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

FORM 10-Q

For the transition period from                               to                              

Commission file number 0-14680

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

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

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

        Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). Yes ý    No o

        The number of shares of Genzyme Stock outstanding as of April 29, 2005: 252,282,367

NOTE REGARDING REFERENCES TO OUR SERIES OF STOCK

        Throughout this Form 10-Q, the words "we," "us," "our" and "Genzyme" refer to Genzyme Corporation as a whole, and "our board of directors" refers to the board of directors of Genzyme Corporation. Genzyme has one outstanding series of common stock, which we refer to as "Genzyme Stock."

NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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



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timing of, and availability of data from, clinical trials;



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merger and acquisition activity, including our pending merger with Bone Care International, Inc., or Bone Care International, and finalization of the purchase accounting for our acquisitions of ILEX Oncology, Inc., or ILEX, and Verigen AG, or Verigen;



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completion of a post-closing working capital assessment for our acquisition of substantially all of the pathology/oncology testing assets related to the Physician Services and Analytical Services business units of IMPATH Inc., or IMPATH;



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estimates of the future amortization expenses for our intangible assets;



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entry into new collaborations and licensing agreements;



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



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sales and marketing plans;



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assessment of competitors and potential competitors and the anticipated impact of potentially competitive products on our revenues;



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estimates of the capacity of, and the projected timetable of approvals for, manufacturing and other facilities to support our products and services;



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expected future revenues, operations and expenditures;



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allocation of expenditures related to our research and development programs;



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projected future earnings and earnings per share;



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assessment of the outcome and financial impact of litigation and other governmental proceedings and the potential impact of unasserted claims;



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projected cash needs;



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U.S. and foreign income tax audits, including our provision for liabilities and assessment of the potential financial impact of favorable settlement of these audits or expiration of the applicable statute of limitations;



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assessment of the impact of recent tax legislation and accounting pronouncements, including Statement of Financial Accounting Standards, or SFAS, No. 123R, and the proposed amendment to SFAS No. 128;



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expected future payments related to employee benefits and leased facilities acquired from ILEX, IMPATH, and SangStat Medical Corporation, or SangStat, and the expected timing of these payments;

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expected future payments upon achievement of development and commercial milestones related to our acquisition of Verigen and the anticipated timing of our purchase of the remaining outstanding shares of Verigen; and



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expected future payments we will pay Wyeth based on the volume of Synvisc sales, and the basis for determining our amortization expense related to such payments in future periods.

        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:

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



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our ability to manufacture sufficient amounts of our products for development and commercialization activities and to do so in a timely and cost-effective manner;



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



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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;



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



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market acceptance of our products and services;



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the use of cash in business combinations or other strategic initiatives;



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our ability to identify new patients for our products and services;



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our ability to satisfy the post-marketing commitments made as a condition of the marketing approvals of Fabrazyme and Aldurazyme;



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



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the content and timing of submissions to and decisions made by the United States Food and Drug Administration, commonly referred to as the FDA, the European Agency for the Evaluation of Medicinal Products, or EMEA, and other regulatory agencies;



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the availability of reimbursement for our products and services from third-party payors, and the extent of such coverage and the accuracy of our estimates of the payor mix for our products;



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our ability to increase market penetration outside the United States for Fabrazyme, Thyrogen and Renagel;



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market acceptance of Thymoglobulin, Campath and Clolar in expanded areas of use and new markets;



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



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our ability to effectively manage wholesaler inventories of our products and the levels of compliance with our inventory management programs;



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our ability to successfully launch Clolar;



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our ability to establish and maintain strategic license, collaboration and distribution arrangements and to manage our relationships with collaborators, distributors and partners;

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our reliance on third parties to provide us with materials and services in connection with the manufacture of our products;



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the continued funding and operation of our joint ventures by our partners;



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decisions made by the United States District Court, arbitrators for the American Arbitrators Association, the United Kingdom Competition Appeal Tribunal, the Federal Trade Commission and other judicial bodies and regulatory and dispute resolution authorities;



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



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the resolution of litigation related to the consolidation of our tracking stocks;



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the initiation of legal proceedings by or against us;



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the impact of changes in the exchange rate for the Euro and other currencies on our product and service revenues in future periods;



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our ability to successfully integrate Verigen, ILEX and the businesses acquired from IMPATH;



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the number of diluted shares considered outstanding, which will depend on business combination activity, our stock price, and potential changes in accounting rules;



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the outcome of our IRS audit; and



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

        We have included more detailed descriptions of these and other risks and uncertainties in Item 2 of this report under the heading "Factors Affecting Future Operating Results." We encourage you to read those descriptions carefully. We caution investors not to place substantial 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 these statements.

