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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

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

FORM 10-Q

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______________ TO ______________

COMMISSION FILE NUMBER 0-14680

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

MASSACHUSETTS 06-1047163
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139
(Address of principal executive offices) (zip code)

(617) 252-7500
(Registrant's telephone number, including area code)

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

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

The number of shares outstanding of each of the issuer's series of common
stock as of April 30, 2001:

Genzyme General Division Common Stock....................... 96,873,505
Genzyme Biosurgery Division Common Stock.................... 36,488,287
Genzyme Molecular Oncology Division Common Stock............ 15,946,856

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report on Form 10-Q contains forward-looking statements, including
statements regarding our:

- - expected two-for-one split of Genzyme General Stock on June 1, 2001;

- - intended redemption of our remaining 5 1/4% convertible subordinated notes on
June 15, 2001;

- - planned acquisition of Wyntek Diagnostics, Inc. and the expected timing of the
acquisition;

- - planned acquisition of Focal, Inc. and the expected timing of the acquisition;

- - planned divestiture of the Snowden-Pencer-Registered Trademark- product lines
and sale of our manufacturing facilities in Quebec, Canada and the expected
timing of these transactions;

- - expected future revenues, operations and expenditures; and

- - projected cash needs.

These statements are based upon the current assumptions of our management
and are only expectations of future results. These statements are subject to
risks and uncertainties, and our actual results may differ significantly from
those that are described in this report on Form 10-Q. These risks and
uncertainties include:

- - our ability to successfully complete preclinical and clinical development of
our products and services;

- - our ability to manufacture sufficient amounts of our products for development
and commercialization activities;

- - our ability to obtain and maintain adequate patent and other proprietary
rights protection of our products and services;

- - the content and timing of submissions to and decisions made by the Food and
Drug Administration, commonly referred to as the FDA, and other regulatory
agencies;

- - the impact of the May 2001 expiration of the orphan drug status of
Cerezyme-Registered Trademark- and Ceredase-Registered Trademark- enzymes on
our revenues from these products;

- - the FDA's response to the additional data and clarification we submitted in
connection with our Biologics License Application submission for Fabrazyme-TM-
enzyme;

- - our ability to resolve the manufacturing issues related to
Renagel-Registered Trademark- tablets and expand manufacturing capacity for
sevelamer hydrochloride for Renagel-Registered Trademark- capsules and
tablets;

- - our ability to optimize dosing and improve patient compliance with
Renagel-Registered Trademark- capsules and tablets;

- - our ability to successfully increase market penetration for
Synvisc-Registered Trademark- viscosupplementation product as a treatment for
osteoarthritis of the knee and to expand its use in other joints;

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

- - market acceptance of our products and services;

- - our ability to obtain reimbursement for our products and services from
third-party payors, and the extent of such coverage;

- - our ability to establish and maintain strategic license, collaboration and
distribution arrangements;

- - the continued funding of our joint ventures;

- - our ability to successfully negotiate purchase and sale agreements for our
Snowden-Pencer-Registered Trademark- product lines and manufacturing facility
in Quebec, Canada;

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

- - the likelihood of stockholder approval of an increase in the number of shares
of Genzyme General Stock authorized under our charter;

- - the likelihood of receipt of requisite stockholder and/or regulatory approvals
for our proposed acquisitions; and

- - whether the holders of our remaining 5 1/4% convertible subordinated notes
elect to convert their notes prior to the redemption date.

For a further description of these risks and other uncertainties, we
encourage you to carefully read Exhibit 99.2, "Factors Affecting Future
Operating Results," to our Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 (our "2000 Form 10-K").

NOTE REGARDING REFERENCES TO GENZYME DIVISIONS AND SERIES OF STOCK

Throughout this Form 10-Q, the words "we," "us," "our" and "Genzyme" refer
to Genzyme Corporation and all of its operating divisions taken as a whole, and
"our board of directors" refers to the board of directors of Genzyme
Corporation. In addition, we refer to our three operating divisions as follows:

- - Genzyme General Division = "Genzyme General;"

- - Genzyme Biosurgery Division = "Genzyme Biosurgery;" and

- - Genzyme Molecular Oncology Division = "Genzyme Molecular Oncology."

We currently have three designated series of common stock. Each of these
series is intended to reflect the value and track the performance of one of our
divisions. We refer to each series of common stock as follows:

- - Genzyme General Division Common Stock = "Genzyme General Stock;"

- - Genzyme Biosurgery Division Common Stock = "Biosurgery Stock;" and

- - Genzyme Molecular Oncology Division Common Stock = "Molecular Oncology Stock."

Holders of Genzyme General Stock, Biosurgery Stock and Molecular Oncology
Stock are stockholders of Genzyme Corporation and are subject to all of the
risks and uncertainties of Genzyme Corporation described in Exhibit 99.2 to our
2000 Form 10-K.

NOTE REGARDING INCORPORATION BY REFERENCE

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

NOTE REGARDING TRADEMARKS

GENZYME-REGISTERED TRADEMARK-, CEREZYME-REGISTERED TRADEMARK-,
CEREDASE-REGISTERED TRADEMARK-, THYROGEN-REGISTERED TRADEMARK-,
CARTICEL-REGISTERED TRADEMARK-, EPICEL-REGISTERED TRADEMARK- and
SNOWDEN-PENCER-REGISTERED TRADEMARK- are registered trademarks of Genzyme.
SEPRA-TM-, SEPRAFILM-TM-, SEPRAMESH-TM- and FABRAZYME-TM- are trademarks of
Genzyme. GENZYME-REGISTERED TRADEMARK- is a registered service mark of Genzyme.
RENAGEL-REGISTERED TRADEMARK- is a registered trademark of GelTex
Pharmaceuticals, Inc. SYNVISC-REGISTERED TRADEMARK- and
HYLAFORM-REGISTERED TRADEMARK- are registered trademarks of Genzyme Biosurgery
Corporation. FOCAL SEAL-REGISTERED TRADEMARK- is a registered trademark of
Focal, Inc. NEUROCELL-TM- is a trademark of Diacrin/ Genzyme LLC. ALDURAZYME-TM-
is a trademark of BioMarin/Genzyme LLC.

GENZYME CORPORATION AND SUBSIDIARIES
FORM 10-Q, MARCH 31, 2001
TABLE OF CONTENTS

PAGE NO.
--------

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

GENZYME CORPORATION AND SUBSIDIARIES
Unaudited, Consolidated Statements of Operations for the
Three Months Ended March 31, 2001 and 2000............. 2
Consolidated Balance Sheets as of March 31, 2001
(unaudited) and
December 31, 2000..................................... 5
Unaudited, Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2001 and 2000............. 6
Notes to Unaudited, Consolidated Financial Statements... 7

GENZYME GENERAL
Unaudited, Combined Statements of Operations for the
Three Months Ended March 31, 2001 and 2000............. 17
Combined Balance Sheets as of March 31, 2001 (unaudited)
and December 31, 2000.................................. 19
Unaudited, Combined Statements of Cash Flows for the
Three Months Ended March 31, 2001 and 2000............. 20
Notes to Unaudited, Combined Financial Statements....... 21

GENZYME BIOSURGERY
Unaudited, Combined Statements of Operations for the
Three Months Ended March 31, 2001 and 2000............. 25
Combined Balance Sheets as of March 31, 2001 (unaudited)
and December 31, 2000.................................. 26
Unaudited, Combined Statements of Cash Flows for the
Three Months Ended March 31, 2001 and 2000............. 27
Notes to Unaudited, Combined Financial Statements....... 28

GENZYME MOLECULAR ONCOLOGY
Unaudited, Combined Statements of Operations for the
Three Months Ended March 31, 2001 and 2000............. 31
Combined Balance Sheets as of March 31, 2001 (unaudited)
and December 31, 2000.................................. 32
Unaudited, Combined Statements of Cash Flows for the
Three Months Ended March 31, 2001 and 2000............. 33
Notes to Unaudited, Combined Financial Statements....... 34

ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 35

ITEM 3. Quantitative and Qualitative Disclosures About
Market Risk............................................... 66

PART II. OTHER INFORMATION

ITEM 6. Exhibits and Reports on Form 8-K.................... 67

Signatures.................................................. 68

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GENZYME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, AMOUNTS IN THOUSANDS)

THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
-------- --------

Revenues:
Net product sales......................................... $250,830 $184,421
Net service sales......................................... 23,760 20,966
Revenue from research and development contracts:
Related parties......................................... 319 131
Other................................................... 3,352 2,612
-------- --------
Total revenues........................................ 278,261 208,130
-------- --------
Operating costs and expenses:
Cost of products sold..................................... 76,532 48,259
Cost of services sold..................................... 13,421 11,851
Selling, general and administrative....................... 91,114 61,551
Research and development (including research and
development related to contracts)....................... 57,110 55,699
Amortization of intangibles............................... 28,991 6,098
-------- --------
Total operating costs and expenses.................... 267,168 183,458
-------- --------

Operating income............................................ 11,093 24,672
-------- --------
Other income (expenses):
Equity in net loss of unconsolidated affiliates........... (9,015) (8,133)
Gain on affiliate sale of stock........................... -- 20,270
Minority interest in net loss of subsidiary............... 1,274 856
Other..................................................... (3,710) 2
Investment income......................................... 10,148 9,944
Interest expense.......................................... (11,370) (3,939)
-------- --------
Total other income (expenses)......................... (12,673) 19,000
-------- --------

Income (loss) before income taxes........................... (1,580) 43,672
Benefit from (provision for) income taxes................... 670 (11,854)
-------- --------
Net income (loss) before cumulative effect of change in
accounting principle...................................... (910) 31,818
Cumulative effect of change in accounting principle, net of
tax....................................................... 4,167 --
-------- --------
Net income.................................................. $ 3,257 $ 31,818
======== ========

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

GENZYME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(UNAUDITED, AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
-------- --------

Comprehensive income (loss), net of tax:
Net income (loss)......................................... $ (910) $ 31,818
-------- --------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments................ (14,121) (10,223)
Unrealized loss on interest rate swap contracts, net of
tax................................................... (507) --
-------- --------
Unrealized gains (losses) on securities:
Unrealized gains (losses) arising during the period... (22,641) 80,198
Reclassification adjustment for (gains) losses
included in net income.............................. -- --
-------- --------
Unrealized gains (losses) on securities, net............ (22,641) 80,198
-------- --------
Other comprehensive income (loss)......................... (37,269) 69,975
-------- --------
Comprehensive income (loss)................................. $(38,179) $101,793
======== ========
NET INCOME (LOSS) PER SHARE:
ALLOCATED TO GENZYME GENERAL STOCK:
Genzyme General net income before cumulative effect of
change in accounting principle........................ $ 25,145 $ 45,309
Cumulative effect of change in accounting principle, net
of tax................................................ 4,167 --
-------- --------
Genzyme General net income.............................. 29,312 45,309
Tax benefit allocated from Genzyme Biosurgery........... 8,116 5,232
Tax benefit allocated from Genzyme Molecular Oncology... 2,826 1,096
-------- --------
Net income allocated to Genzyme General Stock............. $ 40,254 $ 51,637
======== ========
Net income per share of Genzyme General Stock:
Basic:
Net income per share before cumulative effect of
change in accounting principle...................... $ 0.38 $ 0.61
Per share cumulative effect of change in accounting
principle, net of tax............................... 0.04 --
-------- --------
Net income per share allocated to Genzyme General
Stock............................................... $ 0.42 $ 0.61
======== ========
Diluted:
Net income per share before cumulative effect of
change in accounting principle...................... $ 0.36 $ 0.57
Per share cumulative effect of change in accounting
principle, net of tax............................... 0.04 --
-------- --------
Net income per share allocated to Genzyme General
Stock............................................... $ 0.40 $ 0.57
======== ========
Weighted average shares outstanding:
Basic................................................... 95,875 84,502
======== ========
Diluted................................................. 100,400 94,726
======== ========

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

GENZYME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(UNAUDITED, AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
-------- --------

NET INCOME (LOSS) PER SHARE (CONTINUED):
ALLOCATED TO BIOSURGERY STOCK:
Genzyme Biosurgery net loss............................... $(35,327)
Allocated tax benefit..................................... 4,604
--------
Net loss allocated to Biosurgery Stock.................... $(30,723)
========
Net loss per share of Biosurgery Stock--basic and
diluted................................................. $ (0.84)
========
Weighted average shares outstanding....................... 36,402
========
ALLOCATED TO MOLECULAR ONCOLOGY STOCK:
Net loss.................................................. $ (6,274) $ (5,057)
======== ========
Net loss per share of Molecular Oncology Stock--basic and
diluted................................................. $ (0.39) $ (0.37)
======== ========
Weighted average shares outstanding....................... 15,907 13,495
======== ========
ALLOCATED TO SURGICAL PRODUCTS STOCK:
Net loss.................................................. $(10,043)
========
Net loss per share of Surgical Products Stock--basic and
diluted................................................. $ (0.68)
========
Weighted average shares outstanding....................... 14,855
========
ALLOCATED TO TISSUE REPAIR STOCK:
Net loss.................................................. $ (4,971)
========
Net loss per share of Tissue Repair Stock--basic and
diluted................................................. $ (0.17)
========
Weighted average shares outstanding....................... 28,531
========

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

GENZYME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)

MARCH 31, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)

ASSETS
Current assets:
Cash and cash equivalents................................. $ 207,582 $ 236,213
Short-term investments.................................... 122,557 104,586
Accounts receivable, net.................................. 211,452 205,094
Inventories............................................... 165,437 170,341
Prepaid expenses and other current assets................. 36,537 37,681
Deferred tax assets--current.............................. 45,024 46,836
---------- ----------
Total current assets.................................. 788,589 800,751
Property, plant and equipment, net.......................... 512,386 504,412
Long-term investments....................................... 289,475 298,841
Notes receivable--related party............................. 10,159 10,350
Intangibles, net............................................ 1,536,065 1,539,782
Investments in equity securities............................ 76,903 121,251
Other noncurrent assets..................................... 50,835 42,713
---------- ----------
Total assets.......................................... $3,264,412 $3,318,100
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 30,133 $ 26,165
Accrued expenses.......................................... 110,960 139,683
Income taxes payable...................................... 48,956 46,745
Deferred revenue.......................................... 5,401 8,609
Current portion of long-term debt and capital lease
obligations............................................. 19,869 19,897
---------- ----------
Total current liabilities............................. 215,319 241,099
Long-term debt and capital lease obligations................ 381,089 381,560
Convertible notes and debentures............................ 283,485 283,680
Deferred tax liability...................................... 206,980 230,384
Other noncurrent liabilities................................ 9,182 6,236
---------- ----------
Total liabilities..................................... 1,096,055 1,142,959
---------- ----------
Stockholders' equity:
Genzyme General Stock, $0.01 par value.................... 963 956
Biosurgery Stock, $0.01 par value......................... 365 364
Molecular Oncology Stock, $0.01 par value................. 160 159
Treasury Stock--Genzyme General--at cost.................. (901) (901)
Additional paid-in capital--Genzyme General Stock......... 1,290,189 1,269,284
Additional paid-in capital--Biosurgery Stock.............. 823,631 823,353
Additional paid-in capital--Molecular Oncology Stock...... 111,665 111,484
Deferred compensation..................................... (7,319) (9,943)
Notes receivable from stockholders........................ (11,529) (14,760)
Accumulated deficit....................................... (2,481) (5,738)
Accumulated other comprehensive income (loss)............. (36,386) 883
---------- ----------
Total stockholders' equity............................ 2,168,357 2,175,141
---------- ----------
Total liabilities and stockholders' equity.......... $3,264,412 $3,318,100
========== ==========

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

GENZYME CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, AMOUNTS IN THOUSANDS)

THREE MONTHS ENDED
MARCH 31,
--------------------
2001 2000
-------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 3,257 $ 31,818
Reconciliation of net income to net cash provided by
operating activities:
Depreciation and amortization........................... 35,981 17,198
Non-cash compensation expense........................... 2,570 12
Provision for bad debts................................. 1,177 2,299
Deferred income tax expense (benefit)................... (11,784) 3,239
Equity in net loss of unconsolidated affiliates......... 9,015 8,133
Gain on affiliate sale of stock......................... -- (20,270)
Minority interest in net loss of subsidiary............. (1,274) (856)
Other................................................... 344 1,132
Increase (decrease) in cash from working capital
changes:
Accounts receivable................................... (12,883) (1,154)
Inventories........................................... 5,507 (2,754)
Prepaid expenses and other assets..................... 3,011 858
Accounts payable, accrued expenses, income taxes
payable and deferred revenue........................ (20,891) (7,875)
-------- ---------
Net cash provided by operating activities........... 14,030 31,780
-------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments.................................. (136,105) (195,902)
Sales and maturities of investments....................... 130,294 144,561
Acquisitions, net of acquired cash........................ (25,725) --
Purchase of equity securities............................. (5,000) --
Purchase of property, plant and equipment................. (19,851) (15,620)
Investments in unconsolidated affiliates.................. (8,083) (6,032)
Other..................................................... (1,408) 848
-------- ---------
Net cash used in investing activities................. (65,878) (72,145)
-------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock.................... 20,951 14,714
Payments of notes receivable from stockholders............ 3,204 --
Bank overdraft............................................ 3,085 4,209
Other..................................................... 2,407 4,956
-------- ---------
Net cash provided by financing activities............. 29,647 23,879
-------- ---------
Effect of exchange rate changes on cash..................... (6,430) (1,476)
-------- ---------
Decrease in cash and cash equivalents....................... (28,631) (17,962)
Cash and cash equivalents at beginning of period............ 236,213 130,156
-------- ---------
Cash and cash equivalents at end of period.................. $207,582 $ 112,194
======== =========

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

GENZYME CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED, CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

Our unaudited, consolidated financial statements for each period include the
balance sheets, results of operations and cash flows of each of our divisions
and corporate operations taken as a whole. We eliminate all significant
intracompany items and transactions in consolidation. We prepared our unaudited,
consolidated financial statements following the requirements of the SEC for
interim reporting. As permitted under those rules, certain footnotes or other
financial information that are normally required by generally accepted
accounting principles can be condensed or omitted. We have reclassified certain
2000 data to conform with our 2001 presentation.

