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



FORM 10-Q

(Mark One)ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2010Oro

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


Commission File No. 0-14680

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

Massachusetts(State or other jurisdiction of
incorporation or organization)

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

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




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

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

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

Large accelerated filer ý

Accelerated filer o

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

Smaller reporting company o


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

Number of shares of Genzyme Stock outstanding as of July 31, 2010: 254,839,847



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NOTE TO UPDATE SECOND QUARTER EARNINGS RELEASE

On July 21, 2010, we issued a press release containing our financial results for the three month period ended June 30,
2010, which we furnished as an exhibit to a Current Report on Form 8-K prior to hosting a conference call. Subsequent to July 21, 2010, we identified additional inventories
that did not meet our quality specifications. Our decision to discard these inventories has resulted in a second quarter write off of $6.5 million in addition to the $21.9 million write
off previously reported. As a result, our second quarter net loss is $(3.8) million or $(0.01) per diluted share, compared with net income of $23.0 thousand or $0.00 per diluted share reported
on July 21, 2010.

NOTE REGARDING REFERENCES TO GENZYME

Throughout this Form 10-Q, the words "we," "us," "our" and "Genzyme" refer to Genzyme Corporation as a whole, and
"our board of directors" refers to the board of directors of Genzyme Corporation.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

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



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

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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®, Fabrazyme®, Thyrogen®, Myozyme®,
Renagel®, Renvela®, Campath®, Clolar®, Evoltra®, Mozobil®, Thymoglobulin®, Cholestagel®,
Synvisc®, Synvisc-One®, Sepra®, Seprafilm®, Carticel®, Epicel®, MACI®, Hectorol® and
Jonexa® are registered trademarks, and Lumizyme 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. Elaprase® is a registered trademark of Shire Human Genetic Therapies, Inc. Prochymal®
and Chondrogen® are registered trademarks of Osiris Therapeutics, Inc. Fludara® and Leukine® are registered trademarks licensed to Genzyme. All other
trademarks referred to in this Form 10-Q are the property of their respective owners. All rights reserved.

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GENZYME CORPORATION AND SUBSIDIARIES        FORM 10-Q, JUNE 30, 2010        TABLE OF CONTENTS



PAGE NO.PART I.

FINANCIAL INFORMATION


7ITEM 1.

Financial Statements


7Unaudited, Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 2010 and 2009


7Unaudited, Consolidated Balance Sheets as of June 30, 2010 and December 31,
2009


8Unaudited, Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2010 and 2009


9Notes to Unaudited, Consolidated Financial Statements


10ITEM 2.

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


41ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk


91ITEM 4.

Controls and Procedures


92PART II.

OTHER INFORMATION


92ITEM 1.

Legal Proceedings


92ITEM 1A.

Risk Factors


95ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds


95ITEM 6.

Exhibits


96Signatures


97


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PART I.    FINANCIAL INFORMATION



ITEM 1.    FINANCIAL STATEMENTS



GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

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

Three Months Ended
June 30,

Six Months Ended
June 30,2010

2009

2010

2009Revenues:Net product sales

$
974,922

$
1,115,425

$
1,946,547

$
2,152,669Net service sales


103,589


105,693


205,504


207,192Research and development revenue


928


7,392


1,861


17,520Total revenues


1,079,439


1,228,510


2,153,912


2,377,381Operating costs and expenses:Cost of products sold


301,644


288,899


581,383


524,461Cost of services sold


66,524


61,624


132,396


121,874Selling, general and administrative


402,535


354,128


955,845


672,089Research and development


225,558


210,522


446,488


417,447Amortization of intangibles


67,891


63,945


138,875


121,543Contingent consideration expense


10,021


9,090


72,570


9,090Total operating costs and expenses


1,074,173


988,208


2,327,557


1,866,504Operating income (loss)


5,266


240,302


(173,645
)

510,877Other income (expenses):Equity in loss of equity method investments


(870
)




(1,567
)

Losses on investments in equity securities, net


(31,562
)

(105
)

(31,399
)

(681
)Gain on acquisition of business





24,159





24,159Other


356


(2,056
)

(246
)

(3,035
)Investment income


3,084


4,144


6,384


9,494Total other income (expenses)


(28,992
)

26,142


(26,828
)

29,937Income (loss) before income taxes


(23,726
)

266,444


(200,473
)

540,814Benefit from (provision for) income taxes


19,953


(78,870
)

81,752


(157,754
)Net income (loss)

$
(3,773
)
$
187,574

$
(118,721
)
$
383,060Net income (loss) per share:Basic

$
(0.01
)
$
0.69

$
(0.45
)
$
1.42Diluted

$
(0.01
)
$
0.68

$
(0.45
)
$
1.39Weighted average shares outstanding:Basic


265,270


269,958


265,760


270,406Diluted


265,270


274,852


265,760


276,225


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

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GENZYME CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

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

June 30,
2010

December 31,
2009ASSETSCurrent assets:Cash and cash equivalents

$
681,807

$
742,246Short-term investments


152,706


163,630Accounts receivable, net


890,244


899,731Inventories


594,112


608,022Other current assets


193,445


210,747Deferred tax assets


183,698


178,427Total current assets


2,696,012


2,802,803Property, plant and equipment, net


2,846,148


2,809,349Long-term investments


139,641


143,824Goodwill


1,403,639


1,403,363Other intangible assets, net


1,963,429


2,313,262Deferred tax assets-noncurrent


522,311


376,815Investments in equity securities


74,227


74,438Other noncurrent assets


118,492


136,870Total assets

$
9,763,899

$
10,060,724LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable

$
130,323

$
189,629Accrued expenses


939,516


696,223Deferred revenue


34,288


24,747Current portion of contingent consideration obligations


155,898


161,365Current portion of long-term debt and capital lease obligations


8,510


8,166Total current liabilities


1,268,535


1,080,130Long-term debt and capital lease obligations


1,105,956


116,434Deferred revenue-noncurrent


12,338


13,385Long-term contingent consideration obligations


821,311


853,871Other noncurrent liabilities


80,354


313,252Total liabilities


3,288,494


2,377,072Commitments and contingenciesStockholders' equity:Preferred stock, $0.01 par value





Common stock, $0.01 par value


2,531


2,657Additional paid-in capital


5,068,602


5,688,741Share purchase contract


(200,000
)

Accumulated earnings


1,551,375


1,670,096Accumulated other comprehensive income


52,897


322,158Total stockholders' equity


6,475,405


7,683,652Total liabilities and stockholders' equity

$
9,763,899

$
10,060,724


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

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

Six Months Ended
June 30,2010

2009Cash Flows from Operating Activities:Net income (loss)

$
(118,721
)
$
383,060Reconciliation of net income (loss) to cash flows from operating activities:Depreciation and amortization


246,036


208,515Stock-based compensation


92,390


109,831Provision for bad debts


12,431


10,808Contingent consideration expense


72,570


9,090Equity in loss of equity method investments


1,567


Gain on acquisition of business





(24,159
)Losses on investments in equity securities, net


31,399


681Deferred income tax benefit


(62,917
)

(50,632
)Tax benefit from employee stock-based compensation


28,392


9,239Excess tax benefit from (provision for) stock-based compensation


5,372


(4,424
)Other


3,314


4,068Increase (decrease) in cash from working capital changes (excluding impact of acquired assets and assumed liabilities):Accounts receivable


(71,630
)

(106,901
)Inventories


(47,156
)

21,795Other current assets


(20,504
)

(903
)Accounts payable, accrued expenses and deferred revenue


132,615


30,278Cash flows from operating activities


305,158


600,346Cash Flows from Investing Activities:Purchases of investments


(175,816
)

(64,394
)Sales and maturities of investments


187,220


150,739Purchases of equity securities


(4,030
)

(7,363
)Proceeds from sales of investments in equity securities


4,134


1,473Purchases of property, plant and equipment


(330,298
)

(318,324
)Investments in equity method investment


(1,466
)

Acquisitions





(117,073
)Purchases of other intangible assets


(6,155
)

(18,345
)Other


(7,661
)

(5,198
)Cash flows from investing activities


(334,072
)

(378,485
)Cash Flows from Financing Activities:Proceeds from issuance of common stock


58,362


53,508Repurchases of our common stock


(800,000
)

(107,134
)Payments under shares purchase contract


(200,000
)

Excess tax benefits from (provision for) stock-based compensation


(5,372
)

4,424Proceeds from issuance of debt, net


994,387


Payments of debt and capital lease obligations


(4,549
)

(4,305
)Increase (decrease) in bank overdrafts


23,851


(14,303
)Payment of contingent consideration obligation


(61,336
)

Other


939


3,660Cash flows from financing activities


6,282


(64,150
)Effect of exchange rate changes on cash


(37,807
)

2,113Increase (decrease) in cash and cash equivalents


(60,439
)

159,824Cash and cash equivalents at beginning of period


742,246


572,106Cash and cash equivalents at end of period

$
681,807

$
731,930Supplemental disclosures of non-cash transactions:Strategic TransactionsNote 6.Goodwill and Other Intangible AssetsNote 8.Long-Term DebtNote 11.


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 products and services are focused on rare inherited disorders,
kidney disease, orthopaedics, cancer, transplant and immune disease, and diagnostic testing. Our commitment to innovation continues today with a substantial development program focused on these
fields, as well as multiple sclerosis, or MS, cardiovascular disease, neurodegenerative diseases, and other areas of unmet medical need.

We
are organized into five financial reporting units, which we also consider to be our reporting segments:



Effective
January 1, 2010, based on changes in how we review our business, we re-allocated certain of our business units among our segments and adopted new names for
certain of our reporting segments. Specifically:



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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

1. Description of Business (Continued)



We
report the activities of the following business units under the caption "Other": our genetic testing business unit, which provides testing services for the oncology, prenatal and
reproductive markets; and our diagnostic products and pharmaceutical intermediates business units. These operating segments did not meet the quantitative threshold for separate segment reporting.

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

We
have revised our 2009 segment disclosures to conform to our 2010 presentation.

In
May 2010, we announced that we plan to pursue strategic alternatives for our genetic testing, diagnostic products and pharmaceutical intermediates business units. Possible
alternatives include divestiture, spin-out or management buy-out. Our genetic testing business unit had revenue of approximately $371 million for the year ended
December 31, 2009 and approximately $183 million for the six months ended June 30, 2010. Our diagnostic products business unit had revenue of approximately $167 million for
the year ended December 31, 2009 and approximately $76 million for the six months ended June 30, 2010. Revenue from our pharmaceutical intermediates business unit for the same
periods was significantly less in comparison.

2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

Our unaudited, consolidated financial statements for each period include the statements of operations, balance sheets and statements of
cash flows for our operations taken as a whole. We have eliminated all intercompany items and transactions in consolidation. We have reclassified certain 2009 data to conform to our 2010 presentation.
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, or U.S. GAAP.

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 Exhibit 99 to our Form 8-K filed with the
SEC on June 14, 2010. 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. The balance sheet data as of December 31, 2009 that is included in this Form 10-Q was derived from our audited financial statements but does
not include all disclosures required by U.S. GAAP.

Our
unaudited, consolidated financial statements for each period include the accounts of our wholly owned and majority owned subsidiaries. All intercompany accounts and transactions have
been eliminated in consolidation. We account for our investments in entities not subject to consolidation using the equity method of accounting if we have a substantial ownership interest (20% to 50%)
in or exercise significant influence over the entity. Our consolidated net income (loss) includes our share of the earnings or losses of these entities. From January 1, 2008 to
December 31, 2009 we consolidated the results of BioMarin/Genzyme LLC, an entity we formed with BioMarin Pharmaceutical Inc., or BioMarin, in 1998, because we determined that we
were the primary beneficiary of BioMarin/Genzyme LLC. Upon consolidation of the entity, we recorded the assets and liabilities of BioMarin/

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

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

Genzyme LLC
in our consolidated balance sheets at fair value. Effective January 1, 2010, in accordance with new guidance we adopted for consolidating variable interest entities, we no
longer consolidate the results of BioMarin/Genzyme LLC because we determined that the entity does not have a primary beneficiary under the new guidance. As a result, we deconsolidated
BioMarin/Genzyme LLC and no longer record the assets and liabilities in our consolidated balance sheets. Instead, effective January 1, 2010, we began to record our portion of
BioMarin/Genzyme LLC's results in equity in loss of equity method investments in our consolidated statements of operations.

Revenue RecognitionRecent Healthcare Reform Legislation

In March 2010, healthcare reform legislation was enacted in the United States, which contains several provisions that impact our
business. Although many provisions of the new legislation do not take effect immediately, several provisions became effective in the first quarter of 2010. These include:



These
provisions did not have a significant impact on our results of operations or financial position for the six months ended June 30, 2010.

Effective
October 1, 2010, the new legislation re-defines the Medicaid average manufacturer price, or AMP, such that the AMP and, consequently, the Medicaid rebate are
expected to increase for some of our drugs, in particular those that offer discounted pricing to customers.

Beginning
in 2011, the new law requires that drug manufacturers provide a 50% discount to Medicare beneficiaries whose prescription drug costs cause them to be subject to the Medicare
Part D coverage gap, which is known as the "donut hole." Also beginning in 2011, clinical laboratory fee schedule payments will be reduced by 1.75% over a period of five years and we will be
required to pay our share of a new fee assessed on all branded prescription drug manufacturers and importers. This fee will be calculated based upon each organization's percentage share of total
branded prescription drug sales to U.S. government programs (such as Medicare and Medicaid, the Department of Veterans Affairs, or VA, the Department of Defense, or DOD, and the TriCare retail
pharmacy discount programs) made during the previous year. Sales of orphan drugs, however, are not included in the fee calculation. Final guidance relating to how we will be required to account for
this fee is still pending, however, it is expected that the fee will be classified as either a reduction to net sales or an operating expense.

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

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

Presently,
uncertainty exists as many of the specific determinations necessary to implement this new legislation have yet to be decided and communicated to industry participants. We are
still assessing the full extent that the U.S. healthcare reform legislation may have on our business.

Accounts Receivable Related to Sales in Greece

Total accounts receivable in our consolidated balance sheets includes approximately $57 million, net of reserves, as of both
June 30, 2010 and December 31, 2009 of accounts receivable held by our subsidiary in Greece related to sales to government-owned or supported healthcare facilities in Greece. These sales
are subject to significant payment delays due to government funding and reimbursement practices. We believe that this is an industry-wide issue for suppliers to these facilities. In May
2010, the government of Greece announced a plan for repayment of its debt to international pharmaceutical companies, which calls for immediate payment of accounts receivable balances that were
established in 2005 and 2006. For accounts receivable established between 2007 and 2009, the government of Greece will issue non-interest bearing bonds, expected to be exchange tradable,
with maturities ranging from 2 to 4 years. We recorded a charge of $7.2 million to bad debt expense, a component of selling, general and administrative expenses, or SG&A, in our
consolidated statements of operations for the three and six months ended June 30, 2010 to write down the accounts receivable balances held by our subsidiary in Greece to present value using a
10% discount rate.

In
conjunction with this plan, the government of Greece also instituted price decreases of between 20% and 27% for all future pharmaceutical product sales. Because our customers in
Greece are government owned or supported, we may also be impacted by declines in sovereign credit ratings or sovereign debt defaults. The government of Greece has recently required financial support
from both the European Union and the International Monetary Fund, or IMF, to avoid defaulting on its sovereign debt. If significant additional changes occur in the availability of government funding
in Greece, we may not be able to collect on amounts due from these customers. We do not expect this concentration of credit risk to have a material adverse impact on our financial position or
liquidity.

Stock-Based Compensation

All stock-based awards to non-employees are accounted for at their fair value. We periodically grant awards, including time
vesting stock options, time vesting restricted stock units, or RSUs, and performance vesting restricted stock units, or PSUs, under our employee and director equity plans. Beginning in 2010, our
long-term incentive program for senior executives includes a combination of:



Approximately
half of each senior executive's grant consists of time vesting stock options with the remainder in PSUs. Grants under our former long-term incentive program were comprised of
time vesting stock options and time vesting RSUs.

We
record the estimated fair value of awards granted as stock-based compensation expense in our consolidated statements of operations over the requisite service period, which is
generally the vesting period. Where awards are made with non-substantive vesting periods, such as where a portion of the award vests upon retirement eligibility, we estimate and recognize
expense based on the period from the grant date to the date on which the employee is retirement eligible.

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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

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

The
fair values of our:



Recent Accounting Pronouncements

Periodically, accounting pronouncements and related information on the adoption, interpretation and application of U.S. GAAP are
issued or amended by the Financial Accounting Standards Board, or FASB, or other standard setting bodies. Changes to the FASB Accounting Standards Codification, or ASC, are communicated
through Accounting Standards Updates, or ASUs. The following table shows FASB ASUs recently issued that could affect our disclosures and our position for adoption:

ASU Number

Relevant Requirements
of ASU

Issued Date/Our Effective
Dates

Status2009-13 "Multiple-Deliverable Revenue Arrangementsa consensus of the FASB Emerging Issues Task Force."

Establishes the accounting and reporting guidance for arrangements under which a vendor will perform multiple revenue-generating activities. Specifically, the provisions of this update address how to separate deliverables
and how to measure and allocate arrangement consideration to one or more units of accounting.

Issued October 2009. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted.

We will adopt the provisions of this update for the first quarter of 2011. We are currently assessing the impact the provisions of this update will have, if any, on our consolidated financial statements.


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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

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

ASU Number

Relevant Requirements
of ASU

Issued Date/Our Effective
Dates

Status2010-06 "Improving Disclosures about Fair Value Measurements."

Requires new disclosures and clarifies some existing disclosure requirements about fair value measurements codified within ASC 820, "Fair Value Measurements and Disclosures," including significant transfers into and out
of Level 1 and Level 2 investments of the fair value hierarchy. Also requires additional information in the roll forward of Level 3 investments including presentation of purchases, sales, issuances, and settlements on a gross basis.
Further clarification for existing disclosure requirements provides for the disaggregation of assets and liabilities presented, and the enhancement of disclosures around inputs and valuation techniques.

Issued January 2010. Effective for the first interim or annual reporting period beginning after December 15, 2009, except for the additional information in the roll forward of Level 3 investments. Those
disclosures are effective for fiscal years beginning after December 15, 2010, and for interim reporting periods within those fiscal years.

We adopted the applicable provisions of this update, except for the additional information in the roll forward of Level 3 investments (as previously noted), in the first quarter of 2010. Besides a change in
disclosure, the adoption of this update does not have a material impact on our consolidated financial statements. None of our instruments were reclassified between Level 1, Level 2 or Level 3 in 2010.2010-11, "Scope Exception Related to Embedded Credit Derivatives."

Update provides amendments to Subtopic 815-15,"Derivatives and HedgingEmbedded Derivatives,"to clarify the scope exception for embedded credit derivative features
related to the transfer of credit risk in the form of subordination of one financial instrument to another.

