EXHIBIT 13.3

FINANCIAL STATEMENTS

PAGE NO.
--------

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

Combined Selected Financial Data.......................... GMO-2

Management's Discussion and Analysis of Genzyme Molecular
Oncology's Financial Condition and Results of
Operations.............................................. GMO-4

Combined Statements of Operations--For the Years Ended
December 31, 1999, 1998
and 1997................................................ GMO-13

Combined Balance Sheets--December 31, 1999 and 1998....... GMO-14

Combined Statements of Cash Flows--For the Years Ended
December 31, 1999, 1998
and 1997................................................ GMO-15

Notes to Combined Financial Statements.................... GMO-16

Report of Independent Accountants......................... GMO-30

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GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

COMBINED SELECTED FINANCIAL DATA

Genzyme Molecular Oncology is our operating division that is developing
cancer products, with a focus on cancer vaccines and angiogenesis inhibitors.

A series of our common stock, Genzyme Molecular Oncology Division Common
Stock (which we refer to as "Molecular Oncology Stock") is designed to reflect
the value and track the performance of this division. Molecular Oncology Stock
is common stock of Genzyme Corporation, not of Genzyme Molecular Oncology;
Genzyme Molecular Oncology is a division, not a company or legal entity, and
therefore does not and cannot issue stock. The chief mechanisms intended to
cause Molecular Oncology Stock to "track" the financial performance of Genzyme
Molecular Oncology 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 Molecular Oncology into the determination of the amount available
to pay dividends on Molecular Oncology Stock; and

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 Molecular Oncology Stock is defined in our
charter as the net income or loss of Genzyme Molecular Oncology determined in
accordance with generally accepted accounting principles and as adjusted for tax
benefits allocated to or from Genzyme Molecular Oncology 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 Molecular Oncology Stock are based on the
income or losses attributable to Genzyme Molecular Oncology, we include
financial statements and management's discussion and analysis of Genzyme
Molecular Oncology 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 Molecular Oncology and should be read in conjunction with the
financial statements of Genzyme Molecular Oncology and accompanying notes.

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GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

COMBINED SELECTED FINANCIAL DATA

COMBINED STATEMENT OF OPERATIONS DATA

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

Revenues:
Service revenue............................ $ 1,920 $ 2,229 $ 467 $ -- $ --
Service revenue--related party............. 50 466 -- -- --
Research and development revenue--related
party.................................... 496 2,177 315 -- --
Research and development revenue........... -- 3,256 -- -- --
Licensing revenue.......................... 2,125 11,275 -- -- --
Royalty revenue............................ 28 4 -- -- --
-------- -------- -------- ------- -------
Total revenues........................... 4,619 19,407 782 -- --
Operating costs and expenses:
Cost of service revenues................... 620 1,374 50 -- --
Cost of research and development
revenues................................. 698 4,073 287 -- --
Selling, general and administrative........ 5,529 7,155 2,118 185 87
Research and development................... 15,997 12,743 5,341 818 377
Amortization of intangibles................ 11,825 11,983 5,127 -- --
Purchase of in-process research and
development (1).......................... -- -- 7,000 -- --
-------- -------- -------- ------- -------
Total operating costs and expenses....... 34,669 37,328 19,923 1,003 464
-------- -------- -------- ------- -------
Operating loss............................... (30,050) (17,921) (19,141) (1,003) (464)
Other income (expenses):
Equity in net loss of joint venture........ (1,870) (1,647) (258) -- --
Interest income............................ 469 782 392 -- --
Interest expense........................... (28) (2,968) (1,663) -- --
-------- -------- -------- ------- -------
Total other income (expenses)............ (1,429) (3,833) (1,529) -- --
-------- -------- -------- ------- -------
Loss before income taxes..................... (31,479) (21,754) (20,670) (1,003) (464)
Tax benefit.................................. 2,647 2,647 1,092 -- --
-------- -------- -------- ------- -------
Division net loss............................ $(28,832) $(19,107) $(19,578) $(1,003) $ (464)
======== ======== ======== ======= =======

COMBINED BALANCE SHEET DATA

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

Cash and investments............... $ 3,587 $11,900 $21,229 $ -- $ --
Working capital.................... (5,889) 9,189 11,953 -- --
Total assets....................... 9,692 35,952 53,801 -- --
Long-term debt and convertible
debt............................. -- -- 24,606 -- --
Parent company investment.......... -- -- -- 1,504 501
Division equity.................... (1,215) 23,364 13,466 -- --

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

(1) A $7.0 million charge for the purchase of in-process research and
development was incurred in connection with the acquisition of PharmaGenics,
Inc. in 1997.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF GENZYME MOLECULAR ONCOLOGY'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 Molecular Oncology 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
Molecular Oncology and Genzyme.

We formed Genzyme Molecular Oncology as a separate division of Genzyme on
June 18, 1997 by acquiring PharmaGenics, Inc. and combining it with several of
our ongoing programs in the field of oncology.

We prepare the financial statements of Genzyme Molecular Oncology in
accordance with generally accepted accounting principles. We present financial
information and accounting policies specific to Genzyme Molecular Oncology 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 Molecular Oncology. Note A., "Summary of Significant Accounting
Policies," to our consolidated financial statements contains our accounting
policies.

Genzyme Molecular Oncology Division Common Stock, which we refer to as
"Molecular Oncology Stock," is a series of our common stock that is designed to
reflect the value and track the performance of Genzyme Molecular Oncology. The
chief mechanisms intended to cause Molecular Oncology Stock to "track" the
financial performance of Genzyme Molecular Oncology 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 Molecular Oncology into the determination of the amount available
to pay dividends on Molecular Oncology Stock; and

- requires us to exchange, redeem or distribute a dividend to the holders of
Molecular Oncology Stock if all or substantially all of the assets
allocated to Genzyme Molecular Oncology are sold to a third party (a
dividend or redemption payment must equal in value the net after-tax
proceeds from the sale; an exchange must be for Genzyme General Stock at a
10% premium to the exchanged stock's average market price following the
announcement of the sale).

