Back to GetFilings.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2001

Commission File No. 0-14680

GENZYME CORPORATION
(Exact name of Registrant as specified in its Charter)

(617) 252-7500

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Genzyme General Division Common Stock, $0.01 par value ("Genzyme General Stock")
Genzyme Biosurgery Division Common Stock, $0.01 par value ("Biosurgery Stock")
Genzyme Molecular Oncology Division Common Stock, $0.01 par value ("Molecular Oncology Stock")
Genzyme General Stock Purchase Rights
Biosurgery Stock Purchase Rights
Molecular Oncology Stock Purchase Rights

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 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 / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K./ /

Aggregate market value of voting stock held by non-affiliates of the Registrant as of March 1, 2002: $9,831,069,513

Number of shares of Genzyme General Stock outstanding as of March 1, 2002: 213,370,702
Number of shares of Biosurgery Stock outstanding as of March 1, 2002: 39,562,675
Number of shares of Molecular Oncology Stock outstanding as of March 1, 2002: 16,762,920

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 2001 Genzyme General, Genzyme Biosurgery and Genzyme Molecular Oncology Annual Reports are incorporated by reference into Parts I, II and IV of this Form 10-K. Portions of the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on May 30, 2002 are incorporated by reference into Part III of this Form 10-K.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This Annual Report on Form 10-K contains forward-looking statements, including statements regarding our:

•

projected timetables for the preclinical and clinical development of, regulatory submissions and approvals for, and market introduction of, our products and services;



•

estimates of the potential markets for our products and services, including the anticipated drivers for future growth;



•

sales and marketing plans;



•

assessments of competitors and potential competitors;



•

estimates of the capacity of manufacturing and other facilities to support our products and services;



•

expected future revenues, operations and expenditures;



•

allocations of revenue expenses, liabilities and income tax benefits;



•

maintenance of financial covenants contained in our credit facility;



•

potential milestone payments to the former stockholders of Novazyme Pharmaceuticals, Inc.; and



•

projected cash needs.

        These statements are subject to risks and uncertainties, and our actual results may differ significantly from those that are described in this report. 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 and successfully enforce our proprietary rights;



•

the scope, validity and enforceability of patents and other proprietary rights held by third parties and their impact on our ability to commercialize our products and services;



•

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 identify new patients for our products and services;



•

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



•

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 orphan drug status for Cerezyme® and Ceredase® enzymes on our revenues from these products;



•

the outcome of our ongoing discussions with the FDA in connection with our Biologics License Application submission for Fabrazyme™ enzyme;

2

•

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



•

our ability to expand manufacturing capacity for Renagel® phosphate binder;



•

our ability to optimize dosing and improve patient compliance with Renagel phosphate binder;



•

our ability to manage inventories of Renagel phosphate binder;



•

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



•

the continued funding of our joint ventures by our partners;



•

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



•

our ability to increase market penetration in Europe for our Fabrazyme enzyme, Thyrogen® hormone and Renagel phosphate binder; and



•

the possible disruption of our operations due to terrorist activities and armed conflict, including as a result of the disruption of operations of our subsidiaries and our customers, suppliers, distributors, couriers, collaborative partners, licensees and clinical trial sites.

        We have included more detailed descriptions of these risks and uncertainties in Exhibit 99.2, "Factors Affecting Future Operating Results," to this Annual Report on Form 10-K. We encourage you to read those descriptions carefully. We caution investors not to place undue reliance on the forward-looking statements contained in 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 except as required by law.

NOTE REGARDING REFERENCES TO GENZYME DIVISIONS

        Throughout this Annual Report on Form 10-K, 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."

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 Annual Report on Form 10-K. Please read that information.

NOTE REGARDING TRADEMARKS

        Genzyme®, Cerezyme®, Ceredase®, Thyrogen®, Fabrazyme®, N-geneous®, Contrast®, InSight®, AFP3®, AFP4®, GlyPro®, Pleur-evac®, Thora-Klex®, Tevdek®, Polydek®, Deklene®, SaphLITE®, Sepragel®, Seprafilm®, Carticel®, Epicel® and Snowden-Pencer® are registered trademarks of Genzyme. SAGE®, SPHERE™, NextStitch™, Sahara™, Immobilizer™, Sepra™, Sepramesh™ and Seprapack™ are trademarks of Genzyme. Renagel® is a registered trademark of GelTex Pharmaceuticals, Inc. Synvisc®, Hylaform®, Hylashield® and HsS® are registered trademarks and Hylashield Nite™ and Hylasine™ are

3

trademarks of Genzyme Biosurgery Corporation. Focal® and FocalSeal® are registered trademarks of Focal, Inc. OSOM® is a registered trademark of Wyntek Diagnostics, Inc. AVONEX® is a registered trademark of Biogen, Inc. Interceed® is a registered trademark and Intergel™ is a trademark of Johnson & Johnson Corporation. Orthovisc® is a registered trademark of Anika Research, Inc. Hylagan® is a registered trademark of Sanofi-Synthelabo Inc. Co.don® AG is a registered trademark of Co.don® AG. Kabushiki Kaisha. Express® and Oasis® are registered trademarks of Atrium Medical Corporation. WelChol™ is a trademark of Sankyo Pharma, Inc. NKase™ is a trademark of Genentech, Inc. Aldurazyme™ is a trademark of BioMarin/Genzyme LLC. Replagal™ is a trademark of Transkaryotic Therapies, Inc. Foznal™ is a trademark of Shire Laboratories, Inc. Artz™ is a trademark of Seikagaku Kogyo. KM Mice™ is a trademark of Kirin Brewery Co., Ltd. Spraygel™ is a trademark of Confluent Surgical, Inc. Oxiplex™ is a trademark of FizoMed, Inc. Durolane™ is a trademark of Q-Med AB. Artrease™ is a trademark of Bio-Technology General Corp. Vevesca™ is a trademark of Oxford GlycoSciences plc.

4

TABLE OF CONTENTS

5

PART I

ITEM 1.    BUSINESS

Introduction

        We are a biotechnology and human healthcare company that develops innovative products and provides services for major unmet medical needs. We were founded as a Delaware corporation in June 1981 and became a Massachusetts corporation in 1991. We currently have three operating divisions. Each of our divisions has a related series of common stock that is intended to reflect its value and track its financial performance. Our three divisions are:

•

Genzyme General, which develops and markets therapeutic products and diagnostic products and services with an emphasis on genetic disorders and other chronic debilitating diseases with well-defined patient populations. Genzyme General Stock is listed on the Nasdaq National Market under the symbol "GENZ;"



•

Genzyme Biosurgery, which develops and markets implantable biotherapeutic products, biomaterials and medical devices to improve or replace surgery, with an emphasis on the orthopaedics and cardiothoracic markets. Biosurgery Stock is listed on the Nasdaq National Market under the symbol "GZBX;" and



•

Genzyme Molecular Oncology, which is developing a new generation of cancer products focused on cancer vaccines and angiogenesis inhibitors through the integration of its genomics, gene and cell therapy, small molecule drug discovery and protein therapeutic capabilities. Molecular Oncology Stock is listed on the Nasdaq National Market under the symbol "GZMO."

        We allocate all of our products, services, programs, assets and liabilities among our divisions for purposes of financial statement presentation; however, Genzyme, the corporation, together with its subsidiaries, continues to own all of the assets and is responsible for all of the liabilities allocated to each of the divisions.