Issued March 2010. Effective at the beginning of each reporting entity's first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each reporting entity's first fiscal
quarter beginning after issuance of this update.

We will adopt the provisions of this update for the third quarter of 2010. We are currently assessing the impact the provisions of this update will have, if any, on our consolidated financial statements.2010-17, "Milestone Method of Revenue Recognitiona consensus of the FASB Emerging Issues Task Force."

Update provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research and development transactions.

Issued April 2010. Effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted.

We will adopt the provisions of this update beginning January 1, 2011. We are currently assessing the impact the provisions of this update will have, if any, on our consolidated financial statements.2010-19, "Foreign Currency Issues: Multiple Foreign Currency Exchange Rates."

Update codifies the SEC Staff Announcement made at a March 18, 2010 meeting of the Emerging Issues Task Force, or EITF. The Staff Announcement provides the SEC staff's view on certain foreign currency issues related
to investments in Venezuela.

Issued May 2010. Staff announcements made at EITF meetings are effective as of the announcement date, which for this update is March 18, 2010, unless otherwise noted.

We have adopted the provisions of this update beginning March 18, 2010. We don't believe the impact of highly inflationary accounting on differences between amounts recorded for financial reporting purposes versus
the underlying U.S. dollar denominated values is material to our consolidated financial statements.


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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3. Fair Value Measurements

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



Fair Value MeasurementDefinition and Hierarchy

Fair value is defined 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, we are permitted to use various valuation approaches,
including market, income and cost approaches. We are required to follow an established fair value 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, equity securities, derivatives and contingent
consideration obligations within the hierarchy as follows:



Valuation Techniques

Fair value is a market-based measure considered from the perspective of a market participant who would buy the asset or assume the
liability rather than our own specific measure. All of our fixed income securities are priced 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
derivatives and equity securities using market data from observable and corroborated sources. We determine the fair value of the contingent consideration obligations based on

16

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Table of Contents

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Notes to Unaudited, Consolidated Financial Statements (Continued)

3. Fair Value Measurements (Continued)

a
probability-weighted income approach. The measurement is based on significant inputs not observable in the market. In periods of market inactivity, the observability of prices and inputs may be
reduced for certain instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3. During the six months ended
June 30, 2010, none of our instruments were reclassified between Level 1, Level 2 or Level 3.

The
following tables set forth our assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2010 and December 31, 2009 (amounts in
thousands):

Description

Balance as of
June 30,
2010

Level 1

Level 2

Level 3Fixed income investments(1):

Cash equivalents:

Money market funds/other

$
565,413

$
565,413

$


$
Short-term investments:

U.S. Treasury notes


26,823


26,823





Non U.S. Governmental notes


8,843





8,843


U.S. agency notes


72,093





72,093


Corporate notesglobal


44,947





44,947


Total


152,706


26,823


125,883


Long-term investments:

U.S. Treasury notes


59,150


59,150





U.S. agency notes


20,962





20,962


Corporate notesglobal


59,529





59,529


Total


139,641


59,150


80,491


Total fixed income investments


857,760


651,386


206,374


Equity holdings(1):

Publicly-traded equity securities


38,267


38,267





Derivatives:

Foreign exchange forward contracts


(501
)




(501
)

Contingent liabilities(2):

Contingent consideration obligations


(977,209
)







(977,209
)Total assets (liabilities) at fair value

$
(81,683
)
$
689,653

$
205,873

$
(977,209
)


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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3. Fair Value Measurements (Continued)

Description

Balance as of
December 31,
2009

Level 1

Level 2

Level 3Fixed income investments(1):

Cash equivalents:

Money market funds/other

$
603,109

$
603,109

$


$
Short-term investments:

U.S. Treasury notes


41,040


41,040





Non U.S. Governmental notes


4,114





4,114


U.S. Government agency notes


56,810





56,810


Corporate notesglobal


54,825





54,825


Commercial paper


6,841





6,841


Total


163,630


41,040


122,590


Long-term investments:

U.S. Treasury notes


29,793


29,793





Non U.S. Governmental notes


4,873





4,873


U.S. Government agency notes


28,015





28,015


Corporate notesglobal


81,143





81,143


Total


143,824


29,793


114,031


Total fixed income investments


910,563


673,942


236,621


Equity holdings(1):

Publicly-traded equity securities


40,380


40,380





Derivatives:

Foreign exchange forward contracts


4,284





4,284


Contingent liabilities(2):

Contingent consideration obligations


(1,015,236
)







(1,015,236
)Total assets (liabilities) at fair value

$
(60,009
)
$
714,322

$
240,905

$
(1,015,236
)


(1)Changes
in the fair value of our fixed income investments and investments in publicly-traded equity securities are recorded in accumulated other
comprehensive income, a component of stockholders' equity, in our consolidated balance sheets.(2)Changes
in the fair value of the contingent consideration obligations are recorded as contingent consideration expense, a component of operating expenses in
our consolidated statements of operations. We recorded a total of $72.6 million of contingent consideration expense for the six months ended June 30, 2010 in our consolidated statements
of operations, of which $(13.1) million was allocated to our Hematology and Oncology reporting segment and $85.7 million was allocated to our Multiple Sclerosis reporting segment. We recorded
$9.1 million of contingent consideration expense for the six months ended June 30, 2009 in our consolidated statements of operations, including $4.3 million for our Hematology and
Oncology reporting segment and $4.8 million for our Multiple Sclerosis reporting segment.


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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3. Fair Value Measurements (Continued)




Changes in the fair value of our Level 3 contingent consideration obligations during the six months ended June 30, 2010 were as
follows (amounts in thousands):

Balance as of December 31, 2009

$
(1,015,236
)Payments


68,940R&D reimbursement received


(7,604
)Contingent consideration expense(1)


(72,570
)Effect of foreign currency translation adjustments


49,261Fair value at June 30, 2010

$
(977,209
)


(1)For
the six months ended June 30, 2010, includes:




In
June 2010, we issued $500.0 million aggregate principal amount of our 3.625% senior notes due in June 2015, which we refer to as our 2015 Notes, and $500.0 million
aggregate principal amount of our 5.000% senior notes due in June 2020, which we refer to as our 2020 Notes, and, together with our 2015 Notes, as the Notes, as described in Note 11.,
"Long-Term Debt," to these consolidated financial statements. As of June 30, 2010 our:



The
fair values of our 2015 Notes and 2010 Notes were determined through a market-based approach using observable and corroborated sources; within the hierarchy of fair value measurements, these are
classified as Level 2 fair values.

The
carrying amounts reflected in our consolidated balance sheets for cash, accounts receivable, other current assets, accounts payable, accrued expenses, current portion of contingent
consideration obligations and current portion of long-term debt and capital lease obligations approximate fair value due to their short-term maturities.

Derivative Instruments

As a result of our worldwide operations, we face exposure to adverse movements in foreign currency exchange rates. Exposures to
currency fluctuations that result from sales of our products in foreign markets are partially offset by the impact of currency fluctuations on our international expenses. We may also use derivatives,
primarily foreign exchange forward contracts for which we do not apply hedge accounting treatment, to further reduce our exposure to changes in exchange rates, primarily to offset the earnings effect
from short-term foreign currency assets and liabilities. We account for such derivatives at market value with the resulting gains and losses reflected within SG&A in our consolidated
statements of operations. We do not have any derivatives designated as hedging instruments and we do not use derivative instruments for trading or speculative purposes.

19

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

3. Fair Value Measurements (Continued)

Foreign Exchange Forward Contracts

Generally, we enter into foreign exchange forward contracts with maturities of not more than 15 months. All foreign exchange
forward contracts in effect as of June 30, 2010 and December 31, 2009 had maturities of 1 to 2 months. We report these contracts on a net basis. Net asset derivatives are included
in other current assets and net liability derivatives are included in accrued expenses in our consolidated balance sheets.

The
following table summarizes the balance sheet classification of the fair value of these derivatives on both a gross and net basis as of June 30, 2010 and December 31,
2009 (amounts in thousands):

Unrealized Gain/Loss on Foreign Exchange Forward ContractsAs ReportedGross

NetAsset
Derivatives

Liability
Derivatives

Asset
Derivatives

Liability
DerivativesAs of:

Other
current assets

Accrued
expenses

Other
current assets

Accrued
expensesJune 30, 2010

$
1,236

$
1,737

$


$
501December 31, 2009

$
9,834

$
5,550

$
4,284

$



Total
foreign exchange (gains) and losses included in SG&A in our consolidated statements of operations includes unrealized and realized (gains) and losses related to both our foreign
exchange forward contracts and our foreign currency assets and liabilities. The net impact of our overall unrealized and realized foreign exchange (gains) and losses for both the three and six months
ended June 30, 2010 and 2009 was not significant.

The
following table summarizes the effect of the unrealized and realized net (gains)/losses related to our foreign exchange forward contracts on our consolidated statements of operations
for the three and six months ended June 30, 2010 and 2009 (amounts in thousands):

Net (Gain)/Loss ReportedThree Months Ended
June 30,

Six Months Ended
June 30,Statement of
Operations LocationDerivative Instrument

2010

2009

2010

2009Foreign exchange forward contracts

SG&A

$
4,660

$
18,728

$
(381
)
$
7,898


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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

4. Net Income (Loss) Per Share

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

Three Months Ended
June 30,

Six Months Ended
June 30,2010

2009

2010

2009Net income (loss)basic and diluted

$
(3,773
)
$
187,574

$
(118,721
)
$
383,060Shares used in computing net income (loss) per common sharebasic


265,270


269,958


265,760


270,406Effect of dilutive securities(1):Stock options(2)





3,555





4,554Restricted stock units





1,303





1,221Other





36





44Dilutive potential common shares





4,894





5,819Shares used in computing net income (loss) per common sharediluted(1)


265,270


274,852


265,760


276,225Net income (loss) per common share:Basic

$
(0.01
)
$
0.69

$
(0.45
)
$
1.42Diluted

$
(0.01
)
$
0.68

$
(0.45
)
$
1.39


(1)For
the three and six months ended June 30, 2010, basic and diluted net loss per share are the same. We did not include the securities described in
the following table in the computation of diluted net loss per share because these securities would have an anti-dilutive effect due to our net loss for those periods (amounts in
thousands):


Three Months Ended
June 30, 2010

Six Months Ended
June 30, 2010Stock options


2,316


2,633Restricted stock units


2,391


2,462Other


148


198Total shares excluded from calculation of diluted loss per share


4,855


5,293


(2)We
did not include the securities described in the following table in the computation of diluted earnings (loss) per share because these securities were
anti-dilutive during the corresponding period (amounts in thousands):


Three Months Ended
June 30,

Six Months Ended
June 30,2010

2009

2010

2009Shares issuable upon exercise of outstanding options


23,158


19,732


21,903


14,191


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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)



5. Comprehensive Income (Loss)

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

Three Months Ended
June 30,

Six Months Ended
June 30,2010

2009

2010

2009Net income (loss)

$
(3,773
)
$
187,574

$
(118,721
)
$
383,060Other comprehensive income (loss):Foreign currency translation adjustments


(141,890
)

153,780


(267,367
)

33,632Pension liability adjustments, net of tax(1)


(12
)




(21
)

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


(3,639
)

9,657


(1
)

(10,950
)Reclassification adjustment of (gains) losses included in net income (loss), net of tax


(694
)

37


(1,872
)

(160
)Unrealized gains (losses) on securities, net of tax(2)


(4,333
)

9,694


(1,873
)

(11,110
)Other comprehensive income (loss)


(146,235
)

163,474


(269,261
)

22,522Comprehensive income (loss)

$
(150,008
)
$
351,048

$
(387,982
)
$
405,582


(1)Tax
amounts for all periods were not significant.(2)Net
of $2.5 million of tax for the three months ended and $1.1 million of tax for the six months ended June 30, 2010 and $(5.6) million of tax
for the three months ended and $6.3 million of tax for the six months ended June 30, 2009.


6. Strategic Transactions

Purchase of In-Process Research and Development

The following table sets forth the significant in-process research and development, or IPR&D, projects for the companies
and assets we acquired between January 1, 2006 and June 30, 2010 (amounts in millions):

Company/Assets Acquired

Purchase
Price

IPR&D

Programs Acquired

Discount Rate
Used in
Estimating
Cash Flows

Year of
Expected
LaunchBayer (2009)

$
1,006.5

$
458.7

alemtuzumab for MSUS


16
%

2012174.2

alemtuzumab for MSex-US


16
%

2013$
632.9
(1)Bioenvision, Inc., or Bioenvision (2007)

$
349.9

$
125.5
(2)
Clolar(3)


17
%

2010-2016
(4)AnorMED Inc., or AnorMED (2006)

$
589.2

$
526.8
(2)
Mozobil(5)


15
%

2016


(1)Capitalized
as an indefinite-lived intangible asset.(2)Expensed
on acquisition date.(3)Clolar
is approved for the treatment of relapsed and refractory pediatric acute lymphoblastic leukemia, or ALL. The IPR&D projects for Clolar are related to
the development of the product for the treatment of other indications.


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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

6. Strategic Transactions (Continued)

(4)Year
of expected launch reflects both the ongoing launch of products for currently approved indications and the anticipated launch of the products in the
future for new indications.(5)Mozobil
received marketing approval for use in stem cell transplants in the United States in December 2008 and in Europe in July 2009. Mozobil is also being
developed for tumor sensitization.


Pro Forma Financial Summary

The following pro forma financial summary is presented as if the acquisition from Bayer was completed as of January 1, 2009. The
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 this acquisition, such as a gain on acquisition of business of $24.2 million, are
included in the pro forma financial summaries for the period presented (amounts in thousands, except per share amounts):

Three Months Ended
June 30,

Six Months Ended
June 30,2009

2009Total revenues

$
1,280,470

$
2,477,530Net income

$
163,425

$
319,795Net income per share:Basic

$
0.61

$
1.18Diluted

$
0.59

$
1.16Weighted average shares outstanding:Basic


269,958


270,406Diluted


274,852


276,225


7. Inventories

June 30,
2010

December 31,
2009(Amounts in thousands)Raw materials

$
106,394

$
123,434Work-in-process


283,648


288,653Finished goods


204,070


195,935Total

$
594,112

$
608,022


Manufacturing-Related Charges

Cerezyme and Fabrazyme

In order to build a small inventory buffer to help us more consistently manage the resupply of Cerezyme to patients and reduce
interruptions in shipping that occur in the absence of inventory, we began shipping Cerezyme to meet 50% of estimated product demand at the end of February 2010. Although we achieved our goal of
building a small inventory buffer during the first quarter of 2010, we continued shipping at 50% of demand level due to an interruption in operations at our Allston facility

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Notes to Unaudited, Consolidated Financial Statements (Continued)

7. Inventories (Continued)

at
the end of March 2010. The interruption resulted from an unexpected city electrical power failure that compounded issues with the plant's water system. Once production resumed, we continued
shipping at the 50% demand level through the end of the second quarter of 2010. We supplied approximately the same amount of Cerezyme in July 2010 as we supplied in each of May 2010 and June 2010, and
expect that supply will then increase in the following months. However, there will be regional variations when Cerezyme will be available, and in some countries, patients' infusion schedules may need
to shift due to short-term shipping delays.

Since
the fourth quarter of 2009, we have been shipping Fabrazyme to meet approximately 30% of estimated product demand. We have been working to increase the productivity of the
Fabrazyme manufacturing process, which has performed at the low end of the historical range since the re-start of production. We have developed a new working cell bank for Fabrazyme that
has been approved by the FDA and the European Medicines Agency, or EMA. The new working cell bank has completed three runs and has had 30% greater productivity than the old working cell bank. We
expect to continue shipping Fabrazyme at the 30% of demand level through the third quarter and increase shipments of Fabrazyme in the fourth quarter.

We
recorded $14.9 million of charges for the three months ended and $16.4 million of charges for the six months ended June 30, 2010 to cost of products sold in our
consolidated statements of operations to write off Cerezyme and Fabrazyme work-in-process material that was unfinished when the interruption occurred, based on our determination that such material
could not be finished, and other inventory for these products that did not meet the necessary quality specifications.

We
also recorded charges of $6.0 million for the three months and $7.1 million for the six months ended June 30, 2010 to cost of products sold in our consolidated
statements of operations to write off certain lots of Thyrogen that did not meet the necessary quality specifications.

We
capitalize inventory produced for commercial sale, which may result in the capitalization of inventory prior to regulatory approval of a product. If a product is not approved for
sale, it would
result in the write off of the inventory and a charge to earnings. As of June 30, 2010, the amount of inventory for Fabrazyme related to the new working cell bank that has not yet been approved
for sale was not significant.

Inventory Subject to Additional Evaluation and Release

At any particular period, we may have certain inventory that requires further evaluation or testing to ensure that it meets appropriate
quality specifications. As of June 30, 2010, we have approximately $16 million of inventory that is being evaluated or tested, including $6.3 million of Fabrazyme,
$3.9 million of Myozyme and $3.6 million of Thymoglobulin. If we determine that this inventory, or any portion thereof, does not meet the necessary quality standards, it would result in
a write off of the inventory and a charge to earnings.

Sevelamer Hydrochloride and Sevelamer Carbonate

We manufacture the majority of our supply requirements for sevelamer hydrochloride (the active ingredient in Renagel) and sevelamer
carbonate (the active ingredient in Renvela) at our manufacturing facility in Haverhill, England. In December 2009, equipment failure caused an explosion and fire at this facility, which damaged some
of the equipment used to produce these active ingredients

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Notes to Unaudited, Consolidated Financial Statements (Continued)

7. Inventories (Continued)

as
well as the building in which the equipment was located. As a result, we temporarily suspended production of sevelamer hydrochloride and sevelamer carbonate at this facility so the damaged
equipment could be repaired. We resumed production of sevelamer hydrochloride in May 2010. We anticipate that the facility will resume production of sevelamer carbonate in the fourth quarter of 2010.
We believe that we have adequate supply levels to meet the current demand for both Renagel and Renvela and do not anticipate there will be any supply constraints for either product while the facility
undergoes repairs. We recorded $6.1 million of expenses, net of $2.4 million of insurance reimbursements, for the three months ended and $13.7 million, net of $5.4 million
of insurance reimbursements, for the six months ended June 30, 2010, to cost of products sold in our consolidated statements of operations for Renagel and Renvela related to the remediation
cost of our Haverhill, England manufacturing facility, including repairs and idle capacity expenses. We expect to incur approximately $10 million of additional costs related to the remediation
of this facility in the third quarter of 2010.