These financial statements include all normal and recurring adjustments that
we consider necessary for the fair presentation of our financial position and
operating results. Since these are interim financial statements, you should also
read the financial statements and notes included in our 2000 Form 10-K.
Revenues, expenses, assets and liabilities can vary from quarter to quarter.
Therefore, the results and trends in these interim financial statements may not
be the same as those for future periods.

2. INVENTORIES (AMOUNTS IN THOUSANDS)

MARCH 31, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)

Raw materials........................................ $ 55,560 $ 51,545
Work-in-process...................................... 68,976 73,520
Finished products.................................... 40,901 45,276
-------- --------
Total............................................ $165,437 $170,341
======== ========

3. ACQUISITION OF THE CLASS A LIMITED PARTNERSHIP INTERESTS OF GENZYME
DEVELOPMENT PARTNERS, L.P.

In January 2001, we purchased all of the outstanding Class A limited
partnership interests of Genzyme Development Partners, L.P., which we refer to
as GDP, for an advance payment of approximately $25.7 million in cash plus
royalties payable over ten years on sales of certain Sepra-TM- products. We
allocate our interest in GDP to Genzyme Biosurgery. As a result of the
acquisition, significant control over the activities of GDP passed to Genzyme
Biosurgery. The acquisition was accounted for as a purchase, and the purchase
price was allocated to the fair value of the intangible assets acquired as
follows (in thousands):

Patents (to be amortized over 8 years)...................... $ 5,909
Trademarks (to be amortized over 10 years).................. 2,755
Technology (to be amortized over 10 years).................. 8,827
Goodwill (to be amortized over 10 years).................... 8,234
-------
Total................................................. $25,725
=======

GENZYME CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. TAX PROVISION

THREE MONTHS ENDED
MARCH 31, INCREASE/
----------------------- (DECREASE)
2001 2000 % CHANGE
-------- --------- ----------
(UNAUDITED, AMOUNTS IN THOUSANDS
EXCEPT PERCENTAGE DATA)

Benefit from (provision for) income taxes.... $ 670 $(11,854) (106)%
Effective tax rate........................... 42% 27%

Our tax rates for both periods vary from the U.S. statutory tax rate as a
result of our:

- provision for state income taxes;

- use of a foreign sales corporation;

- nondeductible amortization of intangibles; and

- use of tax credits.

5. DERIVATIVE FINANCIAL INSTRUMENTS

On January 1, 2001, we adopted Statement of Financial Accounting Standards
("SFAS") 133, "Accounting for Derivative Instruments and Hedging Activities," as
amended by SFAS 137 and SFAS 138. SFAS 133 establishes accounting and reporting
standards for deriviative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that we
recognize all derivative instruments as either assets or liabilities in our
consolidated balance sheet and measure those instruments at fair value.
Subsequent changes in fair value are reflected in current earnings or other
comprehensive income, depending on whether a derivative instrument is designated
as part of a hedge relationship and, if it is, the type of hedge relationship.

In accordance with the transition provisions of SFAS 133, we recorded a
cumulative-effect adjustment of $4.2 million, net of tax, in our unaudited,
consolidated statement of operations to recognize the fair value of certain
common stock warrants held on January 1, 2001. Transition adjustments pertaining
to interest rate swaps designated as cash-flow hedges and our foreign currency
forward contracts were not significant. For the three months ended March 31,
2001, we recorded a charge of $3.6 million in other expense to reflect the
change in value of certain common stock warrants from January 1, 2001 to
March 31, 2001. We also recorded a charge of $0.5 million in other comprehensive
income to reflect the change in value of our interest rate swaps during the
period, net of tax.

In the normal course of business, we manage risks associated with foreign
exchange rates, interest rates and equity prices through a variety of
strategies, including the use of hedging transactions, executed in accordance
with our policies. Our hedging transactions include, but are not limited to, the
use of various derivative financial instruments. As a matter of policy, we do
not use derivative instruments unless there is an underlying exposure. Any
change in the value of our derivative instruments would be substantially offset
by an opposite change in the value of the underlying hedged items. We do not use
derivative instruments for trading or speculative purposes.

GENZYME CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. NET INCOME (LOSS) PER SHARE

We calculate earnings per share for each series of stock using the two-class
method. To calculate basic earnings per share for each series of stock, we
divide the earnings allocated to each series of stock by the weighted average
number of outstanding shares of that series of stock during the applicable
period. When we calculate diluted earnings per share, we also include in the
denominator all potentially dilutive securities outstanding during the
applicable period. 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 Genzyme General Stock, as defined in our charter, is equal to
the net income or loss of Genzyme General determined in accordance with
generally accepted accounting principles and as adjusted for tax benefits
allocated to or from Genzyme General in accordance with our management and
accounting policies. Earnings attributable to Biosurgery Stock and Molecular
Oncology Stock are defined similarly and, as such, are based on the net income
or loss of the corresponding division as adjusted for the allocation of tax
benefits.

We calculate the income tax provision of each division as if that division
were a separate taxpayer, which process includes assessing realizability of
deferred tax assets at the division level. Our management and accounting
policies provide that, if as of the end of any fiscal quarter, a division can
not 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
other divisions in proportion to their taxable income without compensating
payment or allocation to the division generating the benefit. The tax benefits
allocated to Genzyme General, which are included in earnings attributable to
Genzyme General Stock, were:

THREE MONTHS ENDED
MARCH 31,
----------------------
2001 2000
-------- --------
(AMOUNTS IN
THOUSANDS)

Tax benefits allocated from:
Genzyme Biosurgery...................................... $ 8,116 $5,232
Genzyme Molecular Oncology.............................. 2,826 1,096
------- ------
Total................................................. $10,942 $6,328
======= ======

In the three months ended March 31, 2001, we allocated $4.6 million of tax
benefits to Genzyme Biosurgery that resulted from operations we acquired through
our acquisition of Biomatrix in December 2000, for which there are no similar
amounts in the same period of last year. In future periods, Genzyme Biosurgery
or Genzyme Molecular Oncology may recognize deferred tax assets in the
calculation of their respective tax provisions determined on a separate division
basis in accordance with generally accepted accounting principles. However, to
the extent the benefit of those deferred tax assets has been previously
allocated to Genzyme General in accordance with the management and accounting
policies, the benefit will be reflected as a reduction of net income to
determine net income attributable to Biosurgery Stock or Molecular Oncology
Stock. As of March 31, 2001, the total tax benefits previously allocated to
Genzyme General were (in thousands):

Genzyme Biosurgery.......................................... $176,835
Genzyme Molecular Oncology.................................. 27,350

GENZYME CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. NET INCOME (LOSS) PER SHARE (CONTINUED)
GENZYME GENERAL STOCK:

THREE MONTHS ENDED
MARCH 31,
---------------------
2001 2000
--------- ---------
(AMOUNTS IN
THOUSANDS, EXCEPT PER
SHARE AMOUNTS)

Genzyme General net income before cumulative effect of
change in accounting principle............................ $ 25,145 $45,309
Cumulative effect of change in accounting principle, net of
tax(1).................................................... 4,167 --
-------- -------
Genzyme General net income.................................. 29,312 45,309
Tax benefit allocated from Genzyme Biosurgery............... 8,116 5,232
Tax benefit allocated from Genzyme Molecular Oncology....... 2,826 1,096
-------- -------
Net income allocated to Genzyme General Stock--basic........ 40,254 51,637
Effect of dilutive securities, net of tax(2):
5 1/4% convertible subordinated notes:
Interest expense.......................................... -- 2,108
Amortization of purchasers' discount and offering
costs(3)................................................ -- 150
5% convertible subordinated debentures:
Interest expense.......................................... -- 171
Amortization of debt offering costs(4).................... -- 30
-------- -------
Net income allocated to Genzyme General Stock--diluted...... $ 40,254 $54,096
======== =======

Shares used in computing net income per common
share--basic.............................................. 95,875 84,502
Effect of dilutive securities:
Stock options............................................. 4,525 3,281
5 1/4% convertible subordinated notes(2).................. -- 6,313
5% convertible subordinated debentures(2)................. -- 630
-------- -------
Dilutive potential common shares(5)..................... 4,525 10,224
-------- -------
Shares used in computing net income per share--diluted(5)... 100,400 94,726
======== =======
Net income per share of Genzyme General Stock:
Basic:
Net income per share before cumulative effect of change
in accounting principle............................... $ 0.38 $ 0.61
Per share cumulative effect of change in accounting
principle, net of tax(1).............................. 0.04 --
-------- -------
Net income per share allocated to Genzyme General
Stock................................................. $ 0.42 $ 0.61
======== =======
Diluted(2):
Net income per share before cumulative effect of change
in accounting principle............................... $ 0.36 $ 0.57
Per share cumulative effect of change in accounting
principle, net of tax(1).............................. 0.04 --
-------- -------
Net income per share allocated to Genzyme General
Stock................................................. $ 0.40 $ 0.57
======== =======
Weighted average shares outstanding:
Basic..................................................... 95,875 84,502
======== =======
Diluted(2)................................................ 100,400 94,726
======== =======

GENZYME CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. NET INCOME (LOSS) PER SHARE (CONTINUED)
- ------------------------

(1) This represents a transition adjustment resulting from the January 1, 2001
required adoption of SFAS 133 to record the fair value of certain derivative
assets held on January 1, 2001.

(2) The net income per share allocated to Genzyme General Stock on a diluted
basis and weighted average shares-diluted for the three months ended
March 31, 2001 excludes the dilutive effect of the convertible notes and
debentures allocated to Genzyme General as the effect would be
anti-dilutive.

(3) We are amortizing the debt discount and offering costs of approximately
$7.0 million over the term of these notes, which mature in June 2005.

(4) We are amortizing the debt offering costs of approximately $0.9 million over
the term of these debentures, which mature in August 2003.

(5) We did not include the securities described in the following table in the
computation of Genzyme General's diluted earnings per share because these
securities had an exercise price greater than the average market price of
Genzyme General Stock during relevant periods:

THREE MONTHS ENDED
MARCH 31,
-----------------------
2001 2000
-------- --------
(AMOUNTS IN
THOUSANDS)

Shares of Genzyme General Stock issuable for options........ 456 2,965
=== =====

BIOSURGERY STOCK

We created Biosurgery Stock on December 18, 2000. We created Genzyme
Biosurgery by combining the businesses of our former Genzyme Surgical Products
and Genzyme Tissue Repair divisions as well as the acquired business of
Biomatrix. Accordingly, we amended our charter to create Biosurgery Stock and to
eliminate Genzyme Surgical Products Division common stock, which we refer to as
"Surgical Products Stock," and Genzyme Tissue Repair Division common stock,
which we refer to as "Tissue Repair Stock." Each outstanding share of, and
option to purchase, Surgical Products Stock was converted into the right to
receive 0.6060 of a share of, or option to purchase, Biosurgery Stock, and each
outstanding share of, and option to purchase, Tissue Repair Stock was converted
into the right to receive 0.3352 of a share of, or option to purchase,
Biosurgery Stock.

Prior to December 18, 2000, the net losses of Genzyme Surgical Products and
Genzyme Tissue Repair, which were combined to form Genzyme Biosurgery, were
allocated to Surgical Products Stock and Tissue Repair Stock.

Basic and diluted net loss per share of Biosurgery Stock are the same. We
did not include the securities described in the following table in the
computation of Biosurgery Stock diluted net loss per

GENZYME CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. NET INCOME (LOSS) PER SHARE (CONTINUED)
share for each period because these securities would have an anti-dilutive
effect due to the net loss allocated to Biosurgery Stock.

THREE MONTHS ENDED
MARCH 31,
------------------
2001
------------------
(AMOUNTS IN
THOUSANDS)

Shares of Biosurgery Stock issuable for options.......... 4,436
Warrants to purchase Biosurgery Stock.................... 3
Biosurgery designated shares issuable upon conversion of
5 1/4% convertible subordinated notes allocated to
Genzyme General........................................ 685
Biosurgery designated shares reserved for options........ 108
Biosurgery designated shares............................. 1,195
Shares issuable upon conversion of 6.9% convertible
subordinated note allocated to Genzyme Biosurgery...... 385
-----
Total shares excluded from the calculation of diluted net
loss per share of Biosurgery Stock..................... 6,812
=====

MOLECULAR ONCOLOGY STOCK:

For all periods presented, basic and diluted net loss per share of Molecular
Oncology Stock are the same. We did not include the securities described in the
following table in the computation of Molecular Oncology Stock diluted net loss
per share for each period because these securities would have an anti-dilutive
effect due to the net loss allocated to Molecular Oncology Stock.

THREE MONTHS ENDED
MARCH 31,
-----------------------
2001 2000
-------- --------
(AMOUNTS IN
THOUSANDS)

Shares of Molecular Oncology Stock issuable for
options................................................ 984 675
Warrants to purchase Molecular Oncology Stock............ 10 10
Molecular Oncology designated shares issuable upon
conversion of 5 1/4% convertible subordinated notes
allocated to Genzyme General........................... 682 682
Molecular Oncology designated shares..................... 1,318 1,006
----- -----
Total shares excluded from the calculation of diluted net
loss per share of Molecular Oncology Stock............. 2,994 2,373
===== =====

GENZYME CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. SEGMENT REPORTING

In accordance with SFAS 131, "Disclosures about Segments of an Enterprise
and Related Information," we present segment information in a manner consistent
with the method we use to report this information to our management. Applying
SFAS 131, we have four reportable segments:

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

- Diagnostic Products, which provides diagnostic products to niche markets
focusing on IN VITRO diagnostics;

- Genzyme Biosurgery, which develops, manufactures and sells instruments,
devices, biomaterials and biotherapeutic products to improve or replace
surgery, with an emphasis on the orthopaedics and cardiothoracic markets;
and

- Genzyme Molecular Oncology, which 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 developing cancer products, with a focus on therapeutic
vaccines and angiogenesis inhibitors.

GENZYME CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. SEGMENT REPORTING (CONTINUED)
We have provided information concerning the operations in these reportable
segments in the following table:

THREE MONTHS ENDED
MARCH 31,
-----------------------
2001 2000
---------- ----------
(AMOUNTS IN THOUSANDS)

Revenues:
Genzyme General:
Therapeutics(1)..................................... $176,788 $133,802
Diagnostic Products................................. 16,424 15,238
Other............................................... 29,112 21,422
Eliminations/Adjustments(2)......................... 369 164
-------- --------
Total Genzyme General............................. 222,693 170,626
Genzyme Biosurgery(3)................................. 54,156 34,949
Genzyme Molecular Oncology............................ 1,412 2,555
-------- --------
Total................................................... $278,261 $208,130
======== ========

Net income (loss):
Genzyme General:
Therapeutics(1)..................................... $ 34,339 $ 29,263
Diagnostic Products................................. 782 715
Other............................................... 1,984 (171)
Eliminations/Adjustments(4,5)....................... (11,960) 15,502
-------- --------
Net income for Genzyme General before cumulative
effect of change in accounting principle........ 25,145 45,309
Cumulative effect of change in accounting
principle, net of tax(5)........................ 4,167 --
-------- --------
Net income for Genzyme General.................... 29,312 45,309
-------- --------

Genzyme Biosurgery(3)................................. (35,327) (15,014)
Genzyme Molecular Oncology............................ (6,274) (5,057)
Eliminations/Adjustments(6)........................... 15,546 6,580
-------- --------
Total................................................... $ 3,257 $ 31,818
======== ========

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

(1) In December 2000, we acquired GelTex, a company that develops therapeutic
products based on polymer technology. We allocated the acquisition to
Genzyme General. The operations of GelTex are included in our Therapeutics
segment for the three months ended March 31, 2001.

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

(3) In December 2000, we acquired Biomatrix, a company that develops,
manufactures and sells a series of proprietary viscoelastic products based
on hyaluronan technology that are used in therapeutic medical applications
and skin care. We allocated the acquisition to Genzyme Biosurgery. The
operations of Biomatrix are included in the results of Genzyme Biosurgery
for the three months ended March 31, 2001.

