Table of ContentsQuickLinks

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

FORM 10-Q10-Q/A
Amendment No. 1

Commission File No. 0-14680

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

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

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o

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

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

        Number of shares of Genzyme Stock outstanding as of October 23, 2009: 265,382,892July 31, 2010: 254,839,847

Table of Contents

NOTE REGARDING REFERENCES TO GENZYME

        Throughout this Form 10-Q, the words "we," "us," "our" and "Genzyme" refer to Genzyme Corporation as a whole, and "our board of directors" refers to the board of directors of Genzyme Corporation.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This Form 10-Q contains forward-looking statements. These forward-looking statements include, among others, statements regarding:

•

our expectations regarding the financial impact of production interruption at our Allston, Massachusetts (Allston) manufacturing facility, which we refer to as the Allston facility, and the expected timing for shipping new Cerezyme and Fabrazyme production;



•

our regulatory plans and expectations for approval of alglucosidase alfa produced at the 2000 liter bioreactor, or 2000L, and the 4000 liter bioreactor, or 4000L, scale by the United States Food and Drug Administration, or FDA, and the timing thereof, and our expectations regarding sales of Myozyme in Europe;



•

our plans to increase manufacturing capacity for Cerezyme, Fabrazyme and Myozyme and the timing thereof;



•

our expectations regarding regulatory action with respect to several pending marketing applications;



•

our expectations regarding approval of a new Leukine manufacturing facility;



•

our expectations regarding regulatory approval of alemtuzumab for the treatment of multiple sclerosis, or MS, which we refer to as alemtuzumab for MS, and the timing thereof;



•

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



•

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



•

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



•

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



•

our provision for potential tax audit exposures and our expectations regarding our unrecognized tax benefits;



•

our expectations regarding the impact of changes in foreign exchange rates on our revenues;



•

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



•

our assessment of the impact of recent accounting pronouncements on our financial position and results of operations; and



•

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

Table of Contents

        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:

•

the possibility that we may encounter additional manufacturing problems due to mechanical failures, viral or bacterial contamination or any other reason, or that we may encounter further supply problems due to low product yields or a determination by a regulatory authority that product produced at our Allston facility or any of our other facilities cannot be released;



•

the potential for Gaucher and Fabry disease patients to switch to competitors' products in place of Cerezyme or Fabrazyme or to continue to reduce their doses of our products even after supply stabilizes;



•

our ability to obtain and maintain regulatory approvals for our products, services and manufacturing facilities and processes, and to do so in the anticipated timeframes, including for alglucosidase alfa produced at the 2000L and 4000L scales and for proposed changes to our manufacturing processes to test for Vesivirus 2117, and the timing of receipt of such approvals;



•

our inability to file for U.S. approval for alglucosidase alfa produced using the 4000L process within the expected timeframe due to a failure to obtain FDA approval of the product manufactured using the 2000L process, failure to secure agreement as to strategy, including our decision to file a supplemental biologics license application, or BLA, to the 2000L BLA, or any other reason;



•

our ability to manufacture sufficient amounts of our products and maintain sufficient inventories, and to do so in a timely and cost-effective manner;



•

our ability and the ability of our collaboration partners to successfully complete preclinical and clinical development of new products and services;



•

our ability to expand the use of current and next generation products in existing and new indications;



•

regulatory authorities' views regarding the safety, efficacy and risk-benefit profiles of our products and our manufacturing processes;



•

potential future write offs of inventory or product recalls;



•

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



•

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



•

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



•

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



•

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



•

our ability to successfully identify and market our products and services to new patients;



•

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



•

competition from lower cost generic or biosimilar products;

Table of Contents

•

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



•

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



•

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



•

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



•

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



•

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



•

the outcome of legal proceedings by or against us;



•

the possibility that our integration of the products and development programs acquired from Bayer may be more costly or time consuming than expected;



•

the outcome of our IRS and foreign tax audits;



•

general economic conditions; and



•

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

        We 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.

NOTE REGARDING TRADEMARKS

        Genzyme®, Cerezyme®, Fabrazyme®, Thyrogen®, Myozyme®, Renagel®, Renvela®, Campath®, Clolar®, Evoltra®, Mozobil®, Thymoglobulin®, Cholestagel®, Synvisc®, Synvisc-One®, Sepra®, Seprafilm®, Carticel®, Epicel®, MACI® and Hectorol® are registered trademarks, and Lumizyme™ is a trademark, 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 licensed to Genzyme. All other trademarks referred to in this Form 10-Q are the property of their respective owners. All rights reserved.