Genzyme General—Products and Development Programs

        Genzyme General is organized into two reportable segments—Therapeutics and Diagnostic Products. The Therapeutics segment focuses on developing and marketing products for genetic diseases and other chronic debilitating diseases, including a family of diseases known as lysosomal storage disorders, and specialty therapeutics. The Therapeutics segment also includes the business of GelTex Pharmaceuticals, Inc., a wholly-owned subsidiary that we acquired in December 2000. GelTex is focused on developing non-absorbed polymer drugs that bind and eliminate targeted substances in the gastrointestinal tract and small-molecule pharmaceuticals consisting of novel polyamine analogues and metal chelators. The Diagnostic Products segment develops, markets and distributes in vitro diagnostic products. Outside of these reportable segments, Genzyme General also provides genetic diagnostic services, and develops, manufactures and sells pharmaceutical products that are used by other biotechnology and pharmaceutical companies in their research and development activities.

        In September 2001, we acquired Novazyme Pharmaceuticals, Inc., a developer of biotherapies for the treatment of lysosomal storage disorders. The business of Novazyme is included in our Therapeutics segment. In June 2001, we acquired Wyntek Diagnostics, Inc., a provider of high quality point of care rapid diagnostic tests for pregnancy and infectious diseases. The business of Wyntek is included in our Diagnostic Products segment.

Therapeutics

        Genzyme General's Therapeutics segment currently has five therapeutic products on the market and several other therapeutic products in varying stages of development. The chart set forth below

6

provides summary information on Genzyme General's therapeutic products and clinical development programs as of March 1, 2002.

7

*

If you would like information about this strategic collaboration, please read Note I, "Investments," to our consolidated financial statements, which is contained in Exhibit 13.1 to this Annual Report on Form 10-K (our "Consolidated Financial Statements") and incorporated into this discussion by reference.

        Additional details on Genzyme General's therapeutic products and late-stage development programs are set forth below.

        Cerezyme® (imiglucerase for injection)/Ceredase® (alglucerase injection).    Treatment with Cerezyme or Ceredase enzyme replacement therapy currently represents the only safe and effective treatment known to Genzyme that is available for Type I Gaucher disease, a lysosomal storage disorder. We began marketing Ceredase enzyme in 1991. Because production of Ceredase enzyme was subject to supply constraints, we developed Cerezyme enzyme, a recombinant form of human beta glucocerebrosidase, the enzyme that is deficient in Gaucher patients. Recombinant technology uses specially engineered cells to produce enzymes, or other substances, by inserting into cells of one organism the genetic material of a different species. In the case of Cerezyme enzyme, Chinese hamster ovary cells (or "CHO cells") are engineered to produce human beta glucocerebrosidase. We stopped producing Ceredase enzyme, except for small quantities, in 1998 after we converted substantially all of the patients who previously used Ceredase enzyme to Cerezyme enzyme.

        Genzyme General is marketing these products directly to physicians, hospitals and treatment centers worldwide through a highly trained sales force. This marketing effort is directed at identifying and initiating treatment for the estimated 5,000 to 10,000 Gaucher patients Genzyme believes exist worldwide. We distribute Cerezyme enzyme in over 60 countries worldwide. Our results of operations are highly dependent on sales of these products. Sales of Cerezyme and Ceredase enzymes totaled approximately $569.9 million in 2001, which represented approximately 51% of our consolidated product revenue in that year. Sales of these products totaled approximately $536.9 million, or 66% of our consolidated product revenues in 2000, and approximately $478.4 million, or 70% of our consolidated product revenues, in 1999.

        Renagel® (sevelamer hydrochloride).    Renagel phosphate binder capsules and tablets are used for the reduction of serum phosphorus in patients with end-stage renal disease on hemodialysis. There are an estimated 320,000 end-stage renal disease patients in the United States, approximately 95% of whom receive a phosphate control product. There are also an estimated 170,000 end-stage renal disease patients in Europe and 50,000 in Brazil. Genzyme General is marketing Renagel phosphate binder capsules and tablets in the United States, Europe and Brazil directly to nephrologists, renal dieticians and payors through a dedicated sales force. The launch of the tablet formulation in September 2000 was intended to help nephrologists manage patients into the normal serum phosphorus range. We began recording revenues from Renagel phosphate binder during the second quarter of 2000 under an amended distribution arrangement with GelTex, which we acquired in December 2000. Sales of Renagel phosphate binder totaled approximately $176.9 million, or 16% of our consolidated product revenues in 2001, and approximately $56.0 million, or 6% of our consolidated product revenues in 2000. Chugai

8

Pharmaceutical Co., Ltd has rights to develop and market Renagel phosphate binder in Japan, China and other Pacific Rim countries.

        In the fourth quarter of 2001, Genzyme General completed its Treat-to-Goal study comparing Renagel phosphate binder to the standard calcium-based phosphate binders. The study was expected to last three years, but at the recommendation of its clinical investigators and its Renagel medical advisory board, Genzyme General elected not to pursue a two-year extension protocol because it felt the trial had met its objectives at one year. Genzyme General has completed enrollment for a 2,000-patient study initiated in 2001 and designed to evaluate the ability of the products to improve patient morbidity and mortality.

        Thyrogen® (thyrotropin alfa for injection).    Thyrogen hormone is an adjunctive diagnostic agent used in the follow-up of patients with well-differentiated thyroid cancer. It was developed by Genzyme General to allow patients to continue taking their thyroid hormone supplements while they are being screened for residual or recurring thyroid cancer, which helps patients avoid the debilitating effects of hypothyroidism. Genzyme General began marketing Thyrogen hormone in the United States in 1998 and pursues its marketing efforts through a direct sales force. In the United States, physicians order approximately 150,000 thyroglobulin tests and 30,000 radioiodine imaging whole body scans each year for thyroid cancer patients. Brazil has the highest incidence of thyroid cancer in the developed world, outside of the United States. Physicians order approximately 28,000 thyroglobulin tests and 12,000 radioiodine imaging whole body scans each year in Brazil for thyroid cancer patients. Biobrás S.A. exclusively distributes and markets the product in Brazil. Genzyme General began marketing Thyrogen hormone in Europe in August 2001, and plans to continue product launches in Europe on a country-by-country basis as pricing and reimbursement approvals are obtained. Physicians order approximately 110,000 thyroglobulin tests and 25,000 radioiodine imaging whole body scans each year in Europe for thyroid cancer patients. The product will be sold by Genzyme's existing specialty therapeutics sales force in Europe and through marketing partners in selected countries.

        Fabrazyme® (afgalsidase beta for injection).    Genzyme General is developing Fabrazyme enzyme, a recombinant form of the human enzyme alpha-galactosidase, as a treatment for Fabry disease. Fabry disease is a lysosomal storage disorder that is estimated to affect 1 in 40,000 males worldwide, with an estimated 5,000 patients worldwide. We filed for marketing approval for Fabrazyme enzyme in the United States and in Europe in 2000. In August 2001, we received marketing approval in Europe for Fabrazyme enzyme as a long-term enzyme replacement therapy in patients with a confirmed diagnosis of Fabry disease. Genzyme has launched Fabrazyme enzyme in 19 countries outside of the United States and plans to continue product launches on a country-by-country basis as pricing and reimbursement approvals are obtained. Fabrazyme enzyme is sold by Genzyme's existing Cerezyme sales force in Europe, which maintains close relationships with physicians who specialize in the treatment of genetic disorders.