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 Molecular Oncology Stock is defined in our
charter as the net income or loss of Genzyme Molecular Oncology determined in
accordance with generally accepted accounting principles and as adjusted for tax
benefits allocated to or from Genzyme Molecular Oncology 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 Molecular Oncology Stock is designed to reflect Genzyme Molecular
Oncology's performance, it is common stock of Genzyme Corporation and not
Genzyme Molecular Oncology; Genzyme Molecular

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Oncology is a division, not a company or legal entity, and therefore does not
and cannot issue stock. Consequently, holders of Molecular Oncology Stock have
no specific rights to assets allocated to Genzyme Molecular Oncology. Genzyme
Corporation continues to hold title to all of the assets allocated to Genzyme
Molecular Oncology 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 Molecular Oncology 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 Molecular Oncology Stock
and other tracking stockholders would only have the rights of common
stockholders in the combined assets of Genzyme.

Our charter sets forth what programs and businesses are initially allocated
to Genzyme Molecular Oncology and states that going forward the division will
also include all businesses, products or programs, developed by or acquired for
the division, as determined by our board of directors. We then manage and
account for transactions between Genzyme Molecular Oncology 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.

We present earnings per share data for Molecular Oncology Stock in our
consolidated financial statements. We present financial information and
accounting policies specific to Genzyme Molecular Oncology 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 Molecular Oncology's financial position and
results of operations in conjunction with the financial statements and related
notes of Genzyme Molecular Oncology, 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.

GMO-5

RESULTS OF OPERATIONS

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

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

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

Total revenues................ $ 4,619 $ 19,407 $ 782 (76%) 2,382%
Cost of revenues.............. 1,318 5,447 337 (76%) 1,516%
Selling, general and
administrative.............. 5,529 7,155 2,118 (23%) 238%
Research and development...... 15,997 12,743 5,341 26% 139%
Amortization of intangibles... 11,825 11,983 5,127 (1%) 134%
Purchase of in-process
research and development.... -- -- 7,000 0% (100%)
-------- -------- --------
Total operating costs and
expenses.................. 34,669 37,328 19,923 (7%) 87%
-------- -------- --------
Operating loss................ (30,050) (17,921) (19,141) (68%) 6%
Other expenses, net........... (1,429) (3,833) (1,529) 63% (151%)
-------- -------- --------
Loss before income taxes...... (31,479) (21,754) (20,670) (45%) (5%)
Tax benefit................... 2,647 2,647 1,092 0% 142%
-------- -------- --------
Division net loss............. $(28,832) $(19,107) $(19,578) (51%) 2%
======== ======== ========

REVENUES

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

Service revenue............... $ 1,970 $ 2,695 $ 467 (27%) 477%
Research and development
revenue..................... 496 5,433 315 (91%) 1,625%
Licensing revenue............. 2,125 11,275 -- (81%) 100%
Royalty revenue............... 28 4 -- 600% 100%
-------- -------- --------
Total revenues.............. $ 4,619 $ 19,407 $ 782 (76%) 2,382%
======== ======== ========

1999 AS COMPARED TO 1998

Service revenue decreased as a result of a decline in the provision of
genomics services using Genzyme Molecular Oncology's SAGE-TM- gene expression
technology.

Research and development revenue also decreased as a result of a reduction
in work performed by Genzyme Molecular Oncology on behalf of StressGen/Genzyme
LLC (Genzyme Molecular Oncology's joint venture with StressGen Biotechnologies
Corporation and the Canadian Medical Discoveries Fund, Inc. to develop stress
gene therapies for the treatment of cancer that was dissolved in 1999) and the
completion of research and development work performed on behalf of
Schering-Plough in 1998.

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Licensing revenue decreased in 1999 as a result of the receipt in 1998 of a
licensing fee and milestone payments under a license agreement with
Schering-Plough relating to p53 gene therapy. This amount was partially offset
by amounts received upon the grant by Genzyme Molecular Oncology of licenses
under its rights to the SAGE-TM- gene expression technology and the MDM2
protein.

1998 AS COMPARED TO 1997

The increase in Genzyme Molecular Oncology's research and development and
licensing revenue was primarily due to $13.0 million in revenue recorded in
connection with a research and license agreement with Schering-Plough. Genzyme
Molecular Oncology's revenue includes work performed for StressGen/ Genzyme LLC.

COST OF REVENUES

1999 AS COMPARED TO 1998

Genzyme Molecular Oncology's cost of revenues includes:

- work performed on behalf of StressGen/Genzyme LLC;

- services performed using the SAGE-TM- technology on behalf of third
parties;

- performance of gene therapy research on behalf of Schering-Plough; and

- royalties payable to third parties.

Cost of revenues decreased in 1999 as a result of the completion of the
Schering-Plough research project and a reduction in the royalty rate payable by
Genzyme Molecular Oncology for using the SAGE-TM- gene expression technology on
behalf of third parties.

1998 AS COMPARED TO 1997

The increase in Genzyme Molecular Oncology's cost of revenues in 1998 was
primarily attributable to:

- costs related to the delivery of services using the SAGE-TM- technology;

- royalties payable for using the SAGE-TM- technology on behalf of third
parties; and

- costs incurred in connection with research and development performed on
behalf of StressGen/ Genzyme LLC and Schering-Plough.

SG&A AND R&D EXPENSES

1999 AS COMPARED TO 1998

Genzyme Molecular Oncology's selling, general and administrative expense
decreased primarily as a result of:

- reduced legal costs in 1999 associated with the prosecution and
maintenance of its intellectual property portfolio; and

- a one-time charge taken in 1998 to write off costs incurred in
connection with a public offering of Molecular Oncology Stock that was
not completed.

Genzyme Molecular Oncology's research and development expense increased as a
result of:

- the initiation of a clinical trial for its melanoma tumor vaccine
product; and

- an increase in the number of research personnel and related expenses
required to support the continued development of its cancer vaccine and
angiogenesis inhibitor programs.

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1998 AS COMPARED TO 1997

Genzyme Molecular Oncology's selling, general and administrative expense
increased in 1998 primarily as a result of:

- increased administrative support needed to support the growth of its
business; and

- a one-time charge taken in the third quarter of 1998 to write off costs
incurred in connection with a public offering of Molecular Oncology
Stock that was not completed.

Genzyme Molecular Oncology's research and development expense increased in
1998 as a result of increases in research personnel and related expenses to
support Genzyme Molecular Oncology's SAGE-TM-, gene therapy and small molecule
programs.

