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

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FORM 10-Q

|(Mark One)                                    |                                                                                         
|--------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended March 31, 2008
|or                                           
|o                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For 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)                 

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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 April 30, 2008: 267,313,161



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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:



2

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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®, Evoltra®, Thymoglobulin®, Synvisc®, Synvisc-One®, Sepra®,
Seprafilm®,
Carticel®, Epicel®, MACI®, Lymphoglobuline®, Hylaform®, Cholestagel® and Hectorol® are registered trademarks, and
Mozobil is a trademark, 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, MARCH 31, 2008        TABLE OF CONTENTS

|           |  |                                                                                                                              |  | PAGE NO.
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------- |  | --------
|PART I.    |  | FINANCIAL INFORMATION                                                                                                        |  | 6       
|ITEM 1.    |  | Financial Statements                                                                                                         |  | 6       
|           |  | Unaudited, Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended March 31, 2008 and 2007 |  | 6       
|           |  | Unaudited, Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007                                            |  | 7       
|           |  | Unaudited, Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007                          |  | 8       
|           |  | Notes to Unaudited, Consolidated Financial Statements                                                                        |  | 9       
|ITEM 2.    |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                                        |  | 29      
|ITEM 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                                   |  | 65      
|ITEM 4.    |  | Controls and Procedures                                                                                                      |  | 66      
|PART II.   |  | OTHER INFORMATION                                                                                                            |  | 67      
|ITEM 1.    |  | Legal Proceedings                                                                                                            |  | 67      
|ITEM 1A.   |  | Risk Factors                                                                                                                 |  | 67      
|ITEM 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                  |  | 67      
|ITEM 6.    |  | Exhibits                                                                                                                     |  | 67      
|Signatures |  | 68                                                                                                                          

5

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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 March 31,                                             |        
|------------------------------------ | ---------------------------------------------- | ------------------------------------------------------------------------ | -------
|
|Revenues:                            |                                                |                                                                          |        
|                                     | Net product sales                              |                                                                          | $      
|                                     | Net service sales                              |                                                                          |        
|                                     | Research and development revenue               |                                                                          |        
|                                     |                                                |                                                                          |        
|                                     |                                                | Total revenues                                                           |        
|                                     |                                                |                                                                          |        
|Operating costs and expenses:        |                                                |                                                                          |        
|                                     | Cost of products sold                          |                                                                          |        
|                                     | Cost of services sold                          |                                                                          |        
|                                     | Selling, general and administrative            |                                                                          |        
|                                     | Research and development                       |                                                                          |        
|                                     | Amortization of intangibles                    |                                                                          |        
|                                     |                                                |                                                                          |        
|                                     |                                                | Total operating costs and expenses                                       |        
|                                     |                                                |                                                                          |        
|Operating income                     |                                                |                                                                          | 190,907
|                                     |                                                |                                                                          |        
|Other income (expenses):             |                                                |                                                                          |        
|                                     | Equity in income of equity method investments  |                                                                          |        
|                                     | Minority interest                              |                                                                          |        
|                                     | Gains on investments in equity securities, net |                                                                          |        
|                                     | Other                                          |                                                                          |        
|                                     | Investment income                              |                                                                          |        
|                                     | Interest expense                               |                                                                          |        
|                                     |                                                |                                                                          |        
|                                     |                                                | Total other income                                                       |        
|                                     |                                                |                                                                          |        
|Income before income taxes           |                                                |                                                                          | 205,388
|Provision for income taxes           |                                                |                                                                          | (60,117
|                                     |                                                |                                                                          |        
|Net income                           |                                                | $                                                                        | 145,271
|                                     |                                                |                                                                          |        
|Net income per share:                |                                                |                                                                          |        
|                                     | Basic                                          |                                                                          | $      
|                                     |                                                |                                                                          |        
|                                     | Diluted                                        |                                                                          | $      
|                                     |                                                |                                                                          |        
|Weighted average shares outstanding: |                                                |                                                                          |        
|                                     | Basic                                          |                                                                          |        
|                                     |                                                |                                                                          |        
|                                     | Diluted                                        |                                                                          |        
|                                     |                                                |                                                                          |        
|Comprehensive income, net of tax:    |                                                |                                                                          |        
|Net income                           |                                                | $                                                                        | 145,271
|                                     |                                                |                                                                          |        
|Other comprehensive income:          |                                                |                                                                          |        
|                                     | Foreign currency translation adjustments       |                                                                          |        
|                                     |                                                |                                                                          |        
|                                     | Pension liability adjustments, net of tax      |                                                                          |        
|                                     |                                                |                                                                          |        
|                                     | Unrealized gains on securities, net of tax:    |                                                                          |        
|                                     |                                                | Unrealized gains arising during the period, net of tax                   |        
|                                     |                                                | Reclassification adjustment for gains included in net income, net of tax |        
|                                     |                                                |                                                                          |        
|                                     |                                                | Unrealized gains on securities, net of tax                               |        
|                                     |                                                |                                                                          |        
|                                     | Other comprehensive income                     |                                                                          |        
|                                     |                                                |                                                                          |        
|Comprehensive income                 |                                                | $                                                                        | 258,638
|                                     |                                                |                                                                          |        

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

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GENZYME CORPORATION AND SUBSIDIARIES        Consolidated Balance Sheets        (Unaudited, amounts in thousands, except par value amounts)

|                                             |                                                                 | March 31,
2008                             |           | December 31,
2007 |          
|-------------------------------------------- | --------------------------------------------------------------- | ------------------------------------------ | --------- | ----------------- | ---------
|ASSETS                                       |                                                                 |                                            |           |                   |          
|Current assets:                              |                                                                 |                                            |           |                   |          
|                                             | Cash and cash equivalents                                       |                                            | $         | 882,798           |          
|                                             | Short-term investments                                          |                                            |           | 79,050            |          
|                                             | Accounts receivable, net                                        |                                            |           | 1,031,095         |          
|                                             | Inventories                                                     |                                            |           | 468,824           |          
|                                             | Prepaid expenses and other current assets                       |                                            |           | 160,029           |          
|                                             | Deferred tax assets                                             |                                            |           | 158,593           |          
|                                             |                                                                 |                                            |           |                   |          
|                                             |                                                                 | Total current assets                       |           |                   | 2,780,389
|Property, plant and equipment, net           |                                                                 |                                            | 2,118,960 |                   |          
|Long-term investments                        |                                                                 |                                            | 486,135   |                   |          
|Goodwill                                     |                                                                 |                                            | 1,403,716 |                   |          
|Other intangible assets, net                 |                                                                 |                                            | 1,982,735 |                   |          
|Deferred tax assets                          |                                                                 |                                            | 120,707   |                   |          
|Investments in equity securities             |                                                                 |                                            | 168,301   |                   |          
|Other noncurrent assets                      |                                                                 |                                            | 22,110    |                   |          
|                                             |                                                                 |                                            |           |                   |          
|                                             |                                                                 | Total assets                               |           | $                 | 9,083,053
|                                             |                                                                 |                                            |           |                   |          
|LIABILITIES AND STOCKHOLDERS' EQUITY         |                                                                 |                                            |           |                   |          
|Current liabilities:                         |                                                                 |                                            |           |                   |          
|                                             | Accounts payable                                                |                                            | $         | 121,192           |          
|                                             | Accrued expenses                                                |                                            |           | 616,592           |          
|                                             | Income taxes payable                                            |                                            |           | 19,567            |          
|                                             | Deferred revenue and other income                               |                                            |           | 21,569            |          
|                                             | Current portion of long-term debt and capital lease obligations |                                            |           | 696,743           |          
|                                             |                                                                 |                                            |           |                   |          
|                                             |                                                                 | Total current liabilities                  |           |                   | 1,475,663
|Long-term debt and capital lease obligations |                                                                 |                                            | 111,144   |                   |          
|Deferred revenuenoncurrent                  |                                                                 |                                            | 15,536    |                   |          
|Other noncurrent liabilities                 |                                                                 |                                            | 532,719   |                   |          
|                                             |                                                                 |                                            |           |                   |          
|                                             |                                                                 | Total liabilities                          |           |                   | 2,135,062
|                                             |                                                                 |                                            |           |                   |          
|Commitments and contingencies                |                                                                 |                                            |           |                   |          
|Stockholders' equity:                        |                                                                 |                                            |           |                   |          
|                                             | Preferred stock, $0.01 par value                                |                                            |           |                  |          
|                                             | Common stock, $0.01 par value                                   |                                            |           | 2,670             |          
|                                             | Additional paid-in capital                                      |                                            |           | 5,461,714         |          
|                                             | Notes receivable from stockholders                              |                                            |           | (15,824           | )        
|                                             | Accumulated earnings                                            |                                            |           | 971,986           |          
|                                             | Accumulated other comprehensive income                          |                                            |           | 527,445           |          
|                                             |                                                                 |                                            |           |                   |          
|                                             |                                                                 | Total stockholders' equity                 |           |                   | 6,947,991
|                                             |                                                                 |                                            |           |                   |          
|                                             |                                                                 | Total liabilities and stockholders' equity |           | $                 | 9,083,053
|                                             |                                                                 |                                            |           |                   |          