        We submitted our BLA for Fabrazyme enzyme to the FDA in June 2000 and the FDA accepted our application for review under an accelerated approval mechanism. We received an initial complete response letter from the FDA in December 2000 and submitted our response to that letter in April 2001. On October 22, 2001, we received another complete response letter from the FDA related to our application to market Fabrazyme enzyme in the United States The letter specifies additional data and information the FDA requires to complete its review of our Biologics License Application (or "BLA") for Fabrazyme enzyme. We expect action on the United States regulatory submissions in 2002. In addition, Genzyme General initiated a phase 4 trial of Fabrazyme enzyme in January 2001, which is required under the FDA's accelerated approval mechanism. Please refer to our discussion on Fabrazyme enzyme under the heading "Competition" on page 22.

        WelChol™ (colesevelam hydrochloride).    GelTex received marketing approval for WelChol compound from the FDA in May 2000. WelChol compound is approved for administration alone or in

9

combination with an HMG-CoA reductase inhibitor, also known as a "statin," as adjunctive therapy to diet and exercise for the reduction of elevated LDL cholesterol in patients with primary hypercholesterolemia. While the risks of high cholesterol are well recognized, the condition remains significantly under-treated worldwide. An estimated 25 million Americans require drug therapy to achieve adequate reductions in cholesterol levels. However, only approximately 8 million Americans are receiving cholesterol-reducing drugs, and it is estimated that more than 60% of this population is not at their appropriate National Cholesterol Education Program LDL cholesterol goal. Worldwide, it is estimated that approximately one-third of the individuals who should be receiving cholesterol-reducing drugs are receiving therapy. Sankyo Pharma, Inc. has been marketing WelChol compound in the United States since its launch in September 2000.

        Aldurazyme™ (Laronidase for Injection).    Genzyme General and BioMarin Pharmaceutical, Inc. have formed a joint venture to develop Aldurazyme enzyme, a recombinant form of the human enzyme alpha-L-iduronidase, to treat a lysosomal storage disorder known as mucopolysaccharidosis I, or MPS I. Approximately 3,000 to 4,000 people in the developed world have been diagnosed with MPS I. The joint venture completed a confirmatory phase 3 trial in the third quarter of 2001 and plans to file for marketing approval in Europe and the United States in the first quarter of 2002, and in Canada in 2002.

        AVONEX® (Interferon-Beta 1a).    In September 1998, we entered into an agreement with Biogen, Inc. under which Genzyme General will, following regulatory approval, exclusively distribute AVONEX in Japan. AVONEX is Biogen's treatment for relapsing forms of multiple sclerosis. Genzyme General is managing the clinical development program for AVONEX in Japan and is working to obtain registration and reimbursement approvals for the product. Genzyme General expects to complete the phase 3 trial in Japan in the second quarter of 2002. Genzyme General estimates that there are 5,000 multiple sclerosis patients in Japan.

        GT 160-246 for C. Difficile Colitis.    The leading product currently in development at GelTex is a toxin binder for Clostridium difficile, also known as C. difficile. C. difficile is a major cause of antibiotic associated colitis, a condition common in hospitals and nursing homes. C. difficile is estimated to affect over 600,000 patients each year in the United States, resulting in prolonged hospital stays and increased costs, and is the cause of an estimated 5,000 deaths annually. In December 2001, Genzyme General launched a phase 2 trial of its polymer-based toxin binder for the treatment of C. difficile colitis following a successful pilot phase 2 study.

        Alpha-glucosidase.    Genzyme General is developing a potential therapy for Pompe disease. Pompe disease is a lysosomal storage disorder that is estimated to affect between 5,000 and 10,000 people worldwide. As part of its efforts to develop a safe and effective therapy for patients suffering with Pompe disease as quickly as possible, Genzyme General has devoted resources to the development of several potential therapies. Genzyme General is conducting an extension of the phase 2 trial of transgenically derived human alpha-glucosidase. Genzyme General does not intend to commercialize the transgenic product and plans to transition the patients currently enrolled in this trial to an alpha-glucosidase product produced in CHO cells as soon as practicable. It is conducting a phase 2 trial of a CHO-derived alpha-glucosidase product that it licensed from Synpac (North Carolina), Inc. Genzyme General plans to meet with the FDA to outline a plan for initiating additional clinical trials this year in infantile and delayed-onset Pompe patients and to discuss the regulatory pathway going forward.

        In connection with its efforts to develop a product for the treatment of Pompe disease, Genzyme General previously entered into two joint ventures with Pharming Group N.V—one for the development of the transgenically-derived product, and the other for the development of CHO-derived products. In August 2001, Pharming Group filed for receivership in order to seek protection from creditors. Thereafter, Genzyme General assumed full operational and financial responsibility for the development of CHO-derived products. In October 2001, we acquired Pharming Group's manufacturing

10

facility in Geel, Belgium as part of Genzyme General's efforts to ensure the continued supply of the transgenically-derived product to patients enrolled in the ongoing study until they can be transitioned to a CHO-derived product. In December 2001, we entered into an agreement with Pharming Group to acquire all of its remaining assets related to the diagnosis and treatment of Pompe disease.

        Other Development Programs.    Genzyme General has several on-going preclinical and research programs. Genzyme General is developing an oral iron chelator for the treatment of iron overload disorders. It is conducting preclinical studies of a second generation Cerezyme enzyme product for Type I Gaucher disease. Genzyme General also is engaged in preclinical studies and research of small molecule products for multiple sclerosis, lysosomal storage diseases, polycystic kidney disease and cystic fibrosis, as well as gene therapies for AV shunt failure in renal dialysis, lysosomal storage diseases and other genetic diseases. Finally, Genzyme General is conducting preclinical studies of TGF-beta antagonists for renal and other diseases.

Diagnostic Products

        Genzyme General develops, markets and distributes in vitro diagnostic products with an emphasis on point of care products for the in-hospital and out of hospital rapid test segment, and clinical chemistry reagents and raw materials focused on the clinical laboratory. Sales in Europe and the United States are made primarily to diagnostic reagent and equipment manufacturers who, in turn, distribute the products under their own brand. In Japan, sales are primarily made to distributors. We have described some of Genzyme General's diagnostic products and development programs below.

        Cardiovascular Products.    Genzyme General sells reagents for the measurement of low-density lipoprotein cholesterol, or LDL-cholesterol and high density lipoprotein cholesterol, or HDL-cholesterol. Genzyme General's liquid N-geneous® LDL and liquid N-geneous HDL tests measure cholesterol levels directly without the imprecise labor intensive pretreatment methods that were previously used. These methods are also easily adapted to automated chemistry analyzers, through instrument applications Genzyme General develops as part of its value contribution to its partners. The N-geneous LDL cholesterol test was the first direct, liquid homogeneous LDL cholesterol test available for sale in the United States. Genzyme General is distributing both tests exclusively in the United Sates and Europe under an agreement with the manufacturer of the tests, Daiichi Pure Chemicals., Ltd., of Tokyo. In Asia and Japan, we hold co-exclusive distribution rights. In the primary markets we serve, Genzyme Diagnostics supports approximately 50% of the 150 to 200 million annual direct HDL and LDL cholesterol tests performed.

        GlyPro® Test.    Genzyme General's GlyPro test is a tool for monitoring diabetes. The GlyPro test measures glycated serum protein and provides an intermediate-term assessment of a patients average blood glucose control over the preceding two to three weeks.

