges.

In the third quarter of 2006, in connection with recording the charge for impaired goodwill assigned to our Genetics reporting unit, we also tested the long-lived assets for our Genetics business unit to determine whether any of the impairment recognition criteria in FAS 144 had been met. We determined that the long-lived assets for our Genetics business unit were not impaired and, therefore, no impairment charge was required for those assets.

In-Process Research and Development

In accounting for acquisitions, we allocate the purchase price to the fair value of the acquired tangible and intangible assets, including acquired IPR&D. This allocation requires us to make several significant judgments and estimates. For example, we generally estimate the value of acquired intangible assets and IPR&D using a discounted cash flow model, which requires us to make assumptions and estimates about, among other things:

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

·our ability to develop and commercialize products before our competitors develop and commercialize products for the same indications;

·the amount of revenues that will be derived from the products; and

·the appropriate discount rates to use in the analysis.

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 charges.

Strategic Equity Investments

We invest in marketable securities as part of our strategy to align ourselves with technologies and companies that fit with Genzyme’s future strategic direction. Most often we will collaborate on scientific programs and research with the issuer of the marketable securities.

On a quarterly basis, we review the fair market value of these marketable securities in comparison to historical cost. If the fair market value of a marketable security is less than our carrying value, we consider all available evidence in assessing when and if the value of the investment can be expected to recover to at least its historical cost. This evidence would include:

·continued positive progress in the issuer’s scientific programs;

·ongoing activity in our collaborations with the issuer;

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·a lack of any other substantial company-specific adverse events causing declines in value; and

·overall financial condition and liquidity of the issuer of the securities.

If our review indicates that the decline in value is “other than temporary,” we write down our investment to the then current market value and record an impairment charge to our consolidated statements of operations. The determination of whether an unrealized loss is “other than temporary” requires significant judgment, and can have a material impact on our reported results.

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:

	2006		2005		2004		06/05 Increase/ (Decrease) % Change			05/04 Increase/ (Decrease) % Change
	(Amounts in thousands)
Product revenue	$	2,887,409	$	2,453,303	$	1,976,191		18	%		24	%
Service revenue	282,118		261,379		212,392			8	%		23	%
Total product and service revenue	3,169,527		2,714,682		2,188,583			17	%		24	%
Research and development revenue	17,486		20,160		12,562			(13	)%		60	%
Total revenues	$	3,187,013	$	2,734,842	$	2,201,145		17	%		24	%

Product Revenue

We derive product revenue from sales of:

·Renal products, including Renagel for the reduction of elevated serum phosphorus levels in end-stage renal disease patients on hemodialysis, Hectorol for the treatment of secondary hyperparathyroidism in patients on dialysis and those with CKD, and bulk sevelamer;

·Therapeutics products, including Cerezyme for the treatment of Gaucher disease, Fabrazyme for the treatment of Fabry disease, Myozyme for the treatment of Pompe disease and Thyrogen, which is an adjunctive diagnostic agent used in the follow-up treatment of patients with well-differentiated thyroid cancer;

·Transplant products for the treatment of immune-mediated diseases, primarily Thymoglobulin and Lymphoglobuline, each of which induce immunosuppression of certain types of immune cells responsible for acute organ rejection in transplant patients;

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

·Other products, including:

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

·oncology products, including Campath for the treatment of B-cell chronic lymphocytic leukemia in patients who have been treated with alkylating agents and who have failed fludarabine therapy, and Clolar for the treatment of children (ages 1-21) with refractory or relapsed acute lymphoblastic leukemia; and

·bulk pharmaceuticals, including WelChol, which is a mono and adjunctive therapy for the reduction of LDL cholesterol in patients with primary hypercholesterolemia.

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The following table sets forth our product revenue on a reporting segment basis:

	2006		2005		2004		06/05 Increase/ (Decrease) % Change			05/04 Increase/ (Decrease) % Change
	(Amounts in thousands)
Renal:
Renagel (including sales of bulk sevelamer)	$	515,119	$	417,485	$	363,720		23	%		15	%
Hectorol	93,360		34,515		—			>100	%		N/A
Total Renal	608,479		452,000		363,720			35	%		24	%
Therapeutics:
Cerezyme	1,007,036		932,322		839,366			8	%		11	%
Fabrazyme	359,274		305,064		209,637			18	%		46	%
Thyrogen	93,687		77,740		63,454			21	%		23	%
Myozyme	59,238		3,827		257			>100	%		>100	%
Other Therapeutics	410		2,292		2,205			(82	)%		4	%
Total Therapeutics	1,519,645		1,321,245		1,114,919			15	%		19	%
Transplant:
Thymoglobulin/Lymphoglobuline	149,541		127,739		108,928			17	%		17	%
Other Transplant	6,425		18,143		42,125			(65	)%		(57	)%
Total Transplant	155,966		145,882		151,053			7	%		(3	)%
Biosurgery:
Synvisc	233,860		218,906		88,296			7	%		>100	%
Sepra products	85,338		68,171		61,647			25	%		11	%
Other Biosurgery	28,020		27,402		30,415			2	%		(10	)%
Total Biosurgery	347,218		314,479		180,358			10	%		74	%
Genetics	—		—		753			N/A			(100	)%
Other product revenue	256,101		219,697		165,388			17	%		33	%
Total product revenue	$	2,887,409	$	2,453,303	$	1,976,191		18	%		24	%

2006 As Compared to 2005

Renal

Sales of Renagel, including sales of bulk sevelamer, increased 23% to $515.1 million for 2006, as compared to 2005, primarily due to a $89.9 million increase in 2006 in sales related to increased customer volume, of which $68.0 million is primarily attributable to increased end-user demand worldwide, and $21.9 million is attributable to a 9.5% price increase for Renagel in the United States, which became effective in December 2005. The 1% increase in the Euro against the U.S. dollar for 2006, as compared to 2005, positively impacted Renagel revenue by $1.5 million in 2006. Sales of Renagel, including sales of bulk sevelamer, were 18% of our total product revenue for 2006, as compared to 17% for 2005.

Our acquisition of Bone Care on July 1, 2005 expanded our Renal product offerings with the addition of Hectorol, a complimentary product to Renagel used to treat secondary hyperparathyroidism in patients on dialysis and those with CKD. Bone Care’s operations are integrated into our Renal business, and our sales representatives are selling Hectorol to nephrologists in the United States. Sales of Hectorol increased

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more than 100% to $93.4 million for 2006 as compared to $34.5 million for 2005 because we did not own Hectorol until July 1, 2005 and due to higher wholesaler inventories on the date of acquisition.

We conducted a 2,100-patient post-marketing study of Renagel called the DCOR trial, which evaluated the ability of Renagel to improve patient morbidity and mortality and compared Renagel to calcium-based phosphate binders with respect to overall morbidity and mortality. We released top-line data from this trial in July 2005 and presented the data at the American Society of Nephrology meeting in November 2005. While the study did not meet its primary end point of a statistically significant reduction in mortality from all causes, in a pre-specified sub-group analysis, Renagel demonstrated a significant reduction in mortality from all causes in patients 65 years of age or older and in patients using Renagel for two years or more. The DCOR study included morbidity data from the CMS, which were presented at the 2006 ASN meeting. This data showed patients receiving Renagel experienced lower rates of hospitalization, fewer days in the hospital, and reduced overall health care expenditures compared to patients treated with calcium-based phosphate binders. In early 2007, Kidney International published findings from the RIND study that showed a significantly lower rate of death among patients with Renagel from the time they began dialysis compared with those using calcium-based phosphate binders.

We expect sales of Renagel and Hectorol to increase, driven primarily by growing patient access to our products, including the Medicare Part D program in the United States, and the continued adoption of the products by nephrologists worldwide. We expect adoption rates for Renagel to trend favorably as a result of our DCOR trial and the growing acceptance of the National Kidney Foundation’s 2003 Kidney Disease Outcome Quality Initiative, or ­K/DOQI, Guidelines for Bone Metabolism and Disease in CKD. Renagel and Hectorol compete with several other products and our future sales may be impacted negatively by these products. We discuss these competitors under the heading “Risk Factors—Our future success will depend on our ability to effectively develop and market our products and services against those of our competitors” in this report. In addition, our ability to continue to increase sales of Renagel and Hectorol will depend on many other factors, including our ability to optimize dosing and improve patient compliance with dosing of Renagel, the availability of reimbursement from third-party payors and the extent of coverage, including under the Medicare Part D program, and the accuracy of our estimates of fluctuations in the payor mix. Also our ability to effectively manage wholesaler inventories and the levels of compliance with the inventory management programs we implemented for Renagel 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 15% to $1.5 billion for 2006, as compared to 2005, primarily due to continued growth in sales of Cerezyme, Fabrazyme and Thyrogen and the launch of Myozyme in the European Union, United States and Canada in 2006.

The 8% growth in sales of Cerezyme to $1.0 billion for 2006, as compared to 2005, is attributable to our continued identification of new Gaucher disease patients, particularly in international markets. Our price for Cerezyme has remained consistent from period to period. Although we expect Cerezyme to continue to be a substantial contributor to revenues in the future, it is a mature product, and as a result, we do not expect that the current new patient growth trend will continue. The 1% increase in the Euro against the U.S. dollar in 2006, as compared to 2005, positively impacted Cerezyme revenue by $3.2 million in 2006.

Our results of operations are highly dependent on sales of Cerezyme and a reduction in revenue from sales of this product would adversely affect our results of operations. Sales of Cerezyme were approximately 35% of our total product revenue in 2006 and 38% in 2005. Revenue from Cerezyme would be impacted negatively if competitors developed alternative treatments for Gaucher disease, and the

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alternative products gained commercial acceptance, if our marketing activities are restricted, or if coverage, pricing or reimbursement is limited. Although orphan drug status for Cerezyme, which provided us with exclusive marketing rights for Cerezyme in the United States for seven years, expired in May 2001, we continue to have patents protecting our method of manufacturing Cerezyme until 2010 and the composition of Cerezyme as made by that process until 2013. The expiration of market exclusivity and orphan drug status will likely subject Cerezyme to increased competition, which may decrease the amount of revenue we receive from this product or the growth of that revenue. We are aware of companies that have developed or have initiated efforts to develop competitive products, and other companies may do so in the future. We discuss these competitors under the heading “Risk Factors—Our future success will depend on our ability to effectively develop and market our products and services against those of our competitors,” in this report.

The 18% increase to $359.3 million for 2006 in sales of Fabrazyme, as compared to 2005, was primarily attributable to increased patient identification worldwide as Fabrazyme is introduced into new markets. In addition, we recognized $3.4 million in September 2006 upon receiving reimbursement approval for past shipments of Fabrazyme in Canada. The 1% increase in the Euro against the U.S. dollar in 2006, as compared to 2005, positively impacted Fabrazyme revenue by $1.0 million in 2006.

Sales of Thyrogen increased 21% to $93.7 million for 2006, as compared to 2005, due to worldwide volume growth which positively impacted sales by $15.4 million. Additionally, a 10% increase in price impacted sales by $3.6 million in 2006, as compared to 2005. The 1% increase in the Euro against the U.S. dollar during 2006, as compared to 2005, did not have a material impact on Thyrogen revenue in 2006.

Sales of Myozyme were $59.2 million for 2006 as compared to $3.8 million in 2005. In March 2006, we received marketing authorization for Myozyme in the European Union. We are introducing Myozyme on a country-by-country basis in the European Union, as pricing and reimbursement approvals are obtained. In April 2006, the FDA granted marketing approval for Myozyme. We launched Myozyme in the United States in May 2006, in Europe a month later and in Canada in September 2006. Myozyme has received orphan drug designation in the United States, which provides seven years of market exclusivity, and in the European Union, which provides ten years of market exclusivity. Myozyme sales are expected to significantly increase as patients transition from clinical trials or expanded access programs and as new patients are identified. A marketing application for Myozyme has been submitted in Japan. We also expect to file for approval in several additional countries in 2007. The 1% increase in the Euro against the U.S. dollar during 2006, as compared to 2005, positively impacted Myozyme revenue by $2.0 million in 2006.

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We currently manufacture Myozyme in the United States. In the future, we expect to also produce Myozyme at our new protein manufacturing facility in Geel, Belgium, and at our new fill-finish facility in Waterford, Ireland, to help ensure that we are able to meet the anticipated demand for the product throughout the world.

Transplant

Transplant product revenue increased 7% to $156.0 million for 2006, as compared to 2005. The increase is primarily due to a $22.7 million increase in sales of Thymoglobulin as a result of increased utilization of Thymoglobulin in transplant procedures worldwide. The increase was partially offset by a $9.0 million decrease in revenue from an upfront license fee we had received from Procter & Gamble Pharmaceuticals, Inc., or PGP, a subsidiary of The Procter and Gamble Company in 2005, for which there was no comparable amount in 2006. In December 2005, PGP exercised its option to terminate an agreement under which we had granted PGP an exclusive, worldwide license to develop and market RDP58 for the treatment of gastrointestinal and other disorders.

We expect sales of Thymoglobulin to increase, driven primarily by our continued entry into new geographical markets, together with an overall growth in solid organ and living donor renal transplants. Thymoglobulin competes with several other products and our future sales may be impacted negatively by these products. We discuss these competitors under the heading “Risk Factors—Our future success will depend on our ability to effectively develop and market our products and services against those of our competitors” in this report.

Biosurgery

Biosurgery product revenue increased 10% to $347.2 million for 2006, as compared to 2005. The increase was largely attributable to a $17.2 million increase in sales of our Sepra products and a $15.0 million increase in sales of Synvisc. Sales of Seprafilm increased $15.1 million primarily due to greater penetration into the U.S. and Japanese market. Synvisc sales increased primarily due to an expanded sales and marketing investment. Currently, Synvisc is delivered through three injections at one-week intervals. In December 2006 we completed a pivotal trial evaluating a single-injection regimen of Synvisc, which showed that patients who received a single-injection regimen of Synvisc achieved a statistically significant improvement in pain from osteoarthritis of the knee in 26 weeks compared to those using placebo. We anticipate filing for approval of single-injection Synvisc in the European Union and in the U.S. in the first half of 2007 and we expect to launch this product in the European Union by the end of 2007 and in the United States in the first half of 2008. The clinical advantages of a single-injection regimen of Synvisc has the potential to expand the market for Synvisc.

We are aware of several products that compete with Synvisc, several companies that have initiated efforts to develop competitive products and several companies that market products designed to relieve the pain of osteoarthritis. These products could have an adverse effect on future sales of Synvisc. In addition, a substantial portion of our revenue on sales of Synvisc comes from third party payors, including government health administration authorities and private health insurers who may not continue to provide adequate health insurance coverage or reimbursement for Synvisc. Furthermore, governmental regulatory bodies, such as CMS, may from time-to-time make unilateral changes to the reimbursement rates for Synvisc. For example, in October 2006, CMS announced a change to the billing code for viscosupplementation products effective January 2007 that, if unchanged, could have resulted in Medicare reimbursement for Synvisc at a rate that was lower than the price healthcare providers are currently paying for the product. In December 2006, the CMS reversed this decision. If the CMS billing code decision had been left unchanged, our Synvisc revenues would have been adversely affected because healthcare providers would have been less willing to use Synvisc. We discuss these competitors under the heading

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“Risk Factors—Our future success will depend on our ability to effectively develop and market our products and services against those of our competitors” included in this report.

Other Product Revenue

Other product revenue increased 17% to $256.1 million for 2006, as compared to 2005, primarily due to a 10%, or $10.8 million, increase in sales of our diagnostics products and a 14%, or $11.7 million, increase in sales of bulk pharmaceuticals, including WelChol. The increase in sales of diagnostics products was attributable to a 17%, or $10.2 million, increase in clinical chemistry revenue resulting from our acquisition of Equal Diagnostics in July 2005. The increase in sales of bulk pharmaceuticals was primarily due to a 22%, or $7.2 million, increase in 2006, of bulk sales of and royalties earned on WelChol due to an increased demand from our U.S. marketing partner, Sankyo Pharma, Inc. In addition, oncology product revenue increased 41% to $48.1 million for 2006, as compared to 2005, due to an increase in demand for Campath and Clolar.

2005 As Compared to 2004

Renal

Sales of Renagel, including sales of bulk sevelamer, increased 15% to $417.5 million for 2005, as compared to 2004, primarily due to a $49.9 million increase in 2005 in sales related to increased customer volume, driven primarily by increased end-user demand in the United States and Europe. The 1% increase in net sales price in 2005, as compared to 2004, did not have a significant impact on sales of Renagel. The average exchange rate for the Euro remained relatively stable against the U.S. dollar for 2005, as compared to 2004, therefore having no significant impact on Renagel revenue. However, a 17% decrease in the average exchange rate for the Brazilian Real against the U.S. dollar for 2005, as compared to 2004, positively impacted Renagel revenue by $3.0 million in 2005. Sales of Renagel, including sales of bulk sevelamer, were 17% of our total product revenue for 2005, as compared to 18% for 2004.

Sales of Hectorol were $34.5 million for 2005, reflecting sales beginning on July 1, 2005, the date we acquired Bone Care.

Therapeutics

Therapeutics product revenue increased 19% to $1.3 billion for 2005, as compared to 2004, primarily due to continued growth in sales of Cerezyme, Fabrazyme and Thyrogen.

The 11% growth in sales of Cerezyme to $932.3 million for 2005, as compared to 2004, is attributable to our continued identification of new Gaucher disease patients, particularly in international markets. Our price for Cerezyme remained consistent from period to period. The average exchange rate for the Euro against the U.S. dollar remained relatively stable in 2005, as compared to 2004, resulting in very little impact on the sales of Cerezyme. Sales of Cerezyme were approximately 38% of our total product revenue in 2005 and 42% in 2004.

The 46% increase to $305.1 million for 2005 in sales of Fabrazyme, as compared to 2004, was primarily attributable to increased patient identification worldwide as Fabrazyme is introduced into new markets.

The sales of Thyrogen increased 23% to $77.7 million for 2005, as compared to 2004, primarily due to worldwide volume growth.

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Transplant

Transplant product revenue decreased 3% to $145.9 million for 2005, as compared to 2004. The decrease was primarily due to a $32.5 million decrease in sales of Gengraf, which we formerly co-promoted with Abbott Laboratories under an agreement that expired on December 31, 2004. The decrease was partially offset by a $16.0 million increase in sales of Thymoglobulin as a result of increased utilization of Thymoglobulin in transplant procedures and $9.0 million of previously deferred revenue related to an upfront license fee we had received from PGP.

Biosurgery

Biosurgery product revenue increased 74% to $314.5 million for 2005, as compared to 2004. The increase was largely attributable to a $130.6 million increase in sales of Synvisc, primarily due to our reacquisition of the Synvisc sales and marketing rights from Wyeth in January 2005 in several countries. Upon closing this transaction, we began to record revenue from sales of Synvisc to end-users in the United States, as well as Germany, Poland, Portugal and the Czech Republic. We began selling Synvisc directly to end-users in Greece effective July 1, 2005.

Other Product Revenue

Other product revenue increased 33% to $219.7 million for 2005, as compared to 2004, primarily due to a 14% increase to $104.2 million in sales of diagnostics products and an 18% increase, to $81.3 million, in sales of bulk pharmaceuticals, including WelChol. The increase in sales of diagnostics products was attributable to a 21%, or $10.3 million, increase in clinical chemistry revenue due to additional sales resulting from our acquisition of Equal Diagnostics in July 2005 and a result of higher order volume by several large customers. The increase in sales of bulk pharmaceuticals is primarily due to an increased demand for liquid crystals and a 33% increase in bulk sales of and royalties earned on WelChol due to an increased demand from our U.S. marketing partner, Sankyo Pharma, Inc. Other product revenue includes a $28.8 million increase in oncology revenue primarily due to the addition of sales from two oncology products, Campath and Clolar, that we acquired in the ILEX Oncology transaction in December 2004.

Service Revenue

We derive service revenues primarily from the following principal sources:

·sales of MACI, a 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

·genetic and pathology/oncology testing services, which are included in our Genetics reporting segment.

The following table sets forth our service revenue on a segment basis:

	2006		2005		2004		06/05 Increase/ (Decrease) % Change			05/04 Increase/ (Decrease) % Change
	(Amounts in thousands)
Biosurgery	$	39,458	$	38,553	$	24,917		2	%		55	%
Genetics	240,857		222,328		187,413			8	%		19	%
Other	1,803		498		62			>100	%		>100	%
Total service revenue	$	282,118	$	261,379	$	212,392		8	%		23	%

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2006 As Compared to 2005

Service revenue attributable to our Biosurgery reporting segment increased 2% to $39.5 million for 2006, as compared to 2005. The increase is primarily due to a full year of MACI sales during 2006. We acquired MACI from Verigen in February 2005. In addition, sales of Epicel increased due to an increase in patient demand in 2006.

Service revenue attributable to our Genetics reporting segment increased 8% to $240.9 million for 2006, as compared to 2005. The increase was primarily attributable to continued growth in sales of DNA testing services as well as the prenatal screening and diagnosis market.

2005 As Compared to 2004

Service revenue attributable to our Biosurgery reporting segment increased 55% to $38.6 million for 2005, as compared to 2004. The increase is primarily due to the addition of sales of MACI in February 2005.

Service revenue attributable to our Genetics reporting segment increased 19% to $222.3 million for 2005, as compared to 2004. The increase was primarily attributable to:

·additional service revenue resulting from our acquisition of substantially all of the pathology/oncology testing assets of IMPATH in May 2004; and

·increased sales of DNA testing services, primarily due to growth in the cystic fibrosis screening and diagnosis market, as well as the prenatal screening and diagnosis market.

International Product and Service Revenue

A substantial portion of our revenue was 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:

	2006		2005			2004			06/05 Increase/ (Decrease) % Change			05/04 Increase/ (Decrease) % Change
	(Amounts in thousands)
International product and service revenue	1,455,795		$	1,215,621		$	992,643			20	%		22	%
% of total product and service revenue	46	%	45		%	45		%

2006 As Compared to 2005

The 20% increase to $1.5 billion for 2006 in international product and service revenue, as compared to 2005, is primarily due to a $221.8 million increase in the combined international sales of Renagel, Cerezyme, Fabrazyme, Thyrogen, Myozyme, Thymoglobulin, Synvisc and Campath, primarily due to an increase in the number of patients using these products in countries outside of the United States.

The Euro increased 1% against the U.S. dollar for 2006, as compared to 2005. Therefore, total product and service revenue was positively impacted by $8.8 million.

International product and service revenue as a percentage of total product and service revenue increased 1% for 2006, as compared to 2005. This was primarily due to the increase in total revenue outside the United States, as we continue to identify new patients in the international market for our products and services.

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2005 As Compared to 2004

The 22% increase to $1.2 billion for 2005 in international product and service revenue, as compared to 2004, is primarily due to:

·a $180.1 million increase in the combined international sales of Renagel, Cerezyme, Fabrazyme and Thyrogen, primarily due to an increase in the number of patients using these products in countries outside of the United States; and

·a $7.7 million increase in international sales of Thymoglobulin and Lymphoglobuline due to an increase in volume and price.

Research and Development Revenue

The following table sets forth our research and development revenue on a segment basis:

	2006		2005		2004		06/05 Increase/ (Decrease) % Change			05/04 Increase/ (Decrease) % Change
	(Amounts in thousands)
Therapeutics	$	1,068	$	789	$	—		35	%		N/A
Transplant	—		30		310			(100	)%		(90	)%
Biosurgery	893		144		4,241			>100	%		(97	)%
Other	15,153		17,478		5,109			(13	)%		>100	%
Corporate	372		1,719		2,902			(78	)%		(41	)%
Total research and development revenue	$	17,486	$	20,160	$	12,562		(13	)%		60	%

2006 As Compared to 2005

Total research and development revenue decreased $2.7 million for 2006, as compared to 2005, primarily due to lower revenue recognized by our cardiovascular business as a result of lower spending on MG Biotherapeutics, Inc., our joint venture with Medtronic, Inc., or Medtronic. Other research and development revenue for the year ended December 31, 2006, includes $9.3 million of revenue for research and development work related to alemtuzumab for the treatment of multiple sclerosis and Campath that we perform on behalf of Bayer Schering Pharma AG. Other research and development revenue also includes revenue related to our pharmaceuticals and cardiovascular businesses.

2005 As Compared to 2004

Total research and development revenue increased $7.6 million for 2005, as compared to 2004, primarily due to a $12.4 million increase in other research and development revenue. This increase is attributable to $7.0 million of additional revenue in 2005 resulting from research and development work related to Campath that we performed on behalf of Bayer Schering Pharma, under agreements we assumed in connection with our acquisition of ILEX Oncology in December 2004. This increase was partially offset by a decrease in Biosurgery research and development revenue, primarily due to the completion, in 2004, of a development program for Hylaform and reimbursements received from Wyeth in 2004 for development projects associated with Synvisc. There were no comparable amounts for the reimbursements from Wyeth in 2005.

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MARGINS

The components of our total margins are described in the following table:

	2006			2005			2004			06/05 Increase/ (Decrease) % Change			05/04 Increase/ (Decrease) % Change
	(Amounts in thousands)
Product margin	$	2,351,021		$	1,991,126		$	1,527,749			18	%		30	%
% of total product revenue	81		%	81		%	77		%
Service margin	$	82,835		$	90,904		$	72,248			(9	)%		26	%
% of total service revenue	29		%	35		%	34		%
Total product and service gross margin	$	2,433,856		$	2,082,030		$	1,599,997			17	%		30	%
% of total product and service revenue	77		%	77		%	73		%

Product Margin

2006 As Compared to 2005

Our overall product margin increased $359.9 million, or 18%, for 2006, as compared to 2005. This is primarily due to:

·improved margins for Renagel due to increased customer volume and increased efficiency at our global manufacturing facilities;

·an increase in product margin for Cerezyme, Fabrazyme, Thyrogen, and Thymoglobulin due to increased sales and improved unit costs;

·improved margins for Myozyme due to the launch of Myozyme in the European Union, United States and Canada in 2006;

·a full year of Hectorol’s margin contribution in 2006, as compared to six months in 2005 as a result of the acquisition of Bone Care in July 2005; and

·an increase in product margin for our oncology business due to the increase in global sales of Campath and Clolar.

These increases in product margin were partially offset by stock-based compensation expenses of $12.0 million associated with our adoption of FAS 123R in 2006 for which there was no comparable amount in 2005.

Total product margin as a percentage of product revenue for 2006 was consistent with 2005.

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.

2005 As Compared to 2004

Our overall product margin increased $463.4 million, or 30%, for 2005, as compared to 2004. This is primarily due to:

·a $130.6 million, or 148%, increase in sales of Synvisc resulting from our reacquisition of Synvisc sales and marketing rights from Wyeth in January 2005;

·improved margins for Renagel, Cerezyme, Fabrazyme and Thymoglobulin due to increased sales and increased utilization of capacity at our global manufacturing facilities;

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·Hectorol’s margin contribution in the second half of 2005 due to the acquisition of Bone Care in July 2005; and

·$9.0 million of previously deferred revenue related to an upfront license fee received from PGP was recognized in our results of operations in December 2005 for which there was no comparable amount recorded in 2004.

These increases in product margin were partially offset by the write off of $28.1 million of Cerezyme, Myozyme and Clolar inventory to cost of sales. The write off of Cerezyme and Myozyme inventory was due to unsuccessful production runs of these products that occurred at our Allston Landing manufacturing plant. The write off of Clolar inventory was due to expired inventory acquired in connection with our acquisition of ILEX Oncology.

Service Margin

2006 As Compared to 2005

Our overall service margin decreased $8.1 million, or 9%, for 2006, as compared to 2005. This is primarily due to additional costs in Corporate of $9.5 million related to the adoption of FAS 123R in 2006 for which there was no comparable amount in 2005. This was partially offset by an increase in service margin related to our Biosurgery reporting segment due to an increased demand for Epicel in 2006.

Total service margin as a percent of total service revenue decreased in 2006, as compared to 2005, primarily due to additional costs in Corporate related to the adoption of FAS 123R in 2006. Genetics service margin as a percentage of total service revenue decreased for 2006, as compared to 2005 due to higher costs for payroll, chemicals and supplies.

2005 As Compared to 2004

Our overall service margin increased $18.7 million, or 26%, for 2005, as compared to 2004. This is primarily due to a $13.6 million, or 55%, increase in sales of Biosurgery services as well as a $34.9 million, or 19%, increase in sales of Genetics services. Total service margin as a percent of total service revenue increased in 2005, as compared to 2004, primarily due to increased sales of higher margin Biosurgery services such as Carticel and MACI, which offset increased sales of lower margin testing services attributable to our acquisition of substantially all of the pathology/oncology testing assets related to the Physician Services and Analytical Services business units of IMPATH in May 2004.

OPERATING EXPENSES

Selling, General and Administrative Expenses

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

	2006			2005			2004			06/05 Increase/ (Decrease) % Change			05/04 Increase/ (Decrease) % Change
	(Amounts in thousands)
Selling, general and administrative expenses	$	1,010,400		$	787,839		$	599,388			28	%		31	%
% of total revenue	32		%	29		%	27		%

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2006 As Compared to 2005

SG&A increased $222.6 million for 2006, as compared to 2005, primarily due to increases of:

·$26.8 million for Renal products, primarily due to our acquisition of Bone Care in July 2005 and continued support of Renal’s international business operations growth;

·$21.8 million for Therapeutics products, primarily due to expenses incurred to launch Myozyme in the United States, Canada and in several countries in the European Union and to prepare for its launch in additional countries in 2007;

·$16.8 million for Biosurgery products and services, primarily due to additional expenses related to an increase in staffing and an increase in marketing efforts; and

·$148.5 million for Corporate SG&A, primarily due to $121.8 million of stock-based compensation expenses related to our adoption of FAS 123R and increased spending on legal and information technology expenses.

2005 As Compared to 2004

SG&A increased $188.5 million for 2005, as compared to 2004, primarily due to increases of:

·$33.9 million for Renal products, primarily due to our acquisition of Bone Care in July 2005;

·$39.5 million for Therapeutics products, primarily due to increased spending on additional resources to support volume growth and new country launches for Cerezyme, Fabrazyme and Thyrogen and the anticipated launch of Myozyme;

·$58.5 million for Biosurgery products and services, primarily due to the additional expenses related to the Synvisc sales force we assumed from Wyeth, and because we began performing all marketing for Synvisc in the United States, as well as Germany, Poland, Portugal, the Czech Republic and, as of July 1, 2005, Greece;

·$6.0 million for Genetics, primarily due to our acquisition of substantially all of the pathology/oncology testing assets of IMPATH in May 2004;

·$17.1 million for Other SG&A, primarily due to the increase in expenses for our diagnostic products business as a result of our acquisition of Equal Diagnostics in July 2005 and an increase in expenses for our oncology business as a result of our acquisition of ILEX Oncology in December 2004; and

·$33.9 million for Corporate SG&A, primarily due to increased legal, information technology, recruiting and advertising expenses.

Research and Development Expenses

The following table provides information regarding the change in research and development expense during the periods presented:

	2006			2005			2004			06/05 Increase/ (Decrease) % Change			05/04 Increase/ (Decrease) % Change
	(Amounts in thousands)
Research and development expenses	$	649,951		$	502,657		$	391,802			29	%		28	%
% of total revenue	20		%	18		%	18		%

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2006 As Compared to 2005

Research and development expenses increased $147.3 million for 2006, as compared to 2005, primarily due to:

·a $29.7 million increase in spending on Renal research and development programs, primarily due to our acquisition of Bone Care in July 2005 and to a $12.6 million increase in spending on the tolevamer program due to accelerated patient enrollment in clinical studies;

·a $19.5 million increase in spending on certain Therapeutics research and development programs including $7.3 million in spending for the Myozyme program due to FDA required post-marketing commitments and $8.9 million of spending for the Parkinson’s disease program we acquired from Avigen;

·a $7.9 million increase in spending on Transplant research and development programs, primarily due to our acquisition of AnorMED in November 2006;

·a $10.2 million increase in spending on Biosurgery research and development programs, primarily on next generation orthopaedics products;

·a $19.7 million increase in sepending on Other research and development programs primarily on our Campath and Clolar product lines; and

·an $84.6 million increase in spending on Corporate research and development programs primarily due to stock-based compensation expenses of $65.2 million recorded in 2006 related to our adoption of FAS 123R.

These increases were partially offset by decreases in research and development expenses of $24.3 million in spending on certain Therapeutics research and development programs, including:

·$5.1 million on our Cerezyme program, as patients completed clinical studies during the second quarter of 2006, resulting in a decrease in spending on follow-up monitoring;

·$5.6 million on our deferitrin (iron chelator) program due to the completion of our phase 1/2 study in 2005; and

·$6.8 million from the consolidation of Dyax-Genzyme LLC. Spending decreased for DX-88 in both periods due to the completion of clinical trials.