AMORTIZATION OF INTANGIBLES

Genzyme Molecular Oncology's amortization of intangibles is attributable to
intangible assets acquired in connection with the acquisition of PharmaGenics,
Inc. in June 1997. Because Genzyme Molecular Oncology only amortized these
assets over a six month period in 1997, amortization expense increased in 1998.

OTHER INCOME AND EXPENSES

1999 AS COMPARED TO 1998

Genzyme Molecular Oncology's other expenses decreased because it had reduced
interest expense resulting from the transfer of its convertible debt to Genzyme
General in August 1998. The decrease in interest expense, however, was offset in
part by a $1.0 million charge taken by Genzyme Molecular Oncology in the third
quarter of 1999 in connection with its repurchase of one-half of the Canadian
Medical Discoveries Fund's interest in StressGen/Genzyme LLC. StressGen/Genzyme
LLC was dissolved in December 1999 and, as a result, Genzyme Molecular Oncology
will no longer incur expenses related to this joint venture.

1998 AS COMPARED TO 1997

Interest income increased in 1998 mainly as the result of higher average
cash balances. Interest expense increased to $3.0 million in 1998 compared to
$1.7 million in 1997. The increase in interest expense is the result of interest
and related amortization of the discount on the 6% convertible debentures issued
in August 1997. These debentures, which had been convertible into shares of
Molecular Oncology Stock, were exchanged in August 1998 for 5% convertible
debentures convertible into shares of Genzyme General Stock.

StressGen/Genzyme LLC was established in July 1997. Genzyme Molecular
Oncology recorded an equity in net loss of the joint venture of $1.6 million in
1998 and $0.3 million in 1997.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1999, Genzyme Molecular Oncology had cash, cash equivalents
and short-term investments of $3.6 million, a decrease of $8.3 million from
December 31, 1998.

In 1999, Genzyme Molecular Oncology used $14.6 million of cash for
operations. Investing activities provided $2.0 million of cash, which consisted
primarily of $1.0 million in proceeds from the maturities of investments, and
$0.9 million from the distribution of cash from StressGen/Genzyme LLC upon the
joint venture's dissolution. Financing activities provided $5.0 million of cash
from the issuance of debt. In addition $0.3 million of cash proceeds were
allocated to Genzyme Molecular Oncology from the exercise

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of options to purchase shares of Molecular Oncology Stock and the issuance of
Molecular Oncology Stock under our employee stock purchase plan.

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 arrangement,
Genzyme Molecular Oncology may draw down funds as needed 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 down any funds under this arrangement.

At December 31, 1999, $5.0 million of funds outstanding under one of our
revolving credit facilities was allocated to Genzyme Molecular Oncology. Genzyme
Molecular Oncology, together with our other operating divisions, has access to
our 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 anticipate that Genzyme Molecular Oncology's current cash resources,
together with amounts available from the following sources, will be sufficient
to fund its operations through 2000:

- the $30.0 million interdivisional financing arrangement from Genzyme
General;

- our revolving credit facilities;

- revenues generated from the SAGE-TM- gene expression technology; and

- revenues from license agreements.

We expect Genzyme Molecular Oncology to have significant operating losses
for the next several years. Genzyme Molecular Oncology plans to spend
substantial amounts of money on, among other things:

- research and development;

- preclinical and clinical testing; and

- pursuing regulatory approvals.

Genzyme Molecular Oncology's cash needs may differ from those planned as a
result of many factors, including the:

- results of research and development and clinical testing;

- achievement of milestones under existing strategic alliances;

- ability to establish and maintain additional strategic collaborations
and licensing arrangements;

- costs of protecting its intellectual property rights;

- development of competitive products and services; and

- ability to satisfy regulatory requirements of the FDA and other
government authorities.

Genzyme Molecular Oncology may require significant additional financing to
continue operations. We cannot guarantee that we will be able to obtain any
additional financing for Genzyme Molecular Oncology or find it on favorable
terms. If Genzyme Molecular Oncology has insufficient funds or we are unable to
raise additional funds for Genzyme Molecular Oncology, it may delay, scale back
or eliminate certain of its programs. Genzyme Molecular Oncology may also have
to give third parties rights to commercialize technologies or products that it
would otherwise have sought to commercialize itself.

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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 Molecular Oncology 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.

GENZYME MOLECULAR ONCOLOGY MAY NEVER BE ABLE TO SUCCESSFULLY DEVELOP OR
COMMERCIALIZE ANY OF ITS CANCER THERAPIES.

Genzyme Molecular Oncology does not have any cancer therapies on the market
and its only therapies in clinical development are its melanoma and breast
cancer vaccines. Before commercializing any cancer therapies, Genzyme Molecular
Oncology will need to conduct substantial research and development, including,
in some cases, the replication of preclinical studies performed by its
collaborators, undertake preclinical and clinical testing and obtain regulatory
approvals. This process involves a high degree of uncertainty and may take
several years. Its product development efforts may fail for many reasons,
including:

- the product fails in preclinical studies;

- clinical trials may not support the safety or effectiveness of the
product; or

- we fail to obtain the required regulatory approvals.

We cannot guarantee that Genzyme Molecular Oncology will successfully
develop any particular product or that any product it successfully develops will
gain market acceptance.

GENZYME MOLECULAR ONCOLOGY ANTICIPATES FUTURE LOSSES AND MAY NEVER BECOME
PROFITABLE.

Genzyme Molecular Oncology has not generated significant revenues to date
and does not expect to do so for several years. As of December 31, 1999, Genzyme
Molecular Oncology had an accumulated deficit of approximately $69.0 million. It
expects to have significant operating losses for the next several years. Genzyme
Molecular Oncology plans to spend substantial amounts of money on, among other
things:

- research and development;

- preclinical and clinical testing; and

- pursuing regulatory approvals.

We cannot guarantee that the efforts underlying these expenditures will be
successful or that Genzyme Molecular Oncology's operations will ever be
profitable.

IF GENZYME MOLECULAR ONCOLOGY FAILS TO OBTAIN THE CAPITAL NECESSARY TO FUND ITS
OPERATIONS, IT WILL BE UNABLE TO FUND DEVELOPMENT PROGRAMS AND COMPLETE
CLINICAL TRIALS.