GENZYME CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. SEGMENT REPORTING (CONTINUED)
(4) Includes primarily amounts related to Genzyme General's research and
development and administrative activities that we do not specifically
allocate to a particular segment of Genzyme General. The three months ended
March 31, 2000 also includes a gain of $20.3 million relating to a public
offering of common shares by Genzyme Transgenics Corporation, an
unconsolidated affiliate, which we recognized in accordance with our policy
pertaining to affiliate sales of stock.

(5) On January 1, 2001, in connection with the adoption of SFAS 133, Genzyme
General recorded a cumulative-effect adjustment of $4.2 million, net of tax,
to recognize the fair value of certain common stock warrants held on
January 1, 2001. Eliminations/adjustments for Genzyme General includes a
charge of $3.6 million for the three months ended March 31, 2001 to reflect
the change in value of these common stock warrants from January 1, 2001 to
March 31, 2001.

(6) Includes income tax benefits that have not been recognized in the tax
provisions of the divisions. The three months ended March 31, 2000, also
includes a difference in amortization due to $2.9 million of additional
goodwill associated with our PharmaGenics, Inc. acquisition allocated to
Genzyme Molecular Oncology as compared to amounts recorded at the corporate
level. The difference in the amortization results from the application of
our policy to account for income taxes at the divisional level as if each
division were a separate taxpayer. The goodwill resulting from the
acquisition of PharmaGenics was fully amortized in May 2000.

There has been no material change in segment assets since December 31, 2000.

8. SUBSEQUENT EVENTS

PROPOSED TWO-FOR-ONE SPLIT OF GENZYME GENERAL STOCK

In April 2001, our board of directors approved a two-for-one stock split of
Genzyme General Stock. This stock split is contingent upon shareholder approval
of an increase in the number of authorized shares of Genzyme General Stock. At
our annual meeting of stockholders on May 31, 2001, shareholders will be asked
to approve an amendment to our charter increasing the total number of authorized
shares of Genzyme common stock from 390,000,000 to 690,000,000 shares and
increasing the number of such shares designated as Genzyme General Stock from
200,000,000 to 500,000,000 shares. Assuming the amendment is approved, we will
issue on June 1, 2001, one new share of Genzyme General Stock for each share of
Genzyme General Stock held by shareholders of record as of May 24, 2001.
Securities convertible into shares of Genzyme General Stock will also adjust to
reflect this stock split.

PLANNED ACQUISITION OF FOCAL, INC.

In April 2001, we signed a definitive merger agreement to acquire
Focal, Inc. We will allocate this acquisition to Genzyme Biosurgery and will
account for it using the purchase method of accounting. Focal develops,
manufactures and sells products based on a proprietary polymer technology. We
currently hold approximately 22% of the outstanding shares of Focal's common
stock and will acquire the remaining 78% in an exchange of shares of Biosurgery
Stock for shares of Focal common stock upon completion of the merger. Under the
terms of the merger agreement, Focal shareholders will receive 0.1545 of a share
of Biosurgery Stock for each share of Focal common stock they hold, except for
10,000 shares of Focal common stock that we have agreed to purchase for cash
from a Focal shareholder. Approximately 2.1 million shares of Biosurgery Stock
will be issued as merger consideration. We expect the acquisition, which is
subject to the approval of Focal's shareholders, to

GENZYME CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. SUBSEQUENT EVENTS (CONTINUED)
close in the second or third quarter of 2001. In light of the merger, Focal
agreed to modify certain terms of the existing stock purchase agreement between
the companies. This agreement commits us, at Focal's option, to make future
equity investments of up to $5.0 million subject to certain conditions.

PLANNED ACQUISITION OF WYNTEK DIAGNOSTICS, INC.

In May 2001, we announced an agreement to acquire all of the outstanding
capital stock of privately-held Wyntek Diagnostics, Inc. for $65.0 million in
cash. Wyntek is a provider of high quality point of care rapid diagnostic tests
for pregnancy and infectious diseases. We will allocate the acquisition to
Genzyme General and will account for the acquisition using the purchase method
of accounting. We anticipate the acquisition, which is subject to our receipt of
regulatory approvals, to close in the second quarter of 2001.

PRIVATE PLACEMENT OF $575.0 MILLION 3% CONVERTIBLE SUBORDINATED DEBENTURES

In May 2001, we completed a private placement of $575.0 million of 3%
convertible subordinated debentures. We have allocated the debentures and the
offering proceeds to Genzyme General. Net proceeds from the offering were
approximately $561.7 million. The debentures are convertible, upon the
satisfaction of certain conditions, into shares of Genzyme General Stock at an
initial conversion price of $140.60. The debentures mature on May 15, 2021 and
are first callable on May 20, 2004. Holders may require us to repurchase all or
part of their debentures for cash on May 15, 2006, May 15, 2011 or May 15, 2016
at a price equal to 100% of the principal amount of the debentures plus accrued
interest. We expect to utilize the proceeds from the sale of the debentures for
working capital and general corporate purposes.

INTENDED REDEMPTION OF $250.0 MILLION 5 1/4% CONVERTIBLE SUBORDINATED NOTES

On May 1, 2001, we sent a notice to the trustee under the indenture for our
$250.0 million 5 1/4% convertible subordinated notes due 2005, indicating our
intention to redeem any notes that remain unconverted at June 15, 2001. Each
$1,000 principal amount of these notes currently is convertible into
approximately 25.25 shares of Genzyme General Stock, 2.74 shares of Biosurgery
Stock and 2.73 shares of Molecular Oncology Stock.

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED, AMOUNTS IN THOUSANDS)

THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
-------- --------

Revenues:
Net product sales......................................... $202,206 $155,339
Net service sales......................................... 18,232 15,120
Revenue from research and development contracts:
Related parties......................................... 319 131
Other................................................... 1,936 36
-------- --------
Total revenues........................................ 222,693 170,626
-------- --------
Operating costs and expenses:
Cost of products sold..................................... 47,894 32,220
Cost of services sold..................................... 10,284 8,828
Selling, general and administrative....................... 58,531 38,222
Research and development (including research and
development related to contracts)....................... 40,186 42,743
Amortization of intangibles............................... 17,670 1,968
-------- --------
Total operating costs and expenses:................... 174,565 123,981
-------- --------
Operating income............................................ 48,128 46,645
-------- --------

Other income (expenses):
Equity in net loss of unconsolidated affiliates........... (8,479) (8,133)
Gain on affiliate sale of stock........................... -- 20,270
Minority interest in net loss of subsidiary............... 1,274 856
Other..................................................... (3,717) (21)
Investment income......................................... 9,213 8,087
Interest expense.......................................... (6,398) (3,551)
-------- --------
Total other income (expenses)......................... (8,107) 17,508
-------- --------
Income before income taxes.................................. 40,021 64,153
Provision for income taxes.................................. (14,876) (18,844)
-------- --------
Division net income before cumulative effect of change in
accounting principle...................................... 25,145 45,309
Cumulative effect of change in accounting principle, net of
tax....................................................... 4,167 --
-------- --------
Division net income......................................... $ 29,312 $ 45,309
======== ========

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

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION
COMBINED STATEMENTS OF OPERATIONS (CONTINUED)
(UNAUDITED, AMOUNTS IN THOUSANDS)

THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
-------- --------

Comprehensive income (loss), net of tax:
Division net income....................................... $ 25,145 $ 45,309
-------- --------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment................. (13,420) (10,223)
Unrealized derivative loss resulting from interest rate
swap contracts, net of tax............................ (507) --
-------- --------
Unrealized gains (losses) on securities:
Unrealized gains (losses) arising during the period... (22,738) 78,759
Reclassification adjustment for (gains) losses
included in division net income..................... -- --
-------- --------
Unrealized gains (losses) on securities, net............ (22,738) 78,759
-------- --------
Other comprehensive income (loss)......................... (36,665) 68,536
-------- --------
Comprehensive income (loss)................................. $(11,520) $113,845
======== ========

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

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION
COMBINED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)

MARCH 31, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)

ASSETS
Current assets:
Cash and cash equivalents................................. $ 162,997 $ 135,841
Short-term investments.................................... 122,557 96,644
Accounts receivable, net.................................. 171,453 165,911
Inventories............................................... 107,977 108,767
Prepaid expenses and other current assets................. 26,925 28,012
Due from Genzyme Biosurgery............................... 17,459 18,645
Due from Genzyme Molecular Oncology....................... 5,296 4,660
Deferred tax assets--current.............................. 45,047 46,836
---------- ----------
Total current assets.................................... 659,711 605,316
Property, plant and equipment, net.......................... 455,338 446,759
Long-term investments....................................... 289,475 298,841
Notes receivable-related party.............................. 10,159 10,350
Intangibles, net............................................ 959,095 977,147
Investments in equity securities............................ 76,903 119,648
Other noncurrent assets..................................... 42,695 40,992
---------- ----------
Total assets............................................ $2,493,376 $2,499,053
========== ==========
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable.......................................... $ 20,339 $ 20,091
Accrued expenses.......................................... 83,547 98,201
Income taxes payable...................................... 40,729 40,442
Deferred revenue.......................................... 3,767 6,401
Current portion of long-term debt and capital lease
obligations............................................. 1,448 1,448
---------- ----------
Total current liabilities............................... 149,830 166,583

Long-term debt and capital lease obligations................ 180,202 180,556
Convertible notes and debentures............................ 273,485 273,680
Deferred tax liability...................................... 105,813 124,613
Other noncurrent liabilities................................ 6,695 3,341
---------- ----------
Total liabilities....................................... 716,025 748,773
---------- ----------
Division equity............................................. 1,777,351 1,750,280
---------- ----------
Total liabilities and division equity................... $2,493,376 $2,499,053
========== ==========

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

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED, AMOUNTS IN THOUSANDS)

THREE MONTHS ENDED
MARCH 31,
---------------------
2001 2000
--------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Division net income....................................... $ 29,312 $ 45,309
Reconciliation of net income to net cash provided by
operating activities:
Depreciation and amortization........................... 22,481 11,896
Non-cash compensation expense........................... 2,570 12
Provision for bad debts................................. 1,099 2,192
Deferred income tax (benefit) expense................... (7,180) 3,901
Equity in net loss of unconsolidated affiliates......... 8,479 8,133
Gain on affiliate sale of stock......................... -- (20,270)
Minority interest in net loss of subsidiary............. (1,274) (856)
Other................................................... 266 305
Increase (decrease) in cash from working capital
changes:
Accounts receivable................................... (11,890) (781)
Inventories........................................... 1,243 2,909
Prepaid expenses and other assets..................... 2,980 1,776
Due from Genzyme Biosurgery........................... 1,156 829
Due from Genzyme Molecular Oncology................... (636) 1,334
Accounts payable, accrued expenses, income taxes
payable and deferred revenue........................ (3,310) (3,155)
--------- ---------
Net cash provided by operating activities........... 45,296 53,534
--------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments.................................. (136,105) (160,452)
Sales and maturities of investments....................... 122,502 97,246
Purchase of property, plant and equipment................. (18,205) (14,548)
Investments in unconsolidated affiliates.................. (8,083) (6,032)
Other..................................................... (1,482) 2,215
--------- ---------
Net cash used in investing activities............... (41,373) (81,571)
--------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Allocated proceeds from issuance of Genzyme General
Stock................................................... 20,454 12,713
Net cash allocated to Genzyme Biosurgery.................. -- (5,855)
Bank overdraft............................................ 3,615 3,429
Other..................................................... 2,937 1,912
--------- ---------
Net cash provided by financing activities........... 27,006 12,199
--------- ---------
Effect of exchange rate changes on cash..................... (3,773) (1,476)
--------- ---------
Increase (decrease) in cash and cash equivalents............ 27,156 (17,314)
Cash and cash equivalents at beginning of period............ 135,841 94,523
--------- ---------
Cash and cash equivalents at end of period.................. $ 162,997 $ 77,209
========= =========

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

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO UNAUDITED, COMBINED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The unaudited, combined financial statements of Genzyme General for each
period include the balance sheets, results of operations and cash flows of the
businesses we allocate to Genzyme General. We also allocate a portion of our
corporate operations to Genzyme General using methods described in our
allocation policy included in Exhibit 99.1 to our 2000 Form 10-K. These
unaudited, combined financial statements are prepared using amounts included in
our unaudited, consolidated financial statements included in this Form 10-Q. We
prepared the unaudited, combined financial statements for Genzyme General
following the requirements of the SEC for interim reporting. As permitted under
those rules, certain footnotes or other financial information that are normally
required by generally accepted accounting principles can be condensed or
omitted. We have reclassified certain 2000 data to conform with our 2001
presentation.

These financial statements include all normal and recurring adjustments that
we consider necessary for the fair presentation of Genzyme General's financial
position and operating results. Since these are interim financial statements,
you should also read the financial statements and notes for Genzyme General
included in our 2000 Form 10-K. Revenues, expenses, assets and liabilities can
vary from quarter to quarter. Therefore, the results and trends in these interim
financial statements may not be the same as those for future periods.

2. INVENTORIES (AMOUNTS IN THOUSANDS)

MARCH 31, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)

Raw materials........................................ $ 35,716 $ 30,275
Work-in-process...................................... 42,111 47,880
Finished products.................................... 30,150 30,612
-------- --------
Total............................................ $107,977 $108,767
======== ========

3. TAX PROVISION

THREE MONTHS ENDED
MARCH 31, INCREASE/
------------------- (DECREASE)
2001 2000 % CHANGE
-------- -------- ----------
(UNAUDITED, AMOUNTS IN THOUSANDS
EXCEPT PERCENTAGE DATA)

Provision for income taxes..................... $(14,876) $(18,844) (21)%
Effective tax rate............................. 37% 29%

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

- provision for state income taxes;

- use of a foreign sales corporation;

- nondeductible amortization of intangibles; and

- use of tax credits.

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO UNAUDITED, COMBINED FINANCIAL STATEMENTS (CONTINUED)

4. DERIVATIVE FINANCIAL INSTRUMENTS

On January 1, 2001, we adopted Statement of Financial Accounting Standards
("SFAS") 133, "Accounting for Derivative Instruments and Hedging Activities," as
amended by SFAS 137 and SFAS 138. SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that we
recognize all derivative instruments as either assets or liabilities in our
consolidated balance sheet and measure those instruments at fair value.
Subsequent changes in fair value are reflected in current earnings or other
comprehensive income, depending on whether a derivative instrument is designated
as part of a hedge relationship and, if it is, the type of hedge relationship.

In accordance with the transition provisions of SFAS 133, Genzyme General
recorded a cumulative-effect adjustment of $4.2 million, net of tax, in its
unaudited, combined statement of operations to recognize the fair value of
certain common stock warrants held on January 1, 2001. Transition adjustments
pertaining to interest rate swaps designated as cash-flow hedges and foreign
currency forward contracts allocated to Genzyme General were not significant.
For three months ended March 31, 2001, Genzyme General recorded a charge of
$3.6 million in other expense to reflect the change in value of certain common
stock warrants from January 1, 2001 to March 31, 2001. Genzyme General also
recorded a charge of $0.5 million in division equity, to reflect the change in
value of our interest rate swaps during the period, net of tax.

5. SEGMENT REPORTING

- Diagnostic Products, which provides diagnostic products to niche markets
focusing on IN VITRO diagnostics.

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO UNAUDITED, COMBINED FINANCIAL STATEMENTS (CONTINUED)

5. SEGMENT REPORTING (CONTINUED)
We have provided information concerning the operations in these reportable
segments in the following table:

THREE MONTHS ENDED
MARCH 31,
-----------------------
2001 2000
---------- ----------
(AMOUNTS IN THOUSANDS)

Revenues:
Therapeutics (1).................................... $176,788 $133,802
Diagnostic Products................................. 16,424 15,238
Other............................................... 29,112 21,422
Eliminations/Adjustments (2)........................ 369 164
-------- --------
Total............................................. $222,693 $170,626
======== ========
Division net income:
Therapeutics (1).................................... $ 34,339 $ 29,263
Diagnostic Products................................. 782 715
Other............................................... 1,984 (171)
Eliminations/Adjustments (3,4)...................... (11,960) 15,502
-------- --------
Division net income for Genzyme General before
cumulative effect of change in accounting
principle....................................... 25,154 45,309
Cumulative effect of change in accounting
principle, net of tax (4)....................... 4,167 --
-------- --------
Division net income for Genzyme General........... $ 29,312 $ 45,309
======== ========

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

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

(3) Includes primarily amounts related to Genzyme General's research and
development and administrative activities that we do not specifically
allocate to a particular segment of Genzyme General. The three months ended
March 31, 2000 also includes a gain of $20.3 million relating to a public
offering of common shares by Genzyme Transgenics, an unconsolidated
affiliate, which we recognized in accordance with our policy pertaining to
affiliate sales of stock.

(4) On January 1, 2001, in connection with the adoption of SFAS 133, Genzyme
General recorded a cumulative-effect adjustment of $4.2 million, net of tax,
to recognize the fair value of certain common stock warrants.
Eliminations/Adjustments for Genzyme General includes a charge of
$3.6 million for the three months ended March 31, 2001 to reflect the change
in value of these common stock warrants from January 1, 2001 to March 31,
2001.