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

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GENZYME CORPORATION AND SUBSIDIARIES        Consolidated Statements of Cash Flows        (Unaudited, amounts in thousands)

|                                                 |                                                                       | Three Months Ended
March 31,                                                                                            |                                                        
|------------------------------------------------ | --------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------
|
|Cash Flows from Operating Activities:            |                                                                       |                                                                                                                         |                                                        
|                                                 | Net income                                                            |                                                                                                                         | $                                                      
|                                                 | Reconciliation of net income to cash flows from operating activities: |                                                                                                                         |                                                        
|                                                 |                                                                       | Depreciation and amortization                                                                                           |                                                        
|                                                 |                                                                       | Stock-based compensation                                                                                                |                                                        
|                                                 |                                                                       | Provision for bad debts                                                                                                 |                                                        
|                                                 |                                                                       | Equity in income of equity method investments                                                                           |                                                        
|                                                 |                                                                       | Minority interest                                                                                                       |                                                        
|                                                 |                                                                       | Gains on investments in equity securities, net                                                                          |                                                        
|                                                 |                                                                       | Deferred income tax benefit                                                                                             |                                                        
|                                                 |                                                                       | Tax benefit from employee stock-based compensation                                                                      |                                                        
|                                                 |                                                                       | Excess tax benefits from stock-based compensation                                                                       |                                                        
|                                                 |                                                                       | Other                                                                                                                   |                                                        
|                                                 |                                                                       | Increase (decrease) in cash from working capital changes (excluding impact of acquired assets and assumed liabilities): |                                                        
|                                                 |                                                                       |                                                                                                                         | Accounts receivable                                    
|                                                 |                                                                       |                                                                                                                         | Inventories                                            
|                                                 |                                                                       |                                                                                                                         | Prepaid expenses and other current assets              
|                                                 |                                                                       |                                                                                                                         | Income taxes payable                                   
|                                                 |                                                                       |                                                                                                                         | Accounts payable, accrued expenses and deferred revenue
|                                                 |                                                                       |                                                                                                                         |                                                        
|                                                 |                                                                       |                                                                                                                         |                                                        
|                                                 |                                                                       |                                                                                                                         |                                                        
|Cash Flows from Investing Activities:            |                                                                       |                                                                                                                         |                                                        
|                                                 | Purchases of investments                                              |                                                                                                                         |                                                        
|                                                 | Sales and maturities of investments                                   |                                                                                                                         |                                                        
|                                                 | Purchases of equity securities                                        |                                                                                                                         |                                                        
|                                                 | Proceeds from sales of investments in equity securities               |                                                                                                                         |                                                        
|                                                 | Purchases of property, plant and equipment                            |                                                                                                                         |                                                        
|                                                 | Distributions from equity method investments                          |                                                                                                                         |                                                        
|                                                 | Purchases of other intangible assets                                  |                                                                                                                         |                                                        
|                                                 | Other                                                                 |                                                                                                                         |                                                        
|                                                 |                                                                       |                                                                                                                         |                                                        
|                                                 |                                                                       |                                                                                                                         |                                                        
|                                                 |                                                                       |                                                                                                                         |                                                        
|Cash Flows from Financing Activities:            |                                                                       |                                                                                                                         |                                                        
|                                                 | Proceeds from issuance of common stock                                |                                                                                                                         |                                                        
|                                                 | Repurchases of our common stock                                       |                                                                                                                         |                                                        
|                                                 | Excess tax benefits from stock-based compensation                     |                                                                                                                         |                                                        
|                                                 | Payments of debt and capital lease obligations                        |                                                                                                                         |                                                        
|                                                 | Increase in bank overdrafts                                           |                                                                                                                         |                                                        
|                                                 | Minority interest contributions                                       |                                                                                                                         |                                                        
|                                                 | Other                                                                 |                                                                                                                         |                                                        
|                                                 |                                                                       |                                                                                                                         |                                                        
|                                                 |                                                                       |                                                                                                                         |                                                        
|                                                 |                                                                       |                                                                                                                         |                                                        
|Effect of exchange rate changes on cash          |                                                                       |                                                                                                                         | (17,829                                                
|                                                 |                                                                       |                                                                                                                         |                                                        
|Increase in cash and cash equivalents            |                                                                       |                                                                                                                         | 15,786                                                 
|Cash and cash equivalents at beginning of period |                                                                       |                                                                                                                         | 867,012                                                
|                                                 |                                                                       |                                                                                                                         |                                                        
|Cash and cash equivalents at end of period       |                                                                       | $                                                                                                                       | 882,798                                                
|                                                 |                                                                       |                                                                                                                         |                                                        

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

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GENZYME CORPORATION AND SUBSIDIARIES        Notes to Unaudited, Consolidated Financial Statements

1.    Description of Business

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

9

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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 position and results of operations. Since
these are interim financial statements, you should also read our audited, consolidated financial statements and notes included in our 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 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

10

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

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

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.

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 non-controlling 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
non-controlling 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 non-controlling 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 non-controlling 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.

11

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

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

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.

3.    Fair Value Measurements

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



Fair Value MeasurementDefinition and Hierarchy

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:



12

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)



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.

13

---



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 March 31, 2008 (amounts in thousands):

|Description                                  |  | Total                                |           | Level 1                    |           | Level 2 |         | Level 3
|-------------------------------------------- |  | ------------------------------------ | --------- | -------------------------- | --------- | ------- | ------- | -------
|Fixed income investments(1):                 |  | Cash equivalents:                    |           | Money market funds         |           | $       | 552,031 |        
|                                             |  |                                      |           |                            |           |         |         |        
|                                             |  | Short-term investments:              |           | U.S. Treasury notes        |           |         |        |        
|                                             |  |                                      |           | U.S. agency notes          |           |         | 15,821  |        
|                                             |  |                                      |           | Corporate notesglobal     |           |         | 53,274  |        
|                                             |  |                                      |           | Corporate commercial paper |           |         | 9,955   |        
|                                             |  |                                      |           |                            |           |         |         |        
|                                             |  |                                      |           | Total                      |           |         | 79,050  |        
|                                             |  |                                      |           |                            |           |         |         |        
|                                             |  | Long-term investments:               |           | U.S. Treasury notes        |           |         | 117,267 |        
|                                             |  |                                      |           | U.S. agency notes          |           |         | 156,829 |        
|                                             |  |                                      |           | Corporate notesglobal     |           |         | 212,039 |        
|                                             |  |                                      |           |                            |           |         |         |        
|                                             |  |                                      |           | Total                      |           |         | 486,135 |        
|                                             |  |                                      |           |                            |           |         |         |        
|                                             |  | Total fixed
income
investments       |           |                            | 1,117,216 |         |         | 669,298
|                                             |  |                                      |           |                            |           |         |         |        
|Derivatives:                                 |  | Foreign exchange contracts(2)        |           |                            | (28,894   | )       |         |       
|                                             |  |                                      |           |                            |           |         |         |        
|Equity holdings:                             |  | Publicly-traded equity securities(1) |           |                            | 63,296    |         |         | 63,296 
|                                             |  |                                      |           |                            |           |         |         |        
|Total assets and (liabilities) at fair value |  | $                                    | 1,151,618 |                            | $         | 732,594 |         | $      
|                                             |  |                                      |           |                            |           |         |         |        

---

In accordance with the provisions of FASB Staff Position, or FSP, No. FAS 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 or 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 March 31, 2008.

