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.

Note: All references to increases or decreases for the three months ended September 30, 2009 are as compared to the three months ended September 30, 2008. All references to increases or decreases for the nine months ended September 30, 2009 are as compared to the nine months ended September 30, 2008, unless otherwise noted.

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 genetic disease 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 a 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 and the mobilization of hematopoietic stem cells and is developing a product for the treatment of MS. This unit derives substantially all of its revenue from sales of Campath, clofarabine (which is marketed under the names Clolar and Evoltra), Fludara, Leukine and Mozobil.

Formerly, we included our MS business unit under the caption "Other." As a result of our recent acquisition of certain products and development programs from Bayer, as described under the heading "Strategic Transactions-Acquisition from Bayer," below, our MS business unit is now material. We have aggregated our Hematologic Oncology and MS reporting segments and now report the activities

of these two segments under the caption "Hematologic Oncology." 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

Acquisition of Assets from Targeted Genetics Corporation

On September 8, 2009, we entered into an agreement with Targeted Genetics Corporation to acquire certain gene therapy manufacturing assets for $7.0 million. We acquired intellectual property and materials used in manufacturing AAV vectors. We paid Targeted Genetics Corporation a nonrefundable upfront payment of $3.5 million in September 2009 and will also make additional payments totaling $3.5 million upon achievement of certain technology transfer-based milestones. We recorded a total of $7.0 million as a charge to research and development expenses for our Genetic Diseases reporting segment in our consolidated statements of operations for the three and nine months ended September 30, 2009. The payment for the milestones and the transition of the technology are all expected to be completed by the first quarter of 2010.

Acquisition from Bayer

On May 29, 2009, we completed a transaction with Bayer to:

º •
º exclusively license worldwide rights to commercialize alemtuzumab for MS;

º •
º exclusively license worldwide rights to alemtuzumab for B-CLL and all other indications, except for solid organ transplant, which we refer to as Campath;

º •
º exclusively license Bayer's worldwide rights to the oncology products Fludara and Leukine; and

º •
º acquire a new Leukine manufacturing facility located in Lynnwood, Washington, contingent upon the facility receiving FDA approval, which is expected in 2011.

Prior to this transaction, we shared with Bayer the development and certain commercial rights to alemtuzumab for MS and Campath and received two-thirds of Campath net profits on U.S. sales and a royalty on foreign sales. Under our new arrangement with Bayer, prior to regulatory approval of alemtuzumab for MS, we will have primary responsibility for the product's development while Bayer will continue to fund development at current levels and will participate in the development steering committee. We will have worldwide commercialization rights, with Bayer retaining an option to co-promote alemtuzumab for MS. In exchange for the above, Bayer is eligible to receive the following contingent purchase price payments:

º •
º a percentage of revenues from sales of alemtuzumab for MS capped at a total compensation of $1.25 billion or ten years, whichever comes first;

º •
º a percentage of the combined revenues from sales of Campath, Fludara and Leukine capped at a total compensation of $500.0 million or eight years, whichever comes first;

º •
º sales-based milestone payments determined as a percentage of annual worldwide revenues of alemtuzumab for 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, Fludara and Leukine are reached beginning in 2011; and

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

We are using Bayer for certain transition services and are purchasing commercial supply of Fludara and Leukine from Bayer. We have employed certain members of Bayer's commercial teams for all three products and have an opportunity to employ certain members of Bayer's manufacturing team if we acquire the Leukine facility. The transaction has been accounted for as a business combination and is included in our results of operations beginning on May 29, 2009, the date of acquisition. The results for the acquired products are included in our Hematologic Oncology reporting segment. The fair value of the consideration and acquired assets at the date of acquisition consisted of the following (amounts in thousands):

             Cash, net of refundable cash deposits         $    42,425
             Contingent consideration obligations              964,100

               Total fair value of total consideration     $ 1,006,525

             Inventory                                     $   136,400
             Developed technology:
                 Fludara (to be amortized over 5 years)        182,100
                 Campath (to be amortized over 10 years)        71,000
                 Leukine (to be amortized over 12 years)         8,272
             IPR&D-alemtuzumab for MS                          632,912

               Total fair value of assets acquired           1,030,684

             Gain on acquisition of business               $    24,159

At closing, we paid a total of $117.1 million to Bayer, of which $74.6 million was refundable. The remaining non-refundable amount of $42.4 million represents a payment for acquired inventory. A total of $59.8 million of the refundable amount was received in July 2009 and $14.8 million remains due from Bayer as of September 30, 2009. The contingent consideration obligations are net of the continued funding expected to be received from Bayer for the development of alemtuzumab for MS. We determined the fair value of the contingent consideration obligations based on a probability-weighted income approach derived from revenue estimates and probability assessment with respect to regulatory approval of alemtuzumab for MS. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. The resultant probability-weighted cash flows were then discounted using discount rates of 11% for Campath, Fludara and Leukine and 13% for alemtuzumab for MS.

Of the $964.1 million total contingent consideration obligations recorded as of the acquisition date, $529.1 million related to Campath, Fludara and Leukine, and $435.0 million related to alemtuzumab for MS. Each period we revalue the contingent consideration obligations to their then fair value and record increases in the fair value as contingent consideration expense and decreases in the fair value as a reduction of contingent consideration expense. Increases or decreases in the fair value of the contingent consideration obligations can result from changes in discount periods and rates, changes in the timing and amount of revenue estimates and changes in probability adjustments with respect to regulatory approval of alemtuzumab for MS.