There has been no material change in segment assets since December 31, 2000.

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

NOTES TO UNAUDITED, COMBINED FINANCIAL STATEMENTS (CONTINUED)

6. SUBSEQUENT EVENTS

PLANNED ACQUISITION OF WYNTEK DIAGNOSTICS, INC.

PRIVATE PLACEMENT OF $575.0 MILLION 3% CONVERTIBLE SUBORDINATED DEBENTURES

INTENDED REDEMPTION OF $250.0 MILLION 5 1/4% CONVERTIBLE SUBORDINATED NOTES

GENZYME BIOSURGERY
A DIVISION OF GENZYME CORPORATION
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED, AMOUNTS IN THOUSANDS)

THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
-------- --------

Revenues:
Net product sales......................................... $ 48,624 $ 29,082
Net service sales......................................... 5,528 5,846
Revenue from research and development contracts........... 4 21
-------- --------
Total revenues.......................................... 54,156 34,949
-------- --------
Operating costs and expenses:
Cost of products sold..................................... 28,638 16,039
Cost of services sold..................................... 3,137 3,023
Selling, general and administrative....................... 30,692 22,139
Research and development.................................. 10,719 8,842
Amortization of intangibles............................... 11,321 1,426
-------- --------
Total operating costs and expenses...................... 84,507 51,469
-------- --------
Operating loss.............................................. (30,351) (16,520)
-------- --------
Other income (expenses):
Equity in net loss of unconsolidated affiliates........... (536) --
Investment income......................................... 512 1,784
Interest expense.......................................... (4,959) (301)
Other..................................................... 7 23
-------- --------
Total other income (expenses)........................... (4,976) 1,506
-------- --------
Division net loss........................................... $(35,327) $(15,014)
======== ========
Comprehensive loss, net of tax:
Division net loss......................................... $(35,327) $(15,014)
-------- --------
Other comprehensive loss, net of tax:
Foreign currency translation adjustments................ (701) --
-------- --------
Unrealized losses on securities:
Unrealized gains arising during the period............ 97 1,439
Reclassification adjustment for (gains) losses
included in division net loss....................... -- --
-------- --------
Unrealized gains on securities, net..................... 97 1,439
-------- --------
Other comprehensive income (loss)......................... (604) 1,439
-------- --------
Comprehensive loss.......................................... $(35,931) $(13,575)
======== ========

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

GENZYME BIOSURGERY
A DIVISION OF GENZYME CORPORATION
COMBINED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)

MARCH 31, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)

ASSETS
Current assets:
Cash and cash equivalents................................. $ 21,548 $ 78,163
Accounts receivable, net.................................. 39,588 38,952
Inventories............................................... 57,460 61,574
Prepaid expenses and other current assets................. 9,590 9,543
-------- --------
Total current assets.................................... 128,186 188,232

Property, plant and equipment, net.......................... 56,835 57,409
Intangibles, net............................................ 576,970 562,635
Investment in equity securities............................. -- 1,603
Other noncurrent assets..................................... 8,140 1,721
-------- --------
Total assets............................................ $770,131 $811,600
======== ========
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable.......................................... $ 9,794 $ 6,074
Accrued expenses.......................................... 34,719 46,245
Due to Genzyme General.................................... 17,459 18,645
Current portion of long-term debt and capital lease
obligations............................................. 18,421 18,449
-------- --------
Total current liabilities............................... 80,393 89,413

Long-term debt and capital lease obligations................ 200,887 201,004
Convertible notes........................................... 10,000 10,000
Other noncurrent liabilities................................ 77 77
-------- --------
Total liabilities....................................... 291,357 300,494
-------- --------
Division equity............................................. 478,774 511,106
-------- --------
Total liabilities and division equity................... $770,131 $811,600
======== ========

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

GENZYME BIOSURGERY
A DIVISION OF GENZYME CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED, AMOUNTS IN THOUSANDS)

THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
-------- --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Division net loss......................................... $(30,723) $(15,014)
Reconciliation of division net loss to net cash used in
operating activities:
Depreciation and amortization........................... 13,469 2,559
Deferred income tax benefit............................. (4,604) --
Provision for bad debts................................. 78 107
Equity in net loss of unconsolidated affiliates......... 536 --
Other................................................... (74) 827
Increase (decrease) in cash from working capital
changes:
Accounts receivable................................... (813) (373)
Inventories........................................... 4,264 (5,663)
Prepaid expenses and other current assets............. (72) (683)
Accounts payable, accrued expenses and income taxes
payable............................................. (5,039) 587
Due to Genzyme General................................ (1,156) (829)
-------- --------
Net cash used in operating activities............... (24,134) (18,482)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments.................................. -- (35,450)
Sales and maturities of investments....................... -- 47,315
Purchase of equity securities............................. (5,000) --
Purchase of property, plant and equipment................. (1,646) (1,072)
Acquisition, net of acquired cash and assumed
liabilities............................................. (25,725) --
Other..................................................... 74 (1,367)
-------- --------
Net cash provided by (used in) investing
activities........................................ (32,297) 9,426
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Allocated proceeds from issuance of Biosurgery Stock,
net..................................................... 329 773
Net cash allocated from Genzyme General................... -- 5,855
Payments of notes receivable from stockholders............ 3,204 --
Bank overdraft............................................ (530) 780
Other..................................................... (530) 3,045
-------- --------
Net cash provided by financing activities........... 2,473 10,453
-------- --------

Effect of exchange rate changes on cash..................... (2,657) --
-------- --------
Increase (decrease) in cash and cash equivalents............ (56,615) 1,397
Cash and cash equivalents at beginning of period............ 78,163 32,046
-------- --------
Cash and cash equivalents at end of period.................. $ 21,548 $ 33,443
======== ========

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

GENZYME BIOSURGERY
A DIVISION OF GENZYME CORPORATION
NOTES TO UNAUDITED, COMBINED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The unaudited, combined financial statements of Genzyme Biosurgery for each
period include the balance sheets, results of operations and cash flows of the
businesses we allocate to Genzyme Biosurgery. We also allocate a portion of our
corporate operations to Genzyme Biosurgery using methods described in our
allocation policy included in Exhibit 99.1 to our 2000 Form 10-K. These
unaudited, combined financial statements are prepared using amounts included in
our unaudited, consolidated financial statements included in this Form 10-Q. We
prepared these unaudited, combined financial statements for Genzyme Biosurgery
following the requirements of the SEC for interim reporting. As permitted under
these rules, certain footnotes or other financial information that are normally
required by generally accepted accounting principles can be condensed or
omitted. We have reclassified certain 2000 data to conform to our 2001
presentation.

These financial statements include all normal and recurring adjustments that
we consider necessary for the fair presentation of Genzyme Biosurgery's
financial position and operating results. Since these are interim financial
statements, you should also read the financial statements and notes for Genzyme
Biosurgery included in our 2000 Form 10-K. Revenues, expenses, assets and
liabilities can vary from quarter to quarter. Therefore, the results and trends
in these interim financial statements may not be indicative of results for
future periods.

In December 2000, we acquired Biomatrix, Inc. We accounted for the
acquisition as a purchase. Immediately prior to the acquisition, we combined two
of our operating divisions, Genzyme Surgical Products and Genzyme Tissue Repair,
to form a new division called Genzyme Biosurgery. We allocated the acquired
assets and liabilities of Biomatrix to Genzyme Biosurgery. The combination of
Genzyme Surgical Products and Genzyme Tissue Repair to form Genzyme Biosurgery
did not result in any adjustments to the book values of the net assets of the
divisions because they remained divisions of the same corporation. We present
the financial statements of Genzyme Biosurgery as though the divisions had been
combined for all periods presented, and include the operations of Biomatrix from
the date of acquisition.

2. INVENTORIES (AMOUNTS IN THOUSANDS)

MARCH 31, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)

Raw materials........................................ $19,844 $21,271
Work-in-process...................................... 26,865 25,640
Finished products.................................... 10,751 14,663
------- -------
Total.............................................. $57,460 $61,574
======= =======

3. ACQUISITION OF THE CLASS A LIMITED PARTNERSHIP INTERESTS OF GENZYME
DEVELOPMENT PARTNERS, L.P.

In January 2001, we purchased all of the outstanding Class A limited
partnership interests of GDP for an advance payment of approximately
$25.7 million in cash plus royalties for ten years on sales of certain Sepra-TM-
products. We allocate our interest in GDP to Genzyme Biosurgery. As a result of
the acquisition, significant control over the activities of GDP passed to
Genzyme Biosurgery. The

GENZYME BIOSURGERY
A DIVISION OF GENZYME CORPORATION
NOTES TO UNAUDITED, COMBINED FINANCIAL STATEMENTS (CONTINUED)

3. ACQUISITION OF THE CLASS A LIMITED PARTNERSHIP INTERESTS OF GENZYME
DEVELOPMENT PARTNERS, L.P. (CONTINUED)
acquisition was accounted for as a purchase, and the purchase price was
allocated to the fair value of the intangible assets acquired as follows
(in thousands):

4. INVESTMENT IN FOCAL, INC.

In January 2001, Focal, Inc. completed the exercise of its option to require
us to purchase $5.0 million in Focal common stock at a price of $2.06 per share,
at which time we began accounting for our investment under the equity method. We
have allocated our investment in Focal to Genzyme Biosurgery. Subject to certain
conditions, we are committed, at Focal's option, exercisable from June 15 to
July 12, 2001, to make an additional equity investment payable in four
installments on July 16, July 31, August 15 and August 31, 2001 of up to an
aggregate of $5.0 million. See also Note 6., "Subsequent Event," below.

5. SEGMENT INFORMATION

We present segment information in a manner consistent with the method we use
to report this information to our management. Applying SFAS 131, Genzyme
Biosurgery has three reportable segments:

- Cardiothoracic, which includes chest drainage systems, instruments and
closures used in coronary artery bypass, valve replacement, and other
cardiothoracic surgeries;

- Orthodpaedics, which includes Synvisc-Registered Trademark-
viscosupplementation product and Carticel-TM- chondrocytes; and

- Biosurgical Specialties, which includes the Sepra-TM- products,
instruments for general and plastic surgery, and
Epicel-Registered Trademark- skin grafts.

GENZYME BIOSURGERY
A DIVISION OF GENZYME CORPORATION
NOTES TO UNAUDITED, COMBINED FINANCIAL STATEMENTS (CONTINUED)

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

THREE MONTHS ENDED
MARCH 31,
-----------------------
2001 2000
-------- --------
(UNAUDITED, AMOUNTS IN
THOUSANDS)

Revenues(1):
Cardiothoracic....................................... $18,289 $19,650
Orthopaedics......................................... 20,417 4,532
Biosurgical Specialties.............................. 15,446 10,746
Other(2)............................................. 4 21
------- -------
Total.................................................. $54,156 $34,949
======= =======
Gross Profit(2):
Cardiothoracic....................................... $ 7,164 $ 8,387
Orthopaedics......................................... 13,529 3,933
Biosurgical Specialties.............................. 1,684 3,546
Other(2)............................................. 4 21
------- -------
Total.................................................. $22,381 $15,887
======= =======

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

(1) In December 2000, we acquired Biomatrix, a company that develops,
manufactures, markets and sells a series of proprietary viscoelastic
products based on hyaluronan technology that are used in therapeutic medical
applications and skin care. We allocated the acquisition to Genzyme
Biosurgery. The operations of Biomatrix are included in the results of
Genzyme Biosurgery for the three months ended March 31, 2001.

(2) The Other category includes revenue from Genzyme Biosurgery's research and
development contracts which we do not allocate to a particular segment of
Genzyme Biosurgery.

We do not allocate assets within Genzyme Biosurgery for purposes of segment
information. There has been no material change in segment assets since
December 31, 2000.

6. SUBSEQUENT EVENT

PLANNED ACQUISITION OF FOCAL, INC.

In April 2001, we signed a definitive merger agreement to acquire Focal. We
will allocate the acquisition to Genzyme Biosurgery and account for the
acquisition using the purchase method of accounting. Focal develops,
manufactures and sells products based on a proprietary polymer technology. We
currently hold approximately 22% of the outstanding shares of Focal's common
stock and will acquire the remaining 78% in an exchange of shares of Biosurgery
Stock for shares of Focal common stock upon completion of the merger. Under the
terms of the merger agreement, Focal shareholders will receive 0.1545 of a share
of Biosurgery Stock for each share of Focal common stock they hold, except for
10,000 shares of Focal common stock that we have agreed to purchase for cash
from a Focal shareholder. Approximately 2.1 million shares of Biosurgery Stock
will be used as merger consideration. We expect the acquisition, which is
subject to the approval of Focal's shareholders, to close in the second or third
quarter of 2001. In light of the merger, Focal agreed to modify certain terms of
the existing stock purchase agreement between the companies. This agreement
commits us, at Focal's option, to make future equity investments of up to
$5.0 million subject to certain conditions.

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED, AMOUNTS IN THOUSANDS)

THREE MONTHS
ENDED
MARCH 31,
-------------------
2001 2000
-------- --------

Revenues:
Licensing revenue......................................... $ 664 $ 2,550
Royalty revenue........................................... 45 5
Research and development revenue.......................... 703 --
------- -------
Total revenues........................................ 1,412 2,555
------- -------
Operating costs and expenses:
Cost of revenue........................................... 544 56
Selling, general and administrative....................... 1,891 1,190
Research and development.................................. 5,661 4,058
Amortization of intangibles............................... -- 2,956
------- -------
Total operating costs and expenses:................... 8,096 8,260
------- -------
Operating loss.............................................. (6,684) (5,705)
------- -------
Other income (expenses):
Interest income........................................... 423 73
Interest expense.......................................... (13) (87)
------- -------
Total other income (expenses)......................... 410 (14)
------- -------
Loss before income taxes.................................... (6,274) (5,719)
Tax benefit................................................. -- 662
------- -------
Division net loss........................................... $(6,274) $(5,057)
======= =======
Comprehensive loss, net of tax:
Division net loss......................................... $(6,274) $(5,057)
Other comprehensive loss, net of tax:
Unrealized gains (losses) on securities arising during the
period.................................................. -- --
------- -------
Comprehensive loss........................................ $(6,274) $(5,057)
======= =======

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

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION
COMBINED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)

MARCH 31, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)

ASSETS
Current assets:
Cash and cash equivalents................................. $23,037 $22,209
Short-term investments.................................... -- 7,942
Accounts receivable, net.................................. 411 231
Prepaid expenses and other current assets................. 22 126
------- -------
Total current assets.................................... 23,470 30,508

Equipment, net.............................................. 213 244
------- -------
Total assets............................................ $23,683 $30,752
======= =======
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accrued expenses.......................................... $ 921 $ 1,540
Due to Genzyme General.................................... 5,296 4,660
Deferred revenue--current portion......................... 1,634 2,208
------- -------
Total current liabilities............................. 7,851 8,408

Deferred revenue--long term portion......................... 2,410 2,818
------- -------
Total liabilities..................................... 10,261 11,226

Division equity............................................. 13,422 19,526
------- -------
Total liabilities and division equity................. $23,683 $30,752
======= =======

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

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED, AMOUNTS IN THOUSANDS)

THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
-------- --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Division net loss......................................... $(6,274) $(5,057)
Reconciliation of division net loss to net cash used in
operating activities:
Depreciation and amortization........................... 31 2,995
Deferred income tax benefit............................. -- (662)
Other................................................... 152 --
Increase (decrease) in cash from working capital
changes:
Accounts receivable................................... (180) --
Prepaid expenses and other current assets............. 103 (235)
Accrued expenses, deferred revenue and other.......... (1,600) 1,021
Due to Genzyme General................................ 636 (1,334)
------- -------
Net cash used in operating activities............... (7,132) (3,272)
------- -------

CASH FLOWS FROM INVESTING ACTIVITIES:
Sales and maturities of investments....................... 7,792 --
------- -------
Net cash provided by investing activities........... 7,792 --
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Allocated proceeds from issuance of Molecular Oncology
Stock................................................... 168 1,228
Other..................................................... -- (1)
------- -------
Net cash provided by financing activities........... 168 1,227
------- -------
Increase (decrease) in cash and cash equivalents............ 828 (2,045)
Cash and cash equivalents at beginning of period............ 22,209 3,587
------- -------
Cash and cash equivalents at end of period.................. $23,037 $ 1,542
======= =======

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

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

NOTES TO UNAUDITED, COMBINED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The unaudited, 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 included in Exhibit 99.1 to our 2000
Form 10-K. These unaudited, combined financial statements are prepared using
amounts included in our unaudited, consolidated financial statements included in
this Form 10-Q. We prepared these unaudited, combined financial statements for
Genzyme Molecular Oncology following the requirements of the SEC for interim
reporting. As permitted under these rules, certain footnotes or other financial
information that are normally required by generally accepted accounting
principles can be condensed or omitted. We have reclassified certain 2000 data
to conform to the 2001 presentation.