8. Goodwill and Other Intangible Assets

The following table contains the change in our goodwill during the six months ended June 30, 2010 (amounts in thousands):

Personalized
Genetic
Health

Renal and
Endocrinology

Biosurgery

Hematology
and
Oncology

Multiple
Sclerosis

Other

TotalGoodwill

$
339,563

$
319,882

$
110,376

$
375,889

$
318,059

$
261,631

$
1,725,400Accumulated impairment losses(1)








(102,792
)







(219,245
)

(322,037
)Balance as of December 31, 2009


339,563


319,882


7,584


375,889


318,059


42,386


1,403,363Net exchange differences arising during the period

















(19
)

(19
)Other changes in carrying amounts during the period

















295


295Balance as of June 30, 2010

$
339,563

$
319,882

$
7,584

$
375,889

$
318,059

$
42,662

$
1,403,639Goodwill

$
339,563

$
319,882

$
110,376

$
375,889

$
318,059

$
261,907

$
1,725,676Accumulated impairment losses(1)








(102,792
)







(219,245
)

(322,037
)Balance as of June 30, 2010

$
339,563

$
319,882

$
7,584

$
375,889

$
318,059

$
42,662

$
1,403,639


(1)Accumulated
impairment losses include: 
a $102.8 million pre-tax charge recorded in 2003 to write off the goodwill of our Biosurgery reporting
segment's orthopaedics reporting unit; and


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Table of Contents

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Notes to Unaudited, Consolidated Financial Statements (Continued)

8. Goodwill and Other Intangible Assets (Continued)

a $219.2 million pre-tax charge recorded in 2006 to write off the goodwill of our genetic testing
reporting unit.


Other Intangible Assets

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

As of June 30, 2010

As of December 31, 2009Gross
Other
Intangible
Assets

Accumulated
Amortization

Net
Other
Intangible
Assets

Gross
Other
Intangible
Assets

Accumulated
Amortization

Net
Other
Intangible
AssetsFinite-lived other intangible assets:Technology(1)

$
1,939,330

$
(942,470
)
$
996,860

$
2,180,232

$
(877,611
)
$
1,302,621Distribution rights(2)


446,427


(260,557
)

185,870


440,521


(227,726
)

212,795Patents


188,651


(138,520
)

50,131


188,651


(131,898
)

56,753License fees


98,272


(50,031
)

48,241


98,647


(47,052
)

51,595Customer lists


87,421


(48,282
)

39,139


87,423


(43,822
)

43,601Trademarks


60,608


(50,332
)

10,276


60,608


(47,623
)

12,985Total finite-lived other intangible assets


2,820,709


(1,490,192
)

1,330,517


3,056,082


(1,375,732
)

1,680,350Indefinite-lived other intangible assets:IPR&D


632,912





632,912


632,912





632,912Total other intangible assets

$
3,453,621

$
(1,490,192
)
$
1,963,429

$
3,688,994

$
(1,375,732
)
$
2,313,262


(1)For
the year ended December 31, 2009, includes a gross technology intangible asset of $240.3 million and related accumulated amortization of
$(24.0) million related to the consolidated results of BioMarin/Genzyme LLC. Effective January 1, 2010, under new guidance we adopted for consolidating variable interest entities, we no
longer consolidate the results of this joint venture and no longer include this gross technology asset and the related accumulated amortization or a related other noncurrent liability in our
consolidated balance sheets.(2)Includes
an additional $6.0 million for the six months ended June 30, 2010 for additional payments made or accrued in connection with the
reacquisition of the Synvisc sales and marketing rights from Pfizer in January 2005. As of June 30, 2010, the contingent royalty payments to Pfizer payable under the agreement are substantially
complete. We completed the contingent royalty payments to Pfizer related to North American sales of Synvisc in the first quarter of 2010 and anticipate completing the remaining contingent royalty
payments to Pfizer related to sales of the product outside of the United States by first quarter of 2011, the amount of which is not significant.


All
of our finite-lived other intangible assets are amortized over their estimated useful lives.

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

8. Goodwill and Other Intangible Assets (Continued)

As of June 30, 2010, the estimated future amortization expense for our finite-lived other intangible assets for the remainder of fiscal year 2010, the four succeeding fiscal years
and thereafter is as follows (amounts in thousands):

Year Ended December 31,

Estimated
Revenue-
Based
Amortization
Expense(1)

Estimated
Other
Amortization
Expense

Total
Estimated
Amortization
Expense(1)2010 (remaining six months)

$
49,255

$
91,146

$
140,4012011


119,112


175,060


294,1722012


94,168


148,174


242,3422013


29,545


131,432


160,9772014


26,308


109,116


135,424Thereafter


21,578


352,219


373,797


(1)Includes
estimated future amortization expense for: 
the Synvisc distribution rights based on the forecasted respective future sales of Synvisc and the resulting future
contingent payments we may be required to make to Pfizer and the Myozyme/Lumizyme patent and technology rights pursuant to a license agreement with Synpac based on forecasted future Net Sales of
Myozyme/Lumizyme and the milestone payments we may be required to make to Synpac. These contingent payments will be recorded as intangible assets when the payments are accrued; andthe technology intangible assets resulting from our acquisition of the worldwide rights to Fludara, which are being
amortized based on the forecasted future sales of Fludara.


9. Investment in BioMarin/Genzyme LLC

We and BioMarin have entered into agreements to develop and commercialize Aldurazyme, a recombinant form of the human enzyme alpha-L-iduronidase, used to treat an
LSD known as mucopolysaccharidosis, or MPS, I. Under the relationship, an entity we formed with BioMarin in 1998 called 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.

Prior
to January 1, 2010, we determined that we were the primary beneficiary of BioMarin/Genzyme LLC and, as a result, we:



Effective
January 1, 2010, in accordance with new guidance we adopted for consolidating variable interest entities, we were required to reassess our designation as primary
beneficiary of

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Table of Contents

GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

9. Investment in BioMarin/Genzyme LLC (Continued)

BioMarin/Genzyme LLC.
Under the new guidance, the entity with the power to direct the activities that most significantly impact a variable interest entity's economic performance is the primary
beneficiary. We have concluded that BioMarin/Genzyme LLC is a variable interest entity, but does not have a primary beneficiary because the power to direct the activities of
BioMarin/Genzyme LLC that most significantly impact its performance, is, in fact, shared equally between us and BioMarin through our commercialization rights and BioMarin's manufacturing
rights. Effective January 1, 2010, we no longer consolidate the results of BioMarin/Genzyme LLC and instead record our portion of the results of BioMarin/Genzyme LLC in equity in
loss of equity method investments in our consolidated statements of operations. For the three and six months ended June 30, 2010, the results of BioMarin/Genzyme LLC and our portion of
the results of BioMarin/Genzyme LLC were not significant.

10. Investment in Isis Pharmaceuticals, Inc. Common Stock

We review for potential impairment the carrying value of each of our strategic investments in equity securities on a quarterly basis. The closing price per share of Isis Pharmaceuticals,
Inc, or Isis, common stock exhibited volatility during 2009 and the six months ended June 30, 2010 and has remained below our historical cost since September 1, 2009, with closing prices
since that date ranging from a high of $15.69 per share to a low of $8.66 per share. We considered all available evidence in assessing the decline in value of our investment in Isis common stock,
including investment analyst reports and Isis's expected results and future outlook. However, despite such evidence if the fair value of any of our investments remain below our historical cost for a
consecutive nine months, we will generally conclude that it is unclear over what period the stock price of our investment would recover and that any evidence suggesting that the investment would
recover to at least our historical cost is not sufficient to overcome the presumption that the current market price is the best indicator of the value of this investment. Accordingly, given the
significance and duration of the decline in value of our investment in Isis common stock as of June 30, 2010, we considered the decline in value of this investment to be other than temporary
and we recorded a $32.3 million impairment charge to losses on investment in
equity securities, net in our consolidated statements of operations for the three and six months ended June 30, 2010.

11. Long-Term Debt



In June 2010, we sold $500.0 million aggregate principal amount of our 2015 Notes and $500.0 million aggregate principal
amount of our 2020 Notes through institutional private placements to fund the $1.0 billion payment under our accelerated share repurchase agreement, as discussed in Note 12.,
"Stockholders' Equity," to these consolidated financial statements. We received net proceeds from the sale of the Notes of approximately $986.6 million, after deducting commissions and other
expenses related to the offerings. We recorded the net proceeds in our consolidated balance sheets as of June 30, 2010 as:



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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

11. Long-Term Debt (Continued)

Both
the debt offering costs and debt discount will be amortized to interest expense in our consolidated statements of operations. The debt offering costs have been allocated proportionately to our
2015 Notes and our 2020 Notes and are being amortized based on the term of each such group of the Notes. The debt discount for each group of the Notes will be amortized using the effective interest
method. The 2015 Notes mature in June 2015 and the 2020 Notes mature in June 2020. Interest accrues on the Notes from June 17, 2010 and is payable semi-annually in arrears on
June 15 and December 15 of each year starting on December 15, 2010.

The
Notes are our senior unsecured obligations and rank equally in right of payment with all of our other senior unsecured indebtedness from time to time outstanding. The Notes are fully
and unconditionally guaranteed by one of our subsidiaries that also guarantees our indebtedness under our 2006 revolving credit facility. We may redeem the Notes in whole or in part at any time at a
redemption price equal to the greater of:



We
may be required to offer to repurchase the Notes at a purchase price equal to 101% of their principal amount if we are subject to certain changes of control.

Revolving Credit Facility

In July 2006, we entered into a five-year $350.0 million senior unsecured revolving credit facility with JPMorgan
Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent, ABN AMRO Bank N.V., Citizens Bank of Massachusetts
and Wachovia Bank, National Association, as co-documentation agents, and a syndicate of lenders, 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. We may request that our 2006 revolving credit facility be increased at any time by up to
an additional $350.0 million in the aggregate, subject to the agreement of the lending banks, 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 June 30, 2010, we had approximately $9 million of outstanding standby letters of credit and no borrowings, resulting in approximately $341 million of available
credit under our 2006 revolving credit facility, which matures July 14, 2011. The terms of this credit facility include various covenants, including financial covenants that require us to meet
minimum interest coverage ratios and maximum leverage ratios. As of June 30, 2010, we were in compliance with these covenants.

12. Stockholders' Equity

Share Repurchase Plan

In April 2010, our board of directors authorized a $2.0 billion share repurchase plan consisting of the near-term
purchase of $1.0 billion of our common stock to be financed with proceeds of newly issued debt, and the purchase of an additional $1.0 billion of our common stock by June 2011. On

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Notes to Unaudited, Consolidated Financial Statements (Continued)

12. Stockholders' Equity (Continued)

June 17,
2010, we entered into an accelerated share repurchase agreement with Goldman Sachs & Co., or Goldman Sachs, under which we will repurchase $1.0 billion worth of
shares of our common stock. Our effective per share purchase price will be based generally on the average of the daily volume weighted average prices per share of our common stock, less a discount,
calculated during a period of up to four months. In connection with this agreement, we paid $1.0 billion to Goldman Sachs and received 15.6 million shares, of
which:



We
recorded the $1.0 billion payment to the bank as a decrease to stockholders' equity in our consolidated balance sheet as of June 30, 2010, consisting of decreases of
$0.2 million in common stock and $799.8 million in additional paid-in capital as well as a $200.0 million share purchase contract receivable for the advance payment
described above.

The
total number of shares ultimately repurchased will not be known until the calculation period ends and a final settlement occurs. Upon final settlement, we will either receive a
settlement amount of additional shares of our common stock or be required to remit a settlement amount, payable, at our option, in cash or common stock. Shares repurchased under this agreement will be
deemed authorized shares that are no longer outstanding.

Modification of Certain Stock Options and RSUs

On May 26, 2010, in connection with our plan to approve strategic alternatives for our genetic testing, diagnostic products and
pharmaceutical intermediates business units, the compensation committee of our board of directors approved certain modifications to the stock options and RSUs previously granted to the employees of
those business units, to be effective as of the date of divestiture of each business unit. The post-termination exercise period for these stock options was modified to extend the post-termination
exercise period from three months to one year. We used Black-Scholes valuation models, based on the following assumptions, to determine the valuation adjustment required for the extension of the
post-termination exercise period, and recorded stock-based compensation expense using an expected term of seven months:

New
Post-Termination
Period

Original
Post-Termination
PeriodGrant date fair value as of May 26, 2010


$50.00


$50.00Term


19 months


10 monthsDividend


0


0Volatility


38.00
%

30.00
%Risk-free interest rate


0.63
%

0.32
%


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Notes to Unaudited, Consolidated Financial Statements (Continued)

12. Stockholders' Equity (Continued)

Based
on our analysis, we recorded an additional $9.1 million of stock-based compensation expense in our consolidated statements of operations for the three months ended
June 30, 2010 for the valuation adjustment related to the modification of these stock options.

On
May 26, 2010, the compensation committee of our board of directors also approved the following modifications to certain RSUs granted to the employees of these three business
units, to be effective as of the date of divestiture for each business unit, including:



Prior
to these modifications, the RSUs granted in May 2008 had a grant date fair value of $68.48 per share and the RSUs granted in May 2009 had a grant date fair value of $58.66 per
share based on the closing price of our common stock at the date of each grant. The modifications triggered a new measurement date for these RSUs and, as a result, we revalued these RSUs based on a
new grant date fair value of $50.00 per share, the closing price of our common stock on the date of modification. We recorded a net reduction in stock-based compensation for these RSUs of $(2.9)
million in our consolidated statements of operations for the three months ended June 30, 2010 to adjust the cumulative stock-based compensation expense recorded for these RSUs for the
modifications, including:



We
expect to record approximately $13 million of additional stock-based compensation expense for these RSUs during the second half of 2010 as a result of these modifications.

Long-Term Incentive Program for Senior Executives

From 2007 through 2009, our long-term incentive program for senior executives was comprised of equity awards in the form of
time vesting stock options and time vesting RSUs. Beginning with 2010, the equity vehicles for our long-term incentive program for senior executives includes a combination
of:



Approximately
half of each senior executive's grant consists of time vesting stock options with the remainder in PSUs.

For
the 2010 through 2012 performance period, the performance metrics are:



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Notes to Unaudited, Consolidated Financial Statements (Continued)

12. Stockholders' Equity (Continued)

Each
metric is weighted equally. For both metrics, performance between the threshold level and the target level will be awarded in PSUs. The PSUs will be paid out in shares of our stock
at the end of the three-year period if performance between the threshold level and target level is achieved. If performance above the target level is achieved, the portion of the award
above the target level will be paid out in cash up to a predetermined maximum cash award. Since it is possible that the PSUs may not pay out at all, it is completely "at risk" compensation.

In
January 2010, the compensation committee of our board of directors approved a range for the three-year cash flow return on invested capital metric of 85% to 115%. For
performance between 85% and 100% of the cash flow return on invested capital target, the payout range is 50% to 100% of the senior executive's target PSU award associated with this performance
measure. Performance between 101% and 115% of the cash flow return on invested capital target will result in a cash payment that will be awarded based on performance achieved between target and
maximum levels, up to a predetermined maximum.

The
committee also approved the following performance levels for R-TSR:

Performance Level

Percentile RankThreshold


40thTarget


65thMaximum


75th


For
performance between the R-TSR threshold and target levels, the payout range is 35% to 100% of the senior executive's target PSU award associated with this performance
measure. R-TSR performance between the target and maximum levels will result in a cash payment that will be awarded based on performance achieved between target and maximum levels, up to a
predetermined maximum.

If
a participating senior executive's employment is terminated before the end of the performance period because of death, disability or retirement, payment of the PSU will be
pro-rated to the date of termination based upon the company's actual achievement of performance levels at the end of the performance period. Upon a change in control, payment of a PSU will
be paid out at the target performance level and pro-rated to the date of the change of control.

PSUs

During the six months ended June 30, 2010, we granted a total of 223,066 PSUs with a weighted average grant date fair value of
$49.86 per share to senior executives under our 2004 Equity Plan. The PSUs are subject to the attainment of certain performance criteria established at the beginning of the performance period, as
described above, and cliff vest at the end of the performance period, which ends December 31, 2012. Compensation expense associated with our PSUs is initially based upon the number of shares
expected to vest after assessing the probability that certain performance criteria will be met and the associated targeted payout level that is forecasted will be achieved, net of estimated
forfeitures. Compensation expense for our PSUs is recognized over the applicable performance period, adjusted for the effect of estimated forfeitures.

The
fair value of PSUs subject to the cash flow return on investment performance metric, which includes both performance and service conditions, is estimated based on the market value of
our stock on the date of grant. We use a lattice model with a Monte Carlo simulation to determine the fair value

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12. Stockholders' Equity (Continued)

of
PSUs subject to the R-TSR performance metric, which includes both market and service conditions. The lattice model requires various highly judgmental assumptions to determine the fair
value of the awards. This model samples paths of our stock price and the stock prices of a group of peer companies in the S&P 500 Health Care Index, which we refer to as the Peer Group, and
calculates the resulting change in cash flow multiple at the end of the forecasted performance period. This model iterates these randomly forecasted results until the distribution of results converge
on a mean or estimated fair value.

We
used the following assumptions to determine the fair value of these awards:

Expected dividend yield

0%Range of risk free rate of return

1.33%-1.45%Range of our expected stock price volatility

35.11%-36.06%Range of Peer Group expected stock price volatility

21.27%-60.32%Range of our average closing stock prices on the grant dates

$51.83-$56.50Range of Peer Group average closing stock prices on the grant dates

$7.22-$348.13Range of our historical total shareholder return on the grant dates

5.75%-15.28%Range of historical total shareholder return for the Peer Group on the grant dates

(19.78)%-23.22%


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):

Three Months Ended
June 30,

Six Months Ended
June 30,2010

2009

2010

2009Pre-tax stock-based compensation expense, net of estimated forfeitures(1)

$
(44,694
)
$
(65,167
)
$
(92,335
)

(109,773
)Less: tax benefit from stock options


13,476


15,144


26,548


27,733Total stock-based compensation expense, net of tax

$
(31,218
)
$
(50,023
)
$
(65,787
)
$
(82,040
)


(1)We
also capitalized the following amounts of stock-based compensation expense to inventory, all of which is attributable to participating employees that
support our manufacturing operations (amounts in thousands):


Three Months Ended
June 30,

Six Months Ended
June 30,2010

2009

2010

2009Stock-based compensation expense capitalized to inventory

$
4,038

$
5,729

$
7,840

$
9,141




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

At
June 30, 2010, there was $275.6 million of pre-tax stock-based compensation expense, net of estimated forfeitures, related to unvested awards not yet
recognized which is expected to be recognized over a weighted average period of 2.2 years.

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Notes to Unaudited, Consolidated Financial Statements (Continued)

13. Commitments and Contingencies

FDA Consent Decree

On May 24, 2010, we entered into a consent decree with the FDA relating to our Allston facility. Under the terms of the consent
decree, we will pay an upfront disgorgement of past profits of $175.0 million. Conditioned upon our compliance with the terms of the consent decree, we may continue to ship Cerezyme and
Fabrazyme, which are manufactured, filled and finished at the facility, as well as Thyrogen, which is filled and finished at the facility. In the United States, Thyrogen that is filled and finished at
the facility will only be distributed based on medical necessity, in accordance with FDA criteria. The consent decree requires us to move our fill-finish operations out of the Allston
facility for Thyrogen sold within the United States by November 22, 2010 and for Fabrazyme sold within the United States by November 24, 2010. We must move our fill-finish
operations for all products sold outside of the United States by August 31, 2011. If we are not able to meet these deadlines, the FDA can require us to disgorge 18.5% of the revenue from the
sale of any products that are filled and finished at the Allston facility after the applicable deadlines.

