EXHIBIT 13.2

FINANCIAL STATEMENTS

PAGE NO.
--------

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

Combined Selected Financial Data.......................... GG-2

Management's Discussion and Analysis of Genzyme General's
Financial Condition and Results of Operations........... GG-5

Combined Statements of Operations--For the Years Ended
December 31, 1999, 1998 and 1997........................ GG-18

Combined Balance Sheets--December 31, 1999 and 1998....... GG-19

Combined Statements of Cash Flows--For the Years Ended
December 31, 1999, 1998 and 1997........................ GG-20

Notes to Combined Financial Statements.................... GG-22

Report of Independent Accountants......................... GG-45

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GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION
COMBINED SELECTED FINANCIAL DATA

Genzyme General is our operating division that develops and markets:

- therapeutic products, with an expanding focus on products to treat
patients suffering from lysosomal storage disorders and other specialty
therapeutics;

- diagnostic products, with a focus on IN VITRO diagnostics; and

- other products and services, such as genetic testing services and lipids
and peptides for drug delivery.

A series of our common stock, Genzyme General Division Common Stock (which
we refer to as "Genzyme General Stock") is designed to reflect the value and
track the performance of this division. Genzyme General Stock is common stock of
Genzyme Corporation, not of Genzyme General; Genzyme General is a division, not
a company or legal entity, and therefore does not and cannot issue stock. The
chief mechanisms intended to cause Genzyme General Stock to "track" the
financial performance of Genzyme General are provisions in our charter governing
dividends and distributions. Under these provisions, our charter factors the
assets and liabilities and income or losses attributable to Genzyme General into
the determination of the amount available to pay dividends on Genzyme General
Stock.

To determine earnings per share, we allocate Genzyme's earnings to each
series of our common stock based on the earnings attributable to that series of
stock. The earnings attributable to Genzyme General Stock is defined in our
charter as the net income or loss of Genzyme General determined in accordance
with generally accepted accounting principles and as adjusted for tax benefits
allocated to or from Genzyme General in accordance with our management and
accounting policies. Our charter also requires that all income and expenses of
Genzyme be allocated among the divisions in a reasonable and consistent manner.
Our board of directors, however, retains considerable discretion in determining
the types, magnitudes and extent of allocations to each series of common stock
without shareholder approval.

Because the earnings allocated to Genzyme General Stock are based on the
income or losses attributable to Genzyme General, we include financial
statements and management's discussion and analysis of Genzyme General to aid
investors in evaluating its performance.

The following combined selected financial data reflect the results of
operations and financial position of the operations and assets we have allocated
to Genzyme General and should be read in conjunction with the financial
statements of Genzyme General and accompanying notes.

On June 28, 1999, we created of Genzyme Surgical Products as a separate
division of Genzyme, distributed Surgical Products Stock, and modified the way
that we allocate income and losses to our series of stock. These combined
selected financial data reflect the results and financial position of the
operations and assets we have allocated to Genzyme General as if the operations
of Genzyme Surgical Products had been accounted for as a separate division for
all periods presented. Although the results of Genzyme General for all periods
presented no longer include the results of Genzyme Surgical Products, this does
not impact the historical allocation of Genzyme's earnings among its series of
common stock. Through June 27, 1999, the losses of Genzyme Surgical Products
were allocated to Genzyme General Stock. From June 28, 1999, the losses of
Genzyme Surgical Products were no longer included in the determination of income
allocated to Genzyme General Stock. Subsequent to the creation of Genzyme
Surgical Products, pursuant to the Company's management and accounting policies,
tax benefits generated by Genzyme Surgical Products continued to be allocated to
Genzyme General Stock.

The greater segregation of assets, liabilities and earnings or losses
resulting from the creation of Genzyme Surgical Products is a trend that we do
not expect to continue. We plan to combine Genzyme Surgical Products and Genzyme
Tissue Repair into Genzyme Biosurgery upon the completion of the Biomatrix
acquisition, reducing the segregation of assets among our divisions and reducing
the series of common stock outstanding. As market or competitive conditions
warrant, we may create new series of

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GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION
COMBINED SELECTED FINANCIAL DATA (CONTINUED)

tracking stock or change our earnings allocation methodology. However, at the
present time, we have no plans to do so.

COMBINED STATEMENTS OF OPERATIONS DATA

FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(AMOUNTS IN THOUSANDS)

Revenues:
Net product sales........................... $571,531 $509,727 $429,092 $373,769 $304,365
Net service sales........................... 57,223 55,445 55,835 61,638 47,230
Revenues from research and development
contracts:
Related parties........................... 1,516 3,568 8,041 23,011 26,758
Other..................................... 5,096 579 3,400 2,310 202
-------- -------- -------- -------- --------
Total revenues.......................... 635,366 569,319 496,368 460,728 378,555
Operating costs and expenses:
Cost of products sold(1).................... 115,125 138,802 146,226 123,276 113,231
Cost of services sold....................... 35,637 34,240 35,451 42,889 31,137
Selling, general and administrative......... 149,427 126,172 118,616 107,219 94,944
Research and development (including research
and development related to contracts)..... 97,746 73,139 62,905 62,276 51,936
Amortization of intangibles................. 8,106 7,610 6,887 5,865 4,647
Purchase of in-process research and
development(2)............................ 5,436 -- -- 106,469 14,216
Other....................................... -- -- -- 1,000 --
-------- -------- -------- -------- --------
Total operating costs and expenses........ 411,477 379,963 370,085 448,994 310,111
-------- -------- -------- -------- --------
Operating income.............................. 223,889 189,356 126,283 11,734 68,444
Other income (expenses):
Equity in net loss of unconsolidated
affiliates................................ (37,423) (19,739) (5,782) (3,656) (1,809)
Gain on affiliate sale of stock(3).......... 6,683 2,369 -- 1,013 --
Gain on sale of investment in equity
securities................................ 1,963 3,391 -- 1,711 --
Minority interest........................... 3,674 4,285 -- -- 1,608
Gain on sale of product line(4)............. 8,018 31,202 -- -- --
Charge for impaired investments............. (5,712) (3,397) -- -- --
Other(5).................................... 14,389 -- (2,000) -- --
Investment income........................... 30,881 22,953 9,940 13,825 7,428
Interest expense............................ (19,885) (16,994) (8,074) (6,784) (1,069)
-------- -------- -------- -------- --------
Total other income (expenses)............. 2,588 24,070 (5,916) 6,109 6,158
-------- -------- -------- -------- --------
Income before income taxes.................. 226,477 213,426 120,367 17,843 74,602
Provision for income taxes.................. (84,400) (80,374) (43,725) (28,530) (34,234)
-------- -------- -------- -------- --------
Division net income (loss).................. $142,077 $133,052 $ 76,642 $(10,687) $ 40,368
======== ======== ======== ======== ========

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GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION
COMBINED SELECTED FINANCIAL DATA (CONTINUED)

COMBINED BALANCE SHEET DATA

DECEMBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- -------- -------- --------
(AMOUNTS IN THOUSANDS)

Cash and investments................... $ 513,905 $ 556,097 $192,222 $169,543 $278,663
Working capital........................ 487,561 381,685 273,697 340,817 307,918
Total assets........................... 1,399,583 1,410,391 960,490 975,910 854,411
Long-term debt and convertible
debt(6).............................. 272,622 274,646 117,978 223,846 124,473
Division equity........................ 1,007,614 939,967 745,895 645,185 659,106

- ------------------------

(1) Cost of products sold for 1997 includes a $18.1 million charge in connection
with the discontinuance of our melatonin, bulk pharmaceuticals and fine
chemicals product lines. Cost of products sold for 1998 includes a
$14.8 million charge to write-down excess Ceredase-Registered Trademark-
enzyme inventory.

(2) Charges for the purchase of in-process research and development were
incurred in connection with the following acquisitions:

- 1995-$14.2 million from the acquisition of a minority interest in IG
Laboratories, Inc.

- 1996-$106.4 million from the acquisition of Neozyme II Corporation

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

(3) Gain on affiliate sale of stock in 1999 represents the gain on our
investment in Genzyme Transgenics Corporation ("GTC") as a result of GTC's
various issuances of additional shares of its stock.

(4) Gain on sale of product line of $31.2 million in 1998 relates to the sale of
our research products business assets to Techne Corporation in July 1998.
Gain on sale of product line in 1999 consists of $7.5 million, representing
the payment of a note receivable that we received as partial consideration
for the sale of Genetic Design, Inc. to Laboratory Corporation of America in
1996.

(5) Other income in 1999 includes the receipt of a $14.4 million payment
associated with the termination of our agreement to acquire Cell
Genesys, Inc., net of acquisition related expenses.

(6) Long-term debt and convertible debt consists primarily of $200.0 million and
$100.0 million outstanding under a revolving credit facility in 1996 and
1997, respectively. Long-term debt and convertible debt in 1998 and 1999
consists primarily of $250.0 million in principal of 5 1/4% convertible
subordinated notes due June 2005.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF GENZYME GENERAL'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

INTRODUCTION

This discussion contains forward-looking statements. These forward-looking
statements represent the expectations of our management as of the filing date of
this annual report. Actual results could differ materially from those
anticipated by the forward-looking statements due to the risks and uncertainties
described under the caption "Factors Affecting Future Operating Results" for
Genzyme General and Genzyme Corporation included in this annual report. You
should consider carefully each of these risks and uncertainties in evaluating
the financial condition and results of operations of Genzyme General and
Genzyme.

We prepare the financial statements of Genzyme General in accordance with
generally accepted accounting principles. We present financial information and
accounting policies specific to Genzyme General in the accompanying combined
financial statements. We present financial information and accounting policies
relevant to the corporation and its operating divisions taken as a whole in our
consolidated financial statements. You should read the consolidated financial
statements in conjunction with the financial statements of Genzyme General.
Note A., "Summary of Significant Accounting Policies," to our accompanying
consolidated financial statements contains our accounting policies.

Genzyme General Division Common Stock, which we refer to as "Genzyme General
Stock," is a series of our common stock that is designed to reflect the value
and track the performance of Genzyme General. The chief mechanisms intended to
cause Genzyme General Stock to "track" the financial performance of Genzyme
General are provisions in our charter governing dividends and distributions.
Under these provisions, our charter factors the assets and liabilities and
income or losses attributable to Genzyme General into the determination of the
amount available to pay dividends on Genzyme General Stock.

To determine earnings per share, we allocate Genzyme's earnings to each
series of our common stock based on the earnings attributable to that series of
stock. The earnings attributable to Genzyme General Stock is defined in our
charter as the net income or loss of Genzyme General determined in accordance
with generally accepted accounting principles and as adjusted for tax benefits
allocated to or from Genzyme General in accordance with our management and
accounting policies. Our charter also requires that all income and expenses of
Genzyme be allocated among the divisions in a reasonable and consistent manner.
However, subject to its fiduciary duties, our board of directors can, at its
discretion, change the methods of allocating earnings to each series of common
stock. We intend to allocate earnings using our current methods for the
foreseeable future.

While Genzyme General Stock is designed to reflect Genzyme General's
performance, it is common stock of Genzyme Corporation and not Genzyme General;
Genzyme General is a division, not a company or legal entity, and therefore does
not and cannot issue stock. Consequently, holders of Genzyme General Stock have
no specific rights to assets allocated to Genzyme General. Genzyme Corporation
continues to hold title to all of the assets allocated to Genzyme General and is
responsible for all of its liabilities, regardless of what we deem for financial
statement presentation purposes as allocated to any division. Holders of Genzyme
General Stock, as common stockholders, are therefore subject to the risks of
investing in the businesses, assets and liabilities of Genzyme as a whole. For
instance, the assets allocated to each division are subject to company-wide
claims of creditors, product liability plaintiffs and stockholder litigation.
Also, in the event of a Genzyme liquidation, insolvency or similar event,
holders of Genzyme

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General Stock and other tracking stockholders would only have the rights of
common stockholders in the combined assets of Genzyme.

Our charter requires us to manage and account for transactions between
Genzyme General and our other divisions and with third parties, and any
resulting re-allocations of assets and liabilities, by applying consistently
across divisions a detailed set of policies established by our board of
directors. We publicly disclose our divisional management and accounting
policies, which appear in Exhibit 99.1 to this Annual Report on Form 10-K. Our
charter requires that all assets and liabilities of Genzyme be allocated among
the divisions. Our board of directors, however, retains considerable discretion
in determining the types, magnitudes and extent of allocations to each series of
common stock without shareholder approval.