These financial statements include all normal and recurring adjustments that
we consider necessary for the fair presentation of Genzyme Molecular Oncology's
financial position and operating results. Since these are interim financial
statements, you should also read the financial statements and notes for Genzyme
Molecular Oncology included in our 2000 Form 10-K. Revenues, expenses, assets
and liabilities can vary from quarter to quarter. Therefore, the results and
trends in these interim financial statements may not be indicative of results
for future periods.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This discussion contains forward-looking statements. These forward-looking
statements represent the expectations of our management as of the filing date of
this report. Actual results could differ materially from those anticipated by
the forward-looking statements due to the risks and uncertainties described in
Exhibit 99.2 to our 2000 Form 10-K. You should consider carefully each of these
risks and uncertainties in evaluating our financial condition and results of
operations.

We are a biotechnology company that develops innovative products and
services for significant unmet medical needs. We have three operating divisions:

- Genzyme General, which develops and markets:

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

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

- other products and services, such as genetic testing services and lipid
and peptide products for drug delivery.

We currently have three designated series of common stock--Genzyme General
Division common stock, which we refer to as "Genzyme General Stock," Genzyme
Biosurgery Division common stock, which we refer to as "Biosurgery Stock" and
Genzyme Molecular Oncology Division common stock, which we refer to as
"Molecular Oncology Stock." We also refer to our series of stock as "tracking
stock." Unlike typical common stock, each of our tracking stocks is designed to
track the financial performance of a specific subset of our business operations
and its allocated assets, rather than the operations and assets of our entire
company. The chief mechanisms intended to cause each tracking stock to "track"
the financial performance of each division are provisions in our charter
governing the dividends and distributions. Under these provisions, our charter:

- factors the assets and liabilities and income or losses attributable to a
division into the determination of the amount available to pay dividends
on the associated tracking stock; and

- requires us to exchange, redeem or distribute a dividend to the holders of
Biosurgery Stock or Molecular Oncology Stock if all or substantially all
of the assets allocated to those corresponding divisions 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 the exchanged 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 each series of stock is defined in our charter as the
net income or loss of the corresponding division determined in accordance with
generally accepted accounting principles and as adjusted for tax benefits
allocated to or from that division 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 forseeable future. Our board of directors has also adopted
accounting policies relating to the management of our operating divisions. These
policies are set forth in Exhibit 99.1 to our 2000 Form 10-K.

Because the earnings allocated to each series of stock are based on the
income or losses attributable to each corresponding division, we include
financial statements and management's discussion and analysis for the
corporation as well as for each of our divisions to aid investors in evaluating
our performance and the performance of each of our divisions.

While each tracking stock is designed to reflect a division's performance,
it is common stock of Genzyme Corporation and not of a division; each division
is not a company or a legal entity, and therefore does not and cannot issue
stock. Consequently, holders of a series of tracking stock have no specific
rights to assets allocated to the corresponding division. Genzyme Corporation
continues to hold title to all of the assets allocated to each division 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 each
tracking 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 each tracking stock would only have the rights of common stock
holders in the combined assets of Genzyme.

We provide separate financial statements for each of our divisions as well
as consolidated statements that include the consolidated results of each of our
divisions and our corporate operations taken as a whole. You should read this
discussion of and analysis of our financial position and results of operations
in conjunction with those unaudited, consolidated financial statements and
related notes, which are included in this report.

A. RESULTS OF OPERATIONS

GENZYME CORPORATION

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

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Total revenues........................................ $278,261 $208,130 34%
-------- --------
Cost of products and services sold.................... 89,953 60,110 50%
Selling, general and administrative................... 91,114 61,551 48%
Research and development (including research and
development related to contracts)................... 57,110 55,699 3%
Amortization of intangibles........................... 28,991 6,098 375%
-------- --------
Total operating costs and expenses.................... 267,168 183,458 46%
-------- --------
Operating income...................................... 11,093 24,672 (55)%
Other income (expenses), net.......................... (12,673) 19,000 (167)%
-------- --------
Income (loss) before income taxes..................... (1,580) 43,672 (104)%
Benefit from (provision for) income taxes............. 670 (11,854) 106%
-------- --------
Net income (loss) before cumulative effect of change
in accounting principle............................. (910) 31,818 (103)%
Cumulative effect of change in accounting principle,
net of tax.......................................... 4,167 -- N/A
-------- --------
Net income............................................ $ 3,257 $ 31,818 (90)%
======== ========

REVENUES

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Product revenue....................................... $250,830 $184,421 36%
Service revenue....................................... 23,760 20,966 13%
-------- --------
Total product and service revenue................. 274,590 205,387 34%
Research and development revenue...................... 3,671 2,743 34%
-------- --------
Total revenues.................................... $278,261 $208,130 34%
======== ========

PRODUCT REVENUE:

We derive product revenue from sales by Genzyme General of therapeutic and
diagnostic products and other products, including Cerezyme-Registered Trademark-
and Ceredase-Registered Trademark- enzymes and Renagel-Registered Trademark-
phosphate binder, and sales by Genzyme Biosurgery of cardiothoracic,
orthopaedics and biosurgical specialties products,

including Synvisc-Registered Trademark- viscosupplementation product,
Seprafilm-TM- bioresorbable membrane and Focal Seal-Registered Trademark--L
surgical sealant.

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Genzyme General:
Therapeutics:
Cerezyme-Registered Trademark- enzyme and
Ceredase-Registered Trademark- enzyme........... $139,631 $128,605 9%
Renagel-Registered Trademark- phosphate binder.... 28,595 -- N/A
Thyrogen-Registered Trademark- hormone............ 4,180 3,361 24%
Other therapeutic products........................ 2,496 1,852 35%
-------- --------
Total Therapeutics.............................. 174,902 133,818 31%
Diagnostic products................................... 16,424 15,238 8%
Other................................................. 10,880 6,283 73%
-------- --------
Total product revenue--Genzyme General.......... 202,206 155,339 30%
-------- --------
Genzyme Biosurgery:
Cardiothoracic...................................... 18,289 19,650 (7)%
Orthopaedics........................................ 16,068 -- N/A
Biosurgical specialties............................. 14,267 9,432 51%
-------- --------
Total product revenue--Genzyme Biosurgery....... 48,624 29,082 67%
-------- --------
Total product revenues................................ $250,830 $184,421 36%
======== ========

The increase in sales of Cerezyme-Registered Trademark- enzyme was
attributable to our continued identification of new Gaucher disease patients
worldwide coupled with significant investment in our global infrastructure that
has continued to increase international sales. Additionally, we continue to make
available Ceredase-Registered Trademark- enzyme for the treatment of Gaucher
disease, although we have successfully converted virtually all Gaucher disease
patients who receive therapy from us to a treatment regimen using
Cerezyme-Registered Trademark- enzyme.

Our results of operations are highly dependent on sales of
Cerezyme-Registered Trademark- enzyme and a reduction in revenue from sales of
this product would adversely affect our results of operations. Revenue from
Cerezyme-Registered Trademark- enzyme would be impacted negatively if
competitors developed alternative treatments for Gaucher disease and the
alternative products gained commercial acceptance. We are aware of companies
that have initiated efforts to develop competitive products and other companies
may do so in the future. Cerezyme-Registered Trademark- enzyme has orphan drug
status, providing us with exclusive marketing rights for
Cerezyme-Registered Trademark- enzyme in the United States until May 2001. We
also have patents protecting our method of manufacturing
Cerezyme-Registered Trademark- enzyme until 2010 and the composition of
Cerezyme-Registered Trademark- enzyme as made by that process until 2013. The
expiration of market exclusivity and orphan drug status in May 2001 will likely
subject Cerezyme-Registered Trademark- enzyme to increased competition which may
decrease the amount of revenue we receive from this product or the growth of
that revenue.

The following table provides information regarding the change in sales of
our Gaucher disease therapies as a percentage of total product revenue during
the periods presented:

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Sales of Cerezyme-Registered Trademark- enzyme and
Ceredase-Registered Trademark- enzyme............... $139,631 $128,605 9%
% of total product revenue............................ 56% 70%

Although sales of Genzyme General's Gaucher disease therapies continue to
increase, the decline as a percentage of total product revenue is a trend we
expect will continue in 2001. We expect that growth in the sales of
Renagel-Registered Trademark- phosphate binder will continue to increase, driven
primarily by the accelerating adoption of the product by nephrologists, as
evidenced during the past two quarters by significant increases in both renewal
prescriptions and new prescriptions. Revenue from sales of
Renagel-Registered Trademark- phosphate binder represented approximately 11% of
our total product revenue for the three months ended March 31, 2001 and included
sales of Renagel-Registered Trademark- capsules and sales of the new tablet
formation. We launched the tablet formulation in the United States during the
third quarter of 2000. Renagel-Registered Trademark- phosphate binder is used to
reduce serum phosphorus levels in patients with end-stage renal disease. We
began recording revenues from Renagel-Registered Trademark- phosphate binder
during the second quarter of 2000 under an amended distribution arrangement with
GelTex, which we acquired in December 2000. Prior to this amendment, revenues
from Renagel-Registered Trademark- phosphate binder were recorded by RenaGel
LLC, our joint venture with GelTex, and were $8.0 million for the three months
ended March 31, 2000.

Therapeutics revenue for each period also includes sales of
Thyrogen-Registered Trademark- hormone, which is an adjunctive diagnostic tool
for well differentiated thyroid cancer. Revenues for
Thyrogen-Registered Trademark- hormone increased for the three months ended
March 31, 2001 as compared to the same period a year ago, due primarily to
increased market penetration.

Diagnostic product revenues increased for the three months ended March 31,
2001 as compared to the same period in 2000, due primarily to increased sales of
HDL and LDL cholesterol testing products. Diagnostic's product revenue includes
royalties on product sales by Techne Corporation's biotechnology group.

The decrease in cardiothoracic revenue in the three months ended March 31,
2001, when compared to the same period of 2000, was due to the competitive
pricing pressures in the chest drainage market. This decrease was offset, in
part, by the continued growth in the minimally invasive cardiac surgery products
and the sales revenue from Focal Seal-Registered Trademark--L surgical sealant,
which was added to the cardiothoracic product category in the third quarter of
2000 pursuant to a distribution and marketing agreement with Focal that provides
us with exclusive distribution rights for this product in North America.

Orthopaedics product revenue increased for the three months ended March 31,
2001, when compared to the same period of 2000, primarily due to the sales of
Synvisc-Registered Trademark- viscosupplementation product, which was added to
the orthopaedics product category in December 2000 through our acquisition of
Biomatrix.

Biosurgical specialties product revenue increased in the three months ended
March 31, 2001 when compared to the same period of 2000 due to the increase in
sales of Seprafilm-TM- bioresorbable membrane and Sepramesh-TM- biosurgical
composite. An increase in sales to original equipment manufacturers, and sales
generated from Hylaform-Registered Trademark- and other skin care products also
contributed to the overall increase in biosurgical specialties product revenue.

SERVICE REVENUE:

We derive service revenue primarily from three principal sources:

- genetic testing services performed by Genzyme General;

- Genzyme Biosurgery's Carticel-Registered Trademark- chondrocytes for the
treatment of cartilage damage; and

- Genzyme Biosurgery's Epicel-Registered Trademark- skin grafts for the
treatment of severe burns.

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Genzyme General......................................... $18,232 $15,120 21%
Genzyme Biosurgery...................................... 5,528 5,846 (5)%
------- -------
Total service revenues............................ $23,760 $20,966 13%
======= =======

Our service revenue increased during the three months ended March 31, 2001
primarily due to growth in sales of our DNA and cancer testing services.

RESEARCH AND DEVELOPMENT REVENUE:

THREE MONTHS
ENDED
MARCH 31, INCREASE/
------------------- (DECREASE)
2001 2000 % CHANGE
-------- -------- ----------
(UNAUDITED, AMOUNTS IN
THOUSANDS, EXCEPT PERCENTAGE
DATA)

Genzyme General........................................... $2,255 $ 167 1250%
Genzyme Biosurgery........................................ 4 21 (81)%
Genzyme Molecular Oncology................................ 1,412 2,555 (45)%
------ ------
Total research and development revenues............. $3,671 $2,743 34%
====== ======

The increase in Genzyme General's research and development revenue in the
three months ended March 31, 2001 is primarily attributable to $1.9 million of
revenue recognized by GelTex, which we acquired in December 2000, in connection
with its collaboration agreements for the development of a second-generation
lipid-altering product. Genzyme Biosurgery's research and development revenue
decreased as a result of a non-recurring license fee it received in the first
quarter of 2000. Genzyme Molecular Oncology's research and development revenue
for the first three months of 2001 is attributable to funded research and
revenue recognized from a technology access fee under the cancer antigen
discovery agreement it entered with Purdue Pharma, L.P. in the fourth quarter of
2000, and payments received under cancer diagnostic license agreements. Genzyme
Molecular Oncology's research and development revenue in the same period of 2000
was attributable to a $2.0 million development milestone payment received under
a license agreement with Schering-Plough Ltd.

INTERNATIONAL PRODUCT AND SERVICE REVENUE:

A substantial portion of our revenue was generated outside of the United
States, as described in the following table. Most of these revenues were
attributable to sales of Cerezyme-Registered Trademark- enzyme, which increased
18% to $96.0 million in the three months ended March 31, 2001 from $81.0 million
in the same period last year due to our continued identification of new Gaucher
disease patients worldwide coupled with significant investment in our global
infrastructure that has continued to increase

international sales. The following table provides information regarding the
change in international product and service sales as a percentage of total
product and service revenue during the periods presented:

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

International product and service revenue................... $108,903 $ 86,777 25%
% of total product and service revenue...................... 40% 42%

MARGINS

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Product margin:
Genzyme General..................................... $154,312 $123,119 25%
% of total product revenue.......................... 61% 67%

Genzyme Biosurgery.................................. $ 19,986 $ 13,043 53%
% of total product revenue.......................... 8% 7%

Total product margin................................ $174,298 $136,162 28%
% of total product revenue.......................... 69% 74%

Service margin:
Genzyme General..................................... $ 7,948 $ 6,292 26%
% of total service revenue.......................... 33% 30%

Genzyme Biosurgery.................................. $ 2,391 $ 2,823 (15)%
% of total service revenue.......................... 10% 13%

Total service margin................................ $ 10,339 $ 9,115 13%
% of total service revenue.......................... 44% 43%

Total gross margin:
Genzyme General total gross margin.................. $162,260 $129,411 25%
% of total product and service revenue.............. 59% 63%

Genzyme Biosurgery.................................. $ 22,377 $ 15,866 41%
% of total product and service revenues............. 8% 8%

Total gross margin.................................. $184,637 $145,277 27%
% of total product and service revenue.............. 67% 71%

We provide a broad range of healthcare products and services. As a result,
our gross margin varies significantly based on the category of product or
service. Sales of therapeutic products, including Cerezyme-Registered Trademark-
enzyme, result in higher margins than sales of surgical or diagnostic products.

PRODUCT MARGINS

Product margins for products allocated to Genzyme General continued to
increase for the three months ended March 31, 2001 as compared to the same
period a year ago primarily as a result of increased sales of
Cerezyme-Registered Trademark- enzyme and Renagel-Registered Trademark-
phosphate binder during the first quarter of 2001.

This was offset in part by a charge of $3.4 million to cost of products sold to
amortize a portion of the write-up of the inventory obtained in connection with
our acquisition of GelTex. The decrease in Genzyme General's product margin as a
percentage of product revenue for the period ended March 31, 2001 as compared to
the same period a year ago is primarily attributable to the addition of
Renagel-Registered Trademark- phosphate binder, a lower margin product.

Product margins for products allocated to Genzyme Biosurgery increased
during the period due to increased sales of higher margin products such as
Synvisc-Registered Trademark- viscosupplementation products and devices for
minimally invasive cardiac surgery. Genzyme Biosurgery's product margins for the
three months ended March 31, 2001 include a charge of $6.0 million to cost of
products sold to amortize a portion of the write-up of the inventory obtained in
connection with our acquisition of Biomatrix in December 2000. Without the
effect of this charge, Genzyme Biosurgery's product margin for the three months
ended March 31, 2001 would have increased 99% to $26.0 million.

SERVICE MARGINS

Service margins for services allocated to Genzyme General for the three
months ended March 31, 2001, as compared to the same period a year ago,
continued to increase primarily as a result of increased sales of our DNA and
cancer testing services. Service margin as a percentage of service revenue
increased slightly as increased service revenues of 21% were offset by a 16%
increase in the cost of services sold for the three months ended March 31, 2001
as compared to the same period a year ago.

Service margins for services allocated to Genzyme Biosurgery decreased for
the three months ended March 31, 2001 as a result of a decrease in
Carticel-Registered Trademark- chondrocytes and Epicel-Registered Trademark-
skin grafts service revenue and an increase in the fixed costs associated with
these services.

OPERATING EXPENSES

The increase in selling, general and administrative expenses for the three
months ended March 31, 2001 as compared to the three months ended March 31, 2000
is related to:

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

- increased expenditures to support the increased sales of
Cerezyme-Registered Trademark- enzyme, Renagel-Registered Trademark-
phosphate binder, Thyrogen-Registered Trademark- hormone and Fabrazyme-TM-
enzyme; and

- the addition of expenses from GelTex and Biomatrix, both of which we
acquired in December 2000.

