Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-Q

(Mark One)ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31, 2009Oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from
 to


Commission File No. 0-14680

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

Massachusetts(State or other jurisdiction of
incorporation or organization)

06-1047163(I.R.S. Employer Identification No.)500 Kendall Street
Cambridge, Massachusetts(Address of principal executive offices)

02142(Zip Code)(617) 252-7500(Registrant's telephone number, including area code)




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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes o    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange
Act). Yes o    No ý

Number of shares of Genzyme Stock outstanding as of April 30, 2009: 269,764,111



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NOTE REGARDING REFERENCES TO GENZYME

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.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements. These forward-looking statements include, among others,
statements regarding:



These
statements are subject to risks and uncertainties, and our actual results may differ materially from those that are described in this report. These risks and uncertainties
include:



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3

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We
refer to more detailed descriptions of these and other risks and uncertainties under the heading "Risk Factors" in Management's Discussion and Analysis of Genzyme Corporation and
Subsidiaries' Financial Condition and Results of Operations in Part I, Item 2 of this Form 10-Q. We encourage you to read those descriptions carefully. We caution
investors not to place substantial reliance on the forward-looking statements contained in this Form 10-Q. These statements, like all statements in this
Form 10-Q, speak only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future
developments.

NOTE REGARDING INCORPORATION BY REFERENCE

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

NOTE REGARDING TRADEMARKS

Genzyme®, Cerezyme®, Ceredase®, Fabrazyme®, Thyrogen®,
Myozyme®, Renagel®, Renvela®, Campath®, Clolar®, Mozobil®, Thymoglobulin®, Synvisc®,
Seprafilm®, Carticel®, Epicel®, MACI®, and Hectorol® are registered trademarks, and Cholestagel, Evoltra,
Lumizyme, and Synvisc-One are trademarks, of Genzyme or its subsidiaries. WelChol® is a registered trademark of Sankyo Pharma, Inc.
Aldurazyme® is a registered trademark of BioMarin/Genzyme LLC. Elaprase® is a registered trademark of Shire Human Genetic Therapies, Inc. Prochymal®
and Chondrogen® are registered trademarks of Osiris Therapeutics, Inc. Fludara® and Leukine® are registered trademarks of Bayer Schering Pharma AG.
All rights reserved.

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GENZYME CORPORATION AND SUBSIDIARIES        FORM 10-Q, MARCH 31, 2009        TABLE OF CONTENTS



PAGE NO.PART I.

FINANCIAL INFORMATION


6ITEM 1.

Financial Statements


6Unaudited, Consolidated Statements of Operations for the Three Months Ended March 31,
2009 and 2008


6Unaudited, Consolidated Balance Sheets as of March 31, 2009 and December 31,
2008


7Unaudited, Consolidated Statements of Cash Flows for the Three Months Ended March 31,
2009 and 2008


8Notes to Unaudited, Consolidated Financial Statements


9ITEM 2.

Management's Discussion and Analysis of Genzyme Corporation and Subsidiaries' Financial Condition and Results of Operations


29ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk


69ITEM 4.

Controls and Procedures


70PART II.

OTHER INFORMATION


70ITEM 1.

Legal Proceedings


70ITEM 1A.

Risk Factors


70ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds


71ITEM 6.

Exhibits


71Signatures


72


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PART I.    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS



GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

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

Three Months Ended
March 31,2009

2008Revenues:Net product sales

$
1,037,244

$
1,006,268Net service sales


101,499


85,864Research and development revenue


10,128


7,929Total revenues


1,148,871


1,100,061Operating costs and expenses:Cost of products sold


235,562


216,739Cost of services sold


60,250


55,574Selling, general and administrative


317,961


318,386Research and development


206,925


262,797Amortization of intangibles


57,598


55,658Total operating costs and expenses


878,296


909,154Operating income


270,575


190,907Other income (expenses):Gains (losses) on investments in equity securities, net


(576
)

775Other


(979
)

491Investment income


5,350


14,870Interest expense





(1,655
)Total other income


3,795


14,481Income before income taxes


274,370


205,388Provision for income taxes


(78,884
)

(60,117
)Net income

$
195,486

$
145,271Net income per share:Basic

$
0.72

$
0.54Diluted

$
0.70

$
0.52Weighted average shares outstanding:Basic


270,854


267,276Diluted


277,628


285,208


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)

March 31,
2009

December 31,
2008ASSETSCurrent assets:Cash and cash equivalents

$
643,438

$
572,106Short-term investments


58,808


57,507Accounts receivable, net


1,055,896


1,036,940Inventories


438,905


453,437Prepaid expenses and other current assets


150,709


208,040Deferred tax assets


187,101


188,105Total current assets


2,534,857


2,516,135Property, plant and equipment, net


2,354,299


2,306,567Long-term investments


279,524


344,078Goodwill


1,400,625


1,401,074Other intangible assets, net


1,597,925


1,654,698Deferred tax assetsnoncurrent


304,620


269,237Investments in equity securities


53,413


83,325Other noncurrent assets


94,643


96,162Total assets

$
8,619,906

$
8,671,276LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable

$
126,850

$
127,869Accrued expenses


682,645


765,386Deferred revenue


18,035


13,462Current portion of long-term debt and capital lease obligations


7,792


7,566Total current liabilities


835,322


914,283Long-term debt and capital lease obligations


121,508


124,341Deferred revenuenoncurrent


12,704


13,175Other noncurrent liabilities


310,131


313,484Total liabilities


1,279,665


1,365,283Commitments and contingenciesStockholders' equity:Preferred stock, $0.01 par value





Common stock, $0.01 par value


2,696


2,707Additional paid-in capital


5,759,004


5,779,279Accumulated earnings


1,443,282


1,247,796Accumulated other comprehensive income


135,259


276,211Total stockholders' equity


7,340,241


7,305,993Total liabilities and stockholders' equity

$
8,619,906

$
8,671,276


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)

Three Months Ended
March 31,2009

2008Cash Flows from Operating Activities:Net income

$
195,486

$
145,271Reconciliation of net income to cash flows from operating activities:Depreciation and amortization


98,958


91,039Stock-based compensation


44,560


42,346Provision for bad debts


5,762


2,862Equity in income of equity method investments





(188
)(Gains) losses on investments in equity securities, net


576


(775
)Deferred income tax benefit


(24,376
)

(24,712
)Tax benefit from employee stock-based compensation


6,549


17,599Excess tax benefits from stock-based compensation


(3,492
)

(5,790
)Other


2,238


1,770Increase (decrease) in cash from working capital changes (excluding impact of acquired assets and assumed liabilities):Accounts receivable


(59,210
)

(57,928
)Inventories


818


(1,239
)Prepaid expenses and other current assets


(22,659
)

(6,326
)Income taxes payable


85,792


9,229Accounts payable, accrued expenses and deferred revenue


(73,227
)

(53,625
)Cash flows from operating activities


257,775


159,533Cash Flows from Investing Activities:Purchases of investments


(13,292
)

(146,862
)Sales and maturities of investments


75,058


180,037Purchases of equity securities


(4,870
)

(80,699
)Proceeds from sales of investments in equity securities


1,264


1,148Purchases of property, plant and equipment


(161,561
)

(121,967
)Distributions from equity method investments





6,595Purchases of other intangible assets


(8,056
)

(7,046
)Other


(47
)

3,107Cash flows from investing activities


(111,504
)

(165,687
)Cash Flows from Financing Activities:Proceeds from issuance of common stock


34,526


90,243Repurchases of our common stock


(107,134
)

(73,218
)Excess tax benefits from stock-based compensation


3,492


5,790Payments of debt and capital lease obligations


(2,653
)

(2,554
)Increase (decrease) in bank overdrafts


(3,392
)

18,549Other


1,995


959Cash flows from financing activities


(73,166
)

39,769Effect of exchange rate changes on cash


(1,773
)

(17,829
)Increase in cash and cash equivalents


71,332


15,786Cash and cash equivalents at beginning of period


572,106


867,012Cash and cash equivalents at end of period

$
643,438

$
882,798


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 and service portfolio is focused on rare
disorders, renal disease, orthopaedics, cancer, transplant and immune disease, and diagnostic and predictive testing.

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



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

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

2.    Basis of Presentation and Significant Accounting Policies

Basis of Presentation

Our unaudited, consolidated financial statements for each period include the statements of operations, balance sheets and statements of
cash flows for our operations taken as a whole. We have eliminated all intercompany items and transactions in consolidation. We prepare our unaudited, consolidated financial statements following the
requirements of the SEC for interim reporting. As

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

2.    Basis of Presentation and Significant Accounting Policies (Continued)

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.

These
financial statements include all normal and recurring adjustments that we consider necessary for the fair presentation of our financial position and results of operations. Since
these are interim financial statements, you should also read our audited, consolidated financial statements and notes included in our 2008 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.

Our
unaudited, consolidated financial statements for each period include the accounts of our wholly owned and majority owned subsidiaries. As a result of our adoption of Financial
Accounting Standards Board, or FASB, Interpretation No., or FIN, 46R, "Consolidation of Variable Interest Entities," we also consolidate certain variable interest entities for which we are the primary
beneficiary. For consolidated subsidiaries in which we have less than a 100% ownership interest, we record the minority interest in our consolidated statements of operations for the ownership interest
of the minority owner which was immaterial for all periods presented. We use the equity method of accounting to account for our investments in entities in which we have a substantial ownership
interest (20% to 50%) which do not fall in the scope of FIN 46R, or over which we exercise significant influence. Our consolidated net income includes our share of the earnings or losses of
these entities.

Recent Accounting Pronouncements

Periodically, accounting pronouncements and related information on the adoption, interpretation and application of accounting
principles generally accepted in the United States are issued or amended by the various U.S. financial accounting regulatory groups. The following table provides a description of the types of
accounting pronouncements that are frequently issued or amended:

Accounting Regulatory Group

Type of Pronouncement Issued or AmendedAccounting Principles Board

APB Opinion No., or APBFASB

FASB Statement of Financial Accounting Standards No., or FASFASB Statement of Position No., or FSPEmerging Issues Task Force Issue No., or EITF


The following table shows recently issued accounting pronouncements and our position for adoption:

Pronouncements

Relevant Requirements

Issued Date/ Our
Effective Dates

StatusEITF 07-1, "Accounting for Collaborative Arrangements."

Defines collaborative arrangements and establishes reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties, including the
appropriate income statement presentation and classification of, and the required disclosures related to, these arrangements.

Issued November 2007. Effective January 1, 2009, to be applied retrospectively for collaborative arrangements existing as of the effective date.

The adoption of this pronouncement did not have a material impact on our consolidated financial statements for the periods presented.


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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

2.    Basis of Presentation and Significant Accounting Policies (Continued)

Pronouncements

Relevant Requirements

Issued Date/ Our
Effective Dates

StatusFAS 141R, "Business Combinations."

Modifies and prescribes new requirements for accounting for business combinations. Among other things, acquisition costs will be expensed as incurred; restructuring costs will be expensed subsequent to the acquisition
date; non-controlling interests will be valued at fair value; IPR&D will be recorded at fair value as an indefinite lived intangible asset; contingent purchase price payments will be measured at the acquisition date and re-measured in subsequent
periods with an adjustment to earnings; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition will affect income tax expense.

Issued December 2007. Effective January 1, 2009, to be applied prospectively for all business combinations for which the acquisition date is on or after January 1, 2009.

This pronouncement will significantly change our accounting and reporting for business combination transactions completed on or after January 1, 2009. The adoption of this pronouncement did not have an impact on our
consolidated financial statements for the three months ended March 31, 2009, because we did not complete any business combination transactions during this period but it will impact our consolidated financial statements if such transactions occur
in future periods.FAS 160, "Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51."

Requires ownership interests in subsidiaries, not held by the parent, to be clearly identified in the consolidated statement of financial position within equity, but separate from the parent's equity, and the minority
interest in net income needs to be identified on the consolidated statement of income. Additional disclosures are required.

Issued December 2007. Effective January 1, 2009, prospectively. Disclosure requirements to be applied retrospectively.

The adoption of this pronouncement did not have a material impact on our consolidated financial statements for the periods' presented.FAS 161, "Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133."

Requires enhanced disclosures about an entity's derivative instruments and hedging activities to enable investors to better understand their effects on an entity's financial position, financial performance, and cash
flows.

Issued March 2008. Effective January 1, 2009, prospectively. Comparative disclosures for earlier periods are encouraged, but not required, at initial adoption.

The adoption of this pronouncement did not have a material impact on our consolidated financial statements for the three months ended March 31, 2009.


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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

2.    Basis of Presentation and Significant Accounting Policies (Continued)

Pronouncements

Relevant Requirements

Issued Date/ Our
Effective Dates

StatusFAS 162, "The Hierarchy of Generally Accepted Accounting Principles."

Identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with
generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy).

Issued in May 2008. Effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning ofPresent Fairly in Conformity With Generally Accepted Accounting Principles."

We do not expect the adoption of this pronouncement to have any affect on our consolidated financial statements.FSP FAS 107-1 and APB, 28-1, "Interim Disclosures about Fair Value of Financial Instruments."

Amends guidance on disclosures about fair value and interim financial reporting to require disclosure about fair value of financial instruments whenever summarized financial information is issued for interim reporting
periods.

Issued April 2009. Effective for periods ending after June 15, 2009.

We are evaluating the impact this pronouncement will have, if any, on our consolidated financial statements.FSP FAS 115-2, FAS 124-2, and EITF 99-20-2, "Recognition and Presentation of Other-Than-Temporary
Impairments."

Amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments in the financial
statements.

Issued April 2009. Effective for periods ending after June 15, 2009.

We are evaluating the impact this pronouncement will have, if any, on our consolidated financial statements.FSP FAS 157-2, "Effective Date of FASB Statement 157."

Provides a one year deferral of the effective date of FAS 157, "Fair Value Measurements," or FAS 157, for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed in
financial statements at fair value on a recurring basis (at least annually).

Issued February 2008. Effective January 1, 2009, prospectively.

The adoption of this pronouncement did not have a material impact on our consolidated financial statements for the three months ended March 31, 2009.FSP FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly."

Provides guidelines for making fair value measurements more consistent with the principles presented in FAS 157, as well as additional authoritative guidance in determining whether a market is active or inactive, and
whether a transaction is distressed. Applicable to all assets and liabilities (i.e. financial and nonfinancial) and will require enhanced disclosures.

Issued April 2009. Effective for periods ending after June 15, 2009.

We are evaluating the impact this pronouncement will have, if any, on our consolidated financial statements.


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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements

A significant number of our financial instruments are carried at fair value. These assets and liabilities include:



Fair Value MeasurementDefinition and Hierarchy

FAS 157 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements.
FAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market
participants at the measurement date. In determining fair value, FAS 157 permits the use of various valuation approaches, including market, income and cost approaches. FAS 157
establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used
when available.

