EXHIBIT 13.4

FINANCIAL STATEMENTS
GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

PAGE NO.
--------

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, 2000, 1999 and 1998.......................... GMO-14

Combined Balance Sheets--December 31, 2000 and 1999......... GMO-15

Combined Statements of Cash Flows--For the Years Ended
December 31, 2000, 1999 and 1998.......................... GMO-16

Notes to Combined Financial Statements...................... GMO-17

Report of Independent Accountants........................... GMO-31

GMO-1

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION
COMBINED SELECTED FINANCIAL DATA

These selected financial data have been derived from the audited combined
financial statements of Genzyme Molecular Oncology. You should read the
following information in conjunction with Genzyme Molecular Oncology audited
financial statements and accompanying notes contained elsewhere in this annual
report.

Genzyme Molecular Oncology is our operating division that is utilizing its
functional genomics and antigen discovery technology platforms to develop novel
cancer products focused on cancer vaccines and angiogenesis inhibitors and to
generate partnering revenue.

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 our 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 of our
income and expenses be allocated among our divisions in a reasonable and
consistent manner. Our board of directors, however, retains considerable
discretion in determining the types, magnitude 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.

GMO-2

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION
COMBINED SELECTED FINANCIAL DATA

COMBINED STATEMENT OF OPERATIONS DATA

FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(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................ 584 -- 3,256 -- --
Licensing revenue............................... 4,936 2,125 11,275 -- --
Royalty revenue................................. 151 28 4 -- --
-------- -------- -------- -------- -------
Total revenues................................ 5,671 4,619 19,407 782 --

Operating costs and expenses:
Cost of service revenues........................ -- 620 1,374 50 --
Cost of licensing, research and development
revenues...................................... 826 698 4,073 287 --
Selling, general and administrative............. 5,851 5,529 7,155 2,118 185
Research and development........................ 18,908 15,997 12,743 5,341 818
Amortization of intangibles..................... 5,420 11,825 11,983 5,127 --
Purchase of in-process research and development
(1)........................................... -- -- -- 7,000 --
-------- -------- -------- -------- -------

Total operating costs and expenses............ 31,005 34,669 37,328 19,923 1,003
-------- -------- -------- -------- -------

Operating loss.................................... (25,334) (30,050) (17,921) (19,141) (1,003)
Other income (expenses):
Equity in net loss of joint venture............. -- (1,870) (1,647) (258) --
Interest income................................. 1,211 469 782 392 --
Interest expense................................ (187) (28) (2,968) (1,663) --
-------- -------- -------- -------- -------
Total other income (expenses)................. 1,024 (1,429) (3,833) (1,529) --
-------- -------- -------- -------- -------
Loss before income taxes.......................... (24,310) (31,479) (21,754) (20,670) (1,003)
Tax benefit....................................... 1,214 2,647 2,647 1,092 --
-------- -------- -------- -------- -------
Division net loss................................. $(23,096) $(28,832) $(19,107) $(19,578) $(1,003)
======== ======== ======== ======== =======

COMBINED BALANCE SHEET DATA

DECEMBER 31,
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(AMOUNTS IN THOUSANDS)

Cash and investments........................... $30,151 $ 3,587 $11,900 $21,229 $ --
Working capital................................ 22,100 (5,889) 9,189 11,953 --
Total assets................................... 30,752 9,692 35,952 53,801 --
Long-term debt and convertible debt............ -- -- -- 24,606 --
Parent company investment...................... -- -- -- -- 1,504
Division equity................................ 19,526 (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.

GMO-3

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 prepare the combined 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 our consolidated financial statements in conjunction with the
combined financial statements of Genzyme Molecular Oncology. Note A., "Summary
of Significant Accounting Policies," to our consolidated financial statements
contains a summary of 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 average market price of Molecular Oncology Stock
following the announcement of the sale).

To determine earnings per share, we allocate our 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 of our
income and expenses be allocated among our 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.