NOTE REGARDING INCORPORATION BY REFERENCE

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

NOTE REGARDING TRADEMARKS

        Genzyme®, Renagel®, Cerezyme®, Ceredase®, Fabrazyme®, Thyrogen®, Synvisc®, Carticel®, Seprafilm®, Epicel®, IMPATH®, Myozyme®, Aldurazyme®, Thymoglobulin®, Lymphoglobuline®, Campath®, and MACI® are registered trademarks of Genzyme or its subsidiaries, Sepra™, VERIGEN™ and Clolar™ are trademarks of Genzyme or its subsidiaries. WelChol® is a registered trademark of Sankyo Pharma, Inc. Gengraf® is a registered trademark of Abbott Laboratories. All rights reserved.

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GENZYME CORPORATION AND SUBSIDIARIES
FORM 10-Q, MARCH 31, 2005
TABLE OF CONTENTS

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Income

(Unaudited, amounts in thousands, except per share amounts)

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

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GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited, amounts in thousands, except par value amounts)

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

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GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)

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

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GENZYME CORPORATION AND SUBSIDIARIES

Notes To Unaudited, Consolidated Financial Statements

1. Description of Business

        We are a global biotechnology company dedicated to making a major impact on the lives of people with serious diseases. Our broad product portfolio is focused on rare genetic disorders, renal disease, orthopaedics, organ transplant, and diagnostic and predictive testing. We are organized into five financial reporting units, which we also consider to be our reporting segments:

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Renal, which develops, manufactures and distributes products that treat patients suffering from renal diseases, including chronic renal failure. The unit derives substantially all of its revenue from sales of Renagel (including sales of bulk sevelamer);



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Therapeutics, 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 lysosomal storage disorders, or LSDs, and other specialty therapeutics, such as Thyrogen. The unit derives substantially all of its revenue from sales of Cerezyme, Fabrazyme and Thyrogen;



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Transplant, which develops, manufactures and distributes therapeutic products that address pre-transplantation, prevention and treatment of acute rejection in organ transplantation, as well as other auto-immune disorders. The unit derives its revenue primarily from sales of Thymoglobulin and Lymphoglobuline;



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Biosurgery, which develops, manufactures and distributes biotherapeutics and biomaterial products, with an emphasis on products that meet medical needs in orthopaedics and broader surgical areas. The unit derives its revenue primarily from sales of Synvisc and the Sepra line of products; and



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Diagnostics/Genetics, which develops, manufactures and distributes in vitro diagnostics products, and provides testing services for the oncology, and prenatal and reproductive markets.

        We report the activities of our oncology, bulk pharmaceuticals and cardiovascular business units under the caption "Other." We report our corporate, general and administrative operations and corporate science activities that we do not allocate to our financial reporting units, under the caption "Corporate." Effective January 1, 2005, as a result of changes in how we review our business, we re-allocated the programs of our former drug discovery and development business unit, formerly reported under the caption "Other," amongst several of our existing reporting segments and business units as follows:

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our tolevamer research and development program, for the treatment of C. difficile associated diarrhea, is now included in our Renal reporting segment;



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our deferitrin (iron chelator) research and development program is now included in our Therapeutics reporting segment;



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WelChol, an adjunctive therapy for the reduction of elevated LDL cholesterol in patients with primary hypercholesterolemia, is now included in our bulk pharmaceuticals business unit and as a result, will continue to be reported under the caption "Other;" and



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our other drug discovery research and development programs are now included in our corporate science activities under the caption "Corporate."

We have reclassified our 2004 segment disclosures to conform to our 2005 presentation.