The
consent decree also requires us to implement a plan to bring the Allston facility operations into compliance with applicable laws and regulations. The plan must address any
deficiencies previously reported to us or identified as part of a comprehensive inspection conducted by a third-party expert, who we are required to retain, and who will monitor and oversee our
implementation of the plan. In
2009, we began implementing a comprehensive remediation plan, prepared with assistance from our compliance consultant, The Quantic Group, Ltd., or Quantic, to improve quality and compliance at
the Allston facility. We intend to revise that plan to include any additional remediation efforts required in connection with the consent decree as identified by Quantic, who we are retaining as the
third-party expert under the consent decree. The plan, as revised, which will be subject to FDA approval, is expected to take approximately 3-4 years to complete and will include a timetable of
specified compliance milestones. If the milestones are not met in accordance with the timetable, the FDA can require us to pay $15,000 per day, per affected drug, until these compliance milestones are
met. Upon satisfying the compliance requirements in accordance with the terms of the consent decree, we will be required to retain an auditor to monitor and oversee ongoing compliance at the Allston
facility for an additional five years. The consent decree is subject to, and effective upon, approval by the U.S. District Court for the District of Massachusetts. The consent decree was filed with
the U.S. District Court on May 24, 2010 and we are awaiting the court's approval.

Legal Proceedings

Federal Securities Litigation

In July 2009 and August 2009, two purported securities class action lawsuits were filed in the U.S. District Court for the District of
Massachusetts against us and our President and Chief Executive Officer. The lawsuits were filed on behalf of those who purchased our common stock during the period from June 26, 2008 through
July 21, 2009 and allege violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Each of the lawsuits is
premised upon allegations that we made materially false and misleading statements and omissions by failing to disclose instances of viral contamination at two of our manufacturing facilities and our
receipt of a list of inspection observations from the FDA related to one of the facilities, which detailed observations of practices that the FDA considered to be deviations from good manufacturing
practice, or GMP. The plaintiffs seek unspecified damages and reimbursement of costs, including attorneys' and

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Notes to Unaudited, Consolidated Financial Statements (Continued)

13. Commitments and Contingencies (Continued)

experts'
fees. In November 2009, the lawsuits were consolidated inIn Re Genzyme Corp. Securities Litigationand a lead plaintiff was appointed. In
March 2010, the plaintiffs filed a consolidated amended complaint that extended the class period from October 24, 2007 through November 13, 2009. In June 2010, we filed a motion to
dismiss the class action. If the action is not dismissed, we intend to defend this lawsuit vigorously.

Shareholder Demand Letters

Since August 2009, we have received ten letters from shareholders demanding that our board of directors take action on behalf of
Genzyme Corporation to remedy alleged breaches of fiduciary duty by our directors and certain executive officers. The demand letters are primarily premised on allegations regarding our disclosures to
shareholders with respect to manufacturing issues and compliance with GMP and our processes and decisions related to manufacturing at our Allston facility. Several of the letters also assert that
certain of our executive officers and directors took advantage of their knowledge of material non-public information about Genzyme to illegally sell stock they personally held in Genzyme.
Our board of directors has designated a special committee of three independent directors to oversee the investigation of the allegations made in the demand letters and to recommend to the independent
directors of the board whether any action should be instituted on behalf of Genzyme Corporation against any officer or director. The committee has retained independent legal counsel. If the
independent members of our board of directors were to make a determination that it was in our best interest to institute an action against any officers or directors, any monetary recovery would be to
the benefit of Genzyme Corporation. The special committee's investigation is ongoing.

Shareholder Derivative Actions

In December 2009, two actions were filed by shareholders derivatively for Genzyme's benefit in the U.S. District Court for the
District of Massachusetts against our board of directors and certain of our executive officers after a ninety day period following their respective demand letters had elapsed (the "District Court
Actions"). In January 2010, a derivative action was filed in Massachusetts Superior Court (Middlesex County) by a shareholder who has not issued a demand letter and in February and
March 2010, two additional derivative actions were filed in Massachusetts Superior Court (Suffolk County and Middlesex County, respectively) by two separate shareholders after the lapse of a
ninety day period following the shareholders' respective demand letters (collectively, the "State Court Actions").

The
derivative actions in general are based on allegations that our board of directors and certain executive officers breached their fiduciary duties by causing Genzyme to make
purportedly false and misleading or inadequate disclosures of information regarding manufacturing issues, compliance with GMP, ability to meet product demand, expected revenue growth, and approval of
Lumizyme. The actions also allege that certain of our directors and executive officers took advantage of their knowledge of material non-public information about Genzyme to illegally sell
stock they personally held in Genzyme. The plaintiffs generally seek, among other things, judgment in favor of Genzyme for the amount of damages sustained by Genzyme as a result of the alleged
breaches of fiduciary duty, disgorgement to Genzyme of proceeds that certain of our directors and executive officers received from sales of Genzyme stock and all proceeds derived from their service as
directors or executives of Genzyme, and reimbursement of plaintiffs' costs, including attorneys' and experts' fees. The District

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Notes to Unaudited, Consolidated Financial Statements (Continued)

13. Commitments and Contingencies (Continued)

Court
Actions have been consolidated inIn Re Genzyme Derivative Litigationand the plaintiffs have agreed to a joint stipulation staying these cases
until our board of directors has had sufficient time to exercise its duties and complete an appropriate investigation, which is ongoing. On July 9, 2010, one of the State Court Actions was
dismissed without prejudice for plaintiffs' failure to serve process on the defendants. The Middlesex Court also ordered transfer and consolidation of the remaining two State Court Actions in the
Suffolk Superior Court Business Litigation Session. The court has indicated that discovery in that action also will be stayed for some period pending the board of director's completion of its ongoing
investigation in response to the shareholders demand.

Fabrazyme Patent Litigation

In October 2009, Shelbyzyme LLC filed a complaint against us in the U.S. District Court for the District of Delaware
alleging infringement of U.S. patent 7,011,831 by "making, using, selling and promoting a method for the treatment of" Fabry disease. The '831 patent, which is directed to a method for treating
Fabry disease, was issued in March 2006 and expired in March 2009. The plaintiffs seek damages for past infringement, including treble damages for alleged willful infringement and reimbursement of
costs, including attorney's fees. We intend to defend this lawsuit vigorously.

Other Matters

We are party to a legal action brought by Kayat pending before the District Court in Nicosia, Cyprus. Kayat alleges that we breached a
1996 distribution agreement under which we granted Kayat the right to distribute melatonin tablets in the Ukraine, primarily by not providing products or by providing non-conforming
products. Kayat further claims that
due to the alleged breach, it suffered lost profits that Kayat claims it would have received under agreements it alleges it had entered into with subdistributors. Kayat also alleges common law fraud
and violations of Mass. Gen. L. c. 93A and the Racketeer Influenced and Corrupt Organizations Act. Kayat filed its suit on August 8, 2002 and a trial began in Cyprus in
December 2009. Kayat seeks damages for its legal claims and for expenses it claims it has incurred, including legal fees and advertising, promotion and other out-of-pocket
expenses. We believe we acted appropriately in all regards, including properly terminating the agreement when we decided to exit the melatonin business, and we intend to defend this lawsuit
vigorously.

We
are not able to predict the outcome of the lawsuits and matters described above or estimate the amount or range of any possible loss we might incur if we do not prevail in final,
non-appealable determination of these matters. Therefore, we have not accrued any amounts in connection with the lawsuits and matters described above.

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

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Notes to Unaudited, Consolidated Financial Statements (Continued)

14. Benefit from (Provision for) Income Taxes

Three Months Ended
June 30,

Six Months Ended
June 30,2010

2009

2010

2009(Amounts in thousands)Benefit from (provision for) income taxes

$
19,953

$
(78,870
)
$
81,752

$
(157,754
)Effective tax rate


(84
)%

30
%

(41
)%

29
%


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



In
addition, our tax benefit for both the three and six months ended June 30, 2010 includes:



Our
benefits from tax provisions for the six months ended June 30, 2010 also includes tax benefits in the amount of $15.2 million as a result of the resolution of tax examinations in
major tax jurisdictions.

We
are currently under audit by various states and foreign jurisdictions for various years. We believe that we have provided sufficiently for all audit exposures. Settlement of these
audits or the expiration of the statute of limitations on the assessment of income taxes for any tax year will likely result in a
reduction of future tax provisions. Any such benefit would be recorded upon final resolution of the audit or expiration of the applicable statute of limitations.

15. Segment Information

We present segment information in a manner consistent with the method we use to report this information to our management. Effective January 1, 2010, based on changes in how we
review our business, we re-allocated certain of our business units amongst our segments and adopted new names for certain of our reporting segments. Under the new reporting structure, we
are organized into five reporting segments as described above in Note 1., "Description of Business," to these consolidated financial statements. We have revised our 2009 segment disclosures to
conform to our 2010 presentation.

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Notes to Unaudited, Consolidated Financial Statements (Continued)

15. Segment Information (Continued)

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

Three Months Ended
June 30,

Six Months Ended
June 30,2010

2009

2010

2009Revenues:Personalized Genetic Health(1,3)

$
350,540

$
581,728

$
743,044

$
1,131,688Renal and Endocrinology


258,379


247,277


510,802


489,745Biosurgery


163,982


139,327


301,348


258,849Hematology and Oncology(2)


176,497


111,990


332,807


200,563Multiple Sclerosis(2)





5,066





12,357Other


129,753


142,568


265,612


283,171Corporate


288


554


299


1,008Total

$
1,079,439

$
1,228,510

$
2,153,912

$
2,377,381Income (loss) before income taxes:Personalized Genetic Health(1,3)

$
70,571

$
332,700

$
43,555

$
684,495Renal and Endocrinology


113,436


111,106


227,960


217,168Biosurgery


61,608


33,750


90,603


62,083Hematology and Oncology(2)


31,826


(17,030
)

40,196


(20,015
)Multiple Sclerosis(2)


(52,355
)

(2,161
)

(142,280
)

(18,607
)Other(4)


(447
)

15,013


3,781


10,215Corporate(5)


(248,365
)

(206,934
)

(464,288
)

(394,525
)Total

$
(23,726
)
$
266,444

$
(200,473
)
$
540,814


(1)Includes
the impact of supply constraints for Cerezyme and Fabrazyme for all periods presented.(2)On
May 29, 2009, we acquired the worldwide rights to the oncology products Campath, Fludara and Leukine and alemtuzumab for MS from Bayer. As of that
date, we ceased recognizing research and development revenue for Bayer's reimbursement of a portion of the development costs for alemtuzumab for MS. The fair value of the research and development
costs for alemtuzumab for MS that will be reimbursed by Bayer is accounted for as an offset to the contingent consideration obligations for alemtuzumab for MS.


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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

15. Segment Information (Continued)

Income
(loss) before income taxes for our Hematology and Oncology and Multiple Sclerosis reporting segments includes the following contingent consideration expenses (amounts in thousands):


Three Months Ended
June 30,

Six Months Ended
June 30,2010

2009

2010

2009Contingent consideration expenses:Hematology and Oncology

$
(34,506
)
$
4,330

$
(13,074
)
$
4,330Multiple Sclerosis


44,527


4,760


85,644


4,760Total contingent consideration expenses

$
10,021

$
9,090

$
72,570

$
9,090


In
addition, income (loss) before income taxes for our Multiple Sclerosis reporting segment includes a gain on acquisition of business of $24.2 million for the three and six months ended
June 30, 2009 for which there were no comparable amounts in 2010. The fair value of the identifiable assets acquired of $1.03 billion exceeded the fair value of the purchase price for
the transaction of $1.01 billion. (3)Includes
a charge of $175.0 million recorded to SG&A for the six months ended June 30, 2010 for the upfront disgorgement of past profits
provided for in the consent decree we entered into with the FDA. For more information about the consent decree, see Note 13., "Commitments and Contingencies," to these consolidated financial
statements.(4)Includes
a charge of $18.2 million recorded to research and development expense in our consolidated statements of operations in January 2009 for
intellectual property we acquired from EXACT Sciences Corporation, or EXACT Sciences.(5)Loss
before income taxes for Corporate includes our corporate, general and administrative and corporate science activities, all of our stock-based
compensation expenses, as well as net gains on our investments in equity securities, investment income, interest expense and other income and expense items that we do not specifically allocate to a
particular reporting segment.


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GENZYME CORPORATION AND SUBSIDIARIES

Notes to Unaudited, Consolidated Financial Statements (Continued)

15. Segment Information (Continued)




Segment Assets

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

June 30,
2010

December 31,
2009Segment Assets(1):Personalized Genetic Health(2)

$
1,211,225

$
1,525,602Renal and Endocrinology


1,193,872


1,283,731Biosurgery


482,117


509,064Hematology and Oncology


1,343,840


1,406,684Multiple Sclerosis


951,332


956,448Other


447,740


462,978Corporate(3)


4,133,773


3,916,217Total

$
9,763,899

$
10,060,724


---

June 30,
2010

December 31,
2009Cash, cash equivalents, short- and long-term investments in debt securities

$
974,154

$
1,049,700Deferred tax assets, net


706,009


555,242Property, plant & equipment, net


1,986,309


1,787,054Investments in equity securities


74,227


74,438Other


393,074


449,783Total

$
4,133,773

$
3,916,217


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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.

Note: All references to increases or decreases for the three months ended June 30, 2010 are as compared to the three months ended June 30, 2009. All
references to increases or decreases for the six months ended June 30, 2010 are as compared to the six months ended June 30, 2009, unless otherwise noted.

INTRODUCTION

We are a global biotechnology company dedicated to making a major impact on the lives of people with serious diseases. Our products and
services are focused on rare inherited disorders, kidney disease, orthopaedics, cancer, transplant and immune disease, and diagnostic testing. Our commitment to innovation continues today with a
substantial development program focused on these fields, as well as MS, cardiovascular disease, neurodegenerative diseases, and other areas of unmet medical need.

We
are organized into five financial reporting units, which we also consider to be our reporting segments:



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Effective
January 1, 2010, based on changes in how we review our business, we re-allocated certain of our business units among our segments and adopted new names for
certain of our reporting segments. Specifically:



We
report the activities of the following business units under the caption "Other": our genetic testing business unit, which provides testing services for the oncology, prenatal and
reproductive markets; and our diagnostic products and pharmaceutical intermediates business units. These operating segments did not meet the quantitative threshold for separate segment reporting.

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

We
have revised our 2009 segment disclosures to conform to our 2010 presentation.

In
May 2010, we announced a plan to pursue strategic alternatives for our genetic testing, diagnostic products and pharmaceutical intermediates business units. Possible alternatives
include divestiture, spin-out or management buy-out. Our genetic testing business unit had revenue of approximately $371 million for the year ended December 31,
2009 and approximately $183 million for the six months ended June 30, 2010. Our diagnostic products business unit had revenue of approximately $167 million for the year ended
December 31, 2009 and approximately $76 million for the six months ended June 30, 2010. Revenue from our pharmaceutical intermediates business unit for the same periods was
significantly less in comparison. Transactions for these business units are targeted for the end of 2010.

Update to Second Quarter Earnings Release

On July 21, 2010, we issued a press release containing our financial results for the three month period ended June 30,
2010, which we furnished as an exhibit to a Current Report on Form 8-K prior to hosting a conference call. Subsequent to July 21, 2010, we identified additional inventories
that did not meet our quality specifications. Our decision to discard these inventories has resulted in a second quarter write off of $6.5 million in addition to the $21.9 million write
off previously reported. As a result, our second quarter net loss is $(3.8) million or $(0.01) per diluted share, compared with net income of $23.0 thousand or $0.00 per diluted share reported
on July 21, 2010.

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

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Estimates"
in Part II., Item 7. to our 2009 Form 10-K. Excluding the addition of our policy for PSUs to our stock-based compensation policy, there have been no
significant changes to our critical accounting policies or significant judgments and estimates since December 31, 2009. Additional information regarding our provisions and estimates for our
product sales allowances, sales allowance reserves and accruals, and distributor fees and our revised stock-based compensation policy 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. In some cases, we have estimated the potential impact of these allowances. The sensitivity of our estimates can vary by
program, type of customer and geographic location. Estimates associated with Medicaid and other government allowances may become subject to adjustment in a subsequent period.

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



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

Three Months Ended
June 30,





Six Months Ended
June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009Product sales allowances:Contractual adjustments

$
221,061

$
149,049

$
72,012


48
%
$
401,489

$
285,229

$
116,260


41
%Discounts


7,702


6,764


938


14
%

14,504


13,040


1,464


11
%Sales returns


7,711


9,375


(1,664
)

(18
)%

15,256


15,898


(642
)

(4
)%Total product sales allowances

$
236,474

$
165,188

$
71,286


43
%
$
431,249

$
314,167

$
117,082


37
%Total gross product sales

$
1,211,396

$
1,280,613

$
(69,217
)

(5
)%
$
2,377,796

$
2,466,836

$
(89,040
)

(4
)%Total product sales allowances as a percent of total gross product sales


20
%

13
%







18
%

13
%


Total product sales allowances increased for both the three and six months ended June 30, 2010, primarily due
to:



These
increases were offset, in part, by decreases of $6.3 million for the three months and $16.2 million for the six months in the aggregate product sales allowances for
Cerezyme and Fabrazyme as a result of supply constraints.

Total
estimated product sales allowance reserves and accruals in our consolidated balance sheets increased approximately 11% to approximately $263 million as of June 30,
2010, as compared to approximately $236 million as of December 31, 2009, primarily due to increased contractual adjustments for our Renal and Endocrinology reporting segment and changes
in the timing of certain payments. Our actual results have not differed materially from amounts recorded. The annual variation has been less than 0.5% of total product sales for the last three years.

Accounts Receivable Related to Sales in Greece

Total accounts receivable in our consolidated balance sheets includes approximately $57 million, net of reserves, as of both
June 30, 2010 and December 31, 2009 of accounts receivable held by our subsidiary in Greece related to sales to government-owned or supported healthcare facilities in Greece. These sales
are subject to significant payment delays due to government funding and reimbursement practices. We believe that this is an industry-wide issue for suppliers to these facilities. In May
2010, the government of Greece announced a plan for repayment of its debt to international pharmaceutical companies, which calls for immediate payment of accounts receivable balances that were
established in 2005 and 2006. For accounts receivable established between 2007 and 2009, the government of Greece will issue non-interest bearing bonds, expected to be exchange tradable,
with maturities ranging from 2

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to
4 years. We recorded a charge of $7.2 million to bad debt expense, a component of SG&A, in our consolidated statements of operations for the three and six months ended June 30,
2010 to write down
the accounts receivable balances held by our subsidiary in Greece to present value using a 10% discount rate.