The
fair value hierarchy is broken down into three levels based on the reliability of inputs. We have categorized our fixed income, derivatives and equity securities within the hierarchy
as follows:



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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)



The
following tables set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2009 and December 31, 2008
(amounts in thousands):

Description

Balance
as of
March 31,
2009

Level 1

Level 2

Level 3Fixed income investments(1):

Cash equivalents:

Money market funds/other

$
374,771

$
374,771

$


$
Short-term investments:

U.S. Treasury notes


7,508


7,508





U.S. agency notes


7,081





7,081


Corporate notesglobal


44,219





44,219


Total


58,808


7,508


51,300


Long-term investments:

U.S. Treasury notes


55,493


55,493





Non U.S. Governmental notes


7,290





7,290


U.S. agency notes


108,039





108,039


Corporate notesglobal


108,702





108,702


Total


279,524


55,493


224,031


Total fixed income investments


713,103


437,772


275,331


Derivatives:

Foreign exchange forward contracts(2)


2,237





2,237


Equity holdings(1):

Publicly-traded equity securities


27,619


27,619





Total assets (liabilities) at fair value

$
742,959

$
465,391

$
277,568

$



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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)



Description

Balance
as of
December 31,
2008

Level 1

Level 2

Level 3Fixed income investments(1):

Cash equivalents:

Money market funds/other

$
357,680

$
357,680

$


$
Short-term investments:

U.S. Treasury notes


7,505


7,505





U.S. agency notes


10,328





10,328


Corporate notesglobal


39,674





39,674


Total


57,507


7,505


50,002


Long-term investments:

U.S. Treasury notes


75,040


75,040





Non U.S. Governmental notes


7,322





7,322


U.S. agency notes


121,707





121,707


Corporate notesglobal


140,009





140,009


Total


344,078


75,040


269,038


Total fixed income investments


759,265


440,225


319,040


Derivatives:

Foreign exchange forward contracts(2)


(1,434
)




(1,434
)

Equity holdings(1):

Publicly-traded equity securities


56,596


56,596





Total assets (liabilities) at fair value

$
814,427

$
496,821

$
317,606

$



---

The carrying amounts reflected in our consolidated balance sheets for cash, accounts receivable, prepaid expenses and other current assets,
accounts payable and accrued expenses approximate fair value due to their short-term maturities.

Derivative Instruments

As a result of our worldwide operations, we may face exposure to potential adverse movements in foreign currency exchange rates.
Exposures to currency fluctuations that result from sales of our products in foreign markets are partially offset by the impact of currency fluctuations on our international expenses. We may also use
derivatives, primarily foreign exchange forward contracts for which we do not seek hedge accounting treatment under FAS 133, "Accounting for Derivative Instruments and Hedging Activities," or
FAS 133, to further reduce our exposure to changes in

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)

exchange
rates, primarily to offset the earnings effect from short-term foreign currency assets and liabilities. We account for such derivatives at market value with the resulting gains
and losses reflected in our consolidated statements of operations. We do not have any derivatives designated as hedging instruments under FAS 133 and we do not use derivative instruments for
trading or speculative purposes.

Foreign Exchange Forward Contracts

Generally, we enter into foreign exchange forward contracts with maturities of not more than 15 months. All foreign exchange forward
contracts in effect as of March 31, 2009 and December 31, 2008 had maturities of 1 to 2 months. We report these contracts on a net basis. Net asset derivatives are included in
prepaid expenses and other current assets and net liability derivatives are included in accrued expenses in our consolidated balance sheets.

In
accordance with the provisions of FAS 161, the following table summarizes the balance sheet location of the fair value of these derivatives on both a gross and a net basis as
of March 31, 2009 and December 31, 2008 (amounts in thousands):

Foreign Exchange Forward ContractsAs ReportedGross

NetAsset
Derivatives

Liability
Derivatives

Asset
Derivatives

Liability
DerivativesPeriod

Prepaid expenses
and other
current assets

Accrued
expenses

Prepaid expenses
and other
current assets

Accrued
expensesMarch 31, 2009

$
2,657

$
420

$
2,237

$
December 31, 2008

$
2,758

$
4,192

$


$
1,434


Total
foreign exchange (gains) and losses included in SG&A in our consolidated statements of operations includes unrealized and realized (gains) and losses related to both our foreign
exchange forward contracts and our foreign currency assets and liabilities. The net impact of our overall unrealized and realized foreign exchange (gains) and losses for both the three months ended
March 31, 2009 and 2008 was not significant.

In
accordance with the provisions of FAS 161, the following table summarizes only the effect of the unrealized and realized (gains) and losses related to our foreign exchange
forward contracts on our consolidated statements of operations for the three months ended March 31, 2009 and 2008 (amounts in thousands):

Three Months Ended
March 31,2009

2008Derivative Instrument

Statement of
Operations Location

Net (Gains)
Losses Recorded

Statement of
Operations Location

Net (Gains)
Losses RecordedForeign exchange forward contracts

SG&A

$
(10,830
)
SG&A

$
35,897


16

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

4.    Net Income Per Share

The following table sets forth our computation of basic and diluted net income per common share (amounts in thousands, except per share amounts):

Three Months Ended
March 31,2009

2008Net incomebasic

$
195,486

$
145,271Effect of dilutive securities:Interest expense and debt fee amortization, net of tax, related to our 1.25% convertible senior notes(1)





1,886Net incomediluted

$
195,486

$
147,157Shares used in computing net income per common sharebasic


270,854


267,276Effect of dilutive securities:Shares issuable upon the assumed conversion of our 1.25% convertible senior notes(1)





9,686Stock options(2)


5,553


7,791Restricted stock units


1,138


443Other


83


12Dilutive potential common shares


6,774


17,932Shares used in computing net income per common sharediluted(1,2)


277,628


285,208Net income per common share:Basic

$
0.72

$
0.54Diluted

$
0.70

$
0.52


---

Three Months Ended March 31,2009

2008Shares issuable upon exercise of outstanding options


8,650


1,982


17

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

5.    Comprehensive Income

The components of comprehensive income for the periods presented are as follows (amounts in thousands):

Three Months Ended March 31,2009

2008Comprehensive income, net of tax:Net income

$
195,486

$
145,271Other comprehensive income (loss):Foreign currency translation adjustments


(120,148
)

109,654Pension liability adjustments, net of tax(1)





78Unrealized gains (losses) on securities, net of tax:Unrealized gains (losses) arising during the period, net of tax


(20,607
)

3,905Reclassification adjustment for gains included in net income, net of tax


(197
)

(270
)Unrealized gains (losses) on securities, net of tax(2)


(20,804
)

3,635Other comprehensive income (loss)


(140,952
)

113,367Comprehensive income

$
54,534

$
258,638


---

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6.    Strategic Transactions

We account for business combinations completed prior to January 1, 2009 in accordance with FAS 141 and business combinations completed on or after January 1, 2009 in
accordance with FAS 141R. FAS 141R modifies the criteria that must be met to qualify as a business combination and prescribes new accounting requirements that differ significantly from
FAS 141. Among various other requirements and differences, the following table illustrates how we account for specific elements of our business combinations under FAS 141 and
FAS 141R:

Element

Prior to
January 1, 2009,
FAS 141

On or after
January 1, 2009,
FAS 141RTransaction costs



Capitalized as cost of acquisition



Expensed as incurredExit costs



Capitalized as cost of acquisition if certain criteria were met



Expensed as incurred subsequent to acquisition dateAcquired in-process research and development programs



Measured at fair value and expensed on acquisition date, or capitalized as an intangible asset if certain criteria were
met



Measured at fair value and capitalized as an intangible asset and tested for impairment until completion of program

Amortized from date of completion over estimated useful lifeContingent consideration



Capitalized as cost of acquisition when contingency was resolved



Measured at fair value and recorded on acquisition date

Re-measured in subsequent periods with an adjustment to earningsChanges in deferred tax assets and valuation allowances



Recorded as adjustments to goodwill



Recorded as tax expenseAdjustments to acquisition accounting



Recorded in the current period financial statements



Recorded as adjustments to prior period financial statements


Pending Acquisition from Bayer

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



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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6.    Strategic Transactions (Continued)



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



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

Purchase of Intellectual Property from EXACT Sciences Corporation

On January 27, 2009, we purchased certain intellectual property in the fields of prenatal testing and reproductive health from
EXACT Sciences Corporation, or EXACT Sciences, for our diagnostic testing services business and 3,000,000 shares of EXACT Sciences common stock. We paid EXACT Sciences total cash consideration of
$22.7 million. Of this amount, we allocated $4.5 million to the acquired shares of EXACT Sciences common stock based on the fair value of the stock on the date of acquisition, which we
recorded as an increase to other noncurrent assets in our consolidated balance sheet as of March 31, 2009. As the purchased assets did not qualify as a business combination under
FAS 141R and have not reached technological feasibility nor have alternative future use, we allocated

20

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6.    Strategic Transactions (Continued)

the
remaining $18.2 million to the acquired intellectual property, which we recorded as a charge to research and development expenses in our consolidated statement of operations for the three
months ended March 31, 2009. We will pay EXACT Sciences an additional $1.9 million by July 2010 contingent upon the non-occurrence of certain events.

Purchase of In-Process Research and Development

Prior to January 1, 2009, we expensed IPR&D acquired through a business combination which had not yet reached technological
feasibility and had no alternative future use. In accordance with our adoption of FAS 141R, all IPR&D we acquire through business combinations on or after January 1, 2009 will be
capitalized as an intangible asset on our consolidated balance sheets and periodically tested for impairment.

We
did not complete any business combination acquisitions in the year ended December 31, 2008 or during the three months ended March 31, 2009. In connection with two
business combinations we completed between January 1, 2006 and December 31, 2007, we acquired various IPR&D projects. The following table sets forth the significant IPR&D projects we
acquired between January 1, 2006 and December 31, 2007 (amounts in millions):

Company/Assets Acquired

Purchase
Price

IPR&D

Programs Acquired

Discount Rate
Used in
Estimating
Cash Flows

Year of
Expected
LaunchBioenvision (2007)

$
349.9

$
125.5

Evoltra (clofarabine)(1)


17
%

2009-2013AnorMED (2006)

$
589.2

$
526.8

Mozobil (stem cell transplant)(2)


15
%

2009-201426.1

AMD070 (HIV)(3)


15
%

$
552.9


---

7.    Inventories

March 31,
2009

December 31,
2008(Amounts in thousands)Raw materials

$
93,711

$
96,986Work-in-process


156,807


141,094Finished goods


188,387


215,357Total

$
438,905

$
453,437


We
capitalize inventory produced for commercial sale, which may result in the capitalization of inventory prior to regulatory approval. If a product is not approved for sale, it would
result in the write off of the inventory and a charge to earnings. Our total inventories at March 31, 2009, included

21

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

7.    Inventories (Continued)

$3.3 million
of Campath for oncology inventory, produced at our manufacturing facility in Belgium, that has not yet been approved for sale because the facility has not yet received approval to
manufacture Campath.

8.    Goodwill and Other Intangible Assets

Goodwill

The following table contains the change in our goodwill during the three months ended March 31, 2009 (amounts in thousands):

As of
December 31,
2008

Adjustments

As of
March 31,
2009Genetic Diseases

$
339,563

$


$
339,563Cardiometabolic and Renal


319,882





319,882Biosurgery


7,585





7,585Hematologic Oncology


322,078





322,078Other(1)


411,966


(449
)

411,517Goodwill

$
1,401,074

$
(449
)
$
1,400,625


---

Other Intangible Assets

The following table contains information about our other intangible assets for the periods presented (amounts in thousands):

As of March 31, 2009

As of December 31, 2008Gross
Other
Intangible
Assets

Accumulated
Amortization

Net
Other
Intangible
Assets

Gross
Other
Intangible
Assets

Accumulated
Amortization

Net
Other
Intangible
AssetsTechnology

$
1,918,793

$
(731,369
)
$
1,187,424

$
1,919,074

$
(692,235
)
$
1,226,839Patents


194,560


(125,914
)

68,646


194,560


(121,763
)

72,797Trademarks


60,544


(43,542
)

17,002


60,556


(42,194
)

18,362License fees


98,136


(41,557
)

56,579


98,123


(39,824
)

58,299Distribution rights(1)


406,447


(184,625
)

221,822


399,768


(170,892
)

228,876Customer lists


82,810


(36,358
)

46,452


83,729


(34,271
)

49,458Other


2,039


(2,039
)




2,039


(1,972
)

67Total

$
2,763,329

$
(1,165,404
)
$
1,597,925

$
2,757,849

$
(1,103,151
)
$
1,654,698


---

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

8.    Goodwill and Other Intangible Assets (Continued)



All
of our other intangible assets are amortized over their estimated useful lives. Total amortization expense for our other intangible assets was:



The
estimated future amortization expense for other intangible assets for the remainder of fiscal year 2009, the four succeeding fiscal years and thereafter is as follows (amounts in
thousands):

Year Ended December 31,

Estimated
Amortization
Expense(1,2)2009 (remaining nine months)

$
171,6052010


242,5192011


256,0642012


195,6942013


125,437Thereafter


448,183


---

9.    Revolving Credit Facility

As of March 31, 2009, no amounts were outstanding under our five-year $350.0 million senior unsecured revolving credit facility, which matures July 14,
2011. The terms of this credit facility include various covenants, including financial covenants, that require us to meet minimum interest coverage ratios and maximum leverage ratios. As of
March 31, 2009, we were in compliance with these covenants.

10.    Stockholders' Equity

Stock Repurchase

In May 2007, our board of directors authorized a stock repurchase program to repurchase up to an aggregate maximum amount of
$1.5 billion or 20,000,000 shares of our outstanding common stock over a three year period that began in June 2007. The repurchases are being made from time to time and

23

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

10.    Stockholders' Equity (Continued)

can
be effectuated through open market purchases, privately negotiated transactions, transactions structured through investment banking institutions, or by other means, subject to management's
discretion and as permitted by securities laws and other legal requirements. The manner of the purchase, the amount that we spend and the number of shares we ultimately purchase will vary based on a
range of factors, including share price. The program does not obligate us to acquire any particular amount of common stock and the program may be suspended at any time at our discretion.

During
the three months ended March 31, 2009, we repurchased 2,000,000 shares of our common stock under this program for an average price of $53.55 per share for a total of
$107.1 million in cash, including fees. Since June 2007, when we first began repurchasing shares of our common stock under this program, we have repurchased a cumulative total of 7,500,000
shares of our common stock at an average price of $64.21 per share for a total of $481.7 million in cash, including fees. We recorded the repurchases in our consolidated balance sheets as a
reduction to our common stock account for the par value of the repurchased shares and as a reduction to our additional paid-in capital account.