GMO-4

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
Genzyme Molecular Oncology. 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 requires us to 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 are filed as Exhibit 99.1 to this annual report. Our charter
requires that all of our assets and liabilities be allocated among our
divisions. Our board of directors, however, retains considerable discretion in
determining the types, magnitude 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.

RESULTS OF OPERATIONS

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

GMO-5

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

00/99 99/98
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
2000 1999 1998 % CHANGE % CHANGE
-------- -------- -------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA)

Total revenues............................. $ 5,671 $ 4,619 $ 19,407 23% (76%)
Cost of revenues........................... 826 1,318 5,447 (37%) (76%)
Selling, general and administrative........ 5,851 5,529 7,155 6% (23%)
Research and development................... 18,908 15,997 12,743 18% 26%
Amortization of intangibles................ 5,420 11,825 11,983 (54%) (1%)
-------- -------- --------
Total operating costs and expenses..... 31,005 34,669 37,328 (11%) (7%)
-------- -------- --------
Operating loss............................. (25,334) (30,050) (17,921) 16% (68%)
Other income (expenses), net............... 1,024 (1,429) (3,833) 172% 63%
-------- -------- --------
Loss before income taxes................... (24,310) (31,479) (21,754) 23% (45%)
Tax benefit................................ 1,214 2,647 2,647 (54%) 0%
-------- -------- --------
Division net loss.......................... $(23,096) $(28,832) $(19,107) 20% (51%)
======== ======== ========

REVENUES

00/99 99/98
INCREASE/ INCREASE/
(DECREASE) (DECREASE)
2000 1999 1998 % CHANGE % CHANGE
-------- -------- -------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA)

Service revenue................................ $ -- $1,970 $ 2,695 (100%) (27%)
Research and development revenue............... 584 496 5,433 18% (91%)
Licensing revenue.............................. 4,936 2,125 11,275 132% (81%)
Royalty revenue................................ 151 28 4 439% 600%
------ ------ -------
Total revenues............................. $5,671 $4,619 $19,407 23% (76%)
====== ====== =======

2000 AS COMPARED TO 1999

No service revenue was recorded in 2000 as a result of a planned shift in
genomics business focus from one in which Genzyme Molecular Oncology provides
services to third parties to one in which Genzyme Molecular Oncology grants
licenses under the SAGE-TM- gene expression technology.

Research and development revenue in 2000 is attributable to revenue
recognized from research performed on behalf Purdue Pharma, L.P. as part of a
cancer antigen discovery collaboration. No work was performed by Genzyme
Molecular Oncology on behalf of StressGen/Genzyme LLC in 2000 (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). Research and development
revenue in 1999 was attributable to work performed on behalf of that joint
venture.

Licensing revenue increased in 2000 as a result of the receipt of a
technology access fee and a premium on the sale of Molecular Oncology Stock
associated with the collaboration agreement with Purdue Pharma, and a milestone
payment under a license agreement with Schering-Plough relating to p53 gene
therapy. Licensing revenue also includes amounts received upon the grant by
Genzyme

GMO-6

Molecular Oncology of licenses under its rights to the SAGE-TM- gene expression
technology, its cancer gene diagnostic portfolio and the MDM2 protein.

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 and the completion of research and development work performed on behalf of
Schering-Plough during 1998.

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.

COST OF REVENUES

2000 AS COMPARED TO 1999

Genzyme Molecular Oncology's cost of revenues includes:

- work performed on the cancer antigen discovery agreement with Purdue
Pharma, L.P.;

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

- royalties payable to third parties.

Cost of revenues decreased in 2000 as a result of the dissolution of the
StressGen joint venture in December 1999 and a planned reduction in genomics
services provided by Genzyme Molecular Oncology using the SAGE-TM- gene
expression technology.

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.

SG&A AND R&D EXPENSES

2000 AS COMPARED TO 1999

Genzyme Molecular Oncology's selling, general and administrative expense
increased primarily as a result of increased professional service fees, combined
with $0.4 million in audit and legal fees, related to the registration of a
public stock offering that was subsequently withdrawn.