In June 1999, we established Genzyme Surgical Products as a separate
division of Genzyme. Genzyme General transferred $150.0 million in cash, cash
equivalents and investments, and certain other assets, to Genzyme Surgical
Products in connection with the creation of Genzyme Surgical Products as a
separate division of Genzyme. The business of Genzyme Surgical Products
previously operated as a business unit of Genzyme General. These financial
statements reflect the financial position, results of operations and cash flows
allocated to Genzyme General as if the operations of Genzyme Surgical Products
had been separately accounted for as its own division of the corporation for all
periods presented. By excluding Genzyme Surgical Products' results of
operations, and therefore its operating losses, from Genzyme General's results,
the net income of Genzyme General has increased for all periods presented.
Genzyme General's tax provision also increased because the tax benefits
associated with Genzyme Surgical Products losses are not reflected in Genzyme
General's tax provision. Although such benefits are allocated to Genzyme General
Stock in the determination of Genzyme's earnings allocations, those benefits do
not enter into the determination of Genzyme General's tax provision under
generally accepted accounting principles. The impact on Genzyme General's net
income of the exclusion of Genzyme Surgical Products' results of operations is
as follows (in thousands):

1999 1998 1997
-------- -------- --------

Genzyme Surgical Products net loss.......................... $48,037 $49,856 $29,740
Tax benefit................................................. (16,128) (17,936) (10,112)
------- ------- -------
Increase in Genzyme General's net income.................... $31,909 $31,920 $19,628
======= ======= =======

These increases represented 22%, 24% and 26% of Genzyme General's net income
for 1999, 1998 and 1997, respectively.

The greater segregation of assets, liabilities and earnings or losses
resulting from the creation of Genzyme Surgical Products is a trend that we do
not expect to continue. We plan to combine Genzyme Surgical Products and Genzyme
Tissue Repair into Genzyme Biosurgery upon the completion of the Biomatrix
acquisition, reducing the segregation of assets among our divisions and reducing
the series of common stock outstanding. At this time, we have no plans to create
new series of tracking stock or to change our earnings allocation methodology.

We present earnings per share and earnings allocation data for Genzyme
General Stock in our consolidated financial statements. We present financial
information and accounting policies specific to Genzyme General in the
accompanying combined financial statements. We present financial information and
accounting policies relevant to the corporation and its operating divisions
taken as a whole in our consolidated financial statements. You should,
therefore, read this discussion and analysis of Genzyme General's financial
position and results of operations in conjunction with the financial statements
and related notes of Genzyme General, the discussion and analysis of Genzyme's
financial position and results of operations, and the consolidated financial
statements and related notes of Genzyme, all of which are included in this
annual report.

GG-6

RESULTS OF OPERATIONS

The following discussion summarizes the key factors our management believes
are necessary for an understanding of Genzyme General's financial statements.

The components of Genzyme General's combined statements of operations are
described in the following table:

99/98 98/97
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
1999 1998 1997 % CHANGE % CHANGE
-------- -------- -------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA)

Total revenues............................ $635,366 $569,319 $496,368 12% 15%

Cost of products and services sold........ 150,762 173,042 181,677 (13)% (5)%
Selling, general and administrative....... 149,427 126,172 118,616 18% 6%
Research and development (including
research and development related to
contracts).............................. 97,746 73,139 62,905 34% 16%
Amortization of intangibles............... 8,106 7,610 6,887 7% 10%
Purchase of in-process research and
development............................. 5,436 -- -- 100% N/A
-------- -------- --------
Total operating costs and expenses.... 411,477 379,963 370,085 8% 3%
-------- -------- --------

Operating income.......................... 223,889 189,356 126,283 18% 50%
Other income (expenses), net.............. 2,588 24,070 (5,916) (89)% 507%
-------- -------- --------

Income before income taxes................ 226,477 213,426 120,367 6% 77%
Provision for income taxes................ (84,400) (80,374) (43,725) 5% 84%
-------- -------- --------

Division net income....................... $142,077 $133,052 $ 76,642 7% 74%
======== ======== ========

REVENUES

99/98 98/97
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
1999 1998 1997 % CHANGE % CHANGE
-------- -------- -------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA)

Product revenue........................... $571,531 $509,727 $429,092 12% 19%
Service revenue........................... 57,223 55,445 55,835 3% (1)%
-------- -------- --------
Total product and service revenue..... 628,754 565,172 484,927 11% 17%

Research and development revenue.......... 6,612 4,147 11,441 59% (64)%
-------- -------- --------
Total revenues........................ $635,366 $569,319 $496,368 12% 15%
======== ======== ========

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The following table sets forth Genzyme General's product and service revenue
on a segment basis:

99/98 98/97
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
1999 1998 1997 % CHANGE % CHANGE
-------- -------- -------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA)

Therapeutics.............................. $488,705 $413,645 $332,712 18% 24%

Diagnostic Products....................... 57,971 65,683 66,288 (12)% (1)%
Other:
Product revenue......................... 24,855 30,399 30,092 (18)% 1%
Service revenue......................... 57,223 55,445 55,835 3% (1)%
-------- -------- --------
Total product and service revenue......... $628,754 $565,172 $484,927 11% 17%
======== ======== ========

THERAPEUTICS

Genzyme General's increase in product revenue during both periods is largely
due to increased sales of Cerezyme-Registered Trademark- enzyme, which was
attributed to the identification of new Gaucher disease patients throughout the
world and strong international sales. We have provided information regarding the
growth in sales of Genzyme General's Gaucher disease therapies during both
periods in the following table:

99/98 98/97
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
1999 1998 1997 % CHANGE % CHANGE
-------- -------- -------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA)

Sales of Cerezyme-Registered Trademark-
enzyme and
Ceredase-Registered Trademark- enzyme... $478,538 $411,060 $332,712 16% 24%
% of total product revenue................ 84% 81% 78%

Genzyme General's results of operations are highly dependent on sales of
Cerezyme-Registered Trademark- enzyme and a reduction in revenue from sales of
this product would adversely affect its results of operations. Revenue from
Cerezyme-Registered Trademark- enzyme would be impacted negatively if
competitors developed alternative treatments for Gaucher disease and the
alternative products gained commercial acceptance. Genzyme General is aware of
companies that have initiated efforts to develop competitive products and other
companies may do so in the future.

Therapeutics revenue for each period also includes sales of
Thyrogen-Registered Trademark- hormone, which is an adjunctive diagnostic tool
for well differentiated thyroid cancer.

DIAGNOSTIC PRODUCTS

The decrease in diagnostic products revenue for 1999 as compared to 1998
reflects the sale of the research products business to Techne Corporation in
July 1998 and immunochemistry product line to an operating unit of Sybron
Laboratory Products Corp. in July 1999. Diagnostic products revenue includes
royalties on product sales by Techne's biotechnology group.

OTHER

Other revenue for each period include sales of:

- lipids and peptides for drug delivery; and

- genetic testing services.

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INTERNATIONAL PRODUCT AND SERVICE REVENUE

A substantial portion of Genzyme General's revenue was generated outside of
the United States, as described in the following table. Most of these revenues
were attributable to sales of Cerezyme-Registered Trademark- enzyme.

99/98 98/97
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
1999 1998 1997 % CHANGE % CHANGE
-------- -------- -------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA)

International product and service
revenue................................. $273,851 $248,363 $217,777 10% 14%
% of total product and service revenue.... 44% 44% 45%

MARGINS

99/98 98/97
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
1999 1998 1997 % CHANGE % CHANGE
-------- -------- -------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA)

Product margin............................ $456,406 $370,925 $282,866 23% 31%
% of product revenue.................. 80% 73% 66%

Service margin............................ 21,586 21,205 20,384 2% 4%
% of service revenue.................. 38% 38% 37%

Total gross margin........................ 477,992 392,130 303,250 22% 29%
% of total product and service
revenue............................. 76% 69% 63%

Genzyme General provides a broad range of healthcare products and services.
As a result, Genzyme General's gross margin varies significantly based on the
category of product or service. Sales of therapeutic products, including
Cerezyme-Registered Trademark- enzyme, result in higher margins than diagnostic
products.

During 1998, Genzyme General recorded a $14.8 million charge to cost of
products sold to write down excess inventory used to make
Ceredase-Registered Trademark- enzyme. Without the effect of this charge,
Genzyme General's product margin for 1998 would have been 76% and its total
gross margin during that period would have been 72%.

Excluding the charge described above, the increases in product margin and
total gross margin during each period are a result of increased efficiency and
process improvements in manufacturing as well as increased sales of
Cerezyme-Registered Trademark- enzyme.

Our service margin also increased during each period as a result of
increases in sales of DNA and cancer testing services.

OPERATING EXPENSES

1999 AS COMPARED TO 1998

The increase in selling, general and administrative expenses in 1999 as
compared to 1998 is related to:

- increased staffing to support the growth in several of Genzyme General's
product lines;

- a $3.0 million increase to the reserve for doubtful accounts in Genzyme
General's genetic testing business as a result of a comprehensive review
of contract receivables and self-pay receivables during 1999;

- costs associated with the market introduction of
Thyrogen-Registered Trademark- hormone in January 1999; and

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- increased expenditures to support the increased sales of
Cerezyme-Registered Trademark- enzyme.

The increase in research and development expense in 1999 as compared to 1998
is a result of:

- increased costs for the program to develop transgenic recombinant human
antithrombin III, which is conducted through our consolidated joint
venture, ATIII LLC, discussed in "--Minority Interest" below;

- increased spending on Genzyme General's program to develop Fabrazyme-TM-
enzyme for the treatment of Fabry disease;

- increased spending on Genzyme General's cell and gene therapy programs.

In the fourth quarter of 1998, Genzyme General began amortizing a milestone
payment that it made to GelTex Pharmaceuticals, Inc. upon FDA approval of
Renagel-Registered Trademark- capsules. As a result, amortization of intangibles
increased slightly during 1999 as compared to 1998.

In 1999, we acquired Peptimmune, Inc., a privately-held company whose lead
development program was a preclincal research stage program focused on a
treatment for pemphigus vulgaris, a rare genetic disease. Because the technology
acquired had narrow utility and no application to our ongoing programs, we
considered it to have no alternative future use. As a result, we allocated
$5.4 million of the purchase price to in-process technology. We recorded this
amount as a one-time charge to operations in 1999. We will record our expenses
related to the development of the acquired technology as research and
development expense until the time at which it reaches technological
feasibility. Given the inherent risk in developing early-stage biotechnology
products, we may never demonstrate the feasibility of that technology. See
"--Factors Affecting Future Operating Results" below. In addition, given the
history of consolidation in the biotechnology industry, we expect that we will
complete additional acquisitions in the future. Some of these acquisitions will
result in a further investment by us in in-process technology.

1998 AS COMPARED TO 1997

The increase in selling, general and administrative expenses in 1998 as
compared to 1997 was related to:

- increased sales and marketing costs related to the product launch of
Thyrogen-Registered Trademark- hormone; and

- increased expenditures to support the increased sales of
Cerezyme-Registered Trademark- enzyme.

The increase in research and development expense in 1998 as compared to 1997
was primarily attributable to $12.0 million in costs resulting from the
consolidation of the results of ATIII LLC, for which there were no comparable
amounts in 1997.

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OTHER INCOME AND EXPENSES

99/98 98/97
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
1999 1998 1997 % CHANGE % CHANGE
-------- -------- -------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA)

Equity in net loss of unconsolidated
affiliates................................ $(37,423) $(19,739) $(5,782) 90% 241%
Gain on affiliate sale of stock............. 6,683 2,369 -- 182% N/A
Gain on sale of investments in equity
securities................................ 1,963 3,391 -- (42)% N/A
Minority interest........................... 3,674 4,285 -- (14)% N/A
Gain on sale of product line................ 8,018 31,202 -- (74)% N/A
Charge for impaired investments............. (5,712) (3,397) -- 68% N/A
Other....................................... 14,389 -- (2,000) N/A N/A
Investment income........................... 30,881 22,953 9,940 35% 131%
Interest expense............................ (19,885) (16,994) (8,074) 17% 110%
-------- -------- -------
Total other income (expense), net....... $ 2,588 $ 24,070 $(5,916) (89)% 507%
======== ======== =======

1999 AS COMPARED TO 1998

EQUITY IN NET LOSS OF UNCONSOLIDATED AFFILIATES

Genzyme General records in equity in net loss of unconsolidated affiliates
its portion of the results of its joint ventures with GelTex, BioMarin
Pharmaceutical Inc., Pharming Group, N.V. and Diacrin, Inc. Genzyme General also
records a portion of the results of Genzyme Transgenics in equity in net loss of
unconsolidated affiliates.

