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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 June 30, 2008oro

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 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 July 31, 2008: 268,653,485



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NOTE REGARDING REFERENCES TO OUR COMMON STOCK

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

NOTE REGARDING FORWARD-LOOKING STATEMENTS

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



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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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We
have included more detailed descriptions of these and other risks and uncertainties under the heading "Management's Discussion and Analysis of Genzyme Corporation and Subsidiaries'
Financial Condition and Results of OperationsRisk Factors," in Part I., Item 2. of this Quarterly Report on 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 report. These statements, like all statements in this report, speak
only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments.

NOTE 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®, Thymoglobulin®, Synvisc®, Sepra®, Seprafilm®, Carticel®, Epicel®, MACI®, Hylaform®,
Cholestagel® and Hectorol® are registered trademarks, and Mozobil, Lymphoglobuline 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. All rights reserved.

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GENZYME CORPORATION AND SUBSIDIARIES        FORM 10-Q, JUNE 30, 2008        TABLE OF CONTENTS



PAGE NO.PART I.

FINANCIAL INFORMATION


6ITEM 1.

Financial Statements


6Unaudited, Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended June 30, 2008 and
2007


6Unaudited, Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007


7Unaudited, Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2007


8Notes to Unaudited, Consolidated Financial Statements


9ITEM 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations


30ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk


70ITEM 4.

Controls and Procedures


71PART II.

OTHER INFORMATION


71ITEM 1.

Legal Proceedings


71ITEM 1A.

Risk Factors


72ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds


72ITEM 4.

Submission of Matters to a Vote of Security Holders


72ITEM 6.

Exhibits


73Signatures


74


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PART I.    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

GENZYME CORPORATION AND SUBSIDIARIES        Consolidated Statements of Operations and Comprehensive Income        (Unaudited, amounts in thousands, except per share
amounts)

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Revenues:Net product sales

$
1,071,801

$
845,482

$
2,078,069

$
1,643,672Net service sales


90,622


82,475


176,486


158,356Research and development revenue


8,711


5,462


16,640


14,574Total revenues


1,171,134


933,419


2,271,195


1,816,602Operating costs and expenses:Cost of products sold


241,343


163,252


458,082


317,976Cost of services sold


58,987


54,346


114,561


102,085Selling, general and administrative


347,305


339,480


665,691


608,501Research and development


381,861


198,442


644,658


364,562Amortization of intangibles


55,605


49,465


111,263


99,482Total operating costs and expenses


1,085,101


804,985


1,994,255


1,492,606Operating income


86,033


128,434


276,940


323,996Other income (expenses):Equity in income of equity method investments





5,945


188


11,557Minority interest


563


15


1,026


3,927Gains on investments in equity securities, net


9,153


143


9,928


12,931Other


19


(278
)

(141
)

(803
)Investment income


13,352


17,246


28,222


33,465Interest expense


(1,149
)

(3,621
)

(2,804
)

(7,809
)Total other income


21,938


19,450


36,419


53,268Income before income taxes


107,971


147,884


313,359


377,264Provision for income taxes


(38,407
)

(64,090
)

(98,524
)

(135,283
)Net income

$
69,564

$
83,794

$
214,835

$
241,981Net income per share:Basic

$
0.26

$
0.32

$
0.80

$
0.92Diluted

$
0.25

$
0.31

$
0.77

$
0.88Weighted average shares outstanding:Basic


266,904


263,911


267,127


263,693Diluted


284,262


280,564


285,028


280,244Comprehensive income, net of tax:Net income

$
69,564

$
83,794

$
214,835

$
241,981Other comprehensive income (loss):Foreign currency translation adjustments


(3,981
)

8,636


105,673


21,246Pension liability adjustments, net of tax


(7
)

(464
)

71


(266
)Unrealized gains (losses) on securities, net of tax:Unrealized gains (losses) arising during the period


806


(4,601
)

4,711


(2,732
)Reclassification adjustments for gains (losses) included in net income


(5,628
)

398


(5,898
)

246Unrealized losses on securities, net of tax


(4,822
)

(4,203
)

(1,187
)

(2,486
)Other comprehensive income (loss)


(8,810
)

3,969


104,557


18,494Comprehensive income

$
60,754

$
87,763

$
319,392

$
260,475


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)

June 30,
2008

December 31,
2007ASSETSCurrent assets:Cash and cash equivalents

$
693,687

$
867,012Short-term investments


67,688


80,445Accounts receivable, net


1,066,478


904,101Inventories


472,538


439,115Prepaid expenses and other current assets


170,711


154,183Deferred tax assets


158,728


164,341Total current assets


2,629,830


2,609,197Property, plant and equipment, net


2,212,044


1,968,402Long-term investments


493,119


512,937Goodwill


1,404,070


1,403,828Other intangible assets, net


1,990,162


1,555,652Deferred tax assets


270,750


95,664Investments in equity securities


162,930


89,181Other noncurrent assets


19,947


66,880Total assets

$
9,182,852

$
8,301,741LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable

$
117,180

$
128,380Accrued expenses


636,205


645,645Income taxes payable


23,166


18,479Deferred revenue


18,732


13,277Current portion of long-term debt and capital lease obligations


696,860


696,625Total current liabilities


1,492,143


1,502,406Long-term debt and capital lease obligations


109,157


113,748Deferred revenuenoncurrent


14,783


16,662Other noncurrent liabilities


525,365


55,988Total liabilities


2,141,448


1,688,804Commitments and contingenciesStockholders' equity:Preferred stock, $0.01 par value





Common stock, $0.01 par value


2,670


2,660Additional paid-in capital


5,491,727


5,385,154Notes receivable from stockholders


(13,178
)

(15,670
)Accumulated earnings


1,041,550


826,715Accumulated other comprehensive income


518,635


414,078Total stockholders' equity


7,041,404


6,612,937Total liabilities and stockholders' equity

$
9,182,852

$
8,301,741


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)

Six Months Ended
June 30,2008

2007Cash Flows from Operating Activities:Net income

$
214,835

$
241,981Reconciliation of net income to cash flows from operating activities:Depreciation and amortization


183,119


162,827Stock-based compensation


96,952


102,023Provision for bad debts


5,844


4,569Equity in income of equity method investments


(188
)

(11,557
)Minority interest





(3,927
)Gains on investments in equity securities, net


(9,928
)

(12,931
)Deferred income tax benefit


(172,813
)

(55,026
)Tax benefit from employee stock-based compensation


25,645


8,349Excess tax benefits from stock-based compensation


(8,647
)

(565
)Other


2,175


3,048Increase (decrease) in cash from working capital changes (excluding impact of acquired assets and assumed liabilities):Accounts receivable


(98,174
)

(71,660
)Inventories


(4,812
)

(47,312
)Prepaid expenses and other current assets


(15,295
)

(1,589
)Income taxes payable


13,288


(11,496
)Accounts payable, accrued expenses and deferred revenue


(52,692
)

69,434Cash flows from operating activities


179,309


376,168Cash Flows from Investing Activities:Purchases of investments


(289,129
)

(412,067
)Sales and maturities of investments


319,758


496,986Purchases of equity securities


(81,472
)

(19,945
)Proceeds from sales of investments in equity securities


16,169


19,277Purchases of property, plant and equipment


(251,785
)

(180,041
)Distributions from equity method investments


6,595


10,900Purchases of other intangible assets


(75,400
)

(27,618
)Other


2,571


891Cash flows from investing activities


(352,693
)

(111,617
)Cash Flows from Financing Activities:Proceeds from issuance of our common stock


127,008


68,174Repurchases of our common stock


(143,012
)

(63,430
)Excess tax benefits from stock-based compensation


8,647


565Payments of debt and capital lease obligations


(3,886
)

(3,356
)Increase in bank overdrafts


29,309


15,935Payments of notes receivable from stockholders


2,770


Minority interest contributions





4,136Other


34


2,474Cash flows from financing activities


20,870


24,498Effect of exchange rate changes on cash


(20,811
)

10,222Increase (decrease) in cash and cash equivalents


(173,325
)

299,271Cash and cash equivalents at beginning of period


867,012


492,170Cash and cash equivalents at end of period

$
693,687

$
791,441


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 diseases, orthopaedics, organ transplant, diagnostic and predictive testing, and cancer. We are organized into six financial reporting units, which we also consider to be our
reporting segments:



We
report the activities of our diagnostic products, bulk pharmaceuticals and cardiovascular business units under the caption "Other." We report our corporate, general and administrative
operations and corporate science activities under the caption "Corporate."

Effective
January 1, 2008, as a result of changes in how we review our business, certain general and administrative expenses, which were formerly allocated amongst our reporting
segments and Other, are now allocated to Corporate.

As
a result of our acquisition of Bioenvision in October 2007, our Oncology business unit, which was formerly reported combined with "Other," now meets the criteria for disclosure as a
separate reporting segment. We have revised our 2007 segment disclosures to conform to our 2008 presentation.

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

2.    Basis of Presentation and Significant Accounting Policies

Basis of Presentation

Our unaudited, consolidated financial statements for each period include the statements of operations and comprehensive income, balance
sheets and statements of cash flows for our 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 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 condition and results of operations. Since
these are interim financial statements, you should also read our audited, consolidated financial statements and notes included in our 2007 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 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% interest, we record minority interest in our consolidated statements of operations for the ownership interest
of the minority owner. 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

FAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115."Effective
January 1, 2008, we adopted FAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115," which permits, but
does not require, entities to measure certain financial instruments and other assets and liabilities at fair value on an instrument-by-instrument basis. Unrealized gains and
losses on items for which the fair value option has been elected should be recognized in earnings at each subsequent reporting date. In adopting FAS 159, we did not elect to measure any new
assets or liabilities at their respective fair values and, therefore, the adoption of FAS 159 did not have an impact on our results of operations and financial position.

EITF Issue No. 07-1, "Accounting for Collaborative Arrangements."In December 2007, the Emerging Issues Task Force, or EITF, of the FASB reached
a consensus on Issue No. 07-1, "Accounting for Collaborative Arrangements." The EITF concluded on the definition of a collaborative arrangement and that revenues and costs incurred
with third parties in connection with collaborative arrangements would be presented gross or net based on the criteria in EITF 99-19 and other accounting literature. Companies are
also required to disclose the nature and purpose of collaborative arrangements along with the accounting policies and the classification and amounts attributable to transactions related to the
arrangements. EITF 07-1 is effective January 1, 2009 and we will apply it retrospectively to all

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

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

periods
presented for all collaborative arrangements existing as of the effective date. We are evaluating the impact, if any, that EITF 07-1 will have on our consolidated financial statements.

EITF Issue No. 07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development
Activities."In June 2007, the FASB ratified the EITF consensus reached in EITF Issue No. 07-3, "Accounting for Nonrefundable Advance Payments
for Goods or Services Received for Use in Future Research and Development Activities," which provides guidance for nonrefundable prepayments for goods or services that will be used or rendered for
future research and development activities and directs that such payments should
be deferred and capitalized. Such amounts should be recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be
delivered or the services rendered. EITF 07-3 was effective for us beginning January 1, 2008 and we applied it prospectively to new contracts we entered into on or after that
date. The implementation of EITF 07-3 did not have a material impact on our financial position, results of operations or cash flows.

FAS 141 (revised 2007), "Business Combinations."In December 2007, the FASB issued FAS 141 (revised 2007), "Business Combinations," or
FAS 141R, which replaces FAS 141, "Business Combinations." FAS 141R retains the underlying concepts of FAS 141 in that all business combinations are still required to be
accounted for at fair value under the acquisition method of accounting but changes a number of significant aspects of applying this method. Acquisition costs will generally be expensed as incurred;
noncontrolling interests will be valued at fair value at the acquisition date; in-process research and development, or IPR&D, will be recorded at fair value as an indefinite-lived intangible asset at
the acquisition date; restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances
and income tax uncertainties after the acquisition date generally will affect income tax expense. FAS 141R is effective for us on a prospective basis for all business combinations for which the
acquisition date is on or after January 1, 2009. Early adoption is not permitted. We are currently evaluating the effects, if any, that FAS 141R will have on our consolidated financial
statements.

FAS No. 160, "Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51."In December 2007, the FASB
issued FAS 160, "Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51," which establishes new accounting and reporting standards that
require the ownership interests in subsidiaries not held by the parent to be clearly identified, labeled and presented in the consolidated statement of financial position within equity, but separate
from the parent's equity. FAS 160 also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest, commonly referred to as the minority
interest, to be clearly identified and presented on the face of the consolidated statement of income. Changes in a parent's ownership interest while the parent retains its controlling financial
interest must be accounted for consistently, and when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary must be initially measured at fair value.
The gain or loss on the deconsolidation of the subsidiary is measured using the fair value of any noncontrolling equity investment. FAS 160 also requires entities to provide sufficient
disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. FAS 160 is effective for us January 1, 2009 and
adoption is prospective only. However, upon adoption, presentation and disclosure requirements described above must be applied retrospectively for all

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

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

periods
presented in our consolidated financial statements. We are currently evaluating the effects, if any, that FAS 160 will have on our consolidated financial statements.