We anticipate that Genzyme Molecular Oncology's current cash resources,
together with amounts available under a line of credit from Genzyme General and
revenues generated from our SAGE-TM- technology and license agreements, will be
sufficient to fund its operations through 2000. Genzyme Molecular Oncology's
cash needs may differ from those planned, however, because of many factors,
including the:

- results of research and development and clinical testing;

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- achievement of milestones under existing strategic collaborations;

- ability to establish and maintain additional strategic collaborations
and licensing arrangements;

- costs of protecting its intellectual property rights;

- development of competing products and services; and

- ability to satisfy regulatory requirements of the FDA and other
government authorities.

Genzyme Molecular Oncology may require significant additional financing to
continue operations at anticipated levels. We cannot guarantee that we will be
able to obtain any additional financing for Genzyme Molecular Oncology or find
it on favorable terms. If Genzyme Molecular Oncology has insufficient funds or
we are unable to raise additional funds for Genzyme Molecular Oncology, it may
have to delay, reduce or eliminate some of its programs. Genzyme Molecular
Oncology may also have to give third parties rights to commercialize
technologies or products that it would otherwise have sought to commercialize
itself.

GENZYME MOLECULAR ONCOLOGY MAY NOT RECEIVE SIGNIFICANT PAYMENTS FROM
COLLABORATORS DUE TO UNSUCCESSFUL RESULTS IN EXISTING COLLABORATIONS OR A
FAILURE TO ENTER INTO FUTURE COLLABORATIONS.

Genzyme Molecular Oncology's strategy to develop and commercialize some of
its products and services includes entering into various arrangements with
academic and corporate collaborators and licensees. It depends on the success of
these parties in performing research, preclinical and clinical testing and
marketing. These arrangements may require Genzyme Molecular Oncology to transfer
important rights to its corporate collaborators and licensees. These
collaborators and licensees could choose not to devote resources to these
arrangements or, under certain circumstances, may terminate them early. In
addition, these collaborators and licensees, outside of their arrangements with
Genzyme Molecular Oncology, may develop technologies or products that are
competitive with those that Genzyme Molecular Oncology is developing. As a
result, we cannot guarantee that Genzyme Molecular Oncology will receive
revenues from these relationships or that any of its strategic collaborations
will continue or not terminate early. In addition, we cannot guarantee that
Genzyme Molecular Oncology will be able to enter into collaborations in the
future.

GENZYME MOLECULAR ONCOLOGY MAY BE REQUIRED TO LICENSE TECHNOLOGY FROM
COMPETITORS IN ORDER TO DEVELOP AND COMMERCIALIZE SOME OF ITS PRODUCTS AND
SERVICES, AND IT IS UNCERTAIN WHETHER THESE LICENSES WILL BE AVAILABLE.

Third party patent rights and pending patent applications filed by third
parties, if issued, may cover some of the products Genzyme Molecular Oncology is
developing or testing. As a result, Genzyme Molecular Oncology may be required
to obtain licenses from the holders of these patents in order to use or sell
certain products and services. We cannot guarantee that these licenses will be
made available on acceptable terms or at all. If these licenses are not
available, Genzyme Molecular Oncology's ability to commercialize its products
and services may be impaired.

In its cancer vaccine program, Genzyme Molecular Oncology is in the process
of evaluating the therapeutic administration of peptide products and genes that
encode specific tumor antigens, including MART-1 and gp100. Genzyme Molecular
Oncology is aware of two issued U.S. patents directed to the gene that encodes
MART-1. While it has obtained rights under one of these patents, Genzyme
Molecular Oncology is still in the process of evaluating the scope and validity
of the other to determine whether it needs to obtain a license. Genzyme
Molecular Oncology is also evaluating an issued U.S. patent covering the gene
that encodes gp100 and three published Patent Cooperation Treaty applications by
three different applicants that may cover antigens derived from gp100. Genzyme
Molecular Oncology is in the process of evaluating the scope and validity of
these patents and patent applications to determine whether it needs to obtain
licenses.

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GENZYME MOLECULAR ONCOLOGY MAY INCUR SUBSTANTIAL COSTS AS A RESULT OF LITIGATION
OR OTHER PROCEEDINGS RELATING TO PATENT AND OTHER INTELLECTUAL PROPERTY
RIGHTS.

If Genzyme Molecular Oncology or one of its strategic collaborators initiate
litigation to enforce Genzyme Molecular Oncology's patent or license rights, or
are required to defend these rights in response to third party claims, its
business or financial position may be negatively affected. Genzyme Molecular
Oncology has licensed its p53 gene therapy rights to Schering-Plough. These
patent rights are the subject of an interference proceeding in the U.S. and an
opposition proceeding in Europe. Adverse determinations in these proceedings may
negatively affect Genzyme Molecular Oncology's ability to receive future
milestones and product royalties under its agreement with Schering-Plough.

ADVERSE EVENTS IN THE FIELD OF GENE THERAPY MAY NEGATIVELY AFFECT REGULATORY
APPROVAL OR PUBLIC PERCEPTION OF GENZYME MOLECULAR ONCOLOGY'S GENE THERAPY
PRODUCTS.

The recent death of a patient undergoing gene therapy using an adenoviral
vector to deliver a therapeutic gene has been widely publicized. This death and
any other adverse events in the field of gene therapy that may occur in the
future may result in greater governmental regulation and potential regulatory
delays relating to the testing or approval of Genzyme Molecular Oncology's gene
therapy products. As a result of this death, the U.S. Senate has commenced
hearings to determine whether additional legislation is required to protect
volunteers and patients who participate in gene therapy clinical trials.
Additionally, the Recombinant DNA Advisory Committee, which acts as an advisory
body to the National Institutes of Health (NIH), has extensively discussed the
use of adenoviral vectors in gene therapy clinical trials and recently issued a
draft report on the safety of adenoviral vectors. While this draft report
recommends that clinical trials using adenoviral vectors should continue with
caution, it also suggested a number of changes in the way gene therapy clinical
trials are conducted. If any new guidelines are adopted by the NIH, Genzyme
Molecular Oncology's gene therapy clinical trials could be delayed or become
more expensive to conduct.

