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competition from lower cost generic or biosimilar products;



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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;



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the impact of legislative or regulatory changes, including proposed healthcare reform in the United States;



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



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

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



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the impact of changes in the exchange rates for foreign currencies on our product and service revenues in future periods;



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



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the outcome of legal proceedings by or against us;



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the impact of our recent and future merger and acquisition activity;



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the receipt of regulatory approvals for our transaction with Bayer and our ability to successfully integrate the products and development programs that we would acquirehave acquired from Bayer;



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the outcome of our IRS and foreign tax audits;



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general economic conditions; and



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

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

NOTE REGARDING INCORPORATION BY REFERENCE

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

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NOTE REGARDING TRADEMARKS

        Genzyme®, Cerezyme®, Ceredase®, Fabrazyme®, Thyrogen®, Myozyme®, Renagel®, Renvela®, Campath®, Clolar®, Evoltra®, Mozobil®, Thymoglobulin®, Cholestagel®, Synvisc®, Seprafilm®, Carticel®, Epicel®, MACI®, and Hectorol® are registered trademarks, and Cholestagel™, Evoltra™, Lumizyme™, and Synvisc-One™ are trademarks, of Genzyme or its subsidiaries. WelChol® is a registered trademark of Sankyo Pharma, Inc. Aldurazyme® is a registered trademark of BioMarin/Genzyme LLC. Elaprase® is a registered trademark of Shire Human Genetic Therapies, Inc. Prochymal® and Chondrogen® are registered trademarks of Osiris Therapeutics, Inc. Fludara® and Leukine® are registered trademarks of Bayer Schering Pharma AG.A.G., and licensed to Genzyme. All other trademarks referred to in this Form 10-Q are the property of their respective owners. All rights reserved.

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GENZYME CORPORATION AND SUBSIDIARIES

FORM 10-Q, MARCH 31,JUNE 30, 2009

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PART I.    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

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

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

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GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

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

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

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GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)

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

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements

1.    Description of Business

        We are a global biotechnology company dedicated to making a major impact on the lives of people with serious diseases. Our broad product and service portfolio is focused on rare disorders, renal disease, orthopaedics, cancer, transplant and immune disease, and diagnostic and predictive testing.

        In the fourth quarter of 2008, we changed our segment reporting structure to better reflect the way we manage and measure the performance of our businesses. Under the new reporting structure, we are organized into four financial reporting units, which we also consider to be our reporting segments:

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Genetic Diseases, 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. The unit derives substantially all of its revenue from sales of Cerezyme, Fabrazyme, Myozyme and Aldurazyme;



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



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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/Synvisc-One, the Sepra line of products, Carticel and Matrix-induced Autologous Chondrocyte Implantation, or MACI; and



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Hematologic Oncology, which develops, manufactures and distributes products for the treatment of cancer. ThePrior to May 29, 2009, the unit derivesderived substantially all of its revenue from sales and royalties received on sales of Campath, and clofarabine. Clofarabineclofarabine (which is marketed under the names Clolar and Evoltra. This unit also includesEvoltra), and Mozobil, which received marketing approval in the United States in December 2008.2008 and in Europe in July 2009. On May 29, 2009, we acquired from Bayer the worldwide marketing and distribution rights to Campath, Fludara (fludarabine phosphate) and Leukine (sargramostim). Since that date, sales of Fludara and Leukine have been included in this unit along with sales of Campath.

        Our transplant business unit, which develops, manufactures and distributes therapeutic products that address pre-transplantation, prevention and treatment of graft rejection in organ transplantation and other hematologic and auto-immune disorders, and our genetics business unit, which provides testing services for the oncology, prenatal and reproductive markets, were formerly reported as separate reporting segments. Effective as of the fourth quarter of 2008, we include our transplant and genetics business units under the caption "Other." We also report the activities of our MS, diagnostic products, bulk pharmaceuticals and immune mediated disease business units under the caption "Other." These operating segments did not meet the quantitative threshold for separate segment reporting. We have revised our 2008 segment disclosures to conform to our 2009 presentation.