In
conjunction with this plan, the government of Greece also instituted price decreases of between 20% and 27% for all future pharmaceutical product sales. Because our customers in
Greece are government owned or supported, we may also be impacted by declines in sovereign credit ratings or sovereign debt defaults. The government of Greece has recently required financial support
from both the European Union and the IMF to avoid defaulting on its sovereign debt. If significant additional changes occur in the availability of government funding in Greece, we may not be able to
collect on amounts due from these customers. We do not expect this concentration of credit risk to have a material adverse impact on our financial position or liquidity.

Healthcare Reform Legislation

In March 2010, healthcare reform legislation was enacted in the United States. Although many provisions of the new legislation do not
take effect immediately, several provisions became effective in the first quarter of 2010. These include:



These
provisions did not have a significant impact on our results of operations or financial position for the six months ended June 30, 2010.

Effective
October 1, 2010, the new legislation re-defines the Medicaid AMP such that the AMP and, consequently, the Medicaid rebate are expected to increase for some
of our drugs, in particular those that offer discounted pricing to customers.

Beginning
in 2011, the new law requires drug manufacturers to provide a 50% discount to Medicare beneficiaries whose prescription drug costs cause them to be subject to the Medicare
Part D coverage gap, which is known as the "donut hole". Also beginning in 2011, clinical laboratory fee schedule payments will be reduced 1.75% over a period of five years and we will be
required to pay our share of a new fee assessed on all branded prescription drug manufacturers and importers. This fee will be calculated based upon each organization's percentage share of total
branded prescription drug sales to U.S. government programs (such as Medicare and Medicaid and VA, DOD and TriCare retail pharmacy discount programs) made during the previous year. Sales of orphan
drugs, however, are not included in the fee calculation. Final guidance relating to how we will be required to account for this fee is still pending; however, it is expected that the fee will be
classified as either a reduction of net sales or an operating expense. The aggregated industry wide fee is expected to total approximately

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$28 billion
through 2019, ranging from $2.5 billion to $4.1 billion annually. Beginning in 2013, a 2.3% excise tax will be imposed on sales of all medical devices except retail
purchases by the public intended for individual use.

Presently,
uncertainty exists as many of the specific determinations necessary to implement this new legislation have yet to be decided and communicated to industry participants. We have
made several estimates with regard to important assumptions relevant to determining the financial impact of this legislation on our business due to the lack of availability of both certain information
and complete understanding of how the process of applying the legislation will be implemented. Although we are still assessing the full extent that the U.S. healthcare reform legislation may have on
our business, we currently estimate that our revenues in the United States will be adversely impacted by less than approximately $20 million in 2010, with most of the impact occurring in the
third and fourth quarters, and by approximately $30 million to $40 million in 2011.

We
expect that the U.S. Congress and state legislatures will continue to review and assess healthcare proposals, and public debate of these issues will likely continue. We cannot predict
which, if any, of such reform proposals will be adopted and when they might be adopted. In addition, we anticipate seeing continued efforts to reduce healthcare costs in many other countries outside
the United States. For example, in May 2010, the Greek health ministry imposed a flat mandatory discount of 27% on medicinal products above a certain price level. This discount, however, does not
apply to our orphan drugs or Thymoglobulin. The Greek health ministry has stated that this newly imposed pricing will apply up through August 31, 2010, at which time the ministry will issue new
pricing for most medicinal products based on the average of the three lowest prices in the European Union, and at that time, also determine the pricing for orphan products. As another example, the
German government has enacted legislation, effective August 2010, that among other things, increases mandatory discounts from 6% to 16% and imposes August 2009 pricing levels on pharmaceuticals
through the end of 2013. We expect that our revenues would be negatively impacted if these or similar measures are implemented or maintained.

Distributor Fees

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, is appropriately characterized as a reduction in revenue. We include such fees in contractual adjustments, which are recorded as a reduction to
product sales. That presumption is overcome and the consideration should be characterized as a cost incurred if, and to the extent that, both of the following conditions are
met:



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

Three Months Ended
June 30,





Six Months Ended
June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009Distributor fees:Included in contractual adjustments and recorded as a reduction to product sales

$
5,685

$
7,909

$
(2,224
)

(28
)%
$
11,745

$
12,156

$
(411
)

(3
)%Charged to SG&A


1,547


3,481


(1,934
)

(56
)%

4,893


7,028


(2,135
)

(30
)%Total distributor fees

$
7,232

$
11,390

$
(4,158
)

(37
)%
$
16,638

$
19,184

$
(2,546
)

(13
)%


Stock-Based Compensation

We use the Black-Scholes model to value both service condition and performance condition option awards. For awards with only service
conditions and graded-vesting features, we recognize compensation cost on a straight-line basis over the requisite service period. For awards with performance conditions, we recognize
stock-based compensation expense based on the graded-vesting method. Determining the appropriate fair value model and related assumptions requires judgment, including estimating stock price
volatility, forfeiture rates, and expected terms. The expected volatility rates are estimated based on historical and implied volatilities of our common stock. The expected term represents the average
time that options that vest are expected to be outstanding based on the vesting provisions and our historical exercise, cancellation and expiration patterns. We estimate pre-vesting
forfeitures when recognizing stock-based compensation expense based on historical rates and forward-looking factors. We update these assumptions at least on an annual basis and on an interim basis if
significant changes to the assumptions are warranted.

We
issue PSUs to our senior executives, which vest upon the achievement of certain financial performance goals, including cash flow return on investment and R-TSR. The fair
value of PSUs subject to the cash flow return on investment performance metric, which includes both performance and service conditions, is based on the market value of our stock on the date of grant.
We use a lattice model with a Monte Carlo simulation to value PSUs subject to the R-TSR
performance metric, which is a market condition. We recognize compensation cost for our PSUs on a straight-lined basis over the requisite performance period. Determining the appropriate amount to
expense based on the anticipated achievement of the stated goals requires judgment, including forecasting future financial results. The estimate of expense is revised periodically based on the
probability of achieving the required performance targets and adjustments are made as appropriate. The cumulative impact of any revision is reflected in the period of change. In the case of PSUs
subject to the R-TSR performance metric, if the financial performance goals are not met, the award does not vest, no compensation cost is recognized and any previously recognized
stock-based compensation expense is reversed.

We
review our valuation assumptions periodically and, as a result, we may change our valuation assumptions used to value share-based awards granted in future periods. Such changes may
lead to a significant change in the expense we recognize in connection with share-based payments.

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Table of Contents

RESULTS OF OPERATIONS

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

REVENUES

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

Three Months Ended June 30,





Six Months Ended June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009Product revenue

$
974,922

$
1,115,425

$
(140,503
)

(13
)%
$
1,946,547

$
2,152,669

$
(206,122
)

(10
)%Service revenue


103,589


105,693


(2,104
)

(2
)%

205,504


207,192


(1,688
)

(1
)%Total product and service revenue


1,078,511


1,221,118


(142,607
)

(12
)%

2,152,051


2,359,861


(207,810
)

(9
)%Research and development revenue


928


7,392


(6,464
)

(87
)%

1,861


17,520


(15,659
)

(89
)%Total revenues

$
1,079,439

$
1,228,510

$
(149,071
)

(12
)%
$
2,153,912

$
2,377,381

$
(223,469
)

(9
)%


Product Revenue

The following table sets forth our products and their related indications:

Reporting Segments

Products

Approved IndicationsPersonalized Genetic Health

Cerezyme

Gaucher diseaseFabrazyme

Fabry diseaseMyozyme/Lumizyme

Pompe diseaseAldurazyme

MPS IElaprase

MPS IIRoyalties earned on sales of Welchol

Reduction of LDL in patients with hypercholesterolemiaCholestagel

Reduction of LDL in patients with hypercholesterolemiaRenal and Endocrinology

Renagel/Renvela and bulk sevelamer

Control of serum phosphorus in patients with chronic kidney disease, or CKD, on dialysis and in Europe in CKD patients both on and not on dialysis with serum phosphorus above a certain levelHectorol

Secondary hyperparathyroidism in CKD patients


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Reporting Segments

Products

Approved IndicationsThyrogen

An adjunctive diagnostic agent used in the follow-up treatment of patients with well-differentiated thyroid cancer and an adjunctive therapy in the ablation of remnant thyroid tissue in patients that have undergone
thyroid removalBiosurgery

Synvisc/Synvisc-One/Jonexa

Treatment of pain associated with osteoarthritisSepra products

Prevention of adhesions following various surgical procedures in the abdomen and pelvisHematology and Oncology

Mozobil

Mobilization of hematopoietic stem cellsThymoglobulin

Immunosuppression of certain types of cells responsible for organ rejection in transplant patients and treatment of aplastic anemiaClolar

Relapsed and refractory ALLCampath

LeukemiaFludara

Leukemia and lymphomaLeukine

Reduction of the incidence of severe and life-threatening infections in older adult patients with acute myelogenous leukemia, or AML, following chemotherapy and certain other usesOther

Diagnostic products

Infectious disease and cholesterol testing productsPharmaceutical intermediates products

Pharmaceutical intermediates


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

Three Months Ended June 30,





Six Months Ended June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009Personalized Genetic Health

$
350,517

$
581,685

$
(231,168
)

(40
)%
$
743,001

$
1,131,608

$
(388,607
)

(34
)%Renal and Endocrinology


258,229


247,269


10,960


4
%

510,486


489,724


20,762


4
%Biosurgery


151,807


127,113


24,694


19
%

278,068


236,241


41,827


18
%Hematology and Oncology


176,490


110,846


65,644


59
%

332,781


197,490


135,291


69
%Other product revenue


37,879


48,512


(10,633
)

(22
)%

82,211


97,606


(15,395
)

(16
)%Total product revenue

$
974,922

$
1,115,425

$
(140,503
)

(13
)%
$
1,946,547

$
2,152,669

$
(206,122
)

(10
)%


Personalized Genetic Health

Regulatory and Manufacturing

FDA Consent Decree

On May 24, 2010, we entered into a consent decree with the FDA relating to our Allston facility. Under the terms of the consent
decree, we will pay an upfront disgorgement of past profits of $175.0 million. Conditioned upon our compliance with the terms of the consent decree, we may continue to ship Cerezyme and
Fabrazyme, which are manufactured, filled and finished at the facility, as well as Thyrogen, which is filled and finished at the facility. In the United States, Thyrogen that is filled and finished at
our Allston facility will only be distributed based on medical necessity, in accordance with FDA criteria. The consent decree requires us to move our fill-finish operations out of our Allston facility
for Thyrogen sold within the United States by November 22, 2010 and for Fabrazyme sold within the United States by November 24, 2010. We must move our fill-finish operations for all
products sold outside of the United States by August 31, 2011. If we are not able to meet these deadlines, the FDA can require us to disgorge 18.5 percent of the revenue from the sale of
any products that are filled and finished at our Allston facility after the applicable deadlines.

The
consent decree also requires us to implement a plan to bring our Allston facility operations into compliance with applicable laws and regulations. The plan must address any
deficiencies previously reported to us or identified as part of a comprehensive inspection conducted by a third-party expert, who we are required to retain, and who will monitor and oversee our
implementation of the plan. In 2009, we began implementing a comprehensive remediation plan, prepared with assistance from our compliance consultant, Quantic, to improve quality and compliance at our
Allston facility. We intend to revise that plan to include any additional remediation efforts required in connection with the consent decree as identified by Quantic, who we are retaining as the
third-party expert under the consent decree. The plan, as revised, which will be subject to FDA approval, is expected to take approximately 3-4 years to complete and will include a timetable of
specified compliance milestones. If the milestones are not met in accordance with the timetable, the FDA can require us to pay $15,000 per day, per affected drug, until these compliance milestones are
met. Upon satisfying the compliance requirements in accordance with the terms of the consent decree, we will be required to retain an auditor to monitor and oversee ongoing compliance at our Allston
facility for an additional five years. The consent decree is subject to, and effective upon, approval by the U.S. District Court for the District of Massachusetts. The consent decree was filed with
the U.S. District Court on May 24, 2010 and we are awaiting the court's approval.

Manufacturing and Supply of Cerezyme and Fabrazyme

In June 2009, we interrupted production of Cerezyme and Fabrazyme at our Allston facility after identifying a virus, Vesivirus 2117, in
a bioreactor used for Cerezyme production. The virus we

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identified
impairs the viability of cells used in the manufacturing process and is not known to cause infection in humans. We completed sanitization of the facility and resumed production there in the
third quarter of 2009. Cerezyme and Fabrazyme inventories were not sufficient to avoid shortages.

We
resumed Cerezyme shipments in the fourth quarter of 2009. In order to build a small inventory buffer to help us more consistently manage the resupply of Cerezyme to patients and
reduce interruptions in shipping that occur in the absence of inventory, we began shipping Cerezyme to meet 50% of estimated product demand at the end of February 2010. Although we achieved our goal
of building a small inventory buffer during the first quarter of 2010, we continued shipping at the 50% of demand level due to an interruption in operations at our Allston facility at the end of March
2010. The interruption resulted from an unexpected city electrical power failure that compounded issues with the facility's water system. Once production resumed, we continued shipping at the 50% of
demand level through the end of the second quarter of 2010. We supplied approximately the same amount of Cerezyme in July 2010 as we supplied in each of May 2010 and June 2010, and expect that supply
will then increase in the following months. However, there will be regional variations when Cerezyme will be available, and in some countries, patients' infusion schedules may need to shift due to
short-term shipping delays.

Since
the fourth quarter of 2009, we have been shipping Fabrazyme to meet approximately 30% of estimated product demand. We have been working to increase the productivity of the
Fabrazyme manufacturing process, which has performed at the low end of the historical range since the re-start of production. We have developed a new working cell bank for Fabrazyme that
has been approved by the FDA and EMA. The new working cell bank has completed three runs and has had 30% greater productivity than the old working cell bank. We expect to continue shipping Fabrazyme
at the 30% of demand level through the third quarter and increase shipments of Fabrazyme in the fourth quarter of 2010.

We
will continue to work with minimal levels of inventory for Cerezyme and Fabrazyme until our new Framingham manufacturing facility is approved, which is anticipated to take place in
late 2011. Any additional manufacturing interruptions or delays will likely impact supply of these products. We are also working to transition fill-finish operations out of our Allston
facility to our Waterford, Ireland plant and to Hospira, a third-party contract manufacturer. The fill-finish area of the Waterford facility is being expanded to accommodate the
long-term growth of our PGH products, and we currently anticipate receiving approval of this new capacity in 2011.

Lumizyme Approval

In May 2010, we received FDA approval to market Lumizyme, alglucosidase alfa produced at the 4000L scale in the United States. Lumizyme
is the first treatment approved in the U.S. specifically to treat patents with late-onset Pompe disease. We produce Lumizyme at our Geel facility, where we have produced Myozyme at the
4000L scale since February 2009 when we received approval for the 4000L scale process in Europe. As of the first quarter of 2010, the majority of markets outside of the United States have transitioned
to the 4000L scale product. At our Geel facility, we are adding a third bioreactor for the production of Myozyme/Lumizyme produced at the 4000L scale, for which we expect to receive FDA approval in
mid-2011.

We
have implemented a Risk Evaluation and Mitigation Strategy, or REMS, which we call the Lumizyme ACE Program, to ensure that the appropriate patients receive Lumizyme commercially. We
have initiated this program with the health care professionals involved in the Alglucosidase Alfa Temporary Access Program, or ATAP, the program created in 2007 through which we have provided therapy
free of charge to nearly 200 patients prior to commercial approval of Lumizyme. We will keep ATAP open until August 20, 2010 to ensure that patients have uninterrupted therapy while working to
enroll participants in the Lumizyme ACE Program. We have also begun working with U.S. health care

51

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professionals
to enable those adult patients who have been waiting to access treatment to begin Lumizyme therapy.

Personalized Genetic Health Product Revenue

Three Months Ended June 30,





Six Months Ended June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009(Amounts in thousands)Cerezyme

$
138,736

$
298,087

$
(159,351
)

(53
)%
$
317,883

$
594,057

$
(276,174
)

(46
)%Fabrazyme


39,484


134,302


(94,818
)

(71
)%

92,725


256,503


(163,778
)

(64
)%Myozyme/Lumizyme


92,054


79,273


12,781


16
%

178,113


146,665


31,448


21
%Aldurazyme


43,651


39,190


4,461


11
%

83,548


76,027


7,521


10
%Other Personalized Genetic Health


36,592


30,833


5,759


19
%

70,732


58,356


12,376


21
%Total Personalized Genetic Health

$
350,517

$
581,685

$
(231,168
)

(40
)%
$
743,001

$
1,131,608

$
(388,607
)

(34
)%


PGH product revenue decreased for the three and six months ended June 30, 2010, primarily due to the temporary suspension of production at
our Allston facility in June 2009 during a time of already low levels of inventory for Cerezyme and Fabrazyme, resulting in supply constraints for Cerezyme and Fabrazyme since that time offset, in
part, by:



Cerezyme and Fabrazyme

The supply constraint for Cerezyme adversely impacted Cerezyme revenue by $154.9 million for the three months ended
June 30, 2010 and by $280.5 million for the six months ended June 30, 2010. The weakening of foreign currencies, primarily the Euro, against the U.S. dollar, adversely impacted
Cerezyme revenue by $1.5 million for the three months ended June 30, 2010. Exchange rate fluctuations, primarily the Euro against the U.S. dollar, positively impacted Cerezyme revenue by
$5.9 million for the six months ended June 30, 2010. Our results of operations are dependent on sales of Cerezyme and any reduction in revenue from sales of this product adversely
affects our results of operations. Sales of Cerezyme were approximately 13% of our total revenue for the three months ended June 30, 2010, and 15% of our total revenue for the six months ended
June 30, 2010 which reflect periods of supply constraint, as compared to approximately 24% and 25% for the same periods in 2009.

The
supply constraint for Fabrazyme adversely impacted Fabrazyme revenue by $94.2 million for the three months ended June 30, 2010 and by $166.6 million for the six
month ended June 30, 2010. The weakening of foreign currencies against the U.S. dollar had no significant impact on Fabrazyme revenue for the three months ended June 30, 2010. Exchange
rate fluctuations positively impacted Fabrazyme revenue by $2.3 million for the six months ended June 30, 2010.

Under
the FDA consent decree, we are required to move our fill-finish operations for Cerezyme and Fabrazyme out of our Allston facility. We are in the process of transferring
these operations to Hospira.