FASB Staff Position, or FSP, No. 157-2, "Effective Date of FASB Statement No. 157."In accordance with the
provisions of FSP No. 157-2, "Effective Date of FASB Statement No. 157," we elected to defer implementation of FAS 157, as it relates to our non-financial
assets and non-financial liabilities that are recognized and disclosed at fair value in our consolidated financial statements on a nonrecurring basis, until January 1, 2009. We are
evaluating the impact, if any, the adoption of FAS 157, for those assets and liabilities within the scope of FSP No. FAS 157-2, will have on our financial position, results
of operations and liquidity. We did not have any non-financial assets or non-financial liabilities that would be recognized or disclosed on a recurring basis as of
June 30, 2008.

FAS No. 161, "Disclosures About Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133."In March 2008, the
FASB issued FAS 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133," which amends and expands the disclosure requirements of
FAS 133, "Accounting for Derivative Instruments and Hedging Activities." FAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.
FAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We are
currently evaluating the effects, if any, that FAS 161 will have on our consolidated financial statements.

FSP No. 142-3, "Determination of the Useful Life of Intangible Assets."In April 2008, the FASB issued FSP No. 142-3,
"Determination of the Useful Life of Intangible Assets." FSP No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FAS 142, "Goodwill and Other Intangible Assets". FSP No. 142-3 is effective for fiscal years beginning after
December 15, 2008. We are currently evaluating the effects, if any, that FSP No. 142-3 will have on our consolidated financial statements.

FAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles."In May 2008, the FASB issued FAS 162, "The Hierarchy of Generally Accepted
Accounting Principles." FAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. FAS 162 is
effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles." The implementation of this standard will not have a material impact on our consolidated financial position and results of operations.

3.    Fair Value Measurements

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



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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)



Fair Value MeasurementDefinition and Hierarchy

Effective January 1, 2008, we implemented FAS 157, "Fair Value Measurements," for our financial assets and liabilities
that are re-measured and reported at fair value at each reporting period. The adoption of FAS 157 to our financial assets and liabilities did not have a material impact on our
financial position and results of operations.

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:



Valuation Techniques

Fair value is a market-based measure considered from the perspective of a market participant who would buy the asset or assume the
liability rather than our own specific measure. All of our fixed income securities are priced by our custodial agent and nationally known pricing vendors, using a variety of daily data sources,
largely readily-available market data and broker quotes. To validate these prices, we compare the fair market values of our fixed income investments using market data from observable and corroborated
sources. We also perform the fair value calculations for our derivative and equity securities using market data from observable and corroborated sources. In periods of market inactivity, the
observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or from Level 2 to
Level 3.

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)

The
following table sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2008 (amounts in thousands):

Description

Total

Level 1

Level 2

Level 3Fixed income investments(1):

Cash equivalents:

Money market funds

$
498,111

$
498,111

$


$
Short-term investments:

U.S. agency notes


8,388





8,388


Corporate notesglobal


59,300





59,300


Total


67,688





67,688


Long-term investments:

U.S. Treasury notes


105,243


105,243





U.S. agency notes


170,613





170,613


Corporate notesglobal


217,263





217,263


Total


493,119


105,243


387,876


Total fixed
income
investments


1,058,918


603,354


455,564


Derivatives:

Foreign exchange contracts(2)


(4,824
)




(4,824
)

Equity holdings:

Publicly-traded equity securities(1)


57,224


57,224





Total assets and (liabilities) at fair value

$
1,111,318

$
660,578

$
450,740

$



---

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

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

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Net incomebasic

$
69,564

$
83,794

$
214,835

$
241,981Effect of dilutive securities:Interest expense and debt fee amortization, net of tax, related to our 1.25% convertible senior notes


1,886


1,887


3,772


3,772Net incomediluted

$
71,450

$
85,681

$
218,607

$
245,753Shares used in computing net income per common sharebasic


266,904


263,911


267,127


263,693Effect of dilutive securities:Shares issuable upon the assumed conversion of our 1.25% convertible senior notes


9,686


9,686


9,686


9,686Stock options(1)


7,123


6,906


7,712


6,829Restricted stock units(2)


538


50


491


25Warrants and stock purchase rights


11


11


12


11Dilutive potential common shares


17,358


16,653


17,901


16,551Shares used in computing net income per common sharediluted(1,2)


284,262


280,564


285,028


280,244Net income per common share:Basic

$
0.26

$
0.32

$
0.80

$
0.92Diluted

$
0.25

$
0.31

$
0.77

$
0.88


---

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Shares issuable upon exercise of outstanding options


4,258


15,053


3,120


14,268


15

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

5.    Mergers and Acquisitions

Bioenvision

Effective October 23, 2007, we completed our acquisition of Bioenvision through the culmination of a two step process consisting
of a tender offer completed in July 2007, and a merger approved in October 2007. We paid gross consideration of $349.9 million in cash, including $345.4 million for the outstanding
shares of Bioenvision Common and Series A Preferred Stock and options to purchase shares of Bioenvision Common Stock, and approximately $5 million for acquisition costs. The acquisition
of Bioenvision provided us with the rights to clofarabine outside North America.

In
connection with the merger, holders of 2,880,000 shares of Bioenvision Common Stock, representing less than 5% of the outstanding shares of Bioenvision Common Stock on an
as-converted basis immediately before the merger became effective, submitted written demands for appraisal of their shares and elected not to accept the $5.60 per share merger
consideration. We refer to these stockholders as dissenting stockholders. We obtained ownership of the dissenting shares and accounted for the merger based on 100% ownership of Bioenvision. In October
2007, we accrued $16.1 million in our consolidated balance sheets, which represented our estimate of the price to be paid to the dissenting shareholders upon resolution of their appraisal
demand.

The
purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the
purchase price over the estimated fair value of the assets acquired and liabilities assumed amounted to $85.3 million, which was allocated to goodwill. We expect that substantially all of the
amount allocated to goodwill will be deductible for tax purposes.

The
allocation of purchase price remains subject to potential adjustments, including adjustments for liabilities associated with certain exit and tax restructuring activities. We
recorded immaterial adjustments to the purchase price in the first half of 2008.

Purchase of In-Process Research and Development

We did not complete any acquisitions in the six months ended June 30, 2008. In connection with certain acquisitions that 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 for companies and certain
assets 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)(1,2)


17
%

2008-2010AnorMED Inc. (2006)

$
589.2

$
526.8
26.1

Mozobil (stem cell transplant)(3)
AMD070 (HIV)(4)


15
15
%%

2009-2014
$
552.9


---

16

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

5.    Mergers and Acquisitions (Continued)

Exit Activities

In connection with several of our acquisitions, we initiated integration plans to consolidate and restructure certain functions and
operations, including the relocation and termination of certain personnel of these acquired entities and the closure of certain of the acquired entities' leased facilities. These costs have been
recognized as liabilities in accordance with EITF Issue No. 95-3, "Recognition of Liabilities in Connection with a Purchase or Business Combination," and are subject to potential
adjustments as certain exit activities are confirmed or refined. The following table summarizes the liabilities established for exit activities related to these acquisitions (amounts in thousands):

Employee
Related
Benefits

Closure of
Leased
Facilities

Other
Exit
Activities

Total
Exit
ActivitiesBalance at December 31, 2006

$
6,105

$
24

$


$
6,129Acquisition(1)


2,601





70


2,671Revision of estimates


(931
)

2,593





1,662Payments


(5,602
)

(453
)




(6,055
)Balance at December 31, 2007


2,173


2,164


70


4,407Revision of estimates


(182
)







(182
)Payments


(1,654
)

(384
)

(70
)

(2,108
)Balance at June 30, 2008(2)

$
337

$
1,780

$


$
2,117


---

Pro Forma Financial Summary

The following pro forma financial summary is presented as if the acquisition of Bioenvision had been completed as of January 1,
2007. These pro forma combined results are not necessarily indicative of the actual results that would have occurred had the acquisition been consummated on that date, or of the future operations of
the combined entities. Material nonrecurring charges related to the

17

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

5.    Mergers and Acquisitions (Continued)

acquisition
of Bioenvision, such as IPR&D charges of $125.5 million, are included in the following pro forma financial summary as of January 1, 2007 (amounts in thousands, except per
share amounts):

Three Months Ended
June 30, 2007

Six Months Ended
June 30, 2007Total revenues

$
937,437

$
1,822,742Net income

$
76,192

$
116,965Net income per share:Basic

$
0.29

$
0.44Diluted

$
0.28

$
0.43Weighted average shares outstanding:Basic


263,911


263,693Diluted


280,564


280,244


6.    Strategic Transactions

Collaboration with PTC Therapeutics, Inc.

On July 15, 2008, we entered into a collaboration agreement with PTC Therapeutics, Inc., or PTC, to develop and
commercialize PTC124, PTC's novel oral therapy in late-stage development for the treatment of nonsense-mutation-mediated Duchenne muscular dystrophy, or DMD, and nonsense-mutation-mediated
cystic fibrosis, or CF. Under the terms of the agreement, PTC will commercialize PTC124 in the United States and Canada, and we will commercialize the treatment in all other countries. In connection
with the collaboration agreement, we paid PTC a nonrefundable upfront payment of $100.0 million, which we recorded as a charge to research and development expense in our consolidated statements
of operations in July 2008. We classify nonrefundable fees paid outside of a business combination for the acquisition or licensing of products that have not received regulatory approval and have no
future alternative use as research and development expense. PTC will conduct and be responsible for the phase 2b trial of PTC124 in DMD, the phase 2b trial in CF and two
proof-of-concept studies in other indications to be determined. Once these four studies have been completed, we and PTC will share research and development costs for PTC124
equally. We and PTC will each bear the sales and marketing and other costs associated with the commercialization of PTC124 in our respective territories. PTC is eligible to receive up to
$337.0 million in milestone payments as follows:



PTC
is also eligible to receive tiered, double-digit royalties from sales of PTC124 outside of the United States and Canada.

18

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6.    Strategic Transactions (Continued)

Strategic Alliance with Isis

On January 7, 2008, we entered into a strategic alliance with Isis, whereby we obtained an exclusive license to develop and
commercialize mipomersen, a lipid-lowering drug targeting apolipoprotein B-100, for the treatment of familial hypercholesterolemia, or FH, an inherited disorder that causes exceptionally
high levels of LDL-cholesterol. In February 2008, we made a nonrefundable payment to Isis of $150.0 million, of which $80.1 million was recorded as an investment in equity
securities in our consolidated balance sheets based on the fair value of the five million shares of Isis common stock we acquired in connection with the transaction, and the remaining
$69.9 million was allocated to the mipomersen license, which had not reached technological feasibility and did not have alternative future use. We recorded the $69.9 million license fee
as a charge to research and development expense in our consolidated statements of operations in the first quarter of 2008. We classify nonrefundable fees paid outside of a business combination for the
acquisition or licensing of products that have not received regulatory approval and have no future alternative use as research and development expense.

In
June 2008, we finalized the terms of our license and collaboration agreement with Isis and paid Isis an additional $175.0 million upfront nonrefundable license fee, which we
recorded as a charge to research and development expense in our consolidated statements of operations in June 2008. Under the terms of the agreement, Isis will contribute up to the first
$125.0 million in funding for the development of mipomersen and, thereafter, we and Isis will share development costs for mipomersen equally. The initial funding commitment by Isis and shared
development funding will end when the mipomersen program is profitable. In the event the research and development of mipomersen is terminated prior to Isis completing their funding obligation, we are
not entitled to any refund of our $175.0 million upfront payment. Accordingly, the $175.0 million was recorded as research and development expense in June 2008. Isis is eligible to
receive up to $750.0 million in commercial milestone payments and up to $825.0 million in development and regulatory milestone payments.

We
will be responsible for funding sales and marketing expenses until mipomersen revenues are sufficient to cover such costs. Profits on mipomersen initially will be allocated 70% to us
and 30% to Isis. The profit ratio will be adjusted on a sliding scale as annual revenues for mipomersen ramp up to $2.0 billion, at which point we will share profits equally with Isis. The
results of our mipomersen program are included in the results of our cardiovascular business unit, which are reported under the caption "Other" in our segment disclosures.

7.    Inventories

June 30,
2008

December 31,
2007(Amounts in thousands)Raw materials

$
105,931

$
120,409Work-in-process


147,408


130,812Finished goods


219,199


187,894Total

$
472,538

$
439,115


In
July 2008, we wrote off one lot of Thymoglobulin, valued at approximately $5 million, due to a filter failure at our fill-finish facility in Waterford, Ireland.