As of September 30, 2009, the fair value of the total contingent consideration obligations was $1.0 billion primarily due to changes in discount periods and management estimates. Accordingly, we recorded contingent consideration expense in our consolidated statements of operations of $28.2 million for the three months ended and $37.3 million for the nine months ended September 30, 2009. As of September 30, 2009, we have paid $9.2 million in contingent consideration payments to Bayer and have not received funding from Bayer for the development of alemtuzumab for MS since May 29, 2009.

At the date of acquisition, alemtuzumab for MS had not reached technological feasibility nor had an alternative future use and is therefore considered to be IPR&D. We recorded the fair value of the purchase price attributable to IPR&D as an indefinite-lived intangible asset. We will test the asset annually for impairment, or earlier if conditions warrant. Amortization of this asset will begin upon regulatory approval based on the then estimated useful life of the asset.

The fair value assigned to purchased IPR&D was estimated by discounting, to present value, the cash flows expected to result from the project once it has reached technological feasibility. We used a discount rate of 16% and cash flows that have been probability-adjusted to reflect the risks of advancement through the product approval process, which we believe are appropriate and representative of market participant assumptions. In estimating future cash flows, we also considered other tangible and intangible assets required for successful exploitation of the technology resulting from the purchased IPR&D project and adjusted future cash flows for a charge reflecting the contribution to value these assets.

The fair value of the identifiable assets acquired in this transaction of $1.03 billion exceeded the fair value of the purchase price of $1.01 billion. As a result, we recognized a gain on acquisition of business of $24.2 million in our consolidated statements of operations for the nine months ended September 30, 2009. The fair value of the consideration and assets remain subject to potential adjustments.

SG&A in our consolidated statements of operations for the nine months ended September 30, 2009 includes approximately $4 million of acquisition-related costs, primarily legal fees, associated with the Bayer transaction.
Acquisition-related costs for the three months ended September 30, 2009 were not significant.

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 genetics business unit 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 investments in equity securities in our consolidated balance sheet as of March 31, 2009. As the purchased assets did not qualify as a business combination 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, unless such amount is required to satisfy certain of EXACT Sciences' indemnification obligations.

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. Excluding the addition of our policy for contingent consideration expense, 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 and our policy for accounting for contingent consideration expense 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.

Our provisions for product sales allowances reduced gross product sales as follows (amounts in thousands):

                        Three Months Ended                                           Nine Months Ended
                           September 30,                          Increase/            September 30,                         Increase/
                                                  Increase/       (Decrease)                                  Increase/      (Decrease)
                        2009          2008        (Decrease)       % Change         2009          2008        (Decrease)      % Change
Product sales
allowances:
    Contractual
    adjustments      $   160,132   $   153,800    $     6,332               4 %  $   445,362   $   362,813    $    82,549             23 %
    Discounts              6,628         5,655            973              17 %       19,668        16,663          3,005             18 %
    Sales returns          7,019         8,434         (1,415 )           (17 )%      22,917        20,103          2,814             14 %

        Total
        product
        sales
        allowances   $   173,779   $   167,889    $     5,890               4 %  $   487,947   $   399,579    $    88,368             22 %

Total gross
product sales        $ 1,127,466   $ 1,226,184    $   (98,718 )            (8 )% $ 3,594,302   $ 3,535,943    $    58,359              2 %

Total product
sales allowances
as a percent of
total gross
product sales                 15 %          14 %           (6 )%                          14 %          11 %         >100 %

Total product sales allowances increased for the three and nine months ended September 30, 2009 largely due to the impact of price increases implemented after the second quarter of 2008, primarily for our Cardiometabolic and Renal reporting segment, the addition of sales of Campath, Fludara and Leukine, which we acquired from Bayer in May 2009, and changes in our overall product mix.

Total estimated product sales allowance reserves and accruals in our consolidated balance sheets increased approximately 17% to approximately $246 million as of September 30, 2009, as compared to approximately $210 million as of December 31, 2008, primarily due to changes in the timing of certain payments and approximately $10 million of additional contractual fees in the third quarter of 2009. Our actual results have not differed materially from amounts recorded. The annual variation has been less than 0.5% of total product sales for the last three years.

Distributor Fees

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                                     Nine Months Ended
                         September 30,                       Increase/          September 30,                       Increase/
                                               Increase/     (Decrease)                              Increase/      (Decrease)
                        2009         2008     (Decrease)      % Change         2009        2008      (Decrease)      % Change
Distributor fees:
  Included in
  contractual
  adjustments and
  recorded as a
  reduction to
  product sales       $   4,211     $ 3,437    $      774             23 %   $  11,224   $  9,723    $     1,501             15 %
  Charged to SG&A         3,371       3,519          (148 )           (4 )%     10,400     10,039            361              4 %

       Total
       distributor
       fees           $   7,582     $ 6,956    $      626              9 %   $  21,624   $ 19,762    $     1,862              9 %

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;

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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;

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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 . . .