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

FORM 10-Q, SEPTEMBER 30, 2009

TABLE OF CONTENTS

Table of Contents

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.

Table of Contents

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.

Table of Contents

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.

Table of Contents

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 genetic disease 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:

•

Genetic Diseases, which develops, manufactures and distributes therapeutic products with a 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;



•

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;



•

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



•

Hematologic Oncology, which develops, manufactures and distributes products for the treatment of cancer and the mobilization of hematopoietic stem cells and is developing a product for the treatment of MS. This unit derives substantially all of its revenue from sales of Campath, clofarabine (which is marketed under the names Clolar and Evoltra), Fludara, Leukine and Mozobil.

        Formerly, we included our MS business unit under the caption "Other." As a result of our recent acquisition of certain products and development programs from Bayer, as described under the heading "Acquisition from Bayer" in Note 6., "Strategic Transactions," to these consolidated financial statements, our MS business unit is now material. We have aggregated our Hematologic Oncology and MS reportable segments and now report the activities of these two segments under the caption "Hematologic Oncology." 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 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."

Table of Contents

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 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, commonly referred to as U.S. GAAP.

        In June 2009, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No., or FAS, 168,"The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles." FAS 168 identifies the FASB Accounting Standards Codification™, or ASC, as the authoritative source of U.S. GAAP. Rules and interpretive releases of the SEC under federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. FAS 168 is effective for financial statements issued for interim reporting periods ending after September 15, 2009. The ASC does not change or alter existing U.S. GAAP and, therefore, it does not have an impact on our financial position, results of operations or cash flows.

        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 but does not include all disclosures required by U.S. GAAP.

        Our unaudited, consolidated financial statements for each period include the accounts of our wholly owned and majority owned subsidiaries. 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 minority interest expense in "Other" in our consolidated statements of operations (representing the ownership interest of the minority owner) because the amount was immaterial for all periods presented. We account for our investments in entities not subject to consolidation using the equity method of accounting if we have a substantial ownership interest (20% to 50%) in or exercise significant influence over the entity. 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.

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

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

Recent Accounting Pronouncements

        Periodically, accounting pronouncements and related information on the adoption, interpretation and application of U.S. GAAP are issued or amended by the FASB or the SEC. The following table shows recently issued accounting pronouncements and our position for adoption:

3. Fair Value Measurements

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

•

fixed income investments;



•

investments in publicly-traded equity securities;



•

derivatives; and



•

contingent consideration obligations.

Fair Value Measurement—Definition and Hierarchy

        Fair value is defined 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, we are permitted to use various valuation approaches, including market, income and cost approaches. We are required to follow an established fair value 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.

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3. Fair Value Measurements (Continued)

        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 contingent consideration obligations within the hierarchy as follows:

•

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



•

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



•

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

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3. Fair Value Measurements (Continued)

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

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3. Fair Value Measurements (Continued)

        Changes in the fair value of the our Level 3 contingent consideration obligations during the nine months ended September 30, 2009 were as follows (amounts in thousands):

        The carrying amounts reflected in our consolidated balance sheets for cash, accounts receivable, other current assets, accounts payable, 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.

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

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3. Fair Value Measurements (Continued)

which we do not apply hedge accounting treatment, to further reduce our exposure to changes in 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 selling, general and administrative expenses, or SG&A, in our consolidated statements of operations. We do not have any derivatives designated as hedging instruments 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 September 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 other current assets and net liability derivatives are included in accrued expenses in our consolidated balance sheets.

        The following table summarizes the balance sheet classification of the fair value of these derivatives on both a gross and net basis as of September 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 nine months ended September 30, 2009 and 2008 was not significant.

        The following table summarizes the effect of the unrealized and realized losses related to our foreign exchange forward contracts on our consolidated statements of operations for the three and nine months ended September 30, 2009 and 2008 (amounts in thousands):

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

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):

Table of Contents

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):

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6. Strategic Transactions

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

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6. Strategic Transactions (Continued)

Acquisition of Assets from Targeted Genetics Corporation

        On September 8, 2009, we entered into an agreement with Targeted Genetics Corporation to acquire certain gene therapy manufacturing assets for $7.0 million. We acquired intellectual property and materials used in manufacturing Adeno-Associated Virus, or AAV, vectors. We paid Targeted Genetics Corporation a nonrefundable upfront payment of $3.5 million in September 2009 and will also make additional payments totaling $3.5 million upon achievement of certain technology transfer-based milestones. We recorded a total of $7.0 million as a charge to research and development expenses for our Genetic Diseases reporting segment in our consolidated statements of operations for the three and nine months ended September 30, 2009. The payment for the milestones and the transition of the technology are all expected to be completed by the first quarter of 2010.