        We report our corporate, general and administrative operations and corporate science activities under the caption "Corporate."

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

2.    Basis of Presentation and Significant Accounting Policies

Basis of Presentation

        Our unaudited, consolidated financial statements for each period include the statements of operations, balance sheets and statements of cash flows for our operations taken as a whole. We have eliminated all intercompany items and transactions in consolidation. We have reclassified certain 2008 data to conform to our 2009 presentation. We prepare our unaudited, consolidated financial statements following the requirements of the SEC for interim reporting. As

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

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

permitted under these rules, we condense or omit certain footnotes and other financial information that are normally required by accounting principles generally accepted in the United States.

        These financial statements include all normal and recurring adjustments that we consider necessary for the fair presentation of our financial position and results of operations. Since these are interim financial statements, you should also read our audited, consolidated financial statements and notes included in Exhibit 13 to our 2008 Form 10-K. Revenues, expenses, assets and liabilities can vary from quarter to quarter. Therefore, the results and trends in these interim financial statements may not be indicative of results for future periods. The balance sheet data as of December 31, 2008 that is included in this Form 10-Q was derived from our audited financial statements.

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

        Any material subsequent events have been considered for disclosure through the filing date of this Form 10-Q.

Recent Accounting Pronouncements

        Periodically, accounting pronouncements and related information on the adoption, interpretation and application of accounting principles generally accepted in the United States are issued or amended by the various U.S. financial accounting regulatory groups. The following table provides a description of the types of accounting pronouncements that are frequently issued or amended:

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

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

        The following table shows recently issued accounting pronouncements and our position for adoption:

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

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

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

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

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements

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

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fixed income investments;



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investments in publicly-traded equity securities;



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derivatives; and



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investments in publicly-traded equity securities.contingent consideration obligations.

Fair Value Measurement—Definition and Hierarchy

        FAS 157 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date. In determining fair value, FAS 157 permits the use of

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)

various valuation approaches, including market, income and cost approaches. FAS 157 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available.

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

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



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



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

Valuation Techniques

        Fair value is a market-based measure considered from the perspective of a market participant who would buy the asset or assume the liability rather than our own specific measure. All of our fixed income securities are priced using a variety of daily data sources, largely readily-available market data and broker quotes. To validate these prices, we compare the fair values of our fixed income investments using market data from observable and corroborated sources. We also perform the fair value calculations for our derivatives and equity securities using market data from observable and corroborated sources. We determine the fair value of the contingent consideration obligations based on a probability-weighted income approach. The measurement is based on significant inputs not observable in the market. In periods of market inactivity, the observability of prices and inputs may be reduced for certain instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3.

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)

        The following tables set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31,June 30, 2009 and December 31, 2008 (amounts in thousands):

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)

(1)

Changes in the fair value of our fixed income investments and investments in publicly-traded equity securities are recorded in accumulated other comprehensive income (loss), a component of stockholders' equity, in our consolidated balance sheets.

(2)

The aggregateIn May 2009, in connection with our acquisition from Bayer of the worldwide rights to Campath, Fludara, Leukine and alemtuzumab for the treatment of MS, changes in the fair value of our foreign exchange forward contracts was an unrealized gain of $2.2 million as of March 31, 2009, which wethese contingent consideration obligations are recorded as an increase to prepaidcontingent consideration expense, a component of operating expenses and other current assets in our consolidated balance sheets asstatements of that date, and an unrealized loss of $(1.4) million as of December 31, 2008, which we recorded as an increase to accrued expenses as of that date.operations.

        Changes in the fair value of the our foreign exchange forward contracts are recordedLevel 3 contingent consideration obligations during the six months ended June 30, 2009 were as follows (amounts in unrealized foreign exchange gains and losses, a component of selling, general and administrative expenses, or SG&A, in our consolidated statements of operations.thousands):

        The carrying amounts reflected in our consolidated balance sheets for cash, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses, current portion of contingent consideration obligations and current portion of long-term debt and capital lease obligations approximate fair value due to their short-term maturities.