Genzyme General's equity in net loss of unconsolidated affiliates increased
in 1999 as compared to 1998 as a result of:

- increased losses from RenaGel LLC, our joint venture with GelTex to
develop and commercialize Renagel-Registered Trademark- capsules;

- increased losses from our joint venture with BioMarin to develop and
commercialize Aldurazyme(TM) enzyme for the treatment of
mucopolysaccharidosis-I, which was formed in September 1998;

- increased losses from our joint venture with Pharming to develop a therapy
for Pompe disease, which was formed in October 1998; and

- the reallocation of our joint venture with Diacrin from Genzyme Tissue
Repair to Genzyme General in May 1999.

These increases were offset in part by decreased losses from Genzyme
Transgenics for both periods.

GAIN ON AFFILIATE SALE OF STOCK

Genzyme Transgenics Corporation ("GTC"), an unconsolidated affiliate,
periodically issues additional shares of its common stock. As described in
Note A. to our consolidated financial statements, it is our policy to record
gains on the issuance of stock by our subsidiaries and affiliates. Accordingly,
we recorded a $6.7 million gain in 1999 and a $2.4 million gain in 1998. The
issuance of additional shares by GTC in 1999 reduced our ownership interest in
GTC from 40% to 33%. The issuance of additional shares by GTC in 1998 reduced
our ownership interest in GTC from 43% to 40%.

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MINORITY INTEREST

In 1998, we formed ATIII LLC, a joint venture with GTC for the development
and commercialization of transgenic recombinant human antithrombin III. We are
funding 70% of the first $33.0 million in development costs, excluding facility
costs, under this program and 50% of all development costs thereafter. We will
pay 50% of all new facility costs to be incurred by ATIII LLC. All profits of
ATIII LLC will be split equally; losses are allocated based on the amount of
funding provided by each venturer. Because Genzyme General's combined direct and
indirect interest in ATIII LLC is in excess of 50%, it consolidates the results
of ATIII LLC and records GTC's portion of the ATIII LLC's losses as minority
interest. ATIII LLC had losses of $12.2 million in 1999, of which GTC's portion
was $3.7 million. In 1998, ATIII LLC has losses of $12.0 million, of which GTC's
portion was $4.3 million.

GAIN ON SALE OF INVESTMENTS IN EQUITY SECURITIES

Genzyme General recorded gains of $2.0 million in January 1999 and
$3.4 million in December 1998 upon the sales of shares of Techne Corporation
common stock that it received when it sold its research products business to
Techne Corporation.

GAIN ON SALE OF PRODUCT LINE

In July 1999, Genzyme General recorded a gain of $0.5 million in connection
with the sale of its immunochemistry product lines to an operating unit of
Sybron Laboratory Products Corporation.

In June 1999, Genzyme General recorded a gain of $7.5 million representing
the payment of a note receivable that it received as partial consideration for
the sale of Genetic Design, Inc. in 1996. Genzyme General had previously fully
reserved the amount of this note because it considered the repayment of the note
to be uncertain.

In July 1998, Genzyme General recorded a gain of $31.2 million in connection
with the sale of its research products business to Techne.

CHARGE FOR IMPAIRED INVESTMENTS

Genzyme General recorded a $5.7 million charge in 1999 in connection with
its investments in the common stock of Pharming Group N.V. and IntegraMed
America, Inc., and a $3.4 million charge in 1998 in connection with its
investment in the common stock of Celtrix Pharmaceuticals, Inc. because we
considered the decline in the value of those investments to be other than
temporary.

In connection with these assessments, we concluded that substantial evidence
existed that the value of the investments would recover to at least its cost.
This included continued positive progress in the issuers' scientific programs,
ongoing activity in Genzyme General's collaborations with the issuer, and a lack
of any substantial company-specific adverse events causing the declines in
value. However, given the significance and duration of the declines as of the
end of the applicable quarter, we concluded that it was unclear over what period
such price recoveries would take place and that, accordingly, the positive
evidence suggesting that the investments would recover to at least Genzyme
General's purchase price was not sufficient to overcome the presumption that the
current market price was the best indicator of the value of these investments.

OTHER

In December 1999, Genzyme General recorded a net gain of $14.4 million upon
receipt of a payment associated with the termination of an agreement to acquire
Cell Genesys, Inc.

GG-12

INVESTMENT INCOME

Investment income increased in both periods because our cash balances were
higher. The increase in cash balances was attributable to the issuance in May
1998 of $250.0 million in principal amount of 5 1/4% convertible subordinated
notes and increased cash generated from operations.

INTEREST EXPENSE

Genzyme General's interest expense increased in both periods, primarily as a
result of the issuance of the 5 1/4% convertible subordinated notes.

TAX PROVISION

99/98 98/97
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
1999 1998 1997 % CHANGE % CHANGE
-------- -------- -------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA)

Provision for income taxes................. $(84,400) $(80,374) $(43,725) 5% 84%
Effective tax rate......................... 37% 38% 36%

Genzyme General's tax rates for all periods vary from the U.S. statutory tax
rate as a result of its:

- provision for state income taxes;

- use of a foreign sales corporation;

- nondeductible amortization of intangibles;

- use of tax credits; and

- share of losses of unconsolidated affiliates.

GG-13

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1999, Genzyme General had cash, cash-equivalents, and short-
and long-term investments of $513.9 million, a decrease of $42.2 million from
December 31, 1998.

Genzyme General generated $284.8 million in cash from its operations in
1999.

Genzyme General's investing activities utilized $192.7 million in cash in
1999. Investing activities generated:

- $5.0 million from the sale of Genzyme General's immunochemistry product
line;

- $11.1 million from the sale of Techne common stock; and

- $8.4 million from the payment of a note issued in connection with the sale
of Genetic Design.

Investing activities used:

- $93.4 million for Genzyme General's net purchases of investments;

- $52.9 million to fund capital expenditures;

- $36.4 million to fund Genzyme General's investments in joint ventures;

- $6.5 million to fund its acquisition of Peptimmune;

- $10.0 million to GelTex to make a milestone payment upon the first
anniversary of FDA approval of Renagel-Registered Trademark- capsules;

- $6.6 million to Genzyme Transgenics for the purchase of preferred stock;

- $10.0 million to Biomarin for the purchase of shares of common stock; and

- $3.4 million to Genovo, Inc. for the purchase of shares of preferred
stock.

In 1999, $59.2 million in cash proceeds were allocated to Genzyme General
from the exercise of options to purchase shares of Genzyme General Stock and
shares of Genzyme General Stock issued under our employee stock plans. Genzyme
General's financing activities used the following cash during 1999:

- $85.0 million to repay short-term debt and capital lease obligations; and

- $49.4 million paid to Genzyme Surgical Products in connection with the
creation of Genzyme Surgical Products as a separate division of Genzyme.

- $30.0 million paid to Genzyme Tissue Repair for the transfer of the
interest in Diacrin/Genzyme LLC and a draw by Genzyme Tissue Repair under
an interdivisional financing arrangement.

In 1998, our board of directors made $30.0 million of Genzyme General's cash
available to Genzyme Molecular Oncology. Under the terms of this interdivisional
financing arrangement, Genzyme Molecular Oncology may draw down funds as needed
each quarter in exchange for Genzyme Molecular Oncology designated shares.
Genzyme Molecular Oncology designated shares are shares of Molecular Oncology
Stock that are not issued and outstanding, but which our board of directors may
issue, sell or distribute without allocating the proceeds to Genzyme Molecular
Oncology. Genzyme Molecular Oncology has not yet drawn any funds under this
arrangement.

In 1998, our board of directors also made $50.0 million of Genzyme General's
cash available to Genzyme Tissue Repair. Under the terms of this interdivisional
financing arrangement, Genzyme Tissue Repair may draw down funds as needed each
quarter in exchange for Genzyme Tissue Repair designated shares. Genzyme Tissue
Repair designated shares are shares of Tissue Repair Stock that are not issued
and outstanding, but which our board of directors may issue, sell or distribute
without allocating the proceeds to Genzyme Tissue Repair. In February 1999,
Genzyme Tissue Repair made a $5.0 million draw under this

GG-14

arrangement in exchange for 1,633,399 Genzyme Tissue Repair designated shares.
In May 1999, the amount available under this interdivisional financing
arrangement was reduced by $25.0 million in connection with the reallocation of
our ownership interest in Diacrin/Genzyme LLC from Genzyme Tissue Repair to
Genzyme General.

In June 1999, Genzyme General transferred $150.0 million in cash, cash
equivalents and investments to Genzyme Surgical Products in connection with the
creation of Genzyme Surgical Products as a separate division of Genzyme. In
exchange for this transfer, approximately 14.8 million shares of Surgical
Products Stock were issued and distributed as a dividend to holders of Genzyme
General Stock.

Genzyme General, together with our other operating divisions, has access to
Genzyme's revolving credit facilities. At December 31, 1999, $50.0 million was
available under a facility that matures in November 2000 and $77.0 million was
available under a facility that matures in November 2002.

We believe that Genzyme General's available cash, investments and cash flow
from operations will be sufficient to fund its planned operations and capital
requirements for the foreseeable future. Although Genzyme General currently has
substantial cash resources and positive cash flow, it intends to use substantial
portions of its available cash for:

- product development and marketing;

- expanding facilities;

- working capital; and

- strategic business initiatives.

Genzyme General's cash reserves will be further reduced to pay principal and
interest on the following debt:

- $21.2 million in principal under our 5% convertible subordinated
debentures due August 2003, which are convertible into Genzyme General
Stock; and

- $250.0 million in principal under our 5 1/4% convertible subordinated
notes due June 2005, which are convertible into Genzyme General Stock.

If Genzyme General uses cash to pay or redeem this debt, including the
interest due on it, its cash reserves will be diminished. In addition, Genzyme
General's cash resources will be reduced to the extent that the liabilities
allocated to Genzyme Molecular Oncology, Genzyme Surgical Products or Genzyme
Tissue Repair affect our consolidated results of operations.

To satisfy these and other commitments, Genzyme may have to obtain
additional financing for Genzyme General. We cannot guarantee that we will be
able to obtain any additional financing, extend any existing financing
arrangement, or obtain either on favorable terms.

NEW ACCOUNTING PRONOUNCEMENTS, EURO, YEAR 2000 AND MARKET RISK

See "Management's Discussion and Analysis of Genzyme Corporation and
Subsidiaries' Financial Condition and Results of Operations" included in this
annual report.

FACTORS AFFECTING FUTURE OPERATING RESULTS

The future operating results of Genzyme General could differ materially from
the results described above due to the risks and uncertainties described below
and under the heading "Management's Discussion and Analysis of Genzyme
Corporation and Subsidiaries' Financial Condition and Results of
Operations--Factors Affecting Future Operating Results" included in this annual
report.

GG-15

A REDUCTION IN REVENUES FROM SALES OF PRODUCTS THAT TREAT GAUCHER DISEASE WOULD
HAVE AN ADVERSE EFFECT ON GENZYME GENERAL'S BUSINESS.

Genzyme General generates a majority of its product revenues from sales of
Ceredase-Registered Trademark- enzyme and Cerezyme-Registered Trademark- enzyme,
which are products for patients with Gaucher disease. Sales of
Ceredase-Registered Trademark- enzyme and Cerezyme-Registered Trademark- enzyme
totaled $478.5 million for the year ended December 31, 1999, representing
approximately 84% of Genzyme General's product revenues for that year.

Because Genzyme General's business is highly dependent on
Cerezyme-Registered Trademark- enzyme, a reduction in revenue from sales of this
product would have an adverse effect on its operations and may cause the value
of Genzyme General Stock to decline substantially. Revenues from
Cerezyme-Registered Trademark- enzyme would be impacted negatively if
competitors develop alternative treatments for Gaucher disease and these
alternative products gained commercial acceptance. Some companies have initiated
efforts to develop competitive products, and other companies may do so in the
future. Cerezyme-Registered Trademark- enzyme has orphan drug status, providing
it with market exclusivity in the U.S. until May 2001. We also have patents
protecting its manufacturing method until 2010 and its composition until 2013.
We cannot predict the effect that the expiration of orphan drug status and
market exclusivity will have on sales of Cerezyme-Registered Trademark- enzyme
after May 2001.