        Diagnostic Intermediates.    Genzyme General produces intermediates such as diagnostic enzymes, substrates and specialty proteins for use in diagnostic kits. Complimentary to Genzyme Diagnostic's unique formulated reagents, the raw materials are formulated by Genzyme's OEM partners into finished reagents and used in mainframe clinical chemistry analyzers in the clinical lab. Currently, an example of Genzyme General's product line integration is in the area of pancreatic function, where Genzyme General provides enzymes, substrates and formulated reagents supported by patented methodologies for amylase and lipase determination to diagnostic kit manufacturers. Genzyme General is also a primary supplier of cholesterol enzymes used in testing for coronary heart disease.

        Qualitative Rapid Tests.    Genzyme General's qualitative rapid test portfolio expanded with the acquisition of Wyntek Diagnostics, Inc., in June 2001. In addition to private label products distributed to Genzyme General partners in the same fashion as Genzyme General distributes its products, Wyntek sales include the OSOM brand of pregnancy, Strep A and infectious mono rapid tests. Adding these

11

products to the current Contrast® rapid tests for pregnancy, Strep A and infectious mononucleosis broadens Genzyme General's position as a premier supplier of rapid tests. Genzyme General also manufacturers the first combination rapid test for giardia and cryptosporidium, the two most common causes of intestinal, parasitic infection.

        Quantitative Rapid Tests.    Expanding on its rapid test product offerings, Genzyme General is developing cardiac, stroke and infectious disease quantitative point of care, rapid tests. We anticipate launching the cardiac point-of-care product in the second half of 2002. This product is expected to combine with Genzyme General's first instrument platform and to afford the footprint to offer other, quantitative point of care future products. Because heart disease is the leading cause of death in the United States, rapid identification and management of acute coronary syndromes at the point of care meets an important medical need. Genzyme General also is developing a stroke panel to aid in the management of stroke patients. Following FDA marketing clearance, Genzyme General intends to exclusively manufacture and sell the product worldwide. It is expected that, as a result of launch of the cardiac product, the stroke product will be Genzyme General's second quantitative panel, and will utilize the instruments already in place in the field. Stroke is the third leading cause of death in the United States, affecting approximately 700,000 people annually with a similar incidence in both Europe and Japan. Approximately 150,000 Americans die as a result of a stroke each year.

Other Genzyme General Products and Services

        Genzyme General derives revenues from other products and services not included in the Therapeutics or Diagnostic Products segments. Those revenues are derived primarily from the provision of genetic diagnostic services and the sale of pharmaceutical intermediates.

Genetic Services

        Genzyme General applies advanced biotechnology to develop and provide high quality, sophisticated genetic diagnostic services in the United States and Japan. These services are promoted through a direct sales force in the United States with testing provided by Genzyme General's U.S.-based clinical laboratories. Genzyme Japan services the Japanese market through a direct sales force, with testing services provided for Japan by Genzyme General's clinical laboratory in Santa Fe, New Mexico. Genzyme General employs over 120 board certified genetics professionals who interpret results and provide genetic counseling and support services to medical practitioners and their patients

        In December 2001, we reallocated certain intellectual property rights and licenses related to in vitro cancer diagnostics from Genzyme Molecular Oncology to Genzyme General. In exchange for the reallocation, Genzyme General paid to Genzyme Molecular Oncology $32 million in cash and undertook the obligation to pay an additional $1 million if a specified milestone is met. As a result of this transaction, Genzyme General now has in vitro diagnostic rights to cancer markers which have been identified, or may be identified during the next five years, through Genzyme Molecular Oncology's antigen discovery program. In addition, it has access to Genzyme Molecular Oncology's Serial Analysis of Gene Expression (SAGE™) database to identify diagnostic cancer markers, and options to diagnostic- related discoveries found through research collaborations with laboratories at The Johns Hopkins University and other institutions. Genzyme General also assumed exclusive rights to intellectual property for certain cancer-related genes and methods in the field of in vitro diagnostics.

        Genzyme General offers three types of genetic diagnostic services. We have described those services below.

        Cytogenetic Testing.    Most of Genzyme's cytogenetic testing is routine chromosome analysis done through karyotyping. Karyotyping is an analysis of the chromosomes in a single cell from one individual. Genzyme General's InSight® test utilizes Fluorescence In Situ Hybridization (FISH) technology to expand the capabilities of routine chromosome analysis in prenatal testing. It is used by

12

cytogenetics laboratories and physicians as an adjunct to traditional chromosome analysis, and permits preliminary identification of the most frequently occurring numerical chromosomal abnormalities within 48 hours. Classical cytogenetic testing typically takes one to two weeks. Cytogenetic tests are routinely used to identify genetic abnormalities in pregnancy as well as hematologic cancers.

        Biochemical Testing.    Genzyme General offers both triple (AFP3®) & quad (AFP4®) marker prenatal genetic screening tests. Genzyme General's AFP4® advanced screening test has a higher detection rate and a lower false positive rate than the previous triple screen in assessing fetal risk of neural tube defects, Down Syndrome and Trisomy 18.

        DNA Testing.    Genzyme General's test menu includes over 20 DNA tests used in the screening and diagnosis of single gene disorders and hematological cancers. Genzyme General's CF87™ test screens for 87 genetic mutations associated with cystic fibrosis. In the third quarter of 2001, the American College of Obstetricians and Gynecologists (ACOG) issued new guidelines recommending that all Caucasian women who are pregnant and couples considering pregnancy be offered a genetic test to determine if they are carriers of cystic fibrosis. In anticipation of the ACOG recommendation, and in response to strong growth in its DNA testing business, Genzyme General doubled the capacity of its molecular diagnostics laboratory in Framingham, Massachusetts in 2001. In addition, it launched a comprehensive educational program geared toward helping health professionals in obstetrics advance their knowledge of cystic fibrosis and the issues presented by testing.

Pharmaceuticals

        Genzyme General develops, custom manufactures and sells pharmaceutical drug materials, specializing in synthetic peptides, amino acid derivatives, phospholipids and complex chemical products, which are used by pharmaceutical and biotechnology companies as active pharmaceutical ingredients, key intermediates/excipients or raw materials in their products. These pharmaceutical materials are sold through a direct sales force to customers around the world. In addition, we develop and license to companies new, innovative lipid-based drug delivery technologies for use in their product development programs. Genzyme General's multi-purpose chemical manufacturing facility located in Liestal, Switzerland has a range of manufacturing scale to support the pharmaceutical industry's drug development programs from the research phase through clinical trials and product commercialization.

13

Genzyme Biosurgery—Products and Development Programs

        We created Genzyme Biosurgery in December 2000 by combining two of our former divisions, Genzyme Surgical Products and Genzyme Tissue Repair, and simultaneously acquiring Biomatrix, Inc. Genzyme Biosurgery is organized into three reportable segments—Orthopaedics, Cardiothoracic and Biosurgical Specialties. Its product and development program portfolio consists of biomaterials, biotherapeutics, cardiothoracic devices and sutures, as well as advanced devices for minimally invasive cardiovascular surgery. Genzyme Biosurgery's sales force markets products directly to physicians and hospital administrators throughout the United States and Europe. It also uses a network of distributors to sell certain products in the United States, Europe, Asia and Latin America.

        In October 2001, we sold our manufacturing facility in Pointe-Claire, Quebec, Canada. This facility was formerly used to manufacture Synvisc® (Hylan G-F20) viscosupplementation fluid, Hylaform® and Hylashield®. We had discontinued operations in the Spring of 2001 after transferring all Synvisc viscosupplementation fluid production to our Ridgefield, New Jersey facility.