19

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

8.    Goodwill and Other Intangible Assets

Goodwill

The following table contains the change in our goodwill during the six months ended June 30, 2008 (amounts in thousands):

As of
December 31,
2007

Adjustments

As of
June 30,
2008Renal

$
303,951

$


$
303,951Therapeutics


355,494





355,494Transplant


163,061





163,061Biosurgery


7,585





7,585Oncology


530,909


477


531,386Other


42,828


(235
)

42,593Goodwill

$
1,403,828

$
242

$
1,404,070


Other Intangible Assets

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

As of June 30, 2008

As of December 31, 2007Gross
Other
Intangible
Assets

Accumulated
Amortization

Net
Other
Intangible
Assets

Gross
Other
Intangible
Assets

Accumulated
Amortization

Net
Other
Intangible
AssetsTechnology(1)

$
2,162,028

$
(626,643
)
$
1,535,385

$
1,680,190

$
(545,817
)
$
1,134,373Patents


194,560


(113,088
)

81,472


194,560


(104,413
)

90,147Trademarks


60,623


(39,498
)

21,125


60,634


(36,787
)

23,847License fees


90,871


(33,410
)

57,461


90,237


(28,833
)

61,404Distribution rights(2)


382,976


(147,356
)

235,620


307,260


(125,678
)

181,582Customer lists(3)


88,754


(29,924
)

58,830


97,031


(33,209
)

63,822Other


2,054


(1,785
)

269


2,050


(1,573
)

477Total

$
2,981,866

$
(991,704
)
$
1,990,162

$
2,431,962

$
(876,310
)
$
1,555,652


---

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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.

The
estimated future amortization expense for other intangible assets for the remainder of fiscal year 2008, the four succeeding fiscal years and thereafter is as follows (amounts in
thousands):

Year Ended December 31,

Estimated
Amortization
Expense(1,2)2008 (remaining six months)

$
113,4132009


228,8352010


242,0052011


259,8202012


200,754Thereafter


567,645


---

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

9.    Investments in Equity Securities

We recorded the following gains on investments in equity securities, net of charges for impairment of investments, for the periods presented (amounts in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Gross gains on investments in equity securities:Sirtris Pharmaceuticals, Inc. (Sirtris)

$
10,304

$


$
10,304

$
Therapeutic Human Polyclonals, Inc. (THP)











10,848Other


138


143


913


2,083Total


10,442


143


11,217


12,931Less: charge for impairment of investment


(1,289
)




(1,289
)

Gains on investments in equity securities, net

$
9,153

$
143

$
9,928

$
12,931


In
the second quarter of 2008, we recorded a $10.3 million gain resulting from the liquidation of our investment in the common stock of Sirtris for net cash
proceeds of $14.8 million.

In
March 2007, we recorded a $10.8 million gain in connection with the sale of our entire investment in the capital stock of THP, which had a zero cost basis, for net cash
proceeds of $10.8 million.

At
June 30, 2008, our stockholders' equity includes $28.8 million of unrealized gains and $2.6 million of unrealized losses related to our strategic investments in
equity securities.

10.    Joint Venture with BioMarin

We and BioMarin Pharmaceutical Inc., or BioMarin, formed BioMarin/Genzyme LLC to develop and commercialize Aldurazyme, a recombinant form of the human enzyme
alpha-L-iduronidase, used to treat an LSD known as mucopolysaccharidosis I, or MPS I. Prior to January 1, 2008, we recorded our portion of the results of
BioMarin/Genzyme LLC in equity in income of equity method investments in our consolidated statements of operations. Our portion of BioMarin/Genzyme LLC's net income was
$6.5 million for the three months ended June 30, 2007 and $12.6 million for the six months ended June 30, 2007.

Condensed
financial information for BioMarin/Genzyme LLC is summarized below for the three and six months ended June 30, 2007 (amounts in thousands):

Three Months Ended
June 30, 2007

Six Months Ended
June 30, 2007Revenue

$
29,127

$
55,948Gross margin


22,434


42,957Operating expenses


(9,560
)

(18,034
)Net income


13,016


25,237


22

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

10.    Joint Venture with BioMarin (Continued)

Effective
January 1, 2008, we restructured our relationship with BioMarin/Genzyme LLC regarding the manufacturing and commercialization of Aldurazyme by
entering into several new agreements. BioMarin/Genzyme LLC will no longer engage in commercial activities related to Aldurazyme and will solely:



Under
the restructured relationship, BioMarin/Genzyme LLC has licensed all intellectual property related to Aldurazyme and other collaboration products on a royalty-free basis to
BioMarin and us. BioMarin holds the manufacturing rights and we hold the global marketing rights. We are required to pay BioMarin a tiered payment ranging from 39.5% to 50% of worldwide net product
sales of Aldurazyme.

As
a result of the restructuring of our relationship with BioMarin/Genzyme LLC, effective January 1, 2008, in accordance with the provisions of FIN 46R, we began
consolidating the results of BioMarin/Genzyme LLC. Upon consolidation of BioMarin/Genzyme LLC, we recorded the assets and liabilities of the joint venture in our consolidated balance
sheets at fair value. The value of the intellectual property of the joint venture of approximately $480.5 million was recorded as an intangible asset and will be amortized over a useful life of
20 years. As this intellectual property has been outlicensed from the joint venture to BioMarin and us for no consideration, a noncurrent liability was recorded for an amount equal to the
negative value of these licenses. The noncurrent liability is being amortized over a period of 20 years. We recorded BioMarin's portion of the joint venture's losses, the amount of which was
not significant for the three and six months ended June 30, 2008, as minority interest in our consolidated statements of operations.

11.    Long-Term Debt

Revolving Credit Facility

As of June 30, 2008, no amounts were outstanding under our five-year $350.0 million senior unsecured
revolving credit facility. 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 June 30, 2008, we were in compliance with these covenants.

Mortgage

In July 2008, we purchased land and a manufacturing facility we formerly leased in Framingham, Massachusetts for an aggregate
purchase price of $38.9 million, including fees. We paid $20.8 million of cash and assumed the remaining $18.1 million in principal outstanding under the existing mortgage for the
facility, which bears interest at 5.57% annually and is due in May 2020. We will allocate the purchase price to the fair value of the acquired land and buildings in our consolidated balance
sheets as of July 31, 2008.

23

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

12.    Stockholders' Equity

Stock Repurchase

During the three months ended June 30, 2008, we repurchased and retired an additional 1,000,000 shares of our common stock at an
average price of $69.78 per share for a total of $69.8 million in cash, including fees. Since June 2007, when we first began repurchasing shares of our common stock, we have repurchased a
cumulative total of 5,500,000 shares of our common stock at an average price of $68.09 per share for a total of $374.6 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
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Pre-tax stock-based compensation expense, net of estimated forfeitures, charged to:Cost of products and services sold(1)

$
(6,311
)
$
(6,865
)
$
(12,825
)
$
(12,761
)Selling, general and administrative expense


(31,904
)

(35,248
)

(54,793
)

(57,747
)Research and development expense


(16,092
)

(19,143
)

(28,677
)

(31,455
)Total


(54,307
)

(61,256
)

(96,295
)

(101,963
)Less: tax benefit from stock options


16,834


18,703


29,371


31,135Total stock-based compensation expense, net of tax

$
(37,473
)
$
(42,553
)
$
(66,924
)
$
(70,828
)Effect per common share:Basic

$
(0.14
)
$
(0.16
)
$
(0.26
)
$
(0.27
)Diluted

$
(0.13
)
$
(0.15
)
$
(0.23
)
$
(0.25
)


---

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Stock-based compensation expense capitalized to inventory

$
3,875

$
4,957

$
6,996

$
7,839


24

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

12.    Stockholders' Equity (Continued)

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

At
June 30, 2008, there was $329.6 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 2.4 years.

Notes Receivable from Stockholders

In connection with our acquisition of Biomatrix, we assumed notes receivable from five former employees, directors and consultants of
Biomatrix, who we refer to as the Makers of the notes. The notes are full-recourse promissory notes that accrue interest at rates ranging from 5.30% to 7.18% and mature at various dates
from May 2007 through September 2009. As of June 30, 2008, there was a total of $13.2 million outstanding for these notes, including $8.1 million of principal and
$5.1 million of accrued interest. Of these amounts, a total of $8.0 million of principal and $4.7 million of accrued interest is attributable to one Maker. We record the amount of
principal and interest outstanding under the notes in stockholders' equity because the notes were originally received in exchange for the issuance of Biomatrix common stock, which was subsequently
converted into Genzyme Stock.

During
the second quarter of 2008, we received a total of $2.8 million of cash and shares of Genzyme stock valued at $0.3 million from three of the Makers as payment in
full of their notes, including accrued interest. A total of $11.5 million in principal and accrued interest has come due under the notes but has not yet been repaid, all due from one Maker. We
are pursuing collection of this past due amount and the notes will continue to accrue interest until the outstanding principal and accrued interest have been repaid.

13.    Commitments and Contingencies



We periodically become subject to legal proceedings and claims arising in connection with our business.

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 not yet been entered as a final ruling. Abbott will have 60 days
from the final entry of this award to file 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

25

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

13.    Commitments and Contingencies (Continued)

and
Molecular Oncology Stock. On August 6, 2007, we reached an agreement in principle to settle for $64.0 million, lawsuits related to our 2003 exchange of Genzyme Stock for Biosurgery
Stock. As a result, we recorded a liability for the settlement payment of $64.0 million as a charge to SG&A in our consolidated statements of operations in June 2007, which we subsequently paid
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 insurers have purported to deny coverage, and therefore, we have not recorded a receivable for any potential recovery from our insurers. We intend to vigorously pursue our rights with
respect to insurance coverage and 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 affect on our financial position or results of operations.

14.    Provision for Income Taxes

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007(Amounts in thousands)Provision for income taxes

$
38,407

$
64,090

$
98,524

$
135,283Effective tax rate


36
%

43
%

31
%

36
%


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



Our
effective tax rate for the three and six months ended June 30, 2008 was also impacted by the settlement of IRS audits for the tax years 2004 to 2005. We recorded a
$4.3 million tax benefit to our income tax provision reflecting the settlement of various issues. In conjunction with those settlements, we reduced our tax reserves by $4.9 million and
recorded current and deferred tax benefits for the remaining portion of the settlement amounts.

We
are currently under IRS audit for the tax years 2006 to 2007 and various states for the tax years 1999 to 2005. We believe that we have provided sufficiently for all audit exposures.
Settlement of these audits or the expiration of the statute of limitations on the assessment of income taxes for any tax

26

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

14.    Provision for Income Taxes (Continued)

year
may result in an adjustment of future tax provisions. Any such adjustment would be recorded upon the effective settlement of the audit or expiration of the applicable statute of limitations.

15.    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, we have six reporting segments as described above in Note 1., "Description of Business," to these consolidated financial
statements. Effective January 1, 2008, as a result of changes in how we review our business, certain general and administrative expenses, which were formerly allocated amongst our reporting
segments and Other, are now allocated to Corporate. We have revised our 2007 segment presentation to conform to our 2008 presentation.

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

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Revenues:Renal

$
199,419

$
172,249

$
397,189

$
337,926Therapeutics(1)


611,935


464,749


1,180,628


894,266Transplant


47,843


43,424


93,773


84,701Biosurgery


131,215


107,889


242,877


206,282Genetics


78,534


73,714


152,863


139,872Oncology


33,324


17,430


62,372


39,879Other


68,407


53,564


140,653


112,973Corporate


457


400


840


703Total

$
1,171,134

$
933,419

$
2,271,195

$
1,816,602


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---



Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

15.    Segment Information (Continued)

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Income (loss) before income taxes:Renal

$
88,170

$
72,757

$
181,445

$
137,760Therapeutics(1)


378,199


292,025


743,409


589,999Transplant


(11,496
)

(7,127
)

(19,410
)

(10,325
)Biosurgery


28,670


18,968


47,456


31,835Genetics


3,620


11,965


7,729


15,769Oncology(2)


(26,666
)

(12,826
)

(51,651
)

(19,712
)Other(2,3)


(175,599
)

(224
)

(240,578
)

1,415Corporate(4)


(176,927
)

(227,654
)

(355,041
)

(369,477
)Total

$
107,971

$
147,884

$
313,359

$
377,264


---

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

15.    Segment Information (Continued)



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

June 30,
2008

December 31,
2007Segment Assets(1):Renal

$
1,462,292

$
1,468,428Therapeutics(2)


1,829,763


1,230,128Transplant


435,234


415,903Biosurgery


515,357


458,412Genetics


172,853


148,787Oncology


939,637


940,097Other


238,972


246,496Corporate(3)


3,588,744


3,393,490Total

$
9,182,852

$
8,301,741


---

June 30,
2008

December 31,
2007Cash, cash equivalents, short- and long-term investments in debt securities

$
1,254,495

$
1,460,394Deferred tax assets, net


429,478


260,005Property, plant & equipment, net


1,407,459


1,240,992Investments in equity securities


162,930


89,181Other assets


334,382


342,918Total

$
3,588,744

$
3,393,490


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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 diseases, orthopaedics, organ transplant, diagnostic and predictive testing, and cancer. We are organized into six financial reporting
units, which we also consider to be our reporting segments:



We
report the activities of our diagnostic products, bulk pharmaceuticals and cardiovascular business units under the caption "Other." We report our corporate, general and administrative
operations and corporate science activities under the caption "Corporate."

Effective
January 1, 2008, as a result of a change in how we review our business, certain general and administrative expenses which were formerly allocated amongst our reporting
segments and Other, are now allocated to Corporate.

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Table of Contents

As
a result of our acquisition of Bioenvision in October 2007, our Oncology business unit, which was formerly reported combined with "Other," now meets the criteria for disclosure as a
separate reporting segment. We have revised our 2007 segment disclosures to conform to our 2008 presentation.