2005 As Compared to 2004

Research and development expenses increased $110.9 million for 2005, as compared to 2004, primarily due to:

·a $32.9 million increase in spending on Renal research and development programs primarily due to our acquisition of Bone Care in July 2005 and to a $10.0 million charge recorded in 2005, representing a portion of the approximately $23 million of funding we are obligated to provide under our collaboration with RenaMed, for which there was no comparable charge in 2004;

·a $14.5 million increase in spending on Therapeutics research and development programs including spending on the DX-88 program due to full enrollment in a clinical trial and additional manufacturing runs in 2005;

·a $41.0 million increase in spending on Other research and development programs primarily due to Campath and Clolar clinical trial activity; and

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·a $15.3 million increase in spending for Corporate research and development efforts related to our corporate science activities, including research initiatives for existing products, that we do not allocate to our reporting segments.

Amortization of Intangibles

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

	2006			2005			2004			06/05 Increase/ (Decrease) % Change			05/04 Increase/ (Decrease) % Change
	(Amounts in thousands)
Amortization of intangibles	$	209,355		$	181,632		$	109,473			15	%		66	%
% of total revenue	7		%	7		%	5		%

2006 As Compared to 2005

Amortization of intangibles expense increased $27.7 million for 2006, as compared to 2005, primarily due to additional amortization expense attributable to the intangible assets acquired in connection with our acquisitions of Surgi.B in March 2006 and Bone Care in July 2005, as well as the reacquisition of Synvisc sales and marketing rights in several countries from Wyeth in January 2005.

2005 As Compared to 2004

Amortization of intangibles expense increased $72.2 million for 2005, as compared to 2004, primarily due to additional amortization expense attributable to the intangible assets acquired in connection with our acquisitions of Bone Care, Equal Diagnostics, Verigen and the Synvisc sales and marketing rights from Wyeth all in 2005 and ILEX Oncology in 2004. In addition, the 2005 amortization of intangibles expense includes a full year of expense related to the intangible assets attributable to our acquisition of substantially all of the pathology/oncology testing assets of IMPATH in May 2004, as compared to seven months in 2004.

As discussed in Note H., “Goodwill and Other Intangible Assets,” to our 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 license agreement with Synpac by taking into account forecasted future sales of Synvisc and Myozyme, respectively and the resulting estimated future contingent payments we will be required to make to Wyeth and Synpac. As a result, we expect amortization of intangibles to fluctuate over the next five years based on these future contingent payments.

Purchase of In-Process Research and Development

In connection with five of our acquisitions since 2004, we have acquired various IPR&D projects. Substantial additional research and development will be required prior to any of our acquired IPR&D programs and technology platforms reaching technological feasibility. In addition, once research is completed, each product candidate acquired from AnorMED, Avigen, Bone Care, Verigen and ILEX Oncology will need to complete a series of clinical trials and receive FDA or other regulatory approvals prior to commercialization. Our current estimates of the time and investment required to develop these products and technologies may change depending on the different applications that we may choose to pursue. We cannot give assurances that these programs will ever reach technological feasibility or develop into products that can be marketed profitably. In addition, we cannot guarantee that we will be able to develop and commercialize products before our competitors develop and commercialize products for the

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same indications. If products based on our acquired IPR&D programs and technology platforms do not become commercially viable, our results of operations could be materially adversely affected.

The following table sets forth IPR&D projects for companies and certain assets acquired since 2004 (amounts in millions, except percent data):

Company/Assets Acquired	Purchase Price			IPR&D(1)			Programs Acquired	Discount Rate Used in Estimating Cash Flows(1)			Year of Expected Launch	Estimated Cost to Complete
AnorMED (2006)		$	589.2		$	526.8	Mozobil (stem cell transplant)		15	%	2008-2013		$	125
					26.1		AMD070 (HIV)(2)		15	%
					$	552.9
Avigen (2005)		$	12.0		$	7.0	AV201 (Parkinson’s disease)		N/A		2016		$	74
Bone Care (2005)		$	712.3		$	12.7	LR-103 (secondary
							hyperparathyroidism)		25	%	2012		$	15
Verigen (2005)		$	12.7		$	9.5	MACI (cartilage repair)		24	%	2012-2014		$	20-$35
ILEX Oncology (2004)		$	1,080.3		$	96.9	Campath (alemtuzumab)		11	%	2009-2011		$	194
					113.4		Clolar		12	%	2008-2011		$	99
					44.2		Tasidotin		16	%	2011-2014		$	44
					$	254.5

(1)Management assumes responsibility for determining the valuation of the acquired IPR&D projects. The fair value assigned to IPR&D for each acquisition is estimated by discounting, to present value, the cash flows expected once the acquired projects have reached technological feasibility. The cash flows are probability-adjusted to reflect the risks of advancement through the product approval process. In estimating the future cash flows, we also considered the tangible and intangible assets required for successful exploitation of the technology resulting from the purchased IPR&D projects and adjusted future cash flows for a charge reflecting the contribution to value of these assets.

(2)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.

Charge for Impaired Goodwill

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 asset may not be recoverable. We completed the required annual impairment tests for our $1.5 billion of net goodwill, which was the balance at the time, in the third quarter of 2006 and determined that the $219.2 million of goodwill assigned to our Genetics reporting unit was fully impaired. We discuss our assessment of goodwill for potential impairment under the heading “Critical Accounting Policies—Asset Impairments—Impairment of Goodwill” included in this report.

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OTHER INCOME AND EXPENSES

	2006			2005			2004			06/05 Increase/ (Decrease) % Change			05/04 Increase/ (Decrease) % Change
	(Amounts in thousands)
Equity in income (loss) of equity method investments	$	15,705		$	151		$	(15,624	)		>100	%		>(100	)%
Minority interest	10,418			11,952			5,999				(13	)%		99	%
Gains (losses) on investments in equity securities, net	73,230			5,698			(1,252		)		>100	%		>(100	)%
Other	(2,045		)	(1,535		)	(357		)		33	%		>100	%
Investment income	56,001			31,429			24,244				78	%		30	%
Interest expense	(15,478		)	(19,638		)	(38,227		)		(21	)%		(49	)%
Total other income (expenses)	$	137,831		$	28,057		$	(25,217	)		>100	%		>(100	)%

2006 As Compared to 2005

Equity in Income (Loss) of Equity Method Investments

Under this caption, we record our portion of the results of our joint ventures with BioMarin and Medtronic, and our investments in Peptimmune, Inc., or Peptimmune, and Therapeutic Human Polyclonals, Inc., or THP.

Equity in income (loss) of equity method investments increased more than 100% to $15.7 million in 2006, as compared to 2005, primarily due to an increase of $11.4 million in our portion of the net income of BioMarin/Genzyme LLC attributable to increased sales of Aldurazyme.

Minority Interest

As a result of our application of FIN 46R, “Consolidation of Variable Interest Entities,” we have consolidated the results of Dyax-Genzyme LLC and Excigen Inc. Our consolidated balance sheet as of December 31, 2006, includes assets related to Dyax-Genzyme LLC, which are not significant, and substantially all of which are lab equipment net of their associated accumulated depreciation. We have recorded Dyax’s portion of this joint venture’s losses as minority interest in our consolidated statements of operations. The results of Excigen were not significant.

In February 2007, we agreed with Dyax Corp., or Dyax, to terminate our participation and interest in Dyax-Genzyme LLC effective February 20, 2007.  In connection with this termination, we made a capital contribution of approximately $17 million in cash to Dyax-Genzyme LLC and Dyax purchased our interest in the joint venture for 4.4 million shares of Dyax common stock, valued at $16.9 million, based on the closing price of Dyax common stock on February 23, 2007.

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Gains (Losses) on Investments in Equity Securities, net

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

	2006			2005		2004
Gross gains on investments in equity securities:
CAT	$	69,359		$	—	$	—
BioMarin	6,416			—		—
Theravance, Inc.	—			4,510		—
Other	2,848			1,188		1,610
Total gains on investments in equity securities	78,623			5,698		1,610
Less: charges for impaired investments	(5,393		)	—		(2,862		)
Gains (losses) on investments in equity securities, net	$	73,230		$	5,698	$	(1,252	)

Gross Gains on Investments in Equity Securities

In May 2006, we recorded a $7.0 million gain on the sale of a portion of our investment in CAT. In June 2006, in connection with the acquisition of CAT by AstraZeneca plc, or AstraZeneca, we recorded a $62.4 million gain on the tender of our remaining investment in CAT, which became unconditional on June 21, 2006.

In January 2006, we recorded a $6.4 million gain in connection with the sale of our entire investment of 2.1 million shares of the common stock of BioMarin for net cash proceeds of $24.4 million.

In April 2005, we sold our entire investment in the common stock of Theravance, Inc., or Theravance, for $4.5 million in cash. Our investment in Theravance had a zero cost basis and, as a result, we recorded a gain of $4.5 million in April 2005 related to this sale.

Charges for Impaired Investments

We review the carrying value of each of our strategic investments in equity securities on a quarterly basis for potential impairment. Gains (losses) on investments in equity securities, net, includes charges for impaired investments of $5.4 million for 2006, including $2.5 million to write-off our investment in RenaMed and $2.2 million to write down our investment in ViaCell for which there were no comparable amounts in 2005. We concluded that it was unclear over what period the recovery of the stock prices for these investments would take place and that any evidence suggesting that the investment would recover to at least our historical cost was not sufficient to overcome the presumption that the current market price was the best indicator of the value of these investments.

Investment Income

Our investment income increased 78% to $56.0 million for 2006, as compared to $31.4 million for 2005, primarily due to higher average cash balances and an increase in our average portfolio yield.

Interest Expense

Our interest expense decreased 21% to $15.5 million for 2006, as compared to $19.6 million for 2005, primarily due to reduced interest expense of $2.2 million on our 2003 revolving credit facility, which we replaced with the 2006 credit facility in July 2006, and a $1.5 million decrease due to the payoff of a capital lease obligation related to our administriatve offices in Waltham, Massachusetts in October 2005.

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2005 As Compared to 2004

Equity in Income (Loss) of Equity Method Investments

Under this caption, we record our portion of the results of our joint ventures with BioMarin, and Medtronic, and our investments in Peptimmune and THP.

Previously our equity in income (loss) of equity method investments was a net loss, of which the largest component was our portion of the net losses from our joint venture with BioMarin. However, this joint venture became profitable in the first quarter of 2005 due to increased sales of Aldurazyme. As a result, we recorded income of $7.1 million in 2005, representing our portion of the net income of the joint venture for 2005, as compared to a charge of $9.7 million in 2004, representing our portion of the net losses of the joint venture for 2004.

Minority Interest

As a result of our application of FIN 46R, “Consolidation of Variable Interest Entities,” we have consolidated the results of Dyax-Genzyme LLC, and Excigen Inc. Our consolidated balance sheet as of December 31, 2005, includes assets related to Dyax-Genzyme LLC, which are not significant, and substantially all of which are lab equipment net of their associated accumulated depreciation. We have recorded Dyax’s portion of this joint venture’s losses as minority interest in our consolidated statements of operations. The results of Excigen were not significant.

Gains (Losses) on Investments in Equity Securities

We review the carrying value of each of our strategic investments in equity securities on a quarterly basis for potential impairment. Gains (losses) on investments in equity securities for 2005 includes a $4.5 million gain on the sale of our investment in the common stock of Theravance, which we recorded in our consolidated statement of operations in April 2005 and for which there was no comparable amount in 2004. A $2.9 million impairment charge was recorded in 2004 in connection with our investment in MacroGenics for which there is no comparable amount in 2005.

Investment Income

Our investment income increased 30% to $31.4 million for 2005, as compared to 2004, primarily due to an increase in the average portfolio yield. This increase was offset, in part, by lower average cash and investment balances in interest-bearing accounts and an increase in the realized losses from our U.S. investment portfolio.

Interest Expense

Our interest expense decreased 49% to $19.6 million for 2005, as compared to 2004, primarily due to $17.9 million of interest expense and charges related to the redemption of our $575.0 million in principal of 3% convertible subordinated debentures for cash in June 2004 for which there are no similar amounts in the same period of 2005, including $8.3 million of interest expense, a charge of $4.3 million for the premium paid upon redemption and a charge of $5.3 million to write off the unamortized debt fees associated with these debentures. This decrease was offset, in part, by $0.5 million of additional interest expense for 2005 related to the $350.0 million in principal drawn under our 2003 revolving credit facility to fund the acquisition of Bone Care.

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(Provision for) Benefit from Income Taxes

	2006			2005			2004			06/05 Increase/ (Decrease) % Change			05/04 Increase/ (Decrease) % Change
	(Amounts in thousands)
(Provision for) benefit from income taxes	$	35,881		$	(187,430	)	$	(141,169	)		>(100	)%		33	%
Effective tax rate	(68		)%	30		%	62		%

Our provisions for income taxes were at rates other than the U.S. federal statutory tax rate for the following reasons:

	For the Years Ended December 31,
	2006		2005		2004
Tax provision at U.S. statutory rate	(35.0	)%	35.0	%	35.0	%
State taxes, net	(1.7	)	1.6		2.8
Export sales benefits	(37.2	)	(2.8	)	(7.1	)
Domestic manufacturing deduction	(15.5	)	(1.2	)	—
Tax credits	(30.5	)	(4.1	)	(4.7	)
Foreign rate differential	76.0		0.1		(4.4	)
Charges for IPR&D	—		1.2		39.1
Stock compensation	15.8		—		—
Goodwill impairment	19.6		—		—
Audit settlements	(62.9	)	—		—
Other	3.3		—		1.3
Effective tax rate	(68.1	)%	29.8	%	62.0	%

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

·our provision for state income taxes;

·the tax benefits from export sales;

·the tax benefits from domestic production activities;

·benefits related to tax credits, primarily orphan drug credits; and

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

Our effective tax rate for  2006, was also impacted by:

·the deductible charge for IPR&D of $552.9 million recorded in November 2006 in connection with our acquisition of AnorMED, of which $195.7 million was taxed at rates other than the U.S. statutory tax rate;

·$33.2 million of non-deductible stock compensation expenses;

·a charge for impaired goodwill of $219.2 million recorded in September 2006, of which $29.5 million was not deductible for tax purposes; and

·the settlement of the 1996 to 1999 IRS audit and various state and foreign income tax audits. We recorded a $33.2 million tax benefit to our income tax provision primarily related to export sales benefits, tax credits and deductible intangibles from a prior period acquisition. In conjunction with those settlements, we reduced our tax reserves by approximately $13.2 million and recorded current and deferred tax benefits for the remaining portion of the settlement amounts.

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Our effective tax rates for 2005 and 2004 were also impacted by non-deductible charges for IPR&D of:

·$22.2 million in 2005, of which $9.5 million was recorded in the first quarter of 2005 in connection with our acquisition of Verigen and $12.7 million was recorded in the third quarter of 2005 related to our acquisition of Bone Care; and

·$254.5 million in 2004, all of which was recorded in December 2004 in connection with our acquisition of ILEX Oncology.

In addition, our overall tax rate has changed significantly due to fluctuations in our income (loss) before taxes, which was $(52.7) million in 2006, $628.9 million in 2005 and $227.7 million in 2004.

Our assessment of the potential impact of the required adoption of FIN 48 effective January 1, 2007 is included under the heading “Recent Accounting Pronouncements—FIN 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109,’’ ’’ included in this report.

Research and Development Programs

Our research and development programs are focused on the areas of medicine where we market commercial products, namely rare inherited disorders, kidney disease, transplant and immune diseases, orthopaedics and oncology. We also conduct research in cardiovascular disease, diagnostic testing and other areas of unmet medical needs. Before we can commercialize our development-stage products, we will need to:

·conduct substantial research and development;

·undertake pre-clinical and clinical testing;

·develop and scale-up manufacturing processes and validate facilities; and

·pursue regulatory approvals and, in some countries, pricing approvals.

This process is risky, expensive, and may take several years. We cannot guarantee that we will be able to successfully develop any product, or that we would be able to recover our development costs upon commercialization of a product that we successfully develop.

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Below is a brief description of our significant research and development programs:

Program	Program Description or Indication	Development Status at December 31, 2006	Year of Expected Product Launch
Renvela (sevelamer carbonate)	Control of serum phosphorus in patients with CKD on and off hemodialysis	Completed enrollment in trial for hemodialysis patients in 2005. Completed open-label study to compare powder to tablet formulation that showed the two formulations are equivalent in controlling serum phosphorus in hemodialysis patients. Commenced enrollment in trial for powder formulation to allow once daily dosing in 2006. Filed NDA with the FDA for approval for the control of serum phosphorus in patients with CKD on hemodialysis in December 2006.	2008
Tolevamer(1)	C. difficile-associated disease	Phase 2 trials completed in 2004; phase 3 trial ongoing and anticipated to be completed in the second half of 2007.	2008
Fabrazyme	Fabry disease	Marketed in the European Union since 2001, the U.S. since 2003, and Japan since 2004; marketing approval received in 45 countries and commercial sales in 35 countries; several post-marketing commitments ongoing.	Product was launched in 2001

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Myozyme	Pompe disease	Received marketing approval in the European Union in March 2006, in the U.S. in April 2006 and in Canada in August 2006; marketing approval received in 28 countries and commercial sales in 23 countries; several post-marketing commitments to be initiated in 2007; regulatory submissions filed and under review in Japan, Switzerland, Brazil, Argentina and Colombia with several more planned for submission in 2007.	Product was launched in 2006
GENZ-112638	Gaucher disease	Enrollment of patients in a phase 2 trial commenced in July 2006 and is ongoing.	2011
TGF-beta antagonists	Idiopathic  pulmonary fibrosis	Phase 1 trial commenced in 2005; preliminary results anticipated in 2007. We record 50% of the research and development costs incurred under our collaboration with CAT.	2013
Aldurazyme	MPS I	Marketed in the U.S. and the European Union since 2003; marketing approval received in 50 countries and commercial sales in 36 countries; several post-marketing commitments ongoing.	Product was launched in 2003
Mozobil(2)	Improve the efficacy of stem cell transplantation in patients with blood cancers	Enrollment completed in a phase 3 trial for patients with multiple myeloma and a phase 3 trial for non-Hodgkin’s lymphoma in 2006.	2008, through 2013

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Synvisc(3)	Viscosupplementation products to treat osteoarthritis of the knee and other joints	Received marketing approval in the European Union for Synvisc in the shoulder and ankle in late 2006 and launched Synvisc for those indications in December 2006; clinical development of single-injection Synvisc is ongoing; anticipate launching single-injection Synvisc in the European Union in 2007 and in the United States in 2008.	2007 through 2008
Hylastan	Next generation viscosupplementation product	Pivotal trial anticipated to be completed in the first half of 2007; anticipate filing for approval in the U.S. and the European Union in 2007.	2008
Sepra products(3)	Next stage products to prevent surgical adhesions for various indications	Preclinical.	2009 through 2012
Campath(4)	B-cell chronic lymphocytic leukemia	Phase 3 clinical trial in front-line CLL completed in 2006; phase 3 combination therapy trial in second-line CLL ongoing; phase 2 subcutaneous administration trial in relapsed/retractory CLL ongoing; anticipated commencement of phase 2 trial in 2007 to compare Campath from new manufacturing process with the existing product in front-line CLL.	2009 through 2011
Alemtuzumab (Campath) MS(4)	Multiple Sclerosis	Data from phase 2 trial (CAMMS23) analyzed at the predefined 1 and 2 year interim analyses; anticipated commencement of two phase 3 trials in 2007.	2010

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Clolar(4) Pediatric and adult leukemias and solid tumors Phase 2 trial in pediatric acute leukemias ongoing; phase 2 trial in adult hematologic cancers commenced in 2006 and is ongoing; phase 1 trial in solid tumors ongoing; phase 3 trial in older patients with acute myelogenous leukemia commenced in 2006; anticipated initiation of phase 1 study for treatment of myelodysplastic syndromes in 2007. 2008 through 2011

(1)Program acquired in connection with the December 2000 acquisition of GelTex Pharmaceuticals, Inc., or GelTex.

(2)Program acquired in connection with the November 2006 acquisition of AnorMED.

(3)Program acquired in connection with the December 2000 acquisition of Biomatrix.

(4)Program acquired in connection with the December 2004 acquisition of ILEX Oncology.

The aggregate actual and estimated research and development expense for the programs described above is as follows (amounts in millions):

Costs incurred for the year ended December 31, 2005	$	205.0
Costs incurred for the year ended December 31, 2006	$	234.6
Cumulative costs incurred as of December 31, 2006	$	1,102.6
Estimated costs to complete as of December 31, 2006	$	800 to $1,000

Our current estimates of the time and investment required to develop these products may change depending on the approach we take to pursue them, the results of preclinical and clinical studies, and the content and timing of decisions made by the FDA and other regulatory authorities. We cannot provide assurance that any of these programs will ever result in products that can be marketed profitably. In addition, we cannot guarantee that we will be able to develop and commercialize products before our competitors develop and commercialize products for the same indication. If certain of our development-stage programs do not result in commercially viable products, our results of operations could be materially adversely affected.

Liquidity and Capital Resources

We continue to generate cash from operations. We had cash, cash equivalents and short- and long-term investments of $1.3 billion at December 31, 2006 and $1.1 billion at December 31, 2005.

The following is a summary of our statements of cash flows for 2006 and 2005.

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Cash Flows from Operating Activities

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

	2006			2005
Cash flows from operating activities:
Net income (loss)	$	(16,797	)	$	441,489
Non-cash charges	978,677			427,635
Decrease in cash from working capital changes (excluding impact of acquired assets and assumed liabilities)	(73,311		)	(137,347		)
Cash flows from operating activities	$	888,569		$	731,777

Cash provided by operating activities increased $156.8 million in 2006, as compared to 2005, primarily driven by a $92.8 million increase in earnings, excluding non-cash charges, and a $64.0 million decrease in cash used for working capital. In connection with our adoption of FAS 123R, we were required to change the classification in our consolidated statements of cash flows of any tax benefits realized upon the exercise of stock options in excess of that which is associated with the expense recognized for financial reporting purposes.

Cash Flows from Investing Activities

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

	2006			2005
Cash flows from investing activities:
Net sales (purchases) of investments, excluding investments in equity securities	$	13,168		$	(131,628	)
Net sales (purchases) of investments in equity securities	132,588			(410		)
Purchases of property, plant and equipment	(333,675		)	(192,461		)
Distributions from equity method investments	19,800			3,000
Purchases of other intangible assets	(105,348		)	(172,092		)
Acquisitions, net of acquired cash	(568,953		)	(703,074		)
Other investing activities	6,008			5,682
Cash flows from investing activities	$	(836,412	)	$	(1,190,983	)

In 2006, acquisitions, capital expenditures and purchases of intangible assets accounted for significant cash outlays for investing activities. In 2006 we used:

·$569.0 million in cash to fund the acquisition of AnorMED;

·$333.7 million in cash to fund the purchase of property, plant and equipment, primarily related to the ongoing expansion of our manufacturing capacity in the Republic of Ireland, the United Kingdom and Belgium, and the construction of a new research and development facility in Framingham, Massachusetts; and

·$105.3 million in cash for purchases of other intangible assets.

These decreases in cash were partially offset by cash provided by:

·$132.6 million in cash from the net sales of investments in equity securities, of which $24.4 million is attributable to the sale of our entire investment of 2.1 million shares in the common stock of BioMarin in January 2006, $11.4 million is attributable to the sale of a portion of our investment in

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the common stock of CAT in May 2006 and $99.0 million is attributable to the sale of the remainder of our investment in the common stock of CAT in July 2006;

·$19.8 million of cash distributions from our joint venture with BioMarin; and

·$13.2 million in cash from the net sales of investments.

In 2005, net purchases of investments, including investments in equity securities, acquisitions and capital expenditures accounted for significant cash outlays for investing activities. In 2005, we used:

·$703.1 million in cash for the acquisitions of Bone Care, Equal Diagnostics, Verigen and gene therapy assets of Avigen, net of acquired cash;

·$192.5 million in cash to fund the purchase of property, plant and equipment, primarily related to the ongoing expansion of our manufacturing capacity in the Republic of Ireland, the United Kingdom, Belgium and the United States;

·$172.1 million in cash for our reacquisition of the Synvisc sales and marketing rights from Wyeth; and

·$132.0 million in cash for net purchases of investments, including equity investments.

Cash Flows from Financing Activities

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

	2006			2005
Cash flows from financing activities:
Proceeds from issuance of common stock	$	158,305		$	354,708
Excess tax benefits from stock-based compensation	7,114			—
Proceeds from draws on our 2003 revolving credit facility	—			350,000
Payments of debt and capital lease obligations	(4,501		)	(478,770		)
Increase (decrease) in bank overdrafts	(21,124		)	17,951
Minority interest contributions	11,153			11,423
Other financing activities	1,210			3,261
Cash flows from financing activities	$	152,157		$	258,573

In 2006, cash flows from financing activities decreased $106.4 million, as compared to 2005, primarily due to a $196.4 million decrease in cash proceeds from the issuance of common stock and $350.0 million of cash proceeds drawn under our 2003 revolving credit facility in 2005 for which there were no similar amounts in 2006. These decreases were offset, in part, by a $474.3 million decrease in cash used for the payment of debt and capital lease obligations. Cash used for the payment of debt and capital lease obligations in 2005 includes the repayment of $450.0 million in principal drawn under our 2003 revolving credit facility for which there are no similar repayments in 2006.

In 2005, financing activities generated $258.6 million of cash, primarily due to $350.0 million of proceeds drawn under our revolving credit facility that matures in 2006 and $354.7 million of proceeds from the issuance of common stock under our stock plans, offset in part by $478.8 million in cash utilized to repay debt including $350.0 million drawn under our revolving credit facility and capital lease obligations.

Revolving Credit Facility

In December 2003, we entered into a three-year $350.0 million revolving credit facility with Bank of America, N.A., successor-by merger to Fleet National Bank, as administrative agent and a syndicate of

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lenders, maturing in December 2006, which we refer to as our 2003 revolving credit facility. On July 14, 2006, we terminated our 2003 revolving credit facility and replaced it with a new five-year $350.0 million senior unsecured revolving credit facility with JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent, ABN AMRO Bank N.V., Citizens Bank of Massachusetts and Wachovia Bank, National Association, as co-documentation agents, and a syndicate of lenders, which we refer to as our 2006 revolving credit facility. The proceeds of loans under our 2006 revolving credit facility can be used to finance working capital needs and for general corporate purposes. Our 2006 revolving credit facility may be increased at any time by up to an additional $350.0 million in the aggregate, as long as no default or event of default has occurred or is continuing and certain other customary conditions are satisfied. Borrowings under our 2006 revolving credit facility will bear interest as follows:

·revolving loans denominated in U.S. dollars or a foreign currency (other than Euros) bear interest at a variable rate equal to LIBOR for loans in U.S. dollars and a comparable index rate for foreign currency loans, plus an applicable margin;

·revolving loans denominated in Euros bear interest at a variable rate equal to the EURIBOR Rate plus an applicable margin;

·at our option, U.S. dollar swingline loans (demand loans requiring only one day of advance notice, which grant us access to up to $20.0 million of our 2006 revolving credit facility in order to cover possible working capital shortfalls) bear interest at the greater of the Prime Rate and the Federal Funds Effective Rate plus one half of one percent; and

·multicurrency swingline loans bear interest at a rate equal to the average rate at which overnight deposits in the currency in which such swingline loan is denominated, and approximately equal in principal amount to such swingline loan, are obtainable by the swingline lender for such swingline loan in the interbank market plus an applicable margin.

The applicable margins for LIBOR and multicurrency revolving loans range from 0.180% to 0.675% per annum, and for multicurrency swingline loans from 0.430% to 0.925% per annum, in each case determined by our credit ratings. In addition, we are required to pay a facility fee of between 7 to 20 basis points based on the aggregate commitments under our 2006 revolving credit facility, and in certain circumstances a utilization fee of 10 basis points.

The terms of our 2006 revolving credit facility include various covenants, including financial covenants that require us to meet minimum interest coverage ratios and maximum leverage ratios. As of December 31, 2006, we were in compliance with these covenants.

As of December 31, 2006, no amounts were outstanding under our 2006 revolving credit facility.

1.25% Convertible Senior Notes

In December 2003 we issued $690.0 million of 1.25% convertible senior notes. Holders of the notes may require us to repurchase all or any part of the notes for cash, common stock, or a combination, at our option, on December 1, 2008, 2013 or 2018, at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest through the date prior to the date of repurchase. Additionally, upon a change of control, each holder may require us to repurchase for cash, at 100% of the principal amount of the notes plus accrued interest, all or a portion of the holder’s notes. On or after December 1, 2008, we may redeem for cash at 100% of the principal amount of the notes plus accrued interest, all or part of the notes that have not been previously converted or repurchased.

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Contractual Obligations

As of December 31, 2006, we had committed to make the following payments under contractual obligations (amounts in millions):

	Payments Due by Period
Contractual Obligations	Total		2007		2008			2009		2010		2011		After 2011
Long-term debt obligations (1)	$	698.9	$	1.0	$	691.0	(1)	$	1.1	$	1.1	$	1.1		$	3.6
Capital lease obligations (1)	195.7		15.6		15.5			15.5		15.4		15.4			118.3
Operating leases (1)	308.6		53.5		45.5			34.4		26.0		21.7			127.5
Contingent payments (2)	—		—		—			—		—		—			—
Interest obligations (3)	17.6		8.9		8.1			0.2		0.2		0.1			0.1
Defined pension benefit plans payments	18.4		1.3		1.3			1.5		1.4		1.6			11.3
Unconditional purchase obligations	173.7		30.1		30.4			30.3		27.4		27.6			27.9
Capital commitments (4)	583.2		407.9		82.4			67.4		8.7		5.0			11.8
Research and development agreements (5)	146.8		29.0		30.9			30.9		18.7		18.7			18.6
Total contractual obligations	$	2,142.9	$	547.3	$	905.1		$	181.3	$	98.9	$	91.2		$	319.1

(1)See Note L., “Long-term Debt and Leases” to our consolidated financial statements for additional information on long-term debt and lease obligations.

(2)From time to time, as a result of mergers, acquisitions or license arrangements, we may enter into agreements under which we may be obligated to make contingent payments upon the occurrence of certain events, and/or royalties on sales of acquired products or distribution rights. The actual amounts for and the timing of contingent payments may depend on numerous factors outside of our control, including the success of our preclinical and clinical development efforts with respect to the products being developed under these agreements, the content and timing of decisions made by the United States Patent and Trademark Office, or USPTO, the FDA and other regulatory authorities, the existence and scope of third party intellectual property, the reimbursement and competitive landscape around these products, the volume of sales or gross margin of a product in a specified territory and other factors described under the heading “Risk Factors” below. Because we cannot predict with certainty the amount or specific timing of contingent payments, we have not included any amounts for contingent payments in our contractual obligations table. See Note C., “Mergers and Acquisitions” to our consolidated financial statements for additional information on contingent payments resulting from our acquisitions of Verigen, Equal Diagnostics and the sales and marketing rights to Synvisc from Wyeth.

(3)Represents interest payment obligations related to our 1.25% convertible senior notes due December 2023 but callable beginning on December 1, 2008 and the promissory notes to three former shareholders of Equal Diagnostics.

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(4)Consists of contractual commitments to vendors that we have entered into as of December 31, 2006 for construction on our outstanding capital projects. Our estimated cost of completion for assets under construction as of December 31, 2006 is $583.2 million, as follows (amounts in millions):

Location	Cost to Complete at December 31, 2006
Framingham, Massachusetts, U.S.		$	111.2
Lyon, France		136.9
Geel, Belgium		48.6
Waterford, Ireland		46.6
Allston, Massachusetts, U.S.		57.8
Haverhill, United Kingdom		38.9
Waltham, Massachusetts, U.S.		8.2
Other		135.0
Total estimated cost to complete		$	583.2

(5)From time to time, we enter into agreements with third parties to obtain access to scientific expertise or technology that we do not already have. These agreements frequently require that we pay our licensor or collaborator a technology access fee, milestone payments upon the occurrence of certain events, and/or royalties on sales of products that utilize the licensed technology or arise out of the collaborative research. In addition, these agreements may call for us to fund research activities not being performed by us. The amounts indicated on the research and development agreements line of the contractual obligations table above represent committed funding obligations to our key collaborators under our significant development programs. Should we terminate any of our license or collaboration agreements, the funding commitments contained within them would expire. In addition, the actual amounts that we pay our licensors and collaborators will depend on numerous factors outside of our control, including the success of our preclinical and clinical development efforts with respect to the products being developed under these agreements, the content and timing of decisions made by the USPTO, the FDA and other regulatory authorities, the existence and scope of third party intellectual property, the reimbursement and competitive landscape around these products, and other factors described under the heading “Risk Factors” below.

Dyax Corp.

Agreements with Dyax Corp.