Acquisition from Bayer

        On May 29, 2009, we completed a transaction with Bayer to:

•

exclusively license worldwide rights to commercialize alemtuzumab for MS;



•

exclusively license worldwide rights to alemtuzumab for B-cell chronic lymphocytic leukemia, or B-CLL, and all other indications, except for solid organ transplant, which we refer to as Campath;



•

exclusively license Bayer's worldwide rights to the oncology products Fludara and Leukine; and



•

acquire a new Leukine manufacturing facility located in Lynnwood, Washington, contingent upon the facility receiving FDA approval, which is expected in 2011.

        Prior to this transaction, we shared with Bayer the development and certain commercial rights to alemtuzumab for MS and Campath and received two-thirds of Campath net profits on U.S. sales and a royalty on foreign sales. Under our new arrangement with Bayer, prior to regulatory approval of alemtuzumab for MS, we will have primary responsibility for the product's development while Bayer will continue to fund development at current levels and will participate in the development steering committee. We will have worldwide commercialization rights, with Bayer retaining an option to co-promote alemtuzumab for MS. In exchange for the above, Bayer is eligible to receive the following contingent purchase price payments:

•

a percentage of revenues from sales of alemtuzumab for MS capped at a total compensation of $1.25 billion or ten years, whichever comes first;



•

a percentage of the combined revenues from sales of Campath, Fludara and Leukine capped at a total compensation of $500.0 million or eight years, whichever comes first;



•

sales-based milestone payments determined as a percentage of annual worldwide revenues of alemtuzumab for MS beginning in 2021 if certain minimum annual revenue targets are achieved, provided that we do not exercise our right to buyout such potential future milestones in 2020 for a one-time payment of up to $900.0 million;



•

up to $150.0 million if certain annual combined revenues of Campath, Fludara and Leukine are reached beginning in 2011; and

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6. Strategic Transactions (Continued)

•

between $75.0 million and $100.0 million for the Leukine manufacturing facility, following the receipt of FDA approval of the facility.

        We are using Bayer for certain transition services and are purchasing commercial supply of Fludara and Leukine from Bayer. We have employed certain members of Bayer's commercial teams for all three products and have an opportunity to employ certain members of Bayer's manufacturing team if we acquire the Leukine facility. The transaction has been accounted for as a business combination and is included in our results of operations beginning on May 29, 2009, the date of acquisition. The results for the acquired products are included in our Hematologic Oncology reporting segment. The fair value of the consideration and acquired assets at the date of acquisition consisted of the following (amounts in thousands):

        At closing, we paid a total of $117.1 million to Bayer, of which $74.6 million was refundable. The remaining non-refundable amount of $42.4 million represents a payment for acquired inventory. A total of $59.8 million of the refundable amount was received in July 2009 and $14.8 million remains due from Bayer as of September 30, 2009. The contingent consideration obligations are net of the continued funding expected to be received from Bayer for the development of alemtuzumab for MS. We determined the fair value of the contingent consideration obligations based on a probability-weighted income approach derived from revenue estimates and probability assessment with respect to regulatory approval of alemtuzumab for MS. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. The resultant probability-weighted cash flows were then discounted using discount rates of 11% for Campath, Fludara and Leukine and 13% for alemtuzumab for MS.

        Of the $964.1 million total contingent consideration obligations recorded as of the acquisition date, $529.1 million related to Campath, Fludara and Leukine, and $435.0 million related to alemtuzumab for MS. Each period we revalue the contingent consideration obligations to their then fair value and record increases in the fair value as contingent consideration expense and decreases in the fair value as a reduction of contingent consideration expense. Increases or decreases in the fair value of the contingent consideration obligations can result from changes in discount periods and rates, changes in the timing and amount of revenue estimates and changes in probability adjustments with respect to regulatory approval of alemtuzumab for MS.