MERGERS AND ACQUISITIONS

The following acquisitions were accounted for as business combinations and, accordingly, we have included their results of operations
in our consolidated statements of operations from the date of acquisition.

Diagnostic Assets of Diagnostic Chemicals Limited

On December 3, 2007, we acquired certain diagnostic assets from Diagnostic Chemicals Limited, or DCL, a
privately-held diagnostics and biopharmaceutical company, including DCL's line of over 50 formulated clinical chemistry reagents and their diagnostics operations in Prince
Edward Island, Canada and Connecticut. We paid consideration of $53.8 million in cash.

Bioenvision

Effective October 23, 2007, we completed our acquisition of Bioenvision through the culmination of a two step process consisting
of a tender offer completed in July 2007, and a merger approved in October 2007. We paid gross consideration of $349.9 million in cash, including $345.4 million for the outstanding
shares of Bioenvision Common and Series A Preferred Stock and options to purchase shares of Bioenvision Common Stock, and approximately $5 million for acquisition costs. Net
consideration was $304.7 million as we acquired Bioenvision's cash and cash equivalents totaling $45.2 million.

Bioenvision
was focused on the acquisition, development and marketing of compounds and technologies for the treatment of cancer, autoimmune disease and infection. The acquisition of
Bioenvision provides us with the rights to clofarabine outside North America. We currently market clofarabine in the United States and Canada under the brand name Clolar for relapsed and refractory
pediatric ALL patients. In Europe, we co-developed clofarabine with Bioenvision and, prior to the acquisition, Bioenvision had been marketing the product under the brand name Evoltra, also
for the treatment of relapsed and refractory pediatric ALL patients. We are developing clofarabine for diseases with significantly larger patient populations, including use as a first-line
therapy for the treatment of adult AML. Clofarabine has been granted orphan drug status for the treatment of ALL and AML in both the United States and European Union.

STRATEGIC TRANSACTIONS

Collaboration with PTC

On July 15, 2008, we entered into a collaboration agreement with PTC to develop and commercialize PTC124, PTC's novel oral
therapy in late-stage development for the treatment of nonsense-mutation-mediated DMD and nonsense-mutation-mediated CF. Under the terms of the agreement, PTC will commercialize PTC124 in
the United States and Canada, and we will commercialize the treatment in all other countries. In connection with the collaboration agreement, we paid PTC a nonrefundable upfront payment of
$100.0 million, which we recorded as a charge to research and development in our consolidated statements of operations in July 2008. We classify nonrefundable fees paid outside of a business
combination for the acquisition or licensing of products that have not received regulatory approval and have no future alternative use as research and development expense. PTC will conduct and be
responsible for the phase 2b trial of PTC124 in DMD, the phase 2b trial in CF and two proof-of-concept studies in other indications to be determined. Once these four studies have been
completed, we and PTC will share research and development costs for

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PTC124
equally. We and PTC will each bear the sales and marketing and other costs associated with the commercialization of PTC124 in our respective territories. PTC is eligible to receive up to
$337.0 million in milestone payments as follows:



PTC
is also eligible to receive tiered, double-digit royalties from sales of PTC124 outside of the United States and Canada.

Strategic Alliance with Isis

On January 7, 2008, we entered into a strategic alliance with Isis, whereby we obtained an exclusive license to develop and
commercialize mipomersen, a lipid-lowering drug targeting apolipoprotein B-100, for the treatment of FH, an inherited disorder that causes exceptionally high levels of
LDL-cholesterol. In February 2008, we made a nonrefundable payment to Isis of $150.0 million, of which $80.1 million was recorded as an investment in equity securities in our
consolidated balance sheets based on the fair value of the five million shares of Isis common stock we acquired in connection with the transaction and the remaining $69.9 million was allocated
to the mipomersen license, which had not reached technological feasibility and did not have alternative future use. We recorded the $69.9 million license fee as a charge to research and
development expense in our consolidated statements of operations in the first quarter of 2008. We classify nonrefundable fees paid outside of a business combination for the acquisition or licensing of
products that have not received regulatory approval and have no future alternative use as research and development expense.

In
June 2008, we finalized the terms of our license and collaboration agreement with Isis and paid Isis an additional $175.0 million upfront nonrefundable license fee,
which we recorded as a charge to research and development expense in our consolidated statements of operations in June 2008. Under the terms of the agreement, Isis will contribute up to the
first $125.0 million in funding for the development of mipomersen and, thereafter, we and Isis will share development costs for mipomersen equally. The initial funding commitment by Isis and
shared development funding will end when the mipomersen program is profitable. In the event the research and development of mipomersen is terminated prior to Isis completing their funding obligation,
we are not entitled to any refund of our $175.0 million upfront payment. Accordingly, the $175.0 million was recorded as research and development expense in June 2008. Isis is eligible
to receive up to $750.0 million in commercial milestone payments and up to $825.0 million in development and regulatory milestone payments.

We
will be responsible for funding sales and marketing expenses until mipomersen revenues are sufficient to cover such costs. Profits on mipomersen initially will be allocated 70% to us
and 30% to Isis. The profit ratio will be adjusted on a sliding scale as annual revenues for mipomersen ramp up to $2.0 billion, at which point we will share profits equally with Isis. The
results of our mipomersen program will be included in the results of our cardiovascular business unit, which are reported under the caption "Other" in our segment disclosures.

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 2007 Form 10-K. There have been no significant changes to our critical accounting policies or significant judgments and estimates since December 31, 2007. Additional

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information
regarding our provisions and estimates for our product sales allowances, sales allowance reserves and accruals, and distributor fees, and the key assumptions we use to determine the fair
value assigned to in-process research and development 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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Our
provisions for product sales allowances reduced gross product sales as follows (amounts in thousands):

Three Months Ended
June 30,



Six Months Ended
June 30,Increase/
(Decrease)
% Change

Increase/
(Decrease)
% Change2008

2007

2008

2007Product sales allowances:Contractual adjustments

$
107,095

$
101,396


6
%
$
209,014

$
186,191


12
%Discounts


5,503


4,779


15
%

11,008


9,193


20
%Sales returns


4,917


5,705


(14
)%

11,668


7,422


57
%Total product sales allowances

$
117,515

$
111,880


5
%
$
231,690

$
202,806


14
%Total gross product sales

$
1,189,317

$
957,362


24
%
$
2,309,759

$
1,846,478


25
%Total product sales allowances as a percent of total gross product sales


10
%

12
%




10
%

11
%


Total product sales allowances increased $5.6 million, or 5%, for the three months ended June 30, 2008, as compared to the same
period of 2007, and $28.9 million, or 14%, for the six months ended June 30, 2008, as compared to the same period of 2007, primarily due to an increase in overall gross product sales,
and to a lesser extent, changes in rebate rates or product mix. The decrease in sales returns allowances for the three months ended June 30, 2008, as compared to the same period of 2007, is
primarily due to a slight decrease in estimates for the volume of product returns for our Renal segment. The increase in sales returns allowances for the six months ended June 30, 2008, as
compared to the same period of 2007, is primarily due to increased estimates for the volume of product returns for our Transplant, Biosurgery and Renal segments.

Total
estimated product sales allowance reserves and accruals in our consolidated balance sheets increased 6% to approximately $164 million as of June 30, 2008, as compared
to approximately $155 million as of December 31, 2007, primarily due to increased product sales. 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 Issue No. 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:



We
record fees paid to our distributors for services 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

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distributor
fees recorded as a reduction to product sales and charged to SG&A (amounts in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Distributor fees:Included in contractual adjustments and recorded as a reduction to product sales

$
1,611

$
3,198

$
6,019

$
6,290Charged to SG&A


3,569


3,458


6,520


6,434Total distributor fees

$
5,180

$
6,656

$
12,539

$
12,724


Total
distributor fees decreased $1.5 million for the three months ended June 30, 2008, as compared to the same period of 2007, primarily due to decreased estimates for
distributor fees for our Renal segment.

In-Process Research and Development

In-process research and development 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. The fair value of such technologies is expensed upon acquisition. A technology is considered to have an
alternative future use if it is probable that the acquirer will use the asset in its current, incomplete state as it existed at the acquisition date, the asset will be used in another research and
development project that has not yet commenced, and economic benefit is anticipated from that use. If a technology is determined to have an alternative future use, then the fair value of the program
would be recorded as an asset on the balance sheet rather than expensed. None of the incomplete technology programs we have acquired through our business combinations have reached technological
feasibility nor had an alternative future use and, therefore, the fair value of those programs was expensed on the acquisition date. 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.

Charges
for in-process research and development acquired through business combinations, which we refer to as IPR&D, are classified in our consolidated statements of operations within the
line item Purchase of In-Process Research and Development. Conversely, nonrefundable fees paid outside of a business combination 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.

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:



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

Use
of different estimates and judgments could yield materially different results in our analysis and could result in materially different asset values and IPR&D 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 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 future cash flows we have estimated and recorded as IPR&D 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.

We
have included additional information on the nature, timing and estimated costs necessary to complete our acquired IPR&D programs and the key assumptions used to determine the fair
value of specific IPR&D programs under the caption "Purchase of In-Process Research and Development" in this "Management's Discussion and Analysis of Financial Condition and Results of Operations."

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
June 30,



Six Months Ended
June 30,Increase/
(Decrease)
% Change

Increase/
(Decrease)
% Change2008

2007

2008

2007Product revenue

$
1,071,801

$
845,482


27
%
$
2,078,069

$
1,643,672


26
%Service revenue


90,622


82,475


10
%

176,486


158,356


11
%Total product and service revenue


1,162,423


927,957


25
%

2,254,555


1,802,028


25
%Research and development revenue


8,711


5,462


59
%

16,640


14,574


14
%Total revenues

$
1,171,134

$
933,419


25
%
$
2,271,195

$
1,816,602


25
%


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---



Table of Contents

Product Revenue

We derive product revenue from sales of:



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

Three Months Ended
June 30,



Six Months Ended
June 30,Increase/
(Decrease)
% Change

Increase/
(Decrease)
% Change2008

2007

2008

2007Renal:Renagel/Renvela (including sales of bulk sevelamer)

$
168,567

$
144,954


16
%
$
337,261

$
282,338


19
%Hectorol


30,852


27,295


13
%

59,928


55,588


8
%Total Renal


199,419


172,249


16
%

397,189


337,926


18
%Therapeutics:Cerezyme


319,360


282,979


13
%

623,663


546,770


14
%Fabrazyme


126,608


104,349


21
%

243,083


205,013


19
%Thyrogen


39,448


29,540


34
%

73,233


55,878


31
%Myozyme


77,222


46,745


65
%

144,546


84,664


71
%Aldurazyme


38,667





N/A


75,506





N/AOther Therapeutics


10,437


705


>100
%

20,209


872


>100
%Total Therapeutics


611,742


464,318


32
%

1,180,240


893,197


32
%Transplant:Thymoglobulin/Lymphoglobuline


45,592


41,376


10
%

89,265


80,818


10
%Other Transplant


2,251


2,048


10
%

4,508


3,703


22
%Total Transplant


47,843


43,424


10
%

93,773


84,521


11
%Biosurgery:Synvisc/Synvisc-One


70,927


64,863


9
%

127,069


118,459


7
%Sepra products


34,780


25,076


39
%

65,384


48,191


36
%Other Biosurgery


13,392


8,386


60
%

26,973


18,958


42
%Total Biosurgery


119,099


98,325


21
%

219,426


185,608


18
%Oncology


25,939


14,574


78
%

48,220


31,271


54
%Other product revenue


67,759


52,592


29
%

139,221


111,149


25
%Total product revenues

$
1,071,801

$
845,482


27
%
$
2,078,069

$
1,643,672


26
%


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Renal

Sales of Renagel/Renvela, including sales of bulk sevelamer, increased 16% to $168.6 million for the three months ended
June 30, 2008, as compared to the same period of 2007. Renagel price increases in the United States in April 2007 accounted for $4.7 million of the additional revenue, while increased
end-user demand worldwide accounted for $11.4 million of additional revenue. The strengthening of foreign currencies, primarily the Euro against the U.S. dollar, for the three
months ended June 30, 2008, as compared to the same period of 2007, positively impacted Renagel revenue by $9.1 million. Sales of Renagel/Renvela, including sales of bulk
sevelamer, were 14% of our total revenue for the three months ended June 30, 2008, as compared to 16% for the same period of 2007.

Sales
of Renagel/Renvela, including sales of bulk sevelamer, increased 19% to $337.3 million for the six months ended June 30, 2008, as compared to the same period of 2007.
Renagel price increases in the United States in April 2007 accounted for $11.2 million of the additional revenue, while increased end-user demand worldwide accounted for
$23.0 million of additional revenue. The strengthening of foreign currencies, primarily the Euro against the U.S. dollar, for the six months ended June 30, 2008, as compared to the same
period of 2007, positively impacted Renagel revenue by $17.7 million. Sales of Renagel/Renvela, including sales of bulk sevelamer, were 15% of our total revenue for the six months ended
June 30, 2008, as compared to 16% for the same period of 2007.