GMO-7

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

- research and development expenses directed toward its antigen discovery,
immunotherapy and antiangiogenesis programs;

- the initiation of three additional clinical trials in its immunotherapy
program; 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.

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.

AMORTIZATION OF INTANGIBLES

Genzyme Molecular Oncology's amortization of intangibles is attributable to
intangible assets acquired in connection with the acquisition of PharmaGenics in
June 1997. Because Genzyme Molecular Oncology fully amortized these intangible
assets in June 2000, amortization expense decreased in 2000.

OTHER INCOME AND EXPENSES

2000 AS COMPARED TO 1999

Genzyme Molecular Oncology's other income increased in 2000 due to the
absence of any expenses from the StressGen joint venture that was dissolved in
December 1999 and an increase in interest income due to higher average cash
balances. Interest expense increased in 2000 due to $5.0 million that was
borrowed under our revolving credit facility at the end of 1999. This amount was
repaid in May 2000.

1999 AS COMPARED TO 1998

Genzyme Molecular Oncology's other expenses decreased because it had reduced
interest expense resulting from the transfer of 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.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2000, Genzyme Molecular Oncology had cash, cash equivalents
and short-term investments of $30.2 million, an increase of $26.6 million from
December 31, 1999.

GMO-8

In 2000, Genzyme Molecular Oncology used $12.4 million of cash for
operations. Investing activities used $7.8 million of cash, which consisted of
$30.2 million used for the purchase of investments and $22.4 million in proceeds
from the maturities of investments. Financing activities provided $38.8 million
of cash. This amount includes $28.8 million in proceeds from the issuance of
Molecular Oncology Stock and $15.0 million that was drawn under Genzyme
Molecular Oncology's financing arrangement with Genzyme General, offset in part
by the repayment in May 2000 of $5.0 million that had been drawn under our
revolving credit facility. The proceeds from the issuance of Molecular Oncology
Stock are attributable to the following transactions:

- $20.8 million in net proceeds from a directed public offering in
July 2000;

- $6.3 million in proceeds from a private placement to Purdue Pharma in
connection with a corporate partnership in October 2000; and

- $1.8 million in proceeds from stock issuances attributable to the exercise
of stock options and under our stock purchase program.

Genzyme Molecular Oncology, together with our other operating divisions, has
access to our $500.0 million revolving credit facility, $150.0 million of which
matures in December 2001 and $350.0 million of which matures in December 2003.
At December 31, 2000, none of the amounts outstanding under this facility were
allocated to Genzyme Molecular Oncology. Borrowings under this facility bear
interest at LIBOR plus a margin. During 2000, Genzyme Molecular Oncology repaid
the $5.0 million that had been allocated to it under a predecessor bank credit
facility.

At December 31, 2000, $15.0 million of Genzyme General's cash remained
available to Genzyme Molecular Oncology under a $30.0 million interdivisional
financing arrangement with Genzyme General. In April 2000, Genzyme Molecular
Oncology drew $15.0 million in cash under this arrangement in exchange for
676,254 Molecular Oncology designated shares. Molecular Oncology designated
shares are shares of Molecular Oncology stock that are created when cash or
other assets are transferred from Genzyme General to Genzyme Molecular Oncology.
The proceeds from the sale of these shares will be allocated to Genzyme General.

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 the third quarter of 2002:

- revenues generated from license agreements;

- committed research funding from collaborators;

- the $15.0 million remaining under the interdivisional financing
arrangement with Genzyme General; and

- amounts available to Genzyme Molecular Oncology under our revolving credit
facilities.

Genzyme Molecular Oncology plans to spend substantial amounts of funds 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,
however, because of many factors, including the:

- results of research and development and clinical testing;

- achievement of milestones under existing licensing arrangements;

GMO-9

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

- enforcement of patent and other intellectual property rights;

- market acceptance of novel approaches and therapies;

- 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 it will be
able to obtain any additional financing, extend any existing financing
arrangement, or obtain either on terms that we consider favorable. If Genzyme
Molecular Oncology has insufficient funds or is unable to raise additional
funds, 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.