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6. Strategic Transactions (Continued)

        As of September 30, 2009, the fair value of the total contingent consideration obligations was $1.0 billion primarily due to changes in discount periods and management estimates. Accordingly, we recorded contingent consideration expense in our consolidated statements of operations of $28.2 million for the three months ended and $37.3 million for the nine months ended September 30, 2009. As of September 30, 2009, we have paid $9.2 million in contingent consideration payments to Bayer and have not received funding from Bayer for the development of alemtuzumab for MS since May 29, 2009.

        At the date of acquisition, alemtuzumab for MS had not reached technological feasibility nor had an alternative future use and is therefore considered to be IPR&D. We recorded the fair value of the purchase price attributable to IPR&D as an indefinite-lived intangible asset. We will test the asset annually for impairment, or earlier if conditions warrant. Amortization of this asset will begin upon regulatory approval based on the then estimated useful life of the asset.

        The fair value assigned to purchased IPR&D was estimated by discounting, to present value, the cash flows expected to result from the project once it has reached technological feasibility. We used a discount rate of 16% and cash flows that have been probability-adjusted to reflect the risks of advancement through the product approval process, which we believe are appropriate and representative of market participant assumptions. In estimating future cash flows, we also considered other tangible and intangible assets required for successful exploitation of the technology resulting from the purchased IPR&D project and adjusted future cash flows for a charge reflecting the contribution to value these assets.

        The fair value of the identifiable assets acquired in this transaction of $1.03 billion exceeded the fair value of the purchase price of $1.01 billion. As a result, we recognized a gain on acquisition of business of $24.2 million in our consolidated statements of operations for the nine months ended September 30, 2009. The fair value of the consideration and assets remain subject to potential adjustments.

        SG&A in our consolidated statements of operations for the nine months ended September 30, 2009 includes approximately $4 million of acquisition-related costs, primarily legal fees, associated with the Bayer transaction. Acquisition-related costs for the three months ended September 30, 2009 were not significant.

Purchase of Intellectual Property from EXACT Sciences Corporation

        On January 27, 2009, we purchased certain intellectual property in the fields of prenatal testing and reproductive health from EXACT Sciences Corporation, or EXACT Sciences, for our genetics business unit and 3,000,000 shares of EXACT Sciences common stock. We paid EXACT Sciences total cash consideration of $22.7 million. Of this amount, we allocated $4.5 million to the acquired shares of EXACT Sciences common stock based on the fair value of the stock on the date of acquisition, which we recorded as an increase to investments in equity securities in our consolidated balance sheet as of March 31, 2009. As the purchased assets did not qualify as a business combination and have not reached technological feasibility nor have alternative future use, we allocated the remaining $18.2 million to the acquired intellectual property, which we recorded as a charge to research and development expenses in our consolidated statement of operations for the three months ended March 31, 2009. We will pay EXACT Sciences an additional $1.9 million by July 2010, unless such amount is required to satisfy certain of EXACT Sciences' indemnification obligations.

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6. Strategic Transactions (Continued)

Purchase of In-Process Research and Development

        Prior to January 1, 2009, IPR&D acquired through a business combination was expensed on the acquisition date in our consolidated financial statements. Effective January 1, 2009, all IPR&D we acquire through business combinations on or after January 1, 2009 will be capitalized as an intangible asset on our consolidated balance sheets and periodically tested for impairment.

        The following table sets forth the significant IPR&D projects for the companies and assets we acquired between January 1, 2006 and September 30, 2009 (amounts in millions):

Pro Forma Financial Summary

        The following pro forma financial summary is presented as if the acquisition from Bayer was completed as of January 1, 2009 and 2008. The pro forma combined results are not necessarily indicative of the actual results that would have occurred had the acquisition been consummated on those dates, or of the future operations of the combined entities. Material nonrecurring charges related to this acquisition, such as a gain on acquisition of business of $24.2 million, are included in the pro

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6. Strategic Transactions (Continued)

forma financial summaries for the periods presented (amounts in thousands, except per share amounts):

7. Inventories

        In May 2009, in connection with our acquisition of the worldwide rights to the oncology products Campath, Fludara and Leukine from Bayer, we acquired a total of $136.4 million of inventory, including $15.3 million of Campath inventory, $22.9 million of Fludara inventory and $98.2 million of Leukine inventory.