Genzyme Molecular Oncology has reported to the FDA and the NIH that there
have been three deaths in its Phase I/II melanoma cancer vaccine trial at
Massachusetts General Hospital. The principal investigator for this trial
indicated that each of these deaths was due to disease progression and not
related to the patient's treatment. Deaths are not unexpected in a clinical
trial treating patients with advanced stage melanoma because these patients have
short life expectancies. Genzyme Molecular Oncology cannot, however, rule out
the possibility that its cancer vaccines may be a contributing cause of death
for patients in the future.

The commercial success of any gene therapy products that Genzyme Molecular
Oncology develops will depend in part on public acceptance of the use of gene
therapies for the prevention or treatment of human diseases. Public attitudes
may be influenced by claims that gene therapy is unsafe, and gene therapy may
not gain the acceptance of the public or the medical community. Negative public
reaction to gene therapy could result in greater government regulation and
stricter clinical trial oversight and commercial product labeling requirements
of gene therapies and could cause a decrease in the demand for any gene therapy
product that Genzyme Molecular Oncology may develop.

SUBSEQUENT EVENT

In March 2000, we filed a prospectus with the SEC covering the offering of
3,000,000 shares of Molecular Oncology Stock (plus 450,000 shares issuable upon
exercise of the underwriters' over-allotment option). The proceeds of the
offering were to be allocated to Genzyme Molecular Oncology to fund research,
pre-clinical and clinical development programs, to repay existing indebtedness,
and for working capital and general corporate purposes.

GMO-12

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION
COMBINED STATEMENTS OF OPERATIONS

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

Revenues:
Service revenue........................................... $ 1,920 $ 2,229 $ 467
Service revenue--related party............................ 50 466 --
Research and development--related party................... 496 2,177 315
Research and development.................................. -- 3,256 --
Licensing revenue......................................... 2,153 11,279 --
--------- --------- ---------
Total revenues........................................ 4,619 19,407 782

Operating costs and expenses:
Cost of service revenues.................................. 620 1,374 50
Cost of research and development revenue.................. 698 4,073 287
Selling, general and administrative....................... 5,529 7,155 2,118
Research and development.................................. 15,997 12,743 5,341
Amortization of intangibles............................... 11,825 11,983 5,127
Purchase of in-process research and development........... -- -- 7,000
--------- --------- ---------
Total operating costs and expenses.................... 34,669 37,328 19,923
--------- --------- ---------
Operating loss.............................................. (30,050) (17,921) (19,141)

Other income (expenses):
Equity in net loss of joint venture....................... (1,870) (1,647) (258)
Interest income........................................... 469 782 392
Interest expense.......................................... (28) (2,968) (1,663)
--------- --------- ---------
Total other income (expenses)......................... (1,429) (3,833) (1,529)
--------- --------- ---------
Loss before income taxes.................................... (31,479) (21,754) (20,670)
Tax benefit................................................. 2,647 2,647 1,092
--------- --------- ---------
Division net loss........................................... $ (28,832) $ (19,107) $ (19,578)
========= ========= =========
Comprehensive loss, net of tax:
Division net loss........................................... $ (28,832) $ (19,107) $ (19,578)
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on securities arising during the
period.................................................. -- 7 (7)
--------- --------- ---------
Comprehensive loss.......................................... $ (28,832) $ (19,100) $ (19,585)
========= ========= =========

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

GMO-13

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION
COMBINED BALANCE SHEETS

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

ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,587 $10,868
Short-term investments.................................... -- 1,032
Accounts receivable, net.................................. -- 5,931
Prepaid expenses and other current assets................. 218 85
------- -------
Total current assets.................................. 3,805 17,916

Equipment, net............................................ 467 791
Intangibles, net.......................................... 5,420 17,245
------- -------
Total assets.......................................... $ 9,692 $35,952
======= =======
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accrued expenses.......................................... $ 676 $ 1,273
Due to Genzyme General.................................... 3,793 4,773
Payable to joint venture.................................. -- 1,181
Deferred revenue.......................................... 225 1,500
Current portion of long-term debt......................... 5,000 --
------- -------
Total current liabilities............................. 9,694 8,727

Deferred tax liability...................................... 1,213 3,861
------- -------
Total liabilities..................................... 10,907 12,588
Commitments and contingencies (See Notes)
Division equity (Note H).................................... (1,215) 23,364
------- -------
Total liabilities and division equity................. $ 9,692 $35,952
======= =======

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

GMO-14

GENZYME MOLECULAR ONCOLOGY
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 loss........................................... $ (28,832) $ (19,107) $ (19,578)
Reconciliation of division net loss to net cash used in
operating activities:
Depreciation and amortization............................. 12,057 12,353 5,245
Charge for in-process technology.......................... -- -- 7,000
Deferred tax benefit...................................... (2,647) (2,647) (1,092)
Accretion of debt conversion feature...................... -- 1,867 957
Equity in loss of joint venture........................... 1,870 1,647 258
Accrued interest/amortization of marketable securities.... 10 131 (141)
Gain on sale of equipment................................. (54) -- --
Provision for bad debts................................... 256 100 --
Non-cash compensation expense............................. 10 114 58
Increase (decrease) in cash from working capital:
Accounts receivable..................................... 5,675 (5,915) (117)
Prepaid expenses and other current assets............... (75) 986 (773)
Accrued expenses, payable to joint venture and deferred
revenue............................................... (1,927) 1,779 2,139
Due to Genzyme General.................................. (980) 553 2,011
--------- --------- ---------
Net cash used in operating activities................. (14,637) (8,139) (4,033)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of PharmaGenics, Inc., net of acquired cash..... -- -- 9
Investment in unconsolidated affiliate...................... -- -- (724)
Purchases of investments.................................... -- (2,056) (6,086)
Distribution from joint venture............................. 881 -- --
Maturities of investments................................... 1,022 7,120 --
Acquisitions of equipment................................... (43) (559) (357)
Sale of equipment........................................... 188 -- --
Other....................................................... -- (488) --
--------- --------- ---------
Net cash provided by (used in) investing activities... 2,048 4,017 (7,158)
CASH FLOWS FROM FINANCING ACTIVITIES:
Allocation of debt from Genzyme General..................... -- -- 5,000
Cash allocated from Genzyme General......................... -- 5,000 --
Allocated proceeds from issuance of debt.................... 5,000 -- --
Allocated proceeds from issuance of Molecular Oncology
Stock..................................................... 308 7 --
Allocated proceeds from issuance of warrants................ -- -- 724
Allocated proceeds from issuance of convertible debentures,
net....................................................... -- -- 19,150
Repayments of debts......................................... -- (5,000) --
Parent company investment, Genzyme General.................. -- -- 1,371
Other....................................................... -- (27) (44)
--------- --------- ---------
Net cash provided by (used in) financing activities... 5,308 (20) 26,201
Increase (decrease) in cash and cash equivalents............ (7,281) (4,142) 15,010
Cash and cash equivalents at beginning of period............ 10,868 15,010 --
--------- --------- ---------
Cash and cash equivalents at end of period.................. $ 3,587 $ 10,868 $ 15,010
========= ========= =========
Supplemental disclosures of non-cash transactions:
PharmaGenics acquisition--Note D.
Repurchase of interest in StressGen/Genzyme LLC--Note F.