In October 1998, we entered into a collaboration agreement with Dyax to develop and commercialize DX-88, one of Dyax’s proprietary compounds for the treatment of chronic inflammatory diseases. In May 2002, we restructured our collaboration agreement with Dyax. In 2003, we acquired a 49.99% interest in Dyax-Genzyme LLC, formerly known as Kallikrein LLC, a joint venture with Dyax for the development of DX-88 for hereditary angioedema, or HAE, and other chronic inflammatory diseases. Under the terms of the collaboration agreement and related manufacturing agreement, both companies shared development costs of DX-88, except for the first $14.5 million of manufacturing and validation costs for DX-88 active pharmaceutical ingredient, which were the responsibility of Dyax. As a result of our application of FIN 46, we have consolidated the results of Dyax-Genzyme LLC. Our consolidated balance sheet as of December 31, 2006 includes assets related to Dyax-Genzyme LLC, which are not significant and substantially all of which are lab equipment net of their associated accumulated depreciation. We have recorded Dyax’s portion of this joint venture’s losses as minority interest in our consolidated statements of operations.

F-46

In February 2007, we agreed with Dyax to terminate our participation and interest in Dyax-Genzyme LLC effective February 20, 2007. In connection with this termination, we made a capital contribution of approximately $17 million in cash to Dyax-Genzyme LLC and Dyax purchased our interest in the joint venture for 4.4 million shares of Dyax common stock, valued at $16.9 million, based on the closing price of Dyax common stock on February 23, 2007. Dyax now owns all of the assets of the joint venture, including worldwide rights to develop and commercialize DX-88. Pursuant to the termination agreement, we agreed to:

·a 5 year standstill period during which we will not acquire any additional shares of Dyax;

·not enter into any future licensing or collaboration arrangements for the prevention and or treatment of hereditary, acquired or drug-induced angioedema for 2 years; and

·negotiate in good faith a transitional services agreement for us to provide certain services to Dyax.

Note Receivable from Dyax Corp.

In May 2002, we extended to Dyax a $7.0 million line of credit. Dyax issued a senior secured promissory note in the principal amount of $7.0 million to us under which it can request periodic advances of not less than $250,000 in principal, subject to certain conditions. Advances under this note were due, together with any accrued but unpaid interest, in May 2005. In May 2005, Dyax exercised its right to extend the maturity of the note from May 2005 to May 2007.

In August 2006, we amended our $7.0 million secured promissory note receivable from Dyax to extend the maturity date from May 2007 to May 2010, eliminate the existing financial covenants and replace the original collateral on the note with a letter of credit from a major bank for $7.0 million plus 90 days of interest at the Prime Rate plus 2%. As of December 31, 2006, $7.3 million of principal and accrued interest receivable remains due to us from Dyax under this note, which we have recorded as a note receivable-related party in our consolidated balance sheet. The termination of our participation and interest in the joint venture had no effect on our note receivable from Dyax.

We considered Dyax to be a related party as of December 31, 2006 because the chairman and chief executive officer of Dyax was a member of our board of directors and Dyax-Genzyme LLC was operational during the periods presented. As of December 31, 2006, we held approximately 1% of the outstanding shares of Dyax common stock and as of February 28, 2007, as a result of the additional 4.4 million shares of Dyax common stock we received in connection with the termination of our participation and interest in Dyax-Genzyme LLC, our ownership interest in Dyax increased to approximately 11%.

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 under our 2006 revolving credit facility for:

·product development and marketing;

·business combinations and other strategic business initiatives;

·expanding existing and constructing new facilities;

·expanding staff; and

·working capital, including satisfaction of our obligations under capital and operating leases.

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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. The notes are initially convertible into Genzyme Stock at a conversion price of approximately $71.24 per share. Holders of the notes may require us to repurchase all or any part of the notes for cash, common stock, or a combination, at our option, on December 1, 2008, 2013 or 2018, at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest through the date prior to the date of repurchase. Additionally, upon a change of control, each holder may require us to repurchase for cash, at 100% of the principal amount of the notes plus accrued interest, all or a portion of the holder’s notes. On or after December 1, 2008, we may redeem for cash at 100% of the principal amount of the notes plus accrued interest, all or part of the notes that have not been previously converted or repurchased.

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 also may be required to pay fees to a holder of proprietary rights in order to continue certain operations. We have provided you detail on certain pending legal proceedings in the notes to our consolidated financial statements.

To satisfy these and other commitments, we may have to obtain additional financing. We cannot guarantee that we will be able to obtain any additional financing, extend any existing financing arrangement, or obtain either on favorable terms.

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 research, development, and the 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 income/losses of these entities in the line item “Equity in income (loss) of equity method investments” in our statements of operations. We also acquire companies in which we agree to pay contingent consideration based on attaining certain thresholds.

Significant Relationships

The table below describes our significant relationships. This information is taken from questionnaires that our directors and senior executives are asked to complete on an annual basis in January. We have not undertaken to independently confirm the accuracy of this information.

Entity	Affiliation with Genzyme	Officers & Directors Relationship	Officer & Director Ownership in and Compensation from the Entity
			Stock Shares	Stock Options		2006 Cash Compensation
ABIOMED, Inc.	-Cost method investment	Henri A. Termeer, Genzyme Chairman, President and Chief Executive Officer, is a director of ABIOMED.	29,551		112,351		$	22,200
Aventis Pasteur SA	-Supplier	Charles L. Cooney, Genzyme director, taught an Executive Education course for Aventis in Lyon, France	—		—		$	25,000

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Bank of America	-Banking partner	Senator Connie Mack III, Genzyme director, is a passive investor in Bank of America.	193	—	—
		Robert J. Carpenter, Genzyme director, is a passive investor in Bank of America.	712	—	—
		Evan M. Lebson, Genzyme officer, is a passive investor in Bank of America.	275	—	—
		Mary McGrane, Genzyme officer, is a passive investor in Bank of America; holding 250 shares; 90 shares held solely by spouse.	340	—	—
Bayer Schering Pharma AG	-Commercialization partner for Campath	Henry E. Blair, Genzyme director, is the Chairman and Chief Executive Officer of Dyax, which maintains an agreement with Bayer Schering Pharma AG.	—	—	—
CAT	-Collaboration partner	Henry E. Blair, Genzyme director, is the Chairman and Chief Executive Officr of Dyax. There is an ongoing licensing agreement between Dyax and CAT.	—	—	—
Citibank, N.A.	-Banking partner	Evan M. Lebson, Genzyme officer, is a passive investor in Citibank, N.A.	250	—	—
		Mary McGrane, Genzyme officer, is a passive investor in Citibank, N.A.; holding 240 shares; 240 shares held solely by spouse.	480	—	—
Dyax Corp.	-Cost method investment	Henri A. Termeer, Genzyme Chairman, President and Chief Executive Officer, is a former strategic advisory committee member.	2,649	2,000	—
		Henry E. Blair, Genzyme director, is the Chairman and Chief Executive Officer of Dyax(1).	555,320	792,253	—
		Charles L. Cooney, Genzyme director, is a former strategic advisory committee member.	7,857	20,255	—
		Mark R. Bamforth, Genzyme officer, is a passive investor in Dyax.	1,000	—	—
		Peter Wirth, Genzyme officer, is a former strategic advisory committee member.	9,780	—	—
		The wife of Donald E. Pogorzelski, Genzyme officer, is a passive investor in Dyax.	5,000	—	—

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Excigen, Inc.	-Collaboration partner	Earl M. Collier, Jr. and James A. Geraghty, both Genzyme officers, are directors of Excigen.	—	—	—
GTC Biotherapeutics, Inc.	-Cost method investment -Supply Agreement -Services Agreement	Henri A. Termeer, Genzyme Chairman, President and Chief Executive Officer is a former director of GTC.	9,500	40,500	—
		Henry E. Blair, Genzyme director, is a former director of GTC.	1,000	3,000	—
		Charles L. Cooney, Genzyme director, is a member of the strategic advisory board for GTC	—	3,000	—
		James A. Geraghty, Genzyme officer, is a director of GTC.	62,791	147,500	$19,500
		Earl M. Collier, Jr., Genzyme officer, is a passive investor in GTC.	1,000	—	—
		Richard H. Douglas, Genzyme officer, is a passive investor in GTC.	180	—	—
		Peter Wirth, Genzyme officer(2).	—	2,000	—
Harvard University	-Landlord for property leased by Genzyme in Allston, Massachusetts	The wife of Peter Wirth, Genzyme officer, is an employee of Harvard University.	—	—	—
JP Morgan Chase	-Banking partner	Henry E. Blair, Genzyme director, is the Chairman and Chief Executive Officer of Dyax, which maintains an investment banking relationship with JP Morgan Chase.	—	—	—
		Senator Connie Mack III, Genzyme director, is a passive investor in JP Morgan Chase.	215	—	—
		C. Ann Merrifield, Genzyme officer, is a passive investor in JP Morgan Chase, shares held jointly with spouse.	46	—	—
Medtronic, Inc.	-Joint venture partner with Genzyme in MG Biotherapeutics LLC	Gail K. Boudreaux, Genzyme director, is a passive investor in Medtronic.	52	—	—
		Earl M. Collier, Jr., Genzyme officer, is a passive investor in Medtronic.	1,000	—	—
		Elliott D. Hillback, Genzyme officer, is a passive investor in Medtronic.	2,800	—	—
		Donald E. Pogorzelski, Genzyme officer, is a passive investor in Medtronic. 400 shares held jointly with spouse; 1,000 shares held solely by spouse.	1,400	—	—

F-50

		James A. Geraghty, Genzyme officer, is a passive investor in Medtronic.	—		—	—
MG Biotherapeutics LLC	-Joint venture with Medtronic, Inc.	James A. Geraghty, Genzyme officer, is a director of MG Biotherapeutics LLC.M	—		—	—
Myosix S.A.	-Consolidated investment -Collaboration partner	Earl M. Collier, Jr. and James A. Geraghty, both Genzyme officers, are directors of Myosix.	—		—	—
Oxford Bioscience Partners IV, L.P.	-Cost method investment	Peter Wirth, Genzyme officer, is a limited partner in the MRNA Fund II, L.P., an affiliate fund, and has a made a $100,000 capital commitment to the partnership.	—		—	—
		Henry E. Blair, Genzyme director, is the Chairman and Chief Executive Officer of Dyax, is a limited partner and has made a $50,000 capital commitment to the partnership.	—
		Alison Lawton, Genzyme officer, is a limited partner and has made a $50,000 capital commitment to the partnership.	—		—	—
Peptimmune, Inc.	-Equity method investment -Service agreements	Robert J. Carpenter, Genzyme director, is the Executive Chairman of Peptimmune.	595,238 2,018,750	* **	31,250 —	$	75,000 —
		* Series B preferred stock. ** Common stock.	—		—	—
Sirtris Pharmaceuticals, Inc.	-Cost method investment	Robert J. Carpenter, Genzyme director, is a passive investor in Sirtris Pharmaceuticals, Inc. and holds Series A preferred stock.	25,000		—	—
Therapeutic Human Polyclonals, Inc.	-Equity method investment	James A. Geraghty, Genzyme officer, is a director of THP.	—		—	—
UBS Securities LLC	-Banking partner	C. Ann Merrifield, Genzyme officer, is a passive investor in UBS Securities LLC, holding 13,362 shares; 6,478 shares and 13,980 options held solely by spouse.	19,840		13,980	—
		Henry E. Blair, Genzyme director, is the Chairman and Chief Executive Officer of Dyax, which maintains an investment banking relationship with UBS Securities LLC.	—		—	—
Wachovia Bank National Association	-Banking/lending partner	Gail K. Boudreaux, Genzyme director, is a passive investor in Wachovia Bank National Association.	64		—	—

(1)Mr. Blair’s 2006 compensation from Dyax can be found in Dyax’s 2007 proxy statement.

(2)Mr. Wirth received these stock options in 1998 when Genzyme was affiliated with GTC.

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Recent Accounting Pronouncements

FAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106 and 132(R.)”In September 2006, the FASB issued FAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106 and 132(R).” FAS 158 requires us to recognize the overfunded or underfunded status of any pension or other postretirement plans we may have as a net asset or a net liability on our statement of financial position and to recognize changes in that funded status in the year in which the changes occur as an adjustment to accumulated other comprehensive income in stockholders’ equity. Currently, we have defined benefit pension plans for certain of our foreign subsidiaries and a defined benefit postretirement plan for one of our U.S. subsidiaries, which has been frozen since 1995 and is not significant. Under FAS 158, actuarial gains and losses, prior service costs or credits, and any remaining transition assets or obligations that have not been recognized for our defined benefit pension plans under previous accounting standards must be recognized in accumulated other comprehensive income, net of tax effects, until they are amortized as a component of net periodic benefit cost. In addition, FAS 158 requires that the measurement date, which is the date at which the benefit obligation and plan assets are measured, be as of our fiscal year end, which is December 31. FAS 158 is effective for our fiscal year ending December 31, 2006, except for the measurement date provisions, which are effective for us for our fiscal year ending December 31, 2008. Accordingly, we have recognized the underfunded status of our defined benefit pension plans in our consolidated balance sheets as of December 31, 2006, including $12.8 million of additional minimum pension liabilities and $3.9 million of related taxes, offset by an $8.9 million charge, net of tax, to accumulated other comprehensive income in stockholders’ equity. We have also provided the disclosures required by FAS 158 as of December 31, 2006 in Note P., “Benefit Plans,” to our financial statements included in this report. The adoption of FAS 158 did not have a material impact on our financial condition or results of operations.

SAB 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.”   In September 2006, the SEC staff issued SAB 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” to address the diversity in practice regarding the quantification of financial statement misstatements under the two methods most commonly used by preparers and auditors—the income statement, or “roll-over,” approach, and the balance sheet, or “iron curtain,” approach. Prior to SAB 108, companies could evaluate the materiality of financial statement misstatements using either the income statement approach, focusing on new misstatements added in the current year, or the balance sheet approach, focusing on the cumulative amount of misstatement present in a company’s balance sheet. Misstatements that would be material under one approach could be viewed as immaterial under another approach, and subsequently, not be corrected. The SEC staff believes that reliance on only one of these methods, to the exclusion of the other, does not appropriately quantify all misstatements that could be material to financial statement users. As a result, SAB 108 now requires that companies utilize a dual approach to assessing the quantitative effects of financial statement misstatements, which includes both an income statement focused assessment and a balance sheet focused assessment. The guidance in SAB 108 is effective for our current fiscal year ending December 31, 2006. Although restatement of prior years’ financial statements is permitted, it is not required if we properly applied our previous approach (income statement or balance sheet) and considered all relevant qualitative factors in our assessment of previous errors. In lieu of the prior period restatement, we were permitted to report the cumulative effect of adopting SAB 108 as an adjustment to the opening balance of assets and liabilities, with an offsetting adjustment to the opening balance of retained earnings as of January 1, 2006, the year of adoption, and disclose the nature and amount of each individual error being corrected in the cumulative effect adjustment, when and how each error being corrected arose, and the fact that the errors had previously been considered immaterial.  We did not record any cumulative effect adjustments related to the adoption of SAB 108. The adoption of SAB 108 did not impact our financial position or results of operations.

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FIN 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.”   In July 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109,” which seeks to reduce the significant diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for us as of January 1, 2007. Upon adoption, the cumulative effect of any changes in net assets resulting from the application of FIN 48 will be recorded as an adjustment to accumulated earnings (deficit). Additional guidance from the FASB on FIN 48 is pending. As a result, we are currently unable to finalize our estimate of the impact that adopting the interpretation will have on our financial position or results of operations.

FAS 157, “Fair Value Measurements.”   In September 2006, the FASB issued FAS 157, “Fair Value Measurements,” which provides enhanced guidance for using fair value to measure assets and liabilities. FAS 157 establishes a common definition of fair value, provides a framework for measuring fair value under accounting principles generally accepted in the United States and expands disclosure requirements regarding fair value measurements. FAS 157 is effective for us as of January 1, 2008. We are currently evaluating the impact, if any, the adoption of FAS 157 will have on our financial position and results of operations.

Market Risk

We are exposed to potential loss from exposure to market risks represented principally by changes in interest rates, foreign exchange rates and equity prices. At December 31, 2006, we held various derivative contracts in the form of foreign exchange forward contracts. The derivatives contain no leverage or option features. We also held a number of other financial instruments, including investments in marketable securities and various debt securities we issued. We do not hold derivatives or other financial instruments for trading 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 securities held at December 31, 2006 to be $4.2 million, as compared to $11.6 million at December 31, 2005. 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 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 fixed rate convertible debt and 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 year end are considered equity securities and are excluded;

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·convertible notes that are “out-of-the-money” at year end are analyzed by taking into account both fixed income and equity components; and

·convertible notes will mature on the first available date.

On this basis, we estimate the potential loss in fair value that would result from a hypothetical 1% (100 basis points) increase in interest rates to be $4.2 million as of December 31, 2006, as compared to $5.9 million as of December 31, 2005. The decrease is primarily due to decreases in interest rate sensitivity on our fixed income investment portfolio, our $690.0 million in principal of 1.25% convertible notes, and the capital lease for our corporate headquarters in Cambridge, Massachusetts, which has a remaining principal balance of $116.9 million at December 31, 2006.

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. These exposures are reflected in market risk sensitive instruments, including foreign currency receivables and payables, foreign exchange forward contracts and foreign equity holdings.

As of December 31, 2006, we estimate the potential loss in fair value of our foreign currency contracts that would result from a hypothetical 10% adverse change in exchange rates to be $34.2 million, as compared to $2.9 million as of December 31, 2005. The change from the prior period is primarily due to:

·a new forward contract to hedge approximately $160 million of foreign currency exposure related to an intercompany note denominated in Euros; and

·a new forward contract to hedge approximately $108 million of foreign currency exposure related to the British pound.

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.

Our financial results are highly dependent on sales of Cerezyme.

We generate a significant portion of our revenue from sales of Cerezyme, our enzyme-replacement product for patients with Gaucher disease. Sales of Cerezyme totaled $1.0 billion in 2006, representing approximately 35% of our consolidated total product revenue in 2006. Because our business is highly dependent on Cerezyme, negative trends in revenue from this product could have a significant adverse effect on our results of operations and cause the value of our securities to decline substantially. We will lose revenue if alternative treatments gain commercial acceptance, if our marketing activities are restricted, or if 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.

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If we fail to increase sales of several 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 many different products and services. These products and services include Renagel, Synvisc, Fabrazyme, Aldurazyme, Myozyme, Hectorol, Thymoglobulin, Thyrogen, Clolar, Campath and diagnostic testing services. Our ability to increase sales will depend on a number of factors, including:

·acceptance by the medical community of each product or service;

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

·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 cost efficient manner;

·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 the facilities in which these products are manufactured;

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

·the effectiveness of our sales force;

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

·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, pursuing marketing approval for our products in new jurisdictions and developing next generation products such as Renvela and single-injection Synvisc. For example, we are conducting a phase 3 trial of Clolar in adult acute myelogenous leukemia. 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 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 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 Pharmaceuticals Group plc, or Shire, markets

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Fosrenol®, a non-calcium based phosphate binder. Renagel also competes with over-the-counter calcium carbonate products such as TUMS® and metal-based options such as aluminum and magnesium.

Both the oral and the intravenous formulations of Hectorol face competition. Abbott Laboratories markets intravenous Calcijex® and intravenous Zemplar® in the United States and Europe. More recently it has begun marketing an oral formulation of Zemplar in the United States. Hectorol faces competition from several other vitamin D hormone therapies used to treat hyperparathyroidism and hyperproliferative diseases as well.

UCB S.A. has developed Zavesca®, a small molecule drug for the treatment of Gaucher disease, the disease addressed by Cerezyme. Zavesca 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 announced initiation of a phase 3 study in 2007. 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. We are aware of other development efforts aimed at treating Fabry disease.

Current competition for Synvisc includes Supartz®, a product manufactured by Seikagaku Kogyo 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 and marketed outside the United States through distributors; Euflexxa™, a product manufactured and sold by Ferring Pharmaceuticals and marketed in the United States and Europe; and Durolane®, manufactured by Q-Med AB and distributed outside the United States by Smith & Nephew Orthopedics. 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. Furthermore, several companies market products that are not viscosupplementation products but which are designed to relieve the pain associated with osteoarthritis. Synvisc will have difficulty competing with any of these products to the extent the competitive products are considered more efficacious, less burdensome to administer or more cost-effective.

Several companies market products that, like Thymoglobulin and Lymphoglobuline, are used for the prevention and treatment of acute rejection in renal transplant. These products include Novartis’ Simulect®, Pfizer Inc.’s ATGAM®, Ortho Biotech’s Orthoclone OKT®3, Fresenius Biotech GmbH’s ATG-Fresenius S® and the Roche Group’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. 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

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this class of diseases, such a development would have a material negative impact on our results of operations. Furthermore, we are committed to expanding our oncology portfolio. Many pharmaceutical and biotechnology companies are pursuing programs in this area, and these organizations may develop approaches that are superior to ours.

If we fail to obtain adequate levels of reimbursement for our products from third party payors, the commercial potential of our products 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:

·challenging the prices charged for healthcare products and services;

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

·reducing existing reimbursement rates for commercialized products and services;

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

·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

·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.

Attempts by third party payors to reduce costs in any of these ways could decrease demand for our products. In addition, in certain countries, including countries in the European Union and Canada, the coverage of prescription drugs, the pricing, and the level 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 revenues by causing healthcare providers to be 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. For example, in October 2006, the CMS announced a change to the billing code for viscosupplementation products effective January 2007 that, if unchanged, would have resulted in Medicare reimbursement for Synvisc at a rate that is lower than the price healthcare providers are currently paying for the product. In December 2006, the CMS reversed its decision. If the CMS billing code decision had been left unchanged, our Synvisc revenues would have been adversely affected because healthcare providers likely would have been less willing to use Synvisc. Although, the CMS ultimately reversed its decision and left the mechanism for calculating Synvisc reimbursement in 2007 substantially similar to the reimbursement mechanism for 2006, we have no way of

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knowing whether, at some point in the future, the CMS will change the method for reimbursing Synvisc or any of our other products and services in a way that could have an adverse effect on our revenues.

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:

·conduct substantial research and development;

·undertake preclinical and clinical testing;

·develop and scale-up manufacturing processes; and

·pursue regulatory approvals and, in some jurisdictions, pricing 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:

·failure of the product candidate in preclinical studies;

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

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

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

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

·our failure to obtain the required regulatory approvals for the product candidate or the facilities in which it is manufactured; or

·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. 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 product candidates.

Our efforts to expand the approved indications for our products and to gain marketing approval in new jurisdictions and to 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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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 health care 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 shareholders 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 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 acquiring 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.

If we are able to grow 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 our other 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:

·wholesaler buying patterns;

·reimbursement rates;

·physician prescribing habits;

·the availability or pricing of competitive products; and

·currency exchange rates.

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.

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Our operating results and financial position may be 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 acquisitions of the Physician Services and Analytical Services business units of IMPATH, Inc., ILEX Oncology, Inc., Bone Care International, Inc., and AnorMED Inc., there is a substantial risk that we will fail to realize the benefits we anticipate when we decide 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.

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, or product liability.

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 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 of 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 mandated withdrawal of our products from the market. 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 certain 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, natural disasters, power outages, terrorist activities, or disruptions in the operations of our suppliers.

Manufacturing is also subject to extensive government regulation. Regulatory authorities must approve the facilities in which human healthcare products are produced. 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. In addition, facilities are subject to ongoing inspections and minor changes in manufacturing processes may require additional regulatory approvals, either of which could cause us to incur significant additional costs and lose revenue.

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

Certain 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 application with

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regulatory authorities so that they must be obtained from that specific source unless and until the applicable authority approved 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 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 in a timely manner or at all if these third party suppliers were to cease or interrupt production or otherwise fail to supply 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.

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 lack of capacity available at a third party contractor or any other problems with the operations of these third party contractors could require us to delay shipment of saleable products, recall products previously shipped or could 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.

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, including a joint venture with BioMarin Pharmaceutical Inc. with respect to Aldurazyme. The success of these and similar 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 or limit our access to the underlying intellectual property;

·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 or 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 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 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 any of our other strategic equity investments decline in value and remain below cost for an extended duration, we may incur additional financial statement charges.

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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;

·issuing fines and other civil penalties;

·suspending regulatory approvals;

·refusing to approve pending applications or supplements to approved applications;

·suspending product sales and/or exports;

·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 and Myozyme. 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 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.

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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:

·pay monetary damages;

·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, we are currently defending several lawsuits brought in connection with the elimination of our tracking stock in June 2003, some of which claim considerable damages. Also, 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.

We may also become subject to investigations by government authorities in connection with our business activities. For example, we are currently cooperating with an investigation of Bone Care by the United States Attorney for the Eastern District of New York which was initiated in October 2004, when Bone Care received a subpoena requiring it to provide a wide range of documents related to numerous aspects of its business.

We believe 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 acceptable terms. Any additional insurance we do obtain may not provide adequate coverage against any asserted claims.

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

·diversion of management’s time and attention;

·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

F-63

·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 46% of our consolidated product and service revenues in 2006. 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, primarily in the European Union, Latin America and Japan. 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;

·fluctuations in currency exchange rates;

·the imposition of governmental controls;

·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;

·political instability;

·terrorist activities, armed conflict, or outbreak of diseases such as severe acute respiratory syndrome (SARS) or avian influenza;

·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 other 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 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.

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

F-64

currencies in which we do business have caused foreign currency transaction 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 transaction losses in the future due to the effect of exchange rate fluctuations.

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.

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 profits from these products and services. We may not be able to obtain these licenses on acceptable 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.

F-65

Importation of products from Canada and other countries into the United States 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 further 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, the increase in U.S.-based businesses affiliated with Canadian pharmacies marketing to American purchasers, 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.

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

As of December 31, 2006, we had $1.3 billion in cash, cash equivalents and short- and long-term investments, excluding investments in equity securities.

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

·product development and marketing;

·business combinations and other strategic business initiatives;

·expanding existing and constructing additional facilities;

·expanding staff; and

·working capital, including satisfaction of our obligations under capital and operating leases.

We may further reduce available cash reserves to pay principal and interest on outstanding debt, including our $690.0 million in principal of 1.25% convertible senior notes.

To satisfy our cash requirements, we may have to obtain additional financing. We may be unable to obtain any additional financing or extend any existing financing arrangements at all or on terms that we or our investors consider favorable.

F-66

Our level of indebtedness may harm our financial condition and results of operations.

At December 31, 2006, we had $699.0 million of outstanding indebtedness, excluding capital leases. We may incur additional indebtedness in the future. Our level of indebtedness will have several important effects on our future operations, including:

·increasing our vulnerability to adverse changes in general economic and industry conditions; and

·limiting our ability to obtain additional financing for capital expenditures, acquisitions and general corporate and other purposes.

Our ability to make payments and interest on our indebtedness depends upon our future operating and financial performance.

F-67

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting refers to the process designed by, or under the supervision of, our chief executive officer and chief financial officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

(1)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets;

(2)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with the authorizations of management and directors; and

(3)provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework provided in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2006.

We have excluded the acquisition of AnorMED from our assessment of internal controls over financial reporting as of December 31, 2006, because we acquired AnorMED in a purchase business combination during 2006. The AnorMED business is a component of our Transplant reporting segment and the AnorMED business represents less than 1% of our consolidated assets as of December 31, 2006 and has no revenue for the year ended December 31, 2006.

Our management’s assessment of the effectiveness of our internal controls over financial reporting as of December 31, 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included below.

F-68

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Genzyme Corporation:

We have completed integrated audits of Genzyme Corporation’s consolidated financial statements and of its internal control over financial reporting as of December 31, 2006 in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive income, of cash flows and of stockholders’ equity present fairly, in all material respects, the financial position of Genzyme Corporation and its subsidiaries at December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note M. to the consolidated financial statements, in 2006 the Company changed its method of accounting for stock-based compensation in accordance with Statement of Financial Accounting Standards No. 123R, “Share-Based Payment.”

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in the accompanying “Management’s Report on Internal Control Over Financial Reporting,” that the Company maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

F-69

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in “Management’s Report on Internal Control Over Financial Reporting,” management has excluded the acquisition of AnorMED Inc. from its assessment of internal control over financial reporting as of December 31, 2006 because it was acquired by the Company in a purchase business combination during 2006. We have also excluded AnorMED Inc. from our audit of internal control over financial reporting. AnorMED Inc. is a component of the Company’s Transplant reporting segment whose total assets and total revenues represent less than 1% and 0%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2006.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Boston, Massachusetts
March 1, 2007

F-70

GENZYME CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
(Amounts in thousands, except per share amounts)

	For the Years Ended December 31,
	2006			2005			2004
Revenues:
Net product sales	$	2,887,409		$	2,453,303		$	1,976,191
Net service sales	282,118			261,379			212,392
Research and development revenue	17,486			20,160			12,562
Total revenues	3,187,013			2,734,842			2,201,145
Operating costs and expenses:
Cost of products sold	536,388			462,177			448,442
Cost of services sold	199,283			170,475			140,144
Selling, general and administrative	1,010,400			787,839			599,388
Research and development	649,951			502,657			391,802
Amortization of intangibles	209,355			181,632			109,473
Purchase of in-process research and development	552,900			29,200			254,520
Charge for impaired goodwill	219,245			—			—
Charge for impaired assets	—			—			4,463
Total operating costs and expenses	3,377,522			2,133,980			1,948,232
Operating income (loss)	(190,509		)	600,862			252,913
Other income (expenses):
Equity in income (loss) of equity method investments	15,705			151			(15,624		)
Minority interest	10,418			11,952			5,999
Gains (losses) on investments in equity securities, net	73,230			5,698			(1,252		)
Other	(2,045		)	(1,535		)	(357		)
Investment income	56,001			31,429			24,244
Interest expense	(15,478		)	(19,638		)	(38,227		)
Total other income (expenses)	137,831			28,057			(25,217		)
Income (loss) before income taxes	(52,678		)	628,919			227,696
(Provision for) benefit from income taxes	35,881			(187,430		)	(141,169		)
Net income (loss)	$	(16,797	)	$	441,489		$	86,527
Net income (loss) per share:
Basic	$	(0.06	)	$	1.73		$	0.38
Diluted	$	(0.06	)	$	1.65		$	0.37
Weighted average shares outstanding:
Basic	261,624			254,758			228,175
Diluted	261,624			272,224			234,318
Comprehensive income (loss), net of tax:
Net income (loss)	$	(16,797	)	$	441,489		$	86,527
Other comprehensive income (loss):
Foreign currency translation adjustments	130,500			(122,568		)	80,371
Gain on affiliate sale of stock, net of tax	817			996			—
Additional minimum pension liability, net of tax	(8,564		)	(4,627		)	—
Other, net of tax	(680		)	561			959
Unrealized gains (losses) on securities, net of tax:
Unrealized gains (losses) arising during the period, net of tax	41,504			(15,182		)	16,243
Reclassification adjustment for (gains) losses included in net income (loss), net of tax	(45,065		)	(898		)	201
Unrealized gains (losses) on securities, net of tax	(3,561		)	(16,080		)	16,444
Other comprehensive income (loss)	118,512			(141,718		)	97,774
Comprehensive income	$	101,715		$	299,771		$	184,301

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

F-71

GENZYME CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands, except par value amounts)

	December 31,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	492,170		$	291,960
Short-term investments	119,894			193,946
Accounts receivable, net	746,746			608,326
Inventories	374,644			297,652
Prepaid expenses and other current assets	119,122			100,256
Notes receivable—related party	—			2,416
Deferred tax assets	136,925			170,443
Total current assets	1,989,501			1,664,999
Property, plant and equipment, net	1,610,593			1,320,813
Long-term investments	673,540			603,196
Notes receivable—related party	7,290			7,206
Goodwill, net	1,298,781			1,487,567
Other intangible assets, net	1,492,038			1,590,894
Investments in equity securities	66,563			135,930
Other noncurrent assets	52,882			68,260
Total assets	$	7,191,188		$	6,878,865
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	98,063		$	96,835
Accrued expenses	477,442			431,223
Income taxes payable	54,853			2,486
Deferred revenue and other income	14,855			15,018
Current portion of long-term debt and capital lease obligations	6,226			4,461
Total current liabilities	651,439			550,023
Long-term debt and capital lease obligations	119,803			125,652
Convertible notes	690,000			690,000
Deferred revenue—noncurrent	6,675			4,663
Deferred tax liabilities	10,909			335,612
Other noncurrent liabilities	51,651			23,048
Total liabilities	1,530,477			1,728,998
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value	—			—
Common stock, $0.01 par value	2,630			2,593
Additional paid-in capital	5,106,274			4,687,775
Notes receivable from stockholders	(15,057		)	(14,445		)
Accumulated earnings	312,659			329,456
Accumulated other comprehensive income	254,205			144,488
Total stockholders’ equity	5,660,711			5,149,867
Total liabilities and stockholders’ equity	$	7,191,188		$	6,878,865

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

F-72

GENZYME CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)

	For the Years Ended December 31,
	2006			2005			2004
Cash Flows from Operating Activities:
Net income (loss)	$	(16,797	)	$	441,489		$	86,527
Reconciliation of net income (loss) to cash flows from operating activities:
Depreciation and amortization	331,389			284,620			205,114
Stock-based compensation	208,614			444			10
Provision for bad debts	10,050			9,444			12,249
Purchase of in-process research and development	552,900			29,200			254,520
Charge for impaired goodwill	219,245			—			—
Charge for impaired assets	—			—			4,463
Equity in (income) loss of equity method investments	(15,705		)	(151		)	15,624
Minority interest	(10,418		)	(11,952		)	(5,999		)
(Gains) losses on investments in equity securities, net	(73,230		)	(5,698		)	1,252
Write off of unamortized debt fees	—			—			5,329
Deferred income tax provision (benefit)	(279,795		)	15,300			45,047
Tax benefit from employee stock-based compensation	46,174			102,561			49,974
Excess tax benefits from stock-based compensation	(7,114		)	—			—
Other	(3,433		)	3,867			3,958
Increase (decrease) in cash from working capital changes (excluding impact of acquired assets and assumed liabilities):
Accounts receivable	(120,505		)	(93,931		)	(111,345		)
Inventories	(37,632		)	(17,241		)	18,751
Prepaid expenses and other current assets	(19,784		)	(20,230		)	5,920
Income taxes payable	50,123			(28,650		)	(12,588		)
Accounts payable, accrued expenses and deferred revenue	54,487			22,705			(1,294		)
Cash flows from operating activities	888,569			731,777			577,512
Cash Flows from Investing Activities:
Purchases of investments	(913,159		)	(1,094,576		)	(653,478		)
Sales and maturities of investments	926,327			962,948			976,085
Purchases of equity securities	(7,577		)	(7,477		)	(4,154		)
Proceeds from sales of investments in equity securities	140,165			7,067			—
Purchases of property, plant and equipment	(333,675		)	(192,461		)	(187,400		)
Distributions from (investments in) equity method investments	19,800			3,000			(24,107		)
Purchases of other intangible assets	(105,348		)	(172,092		)	(5,110		)
Acquisitions, net of acquired cash	(568,953		)	(703,074		)	(152,377		)
Other	6,008			5,682			4,845
Cash flows from investing activities	(836,412		)	(1,190,983		)	(45,696		)

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

F-73

GENZYME CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(Amounts in thousands)

	For the Years Ended December 31,
	2006			2005			2004
Cash Flows from Financing Activities:
Proceeds from issuance of common stock	158,305			354,708			140,311
Excess tax benefits from stock-based compensation	7,114			—			—
Proceeds from draws on our 2003 revolving credit facility	—			350,000			135,000
Payments of debt and capital lease obligations	(4,501		)	(478,770		)	(650,818		)
Increase (decrease) in bank overdrafts	(21,124		)	17,951			15,434
Minority interest contributions	11,153			11,423			5,424
Other	1,210			3,261			922
Cash flows from financing activities	152,157			258,573			(353,727		)
Effect of exchange rate changes on cash	(4,104		)	12,395			9,335
Increase (decrease) in cash and cash equivalents	200,210			(188,238		)	187,424
Cash and cash equivalents at beginning of period	291,960			480,198			292,774
Cash and cash equivalents at end of period	$	492,170		$	291,960		$	480,198
Supplemental disclosures of cash flows:
Cash paid during the year for:
Interest, net of capitalized interest	$	1,021		$	5,081		$	14,736
Income taxes	$	154,729		$	105,173		$	73,734
Supplemental disclosures of non-cash transactions:
Mergers and Acquisitions—Note C.
Property, Plant and Equipment—Note G.
Capital lease obligation for Genzyme Center—Note L.