        In November 2001, we sold the assets related to our Snowden-Pencer® surgical instrument product lines, and we are subleasing to the purchaser our manufacturing facility in Tucker, Georgia. The Snowden-Pencer product lines included primarily hand-held reusable surgical instruments and endoscopic instruments for use in general, plastic, gynecological and laparoscopic surgery.

Orthopaedics

        Synvisc® (hylan G-F20).    Synvisc viscosupplementation fluid is a hyaluronan-based biomaterial used to treat the pain and immobility associated with osteoarthritis of the knee. When injected into the knee joint, Synvisc viscosupplementation fluid supplements synovial fluid to restore lubrication and cushioning. Synvisc viscosupplementation fluid is approved in approximately 60 countries and is sold in more than 35 countries, both directly and through marketing and distribution agreements with major pharmaceutical companies, including Wyeth-Ayerst Laboratories in the United States, Germany, Portugal, Turkey and other countries.

        In 2001, a clinical study was conducted comparing Synvisc viscosupplementation treatment to intra-articular steroids with favorable results. We also initiated a next generation viscosupplementation program that will focus on a Synvisc product requiring fewer than three injections. Further in 2001, we evaluated data generated from a pilot clinical trial completed in Europe that studied Synvisc viscosupplementation fluid as a treatment for osteoarthritis of the hip. In 2002, we plan to file for European authorization to market Synvisc viscosupplementation fluid for treating osteoarthritis induced pain in the hip. We also plan to initiate a pivotal clinical trial for use of Synvisc viscosupplementation fluid to treat osteoarthritis of the hip in the United States, and to conduct clinical trials in Europe and possibly the United States to evaluate Synvisc in other joints such as the shoulder, ankle, and digits.

        Advanced Viscosupplementation Products.    Genzyme Biosurgery is continuing development of extension viscosupplementation products to treat the pain and immobility associated with osteoarthritis that are intended to provide patients with improved clinical benefits and ease of use. In 2002 we plan to initiate a pilot clinical trial to evaluate a product with such properties.

        Carticel® (autologous cultured chondrocytes).    Carticel chondrocytes are used to treat damaged articular cartilage in the knee. Genzyme Biosurgery employs a proprietary process to grow autologous, or a patient's own, cartilage cells (chondrocytes) for use in repairing damaged knee cartilage in patients who have had an inadequate response to a prior surgical procedure. The cells are implanted into the damaged area of the knee in a surgical procedure called autologous chrondrocyte implantation. Genzyme Biosurgery also sells biopsy kits and a variety of disposable instruments and sutures that are typically used in the implantation procedure. Carticel chondrocytes currently are marketed in the United States and are available in Europe.

14

        Genzyme Biosurgery is conducting three confirmatory post-marketing studies of Carticel chondrocytes. The first study, which was completed in 2000 ahead of schedule, measured outcomes of patients included within Genzyme Biosurgery's registry during the last three years who did not respond to other treatments before being implanted with Carticel chondrocytes. Outcomes before and after implantation were compared. The second study is designed to compare the long-term clinical effect of treatment with Carticel chondrocytes to alternative treatments. Enrollment in this study, which consists of 104 patients, was completed in June 2001. Follow-up for these patients will take place for approximately four years. The final confirmatory study is an on-going animal study to evaluate the biological role of chondrocytes in the repair procedure.

        Genzyme Biosurgery markets Carticel chondrocytes to orthopedic surgeons in the United States and Europe directly and through distributors. Genzyme Biosurgery also trains orthopedic surgeons, collects and analyzes outcomes data through a registry, and assists physicians and patients in obtaining reimbursements from third-party payors. Approximately one-fourth of its 70-person United States sales and reimbursement staff is involved directly in claims processing and educating insurers about the appropriate uses of the product. Sales of Carticel chondrocytes are usually lower in the summer months as fewer operative procedures are typically performed during those months.

        Carticel® II Chondrocytes.    Carticel II chondrocytes, currently in development, is a next-generation product based on the development of a pre-formed autologous cartilage tissue implant. The implant is intended to allow the procedure to be performed less invasively. If it is successfully developed, Carticel II chondrocytes could significantly decrease the length of surgical and rehabilitation time for patients and may allow surgeons to treat larger and more complex cartilage defects. In connection with the development of Carticel II chondrocytes, Genzyme Biosurgery obtained an exclusive worldwide license in 2000 from Sentron Medical, Inc., for technology and related intellectual property rights that include autologous chondrocyte graft technology to produce cartilage tissue on a supporting membrane in vitro.

        Other Development Programs.    In addition to viscosupplementation treatment of osteoarthritis pain, Genzyme Biosurgery is conducting preclinical studies with a small molecule therapy that affects the progression of the cartilage degradation that causes osteoarthritis. Genzyme Biosurgery also is conducting basic research concerning the biology of cartilage and the cartilage repair process. The objective of this research is to further understand the mechanism of action of viscosupplementation and to ultimately develop more effective products for treating joint disease and to aid in cartilage repair. Genzyme Biosurgery is also committing resources to meet requirements specified by the FDA for validation of certain product manufacturing parameters.

Cardiothoracic

        Devices and Sutures.    Genzyme Biosurgery's products for traditional cardiothoracic surgery include a comprehensive portfolio of products, including fluid management (chest drainage) systems and sutures. Its line of fluid management systems consists primarily of self-contained, disposable chest drainage devices used to drain blood from the chest cavity following open-heart and lung surgery. Genzyme Biosurgery also sells autotransfusion devices that allow the collection of blood lost by the patient and its reinfusion postoperatively, which helps eliminate risks associated with blood transfusions. Genzyme Biosurgery's self-contained, disposable Pleur-evac® chest drainage unit, which was introduced in 1967, is a widely-used device that drains the thoracic cavity of blood and air following heart or lung surgery. Genzyme Biosurgery also sells a line of dry suction-controlled chest drainage and autotransfusion devices under the Sahara™ and Thora-Klex® brand names. Genzyme Biosurgery has entered into selling agreements for its chest drainage devices with Amerinet, Inc., Health Trust Purchasing Group, MedAssets, HSCA Inc. (a successor to Health Services Corporation of America) Novations, LLC, and Hospital Corporation of America, which are large hospital group purchasing organizations representing approximately 49% of the hospitals in the United States. Genzyme Biosurgery also markets sutures, including the Tevdek® and Polydek® valve sutures and Deklene®

15

bypass sutures. In November 2000, Genzyme Biosurgery received FDA approval to launch NextStitch™ cardiovascular valve suture for use in heart-valve replacement surgery in the United States. NextStitch cardiovascular valve sutures incorporate two suture strands into each needle, which reduces the number of needle passes and thus improves the efficiency and reduces the trauma of valve suturing. Additionally, Genzyme Biosurgery sells aortic punches, which are used during coronary artery bypass graft surgery to make clean, round openings in the aorta prior to grafting.

        Minimally Invasive Cardiovascular Surgery Systems.    Genzyme Biosurgery markets products for minimally invasive cardiovascular surgery, with a focus on beating-heart surgery and vein harvesting. In beating-heart surgery, procedures are performed on the heart without stopping the heart and without the use of a heart/lung machine to circulate blood and supply oxygen. This allows surgeons to avoid the complications often associated with the use of heart/lung machines. In December 2001, Genzyme Biosurgery launched the fourth-generation of its Immobilizer™ System for beating-heart surgery. The Immobilizer System consists of a reusable retractor with disposable coronary artery stabilization device. Genzyme Biosurgery also introduced the next generation of its SaphLITE® system in August 2000. Genzyme Biosurgery's SaphLITE system is used to remove the saphenous vein from a patient's leg in a minimally-invasive procedure for use as a graft during a coronary artery bypass graft operation.