        In June 2009, we announced that we had interrupted production of Cerezyme and Fabrazyme, and shipments of Cerezyme, at our Allston facility to sanitize the facility after identifying a virus, Vesivirus 2117, in a bioreactor used for Cerezyme production. We recorded charges totaling $23.7 million for the three months ended and $37.9 million for the nine months ended September 30, 2009 to cost of products sold in our consolidated statements of operations, for costs related to the remediation of this facility, including the sanitization of the facility, idle capacity and overhead expenses and the write off of certain production materials.

        When we suspended production at our Allston facility, we had significant Cerezyme work-in-process material. We decided not to process the majority of this work-in-process material because the material either had expired or we were not sufficiently assured that the material was not contaminated with Vesivirus 2117 and incurred a write off of approximately $8 million for the nine months ended September 30, 2009. In August 2009, the FDA communicated to us steps it recommends we take prior to forward processing the remaining Cerezyme work-in-process. The steps recommended

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

7. Inventories (Continued)

by the FDA were consistent with the steps that we independently had planned to implement. The remaining Cerezyme work-in-process material expires in mid-2010. If we decide not to process this remaining material or if we process the material and the FDA or another regulatory authority does not allow us to release it, we will incur a write off of approximately $3 million for the inventory value of this remaining material. We had two lots of Cerezyme in inventory that were finished before production was suspended at our Allston facility. Both lots were released during the third quarter of 2009.

8. Goodwill and Other Intangible Assets

Goodwill

        The following table contains the change in our goodwill during the nine months ended September 30, 2009 (amounts in thousands):

        We are required to perform impairment tests related to our goodwill annually and whenever events or changes in circumstances suggest that the carrying value of an intangible asset may not be recoverable. We completed the required annual impairment tests for our $1.4 billion of net goodwill in the third quarter of 2009 and determined that no impairment charges were required.

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

8. 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):

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

8. Goodwill and Other Intangible Assets (Continued)

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

        As of September 30, 2009, the estimated future amortization expense for our finite-lived other intangible assets for the remainder of fiscal year 2009, the four succeeding fiscal years and thereafter is as follows (amounts in thousands):

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

9. Investments in Equity Securities

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

        Gross gains (losses) on investments in equity securities for both the three and nine months ended September 30, 2008 includes a charge of $10.0 million to write off the purchase price of an exclusive option to acquire equity in a private company as a result of our termination of the option agreement prior to the exercise deadline. Gross gains (losses) for the nine months ended September 30, 2008 also includes a gain of $10.3 million recorded in the second quarter of 2008 resulting from the liquidation of our investment in the common stock of Sirtris for net cash proceeds of $14.8 million.

        Charges for impairment of investments for all periods presented represents the write down of our investments in certain venture capital funds to fair value at the end of each period.

        At September 30, 2009, our stockholders' equity includes $14.2 million of unrealized gains and $0.2 million of unrealized losses related to our strategic investments in equity securities.

10. Revolving Credit Facility

        As of September 30, 2009, we had approximately $12 million of outstanding standby letters of credit and no borrowings, resulting in approximately $338 million of available credit under our five-year $350.0 million senior unsecured revolving credit facility, which matures July 14, 2011. The terms of this credit facility include various covenants, including financial covenants that require us to meet minimum interest coverage ratios and maximum leverage ratios. As of September 30, 2009, we were in compliance with these covenants.

11. Stockholders' Equity

Stock Repurchase

        In May 2007, our board of directors authorized a stock repurchase program to repurchase 20,000,000 shares of our outstanding common stock over a three year period that began in June 2007. The board authorized the expenditure of up to $1.5 billion to purchase those shares. The repurchases are being made from time to time and can be effectuated through open market purchases, privately negotiated transactions, transactions structured through investment banking institutions, or by other means, subject to management's discretion and as permitted by securities laws and other legal requirements. The manner of the purchase, the amount that we spend and the number of shares we ultimately purchase will be based on a range of factors, including share price. The program does not obligate us to acquire any particular amount of common stock and the program may be suspended at any time at our discretion.

        During the nine months ended September 30, 2009, we repurchased 7,500,000 shares of our common stock under this program at an average price of $55.16 per share for a total of $413.9 million

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

11. Stockholders' Equity (Continued)

in cash, including fees. Since June 2007, when we first began repurchasing shares of our common stock under this program, we have repurchased a cumulative total of 13,000,000 shares of our common stock at an average price of $60.63 per share for a total of $788.5 million in cash, including fees. We recorded the repurchases in our consolidated balance sheets as a reduction to our common stock account for the par value of the repurchased shares and as a reduction to our additional paid-in capital account.