In conjunction with acquisitions completed since January 1, 2004, as described in Note C., “Mergers and Acquisitions,” we assumed the following liabilities (amounts in thousands):

	For the Years Ended December 31,
	2006			2005			2004
Net cash paid for acquisitions and acquisition costs	$	(568,953	)	$	(703,074	)	$	(152,377	)
Issuance of common stock and options	—			—			(1,069,925		)
Fair value of assets acquired	13,202			640,297			350,623
Net deferred tax assets—current and noncurrent	3,355			92,955			53,718
Acquired in-process research and development	552,900			29,200			254,520
Goodwill	30,177			200,184			669,290
Liabilities for exit activities and integration	(6,348		)	(14,635		)	(10,813		)
Income taxes payable	—			(6,683		)	(40,852		)
Net deferred tax liability assumed	(1,288		)	(189,266		)	—
Net liabilities assumed	$	23,045		$	48,978		$	54,184

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

F-74

GENZYME CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
(Amounts in thousands)

						Notes						Accumulated
				Additional		Receivable			Accumulated			Other			Total
	Common Stock			Paid-In		from			Earnings			Comprehensive			Stockholder’s
	Shares	Par Value		Capital		Stockholders			(Deficit)			Income			Equity
Balance, January 1, 2004	224,610		$ 2,246	$ 2,957,579			$ (13,285	)		$ (198,560	)		$ 188,432		$ 2,936,412
Stock issued through stock option and stock purchase plans	5,950		59	140,251			—			—			—		140,310
Tax benefit from stock option exercises	—		—	49,974			—			—			—		49,974
Acquisition of ILEX Oncology	18,458		185	1,069,732			—			—			—		1,069,917
Stock-based compensation	—		—	10			—			—			—		10
Accrued interest receivable on notes receivable from stockholders, net	—		—	—			(580	)		—			—		(580	)
Foreign currency translation adjustments	—		—	—			—			—			80,371		80,371
Change in unrealized gains and losses on investments, net of tax (1)	—		—	—			—			—			16,444		16,444
Other	—		—	(188	)		—			—			959		771
Net income	—		—	—			—			86,527			—		86,527
Balance, December 31, 2004	249,018		2,490	4,217,358			(13,865	)		(112,033	)		286,206		4,380,156
Stock issued through stock option and stock purchase plans	10,133		102	354,606			—			—			—		354,708
Tax benefit from stock option exercises	—		—	102,561			—			—			—		102,561
Stock-based compensation	—		—	444			—			—			—		444
Accrued interest receivable on notes receivable from stockholders, net	—		—	—			(580	)		—			—		(580	)
Foreign currency translation adjustments	—		—	—			—			—			(122,568	)	(122,568	)
Change in unrealized gains and losses on investments, net of tax (1)	—		—	—			—			—			(16,080	)	(16,080	)
Gain on affiliate sale of stock, net of tax (2)	—		—	—			—			—			996		996
Additional minimum pension liability, net of tax (3)	—		—	—			—			—			(4,627	)	(4,627	)
Other	—		—	12,807			—			—			561		13,368
Net income	—		—	—			—			441,489			—		441,489
Balance, December 31, 2005	259,151		2,592	4,687,776			(14,445	)		329,456			144,488		5,149,867
Stock issued through stock option and stock purchase plans	3,875		38	158,267			—			—			—		158,305
Tax benefit from stock option exercises	—		—	46,174			—			—			—		46,174
Stock-based compensation	—		—	215,419			—			—			—		215,419
Accrued interest receivable on notes receivable from stockholders	—		—	—			(612	)		—			—		(612	)
Foreign currency translation adjustments	—		—	—			—			—			130,500		130,500
Change in unrealized gains and losses on investments, net of tax (1)	—		—	—			—			—			(3,561	)	(3,561	)
Gain on affiliate sale of stock, net of tax (2)	—		—	—			—			—			817		817
Additional minimum pension liability, net of tax (3)	—		—	—			—			—			(8,564	)	(8,564	)
Adoption of FAS 158, net of tax (4)	—		—	—			—			—			(8,795	)	(8,795	)
Other	—		—	(1,362	)		—			—			(680	)	(2,042	)
Net loss	—		—	—			—			(16,797	)		—		(16,797	)
Balance, December 31, 2006	263,026		$ 2,630	$ 5,106,274			$ (15,057	)		$ 312,659			$ 254,205		$ 5,660,711

(1)Net of $2.1 million of tax in 2006, $9.0 million of tax in 2005 and $(10.4) million of tax in 2004.

(2)Net of $(0.3) million of tax in 2006 and $(0.6) million of tax in 2005.

(3)Net of $3.8 million of tax in 2006 and $1.9 million of tax in 2005.

(4)Net of $3.7 million of tax in 2006.

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

F-75

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, and diagnostic and predictive testing. We are organized into five 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 (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 and Thyrogen;

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

·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; and

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

We report the activities of our diagnostic products, oncology, 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, 2006, as a result of changes in how we review our business, certain general and administrative expenses, as well as research and development expenses related to our preclinical development programs, which were formerly allocated amongst our reporting segments and Other, are now allocated to Corporate.

Our diagnostic products business unit was formerly reported combined with our Genetics reporting unit under the caption “Diagnostics/Genetics.” Beginning with this report, we now include our diagnostic products business unit under the caption “Other.”

We have revised our 2005 and 2004 segment disclosures to conform to our 2006 presentation.

F-76

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Risks and Uncertainties

We are subject to risks and uncertainties common to companies in the biotechnology industry. These risks and uncertainties may affect our future results, and include:

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

·our ability to secure regulatory approvals for our products and services and to do so on the anticipated timeframes;

·the content and timing of submissions to and decisions made by the FDA, the EMEA, and other regulatory agencies;

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

·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;

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

·our ability to obtain and maintain adequate patent and other proprietary rights protection for our products and services and successfully enforce our proprietary rights;

·the scope, validity and enforceability of patents and other proprietary rights held by third parties and their impact on our ability to commercialize our products and services;

·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 both outside and within the United States for our products and services;

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

·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;

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

·our ability to establish and maintain strategic license, collaboration and distribution arrangements and to manage our relationships with licensors, collaborators, distributors and partners;

·the continued funding and operation of our joint ventures by our partners;

F-77

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

·our use of cash in business combinations or other strategic initiatives;

·the resolution of litigation related to the consolidation of our tracking stocks;

·the initiation of legal proceedings by or against us;

·the impact of changes in the exchange rate for the Euro and other currencies on our product and service revenues in future periods;

·our ability to successfully integrate the business we acquired from AnorMED;

·the number of diluted shares considered outstanding, which will depend on business combination activity, our stock price and any further changes in the accounting rules for the calculation of earnings per share;

·the estimates and input variables used in accounting for stock options and the related stock-based compensation expense;

·the outcome of our IRS and foreign tax audits; and

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

Basis of Presentation and Principles of Consolidation

Our consolidated financial statements include the accounts of our wholly owned and majority owned subsidiaries. As a result of the adoption of FIN 46, “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 own less than 100% interest, we record minority interest in our statements of operations for the ownership interest of the minority owner. We use the equity method to account for investments in entities in which we have a substantial ownership interest (20% to 50%) which do not fall in the scope of FIN 46, or over which we exercise significant influence. Our consolidated net income includes our share of the earnings of these entities. All intercompany accounts and transactions have been eliminated in consolidation. We have reclassified certain 2005 and 2004 data to conform to our 2006 presentation.

Dividend Policy

We have never paid a cash dividend on shares of our stock. We currently intend to retain our earnings to finance future growth and do not anticipate paying any cash dividends on our stock in the foreseeable future.

Use of Estimates

Under accounting principles generally accepted in the United States, we are required to make certain estimates and assumptions that affect reported amounts of assets, liabilities, revenues, expenses, and

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

disclosure of contingent assets and liabilities in our financial statements. Our actual results could differ from these estimates.

Cash and Cash Equivalents

We value our cash and cash equivalents at cost plus accrued interest, which we believe approximates their market value. Our cash equivalents consist principally of money market funds, corporate notes and municipal notes with original maturities of three months or less. We generally invest our cash in investment-grade securities to mitigate risk.

Investments

We invest our excess cash balances in short-term and long-term marketable debt securities. As part of our strategic relationships, we may also invest in equity securities of other biotechnology companies, some of which are currently, or have been in the past, considered related parties. Other investments are accounted for as described below.

We classify all of our marketable equity investments as available-for-sale. We classify our investments in marketable debt securities as either held-to-maturity or available-for-sale based on facts and circumstances present at the time we purchase the securities. As of each balance sheet date presented, we classified all of our investments in debt securities as available-for-sale. We report available-for-sale investments at fair value as of each balance sheet date and include any unrealized holding gains and losses (the adjustment to fair value) in stockholders’ equity. Realized gains and losses are determined on the specific identification method and are included in investment income. If any adjustment to fair value reflects a decline in the value of the investment, we consider all available evidence to evaluate the extent to which the decline is “other than temporary” and mark the investment to market through a charge to our statement of operations. Investments in equity securities for which fair value is not readily determinable are carried at cost, subject to review for impairment. We classify our investments with remaining maturities of twelve months or less as short-term investments exclusive of those categorized as cash equivalents. We classify our investments with remaining maturities of greater than twelve months as long-term investments, unless we expect to sell the investment in less than 1 year.

For additional information on our investments, please read Note I., “Investments in Marketable Securities and Strategic Equity Investments,” and Note J., “Equity Method Investments.”

Inventories

We value inventories at cost or, if lower, fair value. We determine cost using the first-in, first-out method.

We analyze our inventory levels quarterly and write down to its net realizable value:

·inventory that has become obsolete;

·inventory that has a cost basis in excess of its expected net realizable value;

·inventory in excess of expected requirements; and

·expired inventory.

F-79

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

We capitalize inventory produced for commercial sale, which may result in the capitalization of inventory prior to regulatory approval. In no event is inventory capitalized prior to completion of a phase 3 clinical trial. If a product is not approved for sale, it would likely result in the write-off of the inventory and a charge to earnings.

Property, Plant and Equipment

We record property, plant and equipment at cost. When we dispose of these assets, we remove the related cost and accumulated depreciation and amortization from the related accounts on our balance sheet and include any resulting gain or loss in our statement of operations.

We generally compute depreciation using the straight-line method over the estimated useful lives of the assets. We compute economic lives as follows:

·plant and equipment—three to fifteen years;

·furniture and fixtures—five to seven years; and

·buildings—twenty to forty years.

We evaluate the remaining life and recoverability of this equipment periodically based on the appropriate facts and circumstances.

We amortize leasehold improvements and assets under capital leases over their useful life or, if shorter, the term of the applicable lease.

We capitalize certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use. Capitalized software costs are included in property, plant and equipment, net on our consolidated balance sheet and amortized on a straight-line basis over the estimated useful lives of the software, which generally do not exceed 5 years. Net capitalized software and development costs were $14.2 million at December 31, 2006 and $19.1 million at December 31, 2005.

For products we expect to commercialize, we capitalize, to construction-in-progress, the costs we incur in validating facilities and equipment. We begin this capitalization when the validation process begins, provided that the product to be manufactured has demonstrated technological feasibility, and end this capitalization when the asset is substantially complete and ready for its intended use. These capitalized costs include incremental labor and direct material, and incremental fixed overhead and interest. We depreciate these costs using the straight-line method.

Goodwill and Other Intangible Assets

Our intangible assets consist of:

·goodwill;

·purchased technology rights;

·patents, trademarks and trade names;

·distribution rights;

F-80

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

·customer lists; and

·covenants not to compete.

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 asset may not be recoverable. We completed the required annual impairment tests for our $1.5 billion of net goodwill in the third quarter of 2006 and determined that the $219.2 million of goodwill assigned to our Genetics reporting unit was impaired. We discuss our assessment of goodwill for potential impairment in Note H., “Goodwill and Other Intangible Assets—Goodwill,’’ in this report.

We amortize intangible assets using the straight-line method over their estimated useful lives, which range between 1 and 15 years or, using the economic use method if that method results in significantly greater amortization than the straight-line method.

For certain acquired intangible assets, we may be required to make additional payments contingent upon meeting certain sales targets. We record amortization expense for these intangibles based on estimated future sales of the related products and include in the determination of amortization all contingent payments that we believe are probable of being made. We apply this amortization model to our Synvisc distribution rights (acquired from Wyeth), our license agreement with Synpac related to Myozyme patent and technology rights and our license to two products acquired from Surgi.B. We review the sales forecasts of these products on a quarterly basis and assess the impact changes in the forecasts have on the rate of amortization and the likelihood that contingent payments will be made. Adjustments to amortization expense resulting from changes in estimated sales are reflected prospectively.

Accounting for the Impairment of Long-Lived Assets

We periodically evaluate our long-lived assets for potential impairment under FAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” We perform these evaluations whenever events or changes in circumstances suggest that the carrying amount of an asset or group of assets is not recoverable. Indicators of potential impairment include:

·a significant change in the manner in which an asset is used;

·a significant decrease in the market value of an asset;

·a significant adverse change in its business or the industry in which it is sold; and

·a current period operating cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the asset.

If we believe an indicator of potential impairment exists, we test to determine whether impairment recognition criteria in FAS 144 have been met. We charge impairments of the long-lived assets to operations if our evaluations indicate that the carrying value of these assets is not recoverable.

F-81

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Translation of Foreign Currencies

We translate the financial statements of our foreign subsidiaries from local currency into U.S. dollars using:

·the current exchange rate at each balance sheet date for assets and liabilities;

·the average exchange rate prevailing during each period for revenues and expenses; and

·the historical exchange rate for our investments in our foreign subsidiaries.

We consider the local currency for all of our foreign subsidiaries to be the functional currency for that subsidiary. As a result, we include translation adjustments for these subsidiaries in stockholders’ equity. We also record in stockholders’ equity, exchange gains and losses on intercompany balances that are of a long-term investment nature. Our stockholders’ equity includes net cumulative foreign currency translation gains of $263.0 million at December 31, 2006 and $131.1 million at December 31, 2005. Gains and losses on all other foreign currency transactions, including gains and losses attributable to foreign currency forward contracts, are included in SG&A in our results of operations and were a net gain of $7.8 at December 31, 2006, a net loss of $3.8 million at December 31, 2005 and a net gain of $7.1 million at December 31, 2004.

Derivative Instruments

FAS 133, “Accounting for Derivative Instruments and Hedging Activities,” establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that we recognize all derivative instruments as either assets or liabilities in our consolidated balance sheets and measure those instruments at fair value. Subsequent changes in fair value are reflected in current earnings or other comprehensive income (loss), depending on whether a derivative instrument is designated as part of a hedge relationship and, if it is, the type of hedge relationship.

Defined Pension Benefit Plan Accounting

In September 2006, the FASB issued FAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106 and 132(R).” FAS 158 requires us to recognize the overfunded or underfunded status of any pension or other postretirement plans we may have as a net asset or a net liability on our statement of financial position and to recognize changes in that funded status in the year in which the changes occur as an adjustment to accumulated other comprehensive income in stockholders’ equity. Currently, we have defined benefit pension plans for certain of our foreign subsidiaries and a defined benefit postretirement plan for one of our U.S. subsidiaries, which has been frozen since 1995 and is not significant. Under FAS 158, actuarial gains and losses, prior service costs or credits, and any remaining transition assets or obligations that have not been recognized for our defined benefit pension plans under previous accounting standards must be recognized in accumulated other comprehensive income, net of tax effects, until they are amortized as a component of net periodic benefit cost. In addition, FAS 158 requires that the measurement date, which is the date at which the benefit obligation and plan assets are measured, be as of our fiscal year end, which is December 31. FAS 158 is effective for our current fiscal year ending December 31, 2006, except for the  measurement date provisions, which are effective for us for our fiscal year ending December 31, 2008.

F-82

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accordingly, we have recognized the underfunded status of our defined benefit pension plans in our consolidated balance sheets as of December 31, 2006, including $12.6 million of additional minimum pension liabilities and $3.8 million of related deferred tax assets offset by an $8.8 million charge, net of tax, to accumulated other comprehensive income in stockholders’ equity.

FAS 87 continues to require management make certain assumptions relating to the following:

·long-term rate of return on plan assets;

·discount rates used to measure future obligations and interest expense;

·salary scale inflation rates; and

·other assumptions based on the terms of each individual plan.

We obtained actuarial reports to compute the amounts of liabilities and expenses relating to the majority of our plans subject to the assumptions that management selects as of the beginning of the plan year. Management reviews the long-term rate of return, discount, and salary scale inflation on an annual basis and makes modifications to the assumptions based on current rates and trends as appropriate. We have also provided the disclosures required under FAS 158 as of December 31, 2006 and by FAS 87 as of December 31, 2006 and 2005, in Note P., “Benefit Plans.”

Revenue Recognition

We recognize revenue from product sales when persuasive evidence of an arrangement exists, the product has been shipped, title and risk of loss have passed to the customer and collection from the customer is reasonably assured. We recognize revenue from service sales, such as Carticel services and genetic testing services, when we have finished providing the service. We recognize the revenue from the contracts to perform research and development services and selling and marketing services over the term of the applicable contract and as we complete our obligations under that contract. We recognize non-refundable, up-front license fees over the related performance period or when we have no remaining performance obligations.

Revenue from milestone payments for which we have no continuing performance obligations is recognized upon achievement of the related milestone. When we have continuing performance obligations, the milestone payments are deferred and recognized as revenue over the term of the arrangement as we complete our performance obligations.

We evaluate revenue from agreements that have multiple elements to determine whether the components of the arrangement represent separate units of accounting as defined in EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” To recognize a delivered item in a multiple element arrangement, EITF Issue No. 00-21 requires that the delivered items have value to the customer on a stand-alone basis, that there is objective and reliable evidence of fair value of the undelivered items and that delivery or performance is probable and within our control for any delivered items that have a right of return.

We follow the guidance of EITF Issue No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent” in the presentation of revenues and direct costs of revenues. This guidance requires us to assess whether we act as a principal in the transaction or as an agent acting on behalf of others. We record

F-83

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

revenue transactions gross in our statements of operations if we are deemed the principal in the transaction, which includes being the primary obligor and having the risks and rewards of ownership.

We receive royalties related to the manufacture, sale or use of our products or technologies under license arrangements with third parties. For those arrangements where royalties are reasonably estimable, we recognize revenue based on estimates of royalties earned during the applicable period and adjust for differences between the estimated and actual royalties in the following quarter. Historically, these adjustments have not been material. For those arrangements where royalties are not reasonably estimable, we recognize revenue upon receipt of royalty statements from the licensee.

We record allowances for product returns, rebates payable to Medicaid, managed care organizations or customers, chargebacks and sales discounts. These allowances are recorded as a reduction to revenue at the time product sales are recorded. These amounts are based on our historical activity, estimates of the amount of product in the distribution channel and the percent of end-users covered by Medicaid or managed care organizations. We record consideration paid to a customer or reseller of our products as a reduction of revenue unless we receive an identifiable and separable benefit for the consideration, and we can reasonably estimate the fair value of the benefit received. If both conditions are met, we record the consideration paid to the customer as an expense.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers was to deteriorate and result in an impairment of their ability to make payments, additional allowances may be required.

Accounting for Stock-Based Compensation

Prior to January 1, 2006, we elected to:

·account for share-based payment awards under Accounting Principles Board Opinion No., or APB, 25, “Accounting for Stock Issued to Employees,” as amended by FAS 148, “Accounting for Stock-Based Compensation—Transition and Disclosures,” which we refer to collectively as APB 25; and

·disclose the pro forma impact of expensing the fair value of our employee and director stock options and purchases made under our employee stock purchase plan, or ESPP, only in the notes to our financial statements.

F-84

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE A.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Effective January 1, 2006, we adopted the provisions of:

·FAS 123R, “Share-Based Payment, an amendment of FASB Statement Nos. 123 and 95,” which requires us to recognize stock-based compensation expense in our financial statements for all share-based payment awards made to employees and directors based upon the grant date fair value of those awards; and

·SAB 107, “Share-Based Payment,” which provides guidance to public companies related to the adoption of FAS 123R.

FAS 123R applies to stock options granted under our employee and director stock option plans and purchases made under our ESPP, and would also apply to any restricted stock or restricted stock units we may grant in the future.

We adopted FAS 123R using the modified prospective transition method, which requires us to apply the standard to new equity awards and to equity awards modified, repurchased or canceled after January 1, 2006, our adoption date. Additionally, compensation expense for the unvested portion of awards granted prior to our adoption date shall be:

·recognized over the requisite service period, which is generally commensurate with the vesting term; and

·based on the original grant date fair value of those awards, as calculated in our pro forma disclosures, prior to January 1, 2006, under FAS 123, “Accounting for Stock-Based Compensation,” as amended by FAS 148, “Accounting for Stock-Based Compensation—Transition and Disclosures,” which we refer to collectively as FAS 123. Changes to the grant date fair value of equity awards granted prior to our adoption date are not permitted under FAS 123R.

The modified prospective transition method does not allow for the restatement of prior periods. Accordingly, our results of operations for 2006 and future periods will not be comparable to our results of operations prior to January 1, 2006 because our historical results prior to that date do not reflect the impact of expensing the fair value of share-based payment awards.

Prior to January 1, 2006, in the pro forma disclosures regarding stock-based compensation included in the notes to our financial statements, we recognized forfeitures of stock options only as they occurred. Effective January 1, 2006, in accordance with the provisions of FAS 123R, we are now required to estimate an expected forfeiture rate for stock options, which is factored into the determination of our monthly stock-based compensation expense. As a result of the adoption of FAS 123R, we recorded pre-tax stock-based compensation expense totaling $208.5 million, net of estimated forfeitures, in our consolidated statements of operations for 2006. Additional information regarding our stock-based compensation is included in Note M., “Stockholders’ Equity,” to our consolidated financial statements included in this report.

In connection with the adoption of FAS 123R, we were also required to change the classification, in our consolidated statements of cash flows, of any tax benefits realized upon the exercise of stock options in excess of that which is associated with the expense recognized for financial reporting purposes. These amounts are presented as a financing cash inflow rather than as a reduction of income taxes paid in our consolidated statements of cash flows for 2006.

F-85

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Research and Development

We expense internal and external research and development costs, including costs of funded research and development arrangements, in the period incurred. We also expense the cost of purchased technology in the period of purchase if we believe that the technology has not demonstrated technological feasibility and that it does not have an alternative future use.

Issuance of Stock by a Subsidiary or an Affiliate

We include gains on the issuance of stock by our subsidiaries and affiliates in net income unless that subsidiary or affiliate is a research and development, start-up or development stage company or an entity whose viability as a going concern is under consideration. In those situations, we account for the change in our equity ownership of that subsidiary or affiliate in other comprehensive income or loss. All such gains during the years ended December 31, 2006, 2005 and 2004 have been recorded to other comprehensive income or loss.

Income Taxes

We use the asset and liability method of accounting for deferred income taxes. Our provision for income taxes includes income taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities. We record liabilities for income tax contingencies based on our best estimate of the underlying exposures.

We have not provided for possible U.S. taxes on the undistributed earnings of foreign subsidiaries. We do not believe it is practicable to determine the tax liability associated with the repatriation of our foreign earnings because it is our policy to indefinitely reinvest these earnings in non-U.S. operations. These undistributed foreign earnings totaled $273.7 million at December 31, 2006 and $164.5 million at December 31, 2005.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income or loss and all changes in equity from non-shareholder sources, including changes in unrealized gains and losses on investments and on derivative instruments designated as hedges, foreign currency translation adjustments and liabilities for pension obligations, net of taxes.

Net Income (Loss) Per Share

To calculate base earnings per share, we divide our earnings by the weighted average number of outstanding shares during the applicable period. To calculate diluted earnings per share, we also include in the denominator all potentially dilutive securities outstanding during the applicable period unless inclusion of such securities is anti-dilutive.

Recent Accounting Pronouncements

SAB 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.”   In September 2006, the SEC staff issued SAB 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Statements,” to address the diversity in practice regarding the quantification of financial statement misstatements under the two methods most commonly used by preparers and auditors—the income statement, or “roll-over,” approach, and the balance sheet, or “iron curtain,” approach. Prior to SAB 108, companies could evaluate the materiality of financial statement misstatements using either the income statement approach which focuses on new misstatements added in the current year, or the balance sheet approach which focuses on the cumulative amount of misstatement present in a company’s balance sheet. Misstatements that would be material under one approach could be viewed as immaterial under another approach, and subsequently not be corrected. The SEC staff believes that reliance on only one of these methods, to the exclusion of the other, does not appropriately quantify all misstatements that could be material to financial statement users. As a result, SAB 108 now requires that companies utilize a dual approach to assessing the quantitative effects of financial statement misstatements, which includes both an income statement focused assessment and a balance sheet focused assessment. The guidance in SAB 108 is effective for our current fiscal year ending December 31, 2006. Although restatement of prior years’ financial statements is permitted, it is not required if we properly applied our previous approach (income statement or balance sheet) and considered all relevant qualitative factors in our assessment of previous errors. In lieu of the prior period restatement, we were permitted to report the cumulative effect of adopting SAB 108 as an adjustment to the opening balance of assets and liabilities, with an offsetting adjustment to the opening balance of retained earnings as of January 1, 2006, the year of adoption, and disclose the nature and amount of each individual error being corrected in the cumulative effect adjustment, when and how each error being corrected arose, and the fact that the errors had previously been considered immaterial. We did not record any cumulative effect adjustments related to the adoption of SAB 108. The adoption of SAB 108 did not impact our financial position or results of operations.

FIN 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.”In July 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109,” which seeks to reduce the significant diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for us as of January 1, 2007. Upon adoption, the cumulative effect of any changes in net assets resulting from the application of FIN 48 will be recorded as an adjustment to accumulated earnings. Additional guidance from the FASB on FIN 48 is pending. As a result, we are currently unable to finalize our estimate of the impact that adopting this interpretation will have on our financial position or results of operations.

FAS 157, “Fair Value Measurements.”In September 2006, the FASB issued FAS 157, “Fair Value Measurements,” which provides enhanced guidance for using fair value to measure assets and liabilities. FAS 157 establishes a common definition of fair value, provides a framework for measuring fair value under accounting principles generally accepted in the United States and expands disclosure requirements regarding fair value measurements. FAS 157 is effective for us as of January 1, 2008. We are currently evaluating the impact, if any, the adoption of FAS 157 will have on our financial position and results of operations.

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE B.NET INCOME (LOSS) PER SHARE

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

	For the Years Ended December 31,
	2006			2005		2004
Net income (loss)	$	(16,797	)	$	441,489	$	86,527
Effect of dilutive securities:
Interest expense and debt fee amortization, net of tax, related to our 1.25% convertible senior notes	—			7,496		—
Net income (loss)—diluted	$	(16,797	)	$	448,985	$	86,527
Shares used in computing net income (loss) per common share—basic	261,124			254,758		228,175
Effect of dilutive securities (1):
Shares issuable upon the assumed conversion of our 1.25% convertible senior notes (2)	—			9,686		—
Stock options (3)	—			7,769		6,133
Warrants and stock purchase rights	—			11		10
Dilutive potential common shares	—			17,466		6,143
Shares used in computing net income (loss) per common share—diluted (1,2,3)	261,124			272,224		234,318
Net income (loss) per share: (1)
Basic	$	(0.06	)	$	1.73	$	0.38
Diluted	$	(0.06	)	$	1.65	$	0.37

(1)For the year ended December 31, 2006, basic and diluted net loss per share are the same. We did not include the securities described in the following table in the computation of diluted net loss per share because these securities would have an anti-dilutive effect due to our net loss for the period (amounts in thousands):

	For the Year Ended
	December 31, 2006
Shares issuable upon the assumed conversion of our 1.25% convertible senior notes		9,686
Shares issuable for options		6,881
Shares issuable for warrants and stock purchase rights		11
Total shares excluded from the computation of diluted loss per share		16,578

(2)Reflects the retroactive application of the provisions of EITF Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings Per Share.” The potentially dilutive effect of the 9.7 million shares of Genzyme Stock issuable upon conversion of our $690.0 million in principal of 1.25% convertible senior notes is excluded from the calculation of diluted earnings per share for the years ended December 31, 2006 and 2004 because the effect would be anti-dilutive.

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE B.NET INCOME (LOSS) PER SHARE (Continued)

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

	For the Years Ended December 31,
	2006		2005		2004
Shares of Genzyme Stock issuable upon exercise of outstanding options		11,840		7,269		16,008

NOTE C.MERGERS AND ACQUISITIONS

Acquisition of AnorMED

In November 2006, we acquired AnorMED, a publicly-held chemical-based biopharmaceutical company based in Langley, British Columbia, Canada with a focus on the discovery, development and commercialization of new therapeutic products in the area of hematology, oncology and HIV. We paid gross consideration of $589.2 million in cash, including $584.2 million for the shares of AnorMED’s common stock outstanding on the date of acquisition and approximately $5 million for acquisition costs. Net consideration was $569.0 million as we acquired AnorMED’s cash and cash equivalents totaling $20.2 million. We accounted for the acquisition as a business combination and accordingly, included its results of operations in our consolidated statements of operations from November 7, 2006, the date of acquisition.

The purchase price was allocated to the estimated fair value of the acquired tangible and intangible assets and assumed liabilities as follows (amounts in thousands, except share data):

Purchase of 43,272,085 shares of AnorMED common stock	$	584,173
Acquisition costs	5,000
Total purchase price	$	589,173
Cash and cash equivalents	$	20,220
Deferred tax assets—current	2,517
Other current assets	6,341
Property, plant and equipment	2,788
Goodwill	29,080
Other intangible assets (to be amortized over 10 years)	3,500
In-process research and development	552,900
Deferred tax assets—noncurrent	200
Other noncurrent assets	573
Assumed liabilities:
Deferred tax liability	(1,288		)
Liabilities for exit activities	(6,478		)
Other	(21,180		)
Allocated purchase price	$	589,173

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE C.MERGERS AND ACQUISITIONS (Continued)

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 $29.1 million, which was allocated to goodwill. We expect 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 activities and tax restructuring activities.