        Biomaterials.    Genzyme Biosurgery launched FocalSeal®-L surgical sealant in North America in 2000 for use in pulmonary procedures. FocalSeal-L surgical sealant is a biomaterial approved for use in preventing air leaks following surgery. FocalSeal®-L surgical sealant was developed by Focal, Inc., which we acquired in July 2001. Approximately 180,000 lung surgeries are performed in the United States annually, with almost all patients at risk for debilitating air leaks. Genzyme Biosurgery markets FocalSeal-L surgical sealant in North America through its existing sales force. In other parts of the world where it is approved for sale. Genzyme Biosurgery sells the product directly or markets it through distributors. Genzyme Biosurgery is conducting preclinical studies to evaluate the effectiveness of the FocalSeal-S polymer as a device for delivering a cardiac drug that reduces atrial fibrillation following open heart surgery.

        Biotherapeutics.    Genzyme Biosurgery is developing a gene therapy approach to ischemia, or inadequate circulation caused by blood vessel constriction or blockage, including both coronary artery disease (CAD) and peripheral arterial disease (PAD). Genzyme Biosurgery currently is conducting two phase 1 clinical trials to investigate the effect of HIF-1 alpha (hypoxia inducible factor-1), a proprietary gene, in stimulating angiogenesis, or new blood vessel growth. In preclinical studies, HIF-1 alpha has been shown to activate growth factors associated with angiogenesis. Enrollment of patients in the PAD phase 1 clinical trial has been completed, and Genzyme Biosurgery anticipates completing the study in 2002. Genzyme Biosurgery anticipates that its CAD phase 1 clinical trial will be completed in 2003. In addition, Genzyme Biosurgery is conducting research on other gene therapy approaches to congestive heart failure and restenosis.

        Genzyme Biosurgery also is developing a cell therapy approach to repair damaged heart tissue following a heart attack. It plans to file an IND application in 2002 and launch a multi-center phase 1 clinical trial in the second half of 2002.

16

Biosurgical Specialties

        Biomaterials.    Genzyme Biosurgery has an extensive line of biomaterial products on the market and in development for the general, plastic and cardiovascular surgery markets, including its Sepra™ products. Genzyme Biosurgery sells its biomaterial products in the United States and Europe primarily through its own sales force, and in Japan and the rest of the world through distributors.

        The chart set forth below provides summary information on certain of Genzyme Biosurgery's biomaterial products and development programs as of March 1, 2002.

17

        The "Sepra products" are aimed at preventing or reducing adhesions (scar tissue) following surgery. These products are based on hyaluronan, which is a substance that is naturally created in the body to lubricate and protect tissue. Genzyme Biosurgery previously developed the Sepra products on behalf of Genzyme Development Partners, L.P., referred to as GDP, and marketed the products in the United States and Canada on behalf of Genzyme Ventures II, our joint venture with GDP.  In 2001, we purchased all of the outstanding limited partnership interests in GDP for approximately $25.7 million in cash, plus royalties payable over ten years on sales of certain Sepra products in the U.S, Canada and Europe. GDP and Genzyme Ventures II have both been dissolved and Genzyme Biosurgery now develops and markets the Sepra products. Royalties are currently being paid to the former limited partners of GDP on sales of Seprafilm, Seprafilm II, CV Seprafilm II, Sepramesh, Seprapack and Sepragel Sinus.

        Seprafilm adhesion barrier is a bioresorbable membrane of modified hyaluronan that is used to separate tissue surfaces while the normal tissue repair process takes place. It is the only product approved by the FDA that is clinically proven to reduce the incidence, extent and severity of postsurgical adhesions in the abdomen and pelvis. There are approximately 4 million abdominal and pelvic procedures performed annually in the United States.

        To build further clinical evidence of the safety and effectiveness of Seprafilm adhesion barrier, Genzyme Biosurgery is conducting a 22-center phase 4 clinical trial to evaluate the use of Seprafilm adhesion barrier for the reduction of adhesion related postoperative bowel obstruction following abdominal and pelvic surgery. A total of 1,791 patients were enrolled in this study. The study will track patient outcomes for two years after surgery. At the end of 2001, all patients had at least one year of postoperative experience. The study is expected to be completed at the end of 2003. In 2001, Genzyme Biosurgery received Japanese marketing approval and reimbursement authorization for the use of Seprafilm adhesion barrier in patients with colorectal cancer.

        Seprafilm II adhesion barrier is a modified form of Seprafilm adhesion barrier designed to have increased plasticity, improved handling and increased ease of use. Seprafilm II adhesion barrier currently is marketed in Europe, Canada and other countries for use in open and laproscopic abdominal and pelvic surgery to reduce the incidence, extent and severity of postoperative adhesions. A 12-14 center, 120 patient pivotal study of Seprafilm II adhesion barrier in abdominal surgery was initiated in the United States in 2001. Enrollment is expected to be completed in 2002.

        Genzyme Biosurgery obtained clearance to market Sepragel Sinus and Seprapack bioresorbable nasal packing and sinus stents to prevent adhesions and control minimal bleeding after sinus surgery, in 2001 in the United States and in 2000 in Europe. Genzyme Biosurgery estimates that annually approximately 360,000 patients worldwide could be helped by one or both of these products. In 2001, we entered into a partnership with Gyrus® ENT LLC, for the exclusive worldwide distribution of Sepragel Sinus and Seprapack bioresorbable nasal packing and sinus stents as well as other potential hyaluronan-based ear, nose and throat specialty applications. Genzyme Biosurgery and Gyrus plan to launch Sepragel Sinus and Seprapack bioresorbable nasal packing and sinus stents in Europe in 2002.

        Genzyme Biosurgery has been marketing Sepramesh biosurgical composite, a polypropylene mesh that is coated with modified hyaluronan for use in hernia repair, in the United States, Europe and Canada since 2000.

        Hylaform is a hyaluronan-based biomaterial used to correct facial wrinkles and provide tissue augmentation by injection directly into the dermal tissue. It is part of the portfolio of products based on hyaluronan that we acquired through our acquisition of Biomatrix. This product is distributed by Inamed Corporation in Europe, Canada, Japan, Australia, Israel and other designated countries. Inamed also has the exclusive distribution rights to Hylaform in the United States, subject to the completion of a United States clinical trial and FDA approval. In 2001 we agreed to expand our existing relationship with Inamed. Under our new agreement, which we anticipate will become effective

18

in early 2002, Inamed will also distribute Hylaform® Plus and Hylaform® Fineline, closely associated products to Hylaform, in and outside the United States, and will also fund the Hylaform clinical trial in the United States, which is expected to commence in 2002.