NEW ACCOUNTING PRONOUNCEMENTS, EURO 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 at an early stage. Before
commercializing any cancer therapies, Genzyme Molecular Oncology will need to
conduct substantial additional research and development, including, in some
cases, the replication of studies performed by third parties, 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, 2000, Genzyme
Molecular Oncology had an accumulated deficit of approximately $92.1 million. 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. We cannot guarantee
that the efforts underlying these expenditures will be successful or that
Genzyme Molecular Oncology's operations will ever be profitable.

GMO-10

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.

- revenues generated from license agreements;

- committed research funding from collaborators;

- the $15.0 million remaining under the interdivisional financing
arrangement with Genzyme General; and

- amounts available to Genzyme Molecular Oncology under our revolving credit
facilities.

Genzyme Molecular Oncology plans to spend substantial amounts of funds 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,
however, because of many factors, including the:

- results of research and development and clinical testing;

- achievement of milestones under existing licensing arrangements;

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

- enforcement of patent and other intellectual property rights;

- market acceptance of novel approaches and therapies;

- 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 it will be
able to obtain any additional financing or find it on favorable terms. If
Genzyme Molecular Oncology has insufficient funds or is unable to raise
additional funds, 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

GMO-11

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.

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
initiates litigation to enforce Genzyme Molecular Oncology's patent or license
rights, or is 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 death of a patient undergoing gene therapy using an adenoviral vector to
deliver a therapeutic gene has been widely publicized. Although this patient was
not part of a Genzyme Molecular Oncology clinical trial, deaths 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 conducted 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.

GMO-12

Genzyme Molecular Oncology has reported to the FDA and the NIH that there
have been six deaths in its phase 1-2 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 investigational treatment. Deaths are not unexpected in
a clinical trial involving patients with advanced stage melanoma because these
patients have short life expectancies. Genzyme Molecular Oncology cannot,
however, rule out the possibility that its investigational cancer vaccines, like
all investigational drug and biologic products, 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;

- stricter clinical trial oversight;

- tighter commercial product labeling requirements of gene therapies; and

- a decrease in the demand for any gene therapy product that Genzyme
Molecular Oncology may develop.

Recently, the NIH and FDA have issued proposed rules regarding the public
disclosure of information from gene therapy trials. If these rules become
regulation, additional public disclosure requirements may affect public
perception of gene therapies.

GMO-13

GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

COMBINED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------
(AMOUNTS IN THOUSANDS)

Revenues:
Service revenue........................................... $ -- $ 1,920 $ 2,229
Service revenue--related party............................ -- 50 466
Research and development--related party................... -- 496 2,177
Research and development.................................. 584 -- 3,256
Licensing revenue......................................... 5,087 2,153 11,279
-------- -------- --------
Total revenues.......................................... 5,671 4,619 19,407

Operating costs and expenses:
Cost of service revenues.................................. -- 620 1,374
Cost of licensing, research and development revenue....... 826 698 4,073
Selling, general and administrative....................... 5,851 5,529 7,155
Research and development.................................. 18,908 15,997 12,743
Amortization of intangibles............................... 5,420 11,825 11,983
-------- -------- --------
Total operating costs and expenses...................... 31,005 34,669 37,328
-------- -------- --------

Operating loss.............................................. (25,334) (30,050) (17,921)

Other income (expenses):
Equity in net loss of joint venture....................... -- (1,870) (1,647)
Interest income........................................... 1,211 469 782
Interest expense.......................................... (187) (28) (2,968)
-------- -------- --------
Total other income (expenses)........................... 1,024 (1,429) (3,833)
-------- -------- --------
Loss before income taxes.................................... (24,310) (31,479) (21,754)
Tax benefit................................................. 1,214 2,647 2,647
-------- -------- --------
Division net loss........................................... $(23,096) $(28,832) $(19,107)
======== ======== ========
Comprehensive loss, net of tax:
Division net loss......................................... $(23,096) $(28,832) $(19,107)
Other comprehensive loss net of tax:
Unrealized gains on securities arising during the
period.................................................. -- -- 7
-------- -------- --------
Comprehensive loss...................................... $(23,096) $(28,832) $(19,100)
======== ======== ========