Stock-Based Compensation Expense, Net of Estimated Forfeitures

We allocated pre-tax stock-based compensation expense, net of estimated forfeitures, based on the functional cost center of
each employee as follows (amounts in thousands, except per share amounts):

Three Months Ended
March 31,2009

2008Pre-tax stock-based compensation expense, net of estimated forfeitures charged to:Cost of products and services sold(1)

$
(7,234
)
$
(6,514
)Selling, general and administrative expense


(23,836
)

(22,889
)Research and development expense


(13,536
)

(12,585
)Total


(44,606
)

(41,988
)Less: tax benefit from stock options


12,589


12,537Total stock-based compensation expense, net of tax

$
(32,017
)
$
(29,451
)Effect per common share:Basic

$
(0.12
)
$
(0.12
)Diluted

$
(0.12
)
$
(0.10
)


---

Three Months Ended
March 31,2009

2008Stock-based compensation expense capitalized to inventory

$
3,412

$
3,121


We
amortize stock-based compensation expense capitalized to inventory based on inventory turns.

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

10.    Stockholders' Equity (Continued)

At
March 31, 2009, there was $211.9 million of pre-tax stock-based compensation expense, net of estimated forfeitures, related to unvested awards not yet
recognized which is expected to be recognized over a weighted average period of 1.8 years.

11.    Commitments and Contingencies

Legal Proceedings

In April 2005, Church & Dwight Co., Inc., or Church & Dwight, filed a suit in U.S. District Court for the
District of New Jersey against Abbott Laboratories, or Abbott, claiming that certain over-the-counter pregnancy tests distributed by Abbott between 1999 and 2003 infringed upon
patents owned by Church & Dwight. During part of this period, a portion of the test kits distributed by Abbott were manufactured by Wyntek Diagnostics, Inc., or Wyntek, which had agreed
to indemnify Abbott for patent infringement related costs and damages for these products. In 2002, we acquired Wyntek and assumed the obligations under this agreement. In June 2008, the court issued a
ruling awarding Church & Dwight approximately $29 million in damages based on a jury finding of willful infringement by Abbott. This award has been entered as a final ruling and Abbott
has filed an appeal. Because multiple parties, including Abbott, manufactured infringing product for Abbott during this period, any responsibility that we may have for indemnifying Abbott is only for
a portion of its costs and damages related to this case. We currently are disputing with Abbott the percentage of infringing product that was supplied by us and may in the future assert additional
claims that, if successful, would reduce or relieve us of any liability.

Through
June 30, 2003, we had three outstanding series of common stock, which we referred to as tracking stocks: Genzyme General Stock (which we now refer to as Genzyme Stock);
Biosurgery Stock; and Molecular Oncology Stock. On August 6, 2007, we reached an agreement in principle to settle for $64.0 million the lawsuits related to our 2003 exchange of Genzyme
Stock for Biosurgery Stock. We recorded a liability for the settlement payment of $64.0 million as a charge to SG&A in our consolidated statement of operations for the quarterly period ended
June 30, 2007. We paid the settlement in August 2007. The court approved the settlement in October 2007. We have submitted claims to our insurers for reimbursement of portions of the expenses
incurred in connection with these cases; the insurer has purported to deny coverage, and, therefore, we have not recorded a receivable for any potential recovery from our insurer. We are vigorously
pursuing our rights with respect to insurance coverage. To the extent we are successful, we will record the recovery in our consolidated statements of operations.

We
periodically become subject to legal proceedings and claims arising in connection with our business. Although we cannot predict the outcome of these additional proceedings and claims,
we do not believe the ultimate resolution of any of these existing matters would have a material adverse effect on our consolidated financial position or results of operations.

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

12.    Provision for Income Taxes

Three Months Ended
March 31,2009

2008(Amounts in thousands)Provision for income taxes

$
78,884

$
60,117Effective tax rate


29
%

29
%


Our
effective tax rate for both periods varies from the U.S. statutory tax rate as a result of:



We
are currently under IRS audit for tax years 2006 to 2007. We believe that we have provided sufficiently for all audit exposures. We expect to settle the 2006 to 2007 IRS audit within
the next twelve months and do not expect that the settlement will have a material impact on our financial position or results of operations. Settlement of these audits or the expiration of the statute
of limitations on the assessment of income taxes for any tax year may result in a reduction of future tax provisions. Any such benefit would be recorded upon final resolution of the audit or
expiration of the applicable statute of limitations.

13.    Segment Information

In accordance with FAS 131, "Disclosures about Segments of an Enterprise and Related Information," we present segment information in a manner consistent with the method we use to
report this information to our management. Applying FAS 131, in the fourth quarter of 2008, we changed our segment reporting structure to better reflect the way we manage and measure the
performance of our businesses. Under the new reporting structure, we are organized into four reporting segments as described above in Note 1., "Description of Business," to these consolidated
financial statements. We have revised our 2008 segment disclosures to conform to our 2009 presentation.

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

13.    Segment Information (Continued)

We
have provided information concerning the operations of these reportable segments in the following tables (amounts in thousands):

Three Months Ended
March 31,2009

2008Revenues:Genetic Diseases

$
537,050

$
534,889Cardiometabolic and Renal


242,962


231,838Biosurgery


119,522


111,662Hematologic Oncology


35,907


23,880Other


212,976


197,409Corporate


454


383Total


1,148,871


1,100,061Income (loss) before income taxes:Genetic Diseases


351,974


356,721Cardiometabolic and Renal(1)


102,218


28,831Biosurgery


28,333


18,787Hematologic Oncology


(13,642
)

(25,961
)Other(2)


(6,922
)

5,177Corporate(3)


(187,591
)

(178,167
)Total

$
274,370

$
205,388


---

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

13.    Segment Information (Continued)

Segment Assets

We provide information concerning the assets of our reportable segments in the following table (amounts in thousands):

March 31,
2009

December 31,
2008Segment Assets(1):Genetic Diseases

$
1,632,942

$
1,520,586Cardiometabolic and Renal


1,307,437


1,366,970Biosurgery


491,390


497,813Hematologic Oncology


669,892


700,563Other


1,131,758


1,097,169Corporate(2)


3,386,487


3,488,175Total

$
8,619,906

$
8,671,276


---

March 31,
2009

December 31,
2008Cash, cash equivalents, short- and long-term investments in debt securities

$
981,770

$
973,691Deferred tax assets, net


491,720


457,342Property, plant & equipment, net


1,484,134


1,524,442Investments in equity securities


53,413


83,325Other


375,450


449,375Total

$
3,386,487

$
3,488,175


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Table of Contents

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

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

INTRODUCTION

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

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



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

29

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Table of Contents

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

STRATEGIC TRANSACTIONS

Pending Acquisition from Bayer

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



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



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

Purchase of Intellectual Property from EXACT Sciences

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

30

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Table of Contents

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

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

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

Revenue Recognition

Product Sales Allowances

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

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



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Table of Contents



Three Months Ended
March 31,Increase/
(Decrease)
% Change2009

2008Product sales allowances:Contractual adjustments

$
136,180

$
102,002


34
%Discounts


6,275


5,505


14
%Sales returns


6,523


6,751


(3)%Total product sales allowances

$
148,978

$
114,258


30
%Total gross product sales

$
1,186,222

$
1,120,525


6
%Total product sales allowances as a percent of total gross product sales


13
%

10
%


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

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

Distributor Fees

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



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

Three Months Ended
March 31,2009

2008Distributor fees:Included in contractual adjustments and recorded as a reduction to product sales

$
3,479

$
4,696Charged to SG&A


3,547


2,951Total distributor fees

$
7,026

$
7,647


In-Process Research and Development

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

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



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

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

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

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

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

RESULTS OF OPERATIONS

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

REVENUES

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

Three Months Ended
March 31,Increase/
(Decrease)
% Change2009

2008Product revenue

$
1,037,244

$
1,006,268


3
%Service revenue


101,499


85,864


18
%Total product and service revenue


1,138,743


1,092,132


4
%Research and development revenue


10,128


7,929


28
%Total revenues

$
1,148,871

$
1,100,061


4
%


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Product Revenue

We derive product revenue from sales of:



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

Three Months Ended
March 31,Increase/
(Decrease)
% Change2009

2008Genetic Diseases:Cerezyme

$
295,970

$
304,303


(3
)%Fabrazyme


122,201


116,475


5
%Myozyme


67,392


67,324


Aldurazyme


36,837


36,839


Other Genetic Diseases


14,625


9,772


50
%Total Genetic Diseases


537,025


534,713


Cardiometabolic and Renal:Renagel/Renvela (including sales of bulk sevelamer)


170,599


168,694


1
%Hectorol


33,030


29,076


14
%Thyrogen


38,826


33,785


15
%Other Cardiometabolic and Renal


482


237


>100
%Total Cardiometabolic and Renal


242,937


231,792


5
%Biosurgery:Synvisc/Synvisc-One


63,171


56,142


13
%Sepra products


34,304


30,604


12
%Other Biosurgery


11,653


13,581


(14
)%Total Biosurgery


109,128


100,327


9
%Hematologic Oncology


33,978


22,281


52
%Other product revenue


114,176


117,155


(3
)%Total product revenue

$
1,037,244

$
1,006,268


3
%


Genetic Diseases

Genetic Diseases product revenue remained substantially unchanged for the three months ended March 31, 2009, as compared to the
same period of 2008, primarily due to unfavorable exchange rate fluctuations, which offset continued growth in sales volume for Cerezyme, Fabrazyme, Myozyme, Aldurazyme and Elaprase. Elaprase was
developed by Shire Human Genetic Therapies Inc., or Shire. We have the rights to commercialize the product in Japan and other Asia Pacific countries under an agreement with Shire. We launched Elaprase
in Japan in the fourth quarter of 2007. Sales of Elaprase are included in Other Genetic Diseases product revenue.

The
3% decrease in Cerezyme revenue to $296.0 million for the three months ended March 31, 2009, as compared to the same period of 2008, is primarily due to the weakening
of foreign currencies against the U.S. dollar, which adversely impacted revenue by $22.6 million for the three months ended March 31, 2009, as compared to the same period of 2008.
This decrease was offset, in part, by increases in sales volume due to continued identification of Gaucher disease patients, particularly in international markets. Although we expect Cerezyme to
continue to be a substantial contributor to revenues in the future, it is a mature product and, as a result, we expect that the current new patient growth trend will continue at a modest pace going
forward.

Our
results of operations are dependent on sales of Cerezyme and a reduction in revenue from sales of this product would adversely affect our results of operations. Sales of Cerezyme
were

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approximately
26% of our total revenue for the three months ended March 31, 2009, as compared to 28% for the same period in 2008. Revenue from Cerezyme would be impacted negatively if
competitors developed alternative treatments for Gaucher disease which gained commercial acceptance, if our marketing activities are restricted, or if coverage, pricing or reimbursement is limited.

The
5% increase in Fabrazyme revenue to $122.2 million for the three months ended March 31, 2009, as compared to the same period of 2008, is primarily attributable to
increased patient identification
worldwide as Fabrazyme is introduced into new markets. The increase in the sales volume of Fabrazyme was offset, in part, by decreases of $6.8 million attributable to the weakening of foreign
currencies against the U.S. dollar.

Sales
of Myozyme were virtually the same for the three months ended March 31, 2009, as compared to the same period of 2008. Although sales of Myozyme increased for the three
months ended March 31, 2009, due to the identification of new patients following European approval of product produced at the 4000L scale in February 2009, the growth in sales of Myozyme was
adversely affected by the product not yet being approved for promotion in the U.S. market and by a global supply management program under which adult Pompe disease patients temporarily adjusted their
infusion schedules in order to preserve constrained product supply for infants and children. Sales of Myozyme were also adversely impacted for the three months ended March 31, 2009, as compared
to the same period of 2008, by decreases of $8.8 million attributable to the weakening of foreign currencies against the U.S. dollar.

We
currently manufacture Myozyme (alglucosidase alfa) in the United States using a 160L scale process at our manufacturing facility in Framingham, Massachusetts and using the 2000L scale
process at our manufacturing facility in Allston, Massachusetts. We have approval to sell Myozyme manufactured using the 160L scale process in the United States and Canada. Myozyme produced using the
2000L scale process has been approved for sale in more than 40 countries outside of the United States. The product produced using the 160L scale process is reserved for infants and children because
the smaller scale produces a limited supply of FDA-approved product for the U.S. market.

In
October 2007, we submitted a supplemental biologics license application, or BLA, to the FDA seeking approval of alglucosidase alfa produced using the 2000L scale process to help meet
the demand for the product in the U.S. market. In April 2008, the FDA concluded that alglucosidase alfa produced using the 160L scale process and using the 2000L scale process should be classified as
two different products because of analytical differences observed as part of the comparability efforts supporting the manufacturing change. As a result, the FDA required us to submit a separate BLA to
gain U.S. approval for alglucosidase alfa produced using the 2000L scale process, which we submitted in May 2008. In October 2008, the Endocrinologic and Metabolic Drugs Advisory Committee affirmed by
a vote of 16 to 1 that our Late Onset Treatment Study established the clinical effectiveness of alglucosidase alfa produced using the 2000L scale process for the treatment of patients with
late-onset Pompe disease. After the product is approved, it will be marketed as Lumizyme in the United States, while the currently FDA-approved product produced using the 160L
scale process will continue to be marketed as Myozyme.

In
September and October 2008, FDA officials conducted a Good Manufacturing Practices, or GMP, inspection of licensed therapeutic drug products, bulk drug substances and drug components
manufactured at our Allston, Massachusetts facility. We manufacture Cerezyme, Fabrazyme and Myozyme and perform fill/finish for Aldurazyme and Thyrogen at this facility. After this inspection, the FDA
officials issued a list of inspection observations known as a Form FDA 483, or 483, which detailed observations considered by the FDA to be significant deviations from GMP compliance, including
observations relating to our procedures designed to prevent microbiological contamination of sterile drug products; controls for in-process monitoring during bulk drug substance
manufacturing, including our controls for bioburden monitoring; and maintenance of equipment and computer systems

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validation.
We responded to the 483 on October 31, 2008 with a plan and timeline to address the inspectional observations. We also provided a progress update to the FDA on
February 23, 2009. On February 27, 2009, we received a warning letter from the FDA that requested supplemental information in order to fully evaluate the adequacy of our corrective
actions with respect to nine of the FDA's sixteen observations in the 483. We submitted an initial response to the FDA on March 6, 2009 with a plan and timeline for providing this supplemental
information and have been providing regular updates to the FDA on our progress against this plan. We believe that we have addressed all the measures required to respond to the FDA warning letter. We
are awaiting the FDA's re-inspection of the Allston facility. Failure to correct the deviations cited in an FDA warning letter can result in further regulatory action, including suspension
of our license to manufacture products at this facility, or lead to a delay in the approval of new products.

Also
on February 27, 2009, we received a complete response letter, or CR Letter, from the FDA regarding our 2000L application. In the CR Letter, the FDA outlined items that need
to be addressed before our application could be approved. These items included finalizing agreement with the FDA on the design of a post-approval verification study to demonstrate the
clinical benefit of Lumizyme, as required under the FDA's accelerated approval process, as well as a Risk Evaluation and Mitigation Strategy, or REMS, for the product; finalizing label discussions
with the FDA; and providing the FDA with information regarding specific chemistry, manufacturing and controls questions and with a safety update. In addition, the FDA's CR Letter stated that before
the FDA would approve Lumizyme, we would need to resolve issues identified in the warning letter related to our Allston manufacturing facility. We have received final comments from the agency
regarding the REMS for the product, the verification study, and the label.