Acquisition of Surgi.B

In March 2006, through a series of transactions we acquired Surgi.B, a privately-held company based in Beauzelle, France, which owned the exclusive rights to manufacture and sell GlucaMesh and GlucaTex, two beta glucan-coated mesh products for use in the surgical repair of inguinal hernias, for an aggregate up-front cash payment of $5.5 million. We allocated the entire purchase price to license fees, a component of other intangible assets on our consolidated balance sheet, based on their estimated fair values as of March 30, 2006, the date of acquisition. In addition, we are obligated to make certain contingent milestone payments totaling up to approximately $6 million and contingent royalty payments based on future sales of GlucaMesh and GlucaTex. Currently, GlucaMesh is sold only in France.

Acquisition of Gene Therapy Assets from Avigen

In December 2005, we acquired certain gene therapy assets from Avigen, a publicly-traded, biopharmaceutical company based in Alameda, California with a focus on unique small molecule therapeutics and biologics to treat serious neurological disorders, in exchange for an up-front cash payment of $12.0 million. We allocated the purchase price to the intangible assets acquired based on their estimated fair values as of December 19, 2005, the date of acquisition. We allocated $5.0 million of the up-front cash payment to technology in other intangible assets on our consolidated balance sheet and recorded a charge of $7.0 million to IPR&D. In addition, we may be obligated to make up to approximately $38 million of potential milestone payments based on the development and approval of, and royalty payments based on the sale of, products developed between now and 2020 that rely on the intellectual property purchased from Avigen.

Acquisition of Equal Diagnostics

In July 2005, we acquired Equal Diagnostics, a privately-held diagnostics company based in Exton, Pennsylvania, that formerly served as a distributor for our clinical chemistry reagents. We paid $5.0 million in initial cash payments and issued promissory notes to the three former shareholders of Equal Diagnostics totaling $10.0 million in principal and interest. These notes bear interest at 3.86% and are payable over eight years in equal annual installments commencing on March 31, 2007. In addition to these guaranteed payments, we may be obligated to make additional cash payments of up to an aggregate of approximately $8 million during the period commencing March 31, 2007 and ending March 31, 2014 based upon the gross margin of the acquired business, as defined in the purchase agreement. We accounted for the acquisition as a business combination and, accordingly, included its results of operations in our consolidated statements of operations from July 15, 2005, the date of acquisition.

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE C.MERGERS AND ACQUISITIONS (Continued)

The purchase price was allocated to the estimated fair value of the acquired tangible and intangible assets and assumed liabilities as follows (amounts in thousands):

Initial cash payments	$	5,000
Present value of notes payable	8,586
Acquisition costs	250
Total purchase price	$	13,836
Cash and cash equivalents	$	500
Other current assets	3,119
Property, plant and equipment	58
Goodwill	5,344
Other intangible assets (to be amortized over 7 years)	4,850
Other noncurrent assets	14
Assumed liabilities	(49		)
Allocated purchase price	$	13,836

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 $5.3 million, which was allocated to goodwill. We expect that substantially all of the amount allocated to goodwill will be deductible for tax purposes.

Acquisition of Bone Care

In July 2005, we acquired Bone Care, a publicly-held specialty pharmaceutical company based in Middleton, Wisconsin with a focus on nephrology. We paid gross consideration of $712.3 million in cash, including $668.4 million for the outstanding shares of Bone Care’s common stock, $39.9 million to buy out options to purchase shares of Bone Care’s common stock and restricted stock outstanding on the date of acquisition and approximately $4 million for acquisition costs. Net consideration was $604.3 million as we acquired Bone Care’s cash and short-term investments totaling $108.0 million. We accounted for the acquisition as a business combination and, accordingly, included its results of operations in our consolidated statements of operations from July 1, 2005, the date of acquisition.

In October 2004, Bone Care was one of seven companies, all of which market treatments, therapies or diagnostics for kidney disease patients, which received a subpoena from the office of the United States Attorney for the Eastern District of New York. The subpoena required Bone Care to provide a wide range of documents related to numerous aspects of its business and operations. The subpoena included specific requests for documents related to testing for parathyroid hormone levels and vitamin D therapies. Bone Care has cooperated, and we continue to cooperate, with the government’s investigation. To our knowledge, no civil or criminal proceedings have been initiated against Bone Care or Genzyme at this time, although we cannot predict when or if any proceedings might be initiated. As a result, we have not recorded any contingent liabilities related to this investigation. Any such liabilities that may arise out of this investigation in the future will be recorded as a charge in our consolidated statement of operations in the period in which such liabilities become probable and estimable.

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE C.MERGERS AND ACQUISITIONS (Continued)

The purchase price was allocated to the estimated fair value of the acquired tangible and intangible assets and assumed liabilities as follows (amounts in thousands, except share data):

Purchase of 20,254,600 shares of Bone Care common stock	$	668,402
Buy out of options to purchase shares of Bone Care common stock and restricted stock	39,943
Acquisition costs	4,000
Total purchase price	$	712,345
Cash and cash equivalents	$	41,012
Short-term investments	67,015
Accounts receivable	10,499
Inventories	17,500
Deferred tax assets—current	29,262
Other current assets	2,278
Property, plant and equipment	2,895
Goodwill	228,836
Other intangible assets (to be amortized over 16 years)	504,200
In-process research and development	12,700
Deferred tax assets—noncurrent	13,453
Assumed liabilities:
Deferred tax liability	(185,546		)
Liabilities for exit activities	(11,090		)
Other	(20,669		)
Allocated purchase price	$	712,345

The allocation of the purchase price was corrected in June 2006 to create a $3.6 million reserve for returns of short-dated product sold by Bone Care prior to the date of acquisition, and to record adjustments totaling $2.5 million to revise the estimated liabilities related to exit activities and deferred taxes.

The purchase price, as adjusted, 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 $228.8 million, which was allocated to goodwill. We expect that substantially all of the amount allocated to goodwill will be deductible for tax purposes.

Acquisition of Verigen

In February 2005, we acquired Verigen, a private company based in Leverkusen, Germany with a proprietary cell therapy product for cartilage repair (referred to as MACI) that is currently sold in Europe and Australia. We paid gross consideration of $12.7 million, including $0.9 million for acquisition costs, and may be obligated to make additional cash payments of up to an aggregate of approximately $38 million over the next six years, based upon the achievement of development and commercial milestones relating to regulatory approval and commercialization of MACI in the United States, as well as contingent payments

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE C.MERGERS AND ACQUISITIONS (Continued)

on worldwide sales of that product. Net consideration was $11.8 million as we acquired Verigen’s cash totaling $0.9 million. We acquired approximately 96% of Verigen’s outstanding shares in February 2005 and acquired the remaining outstanding shares in August 2005. We accounted for the acquisition as a business combination and, accordingly, included its results of operations in our consolidated statements of operations from February 8, 2005, the date of acquisition.

The purchase price was allocated to the estimated fair value of the acquired tangible and intangible assets and assumed liabilities as follows (amounts in thousands):

Initial cash payments	$	11,803
Contingent purchase price liabilities	5,660
Acquisition costs	912
Total purchase price	$	18,375
Cash and cash equivalents	$	924
Other current assets	4,478
Property, plant and equipment	2,673
Other intangible assets (to be amortized over 10 years)	11,964
In-process research and development	9,500
Other noncurrent assets	1,023
Assumed liabilities:
Deferred tax liabilities	(4,641		)
Liabilities for exit activities	(2,475		)
Other	(5,071		)
Allocated purchase price	$	18,375

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 estimated fair value of the assets acquired and liabilities assumed exceeded the initial payments by $5.7 million resulting in negative goodwill. Pursuant to FAS 142, we recorded as a liability, contingent consideration up to the amount of the negative goodwill. As contingent payments come due, we will apply the payments against the contingent liability. Contingent payments in excess of $5.7 million, if any, will be recorded as goodwill. As of December 31, 2006 we have paid $1.4 million of contingent payments, and the remaining contingent liability is $4.3 million.

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE C.MERGERS AND ACQUISITIONS (Continued)

Acquisition of Synvisc Sales and Marketing Rights from Wyeth

In January 2005, we consummated an arrangement with Wyeth under which we reacquired the sales and marketing rights to Synvisc in the United States, as well as Germany, Poland, Greece, Portugal and the Czech Republic. In exchange for the sales and marketing rights, we paid initial payments totaling $121.0 million in cash to Wyeth and otherwise incurred $0.3 million of acquisition costs. We have also accrued contingent royalty payments to Wyeth totaling $118.3 million, of which $110.0 million had been paid as of December 31, 2006. Distribution rights (a component of other intangible assets, net) in our consolidated balance sheet as of December 31, 2006 include a total of $239.6 million for the initial and contingent royalty payments (made or accrued) as of that date. We will make a series of additional contingent royalty and milestone payments to Wyeth based on the volume of Synvisc sales in the covered territories. These contingent royalty and milestone payments could extend out to June 2012, or could total a maximum of $293.7 million, whichever comes first.

In April 2006, we entered into an agreement with Wyeth to reacquire the sales and marketing rights to Synvisc in Turkey and made an initial payment of $6.0 million in cash to Wyeth, which is included in distribution rights (a component of other intangible assets, net) in our consolidated balance sheet as of December 31, 2006. In addition, we could be obligated to make certain contingent payments to Wyeth totaling up to $5.5 million between now and December 31, 2007

The reacquired Synvisc distribution rights qualify as an asset rather than an acquired business. As a result, we do not provide pro forma results for our reacquisition of the Synvisc distribution rights.

Acquisition of ILEX Oncology

In December 2004, we completed our acquisition of ILEX Oncology, an oncology drug development company. The transaction had a total value of approximately $1 billion, based on the $55.88 per share value of the 18.5 million shares of our common stock exchanged in the acquisition. We accounted for the acquisition as a business combination and, accordingly, included its results of operations in our consolidated statements of operations from December 20, 2004, the date of acquisition.

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE C.MERGERS AND ACQUISITIONS (Continued)

The purchase price was allocated to the acquired tangible and intangible assets and assumed liabilities based on their estimated fair values at the date of acquisition as follows (amounts in thousands, except share data):

Issuance of 18,457,679 shares of Genzyme Stock	$	1,031,485
Issuance of options to purchase 1,736,654 shares of Genzyme Stock	38,440
Acquisition costs	10,349
Total purchase price	$	1,080,274
Cash and cash equivalents	$	121,128
Restricted cash	604
Accounts receivable	12,501
Inventories	16,984
Deferred tax assets—current	36,766
Other current assets	3,168
Property, plant and equipment	2,162
Restricted long-term investments	1,691
Goodwill	445,640
Other intangible assets (to be amortized over 11 to 12 years)	228,627
In-process research and development	254,520
Deferred tax assets—noncurrent	66,402
Other noncurrent assets	1,648
Assumed liabilities:
Notes payable—short-term	(19,968		)
Unfavorable lease liability	(1,610		)
Liabilities for exit activities	(6,270		)
Income tax payable	(47,535		)
Other	(36,184		)
Allocated purchase price	$	1,080,274

We also recorded an estimated tax liability of $47.5 million related to the integration of ILEX Oncology. The excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed amounted to $445.6 million, which was allocated to goodwill. We expect that substantially all of the amount allocated to goodwill will not be deductible for tax purposes.

Acquisition of Physician Services and Analytical Services Business Units of IMPATH

In May 2004, we acquired substantially all of the pathology/oncology testing assets related to the Physician Services and Analytical Services business units of IMPATH, a national medical testing provider, for total cash consideration of $215.3 million, including acquisition costs. At the time of the purchase, IMPATH operated these business units as “debtors-in-possession” under the United States Bankruptcy Code. The assets were sold by IMPATH by means of a sale process conducted pursuant to Section 363 of the United States Bankruptcy Code. We accounted for the acquisition as a business combination and, accordingly, included the results of operations related to the acquired business units in our consolidated statements of operations from May 1, 2004, the date of acquisition. The purchase price was subject to adjustment based

F-95

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE C.MERGERS AND ACQUISITIONS (Continued)

upon the completion of a post-closing assessment of the working capital of the acquired business units as of April 30, 2004. Pursuant to a Settlement and Release Agreement with IMPATH that was approved by the Bankruptcy Court on December 28, 2006, the working capital dispute was resolved with no adjustment to the purchase accounting.

In-Process Research and Development

In connection with five of our acquisitions since 2004, we have acquired various IPR&D projects. Substantial additional research and development will be required prior to any of our acquired IPR&D programs and technology platforms reaching technological feasibility. In addition, once research is completed, each product candidate acquired from AnorMED, Avigen, Bone Care, Verigen and ILEX Oncology will need to complete a series of clinical trials and receive FDA or other regulatory approvals prior to commercialization. Our current estimates of the time and investment required to develop these products and technologies may change depending on the different applications that we may choose to pursue. We cannot give assurances that these programs will ever reach technological feasibility or develop into products that can be marketed profitably. In addition, we cannot guarantee that we will be able to develop and commercialize products before our competitors develop and commercialize products for the same indications. If products based on our acquired IPR&D programs and technology platforms do not become commercially viable, our results of operations could be materially adversely affected.

The following table sets forth IPR&D projects for companies and certain assets acquired since 2004 (amounts in millions, except percent data):

Company/Assets Acquired	Purchase Price			IPR&D(1)			Programs Acquired	Discount Rate Used in Estimating Cash Flows(1)			Year of Expected Launch	Estimated Cost to Complete
AnorMED (2006)		$	589.2		$526.8		Mozobil (stem cell transplant)		15	%	2008-2013		$125
					26.1		AMD070 (HIV)(2)		15	%
					$	552.9
Avigen (2005)		$	12.0		$	7.0	AV201 (Parkinson’s disease)		N/A		2016		$	74
Bone Care (2005)		$	712.3		$	12.7	LR-103 (secondary
							hyperparathyroidism)		25	%	2012		$	15
Verigen (2005)		$	12.7		$	9.5	MACI (cartilage repair)		24	%	2012-2014		$	20-$35
ILEX Oncology (2004)		$	1,080.3		$	96.9	Campath (alemtuzumab)		11	%	2009-2011		$	194
					113.4		Clolar		12	%	2008-2011		$	99
					44.2		Tasidotin		16	%	2011-2014		$	44
					$	254.5

(1)Management assumes responsibility for determining the valuation of the acquired IPR&D projects. The fair value assigned to IPR&D for each acquisition is estimated by discounting, to present value, the cash flows expected once the acquired projects have reached technological feasibility. The cash flows are probability-adjusted to reflect the risks of advancement through the product approval process. In estimating the future cash flows, we also considered the tangible and intangible assets required for successful exploitation of the technology resulting from the purchased IPR&D projects and adjusted future cash flows for a charge reflecting the contribution to value of these assets.

(2)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.

F-96

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE C.MERGERS AND ACQUISITIONS (Continued)

Exit Activities

In connection with our acquisitions of SangStat in 2003, ILEX Oncology in 2004, Verigen and Bone Care in 2005 and AnorMED in 2006, 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 assumed in connection with the acquisition of these entities 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, 2003 (1)	$	7,602			$	2,328		$	306		$	10,236
Acquisitions (2)	4,900				216			214			5,330
Revision of estimates	(455		)		(320		)	(184		)	(959		)
Payments	(5,454		)		(1,548		)	(127		)	(7,129		)
Balance at December 31, 2004	6,593				676			209			7,478
Acquisitions (3)	11,734				1,327			508			13,569
Revision of estimates (4)	382				(519		)	10,851			10,714
Payments	(16,460		)		(1,285		)	(3,451		)	(21,196		)
Balance at December 31, 2005	2,249				199			8,117			10,565
Acquisitions (5)	6,478				—			—			6,478
Revision of estimates	(165		)		(132		)	(750		)	(1,047		)
Payments	(2,457		)		(43		)	(7,367		)	(9,867		)
Balance at December 31, 2006	$	6,105			$	24		$	—		$	6,129

(1)Represents liabilities for exit activities related to our acquisition of SangStat in September 2003.

(2)Represents liabilities for exit activities related to our acquisition of ILEX Oncology in December 2004.

(3)Represents liabilities for exit activities related to our acquisitions of Verigen in February 2005 and Bone Care in July 2005. In 2006, we completed payment of the exit liabilities related to these acquisitions.

(4)In June 2005, we accrued a $9.8 million liability related to the termination of a development contract we assumed in connection with the acquisition of ILEX Oncology. The payment was recorded as a $6.9 million increase to goodwill, net of tax, and a $9.8 million increase to accrued expenses. In November 2005, we paid $2.1 million of this liability and in January 2006, we paid the remaining $7.7 million.

(5)Represents liabilities for exit activities related to our acquisition of AnorMED in November 2006. We expect to pay employee related benefits related to this acquisition through 2008.

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE C.MERGERS AND ACQUISITIONS (Continued)

Pro Forma Financial Summary (Unaudited)

The following pro forma financial summary is presented as if the acquisition of AnorMED was completed as of the beginning of January 1, 2006 and 2005. The 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 acquisition of AnorMED, such as IPR&D charges of $552.9 million, are included in the following pro forma financial summary for both periods (amounts in thousands, except per share amounts):

	2006			2005
Total revenues	$	3,201,754		$	2,735,145
Net income (loss)	$	(49,739	)	$	19,035
Net income (loss) per share:
Basic	$	(0.19	)	$	0.07
Diluted	$	(0.19	)	$	0.07
Weighted average shares outstanding:
Basic	261,124			254,758
Diluted	261,124			262,538

Pro forma results are not presented for the acquisitions of Surgi B, Avigen, Equal Diagnostics, Bone Care or Verigen for the years ended December 31, 2006 or 2005 because those acquisitions individually, and in the aggregate, did not have a material effect on our results of operations in those periods.

NOTE D.DERIVATIVE FINANCIAL INSTRUMENTS

We periodically enter into foreign currency forward contracts, all of which have a maturity of less than three years. These contracts have not been designated as hedges and accordingly, unrealized gains or losses on these contracts are reported in current earnings. The notional settlement value of foreign currency forward contracts outstanding at December 31, 2006 is $455.1 million. At December 31, 2006, these contracts had a fair value of $(1.5) million, representing an unrealized loss, which has been recorded in SG&A in our consolidated statement of operations for the year ended December 31, 2006 and in accrued expenses in our consolidated balance sheet as of December 31, 2006. The notional settlement value of foreign currency forward contracts outstanding at December 31, 2005 was $85.9 million. At December 31, 2005, these contracts had a fair value of $0.9 million, representing an unrealized gain, which has been recorded in SG&A in our consolidated statement of operations for the year ended December 31, 2005 and in prepaid expenses and other current assets in our consolidated balance sheet as of December 31, 2005.

NOTE E.   ACCOUNTS RECEIVABLE

Our trade receivables primarily represent amounts due from distributors, healthcare service providers, and companies and institutions engaged in research, development or production of pharmaceutical and biopharmaceutical products. We perform credit evaluations of our customers on an ongoing basis and generally do not require collateral. We state accounts receivable at fair value after reflecting certain allowances for bad debts, chargebacks and prompt pay discounts. The allowances were $52.6 million at December 31, 2006 and $46.1 million at December 31, 2005.

F-98

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE F.   INVENTORIES

	December 31,
	2006		2005
	(Amounts in thousands)
Raw materials	$	100,697	$	76,466
Work-in-process	119,510		90,629
Finished goods	154,436		130,557
Total	$	374,643	$	297,652

In December 2005, we recorded charges of:

·$16.9 million to write off the cost of unsuccessful production runs of Cerezyme and Myozyme that occurred at our Allston, Massachusetts manufacturing plant; and

·$11.2 million to write off expiring Clolar inventory acquired in connection with our acquisition of ILEX Oncology.

NOTE G.PROPERTY, PLANT AND EQUIPMENT

	December 31,
	2006				2005
	(Amounts in thousands)
Plant and equipment		$	734,669		$	641,282
Land and buildings		763,072			677,770
Leasehold improvements		239,268			206,243
Furniture and fixtures		53,689			41,503
Construction-in-progress		515,307			308,411
		2,306,005			1,875,209
Less accumulated depreciation		(695,412		)	(554,396		)
Property, plant and equipment, net		$	1,610,593		$	1,320,813

Our total depreciation expense was $122.0 million in 2006, $103.0 million in 2005 and $95.6 million in 2004.

Our property, plant and equipment includes the following amounts for assets subject to capital leases (amounts in thousands):

	December 31, 2006
Building—Corporate headquarters in Cambridge, Massachusetts		$	130,689
Less accumulated depreciation		(28,363		)
Assets subject to capital leases, net		$	102,326

F-99

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE G.PROPERTY, PLANT AND EQUIPMENT (Continued)

We capitalize costs we have incurred in validating manufacturing equipment and facilities for products which have reached technological feasibility. As of December 31, 2006, capitalized validation costs, net of accumulated depreciation, were $17.2 million.

We have capitalized the following amounts of interest costs incurred in financing the construction of our manufacturing facilities (amounts in millions):

For the Years Ended December 31,
2006	2005		2004
$9.2	$	8.9	$	8.7

The estimated cost of completion for assets under construction as of December 31, 2006 is approximately $580 million.

NOTE H.   GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The following tables contains the change in our goodwill during the years ended December 31, 2006 and 2005 (amounts in thousands):

	As of December 31, 2005			Acquisitions			Adjustments			Impairment				As of December 31, 2006
Renal (1)		$	304,492		$	—		$	1,036		$	—			$	305,528
Therapeutics		354,709			—			—			—				354,709
Transplant (2)		128,511			29,080			—			—				157,591
Biosurgery		7,585			—			—			—				7,585
Genetics (3)		218,962			—			283			(219,245		)		—
Other (4)		473,308			—			60			—				473,368
Goodwill		$	1,487,567		$	29,080		$	1,379		$	(219,245	)		$	1,298,781

	As of December 31, 2004			Acquisitions			Adjustments				Impairment			As of December 31, 2005
Renal		$	76,753		$	227,739		$	—			$	—		$	304,492
Therapeutics		354,709			—			—				—			354,709
Transplant (5)		132,111			—			(3,600		)		—			128,511
Biosurgery		7,585			—			—				—			7,585
Genetics		218,962			—			—				—			218,962
Other (4,6)		500,796			5,344			(32,832		)		—			473,308
Goodwill		$	1,290,916		$	233,083		$	(36,432	)		$	—		$	1,487,567

(1)The adjustment to goodwill for Renal includes the recording of a $3.6 million reserve for returns of short dated product sold by Bone Care prior to the date of acquisition, offset by $2.5 million of revisions to the estimates of liabilities related to exit activities and deferred taxes

(2)Includes the goodwill resulting from the acquisition of AnorMED in November 2006.

F-100

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE H.GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

(3)Impairment for Genetics represents the write off of the goodwill assigned to our Genetics reporting unit in accordance with FAS 142, “Goodwill and Other Intangible Assets.”

(4)The adjustments to Other goodwill primarily include foreign currency revaluation adjustments for goodwill denominated in foreign currencies.

(5)In 2005, includes $3.6 million of adjustments to SangStat’s goodwill related to the reversal of a tax accrual.

(6)Includes the goodwill resulting from the acquisitions of Equal Diagnostics in July 2005 and ILEX Oncology in December 2004. We recorded $32.9 million of adjustments to the ILEX Oncology goodwill in 2005, mainly consisting of a decrease of $40.9 million related to a revision of estimate of deferred taxes, offset by an increase of $8.0 million primarily related to revisions of estimates of liabilities related to exit activities, of which $6.9 million, net of tax, represents a charge to terminate a development contract.

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 asset may not be recoverable. We completed the required annual impairment tests for our $1.5 billion of net goodwill in the third quarter of 2006 and determined that the $219.2 million of goodwill assigned to our Genetics reporting unit was impaired. Such goodwill was derived as a result of our acquisitions of substantially all of the pathology/oncology testing assets related to the Physician Services and Analytical Services business units of IMPATH in April 2004, Genetrix, Inc. in February 1996 and the minority share of IG Laboratories, Inc. in October 1995.

We determined the fair value of the net assets of our Genetics reporting unit by discounting, to present value, its estimated future cash flows. Due to the reduction of reimbursement rates for certain test offerings and increased infrastructure costs, the discounted future cash flows of our Genetics reporting unit were negatively impacted causing the fair value of the net assets of our Genetics reporting unit to be lower than the carrying value. We calculated the fair value and determined that the goodwill assigned to our Genetics reporting unit was fully impaired and we recorded a pre-tax impairment charge of $219.2 million and $69.8 million of related tax benefits in September 2006. No additional impairment charges were required for the remaining $1.3 billion of goodwill related to our other reporting units.

In connection with recording the charge for impairment of the goodwill assigned to our Genetics business unit, we also tested the long-lived assets for our Genetics business unit to determine whether any of the impairment recognition criteria in FAS 144 had been met.  We determined that the long-lived assets for our Genetics business unit were not impaired and, therefore, no impairment charge was required for those assets.

F-101

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE H.GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

Other Intangible Assets

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

	As of December 31, 2006								As of December 31, 2005
	Gross Other Intangible Assets		Accumulated Amortization				Net Other Intangible Assets		Gross Other Intangible Assets		Accumulated Amortization				Net Other Intangible Assets
Technology	$	1,505,748		$	(424,650	)	$	1,081,098	$	1,503,963		$	(307,503	)	$	1,196,460
Patents (1)	194,560			(87,063		)	107,497		183,360			(71,393		)	111,967
Trademarks	60,227			(31,439		)	28,788		60,227			(26,080		)	34,147
License fees (2)	77,807			(20,597		)	57,210		44,777			(16,206		)	28,571
Distribution rights (3)	260,073			(85,543		)	174,530		195,299			(43,108		)	152,191
Customer lists (4)	90,783			(48,760		)	42,023		108,083			(41,861		)	66,222
Other	2,045			(1,153		)	892		2,078			(742		)	1,336
Total	$	2,191,243		$	(699,205	)	$	1,492,038	$	2,097,787		$	(506,893	)	$	1,590,894

(1)Includes an additional $11.2 million of intangible assets resulting from obtaining an exclusive license to a Hectorol-related patent from Wisconsin Alumni Research Foundation in June 2006, which provides us with effective control of the patent.

(2)Includes additions in 2006 to licenses valued at: $6.5 million resulting from our acquisition of all of the rights to GlucaMesh and GlucaTex products used in the surgical repair of hernias from the former shareholders of Surgi.B in March 2006, $3.5 million resulting from our acquisition of AnorMED and $22.2 million for milestone payments for the development of Myozyme.

(3)Includes an additional $58.7 million of intangible assets resulting from additional payments made or accrued in 2006 in connection with the reacquisition of the Synvisc sales and marketing rights in several countries from Wyeth in January 2005.

(4)Reflects the write off of $17.3 million of fully amortized customer lists, related to our acquisition of SangStat in September 2003, during the first quarter of 2006.

All of our other intangible assets are amortized over their estimated useful lives. Total amortization expense for our other intangible assets was:

·$209.4 million for the year ended December 31, 2006;

·$181.6 million for the year ended December 31, 2005; and

·$109.5 million for the year ended December 31, 2004.

F-102

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE H.GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

The estimated future amortization expense for other intangible assets for the five succeeding fiscal years and thereafter is as follows (amounts in thousands):

Year Ended December 31,	Estimated Amortization Expense(1)
2007		$	199,854
2008		208,005
2009		215,373
2010		228,385
2011		236,822
Thereafter		613,161

(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 milestone payments we will be required to make to Synpac related to regulatory approvals. These contingent payments will be recorded as intangible assets when the payments are accrued. Estimated future amoritization expense also includes estimated amortization for other arrangements involving contingent payments.

F-103

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE I.   INVESTMENTS IN MARKETABLE SECURITIES AND STRATEGIC EQUITY INVESTMENTS

Marketable Securities (amounts in thousands):

	December 31,
	2006				2005
	Cost		Market Value		Cost		Market Value
Cash equivalents (1):
Corporate notes	$	—	$	—	$	45,816	$	45,816
Money market funds	443,477		443,477		34,069		34,069
	443,477		443,477		79,885		79,885
Short-term investments:
Corporate notes	65,932		65,607		108,539		108,121
U.S. Government agencies	21,347		21,174		41,256		40,856
Non U.S. Government agencies	—		—		8,011		7,864
U.S. Treasury notes	33,287		33,113		37,519		37,105
	120,566		119,894		195,325		193,946
Long-term investments:
Corporate notes	355,008		353,497		294,738		291,090
U.S. Government agencies	189,372		188,148		187,713		185,256
Fixed income fund	252		250		254		244
U.S. Treasury notes	132,192		131,645		127,569		126,606
	676,824		673,540		610,274		603,196
Total cash equivalents, short- and long-term investments	$	1,240,867	$	1,236,911	$	885,484	$	877,027
Investments in equity securities	$	45,766	$	66,563	$	104,934	$	135,930

(1)Cash equivalents are included as part of cash and cash equivalents on our consolidated balance sheets.

The following table contains information regarding the range of contractual maturities of our investments in debt securities (amounts in thousands):

	December 31,
	2006				2005
	Cost		Market Value		Cost		Market Value
Within 1 year	$	564,043	$	563,371	$	275,210	$	273,831
1-2 years	157,682		156,944		211,832		209,918
2-10 years	519,142		516,596		398,442		393,278
	$	1,240,867	$	1,236,911	$	885,484	$	877,027

F-104

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE I.INVESTMENTS IN MARKETABLE SECURITIES AND STRATEGIC EQUITY INVESTMENTS (Continued)

Strategic Investments in Equity Securities

The following table shows the strategic investments in equity securities of unconsolidated entities as of December 31, 2006 and 2005 (amounts in thousands):

	December 31, 2006								December 31, 2005
	Adjusted Cost		Market Value		Unrealized Gain/(Loss)				Adjusted Cost		Market Value		Unrealized Gain/(Loss)
Publicily-held companies (1):
ABIOMED, Inc.	$	12,185	$	32,539		$	20,354		$	12,185	$	21,323		$	9,138
GTC Biotherapeutics, Inc.	4,910		4,618			(292		)	5,811		8,077			2,266
Dyax Corp.	1,096		1,727			631			1,096		3,003			1,907
BioMarin Pharmeceutical Inc. (2)	—		—			—			18,000		22,666			4,666
Cambridge Antibody Technology plc (3)	—		—			—			41,012		55,519			14,507
Other (4)	2,455		2,559			104			5,000		3,512			(1,488		)
Total publicly-held companies	20,646		41,443			20,797			83,104		114,100			30,996
Private equity funds (5)	16,732		16,732			—			13,020		13,020			—
Privately-held companies (4,6,7)	8,388		8,388			—			8,810		8,810			—
Total	$	45,766	$	66,563		$	20,797		$	104,934	$	135,930		$	30,996

(1)Marketable equity securities that have readily determinable market values are stated at market value. We record temporary unrealized gains and losses related to these investments in other comprehensive income (loss).

(2)   In January 2006, we recorded a $6.4 million gain in connection with the sale of our entire investment of 2.1 million shares of the common stock of BioMarin.

(3)We have a strategic alliance with CAT, a UK-based biotechnology company for the development and commercialization of human monoclonal antibodies directed against transforming growth factor (TGF)-beta. Prior to May 2006, we owned a total of 4.6 million ordinary shares of CAT. In May 2006, we recorded a $7.0 million gain on the sale of a portion of our investment in CAT. In June 2006, in connection with the acquisition of CAT by AstraZeneca, we recorded a $62.4 million gain on the tender of our remaining investment in CAT, which became unconditional on June 21, 2006.

(4)We review the carrying value of each of our strategic investments in equity securities on a quarterly basis for potential impairment. Gains (losses) on investments in equity securities, net includes charges for impaired investments of $5.4 million in 2006, including $2.5 million to write-off our investment in RenaMed and $2.2 million to write down our investment in ViaCell because we considered the decline in value of these investments to be other than temporary.

(5)Our investments in private equity funds are stated at adjusted  cost basis, which approximates market value.

(6)Equity securities without readily determinable market values and for which we do not exercise significant influence are stated at cost and are periodically reviewed for impairment.

F-105

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE I.INVESTMENTS IN MARKETABLE SECURITIES AND STRATEGIC EQUITY INVESTMENTS (Continued)

(7)In April 2005, we sold our entire investment in the common stock of Theravance for $4.5 million in cash. Our investment in Theravance had a zero cost basis and, as a result, we recorded a gain of $4.5 million in April 2005 related to this sale.