On
October 22, 2007, the FDA granted marketing approval for Renvela, a second-generation buffered form of Renagel for the control of serum phosphorus in patients with CKD on
dialysis. In March 2008, we launched Renvela for dialysis patients in the United States and the product is now included in more than 85% of health plan formularies. Sales of Renvela in the United
States were $0.8 million for the three months ended and $5.4 million for the six months ended June 30, 2008. We are currently pursuing regulatory approvals in Europe, South
America and in other international markets.

In
October 2007, an FDA advisory committee voted to recommend that the agency extend the indications for phosphate binders to include pre-dialysis patients with
hyperphosphatemia. We are engaged in discussions with the FDA regarding the expansion of the product's labeling to include CKD patients with hyperphosphatemia who have not progressed to dialysis. In
addition, we expect to file for approval of a powder form of Renvela that may make it easier for patients to comply with their prescribed treatment program. While Renagel will remain available for a
period of time, our long-term goal is to transition patients to Renvela.

Sales
of Hectorol increased 13% to $30.9 million for the three months ended and 8% to $59.9 million for the six months ended June 30, 2008, as compared to
$27.3 million and $55.6 million for the same periods of 2007, primarily due to higher end-user demand.

We
expect sales of Renagel/Renvela and Hectorol to continue to increase, driven primarily by growing patient access to these products, including through the Medicare Part D
program in the United States, and the continued adoption of the products by nephrologists worldwide. Adoption rates for Renagel/Renvela are expected to trend favorably as a result of the recent
introduction of Renvela in the U.S. market, anticipation of a 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 of the CKD market and the anticipated launch of a 1 mg capsule form of Hectorol in the first
half of 2009. In addition, we expect adoption rates to increase for both Renagel/Renvela and Hectorol as the result of our recent expansion and redeployment of our Renal sales force.

Renagel/Renvela
and Hectorol compete with several other marketed products and our future sales may be impacted negatively by these products. Both Renagel and Hectorol also are subjects
of Abbreviated New Drug Applications (ANDAs) containing "Paragraph IV certifications," which is the

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filing
a generic manufacturer uses to challenge one or more 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.

In
the case of Renagel, the ANDA Paragraph IV certification relates only to one of our Renagel patents, namely our patent that covers features of our tablet dosage form. This
patent expires in 2020. The ANDA applicant has alleged that its generic tablet would not infringe our tablet dosage form patent, but we have not yet received sufficient information from the ANDA
applicant to assess the merits of this position. The ANDA does not contain a Paragraph IV certification with respect to our Renagel pharmaceutical composition and medical use patent estate,
which protect the product and its approved indications until 2014.

In
the case of Hectorol, the ANDA applicant has 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 claiming our highly purified form of
Hectorol (which patent expires in 2021). We believe that our patents are valid, and have not yet received sufficient information from the ANDA application to assess the merits of its
non-infringement allegation.

If
either of the ANDA filers or any other generic manufacturer were to receive approval to sell a generic version of Renagel 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 with Renagel/Renvela dosing, 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 Renal reporting segment that we record from period to period.

Therapeutics

Therapeutics product revenue increased 32% to $611.7 million for the three months ended and 32% to $1.2 billion for the
six months ended June 30, 2008, as compared to the
same periods of 2007, due to continued growth in sales of Cerezyme, Fabrazyme and Myozyme and the inclusion of Aldurazyme sales in our results of operations beginning in 2008. As a result of our
restructured relationship with BioMarin and BioMarin/Genzyme LLC regarding the manufacturing, marketing and sale of Aldurazyme, effective January 1, 2008, we began to record all sales of
Aldurazyme.

Sales
of Cerezyme increased 13% to $319.4 million for the three months ended and 14% to $623.7 million for the six months ended June 30, 2008, as compared to the
same periods of 2007, is attributable to our continued identification of new Gaucher disease patients, particularly in international markets. Through October 2007, our price for Cerezyme had remained
consistent from period to period. Effective November 1, 2007, we implemented a 3% price increase in the United States for Cerezyme. 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 do not expect that the current new patient growth trend will continue. The strengthening of foreign currencies,
primarily the Euro against the U.S. dollar, positively impacted Cerezyme revenue by $19.2 million for the three months ended and $36.5 million for the six months ended June 30,
2008, as compared to the same periods of 2007.

Sales
of Fabrazyme increased 21% to $126.6 million for the three months ended and 19% to $243.1 million for the six months ended June 30, 2008, as compared to the
same periods of 2007, is primarily attributable to increased patient identification worldwide as Fabrazyme is introduced into new markets. We implemented a 3% price increase for Fabrazyme in the
United States in November 2007 which did not have a significant impact on Fabrazyme revenue for the three and six months ended

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June 30,
2008. The strengthening of foreign currencies, primarily the Euro against the U.S. dollar, positively impacted Fabrazyme revenue by $8.3 million for the three months ended and
$15.8 million for the six months ended June 30, 2008, as compared to the same periods of 2007.

Sales
of Myozyme were $77.2 million for the three months ended and $144.5 million for the six months ended June 30, 2008, as compared to $46.7 million and
$84.7 million for the same periods of 2007. We launched Myozyme in the United States in May 2006, in Europe a month later and in Canada in September 2006. We are introducing Myozyme on a
country-by-country basis in the European Union, as pricing and reimbursement approvals are obtained. Myozyme has received orphan drug designation in both the United States,
which provides seven years of market exclusivity, and in the European Union, which provides ten years of market exclusivity. In April 2007, Myozyme was approved for commercial sale in Japan and
subsequently, in June 2007, we launched the product upon receipt of reimbursement approval. We expect to file for approval in several additional countries in the second half of 2008. The strengthening
of foreign currencies, primarily the Euro, against the U.S. dollar, positively impacted Myozyme revenue by $4.5 million for the three months ended and $7.9 million for the six months
ended June 30, 2008, as compared to the same periods of 2007.

We
currently manufacture Myozyme in the United States at the 160 liter bioreactor, or 160L, scale at our manufacturing facility in Framingham, Massachusetts and at the 2000L scale at our
manufacturing facility in Allston, Massachusetts. We have begun Myozyme fill-finish at our 2000L facility in Waterford, Ireland. We have approval to sell Myozyme manufactured at the 160L
scale in the United States and Myozyme produced at the 2000L scale has been approved for sale in more than 40 countries outside the United States.

In
October 2007, we submitted an application to the FDA seeking approval of Myozyme produced at the 2000L scale to meet the expected demand for the product in the U.S. market going
forward. In April 2008, the FDA concluded that Myozyme produced at the 160L scale and at the 2000L scale should be classified as two different products because of differences in the carbohydrate
structures of the molecules. As a result, the FDA has required us to submit a separate BLA to gain U.S. approval for alglucosidase alfa (Myozyme) produced at the 2000L scale. The FDA proposed that we
initiate a rolling BLA review process by submitting results from our Late Onset Treatment Study, or LOTS study, for Myozyme because the Myozyme used in that study was produced at the 2000L scale. We
had already been in the process of preparing the results of that study for submission to the FDA to fulfill a post-marketing commitment. The LOTS study, which met its
co-primary efficacy endpoints, was undertaken to evaluate the safety and efficacy of Myozyme in juvenile and adult patients with Pompe disease. In May 2008, we submitted the BLA for
alglucosidase alfa (Myozyme) produced at the 2000L scale to the FDA. We expect the FDA to give the BLA priority review and to act on the application by the end of 2008. We anticipate that this process
will culminate in the availability of two commercial versions of Myozyme in the United States: one produced at the 160L scale and the other produced at the 2000L scale. This decision by the FDA will
negatively impact our anticipated 2008 Myozyme revenue growth by approximately $45 million and because we will continue to provide Myozyme to some patients through a clinical access program, we
anticipate that costs related to Myozyme in 2008 will be approximately $8-$10 million more than originally expected. We expect demand for Myozyme to continue to grow and expect to
begin providing U.S. patients with commercial 2000L product during the first quarter of 2009. In the meantime, we are continuing our efforts to optimize supply for the U.S. market.

To
meet the global demand for Myozyme, we are working to secure approval to produce Myozyme at our 4000 liter bioreactor, or 4000L, scale manufacturing facility in Belgium. We are
conducting process validation runs for Myozyme produced at the 4000L scale, which we expect to complete in 2008 and subsequently file for EMEA approval. We expect European authorities will approve
Myozyme production at the 4000L scale at our Belgium manufacturing facility during the first half of 2009.

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Product
supply of Myozyme in 2009 is expected to be particularly tight until production at the 4000L scale at this facility is approved.

Effective
January 1, 2008, we, BioMarin and BioMarin/Genzyme LLC restructured our relationship regarding the manufacturing, marketing and sale of Aldurazyme and entered
into several new agreements. BioMarin will continue to manufacture Aldurazyme. We will continue to purchase Aldurazyme exclusively from BioMarin and globally market and sell the product. Effective
January 1, 2008, instead of sharing all costs and profits of Aldurazyme equally, we began to record all sales of
Aldurazyme and began paying BioMarin a tiered payment ranging from approximately 39.5% to 50% of worldwide net product sales of Aldurazyme. Aldurazyme product revenue was $38.7 million for the
three months ended and $75.5 million for the six months ended June 30, 2008. Prior to January 1, 2008, on behalf of BioMarin/Genzyme LLC, we were commercializing Aldurazyme
in the United States, Canada, the European Union, Latin America and the Asia-Pacific regions and continuing to launch Aldurazyme on a country-by-country basis as
pricing and reimbursement approvals were obtained. BioMarin/Genzyme LLC's Aldurazyme product revenue recorded by BioMarin/Genzyme LLC, was $29.1 million for the three months ended
and $55.9 million for the six months ended June 30, 2007. The increase in Aldurazyme sales of $9.5 million for the three months ended and $19.6 million for the six months
ended June 30, 2008 are primarily attributable to increased patient identification worldwide as Aldurazyme was introduced into new markets. We have applications for marketing approval for
Aldurazyme currently pending in several countries in Latin America, Central and Eastern Europe and the Asia-Pacific regions.

Sales
of Thyrogen increased 34% to $39.4 million for the three months ended and 31% to $73.2 million for the six months ended June 30, 2008, as compared to the same
periods of 2007. Thyrogen price increases of approximately 10% in the United States in April 2007 and 15% in the United States in March 2008 accounted for additional revenue of $2.8 million for
the three months ended and $4.2 million for the six months ended June 30, 2008, while worldwide volume growth positively impacted sales by $5.9 million for the three months ended
and $10.0 million for the six months ended June 30, 2008. The strengthening of foreign currencies, primarily the Euro against the U.S. dollar, positively impacted Thyrogen revenue by
$2.0 million for the three months ended and $3.9 million for the six months ended June 30, 2008, as compared to the same periods of 2007. In December 2007 we received FDA approval
for the use of Thyrogen in thyroid cancer remnant ablation procedures.

Transplant

Transplant product revenue increased 10% to $47.8 million for the three months ended and 11% to $93.8 million for the six
months ended June 30, 2008, as compared to the same periods of 2007. This was primarily due to a $4.3 million increase for the three months ended and a $9.7 million increase for
the six months ended June 30, 2008 in Thymoglobulin revenue as a result of an 11% increase in the worldwide average sales price of Thymoglobulin. In addition, sales of Thymoglobulin increased
$2.7 million for the three months ended and $4.0 million for the six months ended June 30, 2008, due to an increase in sales volume resulting from increased utilization of
Thymoglobulin in transplant procedures worldwide.

In
March 2008, we recalled one lot and in April 2008 we recalled an additional three lots of Thymoglobulin that no longer met our specifications for product appearance. The value
of the product returned as a result of these recalls was not significant. We expect to recall additional lots this year for the same reason, although most of the product will likely be consumed prior
to a recall being necessary. In July 2008, we wrote off one lot of Thymoglobulin, valued at approximately $5 million, due to a filter failure at our fill-finish facility in Waterford, Ireland.
We will continue to closely monitor our Thymoglobulin inventory levels and have increased production in an effort to maintain adequate supply

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levels
throughout the remainder of 2008. We have begun construction of a new manufacturing plant for Thymoglobulin in Lyon, France to support the long-term growth of the product.

Biosurgery

Biosurgery product revenue increased 21% to $119.1 million for the three months ended and 18% to $219.4 million for the
six months ended June 30, 2008, as compared to the same periods of 2007. Seprafilm revenue increased $8.2 million for the three months ended and $14.9 million for the six months
ended June 30, 2008, as compared to the same periods of 2007, primarily due to greater penetration of the product into the United States, Japanese and European markets.

We
received approval to market Synvisc-One, a single injection regimen, in the European Union in December 2007. In November 2007, we received a letter from the FDA requesting
additional analysis and data regarding our marketing application for Synvisc-One in the United States. We responded to the FDA's letter in June 2008 and we currently expect regulatory
action on our marketing application by the end of 2008. We also plan on pursuing marketing approvals for Synvisc-One in Canada, Asia and Latin America.