The
FDA has informed us that we can submit our response to the CR Letter before the re-inspection of our Allston facility in connection with the warning letter. In addition,
the FDA has agreed that we can compile and submit existing registry data as part of our response to the CR Letter instead of conducting a separate post-marketing verification study. We are
preparing the requested registry data and expect to submit our response to the CR Letter by the middle of May 2009. Because our submission will include clinical data, we believe that the FDA will
classify our response as a Class 2 resubmission with a six-month review period under the Prescription Drug User Fee Act, or PDUFA. However, given our ongoing dialogue with the FDA,
we believe that we could receive approval before the PDUFA date.

We
are also in discussion with the FDA regarding the submission of a supplemental BLA for the 4000L scale product. We have met with the FDA to review comparability data and are working
collaboratively to determine the most expeditious path toward approval.

In
February 2009, we received approval from the European Commission to market Myozyme produced at our manufacturing facility in Belgium using a 4000L scale process. During January and
February 2009, there was widespread adult patient compliance with our request to adjust infusion schedules to preserve product supply for infants and children. With the approval of Myozyme produced
using the 4000L scale process, adult patients who adjusted their infusion schedules were able to resume their regular schedules and new patients will be able to initiate therapy outside of the United
States. We expect Myozyme sales in Europe to accelerate starting in the second quarter of 2009 and to continue to increase throughout the second half of 2009. During the second half of 2009, we
also plan to begin preparing to add a third 4000L bioreactor to our Belgium facility to help support Myozyme's growth over the longer term. We anticipate that this bioreactor will be approved
for commercial production in the middle of 2011.

Aldurazyme
revenue remained substantially unchanged for the three months ended March 31, 2009, as compared to the same period of 2008. Aldurazyme revenue increased for the three
months ended March 31, 2009, as compared to the same period of 2008, due to increased patient identification

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worldwide
as Aldurazyme was introduced into new markets. The weakening of foreign currencies against the U.S. dollar, adversely impacted Aldurazyme revenue by $3.6 million for the three
months ended March 31, 2009, as compared to the same period of 2008.

Other
Genetic Diseases product revenue increased for the three months ended March 31, 2009, as compared to the same period of 2008, primarily due to increased sales of Elaprase,
driven by the identification of new patients and the strengthening of the Japanese yen against the U.S. dollar, which favorably impacted revenue by $1.1 million.

Cardiometabolic and Renal

In October 2007, the FDA granted marketing approval for Renvela, a second generation buffered form of Renagel. In March 2008, we
launched Renvela for dialysis patients in the United States. We are currently pursuing regulatory approvals for Renvela in Europe, Latin America and other international markets.

Sales
of Renagel/Renvela, including sales of bulk sevelamer, increased 1% to $170.6 million for the three months ended March 31, 2009, as compared to the same period of
2008, primarily due to Renagel price increases in the United States after the first quarter of 2008, offset in part by decreases outside of the United States which adversely impacted revenue. The
weakening of foreign currencies against the U.S. dollar adversely impacted Renagel revenue by $12.9 million and had no impact on sales of Renvela. Sales of Renagel/Renvela, including
sales of bulk sevelamer, were 15% of our total revenues for both the three months ended March 31, 2009 and 2008.

In
October 2007, an FDA advisory committee voted to recommend that the agency extend the indications for phosphate binders to include patients with hyperphosphatemia who have not
progressed to dialysis. In June 2008, we and two other companies submitted a position paper to the FDA regarding the expanded use of phosphate binders. We received written responses from the FDA and
we are in the process of responding to the agency. There is no PDUFA date associated with this expanded label process; however, we anticipate that this indication could be added to Renvela's label in
the United States by the middle of 2009. In March 2009, the European Medicines Agency's Committee for Human Medicinal Products, or CHMP, adopted a positive opinion for the marketing authorization of
Renvela for use in patients with CKD, including patients not on dialysis. Our filing in Europe includes both powder and tablet formulations of Renvela. The European Commission generally follows the
advice of the CHMP, but is not obligated to do so. A decision from the European Commission is expected at the end of May 2009. In addition, we have filed for FDA approval of a powder form of Renvela.
While Renagel will remain available for a period of time, our goal is to transition patients in the United States to Renvela by the fourth quarter of 2009.

Sales
of Hectorol increased 14% to $33.0 million for the three months ended March 31, 2009, as compared to the same period of 2008, primarily due to Hectorol price
increases in the second and fourth quarters of 2008.

We
expect sales of Renagel/Renvela and Hectorol to continue to increase. Adoption rates for Renagel/Renvela are expected to trend favorably as a result of the introduction of Renvela
globally, the potential label expansion to include hyperphosphatemic patients who are not on dialysis, and the introduction of a powder formulation expected in the first half of 2009. Adoption rates
for Hectorol are expected to trend favorably as a result of growth in the CKD market and the launch of a 1mg capsule form of Hectorol in the second half of 2009.

Renagel/Renvela
and Hectorol compete with several other marketed products and our future sales may be impacted negatively by these products. Renagel, Renvela and Hectorol are also
subjects of Abbreviated New Drug Applications, or ANDAs, containing "Paragraph IV certifications," which is the filing a generic drug manufacturer uses to challenge the applicability of one or
more Orange

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Book-listed
patents in order to seek U.S. regulatory approval to market a generic version of a drug prior to the expiration date of those patents. See "Some of our
products may face
competition from lower cost generic or follow-on products" under the heading "Risk Factors" below. If any of the ANDA filers or any other generic drug manufacturer were to
receive approval to sell a generic version of Renagel/Renvela or Hectorol, our revenues from those products would be adversely affected.

In
addition, our ability to continue to increase sales of Renagel/Renvela and Hectorol will depend on many other factors, including our ability to optimize dosing and improve patient
compliance, the availability of reimbursement from third-party payors and the extent of coverage, including under the Medicare Part D program. Also, the accuracy of our estimates of
fluctuations in the payor mix and our ability to effectively manage wholesaler inventories and the levels of compliance with the inventory management programs we implemented for Renagel/Renvela and
Hectorol with our wholesalers could impact the revenue from our Cardiometabolic and Renal reporting segment that we record from period to period.

Sales
of Thyrogen increased 15% to $38.8 million for the three months ended March 31, 2009, as compared to the same period of 2008 primarily due to a 15% price increase for
Thyrogen, which we implemented in the United States in April 2008. In addition, worldwide volume growth, driven by a significant increase in the use of the product in thyroid remnant ablation
procedures, positively impacted Thyrogen revenue. The weakening of foreign currencies against the U.S. dollar adversely impacted Thyrogen revenue by $2.4 million for the three months
ended March 31, 2009, as compared to the same period of 2008.

Biosurgery

Biosurgery product revenue increased 9% to $109.1 million for the three months ended March 31, 2009, as compared to the
same period of 2008. The combined revenues of Synvisc/Synvisc-One increased 13% to $63.2 million for the three months ended March 31, 2009, as compared to the same period of
2008, primarily due to an expanded sales and marketing investment and the initiation of direct sales of the products in Latin America and the addition of Synvisc-One sales in the United States.
We received approval to market Synvisc-One, a single injection regimen, in the European Union in December 2007. In February 2009, we received marketing approval for Synvisc-One
in the United States.

Seprafilm
revenue increased $4.9 million for the three months ended March 31, 2009, as compared to the same period of 2008, primarily due to greater penetration of the
product into the United States, Japan and Europe and the expanded use of Seprafilm in C-sections and gynecological procedures.

The
weakening of foreign currencies against the U.S. dollar adversely impacted Biosurgery product revenue by $1.3 million for the three months ended March 31, 2009,
as compared to the same period of 2008.

Other
Biosurgery product revenue decreased 14% to $11.7 million for the three months ended March 31, 2009, as compared to the same period of 2008, primarily due to a
decrease in milestone revenue associated with the development and commercialization of dermal filler products with Mentor Corporation.

Hematologic Oncology

Hematologic Oncology product revenue increased 52% to $34.0 million for the three months ended March 31, 2009, as
compared to the same period of 2008, primarily due to the addition of sales of Mozobil in the United States and increased demand for Clolar in the United States.

We
are developing the intravenous formulation of clofarabine for new indications, including first-line and relapsed or refractory adult acute myeloid leukemia, or AML. In
November 2008, we filed

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a
supplemental New Drug Application, or NDA, with the FDA for the use of Clolar to treat previously untreated adults age 60 years or older with AML who have at least one unfavorable prognostic
factor. FDA action is expected in the second half of 2009. We have discussed our adult AML development plans with the CHMP in Europe, and based on the CHMP's feedback, await the availability of
additional data before seeking approval for this indication in Europe. We are also developing an oral formulation of clofarabine and have initiated clinical trials for the treatment of myelodysplastic
syndrome, or MDS. Clofarabine has been granted orphan drug status for the treatment of ALL and AML in both the United States and the European Union.

Mozobil
was approved by the FDA in December 2008 to prepare patients with non-Hodgkin's lymphoma and multiple myeloma for autologous stem cell transplants. We have also filed
for approval for Mozobil in Europe and expect approval in the second half of 2009.

Other Product Revenue

Other product revenue decreased 3% to $114.2 million for the three months ended March 31, 2009, as compared to the same
period of 2008, primarily due to decreased demand for diagnostic products, WelChol and liquid crystals.

The
decreases in Other product revenue were offset by a 15% increase in sales of transplant products to $52.7 million for the three months ended March 31, 2009, as compared
to the same period of 2008, primarily due to an increase in Thymoglobulin sales for the three months ended March 31, 2009, as compared to the same period of 2008, due to a
shortage in supply in the first quarter of 2008. Sales of Thymoglobulin increased $7.3 million for the three months ended March 31, 2009, as compared to the same period of 2008,
primarily due to an increase in sales volume resulting from increased utilization of Thymoglobulin in transplant procedures worldwide. The weakening of foreign currencies against the
U.S. dollar adversely impacted Thymoglobulin product revenue by $2.3 million for the three months ended March 31, 2009, as compared to the same period of 2008.

Service Revenue

We derive service revenues primarily from the following sources:



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

Three Months Ended
March 31,Increase/
(Decrease)
% Change2009

2008Genetic Diseases

$
25

$
176


(86
)%Cardiometabolic and Renal


12


14


(14
)%Biosurgery


9,832


10,732


(8
)%Hematologic Oncology


445


410


9
%Other


91,185


74,532


22
%Total service revenue

$
101,499

$
85,864


18
%


Service
revenue attributable to our Biosurgery reporting segment decreased 8% to $9.8 million for the three months ended March 31, 2009, as compared to the same period of
2008. The decrease is primarily due to a decrease in the demand for MACI.

Other
service revenue increased 22% to $91.2 million for the three months ended March 31, 2009, as compared to the same period of 2008. The increase was primarily
attributable to continued growth in sales of genetic testing and prenatal screening services as well as growth in the demand for certain testing services for patients diagnosed with cancer.

International Product and Service Revenue

A substantial portion of our revenue is generated outside of the United States. The following table provides information regarding the
change in international product and service revenue as a percentage of total product and service revenue during the periods presented (amounts in thousands):

Three Months Ended
March 31,Increase/
(Decrease)
% Change2009

2008International product and service revenue

$
551,111

$
564,127


(2
)%% of total product and service revenue


48
%

52
%


The
2% decrease to $551.1 million in international product and service revenue for the three months ended March 31, 2009, as compared to the same period of 2008, is
primarily due to the weakening of foreign currencies against the U.S. dollar, which adversely impacted total product and service revenue by $65.7 million for the three months ended
March 31, 2009, as compared to the same period of 2008. This decrease was offset in part by growth in the international sales volume of Renagel, Cerezyme, Fabrazyme, Myozyme, Aldurazyme,
Elaprase, Synvisc, Campath, Evoltra and Thymoglobulin.

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Research and Development Revenue

The following table sets forth our research and development revenue on a segment basis (amounts in thousands):

Three Months Ended
March 31,Increase/
(Decrease)
% Change2009

2008Cardiometabolic and Renal

$
13

$
32


(59
)%Biosurgery


562


603


(7
)%Hematologic Oncology


1,484


1,189


25
%Other


7,573


5,722


32
%Corporate


496


383


30
%Total research and development revenue

$
10,128

$
7,929


28
%


Total
research and development revenue increased $2.2 million for the three months ended March 31, 2009, as compared to the same period of 2008, primarily due to increases
in revenue recognized by our Hematologic Oncology reporting segment and Other research and development revenue. Other research and development revenue increased primarily due to our increase in
spending for the development of alemtuzumab under our collaboration with Bayer, and Bayer's reimbursement of a portion of these development expenses, particularly in the MS development program.
Effective as of the date our pending acquisition from Bayer closes, we will cease recognizing research and development revenue for Bayer's reimbursement of a portion of the development costs for
alemtuzumab for the treatment of MS. In accordance with the provisions of FAS 141R, the fair value of the research and development costs to be reimbursed by Bayer will be accounted for as an
offset to the consideration paid in the transaction.

GROSS PROFIT AND MARGINS

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

Three Months Ended
March 31,Increase/
(Decrease)
% Change2009

2008Gross product profit

$
801,682

$
789,529


2
%Product margin


77
%

78
%Gross service profit

$
41,249

$
30,290


36
%Service margin


41
%

35
%Total gross product and service profit

$
842,931

$
819,819


3
%Total product and service margin


74
%

75
%


Gross Product Profit and Product Margin

Our overall gross product profit increased $12.2 million, or 2%, for the three months ended March 31, 2009, as compared
to the same period of 2008, primarily due to:



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Product
margin decreased for the three months ended March 31, 2009, as compared to the three months ended March 31, 2008, primarily due to:



For
purposes of this discussion, the amortization of product related intangible assets is included in amortization expense and, as a result, is excluded from cost of products sold and
the determination of product margins described above.

Gross Service Profit and Service Margin

Our overall gross service profit increased $11.0 million, or 36%, for the three months ended March 31, 2009, as compared
to the same period of 2008. The increase was primarily attributable to increases in revenue from our genetic testing and prenatal screening services due to the launch of our Spinal Muscular Atrophy
test in February 2008.

Total
service margin increased by 6% for the three months ended March 31, 2009, as compared to the same period of 2008, due to increases in Carticel revenue and genetic testing
revenue.