14

---



GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3.    Fair Value Measurements (Continued)

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.

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
March 31,2008

2007Net incomebasic

$
145,271

$
158,187Effect of dilutive securities:Interest expense and debt fee amortization, net of tax, related to our 1.25% convertible senior notes


1,886


1,886Net incomediluted

$
147,157

$
160,073Shares used in computing net income per common sharebasic


267,276


263,476Effect of dilutive securities:Shares issuable upon the assumed conversion of our 1.25% convertible senior notes


9,686


9,686Stock options(1)


7,791


6,751Restricted stock units(2)


443


Warrants and stock purchase rights


12


11Dilutive potential common shares


17,932


16,448Shares used in computing net income per common sharediluted(1,2)


285,208


279,924Net income per common share:Basic

$
0.54

$
0.60Diluted

$
0.52

$
0.57


---

Three Months Ended
March 31,2008

2007Shares issuable upon exercise of outstanding options

1,982

13,483


15

---



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.

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 exclusive, worldwide rights to clofarabine.

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 quarter of 2008.

Purchase of In-Process Research and Development

In connection with certain of our acquisitions we completed between January 1, 2006 and December 31, 2007, we have acquired various IPR&D projects.
Substantial additional research and development will be required prior to any of our acquired IPR&D programs and technology platforms reaching technological feasibility. In addition, once research is
completed, each product candidate acquired will need to complete a series of clinical trials and receive FDA or other regulatory approvals prior to commercialization. Our current estimates of the time
and investment required to develop these products and technologies may change depending on the different applications that we may choose to pursue. We cannot give assurances that these programs will
ever reach technological feasibility or develop into products that can be marketed profitably. In addition, we cannot guarantee that we will be able to develop and commercialize products before our
competitors develop and commercialize products for the same indications. If products based on our acquired IPR&D programs and technology platforms do not become commercially viable, our results of
operations could be materially adversely affected. We did not complete any acquisitions in the three months ended March 31, 2008.

16

---



GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

5.    Mergers and Acquisitions (Continued)

The
following table sets forth the significant IPR&D projects for companies and certain assets we have acquired between January 1, 2006 and March 31, 2008 (amounts in
millions):

|Company/Assets Acquired |  | Purchase
Price |       | IPR&D(1) |   | Programs Acquired |  | Discount Rate
Used in
Estimating
Cash Flows(1)  |  | Year of
Expected
Launch
|----------------------- |  | -------------- | ----- | -------- | - | ----------------- |  | ----------------------------------------------- |  | -----------------------
|Bioenvision (2007)      |  | $              | 349.9 |          | $ | 125.5             |  | Clofarabine (rights outside North America)(2,3) |  | 17                     
|                        |  |                |       |          |   |                   |  |                                                 |  |                        
|AnorMED Inc. (2006)     |  | $              | 589.2 |          | $ | 526.8
26.1        |  | Mozobil (stem cell transplant)
AMD070 (HIV)(4)  |  | 15
15                  
|                        |  |                |       |          |   |                   |  |                                                 |  |                        
|                        |  |                |       |          | $ | 552.9             |  |                                                 |  |                        
|                        |  |                |       |          |   |                   |  |                                                 |  |                        

---

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

17

---



GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

5.    Mergers and Acquisitions (Continued)

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(1)

$
6,105

$
24

$


$
6,129Acquisition(2)


2,601





70


2,671Revision of estimates(1)


(931
)

2,593





1,662Payments


(5,602
)

(453
)




(6,055
)Balance at December 31, 2007


2,173


2,164


70


4,407Payments


(1,416
)

(155
)

(70
)

(1,641
)Balance at March 31, 2008

$
757

$
2,009

$


$
2,766


---

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 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
March 31, 2007Total revenues

$
885,305Net income

$
40,773Net income per share:Basic

$
0.15Diluted

$
0.15Weighted average shares outstanding:Basic


263,476Diluted


279,924


18

---



GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6.    Inventories

March 31,
2008

December 31,
2007(Amounts in thousands)Raw materials

$
113,887

$
120,409Work-in-process


148,436


130,812Finished goods


206,501


187,894Total

$
468,824

$
439,115


During
the three months ended March 31, 2008, we recalled one lot of Thymoglobulin that failed to meet our specifications for product appearance. In April, we recalled an
additional three lots for the same reason. The value of the unused portion of these four lots was not significant.

7.    Goodwill and Other Intangible Assets

Goodwill

The following tables contains the change in our goodwill during the three months ended March 31, 2008 (amounts in thousands):

As of
December 31,
2007

Adjustments

As of
March 31,
2008Renal

$
303,951

$


$
303,951Therapeutics


355,494





355,494Transplant


163,061





163,061Biosurgery


7,585





7,585Oncology


530,909


477


531,386Other


42,828


(589
)

42,239Goodwill

$
1,403,828

$
(112
)
$
1,403,716


19

---



GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

7.    Goodwill and Other Intangible Assets (Continued)

Other Intangible Assets

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

|                       |       | As of March 31, 2008 |           | As of December 31, 2007
|---------------------- | ----- | -------------------- | --------- | -----------------------
|
|Technology(1)          |       | $                    | 2,162,032 |                        
|Patents                |       |                      | 194,560   |                        
|Trademarks             |       |                      | 60,618    |                        
|License fees           |       |                      | 91,229    |                        
|Distribution rights(2) |       |                      | 314,213   |                        
|Customer lists(3)      |       |                      | 88,483    |                        
|Other                  |       |                      | 2,052     |                        
|                       |       |                      |           |                        
|                       | Total |                      | $         | 2,913,187              
|                       |       |                      |           |                        

---

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



20

---



GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

7.    Goodwill and Other Intangible Assets (Continued)



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 nine months)

$
169,3202009


228,7952010


241,9702011


259,6912012


200,681Thereafter


567,345


---

8.    Investments in Equity Securities

We recorded the following net gains on investments in equity securities during the periods presented (amounts in thousands):

Three Months Ended
March 31,2008

2007Therapeutic Human Polyclonals, Inc. (THP)

$


$
10,848Other


775


1,940Gains on investments in equity securities, net

$
775

$
12,788


In
March 2007, we recorded a $10.8 million gain in connection with the sale of the entire investment in the capital stock of THP, held by our wholly-owned subsidiary, SangStat
Medical, LLC, which had a zero cost basis, for net cash proceeds of $10.8 million.

Unrealized Gains (Losses)

At March 31, 2008, our stockholders' equity includes $27.6 million of unrealized gains and $1.2 million of unrealized losses related to our
strategic investments in equity securities.

21

---



GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

8.    Investments in Equity Securities (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 paid Isis $150.0 million to purchase five million shares of Isis common stock for $30 per share, of which $80.1 million was recorded as
an increase to investment in equity securities in our consolidated balance sheets based on the $16.02 closing price per share of Isis common stock on February 4, 2008, the date we acquired the
shares, and $69.9 million was charged to research and development expense in our consolidated statements of operations for the premium we paid to purchase the stock. We are working with Isis to
finalize the contracts under which we will develop and commercialize mipomersen.

9.    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 (loss) of equity method investments in our consolidated statements of operations. Our portion of BioMarin/Genzyme LLC's results for the three
months ended March 31, 2007, was net income of $6.1 million.