The
combined revenues of Synvisc/Synvisc-One increased 9% to $70.9 million for the three months ended and 7% to $127.1 million for the six months ended
June 30, 2008, as compared to the same periods of 2007, primarily due to an expanded sales and marketing investment and the initiation of direct sales of the product in Latin America.

Other
Biosurgery product revenue increased 60% to $13.4 million for the three months ended and 42% to $27.0 million for the six months ended June 30, 2008, as
compared to the same periods of 2007, primarily due to $4.6 million of revenue for the three months ended and $7.1 million of revenue for the six months ended June 30, 2008
related to a dermal filler we are developing with and manufacturing for sale to Mentor Corporation, or Mentor.

Oncology

Oncology product revenue increased 78% to $25.9 million for the three months ended and 54% to $48.2 million for the six
months ended June 30, 2008, as compared to the same periods of 2007, primarily due to the addition of sales of Clolar outside of North America, which rights we acquired in connection with our
acquisition of Bioenvision in October 2007.

In
September 2007, the FDA approved expanded labeling for Campath to include first-line treatment of patients with B-cell chronic lymphocytic leukemia, or
B-CLL, significantly increasing the number of patients eligible to receive the product. In December 2007 we received European approval for this expanded indication as well.

We
are developing the intravenous formulation of Clolar for significantly larger indications, including first-line and relapsed or refractory acute myelogenous leukemia, or
AML, in adults. We are also developing an oral formulation of Clolar and have initiated clinical trials for the treatment of myelodysplastic syndrome, or MDS. Clolar has been granted orphan drug
status for the treatment of ALL and AML in both the United States and European Union.

Other Product Revenue

Other product revenue increased 29% to $67.8 million for the three months ended and 25% to $139.2 million for the six
months ended June 30, 2008, as compared to the same periods of 2007, primarily due to:



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Service Revenue

We derive service revenue primarily from the following sources:



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

Three Months Ended
June 30,



Six Months Ended
June 30,Increase/
(Decrease)
% Change

Increase/
(Decrease)
% Change2008

2007

2008

2007Therapeutics

$
167

$



N/A

$
343

$



N/ABiosurgery


11,298


8,338


36
%

22,030


17,700


24
%Genetics


78,534


73,714


7
%

152,863


139,872


9
%Oncology


424


346


23
%

834


628


33
%Other


199


77


>100
%

416


156


>100
%Total service revenue

$
90,622

$
82,475


10
%
$
176,486

$
158,356


11
%


Service
revenue attributable to our Biosurgery reporting segment increased 36% to $11.3 million for the three months ended and 24% to $22.0 million for the six months ended
June 30, 2008, as compared to the same periods of 2007. The increases were primarily due to higher demand for Epicel and MACI.

Service
revenue attributable to our Genetics reporting segment increased 7% to $78.5 million for the three months ended and 9% to $152.9 million for the six months ended
June 30, 2008, as compared to the same periods of 2007. The increases were primarily attributable to continued growth in revenue from our genetic testing and prenatal screening services and the
increase in demand for certain testing services for patients diagnosed with cancer.

The
strengthening of foreign currencies against the U.S. dollar for the three and six months ended June 30, 2008, as compared to the same periods of 2007, did not have a
significant impact on service revenue.

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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
June 30,



Six Months Ended
June 30,Increase/
(Decrease)
% Change

Increase/
(Decrease)
% Change2008

2007

2008

2007International product and service revenue

$
623,237

$
439,897


42
%
$
1,187,364

$
850,916


40
%% of total product and service revenue


54
%

47
%




53
%

47
%


The
42% increase to $623.2 million in international product and service revenue for the three months ended and the 40% increase to $1.2 billion for the six months ended
June 30, 2008, as compared to the same periods of 2007, is primarily due to an $107.7 million increase for the three month period and a $197.3 million increase for the six month
period in the combined international sales of Renagel, Cerezyme, Fabrazyme and Myozyme, primarily due to an increase in the number of patients using these products in the European Union, South America
and the Asia-Pacific rim. In addition, due to the restructured relationship with BioMarin/Genzyme LLC, we began to record Aldurazyme revenue effective January 1, 2008. Revenue
generated outside the United States for Aldurazyme was $31.5 million for the three months ended and $61.2 million for the six months ended June 30, 2008, which had been recorded
as joint venture revenue by BioMarin/Genzyme LLC in 2007.

International
product and service revenue as a percentage of total product and service revenue increased due primarily to the addition of revenue generated outside the United States for
Aldurazyme and clofarabine. We began recording clofarabine revenue outside the United States as a result of our acquisition of Bioenvision in October 2007, which provided us with the exclusive,
worldwide rights to clofarabine.

The
strengthening of foreign currencies against the U.S. dollar, primarily the Euro, positively impacted total product and service revenue by $51.9 million for the three months
ended and $98.5 million for the six months ended June 30, 2008, as compared to the same periods of 2007.

Research and Development Revenue

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

Three Months Ended
June 30,



Six Months Ended
June 30,Increase/
(Decrease)
% Change

Increase/
(Decrease)
% Change2008

2007

2008

2007Therapeutics

$
26

$
431


(94
)%
$
45

$
1,069


(96
)%Transplant








N/A





180


(100
)%Biosurgery


818


1,226


(33
)%

1,421


2,974


(52
)%Oncology


6,961


2,510


>100
%

13,318


7,980


67
%Other


464


896


(48
)%

1,031


1,669


(38
)%Corporate


442


399


11
%

825


702


18
%Total research and development revenue

$
8,711

$
5,462


59
%
$
16,640

$
14,574


14
%


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Table of Contents

Total
research and development revenue increased by $3.2 million for the three months ended and $2.1 million for the six months ended June 30, 2008, as compared to
the same periods of 2007, primarily
due to increases in revenue recognized by our Oncology reporting segment due to higher development activity for Campath, particularly in the multiple sclerosis development program.

MARGINS

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

Three Months Ended
June 30,



Six Months Ended
June 30,Increase/
(Decrease)
% Change

Increase/
(Decrease)
% Change2008

2007

2008

2007Product margin

$
830,458

$
682,230


22
%
$
1,619,987

$
1,325,696


22
%% of total product revenue


77
%

81
%




78
%

81
%Service margin

$
31,635

$
28,129


12
%
$
61,925

$
56,271


10
%% of total service revenue


35
%

34
%




35
%

36
%Total product and service margin

$
862,093

$
710,359


21
%
$
1,681,912

$
1,381,967


22
%% of total product and service revenue


74
%

77
%




75
%

77
%


Product Margin

Our overall product margin increased $148.2 million, or 22%, for the three months ended and $294.3 million, or 22%, for
the six months ended June 30, 2008, as compared to the same periods of 2007. This is primarily due to:



These
increases in product margin were partially offset by the unfavorable effect of exchange rates of $10.3 million for the three months ended and $19.8 million for the
six months ended June 30, 2008 due to the weakening of the U.S. dollar against foreign currencies, primarily the Euro.

Total
product margin as a percentage of total product revenue for the three and six months ended June 30, 2008, as compared to the same periods of 2007, decreased due to the
increase in sales of Myozyme and the addition of Aldurazyme to the results, both of which have lower than average margins, and to higher unit costs for Cerezyme and Fabrazyme.

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.

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Service Margin

Our overall service margin increased $3.5 million, or 12%, for the three months ended and $5.7 million, or 10%, for the
six months ended June 30, 2008, as compared to the same periods of 2007. The increases were primarily attributable to increases in revenues from our genetic testing and prenatal screening
services.

Total
service margin as a percent of total service revenue increased by 1% for the three months ended June 30, 2008, as compared to the same period of 2007, due to an increase in
Epicel revenue. Total service margin as a percent of total service revenue decreased by 1% for the six months ended June 30, 2008, as compared to the same period of 2007, primarily due to an
increase in Carticel and MACI unit costs.

OPERATING EXPENSES

Selling, General and Administrative Expenses

Effective January 1, 2008, as a result of changes in how we review our business, certain general and administrative expenses
which were formerly allocated amongst our reporting segments and Other, are now allocated to Corporate. We have revised our 2007 segment disclosures to conform to our 2008 presentation.

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

Three Months Ended
June 30,



Six Months Ended
June 30,Increase/
(Decrease)
% Change

Increase/
(Decrease)
% Change2008

2007

2008

2007Selling, general and administrative expenses

$
347,305

$
339,480


2
%
$
665,691

$
608,501


9
%% of total revenue


30
%

36
%




29
%

33
%


SG&A
increased by $7.8 million for the three months ended and $57.2 million for the six months ended June 30, 2008, as compared to the same periods of 2007,
primarily due to spending increases of:



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Table of Contents



These
increases were partially offset by a decrease in SG&A for the three and six months ended June 30, 2008 for Corporate because we recorded a $64.0 million charge in
June 2007 for the settlement of the litigation related to the consolidation of our former tracking stocks for which there was no comparable amount recorded in 2008.

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
June 30,



Six Months Ended
June 30,Increase/
(Decrease)
% Change

Increase/
(Decrease)
% Change2008

2007

2008

2007Research and development expenses

$
381,861

$
198,442


92
%
$
644,658

$
364,562


77
%% of total revenue


33
%

21
%




28
%

20
%


Research
and development expenses increased $183.4 million for the three months ended and $280.1 million for the six months ended June 30, 2008, as compared to the
same periods of 2007, primarily due to:



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Table of Contents



These
increases were partially offset by spending decreases 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
June 30,



Six Months Ended
June 30,Increase/
(Decrease)
% Change

Increase/
(Decrease)
% Change2008

2007

2008

2007Amortization of intangibles

$
55,605

$
49,465


12
%
$
111,263

$
99,482


12
%% of total revenue


5
%

5
%




5
%

5
%


Amortization
of intangibles expense increased by $6.1 million for the three months ended and $11.8 million for the six months ended June 30, 2008, as compared to the
same periods of 2007, primarily due to the acquisition of technology in connection with our acquisition of Bioenvision in October 2007 and the acquisition of customer lists and trademarks in
connection with our acquisition of the diagnostic assets of DCL in December 2007.

As
discussed in Note 8., "Goodwill and Other Intangible Assets," to our 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.

Purchase of In-Process Research and Development

We did not complete any acquisitions in the six months ended June 30, 2008. In connection with certain of our acquisitions we
completed between January 1, 2006 and December 31, 2007, we have

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acquired
various IPR&D projects. The following table sets forth IPR&D projects for companies and certain assets we have 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)(1,2)


17
%

2008-2010

$
41AnorMED (2006)

$
589.2

$
526.8

Mozobil (stem cell transplant)(3)


15
%

2009-2014

$
12526.1

AMD070 (HIV)(4)


15
%



$
$
552.9


---

OTHER INCOME AND EXPENSES

Three Months Ended
June 30,



Six Months Ended
June 30,Increase/
(Decrease)
% Change

Increase/
(Decrease)
% Change2008

2007

2008

2007(Amounts in thousands)Equity in income of equity method investments

$


$
5,945


(100
)%
$
188

$
11,557


(98
)%Minority interest


563


15


>100
%

1,026


3,927


(74
)%Gains on investments in equity securities, net


9,153


143


>100
%

9,928


12,931


(23
)%Other


19


(278
)

>(100
)%

(141
)

(803
)

(82
)%Investment income


13,352


17,246


(23
)%

28,222


33,465


(16
)%Interest expense


(1,149
)

(3,621
)

(68
)%

(2,804
)

(7,809
)

(64
)%Total other income

$
21,938

$
19,450


13
%
$
36,419

$
53,268


(32
)%


Equity in Income of Equity Method Investments

Under this caption, we record our portion of the results of our joint venture with Medtronic, Inc., or Medtronic, and our
investment in Peptimmune, Inc., or Peptimmune, and for the three and six months ended June 30, 2007, our portion of the results of BioMarin/Genzyme LLC.

Equity
in income of equity method investments decreased 100% for the three months ended and 98% for the six months ended June 30, 2008, as compared to the same periods of 2007,
primarily due to the restructuring of the relationship with BioMarin/Genzyme LLC. Beginning January 1, 2008, as a result of our restructured relationship with BioMarin, we no longer
account for BioMarin/Genzyme LLC using the equity method of accounting.

49

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Minority Interest

As a result of the restructuring of our relationship with BioMarin/Genzyme LLC, effective January 1, 2008, in accordance
with the provisions of FIN 46R, we began consolidating the results of BioMarin/Genzyme LLC. We recorded BioMarin's portion of this joint venture's income for the three and six months
ended as of June 30, 2008 as minority interest in our consolidated statement of operations for that period, the amounts of which were not significant.

As
a result of our application of FIN 46R, we consolidated the results of Excigen Inc., or Excigen, and, prior to February 20, 2007,
Dyax-Genzyme LLC. On February 20, 2007, we agreed with Dyax to terminate our participation and interest in Dyax-Genzyme LLC. We recorded Dyax's portion of
this joint venture's losses as minority interest in our consolidated statements of operations through February 20, 2007. The results of Excigen were not significant for the three and six months
ended June 30, 2008 and 2007.