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

GMO-14

GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

COMBINED BALANCE SHEETS

DECEMBER 31,
-------------------
2000 1999
-------- --------
(AMOUNTS IN
THOUSANDS)

ASSETS
Current assets:
Cash and cash equivalents................................. $22,209 $ 3,587
Short-term investments.................................... 7,942 --
Accounts receivable, net.................................. 231 --
Prepaid expenses and other current assets................. 126 218
------- -------
Total current assets.................................... 30,508 3,805

Equipment, net............................................ 244 467
Intangibles, net.......................................... -- 5,420
------- -------
Total assets............................................ $30,752 $ 9,692
======= =======

LIABILITIES AND DIVISION EQUITY (DEFICIT)

Current liabilities:
Accrued expenses.......................................... $ 1,540 $ 676
Due to Genzyme General.................................... 4,660 3,793
Deferred revenue--current portion......................... 2,208 225
Current portion of long-term debt......................... -- 5,000
------- -------
Total current liabilities............................... 8,408 9,694

Deferred tax liability...................................... -- 1,213
Deferred revenue--long term portion......................... 2,818 --
------- -------
Total liabilities....................................... 11,226 10,907

Commitments and contingencies............................... -- --

Division equity (deficit) (Note I).......................... 19,526 (1,215)
------- -------
Total liabilities and division equity (deficit)......... $30,752 $ 9,692
======= =======

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

GMO-15

GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

COMBINED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------
(AMOUNTS IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Division net loss........................................... $(23,096) $(28,832) $(19,107)
Reconciliation of division net loss to net cash used in
operating activities:
Depreciation and amortization............................. 5,572 12,057 12,353
Deferred tax benefit...................................... (1,214) (2,647) (2,647)
Accretion of debt conversion feature...................... -- -- 1,867
Equity in loss of joint venture........................... -- 1,870 1,647
Provision for bad debts................................... -- 256 100
Other..................................................... (142) (34) 245
Increase (decrease) in cash from working capital:
Accounts receivable..................................... (231) 5,675 (5,915)
Other current assets.................................... 92 (75) 986
Accrued expenses, payable to joint venture and deferred
revenue............................................... 5,665 (1,927) 1,779
Due to Genzyme General.................................. 938 (980) 553
-------- -------- --------
Net cash used in operating activities................. (12,416) (14,637) (8,139)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments.................................... (30,175) -- (2,056)
Distribution from joint venture............................. -- 881 --
Sales and maturities of investments......................... 22,383 1,022 7,120
Purchase of equipment....................................... -- (43) (559)
Sale of equipment........................................... -- 188 --
Other....................................................... -- -- (488)
-------- -------- --------
Net cash provided by (used in) investing activities... (7,792) 2,048 4,017

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash allocated from Genzyme General......................... 15,000 -- 5,000
Allocated proceeds from issuance of debt.................... -- 5,000 --
Allocated proceeds from issuance of Molecular Oncology
Stock..................................................... 28,830 308 7
Repayments of debt.......................................... (5,000) -- (5,000)
Other....................................................... -- -- (27)
-------- -------- --------
Net cash provided by (used in) financing activities... 38,830 5,308 (20)
-------- -------- --------
Increase (decrease) in cash and cash equivalents............ 18,622 (7,281) (4,142)
Cash and cash equivalents at beginning of period............ 3,587 10,868 15,010
-------- -------- --------
Cash and cash equivalents at end of period.................. $ 22,209 $ 3,587 $ 10,868
======== ======== ========

Supplemental disclosures of non-cash transactions:

Investment in StressGen/Genzyme LLC, Note G.

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

GMO-16

GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

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 1999 and 1998 data
to conform with the 2000 presentation.