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 royalty 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 out-licensed 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

22

---



GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

9.    Joint Venture with BioMarin (Continued)

amount
of which was not significant for the three months ended March 31, 2008, as minority interest in our consolidated statements of operations.

Condensed
financial information for BioMarin/Genzyme LLC is summarized below for the three months ended March 31, 2007 (amounts in thousands):

Three Months Ended
March 31, 2007Revenue

$
26,822Gross margin


20,523Operating expenses


(8,474
)Net income


12,220


10.    Revolving Credit Facility

As of March 31, 2008, no amounts were outstanding under our five-year $350.0 million senior unsecured revolving credit facility, which
we refer to as our 2006 revolving credit facility. The terms of our 2006 revolving credit facility include various covenants, including financial covenants, that require us to meet minimum interest
coverage ratios and maximum leverage ratios. As of March 31, 2008, we were in compliance with these covenants.

11.    Stockholders' Equity

Stock Repurchase

During the three months ended March 31, 2008, we repurchased and retired an additional 1,000,000 shares of our common stock at an average price of
$73.20 per share for a total of $73.2 million in cash, including fees. Since June 2007, when we first began making repurchases, we have repurchased a cumulative total of 4,500,000 shares
of our common stock at an average price of $67.71 per share for a total of $304.8 million in cash, including fees. As a result, we recorded the repurchases in our consolidated balance sheets as
of March 31, 2008 and December 31, 2007, 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.

23

---



GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

11.    Stockholders' Equity (Continued)

Stock-Based Compensation Expense, Net of Estimated Forfeitures

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

Three Months Ended
March 31,2008

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

$
(6,514
)
$
(5,896
)Selling, general and administrative expense


(22,889
)

(22,499
)Research and development expense


(12,585
)

(12,312
)Total


(41,988
)

(40,707
)Less: tax benefit from stock options


12,537


12,432Total stock-based compensation expense, net of tax

$
(29,451
)
$
(28,275
)Effect per common share:Basic

$
(0.12
)
$
(0.11
)Diluted

$
(0.10
)
$
(0.10
)


---

At
March 31, 2008, there was $219.7 million of pre-tax stock-based compensation expense, net of estimated forfeitures, related to unvested awards not yet
recognized which is expected to be recognized over a weighted average period of 1.9 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, which 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, at which point the outstanding principal and accrued interest for each note will become payable. As of March 31, 2008, there is a total of $15.8 million outstanding for
these notes, including $10.2 million of principal and $5.6 million of accrued interest. Of these amounts, a total of $8.0 million of principal and $4.6 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.

On
April 29, 2008, we received $1.0 million of cash from one of the Makers as payment in full upon maturity of that Maker's note, including accrued interest. A total of
$2.8 million in principal and accrued interest has come due under the notes but has not yet been repaid, of which $1.9 million was

24

---



GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

11.    Stockholders' Equity (Continued)

due
as of March 31, 2008 and an additional $0.8 million became due as of April 30, 2008. We are pursuing collection of these past due amounts and the notes will continue to accrue
interest until the outstanding principal and accrued interest have been repaid. A total of $0.7 million of the principal and accrued interest that was due but not repaid as of April 30,
2008 is attributable to the Maker that owes a total of $8.0 million in principal under the notes. In June 2008, an additional $6.7 million in principal will become due from this Maker
plus accrued interest.

12.    Commitments and Contingencies



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

Through
June 30, 2003, we had three outstanding series of common stock, which we referred to as tracking stocks; Genzyme General Stock (which we now refer to as Genzyme Stock),
Biosurgery Stock and Molecular Oncology Stock. On August 6, 2007, we reached an agreement in principle to settle lawsuits related to our 2003 repurchase of Biosurgery Stock for
$64.0 million. The court entered an order approving the settlement on December 30, 2007. As a result, we recorded a liability for the settlement payment of $64.0 million as a
charge to selling, general and administrative expenses, or SG&A, in our consolidated statements of operations in June 2007, which we subsequently paid in August 2007. We have submitted claims to our
insurers for reimbursement of portions of the expenses incurred in connection with these cases; the insurer has purported to deny coverage and therefore, we have not recorded a receivable for any
potential recovery from our insurer. We 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.

13.    Provision for Income Taxes

Three Months Ended
March 31,2008

2007(Amounts in thousands)Provision for income taxes

$
60,117

$
71,193Effective tax rate


29
%

31
%


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



25

---



GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

13.    Provision for Income Taxes (Continued)



We
are currently under IRS audit for tax years 2004 to 2005 and various states for 1999 to 2005. We believe that we have provided sufficiently for all audit exposures. We expect to
settle the 2004 to 2005 IRS audit within the next twelve months and do not expect that the settlement will have a material impact on our financial position or results of operations. Settlement of
these audits or the expiration of the statute of limitations on the assessment of income taxes for any tax year may result in a reduction of future tax provisions. Any such benefit would be recorded
upon the effective settlement of the audit or expiration of the applicable statute of limitations.

14.    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.

26

---



GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

14.    Segment Information (Continued)

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

Three Months Ended
March 31,2008

2007Revenues:Renal

$
197,770

$
165,677Therapeutics(1)


568,693


429,517Transplant


45,930


41,277Biosurgery


111,662


98,393Genetics


74,329


66,158Oncology


29,048


22,449Other


72,246


59,409Corporate


383


303Total

$
1,100,061

$
883,183Income (loss) before income taxes:Renal

$
93,275

$
65,004Therapeutics(1)


365,210


297,973Transplant


(7,914
)

(3,197
)Biosurgery


18,787


12,866Genetics


4,108


3,804Oncology(2)


(24,985
)

(6,886
)Other(2,3)


(64,979
)

1,639Corporate(4)


(178,114
)

(141,823
)Total

$
205,388

$
229,380


---

27

---



GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

14.    Segment Information (Continued)



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

March 31,
2008

December 31,
2007Segment Assets(1):Renal

$
1,476,506

$
1,468,428Therapeutics(2)


1,821,712


1,230,128Transplant


420,802


415,903Biosurgery


447,503


458,412Genetics


157,489


148,787Oncology


944,830


940,097Other


235,055


246,496Corporate(3)


3,579,156


3,393,490Total

$
9,083,053

$
8,301,741


---

March 31,
2008

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

$
1,447,983

$
1,460,394Deferred tax assets, net


279,300


260,005Property, plant & equipment, net


1,361,381


1,240,992Investments in equity securities


168,301


89,181Other


322,191


342,918Total

$
3,579,156

$
3,393,490


28

---





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.

29

---



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 based in Charlottetown, Prince Edward Island, Canada, including DCL's line of over 50 formulated clinical chemistry reagents and its 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 exclusive, worldwide rights to clofarabine. 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 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 TRANSACTION

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 paid Isis $150.0 million to purchase five million shares of Isis common stock for $30 per share, consisting of $69.9 million for the premium we paid to purchase the stock, which was
charged to research and development expenses in our consolidated statements of operations, and $80.1 million for the fair value of the stock, which was recorded as an increase to investment in
equity securities in our consolidated balance sheet. We are working with Isis to finalize the contracts under which we will develop and commercialize mipomersen.