The
Cerezyme and Fabrazyme supply constraints resulting from the suspension of production at our Allston facility have created opportunities for our competitors and our future sales may
be

52

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negatively
affected by competitive products by Shire Human Genetic Therapies Inc., a business unit of Shire plc, or Shire, and Protalix Biotherapeutics Ltd., or Protalix. After our
products experienced supply constraints, Shire and Protalix were able to offer their developmental therapies for the treatment of Gaucher disease to patients in the United States through an
FDA-approved treatment investigational new drug application, or T-IND, protocol and to patients in the European Union and other countries through pre-approval access programs.
Shire received marketing approval for VPRIV from the FDA in late February 2010 and announced that it will price this therapy lower than Cerezyme. Shire also received a positive opinion
from the EMA Committee for Human Medicinal Product in June 2010. Shire has announced that it expects its manufacturing plant to be approved for commercial product in late 2011 or early 2012. Protalix
submitted its new drug application, or NDA, for UPLYSO to the FDA in December 2009 and has been granted "fast track" designation with a Prescription Drug User Fee Act, or PDUFA, date of
February 25, 2011. In December 2009, Protalix and Pfizer entered into an agreement to develop and commercialize UPLYSO. The FDA has granted orphan drug status to both Shire's and Protalix's
therapies for the treatment of Gaucher disease. Outside of the United States, Fabrazyme currently competes with Replagal, a product marketed by Shire. In the United States, the FDA has approved a
T-IND for Replagal. In August 2010, Shire reported that it had withdrawn its biologics license application, or BLA, for Replagal that it had submitted in December 2009 to the FDA, and for which it had
been granted "fast track" designation, to consider updating it with additional clinical data. In June 2010, Shire closed enrollment in its T-IND in the United States for Replagal and
announced plans to actively manage emergency requests for the drug from new patients.

We
are aware that some Gaucher and Fabry patients have switched to one of our competitors' therapies during the period of supply constraint and there is a risk that they may not switch
back to our products, which would result in the loss of additional revenue for us. In April 2010, the EMA advised physicians to consider switching Fabry disease patients from Fabrazyme to Replagal
based on its concerns that certain patients were not tolerating reduced dosages of Fabrazyme. We also have encouraged patients to switch to competitors products during the period of supply constraint.
These actions may result in additional patients switching to our competitors' therapies. In July 2010, the EMA issued a temporary recommendation to physicians that new Fabry disease patients be
treated with Replagal as an alternative to Fabrazyme because of continued supply shortages of Fabrazyme. In addition, the institution of treatment guidelines and dose conservation measures during the
supply constraint present the risk that physicians and patients will not resume prior treatment or dosage levels after the supply constraint has ended, potentially resulting in further loss of revenue
for us. Our estimates of the demand for Cerezyme and Fabrazyme and, as a result, estimates of our shipping allocations based on such demand, are impacted by patients switching to our competitors'
therapies and by long-term adoption by patients of lower treatment or dosage levels.

Myozyme/Lumizyme

Myozyme/Lumizyme revenue increased for the three and six months ended June 30, 2010 due to increased patient identification
outside of the United States following the European approval in February 2009 and the U.S. approval in May 2010 of the product produced at our Geel facility using the 4000L scale process. We
implemented a price increase for Myozyme/Lumizyme as of June 1, 2010 which had no significant impact on Myozyme/Lumizyme revenue for the three and six months ended June 30, 2010. The
weakening of foreign currencies, primarily the Euro, against the U.S. dollar, adversely impacted Myozyme/Lumizyme revenue by $3.7 million for the three months ended June 30, 2010.
Exchange rate fluctuations had no significant impact on Myozyme/Lumizyme revenue for the six months ended June 30, 2010.

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Aldurazyme

Aldurazyme revenue increased for the three and six months ended June 30, 2010 due to increased patient identification worldwide
as Aldurazyme was introduced into new markets. Exchange rate fluctuations had no significant impact on Aldurazyme revenue for the three and six months ended June 30, 2010.

Other Personalized Genetic Health

Other PGH product revenue increased for the three and six months ended June 30, 2010, primarily due to increased sales of
Elaprase attributable to the continued identification of new patients in our territories. We have rights to commercialize Elaprase in Japan and other Asia Pacific countries under an agreement with
Shire. The strengthening of foreign currencies, primarily the Japanese yen, against the U.S. dollar, positively impacted Other PGH product revenue by $1.0 million for the three months ended
June 30, 2010 and by $1.5 million for the six months ended June 30, 2010.

Renal and Endocrinology

Three Months Ended June 30,





Six Months Ended June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009(Amounts in thousands)Renagel/Renvela (including sales of bulk sevelamer)

$
170,066

$
175,398

$
(5,332
)

(3
)%
$
334,673

$
345,997

$
(11,324
)

(3
)%Hectorol


41,863


28,981


12,882


44
%

83,888


62,011


21,877


35
%Thyrogen


46,300


42,860


3,440


8
%

91,925


81,686


10,239


13
%Other Renal and Endocrinology





30


(30
)

(100
)%




30


(30
)

(100
)%Total Renal and Endocrinology

$
258,229

$
247,269

$
10,960


4
%
$
510,486

$
489,724

$
20,762


4
%


Sales of Renagel/Renvela, including sales of bulk sevelamer, decreased for the three and six months ended June 30, 2010, primarily due to
the effect of Renagel pricing in Brazil and the conversion of patients to Renvela in the United States. In 2009, we decreased the price of Renagel in Brazil in connection with successfully negotiating
a government tender in the face of competition from two similar products that had been approved in that country. Total revenue for Renagel/Renvela, including sales of bulk sevelamer, reflects the
increasing percentage of Renvela sales within the United States. The weakening of foreign currencies, primarily the Euro, against the U.S. dollar, had no significant impact on Renagel revenue for the
three months ended June 30, 2010. Exchange rate fluctuations positively impacted Renagel revenue by $6.7 million for the six months ended June 30, 2010.

We
manufacture the majority of our supply requirements for sevelamer hydrochloride (the active ingredient in Renagel) and sevelamer carbonate (the active ingredient in Renvela) at our
manufacturing facility in Haverhill, England. In December 2009, equipment failure caused an explosion and fire at this facility, which damaged some of the equipment used to produce these active
ingredients as well as the building in which the equipment was located. As a result, we temporarily suspended production of sevelamer hydrochloride and sevelamer carbonate at this facility while
repairs were made. We resumed production of sevelamer hydrochloride in May 2010. We anticipate that the facility will resume production of sevelamer carbonate in the fourth quarter of 2010. We believe
that we have adequate supply levels to meet the current demand for both Renagel and Renvela and do not anticipate there will be any supply constraints for either product while the facility undergoes
repairs. We recorded a total of $6.1 million of expenses, net of $2.4 million of insurance reimbursements, for the three months ended and a total of $13.7 million, net of
$5.4 million of insurance reimbursements, for the six months ended June 30, 2010 to cost of products sold in our consolidated statements of operations for Renagel and Renvela related to
the remediation cost of our Haverhill, England

54

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Table of Contents

manufacturing
facility, including repairs and idle capacity expenses. We expect to incur approximately $10 million of additional costs related to the remediation of this facility in the third
quarter of 2010.

Sales
of Hectorol increased for the three and six months ended June 30, 2010, primarily due to price increases in the second and fourth quarters of 2009 and the first quarter of
2010. Sales of Hectorol also include an increase in sales volume due to the addition of the Hectorol 1mcg capsule formulation in August 2009.

Renagel/Renvela
and Hectorol currently compete with several other marketed products and will have additional competitors in the future. Competitive products, especially if they are lower
cost generic or follow-on products, will adversely impact the revenues we recognize from Renagel/Renvela. Our core patents protecting Renagel/Renvela and Hectorol expire in 2014 in the
United States. We are unable to accurately estimate the unfavorable qualitative and quantitative impact of the expiration of these patents on our future operations and liquidity, as the impact is
dependent on numerous factors beyond our control. These factors include: the outcome of pending patent litigations; the timing of a competitive generic product's entry into the market; the number of
generic products that actually enter the market and which markets generic entrants choose or are authorized to enter; the identity and the operational, manufacturing, distribution and marketing
capabilities of the generic entrants; the reimbursement environment for the products in the United States and globally; and, in the case of Renagel/Renvela, requirements that the various regulatory
agencies around the globe may impose on a manufacturer to demonstrate bioequivalence of these non-absorbed polymer-based products. Because these conditional events described above have not
yet occurred, the current periods reflected in this filing have not been adversely affected; however, we expect the future impact to be unfavorable. See also "Some of our
products may face competition from lower cost generic or follow-on products" under the heading "Risk Factors" in this filing.

The
Medicare Improvements for Patients and Providers Act of 2008, or MIPPA, directs the Centers for Medicare and Medicaid Services, or CMS, to establish a bundled payment system to
reimburse dialysis providers treating patients with end stage renal disease, or ESRD. On July 26, 2010, CMS issued a final
rule setting forth the dialysis bundled payment system that will begin on January 1, 2011. The final rule delays until 2014 the inclusion of ESRD-related oral drugs such as
Renagel/Renvela and other oral phosphate binders that do not have an intravenous or injectable equivalent, in the bundled payment system. As a result, Renagel/Renvela will continue to be separately
reimbursed by Medicare until 2014. However, beginning January 1, 2011, the bundled payment system will include ESRD-related IV drugs and biologics and their oral equivalents,
including intravenous Vitamin D analogs and their oral equivalents such as Hectorol for Infusion and Hectorol capsules. We are in the process of evaluating the potential impact of the bundled payment
system on our business.

Sales
of Thyrogen increased for the three months ended June 30, 2010, primarily due to a price increase in July 2009. Sales of Thyrogen increased for the six months ended
June 30, 2010, primarily due to a price increase in July 2009. Exchange rate fluctuations, primarily the Euro against the U.S. dollar, positively impacted Thyrogen revenue by
$1.1 million for the six months ended June 30, 2010. The weakening of foreign currencies, primarily the Euro against the U.S. dollar, had no significant impact on Thyrogen revenue for
the three months ended June 30, 2010. Under the FDA consent decree, Thyrogen distributed in the United States and filled and finished at our Allston facility will only be distributed based on
medical necessity, in accordance with FDA criteria. In addition, the consent decree requires us to move our fill-finish operations out of our Allston facility for Thyrogen sold within the United
States by November 22, 2010 and for Thyrogen sold outside the United States by August 31, 2011. We are in the process of transferring these operations to Hospira, a third-party contract
manufacturer.

55

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Biosurgery

Three Months Ended June 30,





Six Months Ended June 30,Increase/ (Decrease)

Increase/ (Decrease) % Change

Increase/ (Decrease)

Increase/ (Decrease) % Change2010

2009

2010

2009(Amounts in thousands)Synvisc/Synvisc-One

$
107,686

$
82,417

$
25,269


31
%
$
187,193

$
145,588

$
41,605


29
%Sepra products


38,935


36,038


2,897


8
%

76,112


70,342


5,770


8
%Other Biosurgery


5,186


8,658


(3,472
)

(40
)%

14,763


20,311


(5,548
)

(27
)%Total Biosurgery

$
151,807

$
127,113

$
24,694


19
%
$
278,068

$
236,241

$
41,827


18
%


Biosurgery product revenue increased for the three and six months ended June 30, 2010, primarily due to increased sales for
Synvisc/Synvisc-One due to the addition of Synvisc-One sales in the United States. We received marketing approval for Synvisc-One in the United States in February
2009. Exchange rate fluctuations, primarily the Euro against the U.S. dollar, positively impacted Biosurgery revenue by $2.2 million for the six months ended June 30, 2010. The weakening
of foreign currencies, primarily the Euro against the U.S. dollar, had no significant impact on Biosurgery revenue for the three months ended June 30, 2010.

Hematology and Oncology

Three Months Ended June 30,





Six Months Ended June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009(Amounts in thousands)Mozobil

$
22,141

$
11,650

$
10,491


90
%
$
41,107

$
22,487

$
18,620


83
%Thymoglobulin


58,232


53,632


4,600


9
%

111,142


104,287


6,855


7
%Clolar


25,520


19,708


5,812


29
%

50,208


37,868


12,340


33
%Other Hematology and Oncology


70,597


25,856


44,741


>100
%

130,324


32,848


97,476


>100
%Total Hematology and Oncology

$
176,490

$
110,846

$
65,644


59
%
$
332,781

$
197,490

$
135,291


69
%


Hematology and Oncology product revenue increased for the three and six months ended June 30, 2010, primarily
due to:



Exchange
rate fluctuations had no significant impact on Hematology and Oncology revenue for the three and six months ended June 30, 2010.

Other Product Revenue

Three Months Ended June 30,





Six Months Ended June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009(Amounts in thousands)Total Other product revenue

$
37,879

$
48,512

$
(10,633
)

(22
)%
$
82,211

$
97,606

$
(15,395
)

(16
)%


56

---



Table of Contents

Other product revenue decreased for the three and six months ended June 30, 2010, primarily due to decreased demand for pharmaceutical
intermediates products.

Service Revenue

We derive service revenues primarily from the following sources:



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

Three Months Ended June 30,





Six Months Ended June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009Personalized Genetic Health

$
23

$
43

$
(20
)

(47
)%
$
43

$
80

$
(37
)

(46
)%Biosurgery


11,771


11,344


427


4
%

22,317


21,176


1,141


5
%Hematology and Oncology





292


(292
)

(100
)%




737


(737
)

(100
)%Other service revenue


91,795


94,014


(2,219
)

(2
)%

183,144


185,199


(2,055
)

(1
)%Total service revenue

$
103,589

$
105,693

$
(2,104
)

(2
)%
$
205,504

$
207,192

$
(1,688
)

(1
)%


Service revenue decreased slightly for the three and six months ended June 30, 2010, primarily due to a decrease in genetic testing service
revenue due to a decrease in demand for higher priced genetics testing services offset, in part, by an increase in Biosurgery service revenue due to increased demand for Carticel and MACI. Exchange
rate fluctuations had no significant impact on service revenue for the three and six months ended June 30, 2010.

International Product and Service Revenue

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

Three Months Ended June 30,





Six Months Ended June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009International product and service revenue

$
501,568

$
606,988

$
(105,420
)

(17
)%
$
1,015,027

$
1,158,100

$
(143,073
)

(12
)%% of total product and service revenue


47%


50%








47%


49%


International product and service revenue decreased for the three and six months ended June 30, 2010, primarily due to a decrease in
international sales volume for Cerezyme and Fabrazyme for the three and six months ended June 30, 2010 due to supply constraints.

This
decrease was offset, in part, by:



57

---



Table of Contents



Research and Development Revenue

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

Three Months Ended June 30,





Six Months Ended June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009Renal and Endocrinology

$
150

$
8

$
142


>100
%
$
316

$
21

$
295


>100
%Biosurgery


404


870


(466
)

(54
)%

963


1,432


(469
)

(33
)%Hematology and Oncology


7


852


(845
)

(99
)%

26


2,336


(2,310
)

(99
)%Multiple Sclerosis





5,066


(5,066
)

(100
)%




12,357


(12,357
)

(100
)%Other


67


99


(32
)

(32
)%

256


381


(125
)

(33
)%Corporate


300


497


(197
)

(40
)%

300


993


(693
)

(70
)%Total research and development revenue

$
928

$
7,392

$
(6,464
)

(87
)%
$
1,861

$
17,520

$
(15,659
)

(89
)%


Total research and development revenue decreased for the three and six months ended June 30, 2010, primarily due to a decrease in Multiple
Sclerosis research and development revenue as a result of our acquisition from Bayer and termination of the Campath profit share arrangement. As of May 29, 2009, the effective date of our
acquisition from Bayer, we ceased recognizing research and development revenue for Bayer's reimbursement of a portion of the development costs for alemtuzumab for MS. The fair value of the research
and development costs to be reimbursed by Bayer is accounted for as an offset to the contingent consideration obligations for alemtuzumab for MS.

GROSS PROFIT AND MARGINS

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

Three Months Ended June 30,





Six Months Ended June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009Gross product profit

$
673,278

$
826,526

$
(153,248
)

(19
)%
$
1,365,164

$
1,628,208

$
(263,044
)

(16
)%Product margin


69%


74%








70%


76%Gross service profit

$
37,065

$
44,069

$
(7,004
)

(16
)%
$
73,108

$
85,318

$
(12,210
)

(14
)%Service margin


36%


42%








36%


41%Total gross product and service profit

$
710,343

$
870,595

$
(160,252
)

(18
)%
$
1,438,272

$
1,713,526

$
(275,254
)

(16
)%Total product and service margin


66%


71%








67%


73%


58

---



Table of Contents

Gross Product Profit and Product Margin

Our overall gross product profit decreased for the three and six months ended June 30, 2010, primarily
due to:



These
decreases were offset, in part, by:



Our
product margin decreased for the three and six months ended June 30, 2010, primarily due to:



Gross
product profit and gross product margin also decreased for the three and six months ended June 30, 2010 due to manufacturing-related charges as described
below:



Gross
product profit and gross product margin for the three and six months ended June 30, 2009 includes $14.2 million of charges for the initial costs related to the remediation of our
Allston facility and $8.4 million of charges for the write off of Cerezyme work-in-process material recorded in June 2009.

59

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Table of Contents

Our
gross product profit and product margin for the three months ended June 30, 2010 were also impacted by the unfavorable effect of foreign exchange rates on product sales
outside of the United States, offset, in part, by the favorable effect of such rates on the cost of those products. Our gross product profit and product margin for the six months ended June 30,
2010 were also impacted by the favorable effect of foreign exchange rates on product sales outside of the United States, offset, in part, by the unfavorable effect of such rates on the cost of those
products.

We
expect to incur approximately $10 million of additional costs related to the remediation of our Haverhill, England facility in the third quarter of 2010.

At
any particular period, we may have certain inventory that requires further evaluation or testing to ensure that it meets appropriate quality specifications. As of June 30,
2010, we have approximately $16 million of inventory that is being evaluated or tested, including $6.3 million of Fabrazyme, $3.9 million of Myozyme and $3.6 million of
Thymoglobulin. If we determine that this inventory, or any portion thereof, does not meet the necessary quality standards, it would result in a write off of the inventory and a charge to earnings.

Gross Service Profit and Service Margin

Our overall gross service profit and total service margin decreased for the three and six months ended June 30, 2010, primarily
due to increased employee, rent and depreciation expenses for our genetic testing business unit.

OPERATING EXPENSES

Selling, General and Administrative Expenses

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

Three Months Ended
June 30,





Six Months Ended
June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009Selling, general and administrative expenses

$
402,535

$
354,128

$
48,407


14
%
$
955,845

$
672,089

$
283,756


42
%% of total revenue


37
%

29
%







44
%

28
%


SG&A increased for the three and six months ended June 30, 2010, primarily due to spending increases of:



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SG&A
increased by $2.1 million for the three months ended June 30, 2010 due to unfavorable exchange rate fluctuations for the three months ended June 30, 2010. SG&A decreased by
$6.2 million for the six months ended June 30, 2010 due to favorable exchange rate fluctuations for the six months ended June 30, 2010.