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

GMO-15

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

Genzyme Molecular Oncology is our operating division that is developing
cancer products, with a focus on cancer vaccines and angiogenesis inhibitors.

BASIS OF PRESENTATION

The combined financial statements of Genzyme Molecular Oncology for each
period include the balance sheets, results of operations and cash flows of the
businesses we allocate to Genzyme Molecular Oncology. We also allocate a portion
of our corporate operations to Genzyme Molecular Oncology 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.

TRACKING STOCK

- factors the assets and liabilities and income or losses attributable to
Genzyme Molecular Oncology into the determination of the amount available
to pay dividends on Molecular Oncology Stock; and

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 Molecular Oncology Stock, is defined in our
charter as the net income or loss of Genzyme Molecular Oncology determined in
accordance with generally accepted accounting principles and as adjusted for tax
benefits allocated to or from Genzyme Molecular Oncology 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

GMO-16

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 Molecular Oncology Stock is designed to reflect Genzyme Molecular
Oncology's performance, it is common stock of Genzyme Corporation and not
Genzyme Molecular Oncology; Genzyme Molecular Oncology is a division, not a
company or legal entity, and therefore does not and cannot issue stock.
Consequently, holders of Molecular Oncology Stock have no specific rights to
assets allocated to Genzyme Molecular Oncology. Genzyme Corporation continues to
hold title to all of the assets allocated to Genzyme Molecular Oncology 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
Molecular Oncology 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 Molecular Oncology Stock and other tracking stockholders would
only have the rights of common stockholders in the combined assets of Genzyme.

ALLOCATION POLICY

Our charter sets forth what operations and assets are initially allocated to
Genzyme Molecular Oncology and states that going forward the division will also
include all business, products or programs, developed by or acquired for the
division, as determined by our board of directors. We then manage and account
for transactions between Genzyme Molecular Oncology 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.

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

GMO-17

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
charged to the divisions for which the service is performed on a cost
basis. Such charges are generally based on direct labor hours;

- 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.

TRANSLATION OF FOREIGN CURRENCIES

We translate the financial statements of foreign subsidiaries allocated to
Genzyme Molecular Oncology from local currency into U.S. dollars and include
translation adjustments for these subsidiaries in division equity. Genzyme
Molecular Oncology records gains and losses in foreign currency transactions in
income.

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.

REVENUE RECOGNITION

Genzyme Molecular Oncology recognizes service revenue when the service
procedures have been completed or applicable milestones have been achieved.
Revenues from research and development contracts are recognized over applicable
contractual periods as specified by each contract and as costs related to the
contracts are incurred. Up-front license fees and milestone payments are
recognized as revenue only if there are no remaining performance obligations and
the fees are non-refundable.

Genzyme Molecular Oncology receives royalties related to the use of its
technologies under license arrangements with third parties. For those
arrangements where royalties are reasonably estimable, Genzyme Molecular
Oncology recognizes revenue 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 Molecular Oncology 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 the consolidated
financial statements. We present earnings per share data

GMO-18

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. 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

GMO-19

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE B. POLICIES GOVERNING THE RELATIONSHIP OF GENZYME'S OPERATING DIVISIONS
(CONTINUED)
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 Genzyme Molecular Oncology, our board of directors may elect instead to
account for the reallocation as an increase in Genzyme Molecular Oncology
designated shares 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 without the approval of the holders of Molecular Oncology
Stock voting as a separate class unless the policy change does not affect
Genzyme Molecular Oncology.

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

GMO-20

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

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

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 of directors 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 of directors 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 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.

On December 31, 1999, Genzyme Molecular Oncology owed Genzyme General
approximately $3.8 million in connection with these services. On December 31,
1998, approximately $4.8 million was owed.

TAX ALLOCATIONS

We file a consolidated tax return and allocate income taxes to Genzyme
Molecular Oncology 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 Genzyme Molecular
Oncology cannot use any projected annual tax benefit attributable to it to
offset or reduce its

GMO-21

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

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

ACCESS TO TECHNOLOGY AND KNOW-HOW

Genzyme Molecular Oncology 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. ACCOUNTS RECEIVABLE AND INTANGIBLE ASSETS

Genzyme Molecular Oncology's trade receivables primarily represent amounts
due from third party collaborators. Genzyme Molecular Oncology performs credit
evaluations of its customers on an ongoing basis and generally does not require
collateral. Genzyme Molecular Oncology states accounts receivable at fair value
after reflecting an allowance for doubtful accounts. This allowance was $0.3
million at December 31, 1999 and $0.1 million at December 31, 1998. The
following table contains information on Genzyme Molecular Oncology's intangible
assets for the periods presented:

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

Goodwill............................... $14,405 3 $14,405 3
Completed technology................... 20,000 3 20,000 3
------- -------
$34,405 $34,405
Less accumulated amortization.......... (28,985) (17,160)
------- -------
Intangible assets, net................. $ 5,420 $17,245
======= =======

NOTE D. PHARMAGENICS ACQUISITION

In June 1997, we acquired PharmaGenics, Inc., a company engaged in the
research and development of products for the treatment of cancer and other
diseases. We allocated this acquisition to Genzyme Molecular Oncology and
accounted for it as a purchase. We allocated the aggregate purchase price of
$27.5 million, plus acquisition costs of $2.5 million and assumed liabilities of
$4.9 million, to the tangible and intangible assets we acquired from
PharmaGenics based on their respective fair values (amounts in thousands):

Equipment.................................................. $ 208
Other assets............................................... 50
Completed technology (to be amortized over 3 years)........ 20,000
Goodwill (to be amortized over 3 years).................... 15,193
Deferred tax liability (to be amortized over 3 years)...... (7,600)
In-process technology...................................... 7,000
-------
Total.................................................. $34,851
=======

In 1998, we made an adjustment of $0.5 million in the amount of liabilities
we assumed.