Unrealized Gains and Losses on Marketable Securities and Investments in Equity Securities

We record unrealized holding gains and losses, net of tax, related to our investments in marketable securities and strategic investments, to the extent they are determined to be temporary, in stockholders’ equity. The following table sets forth the gross amounts recorded:

	December 31,
	2006		2005
Unrealized holding gains	$	21.9 million	$	32.7 million
Unrealized holding losses	$	5.1 million	$	10.1 million

We also collaborate with or provide services to certain of the companies in which we hold or have held strategic equity investments, including CAT, Dyax, GTC, RenaMed, BioMarin and MacroGenics. Our relationships with Dyax, GTC and RenaMed are described below. Our relationships with BioMarin and MacroGenics are described in Note J., “Equity Method Investments.”

Dyax Corp.

Agreements with Dyax Corp.

In October 1998, we entered into a collaboration agreement with Dyax to develop and commercialize DX-88, one of Dyax’s proprietary compounds for the treatment of chronic inflammatory diseases. In May 2002, we restructured our collaboration agreement with Dyax. In 2003, we acquired a 49.99% interest in Dyax-Genzyme LLC, formerly known as Kallikrein LLC, a joint venture with Dyax for the development of DX-88 for hereditary angioedema, or HAE, and other chronic inflammatory diseases.  Under the terms of the collaboration agreement and related manufacturing agreement, both companies shared development costs of DX-88, except for the first $14.5 million of manufacturing and validation costs for DX-88 active pharmaceutical ingredient, which were the responsibility of Dyax.  As a result of our application of FIN 46, we have consolidated the results of Dyax-Genzyme LLC. Our consolidated balance sheet as of December 31, 2006 includes assets related to Dyax-Genzyme LLC, which are not significant and substantially all of which are lab equipment net of their associated accumulated depreciation. We have recorded Dyax’s portion of this joint venture’s losses as minority interest in our consolidated statements of operations. 

F-106

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE I.INVESTMENTS IN MARKETABLE SECURITIES AND STRATEGIC EQUITY INVESTMENTS (Continued)

In February 2007, we agreed with Dyax to terminate our participation and interest in Dyax-Genzyme LLC effective February 20, 2007.  In connection with this termination, we made a capital contribution of approximately $17 million in cash to Dyax-Genzyme LLC and Dyax purchased our interest in the joint venture for 4.4 million shares of Dyax common stock, valued at $16.9 million, based on the closing price of Dyax common stock on February 23, 2007.  Dyax now owns all of the assets of the joint venture, including worldwide rights to develop and commercialize DX-88.  Pursuant to the termination agreement, we agreed to:

·a 5 year standstill period during which we will not acquire any additional shares of Dyax;

·not enter into any future licensing or collaboration arrangements for the prevention and or treatment of hereditary, acquired or drug-induced angioedema for 2 years; and

·negotiate in good faith a transitional services agreement for us to provide certain services to Dyax.

Note Receivable from Dyax Corp.

In May 2002, we extended to Dyax a $7.0 million line of credit. Dyax issued a senior secured promissory note in the principal amount of $7.0 million to us under which it can request periodic advances of not less than $250,000 in principal, subject to certain conditions. Advances under this note were due, together with any accrued but unpaid interest, in May 2005. In May 2005, Dyax exercised its right to extend the maturity of the note from May 2005 to May 2007.

In August 2006, we amended our $7.0 million secured promissory note receivable from Dyax to extend the maturity date from May 2007 to May 2010, eliminate the existing financial covenants and replace the original collateral on the note with a letter of credit from a major bank for $7.0 million plus 90 days of interest at the Prime Rate plus 2%. As of December 31, 2006, $7.3 million of principal and accrued interest receivable remains due to us from Dyax under this note, which we have recorded as a note receivable-related party in our consolidated balance sheet. The termination of our participation and interest in the joint venture with Dyax has no effect on the note receivable.

We considered Dyax to be a related party as of December 31, 2006 because the chairman and chief executive officer of Dyax was a member of our board of directors and Dyax-Genzyme LLC was operational during the periods presented. As of December 31, 2006, we held approximately 1% of the outstanding shares of Dyax common stock and as of February 28, 2007, as a result of the additional 4.4 million shares of Dyax common stock we received in connection with the termination of our participation and interest in the Dyax-Genzyme LLC, our ownership interest in Dyax increased to approximately 11%.

F-107

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE I.   INVESTMENTS IN MARKETABLE SECURITIES AND STRATEGIC EQUITY INVESTMENTS (Continued)

GTC Biotherapeutics

As of December 31, 2006, we hold approximately 6% of the outstanding shares of GTC common stock. We provide GTC with certain research and development services and sublease to GTC laboratory and research space. During 2006, amounts received from GTC or owed to us by GTC under these agreements were not significant.

RenaMed Collaboration

In June 2005, we made a $2.5 million equity investment in a private financing completed by RenaMed, formerly known as Nephros Therapeutics, Inc. In September 2005, we entered into a strategic collaboration with RenaMed to develop and commercialize RenaMed’s Bio-Replacement TherapyTM for the treatment of acute renal failure. The joint development and commercialization agreement called for us to share costs and profits of the collaboration equally. Through the third quarter of 2006, we contributed a total of $23.5 million of funding to support the next stage of clinical development. In the fourth quarter of 2006, RenaMed terminated its phase 2 clinical trial evaluating the safety and efficacy of Bio-Replacement TherapyTM for the treatment of acute renal failure after an independent data monitoring committee recommended that the trial should be halted. As a result of the termination of this clinical trial, we recorded a charge of $2.5 million in December 2006 to write off our entire investment in RenaMed because we consider the decline in this investment to be other than temporary. In February 2007, we terminated the Collaboration and License Agreement with RenaMed.

NOTE J.   EQUITY METHOD INVESTMENTS

Our equity method investments are included in other noncurrent assets in our consolidated balance sheet and totaled $34.4 million at December 31, 2006 and $39.2 million at December 31, 2005.

The following tables describe:

·our portion of the net income (loss) of each equity method investment for the periods presented, which we have recorded as income (charges) to equity in income (loss) of equity method investments in our consolidated statements of operations; and

·total net income (loss) of each equity method investment for the periods presented.

	Our Portion of the Net Income (Loss) of Our Equity Method Investments									Total Income (Loss) of Our Equity Method Investments
Equity Method Investment	2006			2005			2004			2006			2005			2004
	(Amounts in millions)									(Amounts in millions)
BioMarin/Genzyme LLC	$	18.5		$	7.1		$	(9.7	)	$	37.1		$	14.0		$	(19.3	)
MG Biotherapeutics LLC	(1.8		)	(4.0		)	(2.5		)	(3.6		)	(7.9		)	(5.0		)
Other	(1.0		)	(2.9		)	(3.4		)	(13.6		)	(22.3		)	(18.7		)
Totals	$	15.7		$	0.2		$	(15.6	)	$	19.9		$	(16.2	)	$	(43.0	)

F-108

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE J.EQUITY METHOD INVESTMENTS (Continued)

Condensed financial information for our equity method investees is summarized below in aggregate:

	For the Years Ended December 31,
	2006			2005			2004
	(Amounts in thousands)
Revenue	$	97,060		$	76,698		$	42,583
Gross profit	72,642			52,185			27,630
Operating expenses	(53,931		)	(62,361		)	(71,321		)
Net income (loss)	19,865			(16,251		)	(43,016		)

	December 31,
	2006		2005
	(Amounts in thousands)
Current assets	$	96,727	$	103,793
Noncurrent assets	2,297		3,779
Current liabilities	16,245		12,441
Noncurrent liabilities	7,878		647

The following describes our investments in BioMarin/Genzyme LLC and MG Biotherapeutics LLC. Our investments in Peptimmune and THP are not significant.

BioMarin/Genzyme LLC

In September 1998, we and BioMarin formed a joint venture, 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 MPS I. BioMarin/Genzyme LLC is owned 50% by BioMarin and one of its wholly owned subsidiaries, which we refer to collectively as the BioMarin Companies, and 50% by us. In connection with the formation of BioMarin/Genzyme LLC, we, the BioMarin Companies and BioMarin/Genzyme LLC entered into a collaboration agreement under which we and the BioMarin Companies granted to BioMarin/Genzyme LLC a worldwide, exclusive, irrevocable, royalty-free right and license or sublicense to develop, manufacture and market Aldurazyme for the treatment of MPS I and other alpha-L-iduronidase deficiencies. All program-related costs for BioMarin/Genzyme LLC are equally funded by BioMarin, on behalf of the BioMarin Companies, and us. We and BioMarin are required to make monthly capital contributions to BioMarin/Genzyme LLC to fund budgeted operating costs. If either BioMarin or Genzyme fails to make two or more of the monthly capital contributions, and the other party does not exercise its right to terminate the collaboration agreement or compel performance of the funding obligation, the defaulting party’s (or, in the case of default by BioMarin, the BioMarin Companies’) percentage interest in BioMarin/Genzyme LLC and future funding responsibility will be adjusted proportionately. BioMarin and Genzyme did not make any capital contributions to BioMarin/Genzyme LLC in 2006 and 2005 because BioMarin/Genzyme LLC had sufficient cash to meet its financial obligations.

On April 30, 2003, the FDA granted marketing approval for Aldurazyme as an enzyme replacement therapy for patients with the Hurler and Hurler-Scheie forms of MPS I, and Scheie patients with moderate to severe symptoms. Aldurazyme has been granted orphan drug status in the United States, which generally provides seven years of market exclusivity. On June 11, 2003, the European Commission granted

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Notes To Consolidated Financial Statements (Continued)

NOTE J.EQUITY METHOD INVESTMENTS (Continued)

marketing approval for Aldurazyme to treat the non-neurological manifestations of MPS I in patients with a confirmed diagnosis of the disease. Aldurazyme has been granted orphan drug status in the European Union, which generally provides ten years of market exclusivity. In October 2006, Japan’s Health, Labor and Welfare Ministry granted marketing approval for Aldurazyme, the first specific treatment approved in Japan for patients with MPS I.

We are commercializing Aldurazyme on behalf of BioMarin/Genzyme LLC in the United States, Canada, the European Union, Latin America and the Asia Pacific regions. We continue to launch Aldurazyme in these regions on a country-by-country basis as pricing and reimbursement approvals are obtained. Aldurazyme is manufactured at BioMarin’s facility in Novato, California and is sent to either our manufacturing facility in Allston, Massachusetts or to a third-party facility for the final fill-finish process.

Our portion of the net income (loss) of BioMarin/Genzyme LLC is included in equity in income (loss) of equity method investments in our consolidated statements of operations.

MG Biotherapeutics LLC

In June 2004, we entered into a collaboration with Medtronic for the development of new treatments for heart disease. One aspect of this collaboration involved the formation of MG Biotherapeutics LLC. In June 2004, we made an initial capital contribution of $10.0 million to MG Biotherapeutics LLC. Our current investment balance in MG Biotherapeutics LLC is included in other noncurrent assets in our consolidated balance sheets as of December 31, 2006 and 2005.

NOTE K.   ACCRUED EXPENSES

	December 31,
	2006	2005
	(Amounts in thousands)
Compensation	$169,350	$	147,089
Rebates	62,166	50,304
Bank overdraft	25,966	49,035
Other	219,960	183,604
Total	$477,442	$	430,032

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Notes To Consolidated Financial Statements (Continued)

NOTE L.   LONG-TERM DEBT AND LEASES

Long-Term Debt, Capital Lease Obligations and Convertible Debt

Our long-term debt capital lease obligations and convertible debt consist of the following (amounts in thousands):

	December 31,
	2006			2005
1.25% convertible senior notes due December 2023	$	690,000		$	690,000
Revolving credit facility maturing in December 2006	—			—
Revolving credit facility maturing in July 2011	—			—
Notes payable	8,958			8,693
Capital lease obligations	117,071			121,420
Long-term debt, capital lease obligations and convertible debt, including current portion	816,029			820,113
Less current portion	(6,226		)	(4,461		)
Noncurrent portion	$	809,803		$	815,652

Over the next five years and thereafter, we will be required to repay the following principal amounts of our long-term debt (excluding capital leases) (amounts in millions):

2007	2008		2009		2010		2011		After 2011
$1.0	$	691.0	$	1.1	$	1.1	$	1.1		$	3.6

1.25% Convertible Senior Notes

On December 9, 2003, we completed the private placement of $690.0 million in principal of 1.25% convertible senior notes due December 1, 2023. After deducting offering costs of $17.0 million, net proceeds from the offering were approximately $673.0 million. We pay interest on these notes on June 1 and December 1 each year.

The notes are convertible into shares of Genzyme Stock at an initial conversion rate, subject to adjustment, of 14.0366 shares per $1,000 principal amount of notes (representing an initial conversion price of approximately $71.24 per share) in the following circumstances:

·if the closing sale price of Genzyme Stock for at least 20 consecutive trading days in the 30 consecutive trading day period ending on the trading day immediately preceding the day the notes are surrendered for conversion exceeds 120% of the conversion price in effect on that 30th trading day;

·during the five consecutive trading day period immediately following any 10 consecutive trading day period (the “Note Measurement Period”), if the trading price per $1,000 principal amount of notes on each trading day during the Note Measurement Period was less than 95% of the conversion value of the notes on such trading day, unless the notes are surrendered after December 1, 2018 and the closing sale price of Genzyme Stock on the trading day immediately preceding the day the notes are surrendered is greater than 100% but equal to or less than 120% of the conversion price then in effect;

·if specified corporate transactions have occurred, as provided in the indenture and terms of the note; or

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Notes To Consolidated Financial Statements (Continued)

NOTE L.LONG-TERM DEBT AND LEASES (Continued)

·if we redeem the notes. We have the right to redeem the notes for cash, in whole or in part, at our sole option on and after December 1, 2008.

Furthermore, on each of December 1, 2008, December 1, 2013 and December 1, 2018, holders of the notes may require us to purchase all or a portion of their notes at a purchase price equal to 100% of the principal amount of notes to be purchased, plus any accrued and unpaid interest to, but excluding, the purchase date. We may pay the purchase price, solely at our option, in cash, shares of Genzyme Stock or a combination of cash and shares of Genzyme Stock, provided that we will pay any accrued and unpaid interest in cash. The shares of Genzyme Stock will be valued at 100% of the average closing sale price of Genzyme Stock for the 10 trading days immediately preceding, and including, the third business day immediately preceding the purchase date.

Interest expense related to these notes was $11.9 million in 2006 and 2005. These amounts include $3.2 million in 2006 and 2005 for amortization of debt offering costs. The fair value of these notes was $716.8 million at December 31, 2006 and $781.0 million at December 31, 2005.

Revolving Credit Facility

In December 2003, we entered into our 2003 revolving credit facility. On July 14, 2006, we terminated our 2003 revolving credit facility and replaced it with our 2006 revolving credit facility. The proceeds of loans under our 2006 revolving credit facility can be used to finance working capital needs and for general corporate purposes. Our 2006 revolving credit facility may be increased at any time by up to an additional $350.0 million in the aggregate, as long as no default or event of default has occurred or is continuing and certain other customary conditions are satisfied. Borrowings under our 2006 revolving credit facility will bear interest as follows:

·revolving loans denominated in U.S. dollars or a foreign currency (other than Euros) bear interest at a variable rate equal to LIBOR for loans in U.S. dollars and a comparable index rate for foreign currency loans, plus an applicable margin;

·revolving loans denominated in Euros bear interest at a variable rate equal to the EURIBOR Rate plus an applicable margin;

·at our option, U.S. dollar swingline loans (demand loans requiring only one day of advance notice, which grant us access to up to $20.0 million of our 2006 revolving credit facility in order to cover possible working capital shortfalls) bear interest at the greater of the Prime Rate and the Federal Funds Effective Rate plus one half of one percent; and

·multicurrency swingline loans bear interest at a rate equal to the average rate at which overnight deposits in the currency in which such swingline loan is denominated, and approximately equal in principal amount to such swingline loan, are obtainable by the swingline lender for such swingline loan in the interbank market plus an applicable margin.

The applicable margins for LIBOR and multicurrency revolving loans range from 0.180% to 0.675% per annum, and for multicurrency swingline loans from 0.430% to 0.925% per annum, in each case determined by our credit ratings. In addition, we are required to pay a facility fee of between 7 to 20 basis points based on the aggregate commitments under our 2006 revolving credit facility, and in certain circumstances a utilization fee of 10 basis points.

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Notes To Consolidated Financial Statements (Continued)

NOTE L.LONG-TERM DEBT AND LEASES (Continued)

The terms of our 2006 revolving credit facility include various covenants, including financial covenants that require us to meet minimum interest coverage ratios and maximum leverage ratios. As of December 31, 2006 we were in compliance with these covenants.

As of December 31, 2006, no amounts were outstanding under our 2006 revolving credit facility.

Notes Payable

We assumed a $10.0 million note payable in July 2005 in connection with our acquisition of Equal Diagnostics. This note bears interest at 3.86% and is payable to three former shareholders of Equal Diagnostics over eight years in equal annual installments of $1.3 million.

Capital Leases

We have non-cancelable capital lease obligations related to certain machinery and equipment, administrative offices and our corporate headquarters.

We had a capital lease obligation related to our administrative offices in Waltham, Massachusetts that required us to make interest-only lease payments of approximately $2.0 million per year through October 31, 2005, the end of the lease term. On October 31, 2005, we exercised our option to purchase the building and improvements for a purchase price equal to the total amount funded by the lessor of $25.0 million, plus $0.5 million of accrued interest and an insignificant amount of other closing costs.

Our capital lease obligation related to our corporate headquarters in Cambridge, Massachusetts, which we began to occupy in November 2003, requires us to make monthly payments of $1.3 million, which will be adjusted to $1.6 million in August 2013. We have recorded the value of the building and related obligations of $130.7 million in our consolidated balance sheet. The term of the lease is fifteen years and may be extended at our option for two successive ten-year periods.

Over the next five years and thereafter, we will be required to pay the following amounts under our non-cancelable capital leases (amounts in millions):

2007	$	15.6
2008	15.5
2009	15.5
2010	15.4
2011	15.4
Thereafter	118.3
Total lease payments	195.7
Less: interest	(78.6		)
Total principal payments	117.1
Less current portion	(5.0		)
Total	$	112.1

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Notes To Consolidated Financial Statements (Continued)

NOTE L.LONG-TERM DEBT AND LEASES (Continued)

Operating Leases

We lease facilities and personal property under non-cancelable operating leases with terms in excess of one year. Our total expense under operating leases was (amounts in millions):

For the Years Ended December 31,
2006	2005		2004
$60.9	$	49.5	$	49.0

Over the next five years and thereafter, we will be required to pay the following amounts under non-cancelable operating leases (amounts in millions):

2007	2008		2009		2010		2011		After 2011			Total
$53.5	$	45.5	$	34.4	$	26.0	$	21.7		$	127.5	$	308.6

NOTE M.   STOCKHOLDERS’ EQUITY

Preferred Stock

	At December 31, 2006					At December 31, 2005
Series	Authorized	Issued		Outstanding		Authorized	Issued		Outstanding
Series A Junior Participating, $0.01 par value	3,000,000		—		—	3,000,000		—		—
Undesignated	7,000,000		—		—	7,000,000		—		—
	10,000,000		—		—	10,000,000		—		—

Our charter permits us to issue shares of preferred stock at any time in one or more series. Our board of directors will establish the preferences, voting powers, qualifications, and special or relative rights or privileges of any series of preferred stock before it is issued.

Common Stock

The following table describes the number of authorized and outstanding shares of our common stock at December 31, 2006 and 2005:

		Outstanding at December 31,
Series	Authorized	2006	2005
Genzyme Stock, $0.01 par value	690,000,000	263,026,163	259,151,461

Stock Rights

Under our shareholder rights plan, each outstanding share of Genzyme Stock also represents one preferred stock purchase right. When the stock purchase rights become exercisable, the holders of Genzyme Stock will be entitled to purchase one two-hundredth of a newly issued share of Series A Preferred Stock, $0.01 par value per share, for $150.00.

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Notes To Consolidated Financial Statements (Continued)

NOTE M.STOCKHOLDERS’ EQUITY (Continued)

Each share of Series A Preferred Stock will be entitled to a minimum preferential quarterly dividend payment of $1 per share, but will be entitled to an aggregate dividend of 100 times the cash dividend declared per share of Genzyme Stock. Each share of Series A Preferred Stock will have 100 votes and will vote together with the Genzyme Stock. In the event of any merger, consolidation or other transaction in which Genzyme Stock is exchanged, each share of Series A Preferred Stock will be entitled to receive 100 times the amount received per share of Genzyme Stock.

A stock purchase right becomes exercisable either:

·ten days after our board of directors announces that a third party has become the owner of 15% or more of the total voting power of our outstanding common stock combined; or

·ten business days after a third party announces or initiates a tender or exchange offer that would result in that party owning 15% or more of the total voting power of our outstanding common stock combined.

In either case, the board of directors can extend the ten-day delay. These stock purchase rights expire in March 2009.

Directors’ Deferred Compensation Plan

Each member of our board of directors who is not also one of our employees may defer receipt of all or a portion of the cash compensation payable to him or her as a director and receive either cash or stock in the future. Under this plan, the director may defer his or her compensation until his or her services as a director cease or until another date specified by the director.

Under a deferral agreement, a participant indicates the percentage of deferred compensation to allocate to cash and stock, upon which a cash deferral account and a stock deferral account are established. The cash account bears interest at the rate paid on 90-day Treasury bills with interest payable quarterly. The stock account is for amounts invested in hypothetical shares of Genzyme Stock. These amounts are converted into shares quarterly at the average closing price of the stock for all trading days during the quarter.

Distributions are paid in a lump sum or in annual installments for up to five years. Payments begin the year following a director’s termination of service or, subject to certain restrictions, in a year elected by the participant. As of December 31, 2006, three of the eight eligible directors had established accounts under this plan, and two of these three directors are currently deferring their compensation, however, the amounts are not significant. We have reserved 105,962 shares of Genzyme Stock to cover distributions credited to stock accounts under the plan. We had not made any stock distributions under this plan as of December 31, 2006. As of December 31, 2006, we have made cash distributions totaling $69,492 to one director under the terms of his deferral agreement.

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Notes To Consolidated Financial Statements (Continued)

NOTE M.STOCKHOLDERS’ EQUITY (Continued)

Stock-Based Compensation

Equity Plans

The purpose of our equity plans is to attract, retain and motivate our key employees, consultants and directors. Options granted under these plans can be either incentive stock options (ISO) or nonstatutory stock options (NSO), as specified in the individual plans. Shares issued as a result of stock option exercises are funded through the issuance of new shares as opposed to treasury shares. The following table contains information about our equity plans:

			As of December 31, 2006
Plan Name	Group Eligible	Type of Option Granted	Options Reserved for Issuance	Options Outstanding	Options Available for Grant
2004 Equity Incentive Plan (1,2)	All key employees and consultants	ISO/NSO	23,351,348	13,335,858	10,015,490
2001 Equity Incentive Plan (1)	All key employees and consultants	ISO/NSO	10,253,769	10,134,222	119,547
1997 Equity Incentive Plan (1)	All key employees and consultants, except officers	NSO	12,293,073	11,868,151	424,922
1998 Director Stock Option Plan (2,3)	Non-employee
	board members	NSO	960,291	598,931	361,360
Assumed Options (4)			386,101	386,101	—
			47,244,582	36,323,263	10,921,319

(1)The exercise price of option grants may not be less than the fair market value at the date of grant. Option grants have a maximum term of ten years. The compensation committee of our board of directors, or its delegates as applicable, determines the terms and conditions of each option grant, including who, among eligible persons, will receive option grants, the form of payment of the exercise price, the number of shares granted, the vesting schedule and the terms of exercise.

(2)At our annual meeting of shareholders in May 2006, shareholders authorized us to amend our 2004 Equity Incentive Plan to provide for the grant of restricted stock and restricted stock units. As of December 31, 2006, no restricted stock or restricted stock units have been issued. We plan to seek shareholder approval at our annual meeting of shareholders in May 2007 for the 2007 Director Equity Plan under which we also plan to provide for the grant of restricted stock and restricted stock units and to begin issuing restricted stock units in connection with our general grant to employees in May 2007.

(3)Options are automatically granted on the date of our annual shareholders meeting or at a director’s initial appointment to the board, have an exercise price equal to the fair market value of Genzyme Stock on the date of grant, expire ten years after the initial grant date and vest on the date of the next annual shareholders meeting following the date of grant.

(4)Consists of options we assumed through our acquisitions of Biomatrix, GelTex, Focal, Inc., Novazyme and ILEX Oncology.

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Notes To Consolidated Financial Statements (Continued)

NOTE M.STOCKHOLDERS’ EQUITY (Continued)

All stock-based awards to non-employees are accounted for at their fair value in accordance with FAS 123R and EITF Issue No. 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.”

In 2006, we accounted for options granted to our employees and directors under the fair value method of accounting using the Black-Scholes valuation model to measure stock option expense at the date of grant. All stock option grants have an exercise price equal to the fair market value of Genzyme Stock on the date of grant and generally have a 10-year term and vest in increments, generally over four years from the date of grant, although we may grant options with different vesting terms from time to time. Upon termination of employment other than by death, disability or change of control, unvested options are cancelled, and any unexercised vested options will expire three months after the employee’s termination date. When a director leaves the board, unvested options are cancelled and any unexercised vested options will expire at the end of their term. Excluding our directors who are not employees, when an employee meets a retirement eligibility age of 60 with at least five years of service, upon termination (except for cause) the employee’s options automatically become fully vested and will expire three years after the employee’s termination date or on the original expiration date set at the time the options were granted, whichever is earlier. We recognize stock-based compensation expense for each grant on a straight-line basis over the employee’s or director’s requisite service period, generally the vesting period of the award. Additionally, stock-based compensation expense related to stock options includes an estimate for pre-vesting forfeitures. Effective January 1, 2006, in connection with our adoption of FAS 123R, we now recognize stock-based compensation expense immediately for awards granted to retirement eligible employees or over the period from the grant date to the date retirement eligibility is achieved, if that is expected to occur during the nominal vesting period. For stock-based compensation expense recognition purposes only, grants to retirement eligible employees prior to January 1, 2006 are not subject to accelerated vesting and expense is recognized over the nominal vesting period.

ESPP

Our 1999 ESPP allows employees to purchase our stock at a discount. Under this plan, the purchase price per share of Genzyme Stock is 85% of the lower of the fair market value of Genzyme Stock at the beginning of an enrollment period or on the purchase date. Employees working at least 20 hours per week may elect to participate in our ESPP during specified open enrollment periods, which occur twice each year shortly before the start of each new enrollment period. New enrollment periods begin on the first trading day of January and July and each enrollment period lasts two years. Employee contributions for each enrollment period are automatically used to purchase stock on behalf of each participating employee on eight pre-determined purchase dates during the two-year enrollment period, which occur once every three months, in January, April, July and October. We place limitations on the total number of shares of stock that employees can purchase under the plan in a given year. As of December 31, 2006, 5,829,391 shares of Genzyme Stock were authorized for purchase under the ESPP, of which 813,725 remain available.

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Notes To Consolidated Financial Statements (Continued)

NOTE M.STOCKHOLDERS’ EQUITY (Continued)

Adoption of FAS 123R

As a result of adopting FAS 123R, for the year ended December 31, 2006, we recorded pre-tax stock-based compensation expense, net of estimated forfeitures, which were allocated based on the functional cost center of each employee as follows (amounts in thousands, except per share amount):

	For the Year Ended December 31, 2006
Pre-tax stock-based compensation expense, net of estimated forfeitures (1):
Cost of products and services sold (2)		$	(21,430	)
Selling, general and administrative		(121,822		)
Research and development		(65,248		)
Total		(208,500		)
Less: tax benefit of stock options		66,331
Stock-based compensation expense, net of tax		$	(142,169	)
Per basic and diluted share		$	(0.54	)

(1)In addition, we capitalized $15.1 million of stock-based compensation expense to inventory, all of which is attributable to participating employees that support our manufacturing operations.

(2)We amortize stock-based compensation expense capitalized to inventory based on inventory turns. For the year ended December 31, 2006, pre-tax stock-based compensation expense, net of estimated forfeitures, charged to cost of products and services sold includes the amortization of $8.3 million of pre-tax stock-based compensation expense previously capitalized to inventory in the first and second quarters of 2006.

At December 31, 2006, there was $269.3 million of pre-tax stock-based compensation expense, net of estimated forfeitures, related to unvested awards not yet recognized which is expected to be recognized over a weighted average period of 2.4 years.

Pro Forma Information for the Period Prior to Adoption of FAS 123R

Prior to the adoption of FAS 123R, we accounted for stock options granted to employees in accordance with APB 25 and provided the disclosures required under FAS 123 only in the notes to our financial statements. As a result, no stock-based compensation expense related to our ESPP or stock options was reflected in our net income for the years ended December 31, 2005 and 2004 since all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant.

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Notes To Consolidated Financial Statements (Continued)

NOTE M.STOCKHOLDERS’ EQUITY (Continued)

The following table sets forth our historical disclosure of pro forma net income (loss) and net income (loss) per share data for the years ended December 31, 2005 and 2004, as if compensation expense for our stock-based compensation plans was determined in accordance with FAS 123 based on the individual grant date fair value of the awards (amounts in thousands, except per share amounts):

	For the Years Ended December 31,
	2005				2004
Net income (loss) (1):
As reported		$	441,489			$	86,527
Add: employee stock-based compensation included in as reported, net of tax		280				6
Deduct: pro forma employee stock-based compensation expense, net of tax		(112,808		)		(94,078		)
Pro forma		$	328,961			$	(7,545	)
Net income (loss) per share:
Basic:
As reported		$	1.73			$	0.38
Pro forma		$	1.29			$	(0.03	)
Diluted:
As reported		$	1.65			$	0.37
Pro forma		$	1.24			$	(0.03	)

(1)Under FAS 123 we did not capitalize any stock-based compensation expenses to inventory.

Valuation Assumptions for Stock Option Plans and ESPP

The employee stock-based compensation expense recognized under FAS 123R and presented in the pro forma disclosure required under FAS 123 was determined using the Black-Scholes option valuation model. Option valuation models require the input of subjective assumptions and these assumptions can vary over time. The weighted average assumptions used are as follows:

	For the Years Ended December 31,
	2006			2005			2004
Risk-free interest rate		5	%		4	%		3	%
Dividend yield		0	%		0	%		0	%
Expected option life (in years)—directors		7			5			5
Expected option life (in years)—officers		6			5			5
Expected option life (in years)—all other employees		4			5			5
Volatility-stock options		39	%		46	%		54	%
Volatility-ESPP		27	%		28	%		54	%

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE M.STOCKHOLDERS’ EQUITY (Continued)

The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the date of grant. The dividend yield percentage is zero because we do not currently pay dividends nor intend to do so during the expected option life. We used historical data from exercises of our stock options and other factors to estimate the expected option life (in years), or term, of the share-based payments granted. We determined the volatility rate for our stock options based on the expected term of the equity award granted. We determine separate volatility rates for each enrollment under our ESPP based on the period from the commencement date of each enrollment to each applicable purchase date. Stock option expense in future periods will be based upon the Black-Scholes values determined at the date of each grant or the date of each purchase under our ESPP.

Stock Option Plan Activity

The following tables contain information regarding stock option activity for the years ended December 31, 2004, 2005 and 2006:

	Shares Under Option			Weighted Average Exercise Price			Number Exercisable	Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at December 31, 2003		30,733,628			$	37.95	17,779,047
Granted (1)		9,051,690			43.66
Exercised		(4,663,495	)		25.41
Forfeited and cancelled		(977,102	)		55.99
Outstanding at December 31, 2004		34,144,721			40.66		20,616,197
Granted		8,213,024			63.08
Exercised		(9,283,230	)		33.89
Forfeited and cancelled		(729,198	)		61.81
Outstanding at December 31, 2005		32,345,317			47.71		17,842,706
Granted		7,821,546			59.16
Exercised		(2,976,739	)		39.57
Forfeited and cancelled		(866,861	)		63.32
Outstanding at December 31, 2006		36,323,263			$	50.48	21,903,140		6.83	$	460,604,912

(1)Includes 1,736,655 options assumed in connection with our acquisition of ILEX Oncology in December 2004.

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE M.STOCKHOLDERS’ EQUITY (Continued)

The following table contains information regarding the range of option prices for Genzyme Stock as of December 31, 2006:

			Weighted
			Average					Exercisable
	Number		Remaining		Weighted			Number		Weighted
Range Of	Outstanding		Contractual		Average			Exercisable		Average
Exercise Prices	as of 12/31/06		Life		Exercise Price			as of 12/31/06		Exercise Price
$1.75   - $29.44		3,749,322		2.50		$	24.09		3,749,080		$	24.09
$29.49 - $41.86		3,385,865		5.37		$	33.03		3,308,587		$	32.95
$41.97 - $43.90		5,148,085		7.33		$	43.87		2,797,967		$	43.85
$43.91 - $46.24		4,646,510		6.39		$	46.19		3,519,469		$	46.19
$46.25 - $53.47		3,892,078		4.70		$	52.32		3,717,543		$	52.49
$53.57 - $56.42		380,924		7.25		$	55.42		205,284		$	55.25
$56.48 - $58.50		6,974,795		9.31		$	58.47		1,293,076		$	58.43
$58.62 - $62.24		364,631		8.48		$	59.97		95,269		$	59.82
$62.28 - $62.98		6,539,836		8.37		$	62.97		2,712,690		$	62.97
$63.05 - $2,356.12		1,241,217		7.37		$	100.41		504,175		$	142.84
$1.75   - $2,356.12		36,323,263		6.83		$	50.48		21,903,140		$	46.35

The following table contains information regarding the pre-tax intrinsic value of our stock options, the estimated fair value of shares vested and the weighted average grant date fair value per share of stock granted under our stock option plans for the periods presented (amounts in thousands, except per share amounts):

	For the Years Ended December 31,
	2006		2005		2004
Pre-tax intrinsic value of options exercised	$	81,928	$	296,949	$	128,214
Weighted average grant date fair value per share of stock granted under our stock option plans	$	25.01	$	29.73	$	21.92

For the year ended December 31, 2006, we:

·received a total of $158.3 million of cash proceeds and recognized $27.5 million of tax deductions from the issuance of stock under our stock option plans and ESPP; and

·classified $7.1 million of excess tax benefits from stock-based compensation as a financing cash inflow in our consolidated statements of cash flows.