        Epicel® (cultured epidermal autografts).    Genzyme Biosurgery's Epicel skin grafts are cultured autologous skin cells used for permanent skin replacement for patients with severe burns. Epicel skin grafts were first introduced in 1987. These epidermal grafts are grown from a patient's own skin cells and, therefore, are not rejected by the patient's immune system. Most burn wounds involving less than 60% body surface area are covered with conventional skin grafts within the three to four weeks it currently takes to grow skin grafts produced using the Epicel skin grafts process. The primary candidates for Epicel skin grafts are the approximately 1,500 patients each year in the United States who survive burn injuries covering more than 60% of their body surface area. Genzyme Biosurgery markets Epicel skin grafts to burn centers in the United States and parts of Europe through its own direct sales force and in Japan through a distributor. Sales of Epicel skin grafts fluctuate from quarter to quarter depending on a number of unpredictable factors, including the number and survival rate of severe burn patients prior to treatment with Epicel skin grafts.

        FocalSeal®-S Neurosurgical Sealant.    FocalSeal-S neurosurgical sealant has been approved for sale in Europe since November 1999, and, prior to Focal's termination of its distribution agreement with Ethicon Inc., a division of Johnson & Johnson, in April 2001, was distributed under the trade name AdvaSeal-S by Ethicon. Genzyme Biosurgery is evaluating the potential for a clinical trial in the United States to study FocalSeal-S neurosurgical sealant. In conjunction with Exactech, Inc., preclinical work is also taking place to evaluate the effectiveness of the FocalSeal-S polymer for use in human derived bone grafting applications. Further pre-clinical studies are on-going to evaluate the FocalSeal-S polymer as a device for facilitating the implantation of other human derived and synthetic orthopedic biomaterials.

Genzyme Molecular Oncology—Technology Platforms and Development Programs

        Genzyme Molecular Oncology is developing a new generation of cancer therapeutics based upon the growing understanding of the molecular basis of cancer. It believes that these therapeutics have the potential to treat multiple types of cancer, minimize toxicity and side effects, and complement both existing and novel therapies. Genzyme Molecular Oncology supplements its internal resources through collaborations with some of the world's preeminent scientists and clinicians in the field of cancer.

Technology Platforms

        Antigen Discovery.    Genzyme Molecular Oncology has built a proprietary, state-of-the-art platform for the discovery of antigens—molecular markers in tumor cells that enable the body's immune system to recognize and respond to these cells as "foreign". The power of this platform is its ability to combine antigen identification, optimization and validation in one step—this enables Genzyme Molecular Oncology to rapidly and efficiently incorporate antigens into novel antigen-specific peptide- and gene-based cancer vaccines and generate antibodies which recognize that antigen. Genzyme Molecular Oncology expanded its antigen discovery capabilities in 2001 through the development of a proprietary technology that allows for the efficient identification of relevant targets for antibody-based therapies.

        The primary focus of Genzyme Molecular Oncology's internal program is on antigens which stimulate a cellular immune response against tumors by using vaccines to present tumor-specific antigens to the immune system. During 2001, the first United States patent covering optimized antigen fragments (peptides) discovered using Genzyme Molecular Oncology's antigen discovery platform was issued, and Genzyme Molecular Oncology is conducting preclinical studies on these peptides in preparation for the initiation of clinical studies.

19

        In addition to using its antigen discovery platform for its internal programs, Genzyme Molecular Oncology has used it to enter into strategic partnerships. During 2001, Genzyme Molecular Oncology identified and submitted multiple antigens under its antigen discovery and licensing arrangement with Purdue Pharma L.P. Under this arrangement, Purdue may select up to 20 cancer antigens for use with its proprietary delivery platforms. Genzyme Molecular Oncology retains all rights to these antigens for use in its gene, cell, protein and peptide-based therapeutics, as well as all rights to antigens not selected by Purdue.

        Building on the success of its antigen discovery platform, Genzyme Molecular Oncology has expanded its antigen discovery technologies into the field of infectious disease. In January 2001, it entered into an HIV antigen discovery and research collaboration with Dr. Bruce Walker of Massachusetts General Hospital. Dr. Walker is analyzing optimized novel peptides discovered by Genzyme Molecular Oncology that may be used as HIV vaccines. Given Genzyme Molecular Oncology's focus on cancer therapeutics, it will likely outlicense the right to develop and commercialize product candidates arising from this collaboration.

        SAGE™ Technology.    Genzyme Molecular Oncology's patented SAGE (Serial Analysis of Gene Expression) technology is a high-throughput, high efficiency method of simultaneously detecting and measuring the expression level of virtually all genes expressed in a cell at a given time. The SAGE technology detects and quantifies expression of novel as well as known genes and, because of its high efficiency and sensitivity, the SAGE technology can detect genes expressed at low levels. Some of the uses of the SAGE technology are comparison of disease tissue with healthy tissue, comparison of genes expressed at different stages of disease, elucidation of disease pathways and measurement of response to and toxicity of drug candidates. Genzyme Molecular Oncology enhances the power of the SAGE technology through software and bioinformatics development, technology improvements, database expansion and the integration of the SAGE technology with other genomics tools, such as microarrays.

        Genzyme Molecular Oncology has used the SAGE technology to analyze the most prevalent types of cancer and corresponding normal tissue and also has access to SAGE data generated in the laboratories of Drs. Bert Vogelstein and Kenneth Kinzler at The Johns Hopkins University. Genzyme Molecular Oncology has accumulated from its proprietary analyses, its collaborators, and the Cancer Genome Anatomy Project at the National Cancer Institute a database of over seven million SAGE gene sequence identification tags, representing over 125,000 unique transcripts.

        Genzyme Molecular Oncology also employs the SAGE technology extensively in its own drug discovery and development efforts to identify genes that are functionally relevant. In its cancer vaccine program, Genzyme Molecular Oncology combines the SAGE technology with other proprietary tools to identify tumor-associated antigens. In the field of anti-angiogenesis, Genzyme Molecular Oncology is using the SAGE technology to dissect the biological pathways resulting in angiogenesis and to explore and understand the mechanism of action of drug candidates discovered in functional assays.

        Genzyme Molecular Oncology also uses the SAGE technology and its proprietary SAGE database to generate revenues through licenses and database collaborations. It has granted rights to Celera Genomics and Compugen Ltd. to market the SAGE database to customers on a revenue-sharing basis, and to Invitrogen Corporation to market reagent kits that enable the use of the SAGE technology.

Development Programs

        Genzyme Molecular Oncology is developing products primarily focused on vaccines that aim to treat cancer by stimulating the body's immune system to fight tumor cells, and anti-angiogenic drugs that treat cancer by preventing the formation and development of blood vessels that tumors require for

20

growth or by targeting tumor vasculature. The following chart describes the status of Genzyme Molecular Oncology's development programs as of March 1, 2002:

*

Patient enrollment and treatment are complete, with data analysis ongoing.

Cancer Vaccines

        Genzyme Molecular Oncology believes that the most successful cancer vaccines will be those that activate a cellular immune response directed at the tumor. Its program features two types of investigational vaccines for generating a tumor-specific cellular immune response:

•

where specific tumor antigens are not known, a cell therapy product is created by using a technique that fuses the patient's own tumor cells with dendritic cells, the specialized immune system cells that present antigens to T cells (the immune system's cellular response to disease), which may allow for the selective recognition and destruction of the patients' tumor cells; and



•

where specific tumor antigens have been identified as targets of the cellular immune response, Genzyme Molecular Oncology uses gene-based or peptide-based tumor vaccines.

        Genzyme Molecular Oncology believes that both of these vaccine types should provide clinical benefit and have commercial potential. Genzyme Molecular Oncology believes, however, that antigen-specific vaccines provide the greater long-term opportunity and that over time, as Genzyme Molecular Oncology identifies more tumor-associated antigens, it will be able to develop off-the-shelf vaccines that are based on the specific antigens present in the patients' tumors.