30

---



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. Additional information regarding significant judgments and estimates related to sales reserves are included below. There have been no significant changes to our critical
accounting policies or significant judgments and estimates since December 31, 2007. Additional information regarding our provisions and estimates for our product sales allowances, sales
allowance reserves and accruals, and distributor fees 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:



31

---





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

Three Months Ended
March 31,Increase/
Decrease
% Change2008

2007Product sales allowances:Contractual adjustments

$
101,919

$
84,795

20
%Discounts


5,505


4,414

25
%Sales returns


6,751


1,717

>100
%Total product sales allowances

$
114,175

$
90,926

26
%Total gross product sales

$
1,120,442

$
889,116

26
%Product sales allowances as a percent of total gross product sales


10
%

10
%


Total
product sales allowances increased $23.2 million, or 26%, for the three months ended March 31, 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 increase in sales returns allowances for the three months ended March 31, 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 4% to approximately $162 million as of March 31, 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

32

---



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

Three Months Ended
March 31,2008

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

$
4,408

$
3,092Charged to SG&A


2,951


2,976Total distributor fees

$
7,359

$
6,068


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:

|                                 |                                   | Three Months Ended
March 31, |           |           |  
|-------------------------------- | --------------------------------- | ---------------------------- | --------- | --------- | -
|
|
|
|Product revenue                  |                                   | $                            | 1,006,268 |           | $
|Service revenue                  |                                   |                              | 85,864    |           |  
|                                 |                                   |                              |           |           |  
|                                 | Total product and service revenue |                              |           | 1,092,132 |  
|Research and development revenue |                                   |                              | 7,929     |           |  
|                                 |                                   |                              |           |           |  
|                                 | Total revenues                    |                              | $         | 1,100,061 |  
|                                 |                                   |                              |           |           |  

33

---



Product Revenue

We derive product revenue from sales of:



The
following table sets forth our product revenue on a reporting segment basis:

|                      |                                                     | Three Months Ended
March 31, |        |         |          
|--------------------- | --------------------------------------------------- | ---------------------------- | ------ | ------- | ---------
|
|
|
|Renal:                |                                                     |                              |        |         |          
|                      | Renagel/Renvela (including sales of bulk sevelamer) |                              | $      | 168,694 |          
|                      | Hectorol                                            |                              |        | 29,076  |          
|                      |                                                     |                              |        |         |          
|                      |                                                     | Total Renal                  |        |         | 197,770  
|                      |                                                     |                              |        |         |          
|Therapeutics:         |                                                     |                              |        |         |          
|                      | Cerezyme                                            |                              |        | 304,303 |          
|                      | Fabrazyme                                           |                              |        | 116,475 |          
|                      | Myozyme                                             |                              |        | 67,324  |          
|                      | Aldurazyme                                          |                              |        | 36,839  |          
|                      | Thyrogen                                            |                              |        | 33,785  |          
|                      | Other Therapeutics                                  |                              |        | 9,772   |          
|                      |                                                     |                              |        |         |          
|                      |                                                     | Total Therapeutics           |        |         | 568,498  
|                      |                                                     |                              |        |         |          
|Transplant:           |                                                     |                              |        |         |          
|                      | Thymoglobulin/Lymphoglobuline                       |                              |        | 43,673  |          
|                      | Other Transplant                                    |                              |        | 2,257   |          
|                      |                                                     |                              |        |         |          
|                      |                                                     | Total Transplant             |        |         | 45,930   
|                      |                                                     |                              |        |         |          
|Biosurgery:           |                                                     |                              |        |         |          
|                      | Synvisc/Synvisc-One                                 |                              |        | 56,142  |          
|                      | Sepra products                                      |                              |        | 30,604  |          
|                      | Other Biosurgery                                    |                              |        | 13,581  |          
|                      |                                                     |                              |        |         |          
|                      |                                                     | Total Biosurgery             |        |         | 100,327  
|                      |                                                     |                              |        |         |          
|Oncology              |                                                     |                              | 22,281 |         |          
|                      |                                                     |                              |        |         |          
|Other product revenue |                                                     |                              | 71,462 |         |          
|                      |                                                     |                              |        |         |          
|                      |                                                     | Total product revenue        |        | $       | 1,006,268
|                      |                                                     |                              |        |         |          

34

---



Renal

Sales of Renagel/Renvela, including sales of bulk sevelamer, increased 23% to $168.7 million for the three months ended March 31, 2008, as compared
to the same period of 2007. Renagel price increases in the United States in December 2006 and April 2007 accounted for $6.6 million of the additional revenue, while increased
end-user demand worldwide accounted for $19.6 million of additional revenue. The strengthening of foreign currencies, primarily the Euro against the U.S. dollar, for the three
months ended March 31, 2008, as compared to the same period of 2007, positively impacted Renagel revenue by $8.6 million. Sales of Renagel/Renvela, including sales of bulk sevelamer,
were 15% of our total revenue for the three months ended March 31, 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 the product for dialysis patients in the United States. Sales of Renvela in the United States were $4.6 million for the three months ended March 31,
2008. We are currently pursuing regulatory approvals in Europe, South America and in other markets internationally.

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 3% to $29.1 million for the three months ended March 31, 2008 as compared to $28.3 million for the same period 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 products and our future sales may be impacted negatively by these products. In addition, a generic manufacturer has filed an
Abbreviated New Drug Application (ANDA) seeking to market a generic version of Hectorol prior to the expiration dates of our patents covering the product. If this or any other generic manufacturer
were to receive approval to sell a generic version of Hectorol, our revenues from this product 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 and Hectorol with our wholesalers could impact the revenue from our Renal
reporting segment that we record from period to period.

35

---



Therapeutics

Therapeutics product revenue increased 33% to $568.5 million for the three months ended March 31, 2008, as compared to the same period of 2007, due
to continued growth in sales of Cerezyme, Fabrazyme and Myozyme and the inclusion of Aldurazyme sales in our results 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.

The
15% growth in sales of Cerezyme to $304.3 million for the three months ended March 31, 2008, as compared to the same period of 2007, is attributable to our continued
identification of new Gaucher disease patients, particularly in international markets. Through October 2007, our price for Cerezyme 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 $17.2 million for the three months ended March 31, 2008, as compared to the same period of 2007.

The
16% increase in sales of Fabrazyme to $116.5 million for the three months ended March 31, 2008, as compared to the same period of 2007, is primarily attributable to
increased patient identification worldwide as Fabrazyme is introduced into new markets. We implemented a 3% price increase in the United States for Fabrazyme in November 2007 which did not have a
significant impact on Fabrazyme revenue for the three months ended March 31, 2008. The strengthening of foreign currencies, primarily the Euro against the U.S. dollar, positively impacted
Fabrazyme revenue by $7.6 million for the three months ended March 31, 2008, as compared to the same period of 2007.

Sales
of Myozyme were $67.3 million for the three months ended March 31, 2008, as compared to $37.9 million for the same period 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 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 2008. The strengthening of foreign currencies, primarily the Euro against the U.S. dollar, positively impacted Myozyme revenue by
$3.5 million for the three months ended March 31, 2008.

We
currently manufacture Myozyme in the United States at the 160 liter, or 160L, scale at our manufacturing facility in Framingham, Massachusetts and at the 2000 liter, or 2000L,
scale at our manufacturing facility in Allston, Massachusetts, and have begun Myozyme fill-finish at our 2000L facility in Waterford, Ireland. We have U.S. approval to sell Myozyme
manufactured at the 160L scale and production 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 production at the 2000L scale to meet the expected demand for Myozyme 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 will require us to submit a separate BLA to gain U.S. approval for 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

36

---



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. 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 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 will be approximately $8-$10 million more than originally expected in 2008. We expect sales of Myozyme to continue
to grow and expect to begin providing U.S. patients with commercial 2000L Myozyme during the first quarter of 2009. In the meantime, we are continuing our efforts to optimize supply for the U.S.
market.

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 $36.8 million for the three months ended March 31, 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 was
$26.8 million for the three months ended March 31, 2007. The $10.0 million increase in sales of Aldurazyme is attributable to increased patient identification worldwide as
Aldurazyme is 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 28% to $33.8 million for the three months ended March 31, 2008, as compared to the same period of 2007. A Thyrogen price increase of
approximately 10% in the United States in April 2007 accounted for $1.4 million of the additional revenue while worldwide volume growth positively impacted sales by $4.3 million. The
strengthening of foreign currencies, primarily the Euro against the U.S. dollar, positively impacted Thyrogen revenue by $1.9 million for the three months ended March 31, 2008, as
compared to the same period 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 12% to $45.9 million for the three months ended March 31, 2008, as compared to the same period of 2007. This
was primarily due to a $4.1 million increase in Thymoglobulin revenue as a result of an 11% increase in the worldwide average sales price of Thymoglobulin. In addition, there was a
$2.6 million increase in sales of Thymoglobulin due to an increase in volume. This was a result of increased utilization of Thymoglobulin in transplant procedures worldwide.