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2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

        Our unaudited, consolidated financial statements for each period include the statements of operations and comprehensive income, balance sheets and statements of cash flows for our corporate operations taken as a whole. We have eliminated all significant intercompany items and transactions in consolidation. We prepare our unaudited, consolidated financial statements following the requirements of the SEC for interim reporting. As permitted under these rules, we condense or omit certain footnotes and other financial information that are normally required by accounting principles generally accepted in the United States. We have reclassified certain 2004 data to conform to our 2005 presentation.

        These financial statements include all normal and recurring adjustments that we consider necessary for the fair presentation of our financial position and operating results. Since these are interim financial statements, you should also read our audited, consolidated financial statements and notes included in our 2004 Form 10-K. Revenues, expenses, assets and liabilities can vary from quarter to quarter. Therefore, the results and trends in these interim financial statements may not be indicative of results for future periods.

Accounting for Stock-Based Compensation

        In accounting for stock-based compensation, we do not recognize compensation expense for qualifying options granted to our employees and directors under the provisions of our stock-based compensation plans with fixed terms and an exercise price greater than or equal to the fair market value of the underlying Genzyme Stock on the date of grant. All stock-based awards to non-employees are accounted for at their fair value in accordance with SFAS No. 123, as amended, and Emerging Issues Task Force, or EITF, Issue No. 96-18, "Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services."

        The following table sets forth our net income data as if compensation expense for our stock-based compensation plans was determined in accordance with SFAS No. 123, as amended, based on the fair value at the grant dates of the awards (amounts in thousands):

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        The following table sets forth the impact to our historical net income per share data as if compensation expense for our stock-based compensation plans was determined in accordance with SFAS No. 123, as amended.

        The effects of applying SFAS No. 123, as amended, are not necessarily representative of the effects on reported net income (loss) in future years. Additional awards in future years are anticipated.

Recent Accounting Pronouncements

        SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4."    In November 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 151, "Inventory Costs, an amendment of Accounting Research Bulletin, or ARB, No. 43, Chapter 4." SFAS No. 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted materials spoilage should be recognized as current period charges in all circumstances. SFAS No. 151 will be effective for us beginning January 1, 2006. We have not yet determined the impact, if any, SFAS No. 151 will have on our consolidated financial statements.

        SFAS No. 123R, "Share-Based Payment, an amendment of FASB Statement Nos. 123 and 95."    In December 2004, the FASB issued a revision to SFAS No. 123, also known as SFAS 123R, "Share-Based Payments," which replaces SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board, or APB, Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS 123R will require all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations based on their fair values. SFAS 123R allows alternative methods for determining the fair value of share based payments to employees and alternative methods of implementation. In April 2005, the SEC issued a new rule that allows companies to implement SFAS 123R at the beginning of the next fiscal year, instead of the next reporting period, that begins after June 15, 2005. As a result, we plan to implement SFAS 123R in the reporting period starting January 1, 2006. We expect that SFAS 123R will have a significant impact on our financial statements. We expect that the adoption of SFAS 123R will cause us to record, as expense each quarter, a non-cash accounting charge approximating the fair value of such share based compensation meeting the criteria outlined in the provisions of SFAS 123R. We have not yet determined which valuation method we will use or the method of implementation.

        Proposed Amendment to SFAS No. 128, "Earnings Per Share."    The FASB has proposed amending SFAS No. 128, "Earnings per Share," to make it consistent with International Accounting Standard 33, "Earnings per Share," and make earnings per share computations comparable on a global basis. Under

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the proposed amendment, each quarter, the year-to-date earnings per share computation would be performed independently from the quarterly computation. Additionally, for all contracts that could be settled in either cash or shares of stock, companies would assume that settlement would occur by the issuance of shares for purposes of computing diluted earnings per share, even if they intend to settle by paying cash or have a history of cash-only settlements, and regardless of who controls the means of settlement. Lastly, under the proposed amendment, shares that would be issued upon conversion of a mandatory convertible security would be included in the weighted average number of shares outstanding used in computing basic earnings per share from the date that conversion becomes mandatory, using the if-converted method, regardless of whether the result is anti-dilutive. The proposed amended standard was expected to be issued during the first quarter of 2005. However, the FASB has not yet finalized the revised effective date of the proposed amendment or its transition provisions. Retrospective application in all periods presented will be required, and w