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 our
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 a summary of our
accounting policies. We incorporate that information into this note by
reference.

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

GMO-17

GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
policies. Our charter also requires that all income and expenses of Genzyme be
allocated among its 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 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 Genzyme Molecular Oncology.
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 were 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 are filed as Exhibit 99.1
to this annual report. Our charter requires that all of our assets and
liabilities be allocated among our divisions. Our board of directors, however,
retains considerable discretion in determining the types, magnitude and extent
of allocations to each series of common stock without shareholder approval.

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 in activities which directly benefit a division are allocated to
that 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 that
division;

GMO-18

GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

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

- 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, a 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 record
translation adjustments for these subsidiaries to 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 division equity. Gains and losses on all other
transactions are included in results of operations.

REVENUE RECOGNITION

Genzyme Molecular Oncology recognizes service revenue when the service
procedures have been completed. 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. Non-refundable up-front
license fees are recognized over the related performance period or at the time
there are no remaining performance obligations. 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 royalty
statements from the licensee.

GMO-19

GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
We believe our revenue recognition policies are in compliance with Staff
Accounting Bulletin 101, "Revenue Recognition in Financial 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 only in our
consolidated financial statements because Genzyme Corporation is the issuer of
the securities. Our 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 either 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;

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)
- 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 Genzyme Molecular Oncology, our board of directors may elect instead to
account for the reallocation as an increase in Molecular Oncology designated
shares in accordance with the provisions of our charter. Molecular Oncology
designated shares are authorized but unissued shares of Molecular Oncology Stock
that our board of directors may from time to time issue, sell or otherwise
distribute without allocating the proceeds to Genzyme Molecular Oncology. 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

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)
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. The division providing these products and services does
not recognize revenue on any of these transactions unless it provides them to
unrelated third parties in the ordinary course of business. These transactions
are subject to the conditions described below:

- 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.

- 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.
To perform this calculation, we determine gross fixed assets for the
facility used at the beginning of each fiscal year and apply our
short-term borrowing rate. 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.

- Other than transactions involving research and development, manufacturing,
distribution, sales, marketing, general and administrative services, which
are addressed above, all interdivision transactions are performed on terms
and conditions obtainable in arm's length transactions with third parties.

- Our board of directors must approve interdivision 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 $1.0 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 $1.0 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 interdivision 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.

GMO-22

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)
On December 31, 2000, Genzyme Molecular Oncology owed Genzyme General
approximately $4.7 million in connection with these services. On December 31,
1999, approximately $3.8 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 it 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 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, 2000 and December 31, 1999.

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
2000 (YEARS) 1999 (YEARS)
------------ ---------------- ------------ ----------------
(AMOUNTS IN THOUSANDS, EXCEPT USEFUL DATA)

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

GMO-23

GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE D. EQUIPMENT

DECEMBER 31,
-------------------
2000 1999
-------- --------
(AMOUNTS IN
THOUSANDS)

Equipment................................................... $824 $966
Furniture and fixtures...................................... 13 13
---- ----
837 979
Less accumulated depreciation............................... (593) (512)
---- ----
Equipment, net.............................................. $244 $467
==== ====

Genzyme Molecular Oncology's depreciation expense was $152,000 in 2000,
$232,000 in 1999 and $255,000 in 1998.

NOTE E. OFFERING OF MOLECULAR ONCOLOGY STOCK

In July 2000, we sold 1,607,400 shares of Molecular Oncology Stock to a
limited number of purchasers at a price of $12.91 per share. We received
approximately $20.8 million in net proceeds from the offering, which we
allocated to Genzyme Molecular Oncology. The proceeds of this offering will be
used primarily to fund Genzyme Molecular Oncology's research, preclinical and
clinical development programs, and for its working capital and general corporate
purposes.