Research and Development Expenses

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

Three Months Ended
June 30,





Six Months Ended
June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009Research and development expenses

$
225,558

$
210,522

$
15,036


7
%
$
446,488

$
417,447

$
29,041


7
%% of total revenue


21
%

17
%







21
%

18
%


Research and development expenses increased for the three and six months ended June 30, 2010, primarily due to:



Research
and development expense increased by $1.1 million for the three months ended June 30, 2010 due to unfavorable exchange rate fluctuations for the three months ended
June 30, 2010. Research and development expense decreased by $1.7 million for the six months ended June 30, 2010 due to favorable exchange rate fluctuations for the six months
ended June 30, 2010.

These
increases were partially offset by a spending decrease of:



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Amortization of Intangibles

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

Three Months Ended
June 30,





Six Months Ended
June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009Amortization of intangibles

$
67,891

$
63,945

$
3,946


6
%
$
138,875

$
121,543

$
17,332


14
%% of total revenue


6
%

5
%







6
%

5
%


Amortization of intangibles expense increased for the three and six months ended June 30, 2010, primarily due to the acquisition of the
worldwide marketing and distribution rights to the oncology products Campath, Fludara and Leukine from Bayer and to additional amortization expense for the Synvisc sales and marketing rights we
reacquired from Pfizer.

As
discussed in Note 8., "Goodwill and Other Intangible Assets," to our consolidated financial statements included in this Form 10-Q, we calculate amortization
expense for the Synvisc sales and marketing rights we reacquired from Pfizer and the Myozyme/Lumizyme patent and technology rights pursuant to a licensing agreement with Synpac by taking into account
forecasted future Net Sales of the products, and the resulting estimated future contingent payments we will be required to make. In addition, we also calculate amortization for the technology
intangible assets for Fludara based on forecasted future sales of Fludara. We completed the contingent royalty payments to Pfizer related to North American sales of Synvisc in the first quarter of
2010 and anticipate completing the remaining contingent royalty payments to Pfizer related to sales of the product outside of the United States by the first quarter of 2011, the amount of which is not
significant. As a result, we expect amortization of intangibles expense to fluctuate over the next five years based on the future contingent payments to Synpac, as well as changes in the forecasted
revenue for Fludara.

Contingent Consideration Expense

The following table provides information regarding the change in contingent consideration expense during the periods presented (amounts
in thousands):

Three Months Ended June 30,





Six Months Ended June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease)
% Change2010

2009

2010

2009Contingent consideration expense

$
10,021

$
9,090

$
931


10
%
$
72,570

$
9,090

$
63,480


>100
%% of total revenue


1
%

1
%







3
%




In June 2009, we recorded contingent consideration obligations totaling $964.1 million for the acquisition date fair value of the
contingent royalty and milestone payments due to Bayer based on future sales and the successful achievement of certain sales volumes for Campath, Fludara and Leukine and for alemtuzumab for MS.

Any
change in the fair value of the contingent consideration obligations subsequent to the acquisition date, including changes from events after the acquisition date, such as changes in
our estimates of the sales volume for these products, will be recognized in earnings in the period the estimated fair value changes. The fair value estimates are based on the probability weighted
sales volumes to be achieved for Campath, Fludara, Leukine and for alemtuzumab for MS over the earn-out period for each product. A change in the fair value of the acquisition-related
contingent consideration obligations could have a material affect on our consolidated statements of operations and financial position in the period of the change in estimate.

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As of June 30, 2010, the fair value of the total contingent consideration obligations was $977.2 million primarily due to changes in the assumed
timing and amount of revenue and expense estimates. Accordingly, we recorded a total of $10.0 million for the three months ended June 30, 2010 and $72.6 million for the six months
ended June 30, 2010 of contingent consideration expenses, of which $(13.1) million was allocated to our Hematology and Oncology reporting segment and $85.7 million was allocated to our
Multiple Sclerosis reporting segment. Contingent consideration expense of $20.9 million relates to changes in estimates for the six months ended June 30, 2010.

Purchase of In-Process Research and Development

The following table sets forth the significant IPR&D projects for the companies and assets we acquired between January 1, 2006
and June 30, 2010 (amounts in millions):

Company/Assets
Acquired

Purchase
Price

IPR&D

Programs Acquired

Discount Rate
Used in
Estimating
Cash Flows

Year of
Expected
Launch

Estimated
Cost to
CompleteBayer (2009)

$
1,006.5

$
458.7

alemtuzumab for MSUS


16
%

2012

$
169.7
(1)174.2

alemtuzumab for MSex-US


16
%

2013

$
64.4
(2)$
632.9
(3)Bioenvision (2007)

$
349.9

$
125.5
(4)
Clolar(5)


17
%

2010-2016
(6)
$
20.0AnorMED (2006)

$
589.2

$
526.8
(4)
Mozobil(7)


15
%

2016

$
14.9


(1)Does
not include anticipated reimbursements from Bayer totaling approximately $44 million.(2)Does
not include anticipated reimbursements from Bayer totaling approximately $16 million.(3)Capitalized
as an indefinite-lived intangible asset.(4)Expensed
on acquisition date.(5)Clolar
is approved for the treatment of relapsed and refractory pediatric ALL. The IPR&D projects for Clolar are related to the development of the product
for the treatment of other indications.(6)Year
of expected launch reflects both the ongoing launch of the products for currently approved indications and the anticipated launch of the products in
the future for new indications.(7)Mozobil
received marketing approval for use in stem cell transplants in the United States in December 2008 and in Europe in July 2009. Mozobil is also being
developed for tumor sensitization.


OTHER INCOME AND EXPENSES

Three Months Ended
June 30,





Six Months Ended
June 30,Increase/
(Decrease)

Increase/
(Decrease)
% Change

Increase/
(Decrease)

Increase/
(Decrease) % Change2010

2009

2010

2009(Amounts in thousands)Equity in loss of equity method investments

$
(870
)
$


$
(870
)

N/A

$
(1,567
)
$


$
(1,567
)

N/ALosses on investment in equity securities, net


(31,562
)

(105
)

(31,457
)

>(100
)%

(31,399
)

(681
)

(30,718
)

>(100
)%Gain on acquisition of business





24,159


(24,159
)

(100
)%




24,159


(24,159
)

(100
)%Other


356


(2,056
)

2,412


>100
%

(246
)

(3,035
)

2,789


92
%Investment income


3,084


4,144


(1,060
)

(26
)%

6,384


9,494


(3,110
)

(33
)%Total other income (expenses)

$
(28,992
)
$
26,142

$
(55,134
)

>(100
)%
$
(26,828
)
$
29,937

$
(56,765
)

>(100
)%


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Table of Contents

Equity in Loss of Equity Method Investments

Effective January 1, 2010, in accordance with changes in the guidance related to how we account for variable interest entities,
we were required to reassess our designation as primary beneficiary of BioMarin/Genzyme LLC based on a control-based approach. Under this approach, an entity must have the power to direct the
activities that most significantly impact a variable interest entity's economic performance in order to meet the requirements of a primary beneficiary. We have concluded that
BioMarin/Genzyme LLC is a variable interest entity, but does not have a primary beneficiary because the power to direct the activities of BioMarin/Genzyme LLC that most significantly
impact its performance, is, in fact, shared equally between us and BioMarin through our commercialization rights and BioMarin's manufacturing rights. Effective January 1, 2010, we no longer
consolidate the results of BioMarin/Genzyme LLC and instead record our portion of the results of BioMarin/Genzyme LLC in equity in loss of equity method investments in our consolidated
statements of operations.

Losses on Investment in Equity Securities, Net

We review for potential impairment the carrying value of each of our strategic investments in equity securities on a quarterly basis.
The closing price per share of Isis common stock exhibited volatility during 2009 and the six months ended June 30, 2010 and has remained below our historical cost since September 1,
2009, with closing prices since that date ranging from a high of $15.69 per share to a low of $8.66 per share. We considered all available evidence in assessing the decline in value of our investment
in Isis common stock, including investment analyst reports and Isis's expected results and future outlook. However, despite such evidence if the fair value of any of our investments remain below our
historical cost for a consecutive nine months, we will generally conclude that it is unclear over what period the stock price of our investment would recover and that any evidence suggesting that the
investment would recover to at least our historical cost is not sufficient to overcome the presumption that the current market price is the best indicator of the value of this investment. Accordingly,
given the significance and duration of the decline in value of our investment in Isis common stock as of June 30, 2010, we considered the decline in value of this investment to be other than
temporary and we recorded a $32.3 million impairment charge to losses on investment in equity securities, net in our consolidated statements of operations for the three and six months ended
June 30, 2010.

Gain on Acquisition of Business

We recorded a gain on acquisition of business of $24.2 million for the three months ended June 30, 2009 for our Multiple
Sclerosis reporting segment related to our
acquisition of the worldwide rights to the oncology products Campath, Fludara, Leukine and alemtuzumab for MS from Bayer for which there were no comparable amounts in 2010. The fair value of the
identifiable assets acquired of $1.03 billion exceeded the fair value of the purchase price for the transaction of $1.01 billion.

Investment Income

Our investment income decreased for the three and six months ended June 30, 2010 primarily due to a decrease in our average
portfolio yield and lower average cash and investment balances.

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BENEFIT FROM (PROVISION FOR) INCOME TAXES

Three Months Ended
June 30,

Six Months Ended
June 30,2010

2009

2010

2009(Amounts in thousands)Benefit from (provision for) income taxes

$
19,953

$
(78,870
)
$
81,752

$
(157,754
)Effective tax rate


(84
)%

30
%

(41
)%

29
%


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



In
addition, our tax benefit for both the three and six months ended June 30, 2010 includes:



Our
benefits from tax provisions for the six months ended June 30, 2010 also includes tax benefits in the amount of $15.2 million as a result of the resolution of tax examinations in
major tax jurisdictions.

We
are currently under audit by various states and foreign jurisdictions for various years. We believe that we have provided sufficiently for all audit exposures. Settlement of these
audits or the expiration of the statute of limitations on the assessment of income taxes for any tax year will likely result in a reduction of future tax provisions. Any such benefit would be recorded
upon final resolution of the audit or expiration of the applicable statute of limitations.

LIQUIDITY AND CAPITAL RESOURCES

We continue to generate cash from operations. We had cash, cash equivalents and short-and long-term investments
of $974.2 million at June 30, 2010 and $1.05 billion at December 31, 2009.

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The
following is a summary of our statements of cash flows for the six months ended June 30, 2010 and 2009:

Cash Flows from Operating Activities

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

Six Months Ended
June 30,2010

2009Cash flows from operating activities:Net income (loss)

$
(118,721
)
$
383,060Non-cash charges, net


430,554


273,017Net income, excluding net non-cash charges


311,833


656,077Increase (decrease) in cash from working capital changes


(6,675
)

(55,731
)Cash flows from operating activities

$
305,158

$
600,346


Cash
provided by operating activities decreased $295.2 million for the six months ended June 30, 2010, driven by a $344.2 million decrease in net income, excluding
net non-cash charges, offset by a $49.1 million decrease in working capital, primarily due to the Cerezyme and Fabrazyme supply constraints and a corresponding reduction in
collection activities for these products.

Non-cash
charges, net, increased by $157.5 million for the six months ended June 30, 2010, primarily attributable to:



Cash Flows from Investing Activities

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

Six Months Ended
June 30,2010

2009Cash flows from investing activities:Net sales (purchases) of investments, excluding investments in equity securities

$
11,404

$
86,345Net sales (purchases) of investments in equity securities


104


(5,890
)Purchases of property, plant and equipment


(330,298
)

(318,324
)Acquisitions, net of acquired cash





(117,073
)Investments in equity method investment


(1,466
)

Purchases of other intangible assets


(6,155
)

(18,345
)Other investing activities


(7,661
)

(5,198
)Cash flows from investing activities

$
(334,072
)
$
(378,485
)


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For
the six months ended June 30, 2010, capital expenditures accounted for significant cash outlays for investing activities. During the six months ended June 30, 2010, we
used $330.3 million of cash to fund the purchase of property, plant and equipment, primarily related to the ongoing expansion of our manufacturing capacity in the Republic of Ireland, France
and Belgium, planned improvements at our Allston facility, the additional manufacturing capacity we are constructing in Framingham, Massachusetts and capitalized costs related to the implementation of
an enterprise software system.

For
the six months ended June 30, 2009, investing activities used $318.3 million of cash to fund the purchase of property, plant and equipment, primarily related to the
ongoing expansion of our manufacturing capacity in the Republic of Ireland and France, planned improvements at our Allston facility and capitalized costs of an internally developed enterprise software
system. In addition, we used $117.1 million of cash in connection with our acquisition of the worldwide rights to Campath, Fludara, Leukine and alemtuzumab for MS from Bayer.

Cash Flows from Financing Activities

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

Six Months Ended
June 30,2010

2009Cash flows from financing activities:Proceeds from the issuance of our common stock

$
58,362

$
53,508Repurchases of our common stock


(800,000
)

(107,134
)Payments under shares purchase contract


(200,000
)

Excess tax benefits from stock-based compensation


(5,372
)

4,424Proceeds from the issuance of debt


994,387


Payments of debt and capital lease obligations


(4,549
)

(4,305
)Increase (decrease) in bank overdrafts


23,851


(14,303
)Payment of contingent consideration obligation


(61,336
)

Other financing activities


939


3,660Cash flows from financing activities

$
6,282

$
(64,150
)


Cash
used by financing activities decreased by $70.4 million for the six months ended June 30, 2010, as compared to the same period of 2009, primarily a result of
$994.4 million of proceeds, net of a $5.6 million discount, from the issuance of $1.0 billion in principal of debt, including $500.0 million in aggregate principal amount
of our 2015 Notes and $500.0 million in aggregate principal amount of our 2020 Notes. These proceeds were offset by a $692.9 million increase in cash used to repurchase shares of our
common stock. Also, cash used by financing activities increased as a result of an advance payment to Goldman Sachs of $200.0 million recorded in June 2010 as part of the repurchase of our
common stock. Finally, the proceeds from issuance of debt were also offset by $61.3 million in contingent consideration payments to Bayer in the six months ended June 30, 2010, for which
there were no comparable payments for the same period of 2009.

2015 and 2020 Senior Notes

In June 2010, we sold $500.0 million aggregate principal amount of our 2015 Notes and $500.0 million aggregate principal
amount of our 2020 Notes through institutional private placements to fund the $1.0 billion payment under our accelerated share repurchase agreement, as discussed under the caption "Share
Repurchase Plan" below. We received net proceeds from the sale of the Notes of approximately $986.6 million, after deducting commissions and other expenses related to the offerings.

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Interest
accrues on the Notes from June 17, 2010 and is payable semi-annually in arrears on June 15 and December 15 of each year starting on December 15, 2010.

The
Notes are our senior unsecured obligations and rank equally in right of payment with all of our other senior unsecured indebtedness from time to time outstanding. The Notes are fully
and unconditionally guaranteed by one of our subsidiaries that also guarantees our indebtedness under our 2006 revolving credit facility. We may redeem the Notes in whole or in part at any time at a
redemption price equal to the greater of:



We
may be required to offer to repurchase the Notes at a purchase price equal to 101% of their principal amount if we are subject to certain changes of control.

Revolving Credit Facility

As of June 30, 2010, we had approximately $9 million of outstanding standby letters of credit issued against this
facility and no borrowings, resulting in approximately $341 million of available credit under our 2006 revolving credit facility, which matures July 14, 2011. The terms of this credit
facility include various covenants, including financial covenants that require us to meet minimum interest coverage ratios and maximum leverage ratios. As of June 30, 2010, we were in
compliance with these covenants.

Share Repurchase Plan

In April 2010, our board of directors authorized a $2.0 billion share repurchase plan consisting of the near-term
purchase of $1.0 billion of our common stock to be financed with proceeds of newly issued debt, and the purchase of an additional $1.0 billion of our common stock by June 2011. On
June 17, 2010, we entered into an accelerated share repurchase agreement with Goldman Sachs under which we will repurchase $1.0 billion worth of shares of our common stock. Our effective
per share purchase price will be based generally on the average of the daily volume weighted average prices per share of our common stock, less a discount, calculated during a period of up to four
months. In connection with this agreement, we paid $1.0 billion to Goldman Sachs and received 15.6 million shares, of which:



The
total number of shares ultimately repurchased will not be known until the calculation period ends and a final settlement occurs. Upon final settlement, we will either receive a
settlement amount of additional shares of our common stock or be required to remit a settlement amount, payable, at our option, in cash or common stock. Shares repurchased under this agreement will be
deemed authorized shares that are no longer outstanding.

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Contractual Obligations

As of June 30, 2010, we had committed to make the following payments under contractual obligations (amounts in millions):

Payments Due by PeriodContractual Obligations

Total

July 1, 2010
through
December 31, 2010

2011

2012

2013

2014

After 2014Long-term debt obligations(1,2)

$
1,022.0

$
0.2

$
1.6

$
1.7

$
1.8

$
1.8

$
1,014.9Capital lease obligations(2)


141.9


7.6


15.5


15.5


16.9


18.9


67.5Operating leases(2)


374.3


39.9


69.4


52.6


33.9


27.5


151.0Contingent payments(3)


1,796.2


132.8


211.6


117.1


297.8


481.2


555.7Interest obligations(4)


348.8


23.8


44.2


44.1


44.0


44.0


148.7Defined pension benefit plans payments


31.3


1.0


1.9


2.2


2.4


2.9


20.9Unconditional purchase obligations


99.8


41.1


28.1


19.6


7.0


2.0


2.0Capital commitments(5)


1,084.0


405.0


532.9


117.6


25.3


3.2


Total contractual obligations

$
4,898.3

$
651.4

$
905.2

$
370.4

$
429.1

$
581.5

$
1,960.7


(1)Includes
$500.0 million in principal of our 2015 Notes and $500.0 million in principal of our 2020 Notes.(2)See
Note L., "Long-term Debt and Leases" to our consolidated financial statements included in Item 8 of Exhibit 99 to our
Form 8-K filed with the SEC on June 14, 2010 for additional information on long-term debt and lease obligations.(3)For
all periods presented consists primarily of a total of $1.80 billion of contingent royalty and milestone payments, the value of which has not
been risk adjusted or discounted, that we are obligated to pay to Bayer based on future sales and the successful achievement of certain sales volumes for Campath, Fludara and Leukine and alemtuzumab
for MS.
Bayer
is also eligible to receive a payment between $75.0 million and $100.0 million for a new Leukine manufacturing facility located in Lynnwood, Washington upon the facility receiving
FDA approval, which is expected in 2011. We have not included any amounts for the contingent payments for this facility because we cannot be certain that the FDA will approve the facility or do so in
the anticipated timeframe.

Contingent
payments also include a $20.0 million milestone payment to Synpac estimated to occur in 2010 once sales of Myozyme/Lumizyme reach $400.0 million. Contingent payments exclude
any liabilities pertaining to uncertain tax positions as we cannot make a reliable estimate of the period of cash settlement with the respective taxing authorities.