Research and development expenses for the three months ended March 31, 2000
included a one-time charge of $19.5 million representing initial amounts payable
to Synpac (North Carolina), Inc. under a license granted to us by Synpac to
develop and commercialize a human alpha-glucosidase enzyme replacement therapy
for Pompe disease. Excluding this charge, research and development expenses
increased 58% for the three months ended March 31, 2001 as compared to the three
months ended March 31, 2000, as a result of:

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

- the addition of spending on Synvisc-Registered Trademark-
viscosupplementation product as a result of our acquisition of Biomatrix;

- the addition of spending on the C. DIFFICILE colitis, DENSPM, iron
chelation, oral mucositis, anti-obesity, and GT102-279 programs as a
result of the acquisition of GelTex; and

- increased spending on other internal programs.

In connection with our acquisition of GelTex on December 14, 2000, we
converted options to purchase GelTex common stock into options to purchase
Genzyme General Stock. In accordance with FASB Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock Compensation" ("FIN 44"),
at the date of acquisition the intrinsic value for the unvested portion of these
options of $10.2 million was allocated to deferred compensation, a component of
stockholders' equity. This value is being amortized to operating expense over
the remaining vesting period of one year from the date of acquisition. The
expense is being allocated to the appropriate expense categories of our
statement of operations based on the functional responsibility of each employee
or option holder. For the three months ended March 31, 2001, we recorded $2.6
million of compensation expense related to these options, of which $2.2 million
was charged to research and development expense and $0.4 million was charged to
selling, general and administrative expense. At March 31, 2001, $7.4 million
remained in deferred compensation, all of which will be fully amortized by
December 14, 2001.

OTHER INCOME AND EXPENSES

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Equity in net loss of unconsolidated affiliates...... $ (9,015) $(8,133) 11%
Gain on affiliate sale of stock...................... -- 20,270 (100)%
Minority interest in net loss of subsidiary.......... 1,274 856 49%
Other................................................ (3,710) 2 (185,600)%
Investment income.................................... 10,147 9,944 2%
Interest expense..................................... (11,370) (3,939) 189%
-------- -------
Total other income (expense), net.................... $(12,674) $19,000 (167)%
======== =======

EQUITY IN NET LOSS OF UNCONSOLIDATED AFFILIATES

We record the results of the following joint ventures in equity in net loss
of unconsolidated affiliates:

JOINT VENTURE PARTNER EFFECTIVE DATE PRODUCT/INDICATION GENZYME DIVISION
- ------------- ------------------- -------------- --------------------------- ---------------------------

RenaGel LLC GelTex (1) June 1997 Renagel-Registered Trademark- Genzyme General
phosphate binder for the
reduction of serum
phosphorus in patients with
end-stage renal disease
BioMarin/Genzyme BioMarin September 1998 Aldurazyme-TM- enzyme for Genzyme General
LLC Pharmaceutical Inc. the treatment of
mucopolysaccharidosis-I
Pharming/Genzyme Pharming Group, October 1998 Human alpha-glucosidase for Genzyme General
LLC N.V. the treatment of Pompe
disease (transgenic
product)
Genzyme/Pharming Pharming Group, June 2000 Human alpha-glucosidase for Genzyme General
Alliance LLC N.V. the treatment of Pompe
disease (produced using CHO
cells)
Diacrin/Genzyme Diacrin, Inc. October 1996 Products using porcine Genzyme Biosurgery (until
LLC fetal cells for the May 1999); Genzyme General
treatment of Parkinson's (after May 1999)
and Huntington's diseases

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

(1) We acquired GelTex in December 2000.

We currently own approximately 26% of the common stock of Genzyme
Transgenics and also record in equity in net loss of unconsolidated affiliates
our portion of its results.

Our equity in net loss of unconsolidated affiliates increased slightly for
the three months ended March 31, 2001 as compared to the three months ended
March 31, 2000 as a result of:

- increased losses from our joint venture with BioMarin;

- increased losses from our joint ventures with Pharming; and

- increased losses from Genzyme Transgenics.

These increases were offset in part by decreased losses from our joint venture
with Diacrin.

GAIN ON AFFILIATE SALE OF STOCK

During the quarter ended March 31, 2000, in accordance with our policy
pertaining to affiliate sales of stock, we recognized a gain of $20.3 million
due to the issuance by Genzyme Transgenics, an unconsolidated affiliate, of
additional shares of its common stock. There were no similar gains recognized
during the quarter ended March 31, 2001.

MINORITY INTEREST IN NET LOSS OF SUBSIDIARY

ATIII LLC is our joint venture with Genzyme Transgenics for the development
and commercialization of transgenic recombinant human antithrombin III. We
allocate our interest in ATIII LLC to Genzyme General. Due to our combined
direct and indirect interest in ATIII LLC, Genzyme General consolidates the
results of ATIII LLC and records Genzyme Transgenics' portion of the losses of
that joint venture as minority interest. Minority interest increased in the
three months ended March 31, 2001 due to a change in the funding agreement for
the joint venture in March 2001, retroactive to January 1, 2001, which increased
Genzyme Transgenics portion of the losses incurred by ATIII LLC to 50% as
compared to 30% for the same period a year ago.

INVESTMENT INCOME

Our investment income increased for the three months ended March 31, 2001
due primarily to higher average invested cash balances as compared to the three
months ended March 31, 2000.

INTEREST EXPENSE

Our interest expense increased for the three months ended March 31, 2001 as
compared to the same period a year ago as a result of an additional
$350.0 million of debt drawn under our revolving credit facility in
December 2000, which was used to finance of a portion of the cash consideration
for our acquisitions of GelTex and Biomatrix.

TAX PROVISION

THREE MONTHS
ENDED
MARCH 31, INCREASE/
------------------- (DECREASE)
2001 2000 % CHANGE
-------- -------- ----------
(UNAUDITED, AMOUNTS IN
THOUSANDS,
EXCEPT PERCENTAGE DATA)

Benefit from (provision for) income taxes......... $670 $(11,854) (106)%
Effective tax rate................................ 42% 27%

Our tax rates for both periods vary from the U.S. statutory tax rate as a
result of our:

- provision for state income taxes;

- use of a foreign sales corporation;

- nondeductible amortization of intangibles;

- use of tax credits; and

- share of losses of unconsolidated affiliates.

The increase in our effective tax rate for the period ending March 31, 2001,
as compared to the same period a year ago, was primarily attributable to an
increase in non-deductible amortization of intangible consisting largely of
goodwill resulting from our acquisitions of GelTex and Biomatrix in December
2000.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

On January 1, 2001, we adopted Statement of Financial Accounting Standards
("SFAS") 133, "Accounting for Derivative Instruments and Hedging Activities," as
amended by SFAS 137 and SFAS 138. SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that we
recognize all derivative instruments as either assets or liabilities in our
consolidated balance sheet and measure those instruments at fair value.
Subsequent changes in fair value will be reflected in income, unless the
derivative is part of a qualified hedging relationship.

In accordance with the transition provisions of SFAS 133, we recorded a
cumulative-effect adjustment of $4.2 million, net of tax, in our unaudited,
consolidated statement of operations to record the fair value of certain common
stock warrants held on January 1, 2001. Transition adjustments pertaining to
interest rate swaps designated as cash-flow hedges and our foreign currency
forward contracts were not significant. For the three months ended March 31,
2001, we recorded a charge of $3.6 million in other expense to reflect the
change in the value of certain common stock warrants from

January 1, 2001 to March 31, 2001. We also recorded a charge of $0.5 million in
other comprehensive income to reflect the change in the value of our interest
rate swaps the period, net of tax.

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

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

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

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Total revenues........................................ $222,693 $170,626 31%
-------- --------

Cost of products and services sold.................... 58,178 41,048 42%
Selling, general and administrative................... 58,531 38,222 53%
Research and development (including research and
development related to contracts)................... 40,186 42,743 (6)%
Amortization of intangibles........................... 17,670 1,968 798%
-------- --------

Total operating costs and expenses................ 174,565 123,981 41%
-------- --------
Operating income...................................... 48,128 46,645 3%
Other income (expenses), net.......................... (8,107) 17,508 (146)%
-------- --------

Income before income taxes............................ 40,021 64,153 (38)%
Provision for income taxes............................ (14,876) (18,844) (21)%
-------- --------

Division net income before cumulative effect of change
in accounting principle............................. 25,145 45,309 (45)%
Cumulative effect of change in accounting principle,
net of tax.......................................... 4,167 -- N/A
-------- --------

Division net income................................... $ 29,312 $ 45,309 (35)%
======== ========

REVENUES

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Product revenue....................................... $202,206 $155,339 30%
Service revenue....................................... 18,232 15,120 21%
-------- --------
Total product and service revenue................. 220,438 170,459 29%
Research and development revenue...................... 2,255 167 1,250%
-------- --------

Total revenues........................................ $222,693 $170,626 31%
======== ========

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

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Product Revenue:
Therapeutics:
Cerezyme-Registered Trademark- enzyme and
Ceredase-Registered Trademark- enzyme........... $139,631 $128,605 9%
Renagel-Registered Trademark- phosphate binder.... 28,595 -- N/A
Thyrogen-Registered Trademark- hormone............ 4,180 3,361 24%
Other therapeutic products........................ 2,496 1,852 35%
-------- --------
Total Therapeutics.............................. 174,902 133,818 31%

Diagnostic products................................... 16,424 15,238 8%
Other............................................... 10,880 6,283 73%
-------- --------
Total product revenue............................. 202,206 155,339 30%

Service Revenue:
Other............................................... 18,232 15,120 21%
-------- --------
Total product and service revenues.................... $220,438 $170,459 29%
======== ========

THERAPEUTICS

Genzyme General's continued increase in product revenue primarily was due to
increased sales of Cerezyme-Registered Trademark- enzyme, which was attributable
to Genzyme General's continued identification of new Gaucher disease patients
worldwide coupled with significant investment in our global infrastructure that
has continued to increase international sales. Additionally, Genzyme General
continues to market Ceredase-Registered Trademark- enzyme for the treatment of
Gaucher disease, although it has successfully converted virtually all Gaucher
disease patients that we treat to a treatment regimen using
Cerezyme-Registered Trademark- enzyme.

Genzyme General's results of operations are highly dependent on sales of
Cerezyme-Registered Trademark- enzyme and a reduction in revenue from sales of
this product would adversely affect its results of operations. Revenue from
Cerezyme-Registered Trademark- enzyme would be impacted negatively if
competitors developed alternative treatments for Gaucher disease and the
alternative products gained commercial acceptance. Genzyme General is aware of
companies that have initiated efforts to develop competitive products and other
companies may do so in the future. Cerezyme-Registered Trademark- enzyme has
orphan drug status, providing us with exclusive marketing rights for
Cerezyme-Registered Trademark- enzyme in the United States until May 2001. We
also have

patents protecting our method of manufacturing Cerezyme-Registered Trademark-
enzyme until 2010 and the composition of Cerezyme-Registered Trademark- enzyme
as made by that process until 2013. The expiration of market exclusivity and
orphan drug status in May 2001 will likely subject
Cerezyme-Registered Trademark- enzyme to increased competition which may
decrease the amount of revenue Genzyme General receives from this product or the
growth of that revenue. The following table provides information regarding the
change in sales of Genzyme General's Gaucher disease therapies as a percentage
of its total product revenue during the periods presented:

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Sales of Cerezyme-Registered Trademark- enzyme and
Ceredase-Registered Trademark- enzyme............... $139,631 $128,605 9%
% of total product revenue............................ 69% 83%

Although sales of Genzyme General's Gaucher disease therapies continue to
increase, the decline as a percentage of total product revenue is a trend we
expect will continue in 2001. We expect that growth in the sales of
Renagel-Registered Trademark- phosphate binder will continue to increase, driven
primarily by the accelerating adoption of the product by nephrologists, as
evidenced during the past two quarters by significant increases in both renewal
prescriptions and new prescriptions. Revenue from sales of
Renagel-Registered Trademark- phosphate binder represented approximately 14% of
Genzyme General's total product revenue for the three months ended March 31,
2001. Renagel-Registered Trademark- phosphate binder is used to reduce serum
phosphorus levels in patients with end-stage renal disease. We began recording
revenues from Renagel-Registered Trademark- phosphate binder during the second
quarter of 2000 under an amended distribution agreement with GelTex, which we
acquired in December 2000. Prior to this amendment, revenues from
Renagel-Registered Trademark- phosphate binder were recorded by RenaGel LLC, our
joint venture with GelTex, and were $8.0 million for the three months ended
March 31, 2000. Revenues from sales of Renagel-Registered Trademark- phosphate
binder include sales of Renagel-Registered Trademark- capsules and sales of the
new tablet formulation. We launched the tablet formulation in the United States
during the third quarter of 2000.

DIAGNOSTIC PRODUCTS

Diagnostic product revenues increased for the three months ended March 31,
2001 as compared to the same period in 2000, due primarily to increased sales of
HDL and LDL cholesterol testing products. Diagnostics' product revenue includes
royalties on product sales by Techne Corporation's biotechnology group.

OTHER

The increase in other revenue for the three months ended March 31, 2001 as
compared to the same period in 2000, was primarily attributable to:

- the addition of sales of Fabrazyme-TM- enzyme in France under an
Authorisation Temporaire d'utilisation from the French Medicines Agency;

- increased sales of lipids and peptides for drug delivery; and

- increased sales of genetic testing services.

RESEARCH AND DEVELOPMENT REVENUE

The increase in Genzyme General's research and development revenue is
primarily attributable to revenue recognized by GelTex, which we acquired in
December 2000, in connection with its collaboration agreement for the
development of a second-generation lipid-altering product.

INTERNATIONAL PRODUCT AND SERVICE REVENUE

A substantial portion of Genzyme General's revenue was generated outside of
the United States, as described in the table below. Most of these revenues were
attributable to sales of Cerezyme-Registered Trademark- enzyme, which increased
18% to $96.0 million in the three months ended March 31, 2001 from
$81.0 million in the same period last year primarily due to the continued
identification of new Gaucher disease patients worldwide coupled with
significant investment in our global infrastructure that has continued to
increase international sales. The following table provides information regarding
the change in international product and service sales as a percentage of total
product and service revenue during the periods presented:

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

International product and service revenue............. $ 97,118 $ 77,772 25%
% of total product and service revenue................ 44% 46%

MARGINS

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Product margin........................................ $154,312 $123,119 25%
% of product revenue.................................. 76% 79%

Service margin........................................ $ 7,948 $ 6,292 26%
% of service revenue.................................. 44% 42%

Total gross margin.................................... $162,260 $129,411 25%
% of total product and service revenue................ 74% 76%

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

PRODUCT MARGIN

Product margin for the three months ended March 31, 2001, as compared to the
same period a year ago, continued to increase primarily as a result of increased
sales of Cerezyme-Registered Trademark- enzyme and Renagel-Registered Trademark-
phosphate binder during the first quarter of 2001, offset in part by a charge of
$3.4 million to cost of products sold to amortize a portion of the write up of
the inventory obtained in connection with our acquisition of GelTex in December
2000. The decrease in product margin as a percentage of product revenue for the
period ended March 31, 2001, as compared to the same period a year ago, was
primarily attributable to the addition of Renagel-Registered Trademark-
phosphate binder, a lower margin product. These

lower margins attributable to Renagel-Registered Trademark- phosphate binder
were offset by increased efficiency and process improvements in manufacturing
Cerezyme-Registered Trademark- enzyme.

SERVICE MARGIN

Service margin for the three months ended March 31, 2001, as compared to the
same period a year ago, continued to increase primarily as a result of increased
sales of our DNA and cancer testing services. Service margin as a percentage of
service revenue increased slightly as a service revenue increase of 21% was
offset by a 16% increase in the cost of services sold for the three months ended
March 31, 2001 as compared to the same period a year ago.

OPERATING EXPENSES

The increase in selling, general and administrative expenses for the three
months ended March 31, 2001 as compared to the three months ended March 31, 2000
is related to:

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

- the addition of expenses from GelTex, which was acquired in December 2000.

Research and development expenses for the three months ended March 31, 2001
included a one time charge of $19.5 million representing initial amounts payable
to Synpac (North Carolina), Inc. under a license granted to us by Synpac to
develop and commercialize a human alpha-glucosidase enzyme replacement therapy
for Pompe disease. Excluding this charge, research and development expenses
increased 73% for the three months ended March 31, 2001 as compared to the three
months ended March 31, 2000 as a result of:

- the addition of spending on the C. DIFFICILE colitis, DENSPM, iron
chelation, oral mucositis, anti-obesity, and GT102-279 programs as a
result of our acquisition of GelTex; and

- increased spending on Genzyme General's program to develop Fabrazyme-TM-
enzyme for the treatment of Fabry disease and on other internal programs.