GENZYME GENERAL MAY NOT BE ABLE TO SUCCESSFULLY COMMERCIALIZE
THYROGEN-REGISTERED TRADEMARK- HORMONE AND RENAGEL-REGISTERED TRADEMARK-
CAPSULES.

In January 1999, Genzyme General, together with Knoll Pharmaceutical
Company, launched U.S. sales of Thyrogen-Registered Trademark- recombinant
thyroid stimulating hormone for use in the treatment of thyroid cancer. At about
the same time, Genzyme General, in collaboration with GelTex
Pharmaceuticals, Inc., launched Renagel-Registered Trademark- capsules, a
non-absorbed phosphate binder used in the treatment of end-stage renal disease.
The commercial success of Thyrogen-Registered Trademark- hormone and
Renagel-Registered Trademark- capsules will depend on a number of factors,
including:

- regulation by the FDA;

- the ability to obtain regulatory approvals in foreign countries;

- the development and commercial success of competitive products; and

- the availability of third party reimbursement.

Genzyme General cannot be sure that market penetration of
Thyrogen-Registered Trademark- hormone and Renagel-Registered Trademark-
capsules will increase.

IF THE STRATEGIC COLLABORATIONS GENZYME GENERAL HAS ENTERED INTO TO DEVELOP AND
COMMERCIALIZE ITS PRODUCTS ARE NOT SUCCESSFUL, GENZYME GENERAL'S RESULTS OF
OPERATIONS WILL BE ADVERSELY IMPACTED.

Several of Genzyme General's strategic initiatives involve collaborations
with other biotechnology companies and arrangements with academic medical
centers. These include:

- a joint venture with GelTex for the commercialization of
Renagel-Registered Trademark- capsules;

- an agreement with Knoll Pharmaceutical Company for the marketing of
Thyrogen-Registered Trademark- hormone in the U.S.;

- an agreement with Biogen, Inc. for the marketing of
AVONEX-Registered Trademark- (Interferon-beta 1a), Biogen's treatment for
relapsing forms of multiple sclerosis, in Japan following regulatory
approval;

- a joint venture with BioMarin for the development and commercialization of
Aldurazyme(TM) enzyme for the treatment of the lysosomal storage known as
mucopolysaccharidosis I;

GG-16

- a joint venture with Genzyme Transgenics for the development and
commercialization of transgenic antithrombin III, a human protein that
Genzyme Transgenics produces in the milk of genetically modified animals;

- a joint venture with Pharming for the development and commercialization of
human alpha-glucosidase for the treatment of Pompe disease;

- an agreement with Genovo for the development of gene therapy products for
the treatment of lysosomal storage disorders;

- a relationship with Mount Sinai Medical Center for the development of a
therapy for the treatment of Niemann-Pick disease;

- a joint venture with Diacrin to develop and commercialize products and
processes using porcine fetal cells for the treatment of Parkinson's
disease and Huntington's disease; and

- an agreement with Dyax Corp. to develop and commercialize the protein
EPI-KAL2 for the treatment of chronic inflammatory diseases.

Genzyme General plans to enter into additional collaborations in the future.
The success of these arrangements are largely dependent on the efforts and
skills of Genzyme General's collaborators. Genzyme General cannot guarantee
that:

- these agreements will not be terminated;

- its strategic collaborators will devote significant resources to the
collaborations; or

- any of these collaborations will result in the successful development or
commercialization of any products.

OUR OPTION TO PURCHASE LIMITED PARTNERSHIP INTERESTS COULD DILUTE THE RIGHTS OF
HOLDERS OF GENZYME GENERAL STOCK.

We organized Genzyme Development Partners, L.P., a special purpose research
and development entity, in 1989 and transferred to it technology and commercial
rights to our hyaluronic acid-based products designed to prevent the occurrence
and severity of post-operative adhesions. These products, which we refer to as
the Sepra products, are now allocated to Genzyme Surgical Products. We have an
option to purchase the limited partnership interests in the partnership. If this
option is exercised, we may have to issue shares of Genzyme General Stock or
make substantial cash payments or both. If we make payments in Genzyme General
Stock, the rights of holders of Genzyme General Stock could be diluted and the
market price of that stock may fall. If we make cash payments, our cash
resources would diminish.

SUBSEQUENT EVENT

In February 2000, Genzyme General recorded a gain of $20.3 million relating
to a public offering of 3.5 million common shares by our unconsolidated
affiliate, GTC. The public offering resulted in net proceeds to GTC of
$75.2 million (after the exercise of the underwriters' overallotment option). As
a result of the issuance of the additional shares by GTC, Genzyme General's
ownership interest in GTC decreased from 33% to 28%.

GG-17

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION
COMBINED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED
DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(AMOUNTS IN THOUSANDS)

Revenues:
Net product sales......................................... $571,531 $509,727 $429,092
Net service sales......................................... 57,223 55,445 55,835
Revenue from research and development contracts:
Related parties......................................... 1,516 3,568 8,041
Other................................................... 5,096 579 3,400
-------- -------- --------
Total revenues........................................ 635,366 569,319 496,368
Operating costs and expenses:
Cost of products sold..................................... 115,125 138,802 146,226
Cost of services sold..................................... 35,637 34,240 35,451
Selling, general and administrative....................... 149,427 126,172 118,616
Research and development (including research and
development relating to contracts)...................... 97,746 73,139 62,905
Amortization of intangibles............................... 8,106 7,610 6,887
Purchase of in-process research and development........... 5,436 -- --
-------- -------- --------
Total operating costs and expenses...................... 411,477 379,963 370,085
-------- -------- --------
Operating income............................................ 223,889 189,356 126,283
Other income (expenses):
Equity in net loss of unconsolidated affiliates........... (37,423) (19,739) (5,782)
Gain on affiliate sale of stock........................... 6,683 2,369 --
Gain on sale of investments in equity securities.......... 1,963 3,391 --
Minority interest......................................... 3,674 4,285 --
Gain on sale of product line.............................. 8,018 31,202 --
Charge for impaired investments........................... (5,712) (3,397) --
Other..................................................... 14,389 -- (2,000)
Investment income......................................... 30,881 22,953 9,940
Interest expense.......................................... (19,885) (16,994) (8,074)
-------- -------- --------
Total other income (expenses)......................... 2,588 24,070 (5,916)
-------- -------- --------
Income before income taxes.................................. 226,477 213,426 120,367
Provision for income taxes.................................. (84,400) (80,374) (43,725)
-------- -------- --------
Division net income......................................... $142,077 $133,052 $ 76,642
======== ======== ========

Comprehensive income, net of tax:
Division net income......................................... $142,077 $133,052 $ 76,642
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments.................. (14,883) 7,681 (11,704)
Unrealized gains (losses) on securities:
Unrealized gains (losses) arising during the period..... 26,785 (6,059) 833
Reclassification adjustment for losses included in
division net income.................................... 2,092 2,100 --
-------- -------- --------
Unrealized gains (losses) on securities, net............ 28,877 (3,959) 833
-------- -------- --------
Other comprehensive income (loss)......................... 13,994 3,722 (10,871)
-------- -------- --------
Comprehensive income........................................ $156,071 $136,774 $ 65,771
======== ======== ========

The accompanying notes are an integral part of these combined financial
statements.

GG-18

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION
COMBINED BALANCE SHEETS

DECEMBER 31,
-----------------------
1999 1998
---------- ----------
(AMOUNTS IN THOUSANDS)

ASSETS
Current assets:
Cash and cash equivalents................................. $ 94,523 $ 100,012
Short-term investments.................................... 214,240 174,421
Accounts receivable, net.................................. 141,949 137,615
Inventories............................................... 84,384 85,162
Prepaid expenses and other current assets................. 17,632 27,727
Due from Genzyme Molecular Oncology....................... 3,793 4,773
Due from Genzyme Surgical Products........................ 6,406 --
Due from Genzyme Tissue Repair............................ 683 548
Deferred tax assets--current.............................. 41,195 39,725
---------- ----------
Total current assets.................................... 604,805 569,983

Property, plant and equipment, net........................ 362,548 362,743
Long-term investments..................................... 205,142 281,664
Intangibles, net.......................................... 75,370 85,851
Deferred tax assets--noncurrent........................... 19,844 28,138
Investments in equity securities.......................... 94,719 51,977
Other noncurrent assets................................... 37,155 30,035
---------- ----------
Total assets............................................ $1,399,583 $1,410,391
========== ==========
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable.......................................... $ 23,229 $ 22,324
Accrued expenses.......................................... 62,514 65,643
Income taxes payable...................................... 27,946 16,532
Deferred revenue.......................................... 3,475 1,231
Current portion of long-term debt and capital lease
obligations............................................. 80 82,568
---------- ----------
Total current liabilities............................... 117,244 188,298
Noncurrent liabilities:
Long-term debt.............................................. -- 3,087
Convertible notes and debentures............................ 272,622 271,559
Other noncurrent liabilities................................ 2,103 7,480
---------- ----------
Total liabilities....................................... 391,969 470,424
Commitments and contingencies (See Notes)
Division equity (Note M).................................... 1,007,614 939,967
---------- ----------
Total liabilities and division equity................... $1,399,583 $1,410,391
========== ==========

The accompanying notes are an integral part of these combined financial
statements.

GG-19

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

COMBINED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
(AMOUNTS IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Division net income......................................... $ 142,077 $ 133,052 $ 76,642
Reconciliation of division net income to net cash provided
by operating activities:
Depreciation and amortization............................. 50,234 37,758 34,822
Loss on disposal of fixed assets.......................... 971 108 1,234
Non-cash compensation expense............................. 58 8,519 2,881
Equity in loss of unconsolidated affiliates............... 37,423 19,739 5,440
Accrued interest/amortization of marketable securities.... (1,647) (7,242) (571)
Provision for bad debts and inventory..................... 14,194 8,113 13,440
Accretion of debt conversion feature...................... -- 705 --
Gain on affiliate sale of stock........................... (6,683) (2,369) --
Minority interest in net loss of subsidiary............... (3,674) (4,285) --
Gain on sale of product line.............................. (8,018) (31,202) --
Gain on sale of investments in equity securities.......... (1,963) (3,391) --
Charge for impaired investments........................... 5,712 3,397 --
Deferred income tax benefit............................... (3,414) (3,022) (3,969)
Charge for in-process research and development............ 5,436 -- --
Other..................................................... 556 26 528
Increase (decrease) in cash from working capital:
Accounts receivable..................................... (18,459) (36,437) (13,669)
Inventories............................................. (3,435) 27,928 (31,676)
Prepaid expenses and other assets....................... 9,925 (10,785) (9,033)
Due from Genzyme Molecular Oncology..................... 980 (553) (2,011)
Due from Genzyme Surgical Products...................... (6,406) -- --
Due from Genzyme Tissue Repair.......................... (135) 665 391
Accounts payable, accrued expenses, income taxes payable
and deferred revenue.................................. 71,026 52,275 21,192
--------- --------- ---------
Net cash provided by operating activities........... 284,758 192,999 95,641

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments.................................... (494,016) (439,431) (131,197)
Sales and maturities of investments......................... 400,630 118,871 80,867
Proceeds from sale of investments in equity securities...... 11,090 9,564 --
Acquisitions of property, plant and equipment............... (52,910) (53,312) (25,344)
Sales of property, plant and equipment...................... -- 1,795 --
Proceeds from sale of product line.......................... 5,000 24,760 --
Acquisitions, net of acquired cash and assumed
liabilities............................................... (6,500) (9,949) --
Purchase of technology rights............................... (10,000) (15,100) --
Purchase of equity investments.............................. (13,700) (25,783) (6,449)
Investments in unconsolidated affiliates.................... (43,027) (14,811) --
Loans to affiliates......................................... -- (1,000) (4,601)
Proceeds from notes receivable.............................. 8,360 -- --
Repayment of loans by affiliates............................ -- 3,019 --
Other....................................................... 2,388 (4,431) (134)
--------- --------- ---------
Net cash used in investing activities............... (192,685) (405,808) (86,858)

GG-20

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
(AMOUNTS IN THOUSANDS)

CASH FLOWS FROM FINANCING ACTIVITIES:
Allocated proceeds from issuance of Genzyme General
Stock................................................... 59,216 74,649 123,837
Proceeds from issuance of debt............................ -- 250,000 --
Payments of debt.......................................... (84,985) (33,236) (100,945)
Net cash allocated to Genzyme Molecular Oncology.......... -- (5,000) (5,000)
Net cash allocated to Genzyme Surgical Products........... (49,414) (41,484) (19,003)
Net cash allocated to Genzyme Tissue Repair............... (30,037) (155) (14,892)
Bank overdraft............................................ 7,220 -- --
Other..................................................... 2,510 2,412 (242)
--------- --------- ---------
Net cash provided by (used in) financing
activities........................................ (95,490) 247,186 (16,245)

Effect of exchange rate changes on cash................... (2,072) 334 (2,275)
--------- --------- ---------

Increase (decrease) in cash and cash equivalents.......... (5,489) 34,711 (9,737)
Cash and cash equivalents at beginning of period.......... 100,012 65,301 75,038
--------- --------- ---------

Cash and cash equivalents at end of period................ $ 94,523 $ 100,012 $ 65,301
========= ========= =========
Supplemental disclosures of cash flows:
Cash paid during the year for:
Interest................................................ $ 18,508 $ 15,047 $ 8,684
Income taxes............................................ $ 30,992 $ 24,463 $ 18,887

Supplemental disclosures of non-cash transactions:
Transfer of investments to Genzyme Surgical Products--
Note A.
Other gains and charges--Note C.
Dispositions of assets--Note D.
Peptimmune acquisition--Note E.
Investment in unconsolidated affiliate--Note J.
Conversion of 5% convertible subordinated notes--Note L.
Conversion of 6% convertible subordinated debentures into
5% convertible subordinated debentures--Note L.
Warrant exercise--Note M.