In
the second quarter of 2007, we began experiencing certain manufacturing challenges with respect to the production of Thymoglobulin at our manufacturing facility in Lyon, France, which
resulted in product stability issues. We have worked closely with the FDA in addressing these challenges, and have implemented process changes at our Lyon facility to resolve these production issues.
In addition, the FDA has accepted our responses to their warning letter, which was issued in 2007, regarding the production processes at our Lyon facility. We continue to monitor Thymoglobulin

37

---



lots
produced in 2007 and, if necessary, will recall any lots that are expected to trend outside of our specifications for saleable product prior to the originally established expiration period. In
the three months ended March 31, 2008, we recalled one lot of Thymoglobulin that no longer met our specifications for product appearance. In April 2008 we recalled an additional three
lots for the same reason. The value of the unused portion of these four lots was not significant. We expect to recall additional lots this year, although most of the product will likely be consumed
prior to a recall being necessary. We will continue to closely monitor our Thymoglobulin inventory levels and intend to manage production in order to maintain adequate supply levels throughout the
remainder of 2008. We expect Thymoglobulin sales to accelerate in the second half of 2008 as supply levels increase to meet the full demand of the product.

Biosurgery

Biosurgery product revenue increased 15% to $100.3 million for the three months ended March 31, 2008, as compared to the same period of 2007.
Seprafilm revenue increased $6.7 million for the three months ended March 31, 2008, as compared to the same period of 2007, primarily due to greater penetration of the product into the
United States, Japanese and European markets.

The
combined revenues of Synvisc and Synvisc-One increased by $2.5 million for the three months ended March 31, 2008, as compared to the same period of 2007,
primarily due to an expanded sales and marketing investment.

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 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.

Other
Biosurgery product revenue increased 28% to $13.6 million for the three months ended March 31, 2008, as compared to the same period of 2007, primarily due to
$2.4 million of revenue related to a dermal filler we are developing with Mentor Corporation, or Mentor.

Oncology

Oncology product revenue increased 33% to $22.3 million for the three months ended March 31, 2008, as compared to the same period 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 an expanded indication as well.

We
are developing the intravenous formulation of Clolar for significantly larger indications, including first-line and relapsed or refractory 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.

38

---



Other Product Revenue

Other product revenue increased 22% to $71.5 million for the three months ended March 31, 2008, as compared to the same period of 2007, primarily
due to:



Service Revenue

We derive service revenue primarily from the following sources:



The
following table sets forth our service revenue on a segment basis:

Three Months Ended
March 31,Increase/
(Decrease)
% Change2008

2007(Amounts in thousands)Therapeutics

$
176

$


N/ABiosurgery


10,732


9,362

15
%Genetics


74,329


66,158

12
%Oncology


410


282

45
%Other


217


79

>100
%Total service revenue

$
85,864

$
75,881

13
%


Service
revenue attributable to our Biosurgery reporting segment increased 15% to $10.7 million for the three months ended March 31, 2008, as compared to the same period of
2007. The increase is primarily due to higher demand for Epicel and MACI.

Service
revenue attributable to our Genetics reporting segment increased 12% to $74.3 million for the three months ended March 31, 2008, as compared to the same period of
2007. The increase was primarily attributable to continued growth in revenue from our genetic testing and prenatal screening services.

The
strengthening of foreign currencies for the three months ended March 31, 2008, as compared to the same period of 2007, did not have a significant impact on service revenue.

39

---



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:

Three Months Ended
March 31,Increase/
(Decrease)
% Change2008

2007(Amounts in thousands)International product and service revenue

$
564,127

$
411,019

37
%% of total product and service revenue


52
%

47
%


The
37% increase to $564.1 million in international product and service revenue for the three months ended March 31, 2008, as compared to the same period of 2007, is
primarily due to an $89.5 million increase 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, we began to record Aldurazyme revenue effective January 1, 2008. Revenue generated outside the
United States for Aldurazyme was $29.8 million for the three months ended March 31, 2008, which had been recorded as joint venture revenue 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. As of January 1, 2008, we began to record revenue for Aldurazyme as a result of the restructured relationship with BioMarin/Genzyme LLC. 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, primarily the Euro against the U.S. dollar, positively impacted total product and service revenue by $46.6 million for the three months
ended March 31, 2008, as compared to the same period of 2007.

Research and Development Revenue

The following table sets forth our research and development revenue on a segment basis:

Three Months Ended
March 31,Increase/
(Decrease)
% Change2008

2007(Amounts in thousands)Therapeutics

$
19

$
638

(97
)%Transplant





180

(100
)%Biosurgery


603


1,748

(66
)%Oncology


6,357


5,470

16
%Other


567


773

(27
)%Corporate


383


303

26
%Total research and development revenue

$
7,929

$
9,112

(13
)%


Total
research and development revenue decreased $1.2 million for the three months ended March 31, 2008, as compared to the same period of 2007, primarily due to decreases
in revenue recognized by our Therapeutics and Biosurgery reporting segments partially offset by an increase in revenue from our Oncology reporting segment.

40

---



MARGINS

The components of our total margins are described in the following table:

Three Months Ended
March 31,Increase/
(Decrease)
% Change2008

2007(Amounts in thousands)Product margin

$
789,529

$
643,466

23
%% of total product revenue


78
%

81
%Service margin

$
30,290

$
28,142

8
%% of total service revenue


35
%

37
%Total product and service gross margin

$
819,819

$
671,608

22
%% of total product and service revenue


75
%

77
%


Product Margin

Our overall product margin increased $146.1 million, or 23%, for the three months ended March 31, 2008, as compared to the same period of 2007. This
is primarily due to:



These
increases in product margin were partially offset by the $9.5 million unfavorable effect of exchange due to the weakening of the U.S. dollar against many currencies,
particularly the Euro.

Total
product margin as a percentage of total product revenue for the three months ended March 31, 2008, as compared to the same period of 2007, decreased due to higher unit costs
for Cerezyme and Fabrazyme, increased sales of Myozyme and the addition of Aldurazyme to the results, both of which have lower than average margins.

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.

Service Margin

Our overall service margin increased $2.1 million, or 8%, for the three months ended March 31, 2008, as compared to the same period of 2007. The
increase was primarily attributable to an increase in revenues from our genetic testing and prenatal screening services.

Total
service margin as a percent of total service revenue decreased by 2% for the three months ended March 31, 2008, as compared to the same period of 2007, primarily due to an
increase in Carticel and MACI unit costs.

41

---



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:

Three Months Ended
March 31,Increase/
(Decrease)
% Change2008

2007(Amounts in thousands)Selling, general and administrative expenses

$
318,386

$
269,021

18
%% of total revenue


29
%

30
%


SG&A
increased $49.4 million for the three months ended March 31, 2008, as compared to the same period of 2007, primarily due to spending increases of:



Research and Development Expenses

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

Three Months Ended
March 31,Increase/
(Decrease)
% Change2008

2007(Amounts in thousands)Research and development expenses

$
262,797

$
166,120

58
%% of total revenue


24
%

19
%


42

---



Research
and development expenses increased $96.7 million for the three months ended March 31, 2008, as compared to the same period of 2007, primarily due to:



These
increases were partially offset by decreases of:



Amortization of Intangibles

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

Three Months Ended
March 31,Increase/
(Decrease)
% Change2008

2007(Amounts in thousands)Amortization of intangibles

$
55,658

$
50,017

11
%% of total revenue


5
%

6
%


Amortization
of intangibles expense increased $5.6 million for the three months ended March 31, 2008, as compared to the same period 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 7., "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.