OPERATING EXPENSES

Selling, General and Administrative Expenses

The following table provides information regarding the change in SG&A during the periods presented (amounts in thousands):

Three Months Ended
March 31,Increase/
(Decrease)
% Change2009

2008Selling, general and administrative expenses

$
317,961

$
318,386


(0
)%% of total revenue


28
%

29
%


SG&A
decreased slightly for the three months ended March 31, 2009, as compared to the same period of 2008, due to a decrease of $15.0 million attributable to the weakening
of foreign currencies against the U.S. dollar, offset in part by spending increases of:



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Research and Development Expenses

The following table provides information regarding the change in research and development expenses during the periods presented
(amounts in thousands):

Three Months Ended
March 31,Increase/
(Decrease)
% Change2009

2008Research and development expenses

$
206,925

$
262,797


(21
)%% of total revenue


18
%

24
%


Research
and development expenses decreased $55.9 million, including decreases of $4.9 million due to the weakening of foreign currencies against the U.S. dollar,
for the three months ended March 31, 2009, as compared to the same period of 2008, as well as:



These
decreases were partially offset by spending increases for the three months ended March 31, 2009 of:



Amortization of Intangibles

The following table provides information regarding the change in amortization of intangibles expense during the periods presented
(amounts in thousands):

Three Months Ended
March 31,Increase/
(Decrease)
% Change2009

2008Amortization of intangibles

$
57,598

$
55,658


3
%% of total revenue


5
%

5
%


Amortization
of intangibles expense increased $1.9 million for the three months ended March 31, 2009, as compared to the same period of 2008, primarily due to additional
amortization expense for the Synvisc sales and marketing rights we reacquired from Wyeth.

As
discussed in Note 8., "Goodwill and Other Intangible Assets," to our consolidated financial statements included in this report, we calculate amortization expense for the
Synvisc sales and marketing rights we reacquired from Wyeth and the Myozyme patent and technology rights pursuant to a licensing agreement with Synpac by taking into account forecasted future sales of
the products, and the resulting estimated future contingent payments we will be required to make. As a result, we expect amortization of intangibles expense to fluctuate over the next five years based
on these future contingent payments.

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Purchase of In-Process Research and Development

Prior to January 1, 2009, we expensed IPR&D acquired through a business combination which had not yet reached technological
feasibility and had no alternative future use. In accordance with our adoption of FAS 141R, all IPR&D we acquire through business combinations on or after January 1, 2009 will be
capitalized as an intangible asset on our consolidated balance sheets and periodically tested for impairment.

We
did not complete any business combination acquisitions in the year ended December 31, 2008 or during the three months ended March 31, 2009. In connection with two
business combinations we completed between January 1, 2006 and December 31, 2007, we acquired various IPR&D projects. The following table sets forth the significant IPR&D projects we
acquired between January 1, 2006 and December 31, 2007 (amounts in millions):

Company/Assets Acquired

Purchase
Price

IPR&D

Programs Acquired

Discount
Rate Used
in
Estimating
Cash Flows

Year of
Expected
Launch

Estimated
Cost to
CompleteBioenvision (2007)

$
349.9

$
125.5

Evoltra (clofarabine)(1)


17
%

2009-2013

$
49.4AnorMED (2006)

$
589.2

$
526.8

Mozobil (stem cell transplant)(2)


15
%

2009-2014

$
101.926.1

AMD070 (HIV)(3)


15
%




$
552.9


---

OTHER INCOME AND EXPENSES

Three Months Ended
March 31,Increase/
(Decrease)
% Change2009

2008(Amounts in thousands)Gains (losses) on investments in equity securities, net

$
(576
)
$
775


>(100
)%Other


(979
)

491


>(100
)%Investment income


5,350


14,870


(64
)%Interest expense





(1,655
)

100
%Total other income

$
3,795

$
14,481


(74
)%


Investment Income

Our investment income decreased 64% to $5.4 million for the three months ended March 31, 2009, as compared to
$14.9 million for the same period of 2008, primarily due to a decrease in our average portfolio yield and lower average cash and investment balances.

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Interest Expense

Our interest expense decreased to zero for the three months ended March 31, 2009, as compared to $1.7 million for the
same period of 2008, primarily due to the redemption of our $690.0 million of 1.25% convertible senior notes on December 1, 2008, offset by a decrease in capitalized interest.

Provision for Income Taxes

Three Months Ended
March 31,2009

2008(Amounts in thousands)Provision for income taxes

$
78,884

$
60,117Effective tax rate


29
%

29
%


Our
effective tax rate for both periods varies from the U.S. statutory tax rate as a result of:



We
are currently under IRS audit for tax years 2006 and 2007. We believe that we have provided sufficiently for all audit exposures. We expect to settle the 2006 to 2007 IRS audit within
the next twelve months and do not expect that the settlement will have a material impact on our financial position or results of operations. Settlement of these audits or the expiration of the statute
of limitations on the assessment of income taxes for any tax year may result in a reduction of future tax provisions. Any such benefit would be recorded upon final resolution of the audit or
expiration of the applicable statute of limitations.

LIQUIDITY AND CAPITAL RESOURCES

We continue to generate cash from operations. We had cash, cash equivalents and short- and long-term investments of
$981.8 million at March 31, 2009 and $973.7 million at December 31, 2008.

The
following is a summary of our statements of cash flows for the three months ended March 31, 2009 and 2008:

Cash Flows from Operating Activities

Cash flows from operating activities are as follows (amounts in thousands):

Three Months Ended
March 31,2009

2008Cash flows from operating activities:Net income

$
195,486

$
145,271Non-cash charges, net


130,775


124,151Decrease in cash from working capital changes (excluding impact of acquired assets and assumed liabilities)


(68,486
)

(109,889
)Cash flows from operating activities

$
257,775

$
159,533


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Cash
provided by operating activities increased by $98.2 million for the three months ended March 31, 2009, as compared to the same period of 2008, primarily driven by a
$50.2 million increase in net income as a result of a $69.9 million charge to research and development expense for the license fee we paid to Isis in February 2008, compared to an
$18.2 million charge to research and development in 2009 for the intellectual property we acquired from EXACT Sciences in January 2009. Operating activities were also impacted by a
$41.4 million decrease in cash used for working capital, offset, in part, by an increase of $6.6 million in non-cash charges, net. The increase in non-cash
charges, net, for the three months ended March 31, 2009, as compared to the same period of 2008, is primarily attributable to a $7.9 million increase in depreciation and amortization
expenses.

Cash Flows from Investing Activities

Cash flows from investing activities are as follows (amounts in thousands):

Three Months Ended March 31,2009

2008Cash flows from investing activities:Net sales of investments, excluding investments in equity securities

$
61,766

$
33,175Net purchases of investments in equity securities


(3,606
)

(79,551
)Purchases of property, plant and equipment


(161,561
)

(121,967
)Distributions from equity method investments





6,595Purchases of other intangible assets


(8,056
)

(7,046
)Other investing activities


(47
)

3,107Cash flows from investing activities

$
(111,504
)
$
(165,687
)


For
the three months ended March 31, 2009, net purchases of capital expenditures accounted for significant cash outlays for investing activities. During the three months ended
March 31, 2009, we used $161.6 million in cash to fund the purchase of property, plant and equipment, primarily related to the ongoing expansion of our manufacturing capacity in the
Republic of Ireland and France, planned improvements at our facility in Allston, Massachusetts and capitalized costs of an internally developed enterprise software systems.

This
cash outlay was partially offset by an increase in the net sale of investments and a decrease in the purchase of equity securities.

For
the three months ended March 31, 2008, net purchases of investments in equity securities included $80.1 million to purchase 5,000,000 shares of Isis common stock in
February 2008.

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Cash Flows from Financing Activities

Cash flows from financing activities are as follows (amounts in thousands):

Three Months Ended March 31,2009

2008Cash flows from financing activities:Proceeds from issuance of common stock

$
34,526

$
90,243Repurchases of common stock


(107,134
)

(73,218
)Excess tax benefits from stock-based compensation


3,492


5,790Payments of debt and capital lease obligations


(2,653
)

(2,554
)Increase (decrease) in bank overdrafts


(3,392
)

18,549Other financing activities


1,995


959Cash flows from financing activities

$
(73,166
)
$
39,769


Cash
provided by financing activities decreased $112.9 million for the three months ended March 31, 2009, as compared to the same period of 2008, primarily driven by a
$55.7 million decrease in proceeds from issuance of common stock due to fewer stock option exercises and a $33.9 million increase in the repurchase of our common stock.

In
May 2007, our board of directors authorized a stock repurchase program to repurchase up to an aggregate maximum amount of $1.5 billion or 20,000,000 shares of our outstanding
common stock over a three year period that began in June 2007. The repurchases are being made from time to time and can be effectuated through open market purchases, privately negotiated transactions,
transactions structured through investment banking institutions, or by other means, subject to management's discretion and as permitted by securities laws and other legal requirements. During the
three months ended March 31, 2009, we repurchased 2,000,000 shares of our common stock under this program at an average price of $53.55 per share for a total of $107.1 million in cash,
including fees. Since June 2007,
when we first began repurchasing shares of our common stock under this program, we have repurchased a cumulative total of 7,500,000 shares of our common stock at an average price of $64.21 per share
for a total of $481.7 million in cash, including fees.

Revolving Credit Facility

As of March 31, 2009, no amounts were outstanding under our five-year $350.0 million senior unsecured
revolving credit facility, which matures July 14, 2011. The terms of this credit facility include various covenants, including financial covenants, that require us to meet minimum interest
coverage ratios and maximum leverage ratios. As of March 31, 2009, we were in compliance with these covenants.

Contractual Obligations

The disclosure of payments we have committed to make under our contractual obligations is set forth under the heading "Management's
Discussion and Analysis of Genzyme Corporation and Subsidiaries' Financial Condition and Results of OperationsLiquidity and Capital Resources" in Exhibit 13 to our 2008
Form 10-K. As of March 31, 2009, there have been no material changes to our contractual obligations since December 31, 2008.

Financial Position

We believe that our available cash, investments and cash flows from operations will be sufficient to fund our planned operations and
capital requirements for the foreseeable future. Although we currently

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have
substantial cash resources and positive cash flow, we have used or intend to use substantial portions of our available cash and may make additional borrowings for:



In
addition, we have several outstanding legal proceedings. Involvement in investigations and litigation can be expensive and a court may ultimately require that we pay expenses and
damages. As a result of legal proceedings, we also may be required to pay fees to a holder of proprietary rights in order to continue certain operations.

Recently,
the general economic, global capital and credit market conditions in the United States and other parts of the world have deteriorated significantly and have adversely affected
access to capital and increased the cost of capital. However, we continue to believe that our available cash, investments and cash flow from operations, together with our revolving credit facility and
other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future. We currently do not rely on short-term borrowing to fund
our operations and, as a result, we do not believe that existing global capital and credit market conditions will have a significant impact on our near-term liquidity. We are closely
monitoring our liquidity as well as the condition of these markets. If these conditions continue or become worse, our future cost of debt and equity capital and our future access to capital markets
could be adversely affected. We cannot guarantee that we will be able to obtain any additional financing in the future or extend any existing financing arrangements on favorable terms, or at all.

Off-Balance Sheet Arrangements

We do not use special purpose entities or other off-balance sheet financing arrangements. We enter into guarantees in the
ordinary course of business related to the guarantee of our own performance and the performance of our subsidiaries. In addition, we have joint ventures and certain other arrangements that are focused
on research, development, and the commercialization of products. Entities falling within the scope of FIN 46R are included in our consolidated statements of operations if we qualify as the
primary beneficiary. Entities not subject to consolidation under FIN 46R are accounted for under the equity method of accounting if our ownership percent exceeds 20% or if we exercise
significant influence over the entity. We account for our portion of the results of these entities in the line item "Equity in income of equity method investments" in our consolidated statements of
operations. We also acquire companies in which we agree to pay contingent consideration based on attaining certain thresholds.

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Recent Accounting Pronouncements

The following table shows recently issued accounting pronouncements and our position for adoption:

Pronouncements

Relevant Requirements
of FASB Pronouncements

Issued Date/ Our
Effective Dates

StatusEITF 07-1, "Accounting for Collaborative Arrangements."

Defines collaborative arrangements and establishes reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties, including the
appropriate income statement presentation and classification of, and the required disclosures related to, these arrangements.

Issued November 2007. Effective January 1, 2009, to be applied retrospectively for collaborative arrangements existing as of the effective date.

The adoption of this pronouncement did not have a material impact on our consolidated financial statements for the periods presented.FAS 141R, "Business Combinations."

Modifies and prescribes new requirements for accounting for business combinations. Among other things, acquisition costs will be expensed as incurred; restructuring costs will be expensed subsequent to the acquisition
date; non-controlling interests will be valued at fair value; IPR&D will be recorded at fair value as an indefinite lived intangible asset; contingent purchase price payments will be measured at the acquisition date and re-measured in subsequent
periods with an adjustment to earnings; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition will affect income tax expense.

Issued December 2007. Effective January 1, 2009, to be applied prospectively for all business combinations for which the acquisition date is on or after January 1, 2009.

This pronouncement will significantly change our accounting and reporting for business combination transactions completed on or after January 1, 2009. The adoption of this pronouncement did not have an impact on
our consolidated financial statements for the three months ended March 31, 2009, because we did not complete any business combination transactions during this period but it will impact our consolidated financial statements if such transactions
occur in future periods.FAS 160, "Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51."

Requires ownership interests in subsidiaries, not held by the parent, to be clearly identified in the consolidated statement of financial position within equity, but separate from the parent's equity, and the minority
interest in net income needs to be identified on the consolidated statement of income. Additional disclosures are required.

Issued December 2007. Effective January 1, 2009, prospectively. Disclosure requirements to be applied retrospectively.

The adoption of this pronouncement did not have a material impact on our consolidated financial statements for the periods presented.


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Pronouncements

Relevant Requirements
of FASB Pronouncements

Issued Date/ Our
Effective Dates

StatusFAS 161, "Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133."

Requires enhanced disclosures about an entity's derivative instruments and hedging activities to enable investors to better understand their effects on an entity's financial position, financial performance, and cash
flows.

Issued March 2008. Effective January 1, 2009, prospectively. Comparative disclosures for earlier periods are encouraged, but not required, at initial adoption.

The adoption of this pronouncement did not have a material impact on our consolidated financial statements for the three months ended March 31, 2009.FAS 162, "The Hierarchy of Generally Accepted Accounting Principles."

Identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with
GAAP in the United States (the GAAP hierarchy).

Issued in May 2008. Effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning ofPresent Fairly in Conformity With Generally Accepted Accounting Principles."

We do not expect the adoption of this pronouncement to have any affect on our consolidated financial statements.FSP FAS 107-1 and APB 28-1, "Interim Disclosures about Fair Value of Financial Instruments."

Amends guidance on disclosures about fair value and interim financial reporting to require disclosure about fair value of financial instruments whenever summarized financial information is issued for interim reporting
periods.

Issued April 2009. Effective for periods ending after June 15, 2009.

We are evaluating the impact this pronouncement will have, if any, on our consolidated financial statements.FSP FAS 115-2, FAS 124-2, and EITF 99-20-2, "Recognition and Presentation of Other-Than-Temporary Impairments."

Amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments in the financial
statements.

Issued April 2009. Effective for periods ending after June 15, 2009.