NOTE F. PURDUE PHARMA

In October 2000, we entered into an arrangement with Purdue Pharma L.P.
relating to the discovery and development of cancer antigens. Under this
arrangement, we received approximately $12.0 million in cash, in the form of an
up-front fee, research funding and an equity investment, and will receive
approximately $9.0 million in committed research funding over the next three
years. The equity portion of this arrangement provided for two affiliates of
Purdue Pharma to purchase an aggregate of 532,066 shares of Molecular Oncology
Stock at a premium to the market price for those shares. We allocate our antigen
discovery program to Genzyme Molecular Oncology.

NOTE G. INVESTMENT IN STRESSGEN/GENZYME LLC

In July 1997, together with StressGen Biotechnologies Corp. and the Canadian
Medical Discoveries Fund, Inc., or 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

GMO-24

GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE G. INVESTMENT IN STRESSGEN/GENZYME LLC (CONTINUED)
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.

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 dissolved 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 H. DEBT INSTRUMENTS

REVOLVING CREDIT FACILITY

In December 2000, we refinanced our then-existing bank credit facilities
with a $150.0 million credit facility that matures in December 2001 and a
$350.0 million credit facility that matures in December 2003. At December 31,
2000, Genzyme Molecular Oncology did not have any borrowings outstanding under
either facility. Genzyme Molecular Oncology incurred interest expense of
approximately $126,000 in 2000 and $11,000 in 1999 on the $5.0 million it had
outstanding under the predecessor facility, which was repaid in May 2000.
Additionally, Genzyme Molecular Oncology incurred interest expense of
approximately $73,000 in 1998 on amounts borrowed under a bank credit facility
that matured in 1999.

GMO-25

GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE H. DEBT INSTRUMENTS (CONTINUED)
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 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 Molecular Oncology designated shares for issuance in
connection with this exchange. In October 1999, we increased the number of
Molecular Oncology designated shares reserved in connection with this exchange
by approximately 0.3 million.

NOTE I. DIVISION EQUITY

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

DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
(AMOUNTS IN THOUSANDS)

Balance at beginning of period.............................. $ (1,215) $ 23,364 $ 13,466
Division net loss........................................... (23,096) (28,832) (19,107)
Allocation of cash from Genzyme General for
Molecular Oncology designated shares (1).................... 15,000 -- 5,000
Conversion of debentures into Molecular Oncology designated
shares.................................................... -- -- 19,802
Conversion of note payable into Molecular Oncology
designated shares......................................... -- -- 2,696
Allocated proceeds from issuance of Molecular Oncology Stock
under stock plans......................................... 1,833 308 7
Allocated proceeds from sale of Molecular Oncology Stock.... 27,001 -- --
Allocated stock compensation expense........................ 3 10 114
Allocated value of Molecular Oncology Stock issued upon
repurchase of joint venture interest...................... -- 3,935 --
Unrealized gain (loss) on investments....................... -- -- 7
Allocated equity adjustments................................ -- -- 1,379
-------- -------- --------
Balance at end of period.................................... $ 19,526 $ (1,215) $ 23,364
======== ======== ========

(1) 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, 2000, there were 2,000,198 Molecular
Oncology designated shares.

GMO-26

GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE I. 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 and the 1997
Equity Incentive 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,
------------------------------
2000 1999 1998
-------- -------- --------
(AMOUNTS IN THOUSANDS)

Division net loss:
As reported............................................... $(23,096) $(28,832) $(19,107)
Pro forma................................................. $(26,023) $(29,973) $(20,018)

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 August 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 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. In April 2000, Genzyme Molecular Oncology drew
$15.0 million of cash under this arrangement in exchange for 676,254 Molecular
Oncology designated shares. These funds were used primarily to fund research,
preclinical and clinical development programs, and for working capital and
general corporate purposes. As of December 31, 2000, $15.0 million remained
available to Genzyme Molecular Oncology under this arrangement.

NOTE J. 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, 2000 which, if adversely decided, would
have a material adverse effect on Genzyme Molecular Oncology's results of
operations, financial condition, or liquidity.

GMO-27

GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE K. 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 was amortized over three
years consistent with the life of the completed technology. Genzyme Molecular
Oncology recorded deferred tax benefits of $1.2 million in 2000 and
$2.6 million in each of 1999 and 1998. Amortization of this deferred tax benefit
was completed in 2000.