The accompanying notes are an integral part of these combined financial
statements.

GG-21

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

Genzyme General is our operating division that develops and markets:

- therapeutic products, with an expanding focus on products to treat
patients suffering from lysosomal storage disorders and other specialty
therapeutics;

- diagnostic products, with a focus on IN VITRO diagnostics; and

- other products and services, such as genetic testing and lipids and
peptides for drug delivery.

BASIS OF PRESENTATION

The combined financial statements of Genzyme General for each period include
the balance sheets, results of operations and cash flows of the businesses we
allocate to Genzyme General. We also allocate a portion of our corporate
operations to Genzyme General using methods described in our allocation policy
below. These combined financial statements are prepared using amounts included
in our consolidated financial statements included in this annual report. We have
reclassified certain 1998 and 1997 data to conform with the 1999 presentation.

We prepare the financial statements of Genzyme General in accordance with
generally accepted accounting principles. We present financial information and
accounting policies specific to Genzyme General in the accompanying combined
financial statements. We present financial information and accounting policies
relevant to the corporation and its operating divisions taken as a whole in our
consolidated financial statements. You should read the consolidated financial
statements in conjunction with the financial statements of Genzyme General.
Note A., "Summary of Significant Accounting Policies," to our consolidated
financial statements contains our accounting policies. We incorporate that
information into this note by reference.

TRACKING STOCK

To determine earnings per share, we allocate Genzyme's earnings to each
series of our common stock based on the earnings attributable to that series of
stock. The earnings attributable to Genzyme General Stock, is defined in our
charter as the net income or loss of Genzyme General determined in accordance
with generally accepted accounting principles and as adjusted for tax benefits
allocated to or from Genzyme General in accordance with our management and
accounting policies. Our charter requires that all income and expenses of
Genzyme be allocated among the divisions in a reasonable and consistent manner.
However, subject to its fiduciary duties, our board of directors can, at its
discretion, change the

GG-22

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
methods of allocating earnings to each series of common stock. We intend to
allocate earnings using our current methods for the foreseeable future.

ALLOCATION POLICY

Our allocations to our divisions are based on one of the following
methodologies:

- Specific identification--assets that are dedicated to the production of
goods of a division or which solely benefit a division are allocated to
that division. Liabilities incurred as a result of the performance of
services for the benefit of a division or in connection with the expenses
incurred which directly benefit a division are allocated to the division.
Such specifically identified assets and liabilities include cash,
investments, accounts receivable, inventories, property and equipment,
intangible assets, accounts payable, accrued expenses and deferred
revenue. Revenues from the licensing of a division's products or services
to third parties and the related costs are allocated to a division;

- Actual usage--expenses are charged to the division for whose benefit such
expenses are incurred. Research and development, sales and marketing and
direct general and administrative services are charged to the divisions
for which the service is performed on a cost basis. Such charges are
generally based on direct labor hours;

GG-23

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- Proportionate usage--costs incurred which benefit more than one division
are allocated based on management's estimate of the proportionate benefit
each division receives. Such costs include facilities, legal, finance,
human resources, executive and investor relations; or

- Board directed--programs and products, both internally developed and
acquired, are allocated to divisions by the board of directors. The board
of directors also allocates long-term debt and strategic investments.

Note B., "Policies Governing the Relationship of Genzyme's Operating
Divisions," further describes our policies concerning interdivisional
transactions and income tax allocations.

We believe that the divisional allocations are reasonable and have been
consistently applied. However, the division's results of operations may not be
indicative of what would have been realized if the division was a stand-alone
entity.

PRINCIPLES OF COMBINATION

In June 1999, we created Genzyme Surgical Products as a separate division of
Genzyme. Genzyme General transferred $150.0 million in cash, cash equivalents
and investments, and certain other assets, to Genzyme Surgical Products in
connection with the creation of Genzyme Surgical Products as a separate division
of Genzyme. The business of Genzyme Surgical Products previously operated as a
business unit of Genzyme General. These financial statements reflect the
financial position, results of operations and cash flows allocated to Genzyme
General as if the operations of Genzyme Surgical Products had been separately
accounted for as its own division of the corporation for all periods presented.

We use the equity method to account for investments in entities in which
Genzyme General has a substantial ownership interest (20% to 50%), or in which
it participates in policy decisions. Genzyme General's consolidated net income
includes its share of the earnings of these entities. We report at fair value
investments in entities in which Genzyme General's ownership interest is less
than 20%.

TRANSLATION OF FOREIGN CURRENCIES

We translate the financial statements of foreign subsidiaries allocated to
Genzyme General from local currency into U.S. dollars and include translation
adjustments for these subsidiaries in division equity. Genzyme General's
division equity includes cumulative foreign currency translation charges of
$19.7 million at December 31, 1999 and $4.8 million at December 31, 1998.

We include exchange gains and losses on intercompany balances which are
long-term in nature in our division equity. Our gains and losses on all other
transactions are included in our results of operations. Genzyme General recorded
a net gain of $0.6 million in 1999, a net gain of $0.3 million in 1998 and a net
loss of $0.1 million in 1997.

REVENUE RECOGNITION

Genzyme General recognizes revenue from product sales when it ships the
product and title has passed, net of any applicable third party contractual
allowances and rebates. Genzyme General recognizes revenue from service sales
when it has finished providing the service or when it has achieved an applicable
milestone. Genzyme General recognizes revenue from research and development
contracts over the term

GG-24

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of the applicable contract and as it incurs costs related to that contract. Up
front license fees, milestone fees and royalty revenue are recognized as revenue
only if there are no remaining performance obligations and the fees are
non-refundable.

Genzyme General receives royalties related to the manufacture, sale or use
of products or technologies under license arrangements with third parties. For
those arrangements where royalties are reasonably estimable, Genzyme General
recognizes revenue based on based on estimates of royalties earned during the
applicable period and adjusts 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, Genzyme General recognizes revenue upon receipt of licensee royalty
statements.

NET INCOME (LOSS) PER SHARE

Earnings per share is calculated for each series of Genzyme stock using the
two-class method, as further described in the notes to our consolidated
financial statements. We present earnings per share data only in the
consolidated financial statements of Genzyme because Genzyme Corporation is the
issuer of the securities. Genzyme's divisions do not and cannot issue securities
because they are not companies or legal entities.

NOTE B. POLICIES GOVERNING THE RELATIONSHIP OF GENZYME'S OPERATING
DIVISIONS

Because each of our operating divisions is a part of a single company, our
board of directors has adopted policies to address issues that may arise among
divisions and to govern the management of and the relationships between each
division. With some exceptions that are mentioned specifically in this note, our
board of directors may modify or rescind these policies, or adopt additional
policies, in its sole discretion without stockholder approval, subject only to
our board of directors' fiduciary duty to stockholders. Generally accepted
accounting principles require that any change in policy be preferable (in
accordance with these principles) to the previous policy.

INTERDIVISION ASSET TRANSFERS

Our board of directors may at any time reallocate any program, product or
other asset from one division to any other division. We account for
interdivision asset transfers at book value. The consideration paid for an asset
transfer generally must be fair value as determined by our board of directors.
The difference between the consideration paid and the book value of the assets
transferred is recorded in division equity.

Our board of directors determines fair value using the following
methodologies: a risk-adjusted discounted cash flow model or a comparable
transaction model.

The risk-adjusted discounted cash flow model estimates fair value by taking
the discounted value of all the cash inflows and outflows related to a program
or product over a specified period of time, generally the economic life of the
project, adjusted for the probabilities of certain outcomes occurring or not
occurring.

GG-25

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE B. POLICIES GOVERNING THE RELATIONSHIP OF GENZYME'S OPERATING
DIVISIONS (CONTINUED)
In performing this analysis, we consider various factors that could affect the
success or failure of the program including:

- the duration, cost and probability of success of each phase of
development;

- the current and potential size of the market and barriers to entry into
the market;

- the maximum number of patients likely to be treated with the product and
the speed with which that maximum number will be reached;

- reimbursement policies and pricing limitations;

- current and potential competitors;

- the net proceeds received by us upon the sale of the program or product;
and

- the costs of manufacturing and marketing the product or program.

The comparable transaction model estimates fair value through comparison to
valuations established for other transactions within the biotechnology and
biosurgical areas involving similar programs and products having similar terms
and structure. In identifying comparable transactions, we consider, among other
factors, the following:

- the similarity of market opportunity;

- the comparability of the medical needs addressed;

- the similarity of the regulatory, reimbursement and competitive
environment;

- the stage of product or program development; and

- the risk profile of successfully commercializing the product or program.

We customarily use the comparable transaction model to corroborate
valuations derived under the risk-adjusted discounted cash flow model.

When determining the fair value of a program under development using either
model, our board of directors also takes into account the following criteria:

- the commercial potential of the program;

- the phase of clinical development of the program;

- the expenses associated with realizing any income from the program and the
likelihood and time of the realization; and

- other matters that our board of directors and its financial advisors, if
any, deem relevant.

One division may compensate another division for a reallocation with cash or
other consideration having a value equal to the fair market value of the
reallocated assets. In the case of a reallocation of assets from Genzyme General
to another division, our board of directors may elect instead to account for the
reallocation as an increase in the designated shares representing the division
to which the assets are

GG-26

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE B. POLICIES GOVERNING THE RELATIONSHIP OF GENZYME'S OPERATING
DIVISIONS (CONTINUED)
reallocated in accordance with the provisions of our charter. No gain or loss is
recognized as a result of these transfers.

Our policy regarding transfers of assets between divisions may not be
changed by our board of directors without the approval of the holders of Genzyme
General Stock voting as a separate class unless the policy change does not
affect Genzyme General.

OTHER INTERDIVISION TRANSACTIONS

Our divisions may engage in transactions directly with one or more other
divisions or jointly with one or more other divisions and one or more third
parties. These transactions may include agreements by one division to provide
products and services for use by another division, license agreements and joint
ventures or other collaborative arrangements involving more than one division to
develop new products and services jointly and with third parties. These
transactions are subject to the following conditions:

- We charge research and development (including clinical and regulatory
support), distribution, sales, marketing, and general and administrative
services (including allocated space) performed by one division for another
division to the division for which the services are performed on a cost
basis. We charge direct costs to the division for which we incur them. We
allocate direct labor and indirect costs in reasonable and consistent
manners based on the use by a division of relevant services. Divisions
performing services for other divisions do not recognize revenue for the
services they perform.

- We charge the manufacturing of goods and performance of services by one
division exclusively for another division to the division for which it is
performed on a cost basis. We include in manufacturing costs an interest
charge (based on our short-term borrowing rate at the beginning of the
fiscal year) on the gross fixed assets used in the manufacturing process.
We determine gross fixed assets for the facility used at the beginning of
each fiscal year. We allocate direct labor and indirect costs in
reasonable and consistent manners based on the benefit received by a
division of related goods and services. Divisions performing services for
other divisions do not recognize revenue for the services they perform.