We are evaluating the impact this pronouncement will have, if any, on our consolidated financial statements.FSP FAS 157-2, "Effective Date of FASB Statement 157."

Provides a one year deferral of the effective date of FAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed in financial statements at fair value on a
recurring basis (at least annually).

Issued February 2008. Effective January 1, 2009, prospectively.

The adoption of this pronouncement did not have a material impact on our consolidated financial statements for the three months ended March 31, 2009.


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Pronouncements

Relevant Requirements
of FASB Pronouncements

Issued Date/ Our
Effective Dates

StatusFSP FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly."

Provides guidelines for making fair value measurements more consistent with the principles presented in FAS 157, as well as additional authoritative guidance in determining whether a market is active or inactive,
and whether a transaction is distressed. Applicable to all assets and liabilities (i.e. financial and nonfinancial) and will require enhanced disclosures.

Issued April 2009. Effective for periods ending after June 15, 2009.

We are evaluating the impact this pronouncement will have, if any, on our consolidated financial statements.


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RISK FACTORS

Our future operating results could differ materially from the results described in this report due to the risks and uncertainties
related to our business, including those discussed below.

If we fail to increase sales of several existing products and services or to commercialize new products in our pipeline, we will not meet our financial goals.

Over the next few years, our success will depend substantially on our ability to increase revenue from our existing products and
services. These products and services include Renagel/Renvela, Synvisc, Synvisc-One, Fabrazyme, Myozyme, Aldurazyme, Hectorol, Thymoglobulin, Thyrogen, Clolar/Evoltra, Campath, Mozobil and
diagnostic testing services.

Our
ability to increase sales will depend on a number of factors, including:



Part
of our growth strategy involves conducting additional clinical trials to support approval of expanded uses of some of our products, including Clolar/Evoltra and alemtuzumab for
multiple sclerosis, pursuing marketing approval for our products in new jurisdictions and developing next generation products, such as Genz-112638 and our advanced phosphate binder. The
success of this component of our growth strategy will depend on the outcome of these additional clinical trials, the content and timing of our submissions to regulatory authorities and whether and
when those authorities determine to grant approvals. Because the healthcare industry is extremely competitive and regulatory requirements are rigorous, we spend substantial funds marketing our
products and attempting to expand approved uses for them. These expenditures depress near-term profitability with no assurance that the expenditures will generate future profits that
justify the expenditures.

Our
growth strategy also depends on developing new products, such as mipomersen, Prochymal and ataluren, through entry into strategic alliances and collaborations. If we are unable to
manage these external growth opportunities successfully or if the product development process is unsuccessful, we will not be able to grow our business in the way that we currently expect.

Our future success will depend on our ability to effectively develop and market our products and services against those of our competitors.

The human healthcare products and services industry is extremely competitive. Other organizations, including pharmaceutical,
biotechnology, device and diagnostic testing companies, and

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generic
and biosimilar manufacturers, have developed and are developing products and services to compete with our products, services, and product candidates. If healthcare providers, patients or
payors prefer these competitive products or services or these competitive products or services have superior safety, efficacy, pricing or reimbursement characteristics, we will have difficulty
maintaining or increasing the sales of our products and services.

Renagel/Renvela
competes with several other products for the control of elevated phosphorus levels in patients with chronic kidney failure on hemodialysis. PhosLo®, a
prescription calcium acetate preparation sold by Fresenius Medical Care, is marketed in the United States. Fosrenol®, a prescription lanthanum carbonate sold by Shire, is marketed in the
United States, Europe, Canada and Latin America. A generic formulation of PhosLo was launched in the United States in October 2008. Renagel/Renvela also competes with
over-the-counter calcium carbonate products such as TUMS® and metal-based options such as aluminum and magnesium.

UCB S.A.
has developed Zavesca®, a small molecule drug for the treatment of Gaucher disease, the disease addressed by Cerezyme. Zavesca, sold by Actelion Ltd.,
has been approved in the United States, European Union and Israel as an oral therapy for use in patients with mild to moderate Type 1 Gaucher disease for whom enzyme replacement therapy is
unsuitable. In addition, Shire reported top-line data from a phase 1/2 clinical trial for its gene-activated glucocerebrosidase program to treat Gaucher disease and has
completed enrollment in a phase 3 trial initiated in July 2007. Protalix Biotherapeutics Ltd. initiated a phase 3 trial for a plant-derived enzyme replacement therapy to treat
Gaucher disease in the third quarter of 2007 and has completed enrollment in the trial. Amicus Therapeutics, Inc., or Amicus, is conducting a phase 2 trial for an oral chaperone
medication to treat Gaucher disease and has completed enrollment. We are also aware of other development efforts aimed at treating Gaucher disease.

Outside
the United States, Shire is marketing Replagal®, a competitive enzyme replacement therapy for Fabry disease which is the disease addressed by Fabrazyme. In addition,
while Fabrazyme has received orphan drug designation, which provides us with seven years of market exclusivity for the product in the United States, other companies may seek to overcome our market
exclusivity and, if successful, compete with Fabrazyme in the United States. Amicus has completed phase 2 trials for an oral chaperone medication to treat Fabry disease and is in discussions
with the FDA regarding the conduct of a phase 3 clinical trial, which it plans to initiate in the second quarter of 2009. We are aware of other development efforts aimed at treating Fabry
disease.

Myozyme
has marketing exclusivity in the United States until 2013 and in the European Union until 2016 due to its orphan drug status, although companies may seek to overcome the
associated marketing exclusivity. Amicus has completed two phase 1 clinical studies for a small molecule treatment for Pompe disease and initiated a phase 2 clinical trial in June 2008.
In February 2009, Amicus announced that the company had suspended enrollment for its phase 2 clinical trial and that it had received verbal notice from the FDA that the trial is on clinical
hold.

Current
competition for Synvisc and Synvisc-One includes: Supartz®, a product manufactured by Seikagaku Corporation that is sold in the United States by
Smith & Nephew Orthopaedics and in Japan by Kaken Pharmaceutical Co. under the name Artz®; Hyalgan®, produced by Fidia Farmaceutici S.p.A. and marketed in
the United States by sanofi-aventis; Orthovisc®, produced by Anika Therapeutics, Inc., and marketed in the United States by Johnson & Johnson and marketed outside the United
States through distributors; Anika's Monovisc, which is marketed in Europe; Euflexxa, a product manufactured and sold by Ferring Pharmaceuticals and marketed by Ferring in
the United States and Europe; and Durolane®, manufactured by Q-Med AB and distributed outside the United States by Smith & Nephew Orthopedics. Durolane and Euflexxa are
produced by bacterial fermentation, which may provide these products a competitive advantage over avian-sourced Synvisc and Synvisc-One. We are aware of various viscosupplementation
products on the market or in development, but are unaware of any products that have physical properties of viscosity, elasticity or

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molecular
weight comparable to those of Synvisc and Synvisc-One. Furthermore, several companies market products that are not viscosupplementation products but which are designed to relieve
the pain associated with osteoarthritis. Synvisc and Synvisc-One will have difficulty competing with any of these products to the extent the competitive products have a similar safety
profile and are considered more efficacious, less burdensome to administer or more cost-effective.

Competition
for Campath for patients with relapsed or refractory B-CLL includes: single agent and combination chemotherapy regimens; rituximab, which is marketed as
Rituxan® by Biogen Idec, Inc. and Genentech, Inc. in the United States and as MabThera® by Roche outside of the United States; and bendamustine, which is marketed
as Treanda® by Cephalon, Inc. in the United States. There are also other therapies under clinical study for the treatment of B-CLL, including ofatumumab, lumiliximab and
lenalidomide. Competition for Clolar/Evoltra for the treatment of pediatric patients 1 to 21 years old with relapsed or refractory ALL after at least two prior regimens includes: cytarabine and
mitoxantrone, which are available as generics with no significant commercial promotion; and Arranon® (nelarabine), which is marketed by GlaxoSmithKline and indicated for the treatment of
patients with T-cell ALL whose disease has not responded to or has relapsed following treatment with at least two chemotherapy regimens. T-cell ALL is estimated to represent
less than 20% of pediatric ALL patients. There are a limited number of anti-cancer agents in clinical trials for the treatment of relapsed pediatric ALL patients, including epratuzamab,
which is being developed by Immunomedics, Inc.

The
examples above are illustrative and not exhaustive. Almost all of our products and services face competition. Furthermore, the field of biotechnology is characterized by significant
and rapid technological change. Discoveries by others may make our products or services obsolete. For example, competitors may develop approaches to treating LSDs that are more effective, convenient
or less expensive than our products and product candidates. Because a significant portion of our revenue is derived from products that address this class of diseases and a substantial portion of our
expenditures is devoted to developing new therapies for this class of diseases, such a development would have a material negative impact on our results of operations.

If we fail to obtain and maintain adequate levels of reimbursement for our products and services from third party payors, the commercial potential of our products and
services will be significantly limited.

A substantial portion of our domestic and international revenue comes from payments by third party payors, including government health
administration authorities and private health insurers. Governments and other third party payors may not provide adequate insurance coverage or reimbursement for our products and services, which could
impair our financial results.

Third
party payors are increasingly scrutinizing pharmaceutical budgets and healthcare expenses and are attempting to contain healthcare costs by:



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Efforts
by third party payors to reduce costs could decrease demand for our products and services. In addition, in certain countries, including countries in the European Union and
Canada, the coverage of prescription drugs, pricing and levels of reimbursement are subject to governmental control. Therefore, we may be unable to negotiate coverage, pricing and/or reimbursement on
terms that are favorable to us. Moreover, certain countries reference the prices in other countries where our products are marketed. Thus, inability to secure adequate prices in a particular country
may also impair our ability to maintain or obtain acceptable prices in existing and potential new markets. Government health administration authorities may also rely on analyses of the
cost-effectiveness of certain therapeutic products in determining whether to provide reimbursement for such products. Our ability to obtain satisfactory pricing and reimbursement may
depend in part on whether our products, the cost of some of which is high in comparison to other therapeutic products, are viewed as cost-effective.

Furthermore,
governmental regulatory bodies, such as the Centers for Medicare and Medicaid Services (CMS), may from time-to-time make unilateral changes to
reimbursement rates for our products and services. These changes could reduce our revenue by causing healthcare providers to be less willing to use our products and services. Although we actively seek
to assure that any initiatives that are undertaken by regulatory agencies involving reimbursement for our products and services do not have an adverse impact on us, we may not always be successful in
these efforts.

The development of new biotechnology products involves a lengthy and complex process, and we may be unable to commercialize any of the products we are currently developing.

We have numerous products under development and devote considerable resources to research and development, including clinical trials.

Before
we can commercialize our product candidates, we will need to:



This
process involves a high degree of risk and takes many years. Our product development efforts with respect to a product candidate may fail for many reasons,
including:



Few
research and development projects result in commercial products, and success in preclinical studies or early clinical trials often is not replicated in later studies. For example, in
our phase 3 trial known as the Polymer Alternative for CDAD Treatment (PACT) study, tolevamer did not meet its

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primary
endpoint. In our pivotal study of hylastan for treatment of patients with osteoarthritis of the knee, hylastan did not meet its primary endpoint. We may decide to abandon development of a
product or service candidate at any time or we may be required to expend considerable resources repeating clinical trials or conducting additional trials, either of which would increase costs of
development and delay any revenue from those programs.

Our
efforts to expand the approved indications for our products, gain marketing approval in new jurisdictions and develop next generation products also may fail. These expansion efforts
are subject to many of the risks associated with completely new products and, accordingly, we may fail to recoup the investments we make pursuing these strategies.

Our financial results are dependent on sales of Cerezyme.

Sales of Cerezyme, our enzyme-replacement product for patients with Gaucher disease, totaled $296.0 million for the three months
ended March 31, 2009, representing
approximately 26% of our total revenue. Because our business is dependent on Cerezyme, negative trends in revenue from this product could have an adverse effect on our results of operations and cause
the value of our common stock to decline. We will lose revenue if alternative treatments gain commercial acceptance, if our marketing activities are restricted, or if coverage, pricing or
reimbursement is limited. In addition, the patient population with Gaucher disease is not large. Because a significant percentage of that population already uses Cerezyme, opportunities for future
sales growth are constrained. Furthermore, changes in the methods for treating patients with Gaucher disease, including treatment protocols that combine Cerezyme with other therapeutic products or
reduce the amount of Cerezyme prescribed, could limit growth, or result in a decline, in Cerezyme sales.

We may encounter substantial difficulties managing our growth.

Several risks are inherent to our plans to grow our business. Achieving our goals will require substantial investments in research and
development, sales and marketing, and facilities. For example, we have spent considerable resources building and seeking regulatory approvals for our manufacturing facilities. We cannot assure you
that these facilities will prove sufficient to meet demand for our products or that we will not have excess capacity at these facilities. In addition, building our facilities is expensive, and our
ability to recover these costs will depend on increased revenue from the products produced at the facilities.

We
produce relatively small amounts of material for research and development activities and pre-clinical trials. Even if a product candidate receives all necessary approvals
for commercialization, we may not be able to successfully scale-up production of the product material at a reasonable cost or at all and we may not receive additional approvals in
sufficient time to meet product demand. For example, the FDA has concluded that alglucosidase alfa produced in our 2000 liter bioreactors is a different product than alglucosidase alfa produced in our
160 liter bioreactors and therefore required us to submit a separate BLA for the 2000 liter product. This delay in receipt of FDA approval has had an adverse effect on our revenues and earnings and
will continue to have an adverse effect until we receive regulatory approval.

If
we are able to increase sales of our products, we may have difficulty managing inventory levels. Marketing new therapies is a complicated process, and gauging future demand is
difficult. With Renagel, for example, we have encountered problems in the past managing inventory levels at wholesalers. Comparable problems may arise with any of our products, particularly during
market introduction.

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Growth
in our business may also contribute to fluctuations in our operating results, which may cause the price of our securities to decline. Our revenue may fluctuate due to many
factors, including changes in:



We
may also experience fluctuations in our quarterly results due to price changes and sales incentives. For example, purchasers of our products, particularly wholesalers, may increase
purchase orders in anticipation of a price increase and reduce order levels following the price increase. We occasionally offer sales incentives and promotional discounts on some of our products and
services that could have a similar impact. In addition, some of our products, including Synvisc, are subject to seasonal fluctuation in demand.

Our operating results and financial position may be negatively impacted when we attempt to grow through business combination transactions.

We may encounter problems assimilating operations acquired in business combination transactions. These transactions often entail the
assumption of unknown liabilities, the loss of key employees, and the diversion of management attention. Furthermore, in any business combination there is a substantial risk that we will fail to
realize the benefits we anticipated when we
decided to undertake the transaction. We have in the past taken significant charges for impaired goodwill and for impaired assets acquired in business combination transactions. We may be required to
take similar charges in the future. We enter into most such transactions with an expectation that an acquired business will enhance the long-term strength of our business. These
transactions, however, often depress our earnings in the near-term and the expected long-term benefits may never be realized. Business combination transactions also either
deplete cash resources, require us to issue substantial equity, and/or require us to incur significant debt.