In connection with our acquisition of GelTex on December 14, 2000, we
converted options to purchase GelTex common stock into options to purchase
Genzyme General Stock. In accordance with FIN 44, at the date of acquisition the
intrinsic value for the unvested portion of these options of $10.2 million was
allocated to deferred compensation, a component of stockholders' equity. This
value is being amortized to operating expense over the remaining vesting period
of one year from the date of acquisition. The expense is being allocated to the
appropriate expense categories of Genzyme General's statement of operations
based on the functional responsibility of each employee or option holder. For
the three months ended March 31, 2001, Genzyme General recorded $2.6 million of
compensation expense related to these options, of which $2.2 million was charged
to research and development expense and $0.4 million was charged to selling,
general and administrative expense. At March 31, 2001, $7.4 million remained in
deferred compensation, a component of division equity, all of which will be
fully amortized by December 14, 2001.

OTHER INCOME AND EXPENSES

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Equity in net loss of unconsolidated affiliates....... $(8,479) $ (8,133) 4%
Gain on affiliate sale of stock....................... -- 20,270 (100)%
Minority interest in net loss of subsidiary........... 1,274 856 49%
Other................................................. (3,717) (21) 17,600%
Investment income..................................... 9,213 8,087 14%
Interest expense...................................... (6,398) (3,551) 80%
------- --------
Total other income (expense), net..................... $(8,107) $ 17,508 (146)%
======= ========

EQUITY IN NET LOSS OF UNCONSOLIDATED AFFILIATES

Genzyme General records in equity in net loss of unconsolidated affiliates
its portion of the results of our joint ventures with BioMarin, Pharming and
Diacrin. Genzyme General also records a portion of the results of Genzyme
Transgenics in equity in net loss of unconsolidated affiliates.

Genzyme General's equity in net loss of unconsolidated affiliates increased
slightly for the three months ended March 31, 2001 as compared to the three
months ended March 31, 2000 as a result of:

- increased losses from our joint venture with BioMarin;

- increased losses from our joint ventures with Pharming; and

- increased losses from Genzyme Transgenics.

These increases were offset in part by decreased losses from our joint venture
with Diacrin.

GAIN ON AFFILIATE SALE OF STOCK

During the period ended March 31, 2000, Genzyme General recognized a gain of
$20.3 million due to the issuance by Genzyme Transgenics of additional shares of
its common stock. There were no similar transactions during the period ended
March 31, 2001.

MINORITY INTEREST IN NET LOSS OF SUBSIDIARY

Due to our combined direct and indirect interest in ATIII LLC, Genzyme
General consolidates the results of ATIII LLC and records Genzyme Transgenics'
portion of the losses of that joint venture as minority interest. Minority
interest increased due to a change in the funding agreement for the joint
venture in March 2001, retroactive to January 1, 2001, which increased Genzyme
Transgenics' portion of the losses incurred by ATIII LLC to 50% for the three
months ended March 31, 2001 as compared to 30% for the same period a year ago.

INVESTMENT INCOME

Genzyme General's investment income increased for the three months ended
March 31, 2001 due primarily to higher average cash balances as compared to the
three months ended March 31, 2000.

INTEREST EXPENSE

Genzyme General's interest expense increased for the three months ended
March 31, 2001, as compared to the same period a year ago, as a result of
$150.0 million of debt drawn on our revolving credit facility in December 2000
as part of the financing for the GelTex acquisition.

TAX PROVISION

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Provision for income taxes............................ $(14,876) $(18,844) (21)%
Effective tax rate.................................... 37% 29%

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

- provision for state income taxes;

- use of a foreign sales corporation;

- nondeductible amortization of intangibles; and

- use of tax credits.

The increase in Genzyme General's effective tax rate for the period ending
March 31, 2001 as compared to the same period a year ago was primarily
attributable to an increase in nondeductible amortization of intangibles,
consisting largely of goodwill resulting from our December 2000 acquisition of
GelTex.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

On January 1, 2001, we adopted Statement of Financial Accounting Standards
("SFAS") 133, "Accounting for Derivative Instruments and Hedging Activities," as
amended by SFAS 137 and SFAS 138. SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that we
recognize all derivative instruments as either assets or liabilities in our
consolidated balance sheet and measure those instruments at fair value.
Subsequent changes in fair value will be reflected in income, unless the
derivative is part of a qualified hedging relationship.

In accordance with the transition provisions of SFAS 133, Genzyme General
recorded a transition adjustment of $4.2 million in its unaudited, combined
statement of operations to recognize the fair value of certain common stock
warrants held on January 1, 2001. Transition adjustments pertaining to interest
rate swaps designated as cash-flow hedges and our foreign currency contracts
were not significant. For the three months ended March 31, 2001, Genzyme General
recorded a charge of $3.6 million in other expense to reflect the change in
value of certain common stock warrants from January 1, 2001 to March 31, 2001.
Genzyme General also recorded a charge of $0.5 million in division equity to
reflect the change in value of its interest rate swaps during the period, net of
tax.

instruments would be substantially offset by an opposite change in the value of
the underlying hedged items. We do not use derivative instruments for trading or
speculative purposes.

GENZYME BIOSURGERY
A DIVISION OF GENZYME CORPORATION

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

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Total revenues........................................ $ 54,156 $ 34,949 55%
-------- --------
Cost of products and services sold.................... 31,775 19,062 67%
Selling, general and administrative................... 30,692 22,139 39%
Research and development.............................. 10,719 8,842 21%
Amortization of intangibles........................... 11,321 1,426 694%
-------- --------
Total operating costs and expenses................ 84,507 51,469 64%
-------- --------
Operating loss........................................ (30,351) (16,520) 84%
Other income (expense), net........................... (4,976) 1,506 (430)%
-------- --------
Division net loss..................................... $(35,327) $(15,014) 135%
======== ========

REVENUES

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Cardiothoracic........................................ $18,289 $19,650 (7)%
Orthopaedics.......................................... 20,417 4,532 351%
Biosurgical specialties............................... 15,446 10,746 44%
------- -------
Total product and service revenue................. 54,152 34,928 55%
Research and development revenue...................... 4 21 (81)%
------- -------
Total revenues.................................... $54,156 $34,949 55%
======= =======

The decrease in cardiothoracic revenue in the three months ended March 31,
2001, when compared to the same period of 2000, was due to decreased sales of
chest drainage systems resulting from competitive pricing pressures in that
market. This decrease was offset, in part, by the continued

growth in sales of minimally invasive cardiac surgery products and sales revenue
from FocalSeal-Registered Trademark--L surgical sealant, which was added to the
cardiovascular product category in the third quarter of 2000 pursuant to a
distribution and marketing agreement with Focal which provides us with exclusive
distribution rights for this product in North America.

The orthopaedics product revenue increased for the three months ended
March 31, 2001, when compared to the same period of 2000, primarily due to the
sales of Synvisc-Registered Trademark- viscosupplementation product, which was
added to the orthopaedics product category in December 2000 through our
acquisition of Biomatrix.

The increase in biosurgical specialties product revenue in the three months
ended March 31, 2001, when compared to the same period of 2000, is due to the
increase in sales of Seprafilm-TM- bioresorbable membrane and Sepramesh-TM-
biosurgical composite. An increase in sales to original equipment manufacturers
and sales generated from Hylaform-Registered Trademark- and other skin care
products also contributed to the overall increase in biosurgical specialties
product revenue.

International revenue as a percentage of total sales for the three months
ended March 31, 2001 was 22% as compared to 26% in the same period of 2000.

MARGINS

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Product margins....................................... $ 19,986 $ 13,043 53%
% of product revenue................................ 41% 45%

Service margins....................................... $ 2,391 $ 2,823 (15)%
% of service revenue................................ 43% 48%

Total gross margins................................... $ 22,377 $ 15,866 41%
% of total product and service revenues............. 41% 45%

Genzyme Biosurgery provides a broad range of healthcare products and
services. As a result, Genzyme Biosurgery's gross margins may vary significantly
depending on the market conditions of each product or service.

On December 18, 2000, we acquired Biomatrix, Inc. and adjusted the inventory
to fair value, resulting in an increase of $11.3 million. This amount will be
amortized to cost of products sold as the acquired inventory is sold. For the
quarter ending March 31, 2001, $6.0 million of the initial $11.3 million was
charged to cost of products sold. We expect to sell the remaining amount of the
acquired inventory during the second quarter of 2001. Without the effect of this
adjustment, Genzyme Biosurgery's product margin for the three months ended
March 31, 2001 would have increased 99% to $26.0 million.

Excluding the adjustment described above, product margins increased slightly
in the three months ended March 31, 2001 as a result of an increase in sales of
higher margin products such as Synvisc-Registered Trademark-
viscosupplementation product and devices for minimally invasive cardiac surgery.

Service margins decreased for the three months ended March 31, 2001 as a
result of a decrease in Carticel-Registered Trademark- chondrocytes and
Epicel-Registered Trademark- skin grafts service revenue and an increase in the
fixed costs associated with these services.

OPERATING EXPENSES

The increase in selling, general and administrative expenses for the three
months ended March 31, 2001, as compared to the same period in 2000, was due to
the additional selling, general and administrative expenses related to the
Biomatrix business, which we purchased in December 2000.

Genzyme Biosurgery's research and development expenses increased during the
three months ended March 31, 2001, as compared to the same period in 2000, due
to an increase in spending for orthopaedics products primarily as a result of
the addition of Synvisc-Registered Trademark- viscosupplementation product to
the orthopaedics line in December 2000.

OTHER INCOME AND EXPENSE

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Equity in net loss of unconsolidated affiliates....... $ (536) $ -- N/A
Investment income..................................... 512 1,784 (71)%
Interest expense...................................... (4,959) (301) 1,548%
Other................................................. 7 23 (70)%
------- ------
Total other income (expenses)..................... $(4,976) $1,506 (430)%
======= ======

EQUITY IN NET LOSS OF UNCONSOLIDATED AFFILIATES

In January 2001, Focal completed the exercise of its option to require us to
purchase $5.0 million in Focal common stock, at which time we began accounting
for our investment under the equity method. We have allocated our investment in
Focal to Genzyme Biosurgery. Genzyme Biosurgery records in equity in net loss of
unconsolidated affiliates its portion of the results of Focal. Genzyme
Biosurgery's equity in net loss of unconsolidated affiliates increased for the
three months ended March 31, 2001 when compared to the same period in 2000
because we did not own an equity interest in Focal in 2000.

INVESTMENT INCOME

Investment income decreased as a result of lower average cash balances in
the first three months of 2001 when compared to the first three months of 2000.

INTEREST EXPENSE

Interest expense increased primarily as a result of the $200.0 million of
indebtedness outstanding, as of March 31, 2001, under the portion of our
revolving credit facility that we allocated to Genzyme Biosurgery. Additionally,
we assumed a 6.9% convertible subordinated note in connection with the
acquisition of Biomatrix in December 2000, which we have allocated to Genzyme
Biosurgery. At March 31, 2001, $10.0 million of the principal amount of this
note remained outstanding.

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

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

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Total revenues........................................ $ 1,412 $ 2,555 (45)%
------- -------
Cost of revenues...................................... 544 56 871%
Selling, general and administrative................... 1,891 1,190 59%
Research and development.............................. 5,661 4,058 40%
Amortization of intangibles........................... -- 2,956 (100)%
------- -------
Total operating costs and expenses................ 8,096 8,260 (2)%
------- -------
Operating loss........................................ (6,684) (5,705) 17%
Other income (expenses), net.......................... 410 (14) 3,029%
------- -------
Division net loss before taxes........................ (6,274) (5,719) 10%
Tax benefit........................................... -- 662 (100)%
------- -------
Division net loss..................................... $(6,274) $(5,057) 24%
======= =======

REVENUES

THREE MONTHS ENDED
MARCH 31, INCREASE/
--------------------- (DECREASE)
2001 2000 % CHANGE
--------- --------- -----------
(UNAUDITED, AMOUNTS IN THOUSANDS,
EXCEPT PERCENTAGE DATA)

Licensing revenue..................................... $ 664 $2,550 (74)%
Royalty revenue....................................... 45 5 800%
Research and development revenue...................... 703 -- N/A
------ ------
Total revenues.................................... $1,412 $2,555 (45)%
====== ======

Licensing revenue in the first three months of 2001 included revenue
recognized from a technology access fee associated with Genzyme Molecular
Oncology's cancer antigen discovery agreement with Purdue Pharma, L.P. Licensing
revenue decreased as compared to the same period of 2000, due to a $2.0 million
development milestone payment received in the first quarter of 2000 under a
license agreement with Schering-Plough Ltd.

Research and development revenue in the three month period ended March 31,
2001 was solely attributable to research performed on behalf of the
collaboration agreement with Purdue Pharma.

COST OF REVENUE

Genzyme Molecular Oncology's cost of revenue includes:

- work performed on the cancer antigen discovery agreement with Purdue
Pharma; and

- royalties paid to third parties.

Cost of revenues increased in the first three months of 2001 as a result of the
work performed on the Purdue Pharma collaboration agreement that started in the
fourth quarter of 2000.

OPERATING EXPENSES

Genzyme Molecular Oncology's selling, general and administrative expenses
increased for the three months ended March 31, 2001 as a result of enhanced
business development efforts and an increase in information technology, legal,
accounting and general management services performed by Genzyme General on
Genzyme Molecular Oncology's behalf.

Research and development expenses increased for the three months ended
March 31, 2001 as compared to the same period of last year. The increase
primarily was attributable to Genzyme Molecular Oncology's expansion of its
cancer vaccine clinical trials and increased activity in its antigen discovery
and antiangiogenesis 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 fully
amortized these intangible assets in June 2000, there is no amortization expense
in the first quarter of 2001.

OTHER INCOME AND EXPENSE

Genzyme Molecular Oncology's other income increased in the three months
ended March 31, 2001 due to an increase in interest income that is attributable
to higher average cash balances. Interest expense decreased in the three months
ended March 31, 2001, as compared to the same period of 2000, due to the
May 2000 repayment of $5.0 million that Genzyme Molecular Oncology borrowed
under our revolving credit facility. This amount was outstanding during the
first quarter of 2000.

B. LIQUIDITY AND CAPITAL RESOURCES

GENZYME CORPORATION

At March 31, 2001, we had cash, cash-equivalents, and short- and long-term
investments of $619.6 million, a increase of $20.0 million from December 31,
2000.

We generated $14.0 million in cash from its operations for the three months
ended March 31, 2001.

Our investing activities utilized $65.9 million in cash for the three months
ended March 31, 2001. Investing activities used:

- $5.8 million for our net of purchases, sales and maturities of
investments;

- $25.7 million of cash as an advance payment for our purchase of all of the
Class A Limited Partnership interests of GDP as described below;

- $5.0 million of cash to purchase additional shares of Focal common stock;

- $19.9 million to fund purchases of property, plant and equipment; and

- $8.1 million to fund our investments in unconsolidated affiliates.

During the three months ended March 31, 2001, we received $21.0 million in
cash from the exercise of options and the purchase of shares under our employee
stock plans. Our financing activities used $3.1 million to repay a bank
overdrafts.

In January 2001, we purchased all of the outstanding Class A limited
partnership interests of GDP for an advance payment of approximately
$25.7 million in cash plus royalties on sales of certain Sepra-TM- products for
ten years. We allocate our interest in GDP to Genzyme Biosurgery. As a result of
the acquisition, significant control over the activities of GDP passed to
Genzyme Biosurgery. The acquisition was accounted for as a purchase and the
entire purchase price was allocated to the intangible assets acquired and
goodwill, which will be amortized over eight or ten years depending upon the
asset classification.

We have access to a $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 March 31, 2001, $18.0 million was outstanding under
the facility that matures in December 2001. In addition, $350.0 million was
outstanding under the facility that matures in December 2003. Borrowings under
this facility bear interest at LIBOR plus a margin.

We believe that our available cash, investments and cash flow from
operations will be sufficient to fund our planned operations and capital
requirements for the foreseeable future. Although we currently have substantial
cash resources and positive cash flow, we intend to use substantial portions of
our available cash for:

- product development and marketing;

- expanding facilities;

- working capital; and

- strategic business initiatives.

Our cash reserves will be further reduced to pay principal and interest on
the following debt:

- $368.0 million in principal under our revolving credit facility with a
syndicate of commercial banks;

- $249.5 million in outstanding principal under our 5 1/4% convertible
subordinated notes that mature in June 2005 and are convertible into
shares of Genzyme General Stock, Genzyme Biosurgery Stock and Molecular
Oncology Stock (see "Subsequent Events" below);

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

- $10.0 million in principal under our 6.9% convertible subordinated note in
favor of UBS Warburg LLC that matures in May 2003 and is convertible into
shares of Biosurgery Stock.

If we use cash to pay or redeem this debt, including principal and interest due
on it, our cash reserves will be diminished.

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

SUBSEQUENT EVENTS

PLANNED ACQUISITION OF FOCAL, INC.

In April 2001, we signed a definitive merger agreement to acquire Focal.
Focal develops, manufactures and commercializes products based on a proprietary
polymer technology. We will allocate this acquisition to Genzyme Biosurgery and
will account for it using the purchase method of accounting. We currently hold
approximately 22% of the outstanding shares of Focal's common stock and will
acquire the remaining 78% in an exchange of shares of Biosurgery Stock for
shares of Focal common stock upon completion of the merger. Under the terms of
the merger agreement, Focal shareholders will receive 0.1545 of a share of
Biosurgery Stock for each share of Focal common stock they hold, except for
10,000 shares of Focal common stock that we have agreed to purchase for cash
from a Focal shareholder. Approximately 2.1 million shares of Biosurgery Stock
will be used as merger consideration. We expect the acquisition, which is
subject to the approval of Focal's shareholders, to close in the second or third
quarter of 2001. In anticipation of the merger, Focal agreed to modify certain
terms of the existing stock purchase agreement between the companies. This
agreement commits us, at Focal's option, to make future equity investments of up
to $5.0 million subject to certain conditions.

PLANNED ACQUISITION OF WYNTEK DIAGNOSTICS, INC.

INTENDED REDEMPTION OF $250.0 MILLION 5 1/4% CONVERTIBLE SUBORDINATED NOTES

PRIVATE PLACEMENT OF $575.0 MILLION 3% CONVERTIBLE SUBORDINATED DEBENTURES

GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION

At March 31, 2001, Genzyme General's cash, cash-equivalents, and short- and
long-term investments increased $43.7 million to $575.0 million as compared to
$531.3 million at December 31, 2000.

Genzyme General generated $45.3 million in cash from its operations for the
three months ended March 31, 2001.

Genzyme General's investing activities utilized $41.4 million in cash for
the three months ended March 31, 2001. Investing activities used:

- $13.6 million for Genzyme General's net of purchases, sales and maturities
of investments;

- $18.2 million to fund purchases of property, plant and equipment; and

- $8.1 million to fund Genzyme General's investments in unconsolidated
affiliates.

During the three months ended March 31, 2001, Genzyme General received
$20.5 million in cash from the exercise of options and purchase of shares under
our employee stock plans.

Genzyme General, 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
March 31, 2001, $18.0 million was outstanding under the facility that matures in
December 2001. In addition, $350.0 million was outstanding under the facility
that matures in December 2003, $150.0 million of which was allocated to Genzyme
General in connection with the financing of a portion of the cash component of
the GelTex merger consideration. Borrowings under this facility bear interest at
LIBOR plus a margin.

At March 31, 2001, $10.0 million of Genzyme General's cash remained
available to Genzyme Biosurgery under a $20.0 million interdivisional financing
arrangement with Genzyme General. This arrangement was assumed by Genzyme
Biosurgery from Genzyme Tissue Repair upon the formation of Genzyme Biosurgery
in December 2000. Under the terms of this arrangement, Genzyme Biosurgery may
draw down funds as needed each quarter in exchange for Biosurgery designated
shares based on the fair market value of Biosurgery Stock (as defined in our
charter) at the time of the draw. Biosurgery designated shares are shares of
Biosurgery Stock that are not issued and outstanding, but which our board of
directors may issue, sell or distribute without allocating the proceeds to
Genzyme Biosurgery.

At March 31, 2001, $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. Under the terms of this arrangement,
Genzyme Molecular Oncology may draw down funds as needed each quarter in
exchange for 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. 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.

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

- product development and marketing;

- expanding facilities;

- working capital; and

- strategic business initiatives.

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

- $249.5 million in principal under our 5 1/4% convertible subordinated
notes due June 2005, which are convertible into shares of Genzyme General
Stock; and

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

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

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

SUBSEQUENT EVENTS

PLANNED ACQUISITION OF WYNTEK DIAGNOSTICS, INC.

INTENDED REDEMPTION OF $250.0 MILLION 5 1/4% CONVERTIBLE SUBORDINATED NOTES

PRIVATE PLACEMENT OF $575.0 MILLION 3% CONVERTIBLE SUBORDINATED DEBENTURES

GENZYME BIOSURGERY
A DIVISION OF GENZYME CORPORATION

At March 31, 2001, Genzyme Biosurgery had cash, cash equivalents, and short-
and long-term investments of $21.5 million, a decrease of $56.6 million from
December 31, 2000.

Genzyme Biosurgery used $24.1 million in cash for operations in the first
three months of 2001. This is primarily due to Genzyme Biosurgery's net loss of
$30.7 million for the three months ended March 31, 2001.

Genzyme Biosurgery's investing activities used $32.3 million of cash due to
the following:

- the purchase of all of the outstanding Class A limited partnership
interests of GDP for an advance payment of approximately $25.7 million in
cash as described below;

- $5.0 million of cash was used to purchase Focal common stock as described
below; and

- $1.6 million of cash was used to fund capital expenditures.

In January 2001, Focal completed the exercise of its option to require us to
purchase $5.0 million of Focal common stock at a price of $2.06 per share at
which time our investment in Focal became an equity interest. We have allocated
our investment in Focal to Genzyme Biosurgery. In anticipation of our planned
merger, Focal has agreed to modify certain terms of the existing purchase
agreement between the companies. Under this agreement we are committed, at
Focal's option, to make future equity investments of up to $5.0 million subject
to certain conditions.

In November 2000, we exercised our option to purchase all of the outstanding
Class A limited partnership interests of Genzyme Development Partners, L.P. for
an advance payment approximately $25.7 million in cash. This payment was made in
January 2001, at which time significant control passed to Genzyme Biosurgery.
Genzyme Biosurgery's cash reserves were diminished as a result of this purchase.
We are also required to pay royalties to the former holders of the Class A
interests on sales of certain Sepra-TM- products for ten years.

In connection with our acquisition of Biomatrix, we assumed a 6.9%
convertible subordinated note in favor of UBS Warburg LLC that matures in
May 2003. We have allocated this note to Genzyme Biosurgery. At March 31, 2001,
$10.0 million of the principle of this note remained outstanding. Genzyme
Biosurgery will use a part of its cash flow to satisfy debt service on this
note. If all or a portion of the note is not converted at the option of the
holder into Biosurgery Stock, at maturity Genzyme Biosurgery's cash reserves
will be diminished by the amount necessary to repay the outstanding principal of
the note.

Prior to our acquisition of Biomatrix, Biomatrix sold 744,000 shares of its
common stock to certain of its employees, directors and consultants in exchange
for ten-year, full recourse promissory notes. The notes accrue interest at rates
ranging from 5.30% to 7.18% and mature at various dates from May 2007

through September 2009, upon which all outstanding principal and accrued
interest becomes payable. As a result of the acquisition, these shares were
converted into 532,853 shares of Biosurgery Stock and Genzyme Biosurgery
recorded $14.7 million of outstanding principal and accrued interest to division
equity because the notes were received in exchange for the issuance of stock. As
of March 31, 2001 the outstanding balance on these notes included in division
equity on these notes is $11.5 million.

Genzyme Biosurgery, 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 which matures in December 2003. At
March 31, 2001, $18.0 million was outstanding under the portion of the facility
that matures in December 2001, all of which was allocated to Genzyme Biosurgery.
In addition, $350.0 million was outstanding under the portion of the facility
that matures in December 2003, $200.0 million of which was allocated to Genzyme
Biosurgery in connection with the financing of a portion of the cash component
of the Biomatrix merger consideration. Borrowings under this facility bear
interest at LIBOR plus a margin. Genzyme Biosurgery will use a large part of its
cash flow to make principal and interest payments on this debt. If Genzyme
Biosurgery's cash flow from operations is insufficient to meet these
obligations, we may need to borrow additional funds to make these payments.

At March 31, 2001, $10.0 million of Genzyme General's cash remained
available to Genzyme Biosurgery under a $20.0 million interdivisional financing
arrangement with Genzyme General. This arrangement was assumed by Genzyme
Biosurgery from Genzyme Tissue Repair upon the formation of Genzyme Biosurgery
in December 2000. Under the terms of this arrangement, Genzyme Biosurgery may
draw down funds as needed each quarter in exchange for Biosurgery designated
shares based on the fair market value (as defined in our charter) of Biosurgery
Stock at the time of the draw.

In March 2001, Genzyme General announced its preliminary analysis of results
from the phase 2 trial of NeuroCell-TM--PD. Based on the results of the trial
and the need for additional analysis of those results, a phase 3 clinical study
of NeuroCell-TM--PD will not be initiated before June 30, 2001. As a result,
Genzyme General may, at its election after June 30, 2001, require Genzyme
Biosurgery to repay Genzyme General $20.0 million of the $25.0 million Genzyme
Biosurgery received from Genzyme General in connection with the transfer to
Genzyme General of Genzyme Biosurgery's interest in the joint venture. This
refund, together with accrued interest at 13.5% per year, will be due within
90 days of receipt of Genzyme General's notice of its election. This payment may
be made in cash, Biosurgery designated shares, or a combination of both, at
Genzyme Biosurgery's option. If Genzyme Biosurgery elects to repay Genzyme
General in cash, Genzyme Biosurgery's cash reserves will be diminished.

We believe that Genzyme Biosurgery's cash resources, together with revenues
generated from its products and distribution agreements and from the anticipated
sale of certain assets, will be sufficient to finance its planned operations and
capital requirements through 2001. Genzyme Biosurgery intends to use substantial
portions of its available cash for:

- research and development;

- product development and marketing, including for
Synvisc-Registered Trademark- viscosupplementation product;

- expanding facilities; and

- working capital.

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

- results of research and development efforts;

- ability to establish and maintain strategic alliance;

- ability to enter into and maintain licensing arrangements and additional
distributions arrangements;

- ability to share costs of product development with research and marketing
partners;

- costs involved in enforcing patent claims and other intellectual property
rights;

- market acceptance of novel approaches and therapies;

- success of its initiatives to reduce expenses and streamline its
operations;

- development of competitive products;

- ability to satisfy regulatory requirements of the FDA and other
governmental authorities; and

- ability to sell its Snowden-Pencer-Registered Trademark- product lines and
its manufacturing in Canada, as described below.

In February 2001, Genzyme Biosurgery announced its intention to divest the
Snowden-Pencer-Registered Trademark- surgical instruments product lines. These
product lines include hand-held reusable instruments and endoscopic instruments
for general, plastic, gynecological and cardiovascular surgery. Genzyme
Biosurgery also announced in February its intention to terminate the production
of Synvisc-Registered Trademark- viscosupplementation product in Canada and to
sell its manufacturing facility in Ponte-Claire, Canada. We expect to complete
these transactions in the second half of 2001.

Genzyme Biosurgery may require significant additional financing to continue
operations beyond 2001. We cannot guarantee that Genzyme Biosurgery will be able
to obtain any additional financing, extend any existing financing arrangement,
or accomplish either on terms that we consider favorable. If Genzyme Biosurgery
has insufficient funds or is unable to raise additional funds, it may delay,
scale back or eliminate certain of its programs. Genzyme Biosurgery may also
have to give third parties rights to commercialize technologies or products that
it would otherwise have sought to commercialize itself.

SUBSEQUENT EVENT

ACQUISITION OF FOCAL, INC.

In April 2001, we signed a definitive merger agreement to acquire
Focal, Inc. Focal develops, manufactures and commercializes products based on a
proprietary polymer technology. We will allocate this acquisition to Genzyme
Biosurgery and will account for it using the purchase method of accounting. We
currently hold approximately 22% of the outstanding shares of Focal's common
stock and will acquire the remaining 78% in an exchange of shares of Biosurgery
Stock for shares of Focal common stock upon completion of the merger. Under the
terms of the merger agreement, Focal shareholders will receive 0.1545 of a share
of Biosurgery Stock for each share of Focal common stock they hold, except for
10,000 shares of Focal common stock that we have agreed to purchase for cash
from a Focal shareholder. Approximately 2.1 million shares of Biosurgery Stock
will be used as merger consideration. We expect the acquisition, which is
subject to the approval of Focal's shareholders, to close in the second or third
quarter of 2001. In anticipation of the merger, Focal agreed to modify certain
terms of the existing stock purchase agreement between the companies. This
agreement commits us, at Focal's option, to make future equity investments of up
to $5.0 million subject to certain conditions.

GENZYME MOLECULAR ONCOLOGY
A DIVISION OF GENZYME CORPORATION

At March 31, 2001, Genzyme Molecular Oncology had cash, cash equivalents and
short-term investments of $23.0 million, a decrease of $7.1 million from
December 31, 2000.

During the first three months of 2001, Genzyme Molecular Oncology used
$7.1 million in cash for operations. This is primarily due to Genzyme Molecular
Oncology's net loss for the three months ended March 31, 2001.

Genzyme Molecular Oncology's investing activities in the first three months
of 2001 provided $7.8 million from the sales and maturities of investments.

Financing activities provided cash of $0.2 million from stock issuances
attributable to our stock purchase program and the exercise of stock options.

Genzyme Molecular Oncology, together with our other operating divisions, has
access to our $500.0 million revolving credit facility. At March 31, 2001,
$132.0 million was available under this facility.

At March 31, 2001, $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.

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:

- anticipated revenues generated from license agreements;

- committed research funding from collaborators;

- the $15.0 million remaining under the interdivisional financing arragement
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;

- pre-clinical and clinical testing;

- pursuing regulatory approvals; and

- working capital.

Genzyme Molecular Oncology's cash needs may differ from those planned,
however, as a result of 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;

- costs involved in enforcing patent claims and other intellectual property
rights;

- market acceptance of novel approaches and therapies;

- 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 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 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE ANALYSIS OF MARKET RISK

We are exposed to potential loss from financial market risks that may occur
as a result of changes in interest rates, equity prices and foreign exchange
rates. Our exposure to these risks has not materially changed since
December 31, 2000.

We incorporate by reference our disclosure related to market risk which is
set forth under the heading "Management's Discussion and Analysis of Genzyme
Corporation and Subsidiaries' Financial Condition and Results of
Operations--Euro-The New European Currency;" "--Market Risk;"
"--Interest Rate Risk;" "--Foreign Exchange Risk;" and "--Equity Price Risk" in
Exhibit 13.1 to our 2000 Form 10-K.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

See the Exhibit Index immediately following the signature page to this
report on Form 10-Q.

(b) Reports on Form 8-K

- On January 2, 2001, we filed a Current Report on Form 8-K to announce the
December 18, 2000 completion of the acquisition of Biomatrix. The
acquisition was structured as a merger of Biomatrix with and into one of
our wholly-owned subsidiaries pursuant to an Agreement and Plan of
Merger, dated as of March 6, 2000 by and among Genzyme, Seagull Merger
Corporation and Biomatrix, as amended.

- On February 27, 2001, we filed an Amendment on Form 8-K/A to our Current
Report on Form 8-K dated December 14, 2000 (filed on December 15, 2000)
to include the financial information required by Items 7(a) and 7(b) of
Form 8-K relating to our acquisition in December 2000 of GelTex.

- On March 2, 2001, we filed an Amendment on Form 8-K/A to our Current
Report on Form 8-K dated December 18, 2000 (filed on January 2, 2001) to
include the financial information required by Items 7(a) and 7(b) of
Form 8-K relating to our acquisition in December 2000 of Biomatrix.

- On March 9, 2001, we filed a Current Report on Form 8-K to announce the
adjustment, required under our charter, of the number of votes associated
with a share of Molecular Oncology Stock and the number of votes
associated with a share of Biosurgery Stock. As described therein, from
January 1, 2001 through December 31, 2002, each share of Molecular
Oncology Stock will entitle the holder to 0.14 vote, and each share of
Biosurgery Stock will entitle the holder to 0.14 vote. Each share of
Genzyme General Stock continues to entitle its holder to 1 vote.

GENZYME CORPORATION AND SUBSIDIARIES
FORM 1O-Q, MARCH 31, 2001

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

GENZYME CORPORATION

DATE: May 15, 2001 By: /s/ MICHAEL S. WYZGA
-----------------------------------------
Michael S. Wyzga
Senior Vice President, Finance;
Chief Financial Officer; and
Chief Accounting Officer

GENZYME CORPORATION AND SUBSIDIARIES
FORM 10-Q, MARCH 31, 2001
EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------

*3.1 Restated Articles of Organization of Genzyme, as amended.
Filed as Exhibit 1 to Genzyme's Registration Statement on
Form 8-A filed on December 19, 2000.
*3.2 By-laws of Genzyme, as amended. Filed as Exhibit 3.2 to
Genzyme's Form 10-Q for the quarter ended September 30,
1999.
*4.1 Indenture, dated as of May 8, 2001, by and between Genzyme
and State Street Bank and Trust Company as trustee,
including the form of debenture. Filed as Exhibit 4.1 to
Genzyme's Current Report on Form 8-K filed on May 11, 2001.
*4.2 Registration Rights Agreement, dated as of May 3, 2001, by
and among Genzyme, Credit Suisse First Boston Corporation,
Goldman Sachs & Co. and Salomon Smith Barney Inc. Filed as
Exhibit 4.2 to Genzyme's Current Report on Form 8-K filed on
May 11, 2001.
*10.1 Agreement and Plan of Merger, dated as of April 25, 2001, by
and among Genzyme Corporation, Sammy Merger Corp. and
Focal, Inc. Filed as Exhibit 2.1 to Genzyme's Current Report
on Form 8-K filed on April 26, 2001.

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

* Indicates an exhibit previously filed with the Securities and Exchange
Commission and incorporated herein by reference. Exhibits filed with Forms
8-A, 8-K and 10-Q of Genzyme Corporation were filed under Commission File
No. 0.14680.