Stock-Based Compensation Expense, Net of Estimated Forfeitures

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

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

        At September 30, 2009, there was $278.6 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 2.0 years.

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

12. Commitments and Contingencies

Legal Proceedings

        On July 29, 2009 and August 3, 2009, two purported securities class action lawsuits were filed in the U.S. District Court for the District of Massachusetts against us and our President and Chief Executive Officer. The lawsuits were filed on behalf of those who purchased our common stock during the period from June 26, 2008 through July 21, 2009 and allege violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Each of the suits is premised upon allegations that we made materially false and misleading statements and omissions by failing to disclose instances of viral contamination at two of our manufacturing facilities and our receipt of a list of inspection observations from the FDA related to one of the facilities, which detailed observations of practices that the FDA considered to be deviations from "Good Manufacturing Practices," or GMP. The plaintiffs seek unspecified damages and reimbursement of costs, including attorneys' and experts' fees. We intend to defend these lawsuits vigorously. We are not able to predict the outcome of these lawsuits or estimate the amount or range of any possible loss we might incur if we do not prevail in final, non-appealable determinations of these matters. Therefore, we have not accrued any amounts in connection with these contingencies.

        Beginning in August 2009, we have received six letters from alleged shareholders demanding that our board of directors take action on our behalf to remedy breaches of fiduciary duty by our directors and officers. The demand letters are primarily premised on allegations that we made materially false and misleading disclosures and failed to disclose material information to shareholders with respect to manufacturing issues and compliance with GMP. Several of the letters also assert that certain of our officers and directors took advantage of their knowledge of material non-public information about Genzyme to illegally sell stock they personally held in Genzyme. Our board of directors has designated a special committee of three independent directors to oversee the investigation of the allegations made in the demand letters and to recommend to the independent directors of the board whether any action should be instituted on our behalf against any officer or director. The committee has retained independent legal counsel. If the independent members of our board of directors were to make a determination that it was in our best interest to institute an action against any officers or directors, any monetary recovery would be to our benefit.

        In April 2005, Church & Dwight Co., Inc., or Church & Dwight, filed a suit in U.S. District Court for the District of New Jersey against Abbott Laboratories, or Abbott, claiming that certain over-the-counter pregnancy tests distributed by Abbott between 1999 and 2003 infringed upon patents owned by Church & Dwight. During part of this period, a portion of the test kits distributed by Abbott were manufactured by Wyntek Diagnostics, Inc., or Wyntek, which had agreed to indemnify Abbott for patent infringement related costs and damages for these products. In 2002, we acquired Wyntek and assumed the obligations under this agreement. In June 2008, the court issued a ruling awarding Church & Dwight approximately $29 million in damages based on a jury finding of willful infringement by Abbott and in September 2009, Abbott agreed to pay Church & Dwight approximately $27 million to settle the lawsuit. Because multiple parties, including Abbott, manufactured infringing product for Abbott during this period, any responsibility that we may have for indemnifying Abbott is only for a portion of its costs and damages related to this case. We currently are disputing with Abbott the percentage of infringing product that was supplied by us and may in the future assert additional claims that, if successful, would reduce or relieve us of any liability. The supply agreement between Abbott and Wyntek provides for dispute resolution through an arbitration proceeding in the event that the parties are unable to reach agreement on the indemnification amount.

Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

12. Commitments and Contingencies (Continued)

        Through June 30, 2003, we had three outstanding series of common stock, which we referred to as tracking stocks: Genzyme General Stock (which we now refer to as Genzyme Stock); Biosurgery Stock; and Molecular Oncology Stock. On August 6, 2007, we reached an agreement in principle to settle for $64.0 million the lawsuits related to our 2003 exchange of Genzyme Stock for Biosurgery Stock. We recorded a liability for the settlement payment of $64.0 million as a charge to SG&A in our consolidated statements of operations for the three months ended June 30, 2007. We paid the settlement in August 2007. The court approved the settlement in October 2007. We have submitted claims to our insurers for reimbursement of portions of the expenses incurred in connection with these cases; the insurers have denied coverage, and therefore, we have not recorded a receivable for any potential recovery from our insurers. In our lawsuit against our primary insurer, the court granted the insurer's motion to dismiss the suit in October 2009. We are currently evaluating whether to appeal this judgment.

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

13. Provision for Income Taxes