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE M.STOCKHOLDERS’ EQUITY (Continued)

ESPP Activity

The following table contains information regarding our ESPP activity for the years ended December 31, 2004, 2005 and 2006:

Shares available and issued:
Available for purchase as of December 31, 2003	1,353,617
Additional shares authorized	1,500,000
Shares purchased by employees	(1,288,424	)
Available for purchase as of December 31, 2004	1,565,193
Additional shares authorized	1,000,000
Shares purchased by employees	(852,712	)
Available for purchase as of December 31, 2005	1,712,481
Shares purchased by employees	(898,756	)
Available for purchase as of December 31, 2006	813,725

Notes Receivable from Stockholders

In connection with our acquisition of Biomatrix, we assumed notes receivable from certain former employees, directors and consultants of Biomatrix. 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, at which point the outstanding principal and accrued interest for each note will become payable. As of December 31, 2006, there is a total of $15.1 million of outstanding principal and accrued interest for these notes, which we recorded in stockholders’ equity because the notes were originally received in exchange for the issuance of stock.

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE N.   COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

Four lawsuits have been filed against us regarding the exchange of all of the outstanding shares of Biosurgery Stock for shares of Genzyme Stock in connection with the elimination of our tracking stocks in July 2003. Each of the lawsuits is a purported class action on behalf of holders of Biosurgery Stock. The first case, filed in Massachusetts Superior Court in May 2003, alleged a breach of the implied covenant of good faith and fair dealing in our charter and a breach of our board of directors’ fiduciary duties. The plaintiff in this case sought an injunction to adjust the exchange ratio for the tracking stock exchange. The Court dismissed the complaint in its entirety in November 2003. Upon appeal, the Massachusetts Appeals Court upheld the dismissal by the Superior Court of the fiduciary duty claim, but reversed the earlier decision to dismiss the implied covenant claim. The Massachusetts Supreme Judicial Court (SJC) has granted our petition for further appellate review of the Appeals Court decision reversing the dismissal of the implied covenant claim. The SJC heard oral arguments on December 4, 2006. A ruling on the appeal is anticipated in the first half of 2007. Two substantially similar cases were filed in Massachusetts Superior Court in August and October 2003. These cases were consolidated in January 2004, and in July 2004, the consolidated case was stayed pending disposition of a fourth case, which was filed in the U.S. District Court for the Southern District of New York in June 2003. The complaint initially alleged violations of federal securities laws, common law fraud, and a breach of the merger agreement with Biomatrix, in addition to the state law claims contained in the other cases. The plaintiffs initially sought an adjustment to the exchange ratio, the rescission of the acquisition of Biomatrix, and unspecified compensatory damages. In December 2005, the plaintiffs in this case filed an amended complaint in which they dropped all of the claims alleged in the initial complaint relating to the initial issuance of Biosurgery Stock and the acquisition of Biomatrix, and narrowed the putative class to include only those individuals who held Biosurgery Stock on May 8, 2003. We filed a motion to dismiss the amended complaint and to oppose the class certification. The Court denied our motion to dismiss the amended complaint and certified this case as a class action on behalf of all shareholders who held Biosurgery Stock on May 8, 2003. We filed a petition asking the U.S. Court of Appeals for the Second Circuit to review the class certification decision, which has been denied. Discovery in this action is currently ongoing. We believe each of these cases is without merit and continue to defend against them vigorously.

On March 27, 2003, the Office of Fair Trading, or OFT, in the United Kingdom issued a decision against our wholly-owned subsidiary, Genzyme Limited, finding that Genzyme Limited held a dominant position and abused that dominant position with no objective justification by pricing Cerezyme in a way that excludes other delivery/homecare service providers from the market for the supply of home delivery and homecare services to Gaucher patients being treated with Cerezyme. In conjunction with this decision, the OFT imposed a fine on Genzyme Limited and required modification to its list price for Cerezyme in the United Kingdom. Genzyme Limited appealed this decision to the Competition Appeal Tribunal. On May 6, 2003, the Tribunal issued an order that stayed the OFT’s decision, but required Genzyme Limited to provide a homecare distributor a discount of 3% per unit during the appeal process. The Tribunal issued its judgment on Genzyme Limited’s appeal on March 11, 2004, rejecting portions of the OFT’s decision and upholding others. The Tribunal found that the list price of Cerezyme should not be reduced, but that Genzyme Limited must negotiate a price for Cerezyme that will allow homecare distributors an appropriate margin. The Tribunal also reduced the fine imposed by the OFT. In response to the

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GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE N.COMMITMENTS AND CONTINGENCIES (Continued)

Tribunal’s decision, we recorded an initial liability of approximately $11 million in our 2003 financial statements and additional liabilities totaling approximately $1 million during 2004 and 2005, of which approximately $6 million were paid in 2005. Genzyme Limited and the OFT were unable to negotiate a price for Cerezyme for homecare distributors and, as a result, on September 29, 2005, the Tribunal issued a ruling establishing the discount to be provided by Genzyme Limited to homecare distributors at 7.2%, which approximates the figure used to calculate the initial liability of approximately $11 million we recorded in 2003, and the additional liabilities totaling approximately $1 million we recorded in 2004 and 2005. Genzyme Limited decided not to appeal this decision. Arising out of the OFT decision, on April 5, 2006, Genzyme Limited received a damage claim from Genzyme Limited’s former distributor, Healthcare at Home. In the fourth quarter of 2006, Genzyme Limited paid Healthcare at Home approximately $14 million, inclusive of interest and legal costs in full and final settlement of all claims, of which approximately $6 million had been previously accrued for and approximately $8 million was recorded as a charge to SG&A in our consolidated statements of operations in December 2006.

We are not able to predict the outcome of the pending legal proceeding listed here, or other legal proceedings, to which we may become subject in the normal course of business or estimate the amount or range of any reasonably possible loss we might incur if we do not prevail in the final, non-appealable determinations of such matters. Therefore, we have no current accruals for these potential contingencies. We cannot provide you with assurance that the legal proceedings listed here, or other legal proceedings, will not have a material adverse impact on our financial condition or results of operations.

NOTE O.   INCOME TAXES

Our income (loss) before income taxes and the related income tax provision (benefit) are as follows:

	For the Years Ended December 31,
	2006			2005			2004
	(Amounts in thousands)
Domestic	$	4,158		$	558,434		$	103,470
Foreign	(56,836		)	70,485			124,226
Total	$	(52,678	)	$	628,919		$	227,696
Currently payable:
Federal	$	119,037		$	105,542		$	51,742
State	27,194			33,804			11,769
Foreign	97,684			32,784			32,611
Total	243,915			172,130			96,122
Deferred:
Federal	(219,383		)	32,591			44,423
State	(29,048		)	(19,282		)	(2,255		)
Foreign	(31,365		)	1,991			2,879
Total	(279,796		)	15,300			45,047
Provision for (benefit from) income taxes	$	(35,881	)	$	187,430		$	141,169

F-124

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE O.INCOME TAXES (Continued)

Our provisions for income taxes were at rates other than the U.S. federal statutory tax rate for the following reasons:

	For the Years Ended December 31,
	2006		2005		2004
Tax provision at U.S. statutory rate	(35.0	)%	35.0	%	35.0	%
State taxes, net	(1.7	)	1.6		2.8
Export sales benefits	(37.2	)	(2.8	)	(7.1	)
Domestic manufacturing deduction	(15.5	)	(1.2	)	—
Tax credits	(30.5	)	(4.1	)	(4.7	)
Foreign rate differential	76.0		0.1		(4.4	)
Charges for IPR&D	—		1.2		39.1
Stock compensation	15.8		—		—
Goodwill impairment	19.6		—		—
Audit settlements	(62.9	)	—		—
Other	3.3		—		1.3
Effective tax rate	(68.1	)%	29.8	%	62.0	%

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

·our provision for state income taxes;

·the tax benefits from export sales;

·the tax benefits from domestic production activities;

·benefits related to tax credits, primarily orphan drug credits; and

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

Our effective tax rate for 2006 was also impacted by:

·the deductible charge for IPR&D of $552.9 million recorded in November 2006 in connection with our acquisition of AnorMED, of which $195.7 million was taxed at rates other than the U.S. statutory tax rate;

·$33.2 million of non-deductible stock compensation expenses;

·a charge for impaired goodwill of $219.2 million recorded in September 2006, of which $29.5 million was not deductible for tax purposes; and

·the settlement of the 1996 to 1999 IRS audit and various state and foreign income tax audits. We recorded a $33.2 million tax benefit to our income tax provision primarily related to export sales benefits, tax credits and deductible intangibles from a prior period acquisition. In conjunction with those settlements, we reduced our tax reserves by approximately $13.1 million and recorded current and deferred tax benefits for the remaining portion of the settlement amounts.

F-125

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE O.INCOME TAXES (Continued)

Our effective tax rates for 2005 and 2004 were also impacted by non-deductible charges for IPR&D of:

·$22.2 million in 2005, of which $9.5 million was recorded in the first quarter of 2005 in connection with our acquisition of Verigen and $12.7 million was recorded in the third quarter of 2005 related to our acquisition of Bone Care; and

·$254.5 million in 2004, all of which was recorded in December 2004 in connection with our acquisition of ILEX Oncology.

In addition, our overall tax rate has changed significantly due to fluctuations in our income (loss) before taxes, which was $(52.7) million in 2006, $628.9 million in 2005 and $227.7 million in 2004.

We record liabilities for income tax contingencies based on our best estimate of the underlying exposures. We are currently under IRS audits for tax years 2002 to 2003, 2004 to 2005, and in certain state and foreign jurisdictions. We believe that we have provided sufficiently for all audit exposures and assessments. 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 increase or reduction of future tax provisions. Any such tax or tax benefit would be recorded upon final resolution of the audits or expiration of the applicable statute of limitations.

The components of net deferred tax assets (liabilities) are described in the following table:

	December 31,
	2006			2005
	(Amounts in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	22,772		$	94,774
Tax credits	14,770			12,665
Realized and unrealized capital losses	—			4,984
Inventory	76,004			68,717
Depreciable assets	10,154			1,600
Stock compensation	65,459			—
Reserves, accruals and other	43,759			36,595
Total deferred tax assets	232,918			219,335
Deferred tax liabilities:
Realized and unrealized capital gains	(914		)	—
Intangible assets	(105,988		)	(384,504		)
Net deferred tax assets (liabilities)	$	126,016		$	(165,169	)

Our ability to realize the benefit of net deferred tax assets is dependent on our generating sufficient taxable income and tax credit carryforwards expire. While it is not assured, we believe that it is more likely than not that we will be able to realize all of our net deferred tax assets. The amount we can realize, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

F-126

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE O.INCOME TAXES (Continued)

At December 31, 2006, we had, for U.S. income tax purposes, net operating loss carryforwards of $6.4 million and tax credit carryforwards of $23.4 million. Our net operating loss carryforwards expire between 2011 and 2020 and the tax credits begin expiring after 2017. Ownership changes, as defined under the Internal Revenue Code, may limit the amount of net operating loss carryforwards which may be utilized annually to offset future taxable income. For foreign purposes, we had net operating loss carryforwards of $104.1 million as of December 31, 2006, which begin expiring after 2013.

NOTE P.BENEFIT PLANS

Defined Contribution Plans

We have four defined contribution plans:

·the Genzyme Corporation 401(k) Plan, which we refer to as the 401(k) Plan;

·the Genzyme Surgical Products Corporation Savings and Investment Plan, which we refer to as the GSP Plan;

·the SangStat Medical Corporation 401(k) Plan, which we refer to as the SangStat Plan; and

·the Biomatrix, Inc. Retirement Plan, which we refer to as the Biomatrix Plan.

The 401(k) Plan was established effective January 1, 1988 to provide a long-range program of systematic savings for eligible employees. Employees of Genzyme Corporation as well as our wholly-owned subsidiaries in the United States are eligible to participate in the 401(k) Plan, including employees of the former Deknatel Snowden Pencer, Inc., which we acquired in 1996, who also participate in the GSP Plan, employees of the former Biomatrix, which we acquired in December 2000, who also participate in the Biomatrix Plan and employees of the former SangStat, which we acquired in 2003, who also participate in the SangStat Plan. For 2006, eligible employees could elect, through salary reduction agreements, to have up to 18% or a maximum of $15,000 of their eligible compensation contributed on a pre-tax basis to the 401(k) Plan. We made bi-weekly matching contributions to the 401(k) Plan equal to:

·100% of the elective contributions made to the 401(k) Plan by each participant to the extent that such elective contributions do not exceed 4% of the participant’s eligible compensation for such pay period; and

·50% of the amount of elective contributions made to the 401(k) Plan by the participant to the extent such elective contributions exceed 4% but do not exceed 6% of the participant’s eligible compensation for such pay period.

SG&A includes the following charges related to the 401(k) Plan, representing our matching contributions incurred in each year:

·$23.9 million in 2006;

·$16.0 million in 2005; and

·$13.7 million in 2004.

F-127

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE P.BENEFIT PLANS (Continued)

Effective December 31, 2000, the GSP Plan and the Biomatrix Plan were frozen. As of that date, no new contributions from participants or contributions from us have been accepted by either plan and no new participants have been allowed to enter these two plans. Existing participants continue to have full access to their account balances in the GSP Plan and Biomatrix Plan, including the ability to initiate fund transfers among the available investment options, loans and hardship distributions. Effective December 31, 2000, participants in both the GSP Plan and Biomatrix Plan became eligible to participate in the 401(k) Plan.

In September 2003, in connection with the acquisition of SangStat, we terminated the SangStat Plan. In November 2004, we received approval for the termination from the IRS, at which time all participants in the SangStat Plan became fully vested in their account balances and had the option of receiving a distribution, less applicable taxes and penalties, or transferring their balance to another qualified fund. As of December 31, 2006, the SangStat Plan had not been fully liquidated.

Defined Benefit Plans

We have defined benefit pension plans for certain employees in countries outside the U.S. and a defined benefit post-retirement plan for one of our U.S. subsidiaries, which has been frozen since 1995 and is not significant. These plans are funded in accordance with requirements of the appropriate regulatory bodies governing each plan.

The following table sets forth the funded status and the amounts recognized for our defined benefit pension plans outside the U.S. (amounts in thousands):

	December 31,
	2006			2005
Change in benefit obligation:
Projected benefit obligation, beginning of year	$	64,785		$	53,889
Service cost	4,751			2,983
Interest cost	3,487			2,761
Plan participants’ contributions	1,417			1,209
Actuarial loss	12,037			11,707
Foreign currency exchange rate changes	10,265			(6,477		)
Benefits paid	(1,357		)	(1,287		)
Projected benefit obligation, end of year	$	95,385		$	64,785
Change in plan assets:
Fair value of plan assets, beginning of year	$	46,752		$	40,573
Return on plan assets	6,269			8,148
Employer contribution	3,302			2,659
Plan participants’ contributions	1,416			1,209
Foreign currency exchange rate changes	7,097			(4,667		)
Benefits paid	(1,233		)	(1,170		)
Fair value of plan assets, end of year	$	63,603		$	46,752
Funded status at end of year	$	(31,782	)	$	(18,033	)

F-128

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE P.BENEFIT PLANS (Continued)

Amounts recognized in our consolidated balance sheets consist of (amounts in thousands):

	December 31,
	2006			2005
Noncurrent assets	$	—		$	7,809
Accrued expenses	(1,297		)	—
Other noncurrent liabilities	(30,485		)	(10,265		)
Net amount recognized	$	(31,782	)	$	(2,456	)

The incremental effect of applying FAS 158 on individual line items in our consolidated balance sheets as of December 31, 2006, was as follows (amounts in thousands):

	December 31, 2006
	Before Application of FAS 158		FAS 158 Adjustments				After Application of FAS 158
Accrued expenses	$	476,145		$	1,297		$	477,442
Deferred tax liabilities	14,730			(3,821		)	10,909
Other noncurrent liabilities	40,332			11,319			51,651
Total liabilities	1,521,682			8,795			1,530,477
Accumulated other comprehensive income	263,000			(8,795		)	254,205
Total stockholders’ equity	5,669,506			(8,795		)	5,660,711
Total liabilities and stockholders’ equity	$	7,191,188		—			$	7,191,188

Amounts recognized in other comprehensive income (loss) consist of (amounts in thousands):

	December 31,
	2006			2005
Additional minimum pension liability, net of tax	$	(8,564	)	$	(4,627	)

The weighted average assumptions used in determining related obligations of pension benefit plans are shown below:

	December 31,
	2006		2005
Weighted average assumptions:
Discount rate	5.07	%	4.74	%
Rate of compensation increase	4.42	%	3.94	%

For the year ended December 31, 2006, the discount rate used to determine the benefit obligations for our plans was based on highly rated long-term bond indices and yield curves that match the duration of each plan’s benefit obligations. The bond indices and yield curve analyses include only bonds rated Aa or higher from reputable rating agencies. The discount rate represents the average of the discount rates for each plan weighted by plan liabilities as of December 31, 2006. The discount rate reflects the rate at which the pension benefits could be effectively settled.

F-129

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE P.BENEFIT PLANS (Continued)

The weighted average assumptions used to determine the net pension expense are shown below:

	December 31,
	2006		2005		2004
Weighted average assumptions:
Discount rate	4.73	%	5.23	%	5.56	%
Rate of return on assets	7.47	%	7.32	%	7.09	%
Rate of compensation increase	3.93	%	3.92	%	3.89	%

The components of net pension expense are as follows (amounts in thousands):

	December 31,
	2006			2005			2004
Service cost	$	4,751		$	2,983		$	2,477
Interest cost	3,488			2,761			2,316
Expected return on plan assets	(6,269		)	(8,149		)	(3,010		)
Amortization and deferral of actuarial loss	3,334			5,793			876
Net pension expense	$	5,304		$	3,388		$	2,659

The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets are as follows (amounts in thousands):

	December 31,
	2006		2005
Projected benefit obligation	$	95,385	$	64,785
Accumulated benefit obligation	82,762		56,715
Fair value of plan assets	63,603		46,752

At December 31, 2006 and 2005, plan assets for our foreign defined pension benefit plans consist primarily of the assets of our U.K. Pension Plan. Defined pension benefit plan assets for our other foreign subsidiaries as of December 31, 2006 and 2005 were not significant.

F-130

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE P.BENEFIT PLANS (Continued)

The investment objective of our U.K. Pension Plan is to maximize the overall return from investment income and capital appreciation without resorting to a high risk investment strategy. The plan has no employer-related investments. Our U.K. Pension Plan retains professional investment managers that invest plan assets primarily in equity securities, bonds, property, and cash and other investments, which is consistent with the plan’s liability profile. The weighted average asset allocations for our U.K. Pension Plan are as follows:

	December 31,
	2006			2005
U.K. equity securities		55	%		55	%
Other overseas equity securities		27			25
Bonds		8			11
Real estate		6			5
Other		4			4
Total		100	%		100	%

The assumption made for the expected return on assets is based on the benchmark allocation strategy for our U.K. Pension Plan. Returns for individual asset categories are derived from market yields at the effective date, together with, in the case of equity-type assets, allowance for the additional future return expected from such assets compared to fixed interest investments.

Contributions

We expect to contribute approximately $4 million to our U.K. Pension Plan in 2007.

F-131

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE P.BENEFIT PLANS (Continued)

Estimated Future Benefit Payments

We expect to pay the following benefit payments for our defined pension benefit plans outside the United States, which reflect expected future service, as appropriate (amounts in thousands):

	Estimated Future Benefit Payments
2007		$	1,284
2008		1,265
2009		1,496
2010		1,449
2011		1,588
2012-2016		11,283

NOTE Q.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 five reporting segments as described in Note A., under the heading “Summary of Significant Accounting Policies—Business,” to these financial statements. As described in Note A., above, effective January 1, 2006, as a result of changes in how we review our business, certain general and administrative expenses, as well as research and development expenses related to our preclinical development programs, which were formerly allocated amongst our reporting segments and Other, are now allocated to Corporate. Additionally, our diagnostic products business unit, which was formerly reported combined with our Genetics business unit under the caption “Diagnostics/Genetics,” is now included under the caption “Other.” We have revised our 2005 and 2004 segment presentations to conform to our 2006 presentation.

F-132

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE Q.SEGMENT INFORMATION (Continued)

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

	For the Years Ended December 31,
	2006			2005			2004
Revenues:
Renal (1)	$	608,479		$	452,000		$	363,720
Therapeutics (1)	1,520,713			1,322,034			1,114,919
Transplant (1,2)	155,966			145,912			151,363
Biosurgery (1)	387,569			353,176			209,516
Genetics (1)	240,857			222,328			188,166
Other (1)	273,056			237,673			170,492
Corporate (1)	373			1,719			2,969
Total	$	3,187,013		$	2,734,842		$	2,201,145
Depreciation and amortization expense:
Renal (1)	$	94,809		$	66,626		$	28,547
Therapeutics (1)	19,112			14,602			12,394
Transplant (1)	24,709			30,199			36,199
Biosurgery (1)	73,788			69,200			32,785
Genetics (1)	20,287			15,879			12,515
Other (1)	36,813			34,563			13,212
Corporate (1)	61,871			53,551			69,462
Total	$	331,389		$	284,620		$	205,114
Equity in income (loss) of equity method investments:
Renal	$	—		$	—		$	—
Therapeutics	18,508			7,076			(9,853		)
Transplant	—			(893		)	(1,486		)
Biosurgery	—			—			—
Genetics	—			—			—
Other	(1,814		)	(3,988		)	(2,485		)
Corporate (3)	(989		)	(2,044		)	(1,800		)
Total	$	15,705		$	151		$	(15,624	)
Income (loss) before income taxes:
Renal (1)	$	175,486		$	102,739		$	131,849
Therapeutics (1)	1,015,375			820,921			680,328
Transplant (1)	(542,789		)	15,495			(27,093		)
Biosurgery (1)	40,734			35,468			19,515
Genetics (1,3,4)	(227,796		)	(3,039		)	(3,690		)
Other (1)	(40,148		)	(50,068		)	(260,809		)
Corporate (1,5)	(473,540		)	(292,597		)	(312,404		)
Total	$	(52,678	)	$	628,919		$	227,696

(1)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.

F-133

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE Q.SEGMENT INFORMATION (Continued)

Charges for IPR&D related to these acquisitions are included in segment results in the year of acquisition. Acquisitions completed since January 1, 2004 are:

Acquisition	Date Acquired	Business Segment(s)	IPR&D Charge
AnorMED	November 7, 2006	Transplant	$552.9 million
Hernia repair assets of Surgi.B	March 29, 2006	Biosurgery	None
Gene therapy assets of Avigen	December 19, 2005	Therapeutics	$7.0 million
Equal Diagnostics	July 15, 2005	Other	None
Bone Care	July 1, 2005	Renal/Corporate	$12.7 million
Verigen	February 8, 2005	Biosurgery/Corporate	$9.5 million
Synvisc sales and marketing rights from Wyeth	January 6, 2005	Biosurgery	None
ILEX Oncology	December 20, 2004	Other	$254.5 million
Pathology/oncology testing assets of IMPATH	May 1, 2004	Genetics	None
Alfigen	February 21, 2004	Genetics	None

(2)Transplant revenue for 2005 includes $9.0 million of previously deferred license revenue related to an upfront license fee received from PGP.

(3)In all periods presented, represents our portion of the losses of Peptimmune, an equity method investment, effective April 1, 2003.

(4)Loss before income taxes for Genetics for 2006 includes a $219.2 million charge for impaired goodwill recorded in September 2006. In the third quarter of 2006, in connection with our required annual test of goodwill for potential impairment, we determined that the goodwill assigned to our Genetics business unit was impaired.

(5)Loss before income taxes for Corporate includes our corporate, general and administrative and corporate science activities, all of the stock-based compensation expenses we recorded as a result of our adoption of FAS 123R, as well as, interest income, interest expense and other income and expense items that we do not specifically allocate to a particular reporting segment.

F-134

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE Q.SEGMENT INFORMATION (Continued)

Segment Assets

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

	December 31,
	2006		2005		2004
Segment Assets (1):
Renal (2)	$	1,380,003	$	1,344,117	$	616,979
Therapeutics	1,094,520		972,504		949,168
Transplant (3)	410,436		369,366		408,090
Biosurgery (4)	477,334		456,634		294,715
Genetics (5)	133,839		364,469		363,935
Other (6,7)	851,343		839,055		898,287
Corporate (2,3,5,7)	2,843,713		2,532,720		2,538,247
Total	$	7,191,188	$	6,878,865	$	6,069,421

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

(2)In July 2005, we acquired Bone Care for net consideration paid of $604.3 million. Total assets for this acquisition as of July 1, 2005 include (amounts in millions):

	Amount			Business Segment
Cash and marketable securities		$	108.0	Corporate
Accounts receivable		10.5		Renal
Inventory		17.5		Renal
Property, plant and equipment		2.9		Renal
Goodwill		228.8		Renal
Other intangible assets		504.2		Renal
Other assets		45.0		Renal
Total		$	916.9

F-135

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE Q.SEGMENT INFORMATION (Continued)

(3)In November 2006, we acquired AnorMED for net consideration of $569.0 million. Total assets for AnorMED as of November 7, 2006, the date of acquisition, include (amounts in millions):

	Amount			Business Segment
Cash and cash equivalents		$	20.2	Corporate
Deferred tax assets-current		2.5		Corporate
Other current assets		6.3		Transplant
Property, plant and equipment		2.8		Transplant
Goodwill		29.1		Transplant
Other intangible assets		3.5		Transplant
Other assets		0.8		Transplant
Total		$	65.2

(4)In January 2005, we consummated an arrangement with Wyeth under which we reacquired the sales and marketing rights to Synvisc in in the United States, as well as Germany, Poland, Greece, Portugal and the Czech Republic. In exchange for the sales and marketing rights, we paid initial payments totaling $121.0 million in cash to Wyeth and otherwise incurred $0.3 million of acquisition costs. We have also accrued contingent royalty payments to Wyeth totaling $118.3 million, of which $110.0 million had been paid as of December 31, 2006. Distribution rights (a component of other intangible assets, net) in our consolidated balance sheet as of December 31, 2006 include a total of $239.6 million for the initial and contingent royalty payments (made or accrued) as of that date.

(5)In February 2004, we acquired substantially all of the assets of Alfigen for net consideration of $47.5 million. In May 2004, we acquired substantially all of the pathology/oncology testing assets of IMPATH for net consideration of $215.3 million. Total assets for these acquisitions as of their dates of acquisition include (amounts in millions):

	Alfigen			IMPATH			Total		Business Segment
Accounts receivable		$	—		$	14.5	$	14.5	Genetics/Other
Inventories		—			2.0		2.0		Genetics/Other
Property, plant and equipment		1.2			15.0		16.2		Genetics/Other
Goodwill		33.2			157.5		190.7		Genetics/Other
Other intangible assets		13.0			34.8		47.8		Genetics/Other
Other assets		0.1			4.0		4.1		Genetics/Other
Total		$	47.5		$	227.8	$	275.3

F-136

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE Q.SEGMENT INFORMATION (Continued)

(6)In July 2005, we acquired Equal Diagnostics for net consideration of $13.3 million. Total assets for this acquisition as of the date of acquisition include (amounts in millions):

	Amount			Business Segment
Cash and cash equivalents		$	0.5		Other
Accounts receivable		1.5			Other
Inventories		1.5			Other
Property, plant and equipment		0.1			Other
Goodwill		5.3			Other
Other intangible assets		4.9			Other
Other assets		0.1			Other
Total		$	13.9

(7)Includes the assets related to our corporate, general and administrative operations, and corporate science activities that we do not allocate to a particular segment, including cash, cash equivalents, short- and long-term investments, net property, plant and equipment and deferred tax assets.

Segment assets for Corporate consist of the following (amounts in thousands):

	December 31,
	2006		2005		2004
Cash, cash equivalents, short- and long-term investments	$	1,285,604	$	1,089,102	$	1,081,749
Deferred tax assets-current	136,925		170,443		160,438
Property, plant & equipment, net	1,036,182		826,221		838,516
Investments in equity securities	66,563		135,930		150,253
Other	318,439		311,024		307,291
Total	$	2,843,713	$	2,532,720	$	2,538,247

F-137

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE Q.SEGMENT INFORMATION (Continued)

Geographic Segments

We operate in the healthcare industry and we manufacture and market our products primarily in the United States and Europe. Our principal manufacturing facilities are located in the United States, United Kingdom, Switzerland, Republic of Ireland, France, Belgium and Germany. We purchase products from our subsidiaries in the United Kingdom and Switzerland for sale to customers in the United States. We set transfer prices from our foreign subsidiaries to allow us to produce profit margins commensurate with our sales and marketing effort. The following tables contain certain financial information by geographic area (amounts in thousands):

	For the Years Ended December 31,
	2006		2005		2004
Revenues:
United States	$1,728,497		$	1,517,000	$	1,208,184
Europe	990,745		858,913		723,102
Other	467,771		358,929		269,859
Total	$	3,187,013	$	2,734,842	$	2,201,145

	December 31,
	2006		2005		2004
Long-lived assets:
United States	$	928,547	$	915,107	$	768,540
Europe	801,767		611,657		621,951
Other	7,014		5,444		4,780
Total	$	1,737,328	$	1,532,208	$	1,395,271

Our results of operations are highly dependent on sales of Cerezyme. Sales of this product represented approximately 35% of our product revenue in 2006, approximately 38% of our product revenue in 2005 and approximately 42% of our product revenue in 2004. We manufacture Cerezyme at a single manufacturing facility in Allston, Massachusetts. We sell this product directly to physicians, hospitals and treatment centers as well as through an unaffiliated distributor. Distributor sales of Cerezyme represented 21% of Cerezyme revenue in 2006, 23% in 2005 and 25% in 2004. We believe that our credit risk associated with trade receivables is mitigated as a result of the fact that this product is sold to a large number of customers over a broad geographic area.

Sales of Renagel, including sales of bulk sevelamer, represented 18% of our product revenue in 2006, 17% of our product revenue in 2005 and 18% of our product revenue in 2004. A substantial majority of the sales of Renagel are to wholesale distributors.

F-138

GENZYME CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)

NOTE R.   QUARTERLY RESULTS

	1st Quarter 2006			2nd Quarter 2006			3rd Quarter 2006				4th Quarter 2006
	(Amounts in thousands, except per share amounts)
Total revenues		$	730,842		$	793,356		$	808,574		$	854,241
Operating income (loss)(1)		128,208			112,719			(47,882		)	(383,554		)
Net income (loss)(1)		100,974			134,497			15,966			(268,234		)
Net income (loss) per share:
Basic		$	0.39		$	0.52		$	0.06		$	(1.02	)
Diluted		$	0.37		$	0.49		$	0.06		$	(1.02	)

	1st Quarter 2005			2nd Quarter 2005			3rd Quarter 2005			4th Quarter 2005
	(Amounts in thousands, except per share amounts)
Total revenues		$	629,949		$	668,139		$	708,063		$	728,691
Operating income (2)		136,586			164,673			161,806			137,797
Net income (2)		95,558			123,631			115,654			106,646
Net income per share:
Basic		$	0.38		$	0.49		$	0.45		$	0.41
Diluted		$	0.36		$	0.46		$	0.43		$	0.39

(1)For the three months ended December 31, 2006, includes: a $552.9 million pre-tax charge for IPR&D ($404.3 million after tax) related to our acquisition of AnorMED in November 2006 and a $7.9 million pre-tax charge for the settlement of a case before the Competition Appeal Tribunal in the United Kingdom relating to our homecare business in the United Kingdom.

(2)For the three months ended December 31, 2005, includes: $16.9 million of pre-tax charges to write off the cost of unsuccessful production runs of Cerezyme and Myozyme that occurred at our Allston, Massachusetts manufacturing plant; $11.2 million to write off expiring Clolar inventory; and a $7.0 million charge for IPR&D related to the acquisition of certain gene therapy assets from Avigen in December 2005.