- Other than transactions involving research and development, manufacturing,
distribution, sales, marketing, general and administrative services, which
are addressed above, all interdivisional transactions are performed on
terms and conditions obtainable in arm's length transactions with third
parties. Divisions performing services for other divisions do not
recognize revenue for the services they perform.

- Our board must approve interdivisional transactions that are performed on
terms and conditions other than as described above and are material to one
or more of the participating divisions. In giving its approval, our board
must determine that the transaction is fair and reasonable to each
participating division and to holders of the common stock representing
each participating division.

- Divisions may make loans to other divisions. Any loan of $1 million or
less matures within 18 months and accrues interest at the best borrowing
rate available to the corporation for a loan of like type and duration.
Our board of directors must approve any loan in excess of $1 million. In

GG-27

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE B. POLICIES GOVERNING THE RELATIONSHIP OF GENZYME'S OPERATING
DIVISIONS (CONTINUED)
giving its approval, our board of directors must determine that the
material terms of the loan, including the interest rate and maturity date,
are fair and reasonable to each participating division and to holders of
the common stock representing each such division.

- All material interdivisional transactions are set forth in a written
agreement that is signed by an authorized member of the management team of
each division involved in the transaction.

TAX ALLOCATIONS

We file a consolidated return and allocate income taxes to each division
based upon the financial statement income, taxable income, credits and other
amounts properly allocable to each division under generally accepted accounting
principles as if it were a separate taxpayer. We assess the realizability of our
deferred tax assets at the division level. As a result, our consolidated tax
provision may not equal the sum of the divisions' tax provision. As of the end
of any fiscal quarter, however, if a division cannot use any projected annual
tax benefit attributable to it to offset or reduce its current or deferred
income tax expense, we may allocate the tax benefit to the other divisions in
proportion to their taxable income without any compensating payment or
allocation. Tax benefits allocated to Genzyme General are recorded as a credit
to division equity.

ACCESS TO TECHNOLOGY AND KNOW-HOW

Genzyme General has unrestricted access to all technology and know-how owned
or controlled by Genzyme Corporation that may be useful in its business, subject
to any obligations or limitations that apply to the corporation generally.

NOTE C. OTHER GAINS AND CHARGES

During the fourth quarter of 1999, Genzyme General recorded a net gain of
$14.4 million upon receipt of a payment associated with the termination of an
agreement to acquire Cell Genesys, Inc. Genzyme General recorded this gain as
other income.

During the third quarter of 1998, Genzyme General recorded a $14.8 million
charge to cost of products sold to write down excess inventory used to make
Ceredase-Registered Trademark- enzyme. Genzyme General took this charge
following a determination that, based on the status of efforts to convert
Gaucher disease patients to a treatment regimen using
Cerezyme-Registered Trademark- enzyme, the existing supply of
Ceredase-Registered Trademark- enzyme was sufficient to meet estimated patient
needs.

Genzyme General also recorded $20.1 million in other charges in the fourth
quarter of 1997. The components of these charges are:

- an $18.1 million charge to cost of products sold to write down excess
inventory in Genzyme General's melatonin, bulk pharmaceuticals and fine
chemical product lines. Genzyme General took this charge after it
discontinued these product lines; and

- a $2.0 million charge to other expense relating to uncertainty in
collecting a note receivable that was issued upon the sale of Genetic
Design, Inc.

GG-28

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE D. DISPOSITIONS OF ASSETS

In July 1998, we sold the assets of our research products business to Techne
Corporation in exchange for:

- $24.8 million in cash;

- approximately 987,000 shares of Techne common stock; and

- royalties on product sales by Techne's biotechnology group through
June 2003.

We will record royalty income as it is earned. In 1998, we recorded a
$31.2 million gain in connection with the sale of this business and an
additional $3.4 million gain upon the sale of a portion of our investment in
Techne common stock. In 1999, we recorded a gain of $2.0 million upon the sale
of our remaining shares of Techne common stock. The $3.4 million and
$2.0 million gains were recorded as gains on sale of investments in equity
securities. The research products business had been allocated to Genzyme
General.

Note C., "Dispositions of Assets," to our consolidated financial statements
contains information regarding:

- the sale of Genzyme General's immunochemistry product lines to an
operating unit of Sybron Laboratory Products Corp.; and

- the sale of Genetic Design to Laboratory Corporation of America.

We incorporate that information into this note by reference.

NOTE E. PEPTIMMUNE ACQUISITION

In July 1999, we acquired Peptimmune, Inc., a privately-held company whose
lead development program focuses on a treatment for pemphigus vulgaris. We
allocated this acquisition to Genzyme General and accounted for it as a
purchase. We allocated the aggregate purchase price of $6.5 million and assumed
liabilities of $0.3 million to the tangible and intangible assets we acquired
from Peptimmune based on their respective fair values (amounts in thousands):

Property, plant & equipment................................. $ 128
Deferred tax asset.......................................... 1,229
In-process technology....................................... 5,436
------
Total................................................... $6,793
======

The $5.4 million allocated to in-process technology represents the value we
assigned to Peptimmune's programs that were still in the development stage and
for which there was no alternative future use. Genzyme General recorded this
amount as a charge to operations.

NOTE F. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

Note E., "Off-Balance Sheet Financial Instruments," to our consolidated
financial statements contains information regarding interest rate swap contracts
that are allocated to Genzyme General. We incorporate that information into this
note by reference.

GG-29

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE G. ACCOUNTS RECEIVABLE AND INTANGIBLE ASSETS

Genzyme General's 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. Genzyme General performs credit evaluations of its
customers on an ongoing basis and generally does not require collateral. Genzyme
General states accounts receivable at fair value after reflecting an allowance
for doubtful accounts. This allowance was $17.6 million at December 31, 1999 and
$9.9 million at December 31, 1998.

The following table contains information on Genzyme General's intangible
assets for the periods presented:

WEIGHTED WEIGHTED
AVERAGE AVERAGE
ESTIMATED ESTIMATED
USEFUL USEFUL
DECEMBER 31, LIFE DECEMBER 31, LIFE
1999 (YEARS) 1998 (YEARS)
------------ --------- ------------ ---------
(AMOUNTS IN THOUSANDS, EXCEPT USEFUL LIFE DATA)

Goodwill......................................... $ 69,376 13 $ 79,644 12
License fees..................................... 25,092 15 25,000 15
Customer lists................................... 8,324 10 8,324 10
Non-compete agreements........................... 6,000 5 6,910 5
Other............................................ 5,105 5 5,241 5
-------- --------
113,897 125,119
Less accumulated amortization.................... (38,527) (39,268)
-------- --------
Intangible assets, net........................... $ 75,370 $ 85,851
======== ========

NOTE H. INVENTORIES

DECEMBER 31,
-----------------------
1999 1998
-------- --------
(AMOUNTS IN THOUSANDS)

Raw materials.......................................... $24,057 $29,497
Work-in-process........................................ 40,592 23,359
Finished products...................................... 19,735 32,306
------- -------
Total.............................................. $84,384 $85,162
======= =======

GG-30

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE I. PROPERTY, PLANT AND EQUIPMENT

DECEMBER 31,
-----------------------
1999 1998
---------- ----------
(AMOUNTS IN THOUSANDS)

Plant and equipment..................................... $230,151 $243,816
Land and buildings...................................... 180,624 147,806
Leasehold improvements.................................. 90,128 68,414
Furniture and fixtures.................................. 13,169 13,516
Construction-in-progress................................ 26,964 30,191
-------- --------
541,036 503,743

Less accumulated depreciation........................... (178,488) (141,000)
-------- --------
Property, plant and equipment, net...................... $362,548 $362,743
======== ========

Genzyme General's depreciation expense was $36.9 million in 1999,
$34.9 million in 1998, and $28.4 million in 1997.

Genzyme General has capitalized approximately $34.6 million, which
represents the costs it has incurred in validating the manufacturing process for
products which have reached technological feasibility. Genzyme General has
capitalized the following amounts of interest costs incurred in financing the
construction of manufacturing facilities:

1999 1998 1997
---- ---- ----

$0.9 million $0.7 million $0.5 million

The estimated cost of completion for assets under construction is $37.4
million as of December 31, 1999.

GG-31

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE J. INVESTMENTS

MARKETABLE SECURITIES

DECEMBER 31,
-----------------------------------------
1999 1998
------------------- -------------------
COST MARKET COST MARKET
-------- -------- -------- --------
(AMOUNTS IN THOUSANDS)

Cash equivalents(1):
Corporate notes........................... $ 34,108 $ 34,108 $ 8,131 $ 8,129
Money market fund......................... 22,210 22,210 70,805 70,805
-------- -------- -------- --------
$ 56,318 $ 56,318 $ 78,936 $ 78,934
======== ======== ======== ========
Short-term:
Corporate notes........................... $210,954 $210,173 $173,970 $174,421
Federal agencies.......................... 4,085 4,067 -- --
-------- -------- -------- --------
$215,039 $214,240 $173,970 $174,421
======== ======== ======== ========
Long-term:
Corporate notes........................... $137,482 $135,509 $226,002 $226,259
Federal................................... -- -- 33,412 33,581
U.S. Treasury notes....................... 69,925 69,633 21,323 21,824
-------- -------- -------- --------
$207,407 $205,142 $280,737 $281,664
======== ======== ======== ========

Investments in equity securities.......... $ 59,983 $ 94,719 $ 62,244 $ 51,977
======== ======== ======== ========

- ------------------------

(1) Cash equivalents are included as part of cash and cash equivalents on our
balance sheets.

REALIZED AND UNREALIZED GAINS AND LOSSES ON MARKETABLE SECURITIES AND
INVESTMENTS IN EQUITY SECURITIES

Genzyme General recorded gains of $2.0 million in 1999 and $3.4 million in
1998 upon the sale of its investment in shares of Techne common stock. Genzyme
General also recorded a $5.7 million charge in 1999 in connection with its
investments in the common stock of Pharming Group N.V. and IntegraMed
America, Inc. and a $3.4 million charge in 1998 in connection with its
investment in the common stock of Celtrix Pharmaceuticals, Inc. because we
considered the decline in the value of those investments to be other than
temporary.

In connection with these assessments, we concluded that evidence existed
that the value of the investments would recover to at least its cost. This
included continued positive progress in the issuers' scientific programs,
ongoing activity in Genzyme General's collaborations with the issuers, and a
lack of any substantial company-specific adverse events causing the declines in
value. However, given the significance and duration of the declines as of the
end of the applicable quarter, we concluded that it was unclear over what period
such price recoveries would take place and that, accordingly, the positive
evidence suggesting that the investments would recover to at least Genzyme
General's purchase price was

GG-32

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE J. INVESTMENTS (CONTINUED)
not sufficient to overcome the presumption that the current market price was the
best indicator of the value of these investments.

Genzyme General records gross unrealized holding gains and losses in
division equity. The following table sets forth the amounts recorded:

DECEMBER 31,
-----------------------------
1999 1998
------------- -------------

Unrealized holding gains........................ $37.1 million $3.6 million
Unrealized holding losses....................... $5.0 million $12.5 million

The following table contains information regarding the range of contractual
maturities of Genzyme General's investments in debt securities:

DECEMBER 31,
-----------------------------------------
1999 1998
------------------- -------------------
COST MARKET COST MARKET
-------- -------- -------- --------
(AMOUNTS IN THOUSANDS)

Within 1 years.............................. $271,357 $270,558 $252,907 $253,355
1-2 years................................... 106,046 104,306 259,363 259,788
2-10 years.................................. 101,361 100,836 21,373 21,876
-------- -------- -------- --------
$478,764 $475,700 $533,643 $535,019
======== ======== ======== ========

Note I., "Investments," to our consolidated financial statements contains
information regarding Genzyme General's:

- Equity investments in:

- Abiomed, Inc.;

- Aronex Pharmaceuticals, Inc.;

- BioMarin;

- Celtrix Pharmaceuticals, Inc.;

- GelTex;

- Genovo, Inc.;

- Integramed America, Inc.; and

- Pharming.

- Investments in and relationships with Dyax Corporation, Genzyme
Transgenics and ATIII LLC; and

- Investments in the following joint ventures:

- BioMarin/Genzyme LLC;

- Diacrin/Genzyme LLC;

- Pharming/Genzyme LLC; and

GG-33

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE J. INVESTMENTS (CONTINUED)
- RenaGel LLC.

We incorporate that information into this note by reference.