GMO-22

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE D. PHARMAGENICS ACQUISITION (CONTINUED)
The $7.0 million allocated to in-process research and development represents
the value we assigned to PharmaGenics's programs that were still in the
development stage and for which there was no alternative use. We assigned values
to all of PharmaGenics's programs (both complete and in-process) by selecting
the maximum anticipated value of these programs and comparing them to the values
of comparable technologies. In 1997, we recorded a one-time charge to operations
for the amount of the purchase price allocated to in-process technology.

NOTE E. EQUIPMENT

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

Equipment.............................................. $ 966 $1,111
Furniture and fixtures................................. 13 13
------ ------
$ 979 $1,124
Less accumulated depreciation.......................... (512) (333)
------ ------
Equipment, net......................................... $ 467 $ 791
====== ======

Genzyme Molecular Oncology's depreciation expense was $232,000 in 1999,
$255,000 in 1998, and $74,000 in 1997.

NOTE F. INVESTMENT IN STRESSGEN/GENZYME LLC

In July 1997, together with StressGen Biotechnologies Corp. and the Canadian
Medical Discoveries Fund, Inc. ("CMDF"), we established StressGen/Genzyme LLC, a
joint venture to develop stress gene therapies for the treatment of cancer.
Because CMDF had the right to require StressGen and Genzyme Molecular Oncology
to purchase its membership interest in the joint venture, Genzyme Molecular
Oncology recorded 50% of the net operating losses of the joint venture. As of
December 31, 1998, Genzyme Molecular Oncology's portion of the cumulative losses
of StressGen/Genzyme LLC exceeded our initial capital contribution to the joint
venture by $1.2 million and, as a result, Genzyme Molecular Oncology recorded
the $1.2 million as a liability.

For the period January through August 1999, Genzyme Molecular Oncology
recorded an additional $0.8 million of losses from the joint venture, increasing
the liability related to the joint venture to $2.0 million. In August 1999, CMDF
exercised its put right and StressGen and Genzyme Molecular Oncology were
required to purchase its membership interest in the joint venture at an
aggregate price of $10.0 million (Canadian). As a result, Genzyme Molecular
Oncology was obligated to repurchase one-half of the CMDF's interest in the
joint venture for approximately $3.9 million ($5.0 million (Canadian)). To
record the exercise of the put option, Genzyme Molecular Oncology recorded:

- a $1.9 million increase to their liability related to the joint venture,
thus increasing the liability to $3.9 million;

- a $0.9 million increase to their investment in joint venture to reflect
their 50% interest in the net assets of the joint venture; and

- a $1.0 million charge to equity in net loss of unconsolidated affiliates
because, at that time, it was expected that the joint venture would be
dissolved and the joint venture interest would have no value beyond the
cash it held.

GMO-23

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE F. INVESTMENT IN STRESSGEN/GENZYME LLC (CONTINUED)
Genzyme Molecular Oncology completed the repurchase of CMDF's interest in
October 1999 by issuing to CMDF 617,200 shares of Molecular Oncology Stock at a
price of $6.375 per share. The purchase price was calculated in accordance with
the joint venture agreements based on the market price of Molecular Oncology
Stock over a period prior to the repurchase. To record the repurchase, Genzyme
Molecular Oncology increased stockholders' equity by $3.9 million to reflect the
issuance of the shares of Molecular Oncology Stock and decreased their liability
related to the joint venture by $3.9 million to zero.

Genzyme Molecular Oncology agreed to dissolve StressGen/Genzyme LLC in
December 1999 and in connection with the dissolution the joint venture, received
a cash distribution of $0.9 million which was equal to Genzyme Molecular
Oncology's investment in the joint venture at that time.

Genzyme Molecular Oncology does not present summary financial information
for StressGen/ Genzyme LLC because the impact of its activities are not
considered to be material to their operations for the years ended December 31,
1999 and 1998.

NOTE G. DEBT INSTRUMENTS

REVOLVING CREDIT FACILITY

In November 1999, our $225.0 million revolving credit facility matured. We
refinanced this facility with a $50.0 million revolving credit facility that
matures in November 2000 and a $100.0 million revolving credit facility that
matures in November 2002. At December 31, 1999, $5.0 million of the amount
outstanding under our revolving credit facility was allocated to Genzyme
Molecular Oncology. On that date, the interest rate on this borrowing was
6.765%.

Genzyme Molecular Oncology incurred interest expense of approximately
$11,000 on the $5.0 million outstanding in 1999. Additionally, Genzyme Molecular
Oncology incurred interest expense of approximately $73,000 in 1998 and $160,000
in 1997 on amounts borrowed under our credit facility that matured in 1999.

6% CONVERTIBLE SUBORDINATED DEBENTURES

In August 1997, we issued $20.0 million in principal of 6% convertible
subordinated debentures. These debentures were convertible into shares of
Molecular Oncology Stock at a discount to the market value of that stock.
Genzyme Molecular Oncology recorded charges to interest expense of $1.9 million
in 1998 and $0.9 million in 1997 to reflect the accretion to fair value of the
conversion feature of this debenture. In accordance with the terms of these
debentures, they were exchanged in August 1998 for $21.2 million in principal of
5% convertible subordinated debentures convertible into Genzyme General Stock.
In November 1998 we reserved approximately 3.0 million Genzyme Molecular
Oncology designated shares for issuance in connection with this exchange. In
October 1999 we increased the number of Genzyme Molecular Oncology designated
shares reserved in connection with this exchange by approximately 0.3 million.