F-139

Report of Independent Registered Public Accounting Firm on
Financial Statement Schedule

To the Board of Directors and Shareholders
of Genzyme Corporation:

Our audits of the consolidated financial statements, of management’s assessment of the effectiveness of internal control over financial reporting and of the effectiveness of internal control over financial reporting referred to in our report dated March 1, 2007 appearing in the 2006 Annual Report of Genzyme Corporation (which report, consolidated financial statements and assessment are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Boston, Massachusetts

March 1, 2007

F-140

GENZYME CORPORATION

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004

Column A	Column B		Column C				Column D		Column E
			Additions
Description	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts		Deductions		Balance at End of Period
Year ended December 31, 2006:
Accounts receivable allowances	$	46,127,000	$	10,050,000	$	13,627,000	$	17,241,000	$	52,563,000
Rebates	$	50,304,000	$	—	$	115,500,000	$	103,638,000	$	62,166,000
Year ended December 31, 2005:
Accounts receivable allowances	$	42,397,000	$	9,444,000	$	6,702,000	$	12,416,000	$	46,127,000
Rebates	$	33,464,000	$	—	$	89,713,000	$	72,873,000	$	50,304,000
Year ended December 31, 2004:
Accounts receivable allowances	$	26,638,000	$	12,616,000	$	34,393,000	$	31,250,000	$	42,397,000
Rebates	$	20,187,000	$	—	$	52,640,000	$	39,363,000	$	33,464,000

F-141

EX-21

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

Name	Direct Parent(s)	Ownership	Jurisdiction of Incorporation
BioMarin/Genzyme LLC	Genzyme Corporation	50%	Delaware
Genzyme Europe B.V.	Imtix SangStat (Switzerland) GmbH	100%	The Netherlands
Genzyme Flanders BVBA	Genzyme International Holdings Limited	99.9%	Belgium
	SangStat Luxembourg S.à.r.l.	0.1%
Genzyme GmbH	Genzyme Europe B.V.	100%	Germany
Genzyme International Holdings Limited	SangStat Luxembourg S.à.r.l.	100%	Ireland
Genzyme Ireland Limited	Genzyme International Holdings Limited	100%	Republic of Ireland
Genzyme Limited	Genzyme Corporation	100%	United Kingdom
Genzyme Securities Corporation	Genzyme Corporation	100%	Massachusetts
Genzyme Pharmaceuticals AG	SangStat Luxembourg S.à.r.l.	100%	Switzerland
Genzyme Polyclonals S.A.S.	SangStat Medical, LLC SangStat Atlantique S.A.S.	1% 99%	France
Genzyme Therapeutic Products Limited Partnership	Genzyme Therapeutic	1%	Massachusetts
	Products Corporation
	Genzyme Therapeutic Products LLC	99%
Genzyme Therapeutic Products Corporation	Genzyme Corporation	100%	Massachusetts
Genzyme Therapeutic Products LLC	Genzyme Corporation	100%	Delaware
Imtix SangStat (Switzerland) GmbH	SangStat Luxembourg S.à.r.l.	100%	Switzerland
SangStat Atlantique S.A.S.	SangStat Medical, LLC	100%	France
SangStat Luxembourg S.à.r.l.	Genzyme Luxembourg S.à.r.l.	100%	Luxembourg

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 33-61853, 333-51790, 333-31548, 333-63802, 333-100727, 333-109179) and in the Registration Statements on Form S-8 (File Nos. 33-58359, 33-60437, 333-10003, 333-33249, 333-83677, 333-51906, 33-30007, 33-68208, 333-33265, 333-10005, 333-33251, 333-83669, 333-33291, 33-21241, 333-55126, 333-42371, 333-81275, 333-87967, 333-81277, 333-83673, 333-64103, 333-83681, 333-51872, 333-52202, 333-66130, 333-70310, 333-76762, 333-76766, 333-76768, 333-76770, 333-100722, 333-90514, 333-90512, 333-90510, 333-64095, 333-106691, 333-106692, 333-111314, 333-116650, 333-116651, 333-116653, 333-114184, 333-125723, 333-125724, 333-125726) of Genzyme Corporation of our report dated March 1, 2007 relating to the consolidated financial statements, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated March 1, 2007 relating to Genzyme Corporation’s financial statement schedule, which appears in this Form 10-K and of our report dated February 27, 2007 relating to the financial statements of BioMarin/Genzyme LLC which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

March 1, 2007

EX-31.1

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 annual report on Form 10-K 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: March 1, 2007.	/s/ HENRI A. TERMEER
	Henri A. Termeer
	Chief Executive Officer

EX-31.2

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 annual report on Form 10-K 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: March 1, 2007.	/s/ MICHAEL  S. WYZGA
	Michael S. Wyzga
	Chief Financial Officer

EX-32.1

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 Annual Report on Form 10-K of the Company for the year ended December 31, 2006 (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

Chief Executive Officer

March 1, 2007

EX-32.2

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 Annual Report on Form 10-K of the Company for the year ended December 31, 2006 (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

Chief Financial Officer

March 1, 2007

EX-99

Exhibit 99

BioMarin/Genzyme LLC
Index to Consolidated Financial Statements

	Page(s)
Report of Independent Registered Public Accounting Firm	1
Consolidated Balance Sheets as of December 31, 2006 and 2005	2
Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004 (Unaudited)	3
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004 (Unaudited)	4
Consolidated Statements of Changes in Venturers’ Capital for each of the Years Ended December 31, 2004 (Unaudited), 2005 and 2006	5
Notes to Consolidated Financial Statements	6-15

Report of Independent Registered Public Accounting Firm

To the Steering Committee of BioMarin/Genzyme LLC:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of cash flows and of changes in Venturers’ capital present fairly, in all material respects, the financial position of BioMarin/Genzyme LLC and its subsidiaries (the “Joint Venture”) at December 31, 2006 and 2005, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Joint Venture’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February 27, 2007

1

BioMarin/Genzyme LLC
Consolidated Balance Sheets
(Amounts in thousands)

	December 31,
	2006		2005
ASSETS
Current assets:
Cash and cash equivalents	$	12,778	$	8,127
Restricted cash	340		—
Accounts receivable	25,377		20,725
Due from Genzyme Corporation	6,852		12,746
Inventories	25,564		30,286
Prepaid expenses and other current assets	545		220
Total current assets	71,456		72,104
Technology license fees, net	211		285
Total assets	$	71,667	$	72,389
LIABILITIES AND VENTURERS’ CAPITAL
Current liabilities:
Due to BioMarin Companies	$	1,596	$	1,070
Accrued expenses	6,592		4,827
Deferred revenue	90		573
Total liabilities	8,278		6,470
Commitments and contingencies (Note J)	—		—
Venturers’ capital:
Venturers’ capital—BioMarin Companies	31,695		32,960
Venturers’ capital—Genzyme Corporation	31,694		32,959
Total Venturers’ capital	63,389		65,919
Total liabilities and Venturers’ capital	$	71,667	$	72,389

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

2

BioMarin/Genzyme LLC
Consolidated Statements of Operations
(Amounts in thousands)

	For the Years Ended December 31,
	2006		2005		2004
					(Unaudited)
Revenues:
Net product sales	$	96,291	$	76,417		$	42,583
Operating costs and expenses:
Cost of products sold	24,417		24,513			14,954
Selling, general and administrative	22,178		22,019			26,872
Research and development	13,318		16,156			20,191
Total operating costs and expenses	59,913		62,688			62,017
Income (loss) from operations	36,378		13,729			(19,434		)
Interest income	692		254			151
Net income (loss)	$	37,070	$	13,983		$	(19,283	)
Net income (loss) attributable to each Venturer:
BioMarin Companies	$	18,535	$	6,992		$	(9,641	)
Genzyme Corporation	$	18,535	$	6,991		$	(9,642	)

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

3

BioMarin/Genzyme LLC
Consolidated Statements of Cash Flows
(Amounts in thousands)

	For the Years Ended December 31,
	2006			2005			2004
							(Unaudited)
Cash Flows from Operating Activities:
Net income (loss)	$	37,070		$	13,983			$	(19,283	)
Reconciliation of net income (loss) to net cash provided by (used in) operating activities:
Amortization expense	74			73				—
Noncash charge for inventory write down	185			—				—
Increase (decrease) in cash from working capital changes:
Accounts receivable	(4,652		)	(4,015		)		(11,287		)
Inventories	4,537			8,340				(1,349		)
Prepaid expenses and other current assets	(325		)	(220		)		—
Due from (to) BioMarin Companies	526			(1,090		)		(1,891		)
Due from (to) Genzyme Corporation	5,894			(18,958		)		(652		)
Accrued expenses	1,765			1,906				1,745
Deferred revenue	(483		)	115				391
Cash flows from operating activities	44,591			134				(32,326		)
Cash Flows from Investing Activities:
Increase in restricted cash	(340		)	—				—
Purchase of technology licenses	—			(358		)		—
Cash flows from investing activities	(340		)	(358		)		—
Cash Flows from Financing Activities:
Capital distribution to BioMarin Companies	(19,800		)	(3,000		)		—
Capital distribution to Genzyme Corporation	(19,800		)	(3,000		)		—
Capital contributed by BioMarin Companies	—			—				16,045
Capital contributed by Genzyme Corporation	—			—				16,046
Cash flows from financing activities	(39,600		)	(6,000		)		32,091
Increase (decrease) in cash and cash equivalents	4,651			(6,224		)		(235		)
Cash and cash equivalents at beginning of period	8,127			14,351				14,586
Cash and cash equivalents at end of period	$	12,778		$	8,127			$	14,351

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

4

BioMarin/Genzyme LLC
Consolidated Statements of Changes in Venturers’ Capital
(Amounts in thousands)

	Venturers’ Capital								Total
	BioMarin Companies				Genzyme Corporation				Venturers’ Capital
Balance at December 31, 2003		$	24,502			$	24,502		$	49,004
2004 capital contributions (unaudited)		14,107				14,108			28,215
2004 net loss (unaudited)		(9,641		)		(9,642		)	(19,283		)
Balance at December 31, 2004 (unaudited)		28,968				28,968			57,936
2005 capital distributions		(3,000		)		(3,000		)	(6,000		)
2005 net income		6,992				6,991			13,983
Balance at December 31, 2005		32,960				32,959			65,919
2006 capital distributions		(19,800		)		(19,800		)	(39,600		)
2006 net income		18,535				18,535			37,070
Balance at December 31, 2006		$	31,695			$	31,694		$	63,389

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

5

BioMarin/Genzyme LLC
Notes to Consolidated Financial Statements

A.Nature of Business and Organization

BioMarin/Genzyme LLC, or the Joint Venture, is a limited liability company organized under the laws of the State of Delaware. The Joint Venture is owned:

·50% by BioMarin Pharmaceutical Inc., which is referred to as BioMarin, and BioMarin Genetics, Inc., a wholly-owned subsidiary of BioMarin. BioMarin and its subsidiary are referred to as the BioMarin Companies; and

·50% by Genzyme Corporation, which is referred to as Genzyme.

The BioMarin Companies and Genzyme are collectively referred to as the Venturers and individually as a Venturer. The Joint Venture was organized in September 1998 to develop and commercialize Aldurazyme®, a recombinant form of the human enzyme alpha-L-iduronidase, used to treat a lysosomal storage disorder known as mucopolysaccharidosis I, or MPS I. The Joint Venture commenced operations as of September 4, 1998.

The Joint Venture, BioMarin Companies and Genzyme entered into a Collaboration Agreement dated as of September 4, 1998. Under the terms of the Collaboration Agreement, Genzyme and the BioMarin Companies granted to the Joint Venture a world-wide, exclusive, irrevocable, royalty-free right and license or sublicense to develop, manufacture and market Aldurazyme for the treatment of MPS I and other alpha-L-iduronidase deficiencies. All program-related costs are equally funded by BioMarin, on behalf of the BioMarin Companies, and Genzyme. BioMarin and Genzyme are required to make monthly capital contributions to the Joint Venture to fund budgeted operating costs, as necessary. If either BioMarin or Genzyme fails to make two or more of the monthly capital contributions, and the other party does not exercise its right to terminate the Collaboration Agreement or compel performance of the funding obligation, the defaulting party’s (or, in the case of default by BioMarin, the BioMarin Companies’) percentage interest in the Joint Venture and future funding responsibility will be adjusted proportionately. No contributions were made in 2006 and 2005 because the Joint Venture was profitable in both periods.

The Steering Committee of the Joint Venture serves as the governing body of the Joint Venture and is responsible for determining the overall strategy for the program, coordinating activities of the Venturers as well as performing other such functions as appropriate. The Steering Committee is comprised of an equal number of representatives of each Venturer.

On April 30, 2003, the United States Food and Drug Administration, commonly referred to as the FDA, granted marketing approval for Aldurazyme as an enzyme replacement therapy for patients with the Hurler and Hurler-Scheie forms of MPS I, and Scheie patients with moderate to severe symptoms. Aldurazyme has been granted orphan drug status in the United States, which generally provides seven years of market exclusivity. On June 11, 2003, the European Commission granted marketing approval for Aldurazyme to treat the non-neurological manifestations of MPS I in patients with a confirmed diagnosis of the disease. Aldurazyme has been granted orphan drug status in the European Union, which generally provides ten years of market exclusivity. In October 2006, Japan’s Health, Labor and Welfare Ministry granted marketing approval for Aldurazyme, the first specific treatment approved in Japan for patients with MPS I. Aldurazyme has been granted orphan drug status in Japan, which generally provides ten years of market exclusivity.

On behalf of the Joint Venture, Genzyme is commercializing Aldurazyme in the United States, Canada, the European Union, Latin America and the Asia Pacific regions. Genzyme continues to launch

6

BioMarin/Genzyme LLC
Notes to Consolidated Financial Statements (Continued)

A.Nature of Business and Organization (Continued)

Aldurazyme on a country-by-country basis as pricing and reimbursement approvals are obtained. The Joint Venture’s applications for marketing approval are currently pending in several countries in Latin America, Central and Eastern Europe and the Asia-Pacific Regions. Aldurazyme is manufactured at BioMarin’s facility in Novato, California and is sent to either Genzyme’s manufacturing facility in Allston, Massachusetts or to a third-party facility for the final fill-finish process.

B.Summary of Significant Accounting Policies

Basis of Presentation

The Joint Venture is considered a partnership for federal and state income tax purposes. As such, items of income, loss, deductions and credits flow through to the Venturers. The Venturers have responsibility for the payment of any income taxes on their proportionate share of the taxable income of the Joint Venture.

The consolidated financial statements as of December 31, 2006 and 2005, and for the years ended December 31, 2006 and 2005 have been audited. As of December 31, 2004 and for the year ended December 31, 2004, the Joint Venture did not meet the criteria of a significant subsidiary to either BioMarin or Genzyme and, as a result, the consolidated financial statements for those periods were not audited but include all normal and recurring adjustments that the Venturers consider necessary for the fair presentation of the Joint Venture’s financial position and operating results.

Accounting Method

The consolidated financial statements have been prepared under the accrual method of accounting in conformity with accounting principles generally accepted in the United States of America.

Fiscal Year End

The Venturers have determined that the fiscal year end of the Joint Venture is December 31.

Uncertainties

The Joint Venture is subject to risks common to companies in the biotechnology industry, including:

·the ability of the Joint Venture to manufacture sufficient amounts of its products for development and commercialization activities and to do so in a timely and cost-effective manner;

·the accuracy of the Joint Venture’s estimates of the size and characteristics of markets to be addressed by the Joint Venture’s products including growth projections;

·market acceptance of the Joint Venture’s products in expanded areas of use and new markets;

·the Joint Venture’s ability to obtain reimbursement for its products from third-party payors, where appropriate, the extent of such coverage and the accuracy of the Joint Venture’s estimates of the payor mix for its products;

·the Joint Venture’s ability to successfully obtain timely additional regulatory approvals and adequate patent and other proprietary rights protection for its products; and

7

BioMarin/Genzyme LLC
Notes to Consolidated Financial Statements (Continued)

B.Summary of Significant Accounting Policies (Continued)

·the content and timing of decisions made by the FDA and other regulatory agencies regarding the Joint Venture’s products and manufacturing facilities.

Use of Estimates

Under accounting principles generally accepted in the United States of America, the Joint Venture is required to make certain estimates and assumptions that affect reported amounts of assets, liabilities, revenues, expenses, and disclosure of contingent assets and liabilities in its consolidated financial statements. The Joint Venture’s actual results could differ from these estimates.

Cash and Cash Equivalents

Cash and cash equivalents, consisting principally of money market funds with initial maturities of three months or less, are valued at cost plus accrued interest, which the Joint Venture believes approximates their fair market value. All of the Joint Venture’s cash, excluding its restricted cash, is held on deposit at one financial institution.

Inventories

Inventories are valued at cost or, if lower, fair value. The Venturers determine the cost of raw materials using the average cost method and the cost of work in process and finished goods using the specific identification method. The Venturers analyze the Joint Venture’s inventory levels quarterly and write down to its net realizable value:

·inventory that has become obsolete;

·inventory that has a cost basis in excess of its expected net realizable value;

·inventory in excess of expected requirements; and

·expired inventory.

The Joint Venture capitalizes 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 likely result in the write off of the inventory and a charge to earnings. At December 31, 2006 and 2005, all of the Joint Venture’s inventories are related to Aldurazyme, a product approved for sale.

Comprehensive Loss

The Joint Venture reports comprehensive income (loss) in accordance with Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards No., or FAS, 130, “Reporting Comprehensive Income.” Comprehensive income (loss) for the years ended December 31, 2006, 2005 and 2004 (unaudited) does not differ from the reported net income (loss).

Transactions with Affiliates

Genzyme is commercializing Aldurazyme in the United States, Canada, the European Union, Latin America and the Asia Pacific regions and, as a result, conducts sales and collects cash from product sales in those territories on behalf of the Joint Venture. The majority of the Joint Venture’s operating expenses consist of project expenses incurred by the Venturers, either for internal operating costs or for third-party

8

BioMarin/Genzyme LLC
Notes to Consolidated Financial Statements (Continued)

B.Summary of Significant Accounting Policies (Continued)

obligations incurred by the Venturers on behalf of the Joint Venture which are then charged to the Joint Venture. All charges to the Joint Venture are subject to approval by the Steering Committee. The determination of the amount of internal operating costs incurred by each Venturer on behalf of the Joint Venture requires significant judgment by each Venturer. As a result, the consolidated financial statements for the Joint Venture may not be indicative of the results that would have occurred had the Joint Venture obtained all of its manufacturing, commercialization and research and development services from third-party entities. Genzyme Corporation owed the Joint Venture $6.9 million at December 31, 2006 and $12.7 million at December 31, 2005 consisting of cash received on behalf of the Joint Venture for net product sales, net of project expenses incurred on behalf of the Joint Venture. The Joint Venture owed BioMarin Companies a total of $1.6 million at December 31, 2006 and $1.1 million at December 31, 2005 for project expenses incurred on behalf of the Joint Venture.

Translation of Foreign Currencies

The Joint Venture translates the financial transactions performed by Genzyme’s foreign subsidiaries on behalf of the Joint Venture from local currency into U.S. dollars using the average exchange rate prevailing during each period. The Joint Venture includes any gains and losses on these transactions in selling, general and administrative expenses in its results of operations. Selling, general and administrative expenses includes foreign currency transaction net gains of $1.6 million in 2006, net losses of $2.4 million in 2005 and net gains of $0.3 million in 2004 (unaudited).

Derivative Instruments

In accordance with FAS 133, “Accounting for Derivative Instruments and Hedging Activities,” the Joint Venture recognizes all derivative instruments as either assets or liabilities in its balance sheet and measures those instruments at fair value. Subsequent changes in fair value are reflected in current earnings or other comprehensive income, depending on whether the derivative instrument is designated as part of a hedge relationship and, if it is, the type of hedge relationship.

Revenue Recognition

The Joint Venture recognizes revenue from product sales when persuasive evidence of an arrangement exists, the product has been delivered to the customer, title and risk of loss have passed to the customer, the price to the buyer is fixed or determinable and collection from the customer is reasonably assured. Revenue transactions are evidenced by customer purchase orders, customer contracts in certain instances, invoices and related shipping documents.

The timing of product shipments and receipts can have a significant impact on the amount of revenue that the Joint Venture recognizes in a particular period. Also, Aldurazyme is sold in part through distributors. Inventory in the distribution channel consists of inventory held by distributors, who are the Joint Venture’s customers, and inventory held by retailers, such as pharmacies and hospitals. The Joint Venture’s revenue in a particular period can be impacted by increases or decreases in distributor inventories. If distributor inventories increased to excessive levels, the Joint Venture could experience reduced purchases in subsequent periods. To determine the amount of Aldurazyme inventory in the Joint Venture’s U.S. distribution channel, the Joint Venture receives data on sales and inventory levels directly from its primary distributors for the product. As of December 31, 2006, the Joint Venture believes the

9

BioMarin/Genzyme LLC
Notes to Consolidated Financial Statements (Continued)

B.Summary of Significant Accounting Policies (Continued)

amount of Aldurazyme inventory held by U.S. distributors is sufficient to meet the current forecast of demand for the product in the United States.

The Joint Venture records reserves for rebates payable under Medicaid and payor contracts, such as managed care organizations, as a reduction of revenue at the time product sales are recorded. The Joint Venture’s Medicaid and payor rebate reserves have two components:

·an estimate of outstanding claims for end-user sales that have occurred, but for which related claim submissions have not been received; and

·an estimate of future claims that will be made when inventory in the distribution channel is sold to end-users.

Because the second component is calculated based on the amount of inventory in the distribution channel, the Joint Venture’s assessment of distribution channel inventory levels impacts its estimated reserve requirements. The Joint Venture’s calculation also requires other estimates, including estimates of sales mix, to determine which sales will be subject to rebates and the amount of such rebates. The Joint Venture updates its estimates and assumptions each period and records any necessary adjustments to its reserves. Accrued expenses for the Joint Venture includes a reserve for Medicaid and payor rebates payable of $2.3 million at December 31, 2006 and $1.6 million at December 31, 2005.

The Joint Venture records allowances for product returns, if appropriate, as a reduction of revenue at the time product sales are recorded. Several factors are considered in determining whether an allowance for product returns is required, including:

·the nature of Aldurazyme. Aldurazyme serves as a treatment, rather than a cure, for MPS I and, therefore, must be administered/infused to the patient on a weekly basis. Aldurazyme treats a small patient population, and the Joint Venture has insight into the patients receiving treatment. In addition, Aldurazyme has been granted Orphan Drug status in the United States, European Union and Japan. As a result, Aldurazyme is not currently subject to significant external risk factors such as technological obsolescence or competition;

·the customers’ limited return rights. Due to the nature, purpose and means of use of Aldurazyme, customers do not have the right to return the product in the ordinary course of business, other than for defects. Aldurazyme, like all biotechnology products, must meet stringent FDA regulations and therefore is subjected to strict quality testing before it is sold. As a result, the Joint Venture expects the incidence of defects to be de minimus. Coupled with the inability to return the product, there is a high cost to the product which deters Aldurazyme customers from carrying significant amounts of inventory;

·the Joint Venture and Genzyme’s experience of returns for similar products. Genzyme has extensive experience with other lysosomal storage disorder products in the market, similar to Aldurazyme. These products are marketed and distributed through similar means and to similar customers. Genzyme’s experience with these products is directly applicable to Aldurazyme and supports the Joint Venture’s conclusions related to returns; and

·the Joint Venture’s estimate of distribution channel inventory, based on sales and inventory level information provided by the primary distributors for Aldurazyme, as described above.

10

BioMarin/Genzyme LLC
Notes to Consolidated Financial Statements (Continued)

B.Summary of Significant Accounting Policies (Continued)

Based on these factors, the Joint Venture has concluded that product returns will be minimal and therefore, an allowance for product returns for Aldurazyme is not necessary at December 31, 2006 or 2005. In the future, if any of these factors and/or the history of product returns changes, an allowance for product returns may be required.

Emerging Issues Task Force Issue No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the 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. 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.

The Joint Venture records certain fees paid to its distributors for services as operating expense where the criteria set forth above are met. The fees incurred for these services were $0.7 million in 2006, $0.8 million in 2005 and $1.0 million in 2004 (unaudited).

Research and Development

Research and development costs are expensed in the period incurred. These costs are primarily comprised of development efforts performed by the Venturers or payments to third parties made by the Venturers, both on behalf of the Joint Venture, during the respective periods.

Income Taxes

The Joint Venture is organized as a pass-through entity and accordingly, the consolidated financial statements do not include a provision for income taxes. Taxes, if any, are the liability of the BioMarin Companies and Genzyme, as Venturers.

Accounting for Stock-Based Compensation

FAS 123R, “Share-Based Payment, an amendment of FASB Statement Nos. 123 and 95,” was effective January 1, 2006 and requires companies to recognize stock-based compensation expense in their financial statements for all share-based payment awards made to employees and directors based upon grant date fair value of those awards. The Joint Venture currently has no employees and, as a result, is not currently subject to the provisions of FAS 123R or Staff Accounting Bulletin No., or SAB, 107, “Share-Based Payment.” In addition, the Steering Committee has determined that the stock-based compensation expenses do not currently qualify as program expenses and, therefore, the Venturers are not permitted to charge any portion of their respective stock-based compensation expenses to the Joint Venture. In the future, if the Joint Venture has its own employees or if the Steering Committee determines that stock-based compensation expenses should be included in program costs, then the Joint Venture will become subject to the provisions of FAS 123R.

11

BioMarin/Genzyme LLC
Notes to Consolidated Financial Statements (Continued)

B.Summary of Significant Accounting Policies (Continued)

Recent Accounting Pronouncements

FAS 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.”   In November 2004, the FASB issued FAS 151, “Inventory Costs, an amendment of Accounting Research Bulletin, or ARB, No. 43, Chapter 4,” which clarifies that abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) should be recognized as current period changes in all circumstances. The Joint Venture adopted FAS 151 effective January 1, 2006 and it did not have a material impact on the Joint Venture’s financial position or results of operations.

FAS 157, “Fair Value Measurements.”   In September 2006, the FASB issued FAS 157, “Fair Value Measurements,” which provides enhanced guidance for using fair value to measure assets and liabilities. FAS 157 establishes a common definition of fair value, provides a framework for measuring fair value under accounting principles generally accepted in the United States and expands disclosure requirements about fair value measurements. FAS 157 is effective for the Joint Venture as of January 1, 2008. The Joint Venture is currently evaluating the impact, if any, the adoption of FAS 157 will have on its financial position and results of operations.

C.Derivative Financial Instruments

The Joint Venture periodically enters into foreign currency forward contracts, all of which have a maturity of less than 45 days. These contracts have not been designated as hedges and accordingly, unrealized gains or losses on these contracts are reported in current earnings. The notional settlement value of foreign currency forward contracts outstanding at December 31, 2006 is $12.8 million. At December 31, 2006, these contracts  had a fair value of approximately $15,000, representing an unrealized loss, which has been recorded in selling, general and administrative expenses in the Joint Venture’s consolidated statement of operations for the year ended December 31, 2006 and in accrued expenses in our consolidated balance sheet as of December 31, 2006. The Joint Venture did not enter into any foreign currency forward contracts in 2005.

D.Accounts Receivable

The Joint Venture’s trade receivables primarily represent amounts due from distributors and healthcare service providers. The Joint Venture states accounts receivable at fair value, after reflecting an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make payments. The Joint Venture believes that its credit risk associated with trade receivables is mitigated by the following factors:

·the product is sold to a number of customers over a broad geographic range;

·the Joint Venture performs credit evaluations of its customers on an ongoing basis; and

·the Joint Venture performs a detailed, monthly review of the receivable aging and specific customer balances.

The Joint Venture did not record an allowance for doubtful accounts at either December 31, 2006 or 2005. To date, due to the customers’ credit worthiness, the monthly review of the receivable balances and the customers’ need to maintain a supply of Aldurazyme and Genzyme’s similar products, the Joint Venture has not written-off any receivables and no allowance for doubtful accounts has been necessary. In the future, if the financial condition of any of the Joint Venture’s customers were to deteriorate and result

12

BioMarin/Genzyme LLC
Notes to Consolidated Financial Statements (Continued)

D.Accounts Receivable (Continued)

in an impairment of the customer’s ability to make payments, an allowance for doubtful accounts may be required.

E.Inventories (amounts in thousands)

	December 31,
	2006		2005
Raw materials	$	410	$	1,082
Work in process—bulk material	11,025		10,424
Finished products	14,129		18,780
Total	$	25,564	$	30,286

The Joint Venture recorded a charge of $0.2 million in 2006 to write off expired inventory. There were no similar charges in 2005 or 2004.

The Joint Venture capitalizes inventory produced for commercial sale, which may result in the capitalization of inventory that has not yet been approved for sale. If a product is not approved for sale, it would likely result in the write off of the inventory and a charge to earnings. At December 31, 2006 and 2005, all of the Joint Venture’s inventories are related to Aldurazyme, a product approved for sale.

F.Restricted Cash

In 2006, the Joint Venture entered into a series of foreign currency forward contracts all of which have a maturity of less than 45 days. In connection with these contracts, the Joint Venture is obligated to deposit cash based on the outstanding amount of the hedge contract and foreign exchange movement during the length of the contract in a restricted cash account with the financial institution issuing the contracts. The amount of restricted cash on deposit will be adjusted ratably, from time to time, in accordance with any changes in the amount outstanding under these contracts. As of  December 31, 2006, the Joint Venture had $0.3 million of restricted cash related to these contracts for which there are no comparable amounts in 2005.

G.Technology License Fees

In 2005, the Joint Venture paid $0.4 million for technology license fees, which will be amortized over their estimated useful lives, which range from approximately four to five years. Total amortization expense for the Joint Venture’s technology license fees was approximately $74,000 for the year ended December 31, 2006 and approximately $73,000 for the year ended December 31, 2005.

The estimated future amortization expense for the Joint Venture’s technology license fees for the remaining three succeeding fiscal years is as follows:

Year Ended December 31,	Estimated Amortization Expense
2007		$	73,575
2008		73,575
2009		63,906

13

BioMarin/Genzyme LLC
Notes to Consolidated Financial Statements (Continued)

H.Accrued Expenses:

Accrued expenses consist of the following (amounts in thousands):

	December 31,
	2006		2005
Royalties	$	3,676	$	3,032
Rebates	2,348		1,597
Other	568		198
Total accrued expenses	$	6,592	$	4,827

I.Venturers’ Capital

The Joint Venture distributed a total of $19.8 million in 2006 and $3.0 million in 2005 of cash to each Venturer in accordance with the terms of the Collaboration Agreement.

As of December 31, 2006, Venturers’ capital is comprised of capital contributions made by the Venturers to fund budgeted costs and expenses of the Joint Venture in accordance with the Collaboration Agreement and income (losses) allocated to the Venturers, net of cash distributions to the Venturers. All funding is shared equally by the two Venturers. As of December 31, 2006, the BioMarin Companies and Genzyme have each provided a total of $84.4 million of funding to the Joint Venture, net of $22.8 million of cash distributed by the Joint Venture to each Venturer. The Venturers did not make any capital contributions to the Joint Venture in 2006 because the Joint Venture had sufficient cash to meet its financial obligations.

J.Commitments and Contingencies

The Joint Venture may become subject to legal proceedings and claims arising in connection with its business. There were no asserted claims against the Joint Venture as of December 31, 2006.

K.Segment Information

The Joint Venture operates in one business segment—human therapeutics. Disclosures about revenues by geographic area and revenues from major customers are presented below.

The following table contains revenue information by geographic area (amounts in thousands):

	For the Years Ended December 31,
	2006		2005		2004
					(Unaudited)
Revenues:
U.S.	$	24,795	$	20,408		$	12,568
Europe	58,123		49,189			27,468
Other	13,373		6,820			2,547
Total	$	96,291	$	76,417		$	42,583

14

BioMarin/Genzyme LLC
Notes to Consolidated Financial Statements (Continued)

K.Segment Information (Continued)

The Joint Venture’s results of operations are solely dependent on sales of Aldurazyme. BioMarin manufactures Aldurazyme at a single manufacturing facility in Novato, California. The fill-finish process is completed at either Genzyme’s manufacturing facility in Allston, Massachusetts or at a third party. The percentage of sales of Aldurazyme to distributors, as compared to total revenues in 2006, 2005 and 2004 (unaudited), were as follows:

	% of Total Revenues
	2006			2005			2004
							(Unaudited)
Sales to Distributors:
U.S. distributors		11	%		11	%		12	%
European distributors		8	%		6	%		6	%
Other distributors		3	%		3	%		—	%
Total sales to distributors		22	%		20	%		18	%

The percentage of sales of Aldurazyme to two U.S. distributors, as compared to total revenues in 2006, 2005 and 2004 (unaudited), were as follows:

	% of Total Revenues
	2006			2005			2004
							(Unaudited)
Sales to U.S. Distributors:
Distributor A		4	%		6	%		7	%
Distributor B		7	%		5	%		5	%
Total sales to U.S. distributors		11	%		11	%		12	%

15