The following summarizes Genzyme Molecular Oncology's benefit from income
taxes:

DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
(AMOUNTS IN THOUSANDS)

Currently payable:
Federal................................................... $ -- $ -- $ --
State..................................................... -- -- --
-------- -------- --------
Total................................................... $ -- $ -- $ --
======== ======== ========
Deferred:
Federal................................................... $ (1,118) $ (2,438) $ (2,438)
State..................................................... (96) (209) (209)
-------- -------- --------
Total income tax benefit................................ $ (1,214) $ (2,647) $ (2,647)
======== ======== ========

The differences between the effective tax rates and the U.S. federal
statutory tax rates were as follows:

2000 1999 1998
-------- -------- --------

U.S. federal income tax at statutory rate................... (35.0)% (35.0)% (35.0)%
State income taxes, net of federal benefit.................. (0.9) (1.1) (2.0)
Tax credits................................................. (3.1) (2.5) (2.5)
Nondeductible interest...................................... -- -- 3.0
Nondeductible amortization.................................. 3.2 5.4 8.1
Deductions subject to deferred tax valuation allowance...... 30.8 24.8 16.2
------ ------ ------
Effective tax rate--expense................................. (5.0)% (8.4)% (12.2)%
====== ====== ======

GMO-28

GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE K. INCOME TAXES (CONTINUED)
At December 31, the components of net deferred tax assets were as follows:

2000 1999
-------- --------
(AMOUNTS IN
THOUSANDS)

Deferred tax assets:
Net operating loss carryforwards.................... $ 21,162 $ 14,720
Reserves and other.................................. 437 177
Tax credits......................................... 2,956 2,209
-------- --------
Gross deferred tax asset.............................. 24,555 17,106
Valuation allowance................................... (24,555) (17,106)
-------- --------
Net deferred tax asset................................ -- --
Intangible amortization............................... -- (1,213)
-------- --------
Net deferred tax assets (liabilities)............... $ -- $ (1,213)
======== ========

As a result of uncertainty surrounding our ability to realize certain tax
benefits that primarily relate to operating loss carryforwards and capital
losses from the purchase of in-process research and development, we placed
valuation allowances of $24.6 million in 2000 and $17.1 million in 1999 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, and will be reflected as
a reduction of Genzyme Molecular Oncology's net income to determine net income
attributable to Molecular Oncology Stock.

NOTE L. 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 M. SIGNIFICANT CUSTOMERS

Genzyme Molecular Oncology has three significant pharmaceutical customers.
The following table describes the revenue for each customer in comparison to
total revenue:

% OF % OF % OF
TOTAL TOTAL TOTAL
2000 REVENUE 1999 REVENUE 1998 REVENUE
-------- -------- -------- -------- -------- --------
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGE DATA)

Customer A................................ $1,280 23% $2,800 61% $ 933 5%
Customer B................................ $2,000 35% -- -- $13,000 67%
Customer C................................ $ 908 16% -- -- -- --

GMO-29

GENZYME MOLECULAR ONCOLOGY

A DIVISION OF GENZYME CORPORATION

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE M. 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; and

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

In 2000, no revenues were earned from this joint venture due to its dissolution
in December 1999.

NOTE N. QUARTERLY RESULTS (UNAUDITED)

1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
2000 2000 2000 2000
----------- ----------- ----------- -----------

Net revenue............................... $ 2,555 $ 963 $ 635 $ 1,518
Gross profit.............................. 2,499 824 531 991
Net loss.................................. (5,057) (7,915) (5,504) (4,620)

1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
1999 1999 1999 1999
----------- ----------- ----------- -----------

Net revenue............................... $ 1,613 $ 1,133 $ 709 $ 1,164
Gross profit.............................. 973 761 647 920
Net loss.................................. (7,060) (8,820) (7,559) (5,393)

GMO-30

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, 2000 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, 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 our opinion.

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, 2001

GMO-31