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GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE H. DIVISION EQUITY

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

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

Balance at beginning of period.............................. $ 23,364 $ 13,466 $ --
Division net loss........................................... (28,832) (19,107) (19,578)
Allocation of cash from Genzyme General for Genzyme
Molecular Oncology designated shares(1)................... -- 5,000 1,381
Conversion of debentures into Genzyme Molecular Oncology
designated shares......................................... -- 19,802 --
Conversion of note payable into Genzyme Molecular Oncology
designated shares......................................... -- 2,696 --
Allocated proceeds from issuance of Molecular Oncology Stock
under stock plans......................................... 308 7 --
Allocated proceeds from sale of warrants.................... -- -- 724
Allocated stock compensation expense........................ 10 114 (116)
Allocated value of Molecular Oncology Stock issued upon
acquisition of PharmaGenics............................... -- -- 27,369
Allocated value of Molecular Oncology Stock issued upon
repurchase of joint venture interest...................... 3,935 -- --
Allocated value of debt conversion feature.................. -- -- 3,529
Unrealized gain (loss) on investments....................... -- 7 (7)
Allocated equity adjustments................................ -- 1,379 164
-------- -------- --------
Balance at end of period.................................... $ (1,215) $ 23,364 $ 13,466
======== ======== ========

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

(1) 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. As of December 31, 1999, there were 1,688,237
Genzyme Molecular Oncology designated shares, assuming 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 this
transaction will decrease based on a formula set forth in our charter.

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NOTE H. DIVISION EQUITY (CONTINUED)

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 loss data for Genzyme Molecular
Oncology as if compensation expense for our stock-based compensation plans was
determined in accordance with SFAS 123 based on the fair value at the grant
dates of the awards, and the compensation expense related to Molecular Oncology
Stock awards would be allocated to Genzyme Molecular Oncology in accordance with
our allocation policies:

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

Division net loss:
As reported............................................. $ (28,832) $ (19,107) $ (19,578)
Pro forma............................................... $ (29,973) $ (20,018) $ (19,787)

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.

INTERDIVISIONAL FINANCING ARRANGEMENT

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 received by
Genzyme Molecular Oncology. When we issued $20.0 million in principal of 6%
convertible subordinated debentures in August 1997, 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
each 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.

NOTE I. 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 Molecular Oncology's results of
operations, financial condition, or liquidity.

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NOTE J. INCOME TAXES

There was no provision for income taxes due to Genzyme Molecular Oncology's
continuing operating losses. As part of the acquisition of PharmaGenics, Genzyme
Molecular Oncology recorded a deferred tax liability of $7.6 million resulting
from the difference between the book and tax basis of the completed technology
computed at a 38% incremental tax rate. This amount is being amortized over
three years consistent with the life of the completed technology. Genzyme
Molecular Oncology recorded deferred tax benefits of $2.6 million in each of
1999 and 1998 and $1.1 million in 1997.

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

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

Currently payable:
Federal................................................... $ -- $ -- $ --
State..................................................... -- -- --
-------- -------- --------
Total................................................. $ -- $ -- $ --
======== ======== ========
Deferred:
Federal................................................... $ (2,438) $ (2,438) $ (1,006)
State..................................................... (209) (209) (86)
-------- -------- --------
Total income tax benefit.............................. $ (2,647) $ (2,647) $ (1,092)
======== ======== ========

Genzyme Molecular Oncology'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)%
State taxes, net............................................ (1.1) (2.0) (3.0)
Tax credits................................................. (2.5) (2.5) (2.4)
Nondeductible interest...................................... -- 3.0 2.7
Nondeductible amortization.................................. 5.4 8.1 6.4
Deductions subject to deferred tax valuation allowance...... 24.8 16.2 22.4
----- ----- -----
Effective tax rate.......................................... (8.4)% (12.2)% (8.9)%
===== ===== =====

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NOTE J. 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.......................... $ 14,720 $ 8,166
Reserves and other........................................ 177 --
Tax credits............................................... 2,209 1,003
-------- --------
Gross deferred tax asset.................................... 17,106 9,169
Valuation allowance......................................... (17,106) (9,169)
-------- --------
Net deferred tax asset...................................... -- --
Deferred tax liabilities:
Intangible amortization................................... (1,213) (3,861)
-------- --------
Net deferred tax liabilities.............................. $ (1,213) $ (3,861)
======== ========

As a result of uncertainty surrounding our ability to realize certain tax
benefits that primarily relate to operating loss carryforwards, capital losses
from the purchase of in-process research and development, we placed valuation
allowances of $17.1 million in 1999 and $9.2 million in 1998 against otherwise
recognizable deferred tax assets.

As Genzyme Molecular Oncology recognizes these deferred tax assets in
accordance with generally accepted accounting principles, the benefits of those
assets will be reflected in its tax provision. However, the benefit of these
deferred tax assets has previously been allocated to Genzyme General in
accordance with our management and accounting policies.

NOTE K. BENEFIT PLANS

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

NOTE L. SIGNIFICANT CUSTOMERS

Genzyme Molecular Oncology has two significant pharmaceutical customers. The
following table describes the revenue for each customer in comparison to total
revenue (amounts in thousands):

% OF % OF % OF
TOTAL TOTAL TOTAL
1999 REVENUE 1998 REVENUE 1997 REVENUE
-------- -------- -------- -------- -------- --------

Customer A.................. $2,800 61% $ 933 5% $467 60%
Customer B.................. -- -- $13,000 67% -- --

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NOTE L. SIGNIFICANT CUSTOMERS (CONTINUED)
The portion of Genzyme Molecular Oncology's revenues related to work
performed on behalf of StressGen/Genzyme LLC were:

- $0.5 million, or 11% of total revenues in 1999;

- $2.2 million, or 11% of total revenues in 1998; and

- $0.3 million, or 40% of total revenues in 1997.

NOTE M. SUBSEQUENT EVENT

In March 2000, we filed a prospectus with the SEC covering the offering of
3,000,000 shares of Molecular Oncology Stock (plus 450,000 shares issuable upon
exercise of the underwriters' over-allotment option). The proceeds of the
offering were to be used by Genzyme Molecular Oncology to fund research,
pre-clinical and clinical development programs, to repay existing indebtedness,
and for working capital and general corporate purposes.

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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 Molecular Oncology (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. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with 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
Molecular Oncology is a division of Genzyme Corporation; accordingly, the
combined financial statements of Genzyme Molecular Oncology should be read in
conjunction with the audited consolidated financial statements of Genzyme
Corporation and Subsidiaries.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts
February 23, 2000

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