Patient-Specific Cancer Vaccines

        During 2001, progress continued on the three clinical trials of the patient-specific cancer vaccine Genzyme Molecular Oncology is supporting at the Dana-Farber Cancer Institute and the Beth Israel Deaconess Medical Center in Boston. These vaccines are referred to as "fusion vaccines" because the product is made by fusing the patient's own tumor cells with dendritic cells, which are potent stimulators of the immune system.

21

        In May 2001, Genzyme Molecular Oncology entered into an exclusive license agreement with BruCells, S.A./N.V. for technology developed by a consortium of investigators at the Université Libre de Bruxelles and the Vrije Universiteit Brussel around the fusion vaccines. This license, together with intellectual property licensed from the Dana-Farber Cancer Institute, provides Genzyme Molecular Oncology with a leading patent position around the fusion vaccines. Genzyme Molecular Oncology is also supporting research at BruCells relating to these vaccines.

        Breast Cancer Fusion Vaccine.    A phase 1-2 trial of the fusion vaccine for the treatment of metastatic breast cancer was initiated in September 1999, with a chemical process being used to fuse the patient's tumor cells with dendritic cells isolated from that patient. The end points for this trial are safety, immunologic response and clinical response. This trial is fully enrolled and Genzyme Molecular Oncology expects that data analysis will be completed in 2002. The principal investigator presented preliminary data from this trial in December 2001. Out of nine patients treated with the vaccine, one patient showed a nearly complete clinical response as well as an immunologic response to the tumor following vaccination. Two patients demonstrated stable disease for six months, and in a majority of patients treated for whom immunologic data are available, there was a response. Certain mild, non-serious adverse events were reported, as well as one possibly-related serious adverse event.

        Melanoma and Kidney Cancer Fusion Vaccines.    Patient enrollment and treatment were completed in early 2002 on phase 1-2 clinical trials of the fusion vaccine in both advanced melanoma and advanced renal cell carcinoma (kidney cancer). Both of these trials employed a chemical process for fusing the tumor and dendritic cells. Data analysis for these trials are ongoing and will be completed in 2002. Genzyme Molecular Oncology also anticipates initiating two additional fusion vaccine trials in the coming months. These trials, also in advanced melanoma and advanced kidney cancer, have been designed based on the methods used by an academic group in Germany for which promising clinical data were published and are supported by extensive preclinical data generated at Genzyme Molecular Oncology. The methods used in these trials differ in two principal respects from the earlier trials—first, the dendritic cell component of the vaccine will be derived from a source other than the patient to test the hypothesis that the immune response will be enhanced by the presence of donor cells, and second, the cells will be fused using an electrical, rather than chemical, process. The comparison of these two sets of trials will help guide the further development of the fusion vaccines.

Antigen-Specific Cancer Vaccines

        Melan-A/MART-1 and gp100 Antigen-Specific Vaccines.    Genzyme Molecular Oncology's work in cancer vaccines began several years ago through a collaboration with Dr. Steven Rosenberg at the National Cancer Institute in which two phase 1 clinical trials were conducted. In these trials, adenoviral gene delivery vectors carrying either the Melan-A/MART-1 or gp100 gene were evaluated for safety, immunologic reactivity and potential therapeutic effect when administered directly to the patient (in vivo) alone or in conjunction with recombinant interleukin-2. The results from these early clinical studies suggested that the adenoviral vectors were well tolerated since no serious adverse events associated with the adenovirus were reported. In addition, a small but notable number of patients treated in this trial showed clinically significant tumor regression.

        Following additional preclinical work that optimized delivery of the adenoviral vectors, Genzyme Molecular Oncology initiated a phase 1-2 trial in melanoma patients at Massachusetts General Hospital/Dana-Farber Partners CancerCare. This trial involves isolating and expanding dendritic cells from the patient and combining these cells with adenoviral vectors encoding the Melan-A/MART-1 and gp100 genes outside of the patient (ex vivo). The gene-modified dendritic cells are then administered to the patient as a vaccine. Genzyme Molecular Oncology has completed patient enrollment and treatment in this trial, and data analysis is ongoing. The principal investigator presented preliminary data from this trial in December 2001. Fourteen of the 20 patients treated demonstrated some clinical or immunologic response, with two patients having a measurable clinical response and a third evidencing stable disease. Some non-serious related adverse events were reported, and asymptomatic changes to the retina were the only reported treatment-related serious adverse events.

22

        Genzyme Molecular Oncology initiated an additional phase 1-2 melanoma trial of adenoviral vectors encoding the Melan-A/MART-1 and gp100 tumor antigens in late 2000. In this trial, the vaccine is delivered to the patient intradermally, where large populations of dendritic cells reside. Genzyme Molecular Oncology is assessing safety with this in vivo vaccine delivery approach and monitoring patients' immune responses in order to elucidate whether direct, in vivo vaccine delivery warrants later-stage clinical development. Enrollment in this trial is nearly complete and Genzyme Molecular Oncology expects safety and immunologic data from this study in 2002.

        SPHERE™ Peptide Vaccines.    Genzyme Molecular Oncology has identified numerous proprietary peptides through its antigen discovery program. It is currently evaluating these peptides for multiple cancer indications in preclinical studies, and plans to file its first Investigational New Drug application for a phase 1 trial using its SPHERE peptides in melanoma.

        NY-ESO-1 Antigen-Specific Vaccines.    NY-ESO-1 is an antigen expressed in a subset of a number of different tumor types, including breast cancer, melanoma and lung cancer. Genzyme Molecular Oncology is engaged in preclinical development to support a phase 1-2 trial for NY-ESO-1-positive tumors, which would be performed in collaboration with the Ludwig Institute for Cancer Research.

Angiogenesis Inhibitors

        Genzyme Molecular Oncology is pursuing multiple approaches to anti-angiogenesis, which is the treatment of cancer by cutting off the blood supply that tumors need to survive or by targeting the tumor vasculature. In 2000, Genzyme Molecular Oncology's collaborators at The Johns Hopkins University used the SAGE technology to identify 46 tumor endothelial markers (TEMs), or genes involved in the growth of tumor blood vessels. Genzyme Molecular Oncology believes that some of these genes will yield targets for the development of cancer therapeutics. Progress in the anti-angiogenesis program in 2001 included cloning and characterizing the novel TEMs, validating their expression in different tumor types, initiating patterns analysis to assess their functions, and profiling the impact of various antiangiogenesis drugs on the TEMs and differentiated patterns of expression.

        In November 2001, Genzyme Molecular Oncology formed a strategic antibody collaboration around the TEMs with the pharmaceutical division of Kirin Brewery Co., Ltd. of Japan. The collaboration is focused on the development and commercialization of fully human monoclonal antibodies to be used as therapies in the areas of antiangiogenesis and vascular-targeted cancer drug delivery. Product candidates will be generated by immunizing KM Mice™—Kirin's proprietary breed of transgenic mice—with those TEMs that are both expressed on the cell surface and validated as antibody targets.

Competition

        We are engaged in segments of the human healthcare products industry that are extremely competitive. Our competitors in the United States and elsewhere are numerous and include major pharmaceutical, surgical device and biotechnology companies. Some of these competitors may have more extensive research and development, regulatory, manufacturing and production capabilities. Some competitors may have greater financial resources. These companies may succeed in developing products that are more effective than any that we have or may develop and may also p