Manufacturing problems may cause product launch delays, inventory shortages, recalls and unanticipated costs.

In order to generate revenue from our approved products, we must be able to produce sufficient quantities of the products to satisfy
demand. Many of our products are difficult to manufacture. Our products that are biologics, for example, require product characterization steps that are more onerous than those required for most
chemical pharmaceuticals. Accordingly, we employ multiple steps to attempt to control the manufacturing processes. Problems with these manufacturing processes, even minor deviations, could result in
product defects or manufacturing failures that result in lot failures, product recalls, product liability claims and insufficient inventory. In the past, we have had to write down and incur other
charges and expenses for products that failed to meet internal or external specifications, including Thymoglobulin, or for products that experience terminated production runs, including Myozyme
produced at the 4000L scale. Similar charges could occur in the future.

Certain
of the raw materials required in the commercial manufacturing and the formulation of our products are derived from biological sources, including mammalian sources and human
plasma. Such raw materials may be difficult to procure and subject to contamination or recall. Also, some countries in which we market our products may restrict the use of certain biologically derived
substances in the manufacture of drugs. A material shortage, contamination, recall, or restriction on the use of certain biologically derived substances in the manufacture of our products could
adversely impact or disrupt our commercial manufacturing of our products or could result in a withdrawal of our products from

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markets.
This too, in turn, could adversely affect our ability to satisfy demand for our products, which could materially and adversely affect our operating results.

In
addition, we may only be able to produce some of our products at a very limited number of facilities and, in some cases, we rely on third parties to formulate and manufacture our
products. For example, we manufacture all of our Cerezyme and a portion of our Fabrazyme and Myozyme products at our facility in Allston, Massachusetts. A number of factors could cause production
interruptions at our facilities or the facilities of our third party providers, including equipment malfunctions, labor problems,
raw material shortages, natural disasters, power outages, terrorist activities, or disruptions in the operations of our suppliers.

Manufacturing
is also subject to extensive government regulation. Regulatory authorities must approve the facilities in which human healthcare products are produced and those facilities
are subject to ongoing inspections. For example, we received a warning letter from the FDA in September 2007 that addressed certain of our manufacturing procedures in our Thymoglobulin production
facility in Lyon. The FDA has accepted our response to that warning letter. In February 2009, we received a warning letter from the FDA related to inspectional observations by the FDA at our Allston,
Massachusetts facility considered to be significant deviations from compliance with "Good Manufacturing Practices." We submitted a response to the FDA's warning letter in March 2009. In addition,
changes in manufacturing processes may require additional regulatory approvals. Obtaining and maintaining these regulatory approvals could cause us to incur significant additional costs and lose
revenue. In addition, because our manufacturing processes are highly complex and are subject to lengthy regulatory approval processes, alternative qualified production capacity may not be available on
a timely basis or at all if we cannot produce sufficient commercial requirements of bulk product to meet demand.

We rely on third parties to provide us with materials and services in connection with the manufacture of our products and the performance of our services.

Some materials necessary for commercial production of our products, including specialty chemicals and components necessary for
manufacture, fill-finish and packaging, are provided by unaffiliated third party suppliers. In some cases, such materials are specifically cited in our marketing applications with
regulatory authorities so that they must be obtained from that specific source unless and until the applicable authority approves another supplier. In addition, there may only be one available source
for a particular chemical or component. For example, we acquire polyalylamine (PAA), used in the manufacture of Renagel, Renvela, Cholestagel and WelChol, from Cambrex Charles City, Inc., and
N925, which is necessary to manufacture our LSD products, from Invitrogen Corporation. These suppliers are the only sources for these materials currently qualified in our FDA drug applications for
these products. Our suppliers also may be subject to FDA regulations or the regulations of other governmental agencies outside the United States regarding manufacturing practices. We may be unable to
manufacture our products or to perform our services in a timely manner or at all if these third party suppliers were to cease or interrupt production or otherwise fail to supply sufficient quantities
of these materials or products to us for any reason, including due to regulatory requirements or actions, adverse financial developments at or affecting the supplier, labor shortages or disputes, or
contamination of materials or equipment.

We
also source some of our manufacturing, fill-finish, packaging and distribution operations to third party contractors. The manufacture of products, fill-finish,
packaging and distribution of our products requires successful coordination among these third party providers and us. Our inability to coordinate these efforts, the inability of a third party
contractor to secure sufficient source materials, the lack of capacity available at a third party contractor or any other problems with the operations of a third party contractor could require us to
delay shipment of saleable products, recall products previously shipped or impair our ability to supply products at all. This could increase our costs, cause

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us
to lose revenue or market share and damage our reputation. Furthermore, any third party we use to manufacture, fill-finish or package our products to be sold must also be licensed by
the applicable regulatory authorities. As a result, alternative third party providers may not be readily available on a timely basis.

Our international sales and operating expenses are subject to fluctuations in currency exchange rates.

A significant portion of our business is conducted in currencies other than our reporting currency, the U.S. dollar. We recognize
foreign currency gains or losses arising from our operations in the period in which we incur those gains or losses. As a result, currency fluctuations among the U.S. dollar and the currencies in which
we do business have caused foreign currency translation gains and losses in the past and will likely do so in the future. Because of the number of currencies involved, the variability of currency
exposures and the potential volatility of currency exchange rates, we may suffer significant foreign currency translation losses in the future due to the effect of exchange rate fluctuations.

In
2008, the change in foreign exchange rates had a net favorable impact on our revenues; however, this trend changed during the fourth quarter of 2008 and adversely impacted our revenue
during the first quarter of 2009. Although we cannot predict with certainty future changes in foreign exchange rates or their effect on our results, we do not expect the change in foreign exchange
rates to have a positive impact on our revenues for the remainder of 2009.

Government regulation imposes significant costs and restrictions on the development and commercialization of our products and services.

Government agencies heavily regulate the production and sale of healthcare products and the provision of healthcare services. Our
success will depend on our ability to satisfy regulatory requirements. In particular, the FDA, the EMEA and comparable regulatory agencies in foreign jurisdictions must approve human therapeutic and
diagnostic products before they are marketed, as well as the facilities in which they are made. This approval process can involve lengthy and detailed laboratory and clinical testing, sampling
activities and other costly and time-consuming procedures. We may not receive required regulatory approvals on a timely basis or at all.

Therapies
that have received regulatory approval for commercial sale may continue to face regulatory difficulties. Failure to comply with applicable regulatory requirements results in
regulatory authorities taking actions such as:



Furthermore,
the FDA, the EMEA and comparable foreign regulatory agencies may require post-marketing clinical trials or patient outcome studies. We have agreed with the FDA,
for example, to a number of post-marketing commitments as a condition to U.S. marketing approval for Fabrazyme, Aldurazyme, Myozyme, Clolar and Mozobil. In addition, regulatory agencies
subject a marketed therapy, its manufacturer and the manufacturer's facilities to continual review and periodic inspections. The discovery of previously unknown problems with a therapy or the facility
or process used to produce

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the
therapy could prompt a regulatory authority to impose restrictions on us, or could cause us to voluntarily adopt such restrictions, including withdrawal of one or more of our products or services
from the market.

If regulatory authorities fail to approve pending applications in a timely matter, our results of operations will suffer.

We expect regulatory action on several matters during the next 12 months. For example, we anticipate regulatory action on our
marketing application for alglucosidase alfa produced at the 2000L scale in the United States; our marketing application for Mozobil in Europe; the expansion of labeling for clofarabine in the United
States and Europe to include the treatment of adults with AML; our marketing application for Renvela in Europe and a label expansion of Renvela in the United States to include the treatment of CKD
patients not on dialysis.

Regulatory
authorities denying or delaying these approvals would adversely impact our projected revenue and income growth. A regulatory authority may deny or delay an approval because it
was not
satisfied with the structure or conduct of clinical trials or due to its assessment of the data we supply. A regulatory authority, for instance, may not believe that we have adequately established a
product's risk-benefit profile or adequately addressed negative safety signals. Clinical data are subject to varied interpretations, and regulatory authorities may disagree with our
assessments of our data. In any such case, a regulatory authority could insist that we provide additional data, which could substantially delay or even prevent commercialization efforts, particularly
if we are required to conduct additional pre-approval clinical studies. In addition, the FDA has failed to act on pending marketing applications by the response dates prescribed in the
Prescription Drug User Fee Act. We have encountered delays in marketing in the United States for alglucosidase alfa produced at the 2000L scale, which has adversely impacted our financial results and
resulted in a very tight product supply, and we could face additional delays with this product or other products.

The current credit and financial market conditions may exacerbate certain risk affecting our business.

Sales of our products are dependent, in part, on the availability and extent of reimbursement from third party payers, including
governments and private insurance plans. As a result of the current volatility in the financial markets, third-party payers may delay payment or be unable to satisfy their reimbursement obligations. A
reduction in the availability or extent of reimbursement could negatively affect our product sales and revenue.

In
addition, we rely upon third parties for certain aspects of our business, including collaboration partners, wholesale distributors for our products, contract clinical trial providers,
contract manufacturers, and third-party suppliers. Because of the recent tightening of global credit and the volatility in the financial markets, there may be a delay or disruption in the performance
or satisfaction of commitments to us by these third parties, which could adversely affect our business.

We may incur substantial costs as a result of litigation or other proceedings.

A third party may sue us or one of our strategic collaborators for infringing the third party's patent or other intellectual property
rights. Likewise, we or one of our strategic collaborators may sue to enforce intellectual property rights or to determine the scope and validity of third party proprietary rights. If we do not
prevail in this type of litigation, we or our strategic collaborators may be required to:



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We
are also currently involved in litigation matters and investigations that do not involve intellectual property claims and may be subject to additional actions in the future. For
example, the federal government, state governments and private payors are investigating and have filed actions against numerous pharmaceutical and biotechnology companies, including Genzyme, alleging
that the companies have overstated prices in order to inflate reimbursement rates. Domestic and international enforcement authorities also have instituted actions under healthcare "fraud and abuse"
laws, including anti-kickback and false claims statutes. Moreover, individuals who use our products or services, including our diagnostic products and genetic testing services, sometimes
bring product and professional liability claims against us or our subsidiaries.

Some
of our products are prescribed by healthcare providers for uses not approved by the FDA, the EMEA or comparable regulatory agencies. Although healthcare providers may lawfully
prescribe our products for off-label uses, any promotion by us of off-label uses would be unlawful. Some of our practices intended to make healthcare providers aware of
off-label uses of our products without engaging in off-label promotion could nonetheless be construed as off-label promotion. Although we have policies and
procedures in place designed to help assure ongoing compliance with regulatory requirements regarding off-label promotion, some non-compliant actions may nonetheless occur.
Regulatory authorities could take enforcement action against us if they believe we are promoting, or have promoted, our products for off-label use.

We
have only limited amounts of insurance, which may not provide coverage to offset a negative judgment or a settlement payment. We may be unable to obtain additional insurance in the
future, or we may be unable to do so on favorable terms. Our insurers may dispute our claims for coverage. For example, we have submitted claims to our insurers for reimbursement of portions of the
expenses incurred in connection with the litigation and settlement related to the consolidation of our tracking stock and are seeking coverage for the settlement. The insurers have purported to deny
coverage. Any additional insurance we do obtain may not provide adequate coverage against any asserted claims.

Regardless
of merit or eventual outcome, investigations and litigation can result in:



Our international sales, clinical activities, manufacturing and other operations are subject to the economic, political, legal and business environments of the countries in
which we do business, and our failure to operate successfully or adapt to changes in these environments could cause our international sales and operations to be limited or disrupted.

Our international operations accounted for approximately 48% of our consolidated product and service revenues for the three months
ended March 31, 2009. We expect that international product and service sales will continue to account for a significant percentage of our revenues for the foreseeable future. In addition, we
have direct investments in a number of subsidiaries outside of the United States.

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Our
international sales and operations could be limited or disrupted, and the value of our direct investments may be diminished, by any of the following:



Our
operations and marketing practices are also subject to regulation and scrutiny by the governments of the countries in which we operate. In addition, the United States Foreign Corrupt
Practices Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their representatives from offering, promising, authorizing or making payments to
foreign officials for the purpose of obtaining or retaining business. We operate in many parts of the world that have experienced governmental corruption to some degree. Although we have policies and
procedures designed to help ensure that we, our employees and our agents comply with the FCPA and other anti-bribery laws, there is no assurance that such policies and procedures will
protect us against liability under the FCPA or other laws for actions taken by our employees, agents and intermediaries with respect to our business. Failure to comply with domestic or foreign laws
could result in various adverse consequences, including possible delay in the approval or refusal to approve a product, recalls, seizures, withdrawal of an approved product from the market, and/or the
imposition of civil or criminal sanctions.

We may fail to adequately protect our proprietary technology, which would allow competitors or others to take advantage of our research and development efforts.

Our long-term success largely depends on our ability to market technologically competitive products. If we fail to obtain
or maintain adequate intellectual property protection in the United States or abroad, we may not be able to prevent third parties from using our proprietary technologies. Our currently pending or
future patent applications may not result in issued patents. Patent applications are typically confidential for 18 months following their earliest filing, and because third parties may have
filed patent applications for technology covered by our pending patent applications without us being aware of those applications, our patent applications may not have priority over patent applications
of others. In addition, our issued patents may not contain claims sufficiently broad to protect us against

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third
parties with similar technologies or products, or provide us with any competitive advantage. If a third party initiates litigation regarding our patents, our collaborators' patents, or those
patents for which we have license rights, and is successful, a court could declare our patents invalid or unenforceable or limit the scope of coverage of those patents. Governmental patent offices and
courts have not always been consistent in their interpretation of the scope and patentability of the subject matter claimed in biotechnology patents. Any changes in, or unexpected interpretations of,
the patent laws may adversely affect our ability to enforce our patent position.

We
also rely upon trade secrets, proprietary know-how, and continuing technological innovation to remain competitive. We attempt to protect this information with security
measures,
including the use of confidentiality agreements with employees, consultants, and collaborators. These individuals may breach these agreements and any remedies available to us may be insufficient to
compensate for our damages. Furthermore, our trade secrets, know-how and other technology may otherwise become known or be independently discovered by our competitors.

Some of our products may face competition from lower cost generic or follow-on products.

Some of our drug products, for example Renagel, Renvela, Hectorol, Clolar and Mozobil, are approved under the provisions of the United
States Food, Drug and Cosmetic Act that render them susceptible to potential competition from generic manufacturers via the Abbreviated New Drug Application (ANDA) procedure. Generic manufacturers
pursuing ANDA approval are not required to conduct costly and time-consuming clinical trials to establish the safety and efficacy of their products; rather, they are permitted to rely on
the innovator's data regarding safety and efficacy. Thus, generic manufacturers can sell their products at prices much lower than those charged by the innovative pharmaceutical or biotechnology
companies who have incurred substantial expenses associated with the research and development of the drug product.