Gains on Investments in Equity Securities, Net

We recorded the following gains on investments in equity securities, net of charges for impairment of investments, during the periods
presented (amounts in thousands):

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Gross gains on investments in equity securities:Sirtris

$
10,304

$


$
10,304

$
THP











10,848Other


138


143


913


2,083Total


10,442


143


11,217


12,931Less: charge for impairment of investment


(1,289
)




(1,289
)

Gains on investments in equity securities, net

$
9,153

$
143

$
9,928

$
12,931


In
the second quarter of 2008, we recorded a $10.3 million gain resulting from the liquidation of our investment in the common stock of Sirtris for net cash
proceeds of $14.8 million.

In
March 2007, we recorded a $10.8 million gain in connection with the sale of our entire investment in the capital stock of THP, which had a zero cost basis, for net cash
proceeds of $10.8 million.

At
June 30, 2008, our stockholders' equity includes $28.8 million of unrealized gains and $2.6 million of unrealized losses related to our strategic investments in
equity securities.

Investment Income

Our investment income decreased 23% to $13.4 million for the three months ended and 16% to $28.2 million for the six
months ended June 30, 2008, as compared to $17.2 million and $33.5 million for the same periods of 2007, primarily due to a decrease in our average portfolio yield and lower
balances for international cash, partially offset by higher domestic average cash balances.

Interest Expense

Our interest expense decreased 68% to $1.1 million for the three months ended and 64% to $2.8 million for the six months
ended June 30, 2008, as compared to $3.6 million and $7.8 million for the same periods of 2007, primarily due to a $1.2 million decrease in interest expense for the three
months ended and $2.6 million for the six months ended June 30, 2008 related to asset retirement

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obligations
and a $1.3 million increase for the three months ended and $2.4 million for the six months ended June 30, 2008 in capitalized interest.

Provision for Income Taxes

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007(Amounts in thousands)Provision for income taxes

$
38,407

$
64,090

$
98,524

$
135,283Effective tax rate


36
%

43
%

31
%

36
%


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



Our
effective tax rate for the three and six months ended June 30, 2008 was also impacted by the settlement of IRS audits for the tax years 2004 to 2005. We recorded a
$4.3 million tax benefit to our income tax provision reflecting the settlement of various issues. In conjunction with those settlements, we reduced our tax reserves by $4.9 million and
recorded current and deferred tax benefits for the remaining portion of the settlement amounts.

We
are currently under IRS audit for the tax years 2006 to 2007 and various states for the tax years 1999 to 2005. We believe that we have provided sufficiently for all audit exposures.
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 an adjustment of future tax provisions. Any such adjustment
would be recorded upon the effective settlement 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
$1.25 billion at June 30, 2008 and $1.46 billion at December 31, 2007.

The
following is a summary of our statements of cash flows for the six months ended June 30, 2008 and 2007.

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Cash Flows from Operating Activities

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

Six Months Ended
June 30,2008

2007Cash flows from operating activities:Net income

$
214,835

$
241,981Non-cash charges


241,953


196,810Decrease in cash from working capital changes (excluding impact of acquired assets and assumed liabilities)


(277,480
)

(62,623
)Cash flows from operating activities

$
179,308

$
376,168


Cash
provided by operating activities decreased $196.9 million for the six months ended June 30, 2008, as compared to the same period of 2007, primarily
driven by a $27.1 million decrease in net income, which was impacted by a $244.9 million charge for license fees paid to Isis in exchange for the exclusive worldwide rights to mipomersen
and a $214.9 million increase in cash used for working capital, offset, in part, by a net increase of $45.1 million in non-cash charges. The net increase in
non-cash charges for the six months ended June 30, 2008, as compared to the same period of 2007, is primarily attributable to:



Cash Flows from Investing Activities

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

Six Months Ended
June 30,2008

2007Cash flows from investing activities:Net sales of investments, excluding investments in equity securities

$
30,629

$
84,919Net purchases of investments in equity securities


(65,303
)

(668
)Purchases of property, plant and equipment


(251,785
)

(180,041
)Distributions from equity method investments


6,595


10,900Purchases of other intangible assets


(75,400
)

(27,618
)Other investing activities


2,572


891Cash flows from investing activities

$
(352,692
)
$
(111,617
)


For
the six months ended June 30, 2008, net purchases of investments in equity securities, purchases of other intangible assets and capital expenditures accounted
for significant cash outlays for investing activities. During the six months ended June 30, 2008, we used:



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These
cash outlays were partially offset by $16.2 million of net cash proceeds from the sale of investments in equity securities and $6.6 million of cash distributions from
BioMarin/Genzyme LLC.

Cash Flows from Financing Activities

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

Six Months Ended
June 30,2008

2007Cash flows from financing activities:Proceeds from issuance of our common stock

$
127,008

$
68,174Repurchases of our common stock


(143,012
)

(63,430
)Excess tax benefits from stock-based compensation


8,647


565Payments of debt and capital lease obligations


(3,886
)

(3,356
)Increase in bank overdrafts


29,309


15,935Payments of notes receivable from stockholders


2,770


Minority interest contributions





4,136Other financing activities


34


2,474Cash flows from financing activities

$
20,870

$
24,498


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 three years, beginning 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 six months ended June 30, 2008, we repurchased an additional 2,000,000 shares of our common stock at an average price of $71.49 per share for a total of $143.0 million in
cash, including fees. As of June 30, 2008 we have repurchased a cumulative total of 5,500,000 shares of our common stock at an average price of $68.09 per share for a total of
$374.6 million in cash, including fees.

Revolving Credit Facility

As of June 30, 2008, no amounts were outstanding under our five year, $350.0 million senior unsecured revolving credit
facility. 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
June 30, 2008, 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 2007
Form 10-K. As of June 30, 2008, there have been no material changes to our contractual obligations since December 31, 2007 except the
following:



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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 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:



Our
cash reserves may be further reduced to pay principal and interest on the $690.0 million in principal under our 1.25% convertible senior notes due December 1, 2023. The
notes are initially convertible into Genzyme Stock at a conversion price of approximately $71.24 per share. Holders of the notes may require us to repurchase all or any part of the notes for cash,
common stock, or a combination, at our option, on December 1, 2008, 2013 or 2018, at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest through the date
prior to the date of repurchase. Additionally, upon a change of control, each holder may require us to repurchase, at 100% of the principal amount of the notes plus accrued interest, all or a portion
of the holder's notes for cash. On or after December 1, 2008, we may redeem for cash at 100% of the principal amount of the notes plus accrued interest, all or part of the notes that have not
been previously converted or repurchased.

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.

To
satisfy these and other commitments, we may have to obtain additional financing. We cannot guarantee that we will be able to obtain any additional financing, extend any existing
financing arrangement, or obtain either on favorable terms.

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 the research, development and 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

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operations.
We also acquire companies in which we agree to pay contingent consideration based on attaining certain thresholds.

Recent Accounting Pronouncements

FAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115."Effective
January 1, 2008, we adopted FAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115," which permits, but
does not require, entities to measure certain financial instruments and other assets and liabilities at fair value on an instrument-by-instrument basis. Unrealized gains and
losses on items for which the fair value option has been elected should be recognized in earnings at each subsequent reporting date. In adopting FAS 159, we did not elect to measure any new
assets or liabilities at their respective fair values and, therefore, the adoption of FAS 159 did not have an impact on our results of operations and financial position.

EITF Issue No. 07-1, "Accounting for Collaborative Arrangements."In December 2007, the Emerging Issues Task Force, or EITF, of the FASB reached
a consensus on Issue No. 07-1, "Accounting for Collaborative Arrangements." The EITF concluded on the
definition of a collaborative arrangement and that revenues and costs incurred with third parties in connection with collaborative arrangements would be presented gross or net based on the criteria in
EITF 99-19 and other accounting literature. Companies are also required to disclose the nature and purpose of collaborative arrangements along with the accounting policies and the
classification and amounts of significant financial-statement amounts related to the arrangements. EITF 07-1 will become effective for us January 1, 2009 and will be applied
retrospectively to all periods presented for all collaborative arrangements existing as of the effective date. We are evaluating the impact, if any, this standard will have on our consolidated
financial statements.

EITF Issue No. 07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development
Activities."In June 2007, the FASB ratified the EITF consensus reached in EITF Issue No. 07-3, "Accounting for Nonrefundable Advance Payments
for Goods or Services Received for Use in Future Research and Development Activities," which provides guidance for nonrefundable prepayments for goods or services that will be used or rendered for
future research and development activities and directs that such payments should be deferred and capitalized. Such amounts should be recognized as an expense as the goods are delivered or the related
services are performed, or until it is no longer expected that the goods will be delivered or the services rendered. EITF 07-3 was effective for us beginning January 1, 2008
and we applied it prospectively to new contracts we entered into on or after that date. The implementation of this standard did not have a material impact on our financial position, results of
operations or cash flows.

FAS 141 (revised 2007), "Business Combinations."In December 2007, the FASB issued FAS 141 (revised 2007), "Business Combinations," or
FAS 141R, which replaces FAS 141, "Business Combinations." FAS 141R retains the underlying concepts of FAS 141 in that all business combinations are still required to be
accounted for at fair value under the acquisition method of accounting but changes a number of significant aspects of applying this method. Acquisition costs will generally be expensed as incurred;
noncontrolling interests will be valued at fair value at the acquisition date; IPR&D will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date; restructuring costs
associated with a business combination will generally be expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the
acquisition date generally will affect income tax expense. FAS 141R is effective for us on a prospective basis for all business combinations for which the acquisition date is on or after
January 1, 2009. Early adoption is not permitted. We are currently evaluating the effects, if any, that FAS 141R will have on our consolidated financial statements.

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FAS No. 160, "Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51."In December 2007, the FASB
issued FAS 160, "Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51," which establishes new accounting and reporting standards that
require the ownership interests in subsidiaries not held by the parent to be clearly identified, labeled and presented in the consolidated statement of financial position within equity, but separate
from the parent's equity. FAS 160 also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest, commonly referred to as the minority
interest, to be clearly identified and presented on the face of the consolidated statement of income. Changes in a parent's ownership interest while the parent retains its controlling financial
interest must be accounted for consistently, and when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary must be initially measured at fair value.
The gain or loss on the deconsolidation of the subsidiary is measured using the fair value of any noncontrolling equity investment. FAS 160 also requires entities to provide sufficient
disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. FAS 160 is effective for us January 1, 2009 and
adoption is prospective only. However, upon adoption, presentation and disclosure requirements described above must be applied retrospectively for all periods presented in our consolidated financial
statements. We are currently evaluating the effects, if any, that FAS 160 will have on our consolidated financial statements.

FSP No. 157-2, "Effective Date of FASB Statement No. 157."In accordance with the
provisions of FSP No. 157-2, "Effective Date of FASB Statement No. 157," we elected to defer implementation of FAS 157, as it relates to our non-financial
assets and non-financial liabilities that are recognized and disclosed at fair value in our consolidated financial statements on a nonrecurring basis, until January 1, 2009. We are
evaluating the impact, if any, the adoption of FAS 157, for those assets and liabilities within the scope of FSP No. 157-2, will have on our financial position, results of
operations and liquidity. We did not have any non-financial assets or non-financial liabilities that would be recognized or disclosed on a recurring basis as of June 30,
2008.

FAS No. 161, "Disclosures About Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133."In March 2008, the
FASB issued FAS 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133," which amends and expands the disclosure requirements of
FAS 133, "Accounting for Derivative Instruments and Hedging Activities." FAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.
FAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We are
currently evaluating the effects, if any, that FAS 161 will have on our consolidated financial statements.

FSP No. 142-3, "Determination of the Useful Life of Intangible Assets."In April 2008, the FASB issued FSP No. 142-3,
"Determination of the Useful Life of Intangible Assets." FSP No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine
the useful life of a recognized intangible asset under FAS 142, "Goodwill and Other Intangible Assets." FSP No. 142-3 is effective for fiscal years beginning after
December 15, 2008. We are currently evaluating the effects, if any, that FSP No. 142-3 will have on our consolidated financial statements.

FAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles."In May 2008, the FASB issued FAS 162, "The Hierarchy of Generally Accepted
Accounting Principles." FAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. FAS 162 is
effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles." The implementation of this standard will not have a material impact on our consolidated financial position and results of operations.

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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, 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, Hectorol, Thymoglobulin, Thyrogen, Clolar, Campath, Aldurazyme 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 and alemtuzumab, pursuing
marketing approval for our products in new jurisdictions and developing next generation products, such as Synvisc-One and Genz-112638. 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 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, 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

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reimbursement
characteristics, we will have difficulty maintaining or increasing the sales of our products and services.

Renagel/Renvela
competes with two other products approved in the United States for the control of elevated phosphorus levels in patients with chronic kidney failure on hemodialysis.
Fresenius Medical Care markets PhosLo®, a calcium-based phosphate binder. Shire Pharmaceuticals Group plc, or Shire, markets Fosrenol®, a non-calcium based
phosphate binder. In 2007, Amgen, Inc. acquired Ilypsa and its product candidate, ILY101 (now AMG 223), a polymeric phosphate binder that completed a phase 2 trial in CKD patients
on dialysis. Amgen is currently conducting a Phase 2b study. Renagel 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, also to treat Gaucher disease,
and initiated phase 3 studies in July 2007. Protalix Biotherapeutics Ltd. initiated a phase 3 trial for plant-derived enzyme replacement therapy to treat Gaucher disease in the
third quarter of 2007. Amicus Therapeutics, Inc., or Amicus, is conducting phase 2 trials for oral chaperone medication to treat Gaucher disease. 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 plans to meet with
the FDA
and EMEA to discuss the conduct of phase 3 clinical trials. We are aware of other development efforts aimed at treating Fabry disease.