NOTE K. ACCRUED EXPENSES

DECEMBER 31,
-----------------------
1999 1998
-------- --------
(AMOUNTS IN THOUSANDS)

Compensation........................................... $21,363 $20,434
Technology access fee.................................. -- 10,000
Professional fees...................................... 2,938 4,853
Royalties.............................................. 6,891 5,846
Rebates................................................ 7,126 5,663
Other.................................................. 24,196 18,847
------- -------
$62,514 $65,643
======= =======

NOTE L. LONG-TERM DEBT AND LEASES

LONG-TERM DEBT

DECEMBER 31,
-----------------------
1999 1998
---------- ----------
(AMOUNTS IN THOUSANDS)

5 1/4% convertible subordinated notes....................... $250,000 $250,000
Revolving credit facility maturing in November 1999......... -- $ 82,000
5% convertible subordinated debentures...................... 22,622 21,559
Mortgage notes.............................................. -- 3,167
-------- --------
$272,622 $356,726
Less current portion........................................ -- (82,080)
-------- --------
$272,622 $274,646
======== ========

Over the next five years, Genzyme General will be required to repay the
following principal amounts on its long-term debt (excluding capital leases):

2000 2001 2002 2003 2004 AFTER 2004
---- ---- ---- ---- ---- ----------

$0.0 million $0.0 million $0.0 million $22.6 million $0.0 million $250.0 million

REVOLVING CREDIT FACILITY; CONVERTIBLE DEBT; MORTGAGE NOTE

Note K. "Long Term Debt and Leases," to our consolidated financial
statements contains information regarding our:

- revolving credit facilities;

GG-34

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE L. LONG-TERM DEBT AND LEASES (CONTINUED)
- 5 1/4% convertible subordinated notes due June 2005;

- 5% convertible subordinated debentures due August 2003; and

- mortgage note.

We incorporate that information into this note by reference.

OPERATING LEASES

Genzyme General leases facilities and personal property under operating
leases with terms in excess of one year. Genzyme General's total expense under
operating leases was:

1999 1998 1997
---- ---- ----

$20.7 million $16.3 million $14.2 million

Over the next five years, Genzyme General will be required to repay the
following amounts under operating leases:

2000 2001 2002 2003 2004 AFTER 2004
---- ---- ---- ---- ---- ----------

$15.8 million $15.3 million $14.0 million $11.9 million $11.4 million $115.4 million

In June 1992, one of our wholly-owned subsidiaries entered into a 65-year
land lease with an unaffiliated lessor. Our expenses under this lease, which are
allocated to Genzyme General, were $1.5 million in 1999 and 1998, and
$1.3 million in 1997. Our rent under this lease increases every five years based
on the Consumer Price Index or, if higher, 3% per year.

Genzyme Tissue Repair leases from Genzyme General a portion of a research
and development facility. Genzyme Tissue Repair is obligated to pay Genzyme
General $0.6 million per year for 3 years commencing on July 1, 1998.
Diacrin/Genzyme LLC has subleased a portion of this facility and is obligated to
pay Genzyme Tissue Repair rent of $0.4 million per year pursuant to the terms of
the sublease agreement.

GG-35

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE M. DIVISION EQUITY

The following table contains the components of division equity for Genzyme
General for the periods presented:

1999 1998 1997
---------- -------- --------
(AMOUNTS IN THOUSANDS)

Balance at beginning of period.............................. $ 939,967 $745,895 $645,185
Division net income....................................... 142,077 133,052 76,642
Allocation of tax benefits generated by:
Genzyme Molecular Oncology.............................. 7,812 3,527 2,755
Genzyme Surgical Products............................... 16,128 17,936 10,112
Genzyme Tissue Repair................................... 10,866 16,394 17,666
Allocated proceeds from issuance of Genzyme General Stock
under stock plans......................................... 59,587 74,360 35,963
Allocated proceeds from exercise of warrants to purchase
Genzyme General Stock..................................... -- 289 855
Allocation of cash:
To Genzyme Molecular Oncology for designated
shares(1)............................................. -- (5,000) --
To Genzyme Surgical Products for designated shares(1)... (176,706) (41,975) (25,669)
To Genzyme Tissue Repair for designated shares(1)....... (4,937) -- (14,892)
To Genzyme Tissue Repair for research program........... (100) (250) --
To Genzyme Tissue Repair for transfer of interest in
joint venture......................................... (25,000) -- --
Allocated tax benefit from disqualifying dispositions....... 24,238 18,561 4,127
Conversion of debentures for Genzyme Molecular Oncology
designated shares(1)...................................... -- (19,802) --
Conversion of note receivable for Genzyme Molecular Oncology
designated shares(1)...................................... -- (2,696) --
Loss on purchase of facility from Genzyme Tissue Repair..... -- (711) --
Allocation of acquired deferred tax asset................... -- -- 2,900
Allocated stock compensation expense........................ 58 48 1,218
Allocated equity adjustments................................ 13,624 339 (10,967)
---------- -------- --------
Balance at end of period.................................... $1,007,614 $939,967 $745,895
========== ======== ========

- ------------------------
(1) Designated shares are shares of our common stock that are not issued and
outstanding, but which our board of directors may issue, sell or distribute
without allocating the proceeds to the division corresponding to that series
of stock. As of December 31, 1999, there were 1,688,237 Genzyme Molecular
Oncology designated shares, 1,164,839 Genzyme Surgical Products designated
shares and 2,238,053 Genzyme Tissue Repair designated shares. The number of
Genzyme Molecular Oncology designated shares assumes that a public offering
of Molecular Oncology Stock is not completed prior to June 18, 2000. If such
an offering is completed prior to that date, the number of Genzyme Molecular
Oncology designated shares reserved for issuance in connection with a draw
under an equity line of credit in 1998 will decrease based on a formula set
forth in our charter.

GG-36

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE M. DIVISION EQUITY (CONTINUED)

INTERDIVISIONAL FINANCING ARRANGEMENTS

GENZYME MOLECULAR ONCOLOGY

In 1997, our board of directors made $25.0 million of Genzyme General's cash
available to Genzyme Molecular Oncology. This arrangement was subject to
dollar-for-dollar reduction by the proceeds of outside financing allocated to
Genzyme Molecular Oncology. When Genzyme issued $20.0 million in principal of 6%
convertible subordinated debentures in August 1997 and allocated the proceeds to
Genzyme Molecular Oncology, the amount available under the arrangement was
reduced to $5.0 million. In September 1998, Genzyme Molecular Oncology drew the
remaining $5.0 million available under this arrangement in exchange for Genzyme
Molecular Oncology designated shares.

In August 1998, our board of directors made an additional $30.0 million of
Genzyme General's cash available to Genzyme Molecular Oncology. Under the terms
of this arrangement, Genzyme Molecular Oncology may draw down funds as needed
cash quarter in exchange for Genzyme Molecular Oncology designated shares based
on the fair market value of Molecular Oncology Stock (as defined in our charter)
at the time of the draw. As of December 31, 1999, Genzyme Molecular Oncology had
not yet drawn any funds from this arrangement.

GENZYME TISSUE REPAIR

In October 1996, our board of directors made $20.0 million of Genzyme
General's cash available to Genzyme Tissue Repair in order for Genzyme Tissue
Repair to fund its obligations under its joint venture with Diacrin. Under this
arrangement, Genzyme Tissue Repair may draw down funds as needed each quarter in
exchange for Genzyme Tissue Repair designated shares based on the fair market
value of Tissue Repair Stock (as defined in our charter) at the time of the
draw. Genzyme Tissue Repair made a $7.0 million draw under this line in 1997.

In May 1998, our board of directors increased the amount committed under
this arrangement from $13.0 million to $50.0 million. Genzyme Tissue Repair made
a $5.0 million draw in February 1999. In May 1999, the amount available under
this arrangement was reduced by $25.0 million in connection with the
reallocation of our ownership interest in Diacrin/Genzyme LLC from Genzyme
Tissue Repair to Genzyme General.

STOCK COMPENSATION PLANS

We apply APB Opinion 25 and related interpretations in accounting for our
five stock-based compensation plans: the 1990 Equity Incentive Plan, the 1997
Equity Plan (both of which are stock option plans), the 1990 Employee Stock
Purchase Plan, the 1999 Employee Stock Purchase Plan, and the 1998 Director
Stock Option Plan. We do not recognize compensation expense for options granted
and shares purchased under the provisions of these plans for options granted to
employees with an exercise price greater than or equal to fair market value.

The following table sets forth division net income data for Genzyme General
as if compensation expense for our stock-based compensation plans was determined
in accordance with SFAS 123 based on

GG-37

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE M. DIVISION EQUITY (CONTINUED)
the fair value at the grant dates of the awards, and the compensation expense
related to Genzyme General Stock awards would be allocated to Genzyme General in
accordance with our allocation policies:

1999 1998 1997
-------- -------- --------
(AMOUNTS IN THOUSANDS)

Division net income:
As reported............................... $142,077 $133,052 $ 76,642
Pro forma................................. $124,417 $119,477 $ 64,635

Note L., "Stockholders' Equity," to our consolidated financial statements
contains information regarding the assumptions we made in calculating pro forma
compensation expense in accordance with SFAS 123. The effects of applying
SFAS 123 are not likely to be representative of the effects on reported division
net income in future years. SFAS 123 does not apply to awards granted prior to
1995, and additional awards are anticipated in future years.

NOTE N. RESEARCH AND DEVELOPMENT AGREEMENTS

Genzyme General's revenue from research and development agreements with
Genzyme Transgenics Corporation was:

1999 1998 1997
---- ---- ----

$1.5 million $3.6 million $8.0 million

Note M., "Research and Development Agreements," to our consolidated
financial statements contains information regarding Genzyme General's:

- Relationships with Genzyme Transgenics Corporation; and

- Investments in the following joint ventures:

- BioMarin/Genzyme LLC;

- Diacrin/Genzyme LLC;

- Pharming/Genzyme LLC; and

- RenaGel LLC.

We incorporate that information in this note by reference.

NOTE O. COMMITMENTS AND CONTINGENCIES

We periodically become subject to legal proceedings and claims arising in
connection with our business. We do not believe that there were any asserted
claims against us as of December 31, 1999 which, if adversely decided, would
have a material adverse effect on Genzyme General's results of operations,
financial condition or liquidity.

GG-38

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE P. INCOME TAXES

Genzyme General's income before income taxes and the related income tax
expense (benefit) are described in the following table:

1999 1998 1997
-------- -------- --------
(AMOUNTS IN THOUSANDS)

Domestic(1)................................... $210,097 $204,182 $112,349
Foreign....................................... 16,380 9,514 8,822
-------- -------- --------
Total..................................... $226,477 $213,696 $121,171
======== ======== ========
Currently payable:
Federal....................................... $ 77,779 $ 69,567 $ 40,426
State......................................... 4,302 9,354 4,286
Foreign....................................... 5,733 4,016 2,971
-------- -------- --------
Total..................................... $ 87,814 $ 82,937 $ 47,683
======== ======== ========
Deferred:
Federal....................................... $ (3,036) $ (1,734) $ (3,713)
State......................................... (378) (829) (245)
-------- -------- --------
Total..................................... (3,414) $ (2,563) $ (3,958)
-------- -------- --------
Provision for income taxes.................... $ 84,400 $ 80,374 $ 43,725
======== ======== ========

- ------------------------

(1) Includes $5.4 million in charges for purchased research and development and
$5.5 million in charges for impaired investments in 1999.