The
ANDA procedure includes provisions allowing generic manufacturers to challenge the effectiveness of the innovator's patent protection long prior to the generic manufacturer actually
commercializing their productsthe so-called "Paragraph IV" certification procedure. A patent owner who receives a Paragraph IV certification may choose to sue
the generic applicant for patent infringement. If such patent infringement lawsuit is made within a statutory 45-day period, then a 30-month stay of FDA approval for the ANDA
is triggered. In recent years, generic manufacturers have used Paragraph IV certifications extensively to challenge the applicability of Orange Book-listed patents on a wide array
of innovative pharmaceuticals, and we expect this trend to continue and to implicate drug products with even relatively modest revenues.

Renagel,
Renvela and Hectorol are subjects of ANDAs containing Paragraph IV certifications. Renagel is the subject of three ANDAs containing Paragraph IV certifications.
One of the ANDAs contains a Paragraph IV certification that relates only to one of our Orange Book-listed patents, namely our patent that covers features of our tablet dosage form.
This patent expires in 2020, and the ANDA applicant alleged that its proposed product would not infringe that patent. We reviewed the Paragraph IV certification and did not initiate patent
infringement litigation. The other two ANDA applications contain Paragraph IV certifications challenging additional aspects of the Renagel patent estate, including patents that expire in 2014
and 2013. Specifically, one ANDA applicant seeks to market its generic product prior to the expiration of all of our Orange Book-listed patents, while the other seeks to market its generic
product only after the expiration of our Orange Book-listed patents that expire in 2013. We have initiated patent litigation against these latter two ANDA applicants.

Renvela
is the subject of two ANDAs containing Paragraph IV certifications. One of the ANDA applicants seeks to market a generic sevelamer carbonate product prior to the
expiration of all of our Orange Book-listed patents. We are evaluating this ANDA application and associated legal issues in advance of our May 2009 deadline to initiate patent litigation
and trigger the statutory 30-month stay

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of
FDA approval for the ANDA. The other ANDA applicant seeks to market its generic product only after the expiration of our Orange Book-listed patents that expire in 2013. We initiated
patent litigation against this ANDA applicant.

Our
Hectorol injection product is the subject of two ANDAs containing Paragraph IV certifications. In the first-filed ANDA, the applicant submitted a Paragraph IV
certification alleging the invalidity of our patent related to the use of Hectorol to treat hyperparathyroidism secondary to end-stage renal disease (which patent expires in 2014), and
alleging non-infringement of our patent covering our highly purified form of Hectorol (which patent expires in 2021). We initiated patent infringement litigation in February 2008. We have
since granted to this ANDA applicant a covenant not to sue on the Orange Book-listed patent that expires in July 2021. We continue, however, to pursue our claims related to the Orange
Book-listed patent that expires in February 2014. A trial on the merits is scheduled for April 2010. The ANDA applicant also has submitted a Paragraph IV certification alleging the
invalidity of our patent that claims specific aspects of our Hectorol vial formulation. We reviewed the Paragraph IV certification related to our vial formulation and did not initiate patent
infringement litigation. In the second ANDA application for our Hectorol injection product, the applicant's Paragraph IV certification alleged that each of our Orange Book-listed
patents is either invalid or will not be infringed by the applicant's generic product. We initiated patent infringement litigation in April 2009 against this ANDA applicant.

Other
of our products, including Cerezyme, Fabrazyme, Aldurazyme, Myozyme and Campath (so-called "biotech drugs") are not currently considered susceptible to an abbreviated
approval procedure, either due to current United States law or FDA practice in approving biologic products. However, the United States Congress has been exploring since 2007 legislation that would
establish a procedure for the FDA to accept ANDA-like abbreviated applications for the approval of "follow-on," "biosimilar" or "comparable" biotech drugs. Congress continues
to be interested in the issue and the new U.S. presidential administration has also expressed an interest in passing legislation regarding biosimilars. Such legislation has already been adopted in the
European Union.

If
an ANDA filers or any other generic manufacturer were to receive approval to sell a generic or follow-on version of one of our products, that product would become subject
to increased competition and our revenues for that product would be adversely affected.

Guidelines, recommendations and studies published by various organizations can reduce the use of our products.

Professional societies, practice management groups, private health/science foundations, and organizations involved in various diseases
may publish guidelines, recommendations or studies to the healthcare and patient communities from time to time. Recommendations of government agencies or these other groups/organizations may relate to
such matters as usage, dosage, route of administration, cost-effectiveness, and use of related therapies. Organizations like these have in the past made recommendations about our products
and products of our competitors. Recommendations, guidelines or studies that are followed by patients and healthcare providers could result in decreased use of our products. The perception by the
investment community or stockholders that recommendations, guidelines or studies will result in decreased use of our products could adversely affect prevailing market price for our common stock. In
addition, our success also depends on our ability to educate patients and healthcare providers about our products and their uses. If these education efforts are not effective, then we may not be able
to increase the sales of our existing products or successfully introduce new products to the market.

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We may be required to license patents from competitors or others in order to develop and commercialize some of our products and services, and it is uncertain whether these
licenses would be available.

Third party patents may cover some of the products or services that we or our strategic partners are developing or producing. A patent
is entitled to a presumption of validity and accordingly, we face significant hurdles in any challenge to a patent. In addition, even if we are successful in challenging the validity of a patent, the
challenge itself may be expensive and require significant management attention.

To
the extent valid third party patent rights cover our products or services, we or our strategic collaborators would be required to seek licenses from the holders of these patents in
order to manufacture, use or sell these products and services, and payments under them would reduce our profits from these products and services. We may not be able to obtain these licenses on
favorable terms, or at all. If we fail to obtain a required license or are unable to alter the design of our technology to fall outside the scope of a third party patent, we may be unable to market
some of our products and services, which would limit our profitability.

Legislative or regulatory changes may adversely impact our business.

The United States government and other governments have shown significant interest in pursuing healthcare reform. Any
government-adopted reform measures could adversely impact:



New
laws, regulations and judicial decisions, or new interpretations of existing laws, regulations and decisions, that relate to healthcare availability, methods of delivery or payment
for products and services, or sales, marketing or pricing may cause our revenue to decline, and we may need to revise our research and development programs. The pricing and reimbursement environment
for our products may change in the future and become more challenging due to among other reasons, policies advanced by the new presidential administration in the United States, new healthcare
legislation or fiscal challenges faced by government health administration authorities.

On
September 27, 2007, the Food and Drug Administration Amendments Act of 2007 was enacted, giving the FDA enhanced post-market authority, including the authority to
require post-marketing studies and clinical trials, labeling changes based on new safety information, and compliance with risk evaluations and mitigation strategies approved by the FDA.
The FDA's exercise of its new authority could result in delays or increased costs during the period of product development, clinical trials and regulatory review and approval, increased costs to
assure compliance with new post-approval regulatory requirements, and potential restrictions on the sale and/or distribution of approved products.

If our strategic alliances are unsuccessful, our operating results will be adversely impacted.

Several of our strategic initiatives involve alliances with other biotechnology and pharmaceutical companies. The success of these
arrangements is largely dependent on technology and other intellectual property contributed by our strategic partners or the resources, efforts, and skills of our partners. Disputes and difficulties
in such relationships are common, often due to conflicting priorities or conflicts of interest. Merger and acquisition activity may exacerbate these conflicts. The benefits of these alliances are
reduced or eliminated when strategic partners:



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Furthermore,
payments we make under these arrangements may exacerbate fluctuations in our financial results. In addition, under some of our strategic alliances, we make upfront and
milestone payments well in advance of commercialization of products with no assurance that we will ever recoup these
payments. We also may make equity investments in our strategic partners, as we did with EXACT Sciences in January 2009 and Isis in February 2008. Our strategic equity investments are subject to market
fluctuations, access to capital and other business events, such as initial public offerings, the completion of clinical trials and regulatory approvals, which can impact the value of these
investments. If any of our strategic equity investments decline in value and remain below cost for an extended duration, we may be required to write off our investment.

Our investments in marketable securities are subject to market, interest and credit risk that may reduce their value.

We maintain a significant portfolio of investments in marketable securities. Our earnings may be adversely affected by changes in the
value of this portfolio. In particular, the value of our investments may be adversely affected by increases in interest rates, downgrades in the corporate bonds included in the portfolio, instability
in the global financial markets that reduces the liquidity of securities included in the portfolio, and by other factors which may result in other than temporary declines in value of the investments.
Each of these events may cause us to record charges to reduce the carrying value of our investment portfolio or sell investments for less than our acquisition cost. We attempt to mitigate these risks
with the assistance of our investment advisors by investing in high quality securities and continuously monitoring the overall risk profile of our portfolio.

Importation of products may lower the prices we receive for our products.

In the United States and abroad, many of our products are subject to competition from lower-priced versions of our products and
competing products from other countries where government price controls or other market dynamics result in lower prices for such products. Our products that require a prescription in the United States
may be available to consumers in markets such as Canada, Mexico, Taiwan and the Middle East without a prescription, which may cause consumers to seek out these products in these lower priced markets.
The ability of patients and other customers to obtain these lower priced imports has grown significantly as a result of the Internet, an expansion of pharmacies in Canada and elsewhere that target
American purchasers, an increase in U.S.-based businesses affiliated with these Canadian pharmacies and other factors. Most of these foreign imports are illegal under current United States law.
However, the volume of imports continues to rise due to the limited enforcement resources of the FDA and the United States Customs Service, and there is increased political pressure to permit such
imports as a mechanism for expanding access to lower-priced medicines. The importation of lower-priced versions of our products into the United States and other markets adversely affects our
profitability. This impact could become more significant in the future.

We may require significant additional financing, which may not be available to us on favorable terms, if at all.

As of March 31, 2009, we had $981.8 million in cash, cash equivalents and short- and long-term investments,
excluding our investments in equity securities.

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We intend to use substantial portions of our available cash for:



In
addition, we have several outstanding legal proceedings. Involvement in investigations and litigation can be expensive and a court may ultimately require that we pay expenses and
damages. As a result of legal proceedings, we may also be required to pay fees to a holder of proprietary rights in order to continue certain operations.

Recently,
the general economic, global capital and credit market conditions in the United States and other parts of the world have deteriorated significantly and have adversely affected
access to capital and increased the cost of capital. However, we continue to believe that our available cash, investments and cash flow from operations, together with our revolving credit facility and
other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future. We currently do not rely on short-term borrowing to fund
our operations and, as a result, we do not believe that existing global capital and credit market conditions will have a significant impact on our near-term liquidity. We are closely
monitoring our liquidity as well as the condition of these markets. If these conditions continue or become worse, our future cost of debt and equity capital and our future access to capital markets
could be adversely affected. We cannot guarantee that we will be able to obtain any additional financing in the future or extend any existing financing arrangements on favorable terms, or at all.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

We are exposed to potential loss from exposure to market risks represented principally by changes in foreign exchange rates, interest
rates and equity prices. At March 31, 2009, we held derivative contracts in the form of foreign exchange forward contracts. We also held a number of other financial instruments, including
investments in marketable securities and we had debt securities outstanding. We do not hold derivatives or other financial instruments for speculative purposes.

Equity Price Risk

We hold investments in a limited number of U.S. and European equity securities. We estimated the potential loss in fair value due to a
10% decrease in the equity prices of each marketable security held at March 31, 2009 to be $2.8 million, as compared to $5.7 million at December 31, 2008. This estimate
assumes no change in foreign exchange rates from quarter-end spot rates and excludes any potential risk associated with securities that do not have a readily determinable market value.

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Interest Rate Risk

We are exposed to potential loss due to changes in interest rates. Our principal interest rate exposure is to changes in U.S. interest
rates. Instruments with interest rate risk include short- and long-term investments in fixed income securities and a fixed rate capital lease. To estimate the potential loss due to changes
in interest rates, we performed a sensitivity analysis using the instantaneous adverse change in interest rates of 100 basis points across the yield curve.

On
this basis, we estimate the potential loss in net fair value of our interest-bearing instruments to be $7.3 million as of March 31, 2009, as compared to
$6.2 million as of December 31, 2008. The increase is primarily a result of a decrease in the amount and duration of the fixed income investment portfolio, which provides less of an
offset to the increase in the fair value of our capital lease.

Foreign Exchange Risk

As a result of our worldwide operations, we may face exposure to potential adverse movements in foreign currency exchange rates.
Exposures to currency fluctuations that result from sales of our products in foreign markets are partially offset by the impact of currency fluctuations on our international expenses. We use foreign
exchange forward contracts to further reduce our exposure to changes in exchange rates, primarily to offset the earnings effect from foreign currency assets and liabilities. We also hold a limited
amount of foreign currency denominated equity securities.

As
of March 31, 2009, we estimate the potential loss in fair value of our foreign exchange forward contracts and foreign equity holdings that would result from a hypothetical 10%
adverse change in exchange rates to be $25.4 million, as compared to $26.9 million as of December 31, 2008. The change from the prior period is due to a decrease in our net
foreign exchange forward contracts. Since the contracts hedge mainly transactional exchange exposures, any changes in the fair values of the contracts would be offset by changes in the underlying
values of the hedged items.

ITEM 4.    CONTROLS AND PROCEDURES

As of March 31, 2009, we evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the
effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2009.

There
were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred
during the quarter ended March 31, 2009, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We periodically become subject to legal proceedings and claims arising in connection with our business. Although we cannot predict the
outcome of these additional proceedings and claims, we do not believe the ultimate resolution of any of these existing matters would have a material adverse effect on our financial position or results
of operations.

ITEM 1A.    RISK FACTORS

We incorporate by reference our disclosure related to risk factors which is set forth under the heading "Management's Discussion and
Analysis of Genzyme Corporation and Subsidiaries' Financial

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Condition
and Results of OperationsRisk Factors" in Part I., Item 2. of this Quarterly Report on Form 10-Q.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about our repurchases of our equity securities during the quarter ended March 31, 2009:

Period

Total
Number of
Shares
Purchased

Average
Price
Paid per
Share

Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs

Approximate
Dollar Value
of Shares that
May Yet Be
Purchased
Under the
Plans or
ProgramsJanuary 1, 2009-January 31, 2009










$
1,125,521,738February 1, 2009-February 28, 2009










$
1,125,521,738March 1, 2009-March 31, 2009


2,000,000

$
53.55


2,000,000

$
1,018,427,338Total


2,000,000
(1)
$
53.55
(2)

2,000,000


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ITEM 6.    EXHIBITS

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

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

GENZYME CORPORATIONDated: May 8, 2009

By:

/s/ MICHAEL S. WYZGA Michael S. Wyzga Executive Vice President, Finance,
Chief Financial Officer


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GENZYME CORPORATION AND SUBSIDIARIES

FORM 10-Q, MARCH 31, 2009

EXHIBIT INDEX

EXHIBIT NO.

DESCRIPTION31.1

Certification of the Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.31.2

Certification of the Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.32.1

Certification of the Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.32.2

Certification of the Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.


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