43

---



Purchase of In-Process Research and Development

In connection with certain of our acquisitions we completed between January 1, 2006 and December 31, 2007, we have acquired various IPR&D projects.
Substantial additional research and development will be required prior to any of our acquired IPR&D programs and technology platforms reaching technological feasibility. In addition, once research is
completed, each product candidate acquired will need to complete a series of clinical trials and receive FDA or other regulatory approvals prior to commercialization. Our current estimates of the time
and investment required to develop these products and technologies may change depending on the different applications that we may choose to pursue. We cannot give assurances that these programs will
ever reach technological feasibility or develop into products that can be marketed profitably. In addition, we cannot guarantee that we will be able to develop and commercialize products before our
competitors develop and commercialize products for the same indications. If products based on our acquired IPR&D programs and technology platforms do not become commercially viable, our results of
operations could be materially adversely affected. We did not complete any acquisitions in the three months ended March 31, 2008.

The
following table sets forth IPR&D projects for companies and certain assets we have acquired between January 1, 2006 and March 31, 2008 (amounts in millions):

|Company/Assets Acquired |  | Purchase
Price |       | IPR&D(1) |   | Programs Acquired |  | Discount Rate
Used in
Estimating
Cash Flows(1)  |  | Year of
Expected
Launch |   | Estimated
Cost to
Complete
|----------------------- |  | -------------- | ----- | -------- | - | ----------------- |  | ----------------------------------------------- |  | ----------------------- | - | --------------------------
|Bioenvision (2007)      |  | $              | 349.9 |          | $ | 125.5             |  | Clofarabine (rights outside North America)(2,3) |  | 17                      | % | 2008-2010                 
|                        |  |                |       |          |   |                   |  |                                                 |  |                         |   |                           
|AnorMED (2006)          |  | $              | 589.2 |          | $ | 526.8             |  | Mozobil (stem cell transplant)                  |  | 15                      | % | 2009-2014                 
|                        |  |                |       |          |   | 26.1              |  | AMD070 (HIV)(4)                                 |  | 15                      | % |                          
|                        |  |                |       |          |   |                   |  |                                                 |  |                         |   |                           
|                        |  |                |       |          | $ | 552.9             |  |                                                 |  |                         |   |                           
|                        |  |                |       |          |   |                   |  |                                                 |  |                         |   |                           

---

44

---



OTHER INCOME AND EXPENSES

Three Months Ended
March 31,Increase/
(Decrease)
% Change2008

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

$
188

$
5,612

(97
)%Minority interest


463


3,912

(88
)%Gains on investments in equity securities, net


775


12,788

(94
)%Other


(160
)

(525
)
(70
)%Investment income


14,870


16,219

(8
)%Interest expense


(1,655
)

(4,188
)
(60
)%Total other income

$
14,481

$
33,818

(57
)%


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 months ended March 31, 2007, our portion of the results of BioMarin/Genzyme LLC.

Equity
in income of equity method investments decreased 97% to $0.2 million for the three months ended March 31, 2008, as compared to $5.6 million for the same
period 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.

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 months ended March 31, 2008 as
minority interest in our consolidated statement of operations for that period, the amount of which was 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 both the three months
ended March 31, 2008 and 2007.

Gains on Investments in Equity Securities, Net

We recorded the following net realized gains on investments in equity securities during the periods presented (amounts in thousands):

Three Months Ended
March 31,2008

2007THP

$


$
10,848Other


775


1,940Gains on investments in equity securities, net

$
775

$
12,788


45

---



In
March 2007, we recorded a $10.8 million gain in connection with the sale of the entire investment in the capital stock of THP held by our wholly-owned subsidiary, SangStat
Medical, LLC, which had a zero cost basis, for net cash proceeds of $10.8 million.

At
March 31, 2008, our stockholders' equity includes $27.6 million of unrealized gains and $1.2 million of unrealized losses related to our strategic investments in
equity securities.



As of March 31, 2008, we owned 660,204 shares of the common stock of Sirtris that had a total cost basis of $4.5 million. In April 2008, Sirtris
announced its entry into a definitive agreement with GSK, under which GSK will acquire Sirtris for approximately $720 million through a cash tender offer of $22.50 per share. Sirtris and GSK
anticipate that the tender offer will commence in early May and close in the second quarter of 2008. We plan to record a pre-tax gain of approximately $10 million, based on the
current tender offer price, in gains on investments in equity securities, net, in our consolidated statements of operations in the period in which our shares of Sirtris common stock are successfully
tendered and accepted for payment.

Investment Income

Our investment income decreased 8% to $14.9 million for the three months ended March 31, 2008, as compared to $16.2 million for the same
period of 2007, primarily due to a decrease in our average portfolio yield, partially offset by higher domestic average cash balances.

Interest Expense

Our interest expense decreased 60% to $1.7 million for the three months ended March 31, 2008, as compared to $4.2 million for the same period
of 2007, primarily due to a $1.4 million decrease in interest expense related to asset retirement obligations and a $1.1 million increase in capitalized interest.

Provision for Income Taxes

Three Months Ended
March 31,Increase/
(Decrease)
% Change2008

2007(Amounts in thousands)Provision for income taxes

$
60,117

$
71,193

(16
)%Effective tax rate


29
%

31
%


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



We
are currently under IRS audit for tax years 2004 to 2005 and various states for 1999 to 2005. We believe that we have provided sufficiently for all audit exposures. We expect to
settle the 2004 to 2005 IRS audit within the next twelve months and do not expect that the settlement will have a

46

---



material
impact on our financial position or results of operations. Settlement of these audits or the expiration of the statute of limitations on the assessment of income taxes for any tax year may
result in a reduction of future tax provisions. Any such benefit would be recorded upon 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 $1.4 billion at
March 31, 2008 and $1.5 billion at December 31, 2007.

The
following is a summary of our statements of cash flows for the three months ended March 31, 2008 and 2007.

Cash Flows from Operating Activities

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

Three Months Ended
March 31,2008

2007Cash flows from operating activities:Net income

$
145,271

$
158,187Non-cash charges


124,151


82,557Decrease in cash from working capital changes (excluding impact of acquired assets and assumed liabilities)


(109,889
)

(42,938
)Cash flows from operating activities

$
159,533

$
197,806


Cash
provided by operating activities decreased $38.3 million for the three months ended March 31, 2008, as compared to the same period of 2007, primarily driven by a
$12.9 million decrease in net income, which was impacted by a $69.9 million charge to research and development expense for the premium paid to purchase five million shares of Isis stock,
a $67.0 million increase in cash used for working capital, offset, in part, by an increase of $41.6 million in non-cash charges, net. The increase in non-cash
charges, net, for the three months ended March 31, 2008, as compared to the same period of 2007, is primarily attributable to:



47

---





Cash Flows from Investing Activities

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

Three Months Ended
March 31,2008

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

$
33,175

$
32,060Net purchases of investments in equity securities


(79,551
)

(1,397
)Purchases of property, plant and equipment


(121,967
)

(82,982
)Distributions from equity method investments


6,595


6,000Purchases of other intangible assets


(7,046
)

(12,207
)Other investing activities


3,107


603Cash flows from investing activities

$
(165,687
)
$
(57,923
)


For
the three months ended March 31, 2008, net purchases of investments in equity securities and capital expenditures accounted for significant cash outlays for investing
activities. During the three months ended March 31, 2008, we used:



These
decreases in cash were partially offset by $6.6 million of cash distributions from our joint venture with BioMarin.

Cash Flows from Financing Activities

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

Three Months Ended
March 31,2008

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

$
90,243

$
27,765Repurchases of our common stock


(73,218
)

Excess tax benefits from stock-based compensation


5,790


264Payments of debt and capital lease obligations


(2,554
)

(2,117
)Increase in bank overdrafts


18,549


29,528Minority interest contributions





4,136Other financing activities


959


2,482Cash flows from financing activities

$
39,769

$
62,058


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

48

---



through
investment banking institutions, or by other means, subject to management's discretion and as permitted by securities laws and other legal requirements. During the three months ended
March 31, 2008, we repurchased an additional 1,000,000 shares of our common stock at an average price of $73.20 per share for a total of $73.2 million in cash, including fees. As
of March 31, 2008, we have repurchased a cumulative total of 4,500,000 shares of our common stock at an average price of $67.71 per share for a total of $304.8 million in cash, including
fees.