Genzyme General's provisions for income taxes were at rates other than the
U.S. federal statutory tax rate for the following reasons:

1999 1998 1997
-------- -------- --------

Tax at U.S. statutory rate............................... 35.0% 35.0% 35.0%
Losses in foreign subsidiary and less than 80% owned
subsidiaries with no current tax benefit............... 0.1 0.8 0.8
State taxes, net......................................... 1.2 3.1 3.0
Foreign sales corporation................................ (2.2) (1.5) (1.8)
Nondeductible amortization............................... 0.7 0.8 1.4
Benefit of tax credits................................... (1.4) (1.0) (1.3)
Other, net............................................... 2.2 0.5 (0.8)
---- ---- -----
Effective tax rate before certain charges................ 35.6% 37.7% 36.3%
Charge for impaired investment........................... 0.5 -- --
Charge for purchased research and development............ 0.5 -- --
---- ---- -----
Effective tax rate....................................... 36.6% 37.7% 36.3%
==== ==== =====

GG-39

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE P. INCOME TAXES (CONTINUED)
The components of net deferred tax assets are described in the following
table:

DECEMBER 31,
-----------------------
1999 1998
---------- ----------
(AMOUNTS IN THOUSANDS)

Deferred tax assets:
Net operating loss carryforwards.................... $ 3,164 $ 2,423
Tax credits......................................... 9,413 3,714
Deferred loss....................................... -- 2,002
Intangible amortization............................. 36,496 38,271
Investments in unconsolidated subsidiary............ 3,396 3,108
Realized and unrealized capital losses.............. 10,088 8,822
Reserves, accruals and other........................ 37,055 35,798
Allocation of tax asset from Genzyme Molecular
Oncology.......................................... 3,787 15,621
Allocation of tax asset from Genzyme Tissue
Repair............................................ 15,510 2,648
-------- --------
Gross deferred tax asset................................ $118,909 $112,407
Valuation allowance..................................... (17,646) (15,383)
-------- --------
101,263 97,024
Deferred tax liabilities:
Depreciable assets.................................. (22,591) (26,373)
Realized and unrealized capital gains............... (12,686) --
Deferred gains...................................... (878) --
Allocation of tax liability from Genzyme Surgical
Products.......................................... (4,069) (2,788)
-------- --------
Net deferred tax asset.............................. $ 61,039 $ 67,863
======== ========

As a result of uncertainty surrounding our ability to realize certain tax
benefits that primarily relate to capital losses from the purchase of in-process
research and development, we placed valuation allowances of $17.6 million in
1999 and $15.4 million in 1998 against otherwise recognizable deferred tax
assets.

Our ability to realize the benefit of net deferred tax assets is dependent
on our generating sufficient taxable income before loss 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.

At December 31, 1999, Genzyme General had for U.S. income tax purposes
allocated net operating loss carryforwards of $9.0 million and an allocated tax
credit carryforward of $9.4 million. The net operating loss carryforwards expire
between 2003 and 2019 and, prior to expiration, Genzyme General's ability to use
this carryforward may be limited under U.S. tax laws. Tax credits of
$4.9 million will carryforward indefinitely and approximately $4.5 million of
the tax credit carryforwards will expire from 2014 to 2019. Approximately
$9.4 million of the tax credit carryforwards relate to exercises of
non-qualified stock options and disqualifying dispositions of incentive stock
options, the tax benefit of which, if realized, will be credited to additional
paid-in-capital.

GG-40

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE Q. BENEFIT PLANS

Note P., "Benefit Plans," to our consolidated financial statements contains
information regarding our 401(k) and other pension plans. We incorporate that
information into this note by reference.

NOTE R. SEGMENT INFORMATION

In accordance with SFAS 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
SFAS 131, Genzyme General has two reportable segments:

- Therapeutics, which develops, manufactures and distributes human
therapeutic products for significant unmet medical needs. The business
derives substantially all of its revenue from sales of
Cerezyme-Registered Trademark- enzyme; and

- Diagnostic Products, which provides diagnostic products to niche markets,
focusing on in vitro diagnostics.

GG-41

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE R. SEGMENT INFORMATION (CONTINUED)
We have provided information concerning the operations in these reportable
segments in the following table:

DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(AMOUNTS IN THOUSANDS)

Revenues:
Therapeutics.............................................. $488,705 $413,645 $332,712
Diagnostic Products....................................... 57,971 65,683 66,288
Other..................................................... 86,409 85,846 86,927
Eliminations/Adjustments(1)............................... 2,281 4,145 10,441
-------- -------- --------
Total....................................................... $635,366 $569,319 $496,368
======== ======== ========
Depreciation and amortization expense:
Therapeutics.............................................. $ 21,068 $ 10,862 $ 10,054
Diagnostic Products....................................... 1,909 4,715 4,540
Other..................................................... 6,422 11,470 7,410
Eliminations/Adjustments(1)............................... 20,835 10,711 12,818
-------- -------- --------
Total....................................................... $ 50,234 $ 37,758 $ 34,822
======== ======== ========
Equity in net loss of unconsolidated affiliates:
Therapeutics.............................................. $(30,094) $(12,480) $ (2,310)
Diagnostic Products....................................... -- -- --
Other..................................................... 56 (107) (71)
Eliminations/Adjustments(2)............................... (7,385) (7,152) (3,401)
-------- -------- --------
Total....................................................... $(37,423) $(19,739) $ (5,782)
======== ======== ========
Income tax (expense) benefits:
Therapeutics.............................................. $(84,859) $(76,606) $(61,389)
Diagnostic Products....................................... (2,485) (13,755) (1,409)
Other..................................................... 2,952 2,134 8,658
Eliminations/Adjustments(1)............................... (8) 7,853 10,415
-------- -------- --------
Total....................................................... $(84,400) $(80,374) $(43,725)
======== ======== ========
Division net income:
Therapeutics (3).......................................... $133,854 $120,832 $104,527
Diagnostic Products (4)................................... 3,915 21,694 2,400
Other (5)................................................. (4,661) (3,367) (14,741)
Eliminations/Adjustments(6)............................... 8,969 (6,107) (15,544)
-------- -------- --------
Total....................................................... $142,077 $133,052 $ 76,642
======== ======== ========

- ------------------------

(1) Includes primarily amounts related to Genzyme General's research and
development and administrative activities that we do not specifically
allocate to a particular segment of Genzyme General.

GG-42

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE R. SEGMENT INFORMATION (CONTINUED)
(2) Represents our portion of the net loss of Genzyme Transgenics Corporation,
an unconsolidated affiliate, which we do not specifically allocate to a
particular segment of Genzyme General.

(3) Therapeutics' net income for 1998 includes a $14.8 million charge to write
down excess inventory used to make Ceredase-Registered Trademark- enzyme.

(4) Diagnostic Products' net income for 1998 and 1999 includes gains on the sale
of product lines of $0.5 million in 1999 and $31.2 million in 1998.

(5) Other net income for 1999 includes a $7.5 million gain on the sale of a
product line.

(6) Includes the net income for Genzyme General's corporate administrative and
research and development activities which we do not specifically allocate to
a particular segment of Genzyme General. Includes a $14.4 million gain upon
receipt of a payment associated with the termination of the agreement to
acquire Cell Genesys, Inc.

DECEMBER 31,
-----------------------
1999 1998
---------- ----------
(AMOUNTS IN THOUSANDS)

Segment Assets:
Therapeutics....................................... $ 338,960 $ 326,305
Diagnostic Products................................ 40,266 49,430
Other.............................................. 83,088 94,930
Eliminations/Adjustments........................... 937,269 939,726
---------- ----------
Total................................................ $1,399,583 $1,410,391
========== ==========

Segment assets for Genzyme include accounts receivable, inventory, and
certain fixed and intangible assets. Eliminations/Adjustments for Genzyme
General consists of the differences between the total assets for Genzyme
General's segments and the total combined assets for Genzyme General as follows:

DECEMBER 31,
-----------------------
1999 1998
---------- ----------
(AMOUNTS IN THOUSANDS)

Cash, cash equivalents, and short- and long-term
investments........................................... $513,905 $556,097
Deferred tax assets-current............................. 41,195 39,725
Intangibles, net........................................ 34,341 41,556
Property, plant and equipment, net...................... 172,165 133,995
Investment in equity securities......................... 94,719 51,977
Deferred tax assets-noncurrent.......................... 18,631 28,138
Other................................................... 62,313 88,238
-------- --------
Total................................................... $937,269 $939,726
======== ========

Genzyme General operates in the healthcare industry, and manufactures and
markets its products primarily in the United States and Europe. Genzyme
General's principal manufacturing facilities are located in the United States,
the United Kingdom, Switzerland and Germany. It purchases products from our
English and Swiss subsidiaries for sale to customers in the United States.
Genzyme General sets transfer prices from our foreign subsidiaries to allow it
to produce profit margins commensurate with its

GG-43

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE R. SEGMENT INFORMATION (CONTINUED)
sales and marketing effort. Our Dutch subsidiary is Genzyme General's primary
distributor of therapeutic products in Europe.

No subsidiary in any individual foreign country has revenue form external
customers in excess of 10% of our total revenue. The following table contains
certain financial information by geographic area:

1999 1998 1997
-------- -------- --------
(AMOUNTS IN THOUSANDS)

Revenues:
United States............................... $412,611 $371,587 $363,455
Europe...................................... 158,428 147,088 134,637
Other....................................... 64,327 50,644 1,724
-------- -------- --------
Total......................................... $635,366 $569,319 $496,368
======== ======== ========
Long-lived assets:
United States............................... $647,024 $755,023 $506,085
Other....................................... 52,541 57,247 54,198
-------- -------- --------
Total......................................... $699,565 $812,270 $560,283
======== ======== ========

Genzyme General's results of operations are highly dependent on sales of
Ceredase-Registered Trademark- and Cerezyme-Registered Trademark- enzymes. Sales
of these products represented 84% of Genzyme General's product revenue in 1999,
81% of product revenue in 1998, and 78% of product revenue in 1997. Genzyme
General sells these products directly to physicians, hospitals and treatment
centers as well as through unaffiliated distributors. Sales to one distributor
represented 20% of Ceredase-Registered Trademark- and
Cerezyme-Registered Trademark- enzyme revenues in 1999, 19% of these revenues in
1998, and 18% of these revenues in 1997. We believe that our credit risk
associated with trade receivables is mitigated as a result of the fact that
these products are sold to a large number of customers in a number of different
industries and over a broad geographic area.

NOTE S. QUARTERLY RESULTS (UNAUDITED)

1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(AMOUNTS IN THOUSANDS)

1999
Net revenue......................................... $150,766 $154,205 $157,669 $172,726
Gross profit........................................ 113,519 117,557 120,693 126,223
Division net income................................. 33,505 27,913 29,971 50,688

1998
Net revenue......................................... 129,896 $141,779 $142,225 $155,419
Gross profit........................................ 89,089 98,860 86,546 117,635
Division net income................................. 25,135 31,289 40,202 36,426

NOTE T. SUBSEQUENT EVENT

In February 2000, Genzyme General recorded a gain of $20.3 million relating
to a public offering of 3.5 million common shares by our unconsolidated
affiliate, Genzyme Transgenics Corporation. The public offering resulted in net
proceeds to GTC of $75.2 million (after the exercise of the underwriter's
overallotment option). As a result of the issuance of the additional shares by
GTC, Genzyme General's ownership interest in GTC decreased from 33% to 28%.

GG-44

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Genzyme Corporation:

In our opinion, the accompanying combined balance sheets and the related
combined statements of operations and of cash flows present fairly, in all
material respects, the financial position of Genzyme General (as described in
Note A) at December 31, 1999 and 1998, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
In addition, in our opinion, the financial statement schedule presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related combined financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States which 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 the opinion expressed
above.

As more fully described in Note A to these financial statements, Genzyme
General is a division of Genzyme Corporation; accordingly, the combined
financial statements of Genzyme General should be read in conjunction with the
audited consolidated financial statements of Genzyme Corporation and
Subsidiaries.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February 23, 2000

GG-45

GENZYME GENERAL DIVISION

A DIVISION OF GENZYME CORPORATION

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------- ------------------- --------------------------------- ----------- -------------
ADDITIONS
---------------------------------
BALANCE AT CHARGED TO COSTS CHARGED TO BALANCE AT
DESCRIPTION BEGINNING OF PERIOD AND EXPENSES OTHER ACCOUNTS DEDUCTIONS END OF PERIOD
- ------------------------- ------------------- ---------------- -------------- ----------- -------------

Year ended December 31,
1999:
Allowance for doubtful
accounts............... $ 9,913,100 $12,216,200 $ -- $ 3,167,400(1) $18,961,900
Inventory reserve........ $17,631,100 $ 1,978,000 $ -- $ 3,918,000 $15,691,100
Year ended December 31,
1998:
Allowance for doubtful
accounts............... $ 8,415,700 $ 5,059,000 $ -- $ 3,561,600(1) $ 9,913,100
Inventory reserve........ $15,471,300 $18,178,000 $ -- $16,018,200 $17,631,100
Year ended December 31,
1997:
Allowance for doubtful
accounts............... $11,967,900 $ 2,080,000 $ -- $ 5,632,200(1) $ 8,415,700
Inventory reserve........ $ 2,631,300 $15,101,000 $ -- $ 2,261,000 $15,471,300

- ------------------------

(1) Uncollectible accounts written off, net of recoveries.

GG-46