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's Mitek division and marketed
outside the United States through distributors; 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 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 are considered more efficacious, less burdensome to administer or more cost-effective.

Myozyme
has marketing exclusivity in the United States until 2013 and in the European Union until 2016 due to its orphan drug status. Amicus Therapeutics 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.

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Several
companies market products that, like Thymoglobulin, are used for the prevention and treatment of acute rejection in renal transplant. These products include Novartis'
Simulect® and Roche's ZENAPAX®. Competition in the acute transplant rejection market is driven largely by product efficacy due to the potential decreased long-term
survival of transplanted organs as the result of an acute organ rejection episode.

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:



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. 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.

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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 development-stage 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 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 and to gain marketing approval in new jurisdictions and to 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 $623.7 million for the six months
ended June 30, 2008, representing approximately 27% 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 securities 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

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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 plants. 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 manufacturing approvals in
sufficient time to meet product demand. For example, the FDA has concluded that Myozyme produced in our 2000 liter bioreactors is a different product than Myozyme produced in our 160 liter bioreactors
and has 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. In addition, to meet the global demand for Myozyme, we are working to secure EMEA approval of Myozyme produced at our 4000 liter
bioreactor scale manufacturing plant in Belgium. Product supply will be tight until the Belgian plant is approved, and delay in securing approval would have an adverse effect on our revenues and
earnings.

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.

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.

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Our operating results and financial position may be 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, including our acquisition of Bioenvision, 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 deplete cash resources and some may require us to issue substantial equity or 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. 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. Minor deviations in these manufacturing processes could result in unacceptable changes in the products that
result in lot failures, product recalls, product liability claims and insufficient inventory. For example, we have experienced manufacturing issues with Thymoglobulin that resulted in write-offs or
recalls of lots that went out of specification prior to expiry.

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 of 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 mandated withdrawal of our products from 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. 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. 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.

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Guidelines and recommendations 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 or recommendations 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 or guidelines that are followed by patients and healthcare providers could result in decreased use of our products. The perception by the investment
community or shareholders that recommendations or guidelines 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.

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

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 application 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., the
only source for this material 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 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, or labor shortages or disputes.

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 Genzyme. 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 could impair our ability to supply products at all. This could increase our costs, cause us to lose revenue or market share
and damage our reputation.

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

Our success will depend on our ability to satisfy regulatory requirements. We may not receive required regulatory approvals on a timely
basis or at all. Government agencies heavily regulate the production and sale of healthcare products and the provision of healthcare services. In particular, the FDA 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. Several biotechnology companies have failed to obtain

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regulatory
approvals because regulatory agencies were not satisfied with the structure or conduct of clinical trials. Similar problems could delay or prevent us from obtaining approvals. Furthermore,
regulatory authorities, including the FDA, may not agree with our interpretations of our clinical trial data, which could delay, limit or prevent regulatory approvals.

Therapies
that have received regulatory approval for commercial sale may continue to face regulatory difficulties. If we fail to comply with applicable regulatory requirements,
regulatory authorities could take actions against us, including:



Furthermore,
the FDA 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 and Clolar. 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 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. For example, we received a warning letter from the FDA in September 2007 that addresses certain of our manufacturing procedures in our Thymoglobulin
production facility in Lyon, France. The FDA has accepted our response to the warning letter and we continue to work to optimize our processes at this plant.

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:



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 begun to file

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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 physicians for uses not approved by the FDA or comparable regulatory agencies outside the United States. Although physicians 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 physicians 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 53% of our consolidated product and service revenues for the six months ended
June 30, 2008. 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. 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:



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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 prohibits U.S. companies and their representatives from offering, promising, authorizing or making payments to foreign officials for the purpose of obtaining or retaining business
abroad. 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.

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.

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 confidential for 18 months following their 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 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 consistently treated the breadth of claims allowed in biotechnology patents. If patent
offices or the courts begin to allow or interpret claims more broadly, the incidence and cost of patent interference proceedings and

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the
risk of infringement litigation will likely increase. On the other hand, if patent offices or the courts begin to allow or interpret claims more narrowly, the value of our proprietary rights may
be reduced. 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 corporate 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, Clolar and Hectorol, 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 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. In recent years, generic manufacturers have used Paragraph IV certifications
extensively to challenge patents on a wide array of innovative pharmaceuticals, and we expect this trend to continue and to implicate drug products with even relatively small total revenues.

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 is expected to continue to explore, and ultimately
enact, 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. Such legislation has already been adopted in the European Union.

Both
Renagel and Hectorol are subjects of ANDAs containing Paragraph IV certifications. In the case of Renagel, the ANDA Paragraph IV certification relates only to one of
our Renagel patents, namely our patent that covers features of our tablet dosage form. This patent expires in 2020. The ANDA applicant has alleged that its generic tablet would not infringe our tablet
dosage form patent, but we have not yet received sufficient information from the ANDA applicant to assess the merits of this position. The ANDA does not contain a Paragraph IV certification
with respect to our Renagel pharmaceutical composition and medical use patent estate, which protect the product and its approved indications until 2014. Because the last of our composition of matter
patents expire in 2014, we would expect Renagel to be subject to competition beginning in 2014.

In
the case of Hectorol, the ANDA applicant has 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 claiming our highly purified form of
Hectorol (which patent expires in 2021). We believe that our

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patents
are valid, and have not yet received sufficient information from the ANDA application to assess the merits of its non-infringement allegation.

If
either of the 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.

We may be required to license technology 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.

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 further 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 Canadian pharmacies marketing to American purchasers 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.

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.

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On
September 27, 2007, the Food and Drug Administration Amendments Act of 2007 (the "FDAAA") 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 of approved products.

If our strategic alliances are unsuccessful, our operating results will be negatively 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:



Furthermore,
payments we make under these arrangements may exacerbate fluctuations in our financial results. In addition, under some of our strategic alliances, we make 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
RenaMed Biologics, Inc., or RenaMed, in June 2005. 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. For example, in October 2006, RenaMed suspended clinical trials of its renal
assist device which was being developed to treat patients with acute renal failure, causing us to write off our entire investment in RenaMed. If any of our other
strategic equity investments decline in value and remain below cost for an extended duration, we may incur additional charges.

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

As of June 30, 2008, we had $1.25 billion in cash, cash equivalents and short- and long-term investments,
excluding our investments in equity securities.

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



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We
may further reduce available cash reserves to pay principal and interest on outstanding debt, including our $690.0 million in principal of 1.25% convertible senior notes.

To
satisfy our cash requirements, we may have to obtain additional financing. We may be unable to obtain any additional financing or extend any existing financing arrangements at all or
on terms that we or our investors consider favorable.

Our level of indebtedness may harm our financial condition and results of operations.

As of June 30, 2008, we had $696.8 million of outstanding indebtedness, excluding capital leases. We may incur additional
indebtedness in the future. Our level of indebtedness will have several important effects on our future financial condition and results of operations,
including:



Our
ability to make payments and interest on our outstanding and future indebtedness depends upon our future operating results and financial condition.

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 June 30, 2008, 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 June 30, 2008 to be $5.7 million, as compared to $6.5 million at December 31, 2007. 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.

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. Other exposures to interest rate risk include the fair value of fixed rate
convertible debt and other fixed rate debt. 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.

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We used the following assumptions in preparing the sensitivity analysis for our convertible bonds:



On
this basis, we estimate the potential loss in fair value that would result from a hypothetical 1% (100 basis points) decrease in interest rates to be $2.7 million as of
June 30, 2008, as compared to $3.3 million as of December 31, 2007.

Foreign Exchange Risk

As a result of our worldwide operations, we may face exposure to adverse movements in foreign currency exchange rates, primarily to the
Euro, British Pound and Japanese Yen. 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 forward foreign exchange contracts to further reduce our exposure to changes in exchange rates, primarily to offset the earnings effect from intercompany short-term
foreign currency assets and liabilities. We also hold a limited amount of foreign cash and foreign currency denominated equity securities.

As
of June 30, 2008, we estimated the potential loss in fair value of our foreign currency contracts, foreign cash, and foreign equity holdings that would result from a
hypothetical 10% adverse change in exchange rates to be $71.2 million, as compared to $36.2 million as of December 31, 2007. The change from the prior period is due to an increase
in our net foreign currency 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 June 30, 2008, 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 June 30, 2008.

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 June 30, 2008 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.

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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 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 June 30, 2008:

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
ProgramsApril 1, 2008-April 30, 2008










$
1,195,296,813.47May 1, 2008-May 31, 2008


1,000,000

$
69.78


1,000,000

$
1,125,521,738.47June 1, 2008-June 30, 2008










$
1,125,521,738.47Total


1,000,000
(1)
$
69.78
(2)

1,000,000


---

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We held our annual meeting of shareholders on May 22, 2008. We have set forth below the results of the voting on proposals
submitted to our shareholders for a vote at the annual meeting. Abstentions and broker non-votes were counted for determining a quorum, but were not treated as votes cast on any of the
proposals.

a.     A
proposal to re-elect five directors, each for a one-year term:

Number of VotesNumber of
Broker Non-VotesNominee

For

Against

AbstainDouglas A. Berthiaume


218,770,394


5,631,336


2,688,606


7Gail K. Boudreaux


223,421,741


1,058,804


2,609,794


4Robert J. Carpenter


218,814,032


5,593,529


2,682,776


6Charles L. Cooney


218,809,678


5,580,163


2,700,495


7Richard F. Syron


130,586,444


93,697,045


2,806,841


13


The
number of votes cast in favor of each nominee exceeded the number of votes cast against each nominee and therefore each was reelected as a director of Genzyme. The terms of office of
Victor J. Dzau, M.D., Senator Connie Mack III and Henri A. Termeer continued after the annual meeting.

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b.     A
proposal to amend the 2004 Equity Incentive Plan by increasing the number of shares of common stock covered by the plan by 2,250,000 shares;

Number of
Votes for

Number of
Votes Against

Number of
Votes Abstaining

Number of
Broker Non-Votes177,441,327


21,932,661


2,208,390


25,507,965


The
number of votes cast in favor of the proposal exceeded the number of votes cast against it, and therefore the proposal was adopted.

c.     A
proposal to amend the 2007 Director Equity Plan to specify the automatic grant provisions under the plan;

Number of
Votes for

Number of
Votes Against

Number of
Votes Abstaining

Number of
Broker Non-Votes183,333,706


15,991,677


2,256,996


25,507,964


The
number of votes cast in favor of the proposal exceeded the number of votes cast against it, and therefore the proposal was adopted.

d.     A
proposal to ratify the audit committee's selection of PricewaterhouseCoopers, LLP as our independent auditors for 2008;

Number of
Votes for

Number of
Votes Against

Number of
Votes Abstaining

Number of
Broker Non-Votes221,211,634


3,641,708


2,236,996


5


The
number of votes cast in favor of the proposal exceeded the number of votes cast against it, and therefore the proposal was adopted.

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: August 8, 2008



By:

/s/MICHAEL S. WYZGAMichael S. Wyzga Executive Vice President, Finance, Chief
Financial Officer, and Chief Accounting Officer


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GENZYME CORPORATION AND SUBSIDIARIES

FORM 10-Q, JUNE 30, 2008

EXHIBIT INDEX

EXHIBIT NO.

DESCRIPTION*3.1

Restated Articles of Organization of Genzyme, as amended. Filed as Exhibit 3.1 to Genzyme's Form 10-Q for the quarter ended June 30, 2006.*3.2

By-laws of Genzyme, as amended. Filed as Exhibit 3.1 to Genzyme's Form 8-K filed May 25, 2007.*10.1

2004 Equity Incentive Plan. Filed as Appendix A to Genzyme's Proxy Statement on Schedule 14A for the 2008 Annual Meeting of Shareholders filed April 10, 2008.*10.2

2007 Director Equity Plan. Filed as Appendix B to Genzyme's Proxy Statement on Schedule 14A for the 2008 Annual Meeting of Shareholders filed April 10, 2008.10.3

Form of Non-Statutory Stock Option Agreement for grants under Genzyme's 2007 Director Equity Plan. Filed herewith.10.4

Form of Restricted Stock Unit Award Agreement for grants under Genzyme's 2007 Director Equity Plan. Filed herewith.10.5

Forms of Non-Statutory Stock Option Agreement for grants to executive officers under Genzyme's 2001 Equity Incentive Plan. Filed herewith.10.6

Forms of Incentive Stock Option Agreement for grants to executive officers under Genzyme's 2001 Equity Incentive Plan. Filed herewith.**10.7

License and Co-Development Agreement between Genzyme and Isis Pharmaceuticals, Inc. dated June 24, 2008. Filed herewith.31.1

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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