Revolving Credit Facility

In July 2006, we entered into a five-year $350.0 million senior unsecured revolving credit facility, which we refer to as our 2006 revolving
credit facility. The proceeds of loans under our 2006 revolving credit facility can be used to finance working capital needs and for general corporate purposes. Our 2006 revolving credit facility may
be increased at any time by up to an additional $350.0 million in the aggregate, as long as no default or event of default has occurred or is continuing and certain other customary conditions
are satisfied. Borrowings under our 2006 revolving credit facility will bear interest at various rates depending on the nature of the loan.

As
of March 31, 2008, no amounts were outstanding under our 2006 revolving credit facility. The terms of our 2006 revolving credit facility include various covenants, including
financial covenants that require us to meet minimum interest coverage ratios and maximum leverage ratios. As of March 31, 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
March 31, 2008, there have been no material changes to our contractual obligations since December 31, 2007.

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:



49

---





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 research, development,
and the commercialization of products. Entities falling within the scope of FIN 46R are included in our consolidated statements of operations if we qualify as the primary beneficiary. Entities
not subject to consolidation under FIN 46R are accounted for under the equity method of accounting if our ownership percent exceeds 20% or if we exercise significant influence over the entity.
We account for our portion of the results of these entities in the line item "Equity in income of equity method investments" in our consolidated statements of operations. We also acquire companies in
which we agree to pay contingent consideration based on attaining certain thresholds.

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, us 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 are 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 or financial position.

50

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EITF Issue No. 07-1, "Accounting for Collaborative Arrangements."In December 2007, the 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 beginning 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.

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 company 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 non-controlling 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
non-controlling 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 non-controlling 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 non-controlling owners. FAS 160 is effective for us beginning January 1, 2009 and adoption is

51

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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.

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.

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 Renvela

52

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

Renagel
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. Amgen, Inc. recently acquired Ilypsa and its product candidate, ILY101, a polymeric phosphate binder that completed a phase 2 trial in CKD patients on dialysis. 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 initiated phase 2 trials for an oral chaperone medication to treat Fabry disease. 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 in the United States and Europe; and
Durolane®,

53

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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 has announced their plans to initiate a phase 2 clinical trial in early 2008.

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 Pfizer Inc.'s ATGAM®. 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 from third party payors, the commercial potential of our products will be significantly
limited.

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

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



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Attempts
by third party payors to reduce costs in any of these ways could decrease demand for our products. In addition, in certain countries, including countries in the European Union
and Canada, the coverage of prescription drugs, the pricing, and the level 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 revenues by causing healthcare providers to be less willing to use our products and services. Although we actively
seek to assure that any initiatives that are undertaken by regulatory agencies involving reimbursement for our products and services do not have an adverse impact on us, we may not always be
successful in these efforts.

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

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

Before
we can commercialize our 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

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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 product candidates.

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 $304.3 million for the three months ended March 31,
2008, representing approximately 28% 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 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 is therefore requiring us to submit a separate BLA for the 2000 liter Myozyme. This delay in receipt of FDA approval has had an adverse effect on our revenues and earnings and will continue to
have an adverse effect until we receive regulatory approval.

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

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



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

Our operating results and financial position may be 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.

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 produced
in 2007 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 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 the market. 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

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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, 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.

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 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 the 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 these third party contractors could require us
to delay shipment of saleable products,

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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 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 and 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:



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We
are also currently involved in litigation matters and investigations that do not involve intellectual property claims and may be subject to additional actions in the future. For
example, the federal government, state governments and private payors are investigating and have begun to file 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.

We
may also become subject to investigations by government authorities in connection with our business activities. For example, we are currently cooperating with an investigation of Bone
Care (a company we acquired in July 2005) by the United States Attorney for the Eastern District of New York which was initiated in October 2004, when Bone Care received a subpoena requiring it to
provide a wide range of documents related to numerous aspects of its business.

We
believe 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 acceptable 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 insurer has 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 litigations 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 52% of our consolidated product and service revenues for the three months ended March 31, 2008. We
expect that international product and

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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:



Our
operations and marketing practices are also subject to regulation and scrutiny by the governments of the other 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.

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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 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 in the future.

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 innovators 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,

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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.

A
generic manufacturer has filed an ANDA seeking to market a generic version of Hectorol prior to the expiration dates of our patents covering the product. If this or any other
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 likely be impacted negatively.

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
acceptable 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:



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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.

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 March 31, 2008, we had $1.4 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 March 31, 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 operations, including:



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

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

We are exposed to potential loss from exposure to market risks represented principally by changes in foreign exchange rates, interest rates and equity prices. At
March 31, 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 March 31, 2008 to be $6.3 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.

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Interest Rate Risk

We are exposed to potential loss due to changes in interest rates. Our principal interest rate exposure is to changes in U.S. interest rates. Instruments with
interest rate risk include short- and long-term investments in fixed income securities. 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.

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) increase in interest rates to be $3.5 million as of
March 31, 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. We also hold a limited amount of foreign cash and foreign currency denominated equity securities.

As
of March 31, 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 $64.1 million, as compared to $36.2 million as of December 31, 2007. The change from the prior period is primarily due to
an increase in our net foreign currency contracts.

ITEM 4.    CONTROLS AND PROCEDURES

As of March 31, 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 March 31, 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 March 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

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

ITEM 1A.    RISK FACTORS

We incorporate by reference our disclosure related to risk factors which is set forth under the heading "Management's Discussion and Analysis of Genzyme
Corporation and Subsidiaries' Financial Condition and Results of OperationsRisk Factors" in Part I., Item 2. of this Quarterly Report on Form 10-Q.

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

The following table provides information about our repurchases of our equity securities during the quarter ended March 31, 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
Programs
|---------------------------------- | ----- | -------------------------------- | --------- | ---------------------------- | ----- | -------------------------------------------------------------------------------- | --------- | ----------------------------------------------------------------------------------------
|January 1, 2008-January 31, 2008   |       |                                 |           |                              |      |                                                                                  |          |                                                                                         
|February 1, 2008-February 29, 2008 |       |                                 |           |                              |      |                                                                                  |          |                                                                                         
|March 1, 2008-March 31, 2008       |       | 1,000,000                        |           | $                            | 73.20 |                                                                                  | 1,000,000 |                                                                                         
|                                   |       |                                  |           |                              |       |                                                                                  |           |                                                                                         
|                                   | Total |                                  | 1,000,000 | (1)                          | $     | 73.20                                                                            | (2)       | 1,000,000                                                                               
|                                   |       |                                  |           |                              |       |                                                                                  |           |                                                                                         

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ITEM 6.    EXHIBITS

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

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SIGNATURES

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

|                   |  |  |  | GENZYME CORPORATION
|------------------ |  |  |  | -------------------
|Dated: May 9, 2008 |  |  |  | By:                
|                   |  |  |  |                    

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GENZYME CORPORATION AND SUBSIDIARIES

FORM 10-Q, MARCH 31, 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      |  | Amended and Restated Collaboration Agreement, effective as of January 1, 2008, among Genzyme, BioMarin Pharmaceutical, Inc. and BioMarin/Genzyme LLC. Filed herewith.
|**10.2      |  | Manufacturing, Marketing and Sales Agreement, effective as of January 1, 2008, among Genzyme, BioMarin Pharmaceutical, Inc. and BioMarin/Genzyme LLC. Filed herewith.
|10.3        |  | Forms of Restricted Stock Unit Award Agreements for grants to executive officers under Genzyme's 2004 Equity Incentive Plan. 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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