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)

Derivative Instruments

        As a result of our worldwide operations, we may face exposure to potential adverse movements in foreign currency exchange rates. Exposures to currency fluctuations that result from sales of our products in foreign markets are partially offset by the impact of currency fluctuations on our international expenses. We may also use derivatives, primarily foreign exchange forward contracts for which we do not seekapply hedge accounting treatment under FAS 133, "Accounting for Derivative Instruments and Hedging Activities," or FAS 133, to further reduce our exposure to changes in

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)

exchange rates, primarily to offset the earnings effect from short-term foreign currency assets and liabilities. We account for such derivatives at market value with the resulting gains and losses reflected within SG&A expense in our consolidated statements of operations. We do not have any derivatives designated as hedging instruments under FAS 133 and we do not use derivative instruments for trading or speculative purposes.

Foreign Exchange Forward Contracts

        Generally, we enter into foreign exchange forward contracts with maturities of not more than 15 months. All foreign exchange forward contracts in effect as of March 31,June 30, 2009 and December 31, 2008 had maturities of 1 to 2 months. We report these contracts on a net basis. Net asset derivatives are included in prepaid expenses and other current assets and net liability derivatives are included in accrued expenses in our consolidated balance sheets.

        In accordance with the provisions of FAS 161, "Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133," the following table summarizes the balance sheet locationclassification of the fair value of these derivatives on both a gross and a net basis as of March 31,June 30, 2009 and December 31, 2008 (amounts in thousands):

        Total foreign exchange (gains) and losses included in SG&A in our consolidated statements of operations includes unrealized and realized (gains) and losses related to both our foreign exchange forward contracts and our foreign currency assets and liabilities. The net impact of our overall unrealized and realized foreign exchange (gains) and losses for both the three and six months ended March 31,June 30, 2009 and 2008 was not significant.

        In accordance with the provisions of FAS 161, the following table summarizes only the effect of the unrealized and realized (gains) and losses related to our foreign exchange forward contracts on our consolidated statements of operations for the three months ended March 31, 2009 and 2008 (amounts in thousands):

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)

statements of operations for the three and six months ended June 30, 2009 and 2008 (amounts in thousands):

4.    Net Income Per Share

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

(1)

Prior to January 1, 2009, in accordance with EITF 04-8, "The Effect of Contingently Convertible Debt on Diluted Earnings Per Share," the shares issuable upon conversionredemption of our $690.0 million in principal of our 1.25% convertible senior notes were included in diluted weighted average shares outstanding for purposes of computing diluted earnings per share, unless the effect was anti-dilutive. Accordingly, for the three months ended March 31, 2008, interest and debt fees related to these notes of $1.9 million, net of tax, have been added back to net income and approximately 9.7 million shares issuable upon conversion of these notes have been included in diluted weighted average shares outstanding. There are no similar adjustments to the computation of diluted earnings per share for

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

4.    Net Income Per Share (Continued)

the three and six months ended March 31,June 30, 2009, because we redeemed these notes, primarily for cash, on December 1, 2008.

(2)

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

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

5.    Comprehensive Income

        The components of comprehensive income for the periods presented are as follows (amounts in thousands):

(1)

Tax amounts for bothall periods were not significant.

(2)

Net of $11.9$(5.6) million of tax for the three months ended March 31,and $6.3 million of tax for the six months ended June 30, 2009 and $(2.0)$2.7 million of tax for the three months ended March 31,and $0.7 million of tax for the six months ended June 30, 2008.

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6.    Strategic Transactions

        We account for business combinations completed prior to January 1, 2009 in accordance with FAS 141 and business combinations completed on or after January 1, 2009 in accordance with FAS 141R. FAS 141R modifies the criteria that must be met to qualify as a business combination and prescribes new accounting requirements that differ significantly from FAS 141. Among various other requirements and differences, the following table illustrates how we account for specific elements of our business combinations under FAS 141 and FAS 141R: