When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that characterize our business. In particular, we encourage you to review the risks and uncertainties described under the heading "Risk Factors" below. These risks and uncertainties could cause actual results to differ materially from those forecasted in forward-looking statements or implied by past results and trends. Forward-looking statements are statements that attempt to project or anticipate future developments in our business; we encourage you to review the examples of forward-looking statements under "Note Regarding Forward-Looking Statements" at the beginning of this report. These statements, like all statements in this report, speak only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments.

INTRODUCTION

We are a global biotechnology company dedicated to making a major impact on the lives of people with serious diseases. Our broad product and service portfolio is focused on rare disorders, renal disease, orthopaedics, cancer, transplant and immune disease, and diagnostic and predictive testing.

In the fourth quarter of 2008, we changed our segment reporting structure to better reflect the way we manage and measure the performance of our businesses. Under the new reporting structure, we are organized into four financial reporting units, which we also consider to be our reporting segments:

º •
º Genetic Diseases, which develops, manufactures and distributes therapeutic products, with an expanding focus on products to treat patients suffering from genetic diseases and other chronic debilitating diseases, including a family of diseases known as LSDs. The unit derives substantially all of its revenue from sales of Cerezyme, Fabrazyme, Myozyme and Aldurazyme;

º •
º Cardiometabolic and Renal, which develops, manufactures and distributes products that treat patients suffering from renal diseases, including chronic renal failure, and endocrine and cardiovascular diseases. The unit derives substantially all of its revenue from sales of Renagel/Renvela (including sales of bulk sevelamer), Hectorol and Thyrogen;

º •
º Biosurgery, which develops, manufactures and distributes biotherapeutics and biomaterial-based products, with an emphasis on products that meet medical needs in the orthopaedics and broader surgical areas. The unit derives substantially all of its revenue from sales of Synvisc/Synvisc-One, the Sepra line of products, Carticel and MACI; and

º •
º Hematologic Oncology, which develops, manufactures and distributes products for the treatment of cancer. The unit derives substantially all of its revenue from sales and royalties received on sales of Campath and clofarabine. Clofarabine is marketed under the names Clolar and Evoltra. This unit also includes Mozobil, which received marketing approval in the United States in December 2008.

Our transplant business unit, which develops, manufactures and distributes therapeutic products that address pre-transplantation, prevention and treatment of graft rejection in organ transplantation and other hematologic and auto-immune disorders, and our genetics business unit, which provides testing services for the oncology, prenatal and reproductive markets, were formerly reported as separate reporting segments. Effective as of the fourth quarter of 2008, we include our transplant and genetics business units under the caption "Other." We also report the activities of our diagnostic products, bulk pharmaceuticals and immune mediated disease business units under the caption "Other." These operating segments did not meet the quantitative threshold for separate segment reporting. We have revised our 2008 segment disclosures to conform to our 2009 presentation.

We report our corporate, general and administrative operations and corporate science activities under the caption "Corporate."

STRATEGIC TRANSACTIONS

Pending Acquisition from Bayer

On March 30, 2009, we entered into an agreement with Bayer to exclusively in-license and acquire:

º •
º worldwide rights to commercialize alemtuzumab (Campath) for the treatment of MS;

º •
º worldwide rights to Campath for oncology;

º •
º Bayer's rights to the oncology products Fludara (fludarabine phosphate) and Leukine (sargramostim); and

º •
º a new Leukine manufacturing facility located in Lynnwood, Washington, contingent upon the facility receiving FDA approval, which is expected in 2010.

The agreement also provides an opportunity to employ certain members of Bayer's commercial and manufacturing teams for all three products. Prior to this agreement, we shared with Bayer the development and certain commercial rights to alemtuzumab for the treatment of MS and Campath for oncology. Under the new agreement, prior to regulatory approval of alemtuzumab as a treatment for MS, we will have primary responsibility for its development while Bayer will continue to fund that development at current levels. We will have worldwide commercialization rights, with Bayer retaining an option to co-promote the product as a treatment for MS. Bayer is eligible to receive the following contingent purchase price payments:

º •
º up to $1.25 billion based on a percentage of monthly revenues for alemtuzumab for the treatment of MS, subject to a time limit of ten years;

º •
º up to $500.0 million based on a percentage of the monthly combined revenues of Campath for oncology, Fludara and Leukine, subject to a time limit of eight years;

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

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

º •
º from $75.0 to $100.0 million for the Leukine manufacturing facility, following the receipt of FDA approval of the facility.

The agreement also includes our purchase of certain transition services and commercial supply of Fludara and Leukine from Bayer. The transaction will be accounted for as a business combination under FAS 141R and is expected to close in the second quarter of 2009, after the satisfaction of closing conditions, including receipt of clearance from the FTC and DOJ. The transaction will be included in our results of operations beginning on the date of acquisition. The results for Campath for oncology, Fludara and Leukine will be included in our Hematologic Oncology reporting segment and the results for alemtuzumab for the treatment of MS will be included in our MS business unit, which is reported under the caption "Other."

Purchase of Intellectual Property from EXACT Sciences

On January 27, 2009, we purchased certain intellectual property in the fields of prenatal testing and reproductive health from EXACT Sciences for our diagnostic testing services business and

3,000,000 shares of EXACT Sciences common stock. We paid EXACT Sciences total cash consideration of $22.7 million. Of this amount, we allocated $4.5 million to the acquired shares of EXACT Sciences common stock based on the fair value of the stock on the date of acquisition, which we recorded as an increase to other noncurrent assets in our consolidated balance sheet as of March 31, 2009. As the purchased assets did not qualify as a business combination under FAS 141R and have not reached technological feasibility nor have alternative future use, we allocated the remaining $18.2 million to the acquired intellectual property, which we recorded as a charge to research and development expenses in our consolidated statement of operations for the three months ended March 31, 2009. We will pay EXACT Sciences an additional $1.9 million by July 2010 contingent upon the non-occurrence of certain events.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

Our critical accounting policies and significant judgments and estimates are set forth under the heading "Management's Discussion and Analysis of Genzyme Corporation and Subsidiaries' Financial Condition and Results of Operations-Critical Accounting Policies and Significant Judgments and Estimates" in Exhibit 13 to our 2008 Form 10-K. There have been no significant changes to our critical accounting policies or significant judgments and estimates since December 31, 2008. Additional information regarding our provisions and estimates for our product sales allowances, sales allowance reserves and accruals, and distributor fees and IPR&D are included below.

Revenue Recognition

Product Sales Allowances

Sales of many biotechnology products in the United States are subject to increased pricing pressure from managed care groups, institutions, government agencies and other groups seeking discounts. We and other biotechnology companies in the U.S. market are also required to provide statutorily defined rebates and discounts to various U.S. government agencies in order to participate in the Medicaid program and other government-funded programs. In most international markets, we operate in an environment where governments may and have mandated cost-containment programs, placed restrictions on physician prescription levels and patient reimbursements, emphasized greater use of generic drugs and enacted across-the-board price cuts as methods to control costs. The sensitivity of our estimates can vary by program, type of customer and geographic location. Estimates associated with Medicaid and other government allowances may become subject to adjustment in a subsequent period.

We record product sales net of the following significant categories of product sales allowances:

º •
º Contractual adjustments-We offer chargebacks and contractual discounts and rebates, which we collectively refer to as contractual adjustments, to certain private institutions and various government agencies in both the United States and international markets. We record chargebacks and contractual discounts as allowances against accounts receivable in our consolidated balance sheets. We account for rebates by establishing an accrual for the amounts payable by us to these agencies and institutions, which is included in accrued liabilities in our consolidated balance sheets. We estimate the allowances and accruals for our contractual adjustments based on historical experience and current contract prices, using both internal data as well as information obtained from external sources, such as independent market research agencies and data from wholesalers. We continually monitor the adequacy of these estimates and adjust the allowances and accruals periodically throughout each quarter to reflect our actual experience. In evaluating these allowances and accruals, we consider several factors, including significant changes in the sales performance of our products subject to contractual adjustments, inventory in the distribution channel, changes in U.S. and foreign healthcare legislation impacting rebate or allowance rates, changes in contractual discount rates and the estimated lag time between a sale and payment of the corresponding rebate;

º •
º Discounts-In some countries, we offer cash discounts for certain products as an incentive for prompt payment, which are generally a stated percentage off the sales price. We account for cash discounts by reducing accounts receivable by the full amounts of the discounts. We consider payment performance and adjust the accrual to reflect actual experience; and

º •
º Sales returns-We record allowances for product returns at the time product sales are recorded. The product returns reserve is estimated based on the returns policies for our individual products and our experience of returns for each of our products. If the price of a product changes or if the history of product returns changes, the reserve is adjusted accordingly. We determine our estimates of the sales return accrual for new products primarily based on the historical sales returns experience of similar products, or those within the same or similar therapeutic category (amounts in thousands):

                                                   Three Months Ended
                                                        March 31,            Increase/
                                                                            (Decrease)
                                                   2009          2008        % Change
   Product sales allowances:
       Contractual adjustments                  $   136,180   $   102,002            34 %
       Discounts                                      6,275         5,505            14 %
       Sales returns                                  6,523         6,751          (3)%

           Total product sales allowances       $   148,978   $   114,258            30 %

   Total gross product sales                    $ 1,186,222   $ 1,120,525             6 %

   Total product sales allowances as a
   percent of total gross product sales                  13 %          10 %

Total product sales allowances increased $34.7 million, or 30%, in 2009, as compared to 2008, primarily due to the impact of price increases implemented after the first quarter of 2008, primarily for our Cardiometabolic and Renal reporting segment, and changes in our overall product mix.

Total estimated product sales allowance reserves and accruals in our consolidated balance sheets increased 4% to approximately $219 million as of March 31, 2009, as compared to approximately $210 million as of December 31, 2008, primarily due to changes in the timing of certain payments. Our actual results have not differed materially from amounts recorded. The annual variation has been less than 0.5% of total product sales for each of the last three years.

Distributor Fees

EITF 01-9, "Accounting for Consideration given by a Vendor to a Customer (including a Reseller of a Vendor's Products)" specifies that cash consideration (including a sales incentive) given by a vendor to a customer is presumed to be a reduction of the selling prices of the vendor's products or services and, therefore, should be characterized as a reduction of revenue. We include such fees in contractual adjustments, which are recorded as a reduction to product sales. That presumption is overcome and the consideration should be characterized as a cost incurred if, and to the extent that, both of the following conditions are met:

º •
º the vendor receives, or will receive, an identifiable benefit (goods or services) in exchange for the consideration; and

º •
º the vendor can reasonably estimate the fair value of the benefit received.

We record service fees paid to our distributors as a charge to SG&A, a component of operating expenses, only if the criteria set forth above are met. The following table sets forth the distributor fees recorded as a reduction to product sales and charged to SG&A (amounts in thousands):

                                                            Three Months Ended
                                                                March 31,
                                                             2009         2008
      Distributor fees:
        Included in contractual adjustments and
        recorded as a reduction to product sales           $   3,479     $ 4,696
        Charged to SG&A                                        3,547       2,951

             Total distributor fees                        $   7,026     $ 7,647

In-Process Research and Development

IPR&D represents the fair value assigned to incomplete technologies that we acquire, which at the time of acquisition have not reached technological feasibility and have no alternative future use. A technology is considered to have an alternative future use if it is probable that the acquirer will use the asset in its incomplete state as it exists at the acquisition date, in another research and development project that has not yet commenced, and economic benefit is anticipated from that use.

Substantial additional research and development will be required before any of our acquired programs reach technological feasibility. In addition, once research is completed, each underlying product candidate will need to complete a series of clinical trials and receive regulatory approvals prior to commercialization. Management assumes responsibility for determining the valuation of the acquired IPR&D programs. The fair value assigned to IPR&D for each acquisition is estimated by discounting, to present value, the future cash flows expected from the programs since the date of our acquisition. Accordingly, such cash flows reflect our estimates of revenues, costs of sales, operating expenses and income taxes from the acquired IPR&D programs based on the following factors:

º •
º relevant market sizes and market growth factors;

º •
º current and expected trends in technology and product life cycles;

º •
º the time and investment that will be required to develop products and technologies;

º •
º the ability to obtain marketing authorization and regulatory approvals;

º •
º the ability to manufacture and commercialize the products;

º •
º the extent and timing of potential new product introductions by our competitors that may be deemed more efficacious, more convenient to use, or more cost effective;

º •
º the amount of revenues that could be derived from the products; and

º •
º the appropriate discount rates to use in the analysis.

The discount rates used are commensurate with the uncertainties associated with the economic estimates described above. The resulting discounted future cash flows are then probability-adjusted to reflect the different stages of development, the time and resources needed to complete the development of the product and the risks of advancement through the product approval process. In estimating the future cash flows, we also consider the tangible and intangible assets required for successful exploitation of the technology resulting from the purchased IPR&D programs and adjust future cash flows for a charge reflecting the contribution to value of these assets. Such contributory tangible and intangible assets may include, but are not limited to, working capital, fixed assets, assembled workforce, customer relationships, patents, trademarks, and core technology.

Use of different estimates and judgments could yield materially different results in our analysis and could result in materially different asset values or expense. There can be no assurance that we will be able to successfully develop and complete the acquired IPR&D programs and profitably commercialize the underlying product candidates at all or before our competitors develop and commercialize products for the same indications. Moreover, if certain of the acquired IPR&D programs fail, are abandoned during development, or do not receive regulatory approval, then we may not realize the value we have estimated and recorded in our financial statements on the acquisition date, and we may also not recover the research and development investment made since the acquisition to further develop that program. If such circumstances were to occur, our future operating results could be materially adversely impacted.

Prior to January 1, 2009, IPR&D acquired through a business combination was expensed. In accordance with the adoption of FAS 141R, IPR&D acquired through business combinations on or after January 1, 2009 will be capitalized as an intangible asset on the balance sheet and periodically tested for impairment. Amortization of such capitalized IPR&D will commence upon the successful completion of the program and continue for the estimated useful life of the asset.

None of the incomplete technology programs we have acquired through our business combinations prior to January 1, 2009 have reached technological feasibility nor had an alternative future use and, therefore, the fair value of those programs was expensed on the acquisition date and classified in our consolidated statements of operations within the line item Purchase of In-Process Research and Development. We did not complete any business combinations on or after January 1, 2009 and therefore did not capitalize any IPR&D during the three months ended March 31, 2009.

FAS 141R has no impact on the accounting and classification for incomplete technology programs acquired outside of a business combination. As such, nonrefundable fees paid for the acquisition or licensing of products that have not received regulatory approval and have no future alternative use are classified in our consolidated statements of operations within the line item Research and Development. However, if a technology acquired outside of a business combination is determined to have an alternative future use, then the fair value of the program would be recorded as an intangible asset on our consolidated balance sheet.

RESULTS OF OPERATIONS

The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial statements.

REVENUES

    The components of our total revenues are described in the following table
(amounts in thousands):


                                              Three Months Ended
                                                   March 31,            Increase/
                                                                        (Decrease)
                                              2009          2008         % Change
     Product revenue                       $ 1,037,244   $ 1,006,268              3 %
     Service revenue                           101,499        85,864             18 %

       Total product and service revenue     1,138,743     1,092,132              4 %
     Research and development revenue           10,128         7,929             28 %

       Total revenues                      $ 1,148,871   $ 1,100,061              4 %

Product Revenue

We derive product revenue from sales of:

º •
º Genetic Diseases products, including Cerezyme for the treatment of Gaucher disease, Fabrazyme for the treatment of Fabry disease, Myozyme for the treatment of Pompe disease, Aldurazyme for the treatment of MPS I and Elaprase for the treatment of Hunter Syndrome;

º •
º Cardiometabolic and Renal products, including Renagel/Renvela for the reduction of elevated serum phosphorus levels in end-stage renal disease patients on hemodialysis, Hectorol for the treatment of secondary hyperparathyroidism in patients on dialysis and those with chronic kidney disease, or CKD, bulk sevelamer, and Thyrogen, which is an adjunctive diagnostic agent used in the follow-up treatment of patients with well-differentiated thyroid cancer and an adjunctive therapy in the ablation of remnant thyroid tissue;

º •
º Biosurgery products, including orthopaedic products, such as Synvisc/Synvisc-One, and the Sepra line of products, such as Seprafilm;

º •
º Hematologic Oncology products, including Campath for the treatment of B-CLL, Clolar/Evoltra for the treatment of ALL after at least two prior regimens and Mozobil; and

º •
º Other products, including:

º •
º transplant products for the treatment of immune-mediated diseases, primarily Thymoglobulin, which induces immunosuppression of certain types of cells responsible for organ rejection in transplant patients;

º •
º diagnostic products, including infectious disease and cholesterol testing products; and

º •
º bulk pharmaceuticals, including WelChol, which is a therapy for the reduction of LDL cholesterol in patients with primary hypercholesterolemia.

The following table sets forth our product revenue on a reporting segment basis (amounts in thousands):

                                                 Three Months Ended
                                                      March 31,            Increase/
                                                                          (Decrease)
                                                 2009          2008        % Change
    Genetic Diseases:
      Cerezyme                                $   295,970   $   304,303            (3 )%
      Fabrazyme                                   122,201       116,475             5 %
      Myozyme                                      67,392        67,324             -
      Aldurazyme                                   36,837        36,839             -
      Other Genetic Diseases                       14,625         9,772            50 %

         Total Genetic Diseases                   537,025       534,713             -

    Cardiometabolic and Renal:
      Renagel/Renvela (including sales of         170,599       168,694             1 %
      bulk sevelamer)
      Hectorol                                     33,030        29,076            14 %
      Thyrogen                                     38,826        33,785            15 %
      Other Cardiometabolic and Renal                 482           237          >100 %

         Total Cardiometabolic and Renal          242,937       231,792             5 %

    Biosurgery:
      Synvisc/Synvisc-One                          63,171        56,142            13 %
      Sepra products                               34,304        30,604            12 %
      Other Biosurgery                             11,653        13,581           (14 )%

         Total Biosurgery                         109,128       100,327             9 %

    Hematologic Oncology                           33,978        22,281            52 %

    Other product revenue                         114,176       117,155            (3 )%

         Total product revenue                $ 1,037,244   $ 1,006,268             3 %

Genetic Diseases

Genetic Diseases product revenue remained substantially unchanged for the three months ended March 31, 2009, as compared to the same period of 2008, primarily due to unfavorable exchange rate fluctuations, which offset continued growth in sales volume for Cerezyme, Fabrazyme, Myozyme, Aldurazyme and Elaprase. Elaprase was developed by Shire Human Genetic Therapies Inc., or Shire. We have the rights to commercialize the product in Japan and other Asia Pacific countries under an agreement with Shire. We launched Elaprase in Japan . . .