From
time to time, as a result of mergers, acquisitions or license arrangements, we may enter into agreements under which we may be obligated to make contingent payments upon the occurrence of
certain events, and/or royalties on sales of acquired products or distribution rights. The actual amounts for and the timing of contingent payments may depend on numerous factors outside of our
control, including the success of our preclinical and clinical development efforts with respect to the products being developed under these agreements, the content and timing of decisions made by the
United States Patent and Trademark Office, the FDA and other regulatory authorities, the existence and scope of third-party intellectual property, the reimbursement and competitive landscape around
these products, the volume of sales or gross margin of a product in a specified territory and other factors described under the heading "Risk Factors" below. Because we cannot predict with certainty
the amount or specific timing of contingent payments, we have included amounts for contingent payments that we believe are probable of being paid in our contractual obligations table. See
Note C., "Strategic Transactions," to our consolidated financial statements


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Table of Contents

included
in Item 8 of Exhibit 99 to our Form 8-K filed with the SEC on June 14, 2010 for additional information on our transaction with Bayer. (4)Represents
interest payment obligations related to the senior notes that we issued in June 2010, promissory notes to three former shareholders of Equal
Diagnostics and the mortgage payable we assumed in connection with the purchase of land and a manufacturing facility we formerly leased in Framingham, Massachusetts.(5)Consists
of contractual commitments to vendors that we have entered into as of June 30, 2010 related to our outstanding capital and internally
developed software projects. Our estimated cost of completion for assets under construction as of June 30, 2010 is as follows (amounts in millions):


Location

Cost to
Complete at
June 30, 2010Framingham, Massachusetts, U.S (approximately 38% for software development).

$
428.1Westborough, Massachusetts, U.S. (primarily software development)


33.8Lyon, France


12.0Geel, Belgium


344.2Waterford, Ireland


28.5Allston, Massachusetts, U.S.


96.1Ridgefield, New Jersey, U.S.


27.0Haverhill, England


26.0Other


88.3Total estimated cost to complete

$
1,084.0




Financial Position

We believe that our available cash, investments and cash flows from operations, together with our revolving credit facility and other
available debt financing will be adequate to meet our operating, investing and financing needs in the foreseeable future. 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:



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In
May 2010, we announced a $2.0 billion stock repurchase program. In June 2010, we executed an accelerated share repurchase agreement with Goldman Sachs for the repurchase of
$1.0 billion of our common stock, which we financed with the net proceeds of our $1.0 billion senior note offering. We plan to repurchase the additional $1.0 billion before June
2011.

In
addition, we have several outstanding legal proceedings. Involvement in investigations and litigation can be expensive and a court may also 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.

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 ASC 810 are included in our consolidated statements of operations if we qualify as the primary
beneficiary. Entities not subject to consolidation under ASC 810 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 income (losses) of these entities in the line item "Equity in loss of equity method investments" in our consolidated statements of operations. We
also acquire companies under agreements in which we agree to pay contingent consideration based on attaining certain thresholds.

Recent Accounting Pronouncements

Periodically, accounting pronouncements and related information on the adoption, interpretation and application of U.S. GAAP are
issued or amended by the FASB or other standard setting bodies. Changes to the ASC are communicated through ASUs. The following table shows FASB ASUs recently issued that could affect our disclosures
and our position for adoption:

ASU Number

Relevant Requirements
of ASU

Issued Date/Our Effective Dates

Status2009-13 "Multiple-Deliverable Revenue Arrangementsa consensus of the FASB Emerging Issues Task Force."

Establishes the accounting and reporting guidance for arrangements under which a vendor will perform multiple revenue-generating activities. Specifically, the provisions of this update address how to separate
deliverables and how to measure and allocate arrangement consideration to one or more units of accounting.

Issued October 2009. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted.

We will adopt the provisions of this update for the first quarter of 2011. We are currently assessing the impact the provisions of this update will have, if any, on our consolidated financial statements.


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ASU Number

Relevant Requirements
of ASU

Issued Date/Our Effective Dates

Status2010-06 "Improving Disclosures about Fair Value Measurements."

Requires new disclosures and clarifies some existing disclosure requirements about fair value measurements codified within ASC 820, "Fair Value Measurements and Disclosures," including significant transfers into and out
of Level 1 and Level 2 investments of the fair value hierarchy. Also requires additional information in the roll forward of Level 3 investments including presentation of purchases, sales, issuances, and settlements on a gross basis.
Further clarification for existing disclosure requirements provides for the disaggregation of assets and liabilities presented, and the enhancement of disclosures around inputs and valuation techniques.

Issued January 2010. Effective for the first interim or annual reporting period beginning after December 15, 2009, except for the additional information in the roll forward of Level 3 investments. Those
disclosures are effective for fiscal years beginning after December 15, 2010, and for interim reporting periods within those fiscal years.

We adopted the applicable provisions of this update, except for the additional information in the roll forward of Level 3 investments (as previously noted), in the first quarter of 2010. Besides a change in
disclosure, the adoption of this update does not have a material impact on our consolidated financial statements. None of our instruments were reclassified between Level 1, Level 2 or Level 3 in 2010.2010-11, "Scope Exception Related to Embedded Credit Derivatives."

Update provides amendments to Subtopic 815-15,"Derivatives and HedgingEmbedded Derivatives,"to clarify the scope exception for embedded credit derivative
features related to the transfer of credit risk in the form of subordination of one financial instrument to another.

Issued March 2010. Effective at the beginning of each reporting entity's first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each reporting entity's first fiscal
quarter beginning after issuance of this update.

We will adopt the provisions of this update for the third quarter of 2010. We are currently assessing the impact the provisions of this update will have, if any, on our consolidated financial statements.2010-17, "Milestone Method of Revenue Recognitiona consensus of the FASB Emerging Issues Task Force."

Update provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research and development transactions.

Issued April 2010. Effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted.

We will adopt the provisions of this update beginning January 1, 2011. We are currently assessing the impact the provisions of this update will have, if any, on our consolidated financial statements.2010-19, "Foreign Currency Issues: Multiple Foreign Currency Exchange Rates."

Update codifies the SEC Staff Announcement made at a March 18, 2010 meeting of the EITF. The Staff Announcement provides the SEC staff's view on certain foreign currency issues related to investments in
Venezuela.

Issued May 2010. Staff announcements made at EITF meetings are effective as of the announcement date, which for this update is March 18, 2010, unless otherwise noted.

We have adopted the provisions of this update beginning March 18, 2010. We don't believe the impact of highly inflationary accounting on differences between amounts recorded for financial reporting purposes
versus the underlying U.S. dollar denominated values is material to our consolidated financial statements.


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RISK FACTORS

Our future operating results could differ materially from the results described in this report due to the risks and uncertainties
related to our business, including those discussed below. In addition, these factors represent risks and uncertainties that could cause actual results to differ materially from those implied by
forward-looking statements. We refer you to our "Cautionary Note Regarding Forward-Looking Statements," which identifies forward-looking statements in this report. The risks described below are not
the only risks we face. Additional risk and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, financial
condition or results of operations.

Manufacturing problems have caused inventory shortages, loss of revenues and unanticipated costs and may do so in the future.

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

Certain
of the raw materials required in the commercial manufacturing and the formulation of our products are derived from biological sources, including bovine serum and human serum
albumin. Such raw materials are difficult to procure and 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 on the use of certain biologically derived substances in the manufacture of our products
could adversely impact or disrupt commercial manufacturing of our products or could result in a withdrawal of our products from markets. This, 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, therefore, have limited or no redundant manufacturing capacity for these
products. For example, we manufacture all of our bulk Cerezyme and most of our bulk Fabrazyme products at our Allston facility, all of our bulk Myozyme produced at the 160L scale at our Framingham
facility, and all of our bulk Myozyme/Lumizyme produced at the 4000L scale at our Belgium facility. In some cases, we contract out the manufacturing of our products to third parties, of which there
are only a limited number capable of executing the manufacturing processes we require. A number of factors could cause production interruptions at our facilities or the facilities of our third-party
providers, including equipment malfunctions, facility contamination, labor problems, raw material shortages or contamination, natural disasters, disruption in utility services, terrorist activities,
human error or disruptions in the operations of our suppliers.

In
June 2009, we announced that we had detected a virus, Vesivirus 2117, that impairs cell growth in one of the bioreactors used at our Allston facility to produce Cerezyme. We believe
the virus was likely introduced through a raw material used in the manufacturing process. We temporarily interrupted bulk production at the plant to sanitize the facility, which affected production of
Cerezyme and Fabrazyme. Cerezyme and Fabrazyme inventories were not sufficient to meet global demand. In 2009,

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we
confirmed that Vesivirus 2117 was the cause of declines in cell productivity in one previous instance in 2008 at our Allston facility and one previous instance in 2008 at our Belgium facility. We
were able to detect the virus in 2009 at our Allston facility using a highly specific assay we had developed after standard tests were unable to identify the cause of the productivity declines that
occurred in 2008. We
are in the process of adding steps to increase the robustness of our raw materials screening, process monitoring for viruses and viral removal processes. Some of these steps are subject to regulatory
approval. However, given the nature of biologics manufacturing, contamination issues could occur at our facilities in the future. The Vesivirus contamination has had a material adverse effect on our
Cerezyme and Fabrazyme revenues as well as on our results of operations, and any future contamination could have a similarly material financial impact.

The
steps in successfully producing our biologic products are highly complex and in the normal course are subject to equipment failures and other production difficulties. For example,
when we restarted Fabrazyme production at Allston, we experienced cell growth at lower than expected levels, which negatively affected our ability to supply the product to patients. In addition, in
March 2010, we experienced an interruption in operations at our Allston facility resulting from an unexpected city electrical power failure that compounded issues with the plant's water system. This
resulted in continued supply limitations for Cerezyme and Fabrazyme as well as product write-offs. We also have experienced other shipment interruptions since restarting Cerezyme and
Fabrazyme production. We will continue to work with minimal levels of inventory for Cerezyme and Fabrazyme until our new Framingham manufacturing facility is approved and any additional manufacturing
delays will likely impact supply of these products.

Our Cerezyme and Fabrazyme supply constraints have created opportunities for our competitors.

Outside of the United States, Fabrazyme competes with Replagal, a product marketed by Shire plc. In the United States, the FDA
has approved a treatment protocol for Replagal. In August 2010, Shire reported that it had withdrawn its BLA for Replagal that it had submitted in December 2009 to the FDA, and for which it had been
granted "fast track" designation, to consider updating it with additional clinical data. In June 2010, Shire closed enrollment in their T-IND in the U.S. for Replagal and announced plans
to actively manage emergency requests for the drug from new patients. For Cerezyme, Shire and Protalix were able to offer their developmental therapies for the treatment of Gaucher disease to patients
in the United States through an FDA-approved treatment protocol and to patients in the European Union and other countries through pre-approval access programs. Shire received
FDA approval of VPRIV to treat Gaucher disease in February 2010 and announced it will price its therapy lower than Cerezyme. In addition, Shire received a positive opinion from the EMA Committee for
Human Medicinal Products in June 2010. Shire expects to launch its therapy in the European Union by the end of 2010 and in other countries beginning in 2011. Also, Shire has announced that it expects
its manufacturing plant to be approved for commercial product in late 2011 or early 2012. Protalix submitted its NDA for UPLYSO to the FDA in December 2009 and has been granted "fast track"
designation, with a PDUFA date of February 25, 2011. In December 2009, Protalix and Pfizer entered into an agreement to develop and commercialize UPLYSO. The FDA has granted orphan drug status
to both Shire's and Protalix's therapies for the treatment of Gaucher disease. In addition, Zavesca® is currently approved in the United States for patients with Gaucher disease for whom
enzyme replacement therapy is unsuitable.

The
approval of treatment protocols and access programs for Shire's and Protalix's therapies has allowed physicians to treat Fabry and Gaucher disease patients with the therapies ahead
of their commercial availability. Some Gaucher and Fabry patients have used our competitors' therapies during the period of supply constraint and there is a risk that they may not switch back to our
products, which would result in the loss of additional revenue for us. In April 2010, the EMA advised physicians to consider switching Fabry disease patients from Fabrazyme to Replagal based on its
concerns that certain patients were not tolerating reduced dosages of Fabrazyme. We also have encouraged patients

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to
switch to competitive products during the period of supply constraint. These actions may result in additional patients switching to our competitors' therapies. In July 2010, the EMA issued a
temporary recommendation to physicians that new Fabry disease patients be treated with Replagel as an alternative to Fabrazyme because of continued supply shortages of Fabrazyme. In addition, the
institution of treatment guidelines and dose conservation measures during the supply constraint presents the risk that physicians and patients will not resume regular treatment levels after the supply
constraint has ended.

Our products and manufacturing facilities are subject to significant government regulations and approvals, which are often costly and could result in adverse consequences to
our business if we fail to comply with the regulations or maintain the approvals.

Our commercial products and the manufacturing facilities in which they are produced are subject to extensive continuing government
regulations relating to, among other things, testing, quality control, labeling and promotion. For example, we and certain of our third-party suppliers are required to maintain compliance with GMP
requirements, and are subject to inspections by the FDA, the EMA and comparable agencies in other jurisdictions to confirm such compliance. Failure to comply with applicable regulatory requirements
could result in regulatory authorities taking actions such as:



For
example, on May 24, 2010, we entered into a consent decree with the FDA relating to our Allston facility. Under the terms of the consent decree, we will pay an upfront
disgorgement of past profits of $175.0 million. The consent decree requires us to move all of our fill-finish operations out of our Allston facility by certain deadlines. If we are not able to
meet these deadlines, the FDA can require us to disgorge 18.5% of the revenue from the sale of any products that are filled and finished at our Allston facility after the applicable deadlines. The
consent decree also requires us to implement a plan to bring our Allston facility operations into compliance with applicable laws and regulations. The plan must address any deficiencies previously
reported to us or identified as part of a comprehensive inspection conducted by a third-party expert, who we are required to retain, and who will monitor and oversee our implementation of the plan. In
2009, we began implementing a comprehensive remediation plan, prepared with assistance from our compliance consultant, Quantic, to improve quality and compliance at our Allston facility. We intend to
revise that plan to include any additional remediation efforts required in connection with the consent decree as identified by Quantic, who we are retaining as the third-party expert under the consent
decree. The plan, as revised, which will be subject to FDA approval, is expected to take approximately 3-4 years to complete and will include a timetable of specified compliance
milestones. If the milestones are not met in accordance with the timetable, the FDA can require us to pay $15,000 per day, per affected drug, until these compliance milestones are met. Upon satisfying
the compliance requirements in accordance with the terms of the consent decree, we will be required to retain an auditor, which can be Quantic, to monitor and oversee ongoing

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compliance
at our Allston facility for an additional five years. If we are unable to satisfy the terms of the consent decree, or if satisfaction of our obligations takes longer than expected, our
business could be adversely impacted.

The
FDA, the EMA and comparable regulatory agencies worldwide may require post-marketing clinical trials or patient outcome studies. We have agreed with the FDA, for example,
to a number of post-marketing commitments as a condition to U.S. marketing approval for Fabrazyme, Aldurazyme, Myozyme/Lumizyme, Clolar and Mozobil. In addition, holders of exclusivity for
orphan drugs are expected to assure the availability of sufficient quantities of their orphan drugs to meet the needs of patients. Failure to do so could result in the withdrawal of marketing
exclusivity for the drug.

In
recent years, several states, including California, Vermont, Maine, Minnesota, Massachusetts, New Mexico and West Virginia, in addition to the District of Columbia, have enacted
legislation requiring biotechnology, pharmaceutical and medical device companies to establish marketing compliance programs and file periodic reports on sales, marketing, and other activities. Similar
legislation is being considered in other states. Many of these requirements are new and uncertain, and available guidance is limited. We could face enforcement action, fines and other penalties and
could receive adverse publicity, all of which could harm our business, if it is alleged that we have failed to fully comply with such laws and related regulations.

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

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

Before
we can commercialize our product candidates, we 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:



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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 pivotal study of hylastan for treatment of patients with osteoarthritis of the knee, hylastan did not meet its primary endpoint. In addition, in November 2009, we discontinued development of an
advanced phosphate binder. Although the advanced phosphate binder met its primary endpoint in its phase 2/3 trial, it did not demonstrate significant improvement in phosphate lowering compared
to Renvela. In September 2009, our collaboration partner Osiris, to whom we have made substantial nonrefundable upfront payments, announced that its two phase 3 trials evaluating Prochymal for
the treatment of acute
Graft-versus-Host Disease failed to meet their primary endpoints, drawing into question the size of the market that may benefit from use of the product.

We
may decide to abandon development of a product or service candidate at any time, or we may be required to expend considerable resources repeating clinical trials or conducting
additional trials, either of which would increase costs of development and delay any revenue from those programs.

In
addition, a regulatory authority may deny or delay an approval because it was not satisfied with the structure or conduct of clinical trials or due to its assessment of the data we
supply. A regulatory authority, for instance, may not believe that we have adequately addressed negative safety signals. Clinical data are subject to varied interpretations, and regulatory authorities
may disagree with our assessments of data. In any such case, a regulatory authority could insist that we provide additional data, which could substantially delay or even prevent commercialization
efforts, particularly if we are required to conduct additional pre-approval clinical studies.

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

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

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

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



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Part
of our growth strategy involves conducting additional clinical trials to support approval of expanded uses of some of our products, including Mozobil, Clolar and alemtuzumab for MS,
pursuing marketing approval for our products in new jurisdictions and developing next generation products, such as eliglustat tartrate (formerly Genz-112638). The success of this component
of our growth strategy will depend on the outcome of these additional clinical trials, the content and timing of our submissions to regulatory authorities and whether and when those authorities
determine to grant approvals. Because the healthcare industry is extremely competitive and regulatory requirements are rigorous, we spend substantial funds marketing our products and attempting to
expand approved uses for them. These expenditures depress near-term profitability with no assurance that the expenditures will generate future profits that justify the expenditures. For
example, we received a complete response letter from the FDA in October 2009 for Clolar's use in adult AML in which the agency recommended that a randomized, controlled clinical study be conducted for
label expansion of Clolar in this indication, which are ongoing and from which we expect to report results before the end of this year.

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 genetic and diagnostic testing companies, and generic and biosimilar manufacturers, have developed and are developing products and services to compete with our products,
services and product candidates. If healthcare providers, patients or payors prefer these competitive products or services or these competitive products or services have superior safety, efficacy,
pricing or reimbursement characteristics, we will have difficulty maintaining or increasing the sales of our products and services. As described under the heading "The Cerezyme
and Fabrazyme supply constraints resulting from the suspension of production at our Allston facility have created opportunities for our competitors," the virus at our Allston
facility and associated production interruption have provided new opportunities for our competitors.

There
are currently two other marketed products aimed at treating Gaucher disease, the disease addressed by Cerezyme: Zavesca® and VPRIV. Zavesca is a small molecule oral
therapy that has been approved in approximately thirty-five countries, including the United States, European Union and Israel, for use in patients with mild to moderate Type 1
Gaucher disease for whom enzyme replacement therapy is unsuitable. Zavesca has been sold in the European Union since 2003 and in the United States since 2004. VPRIV is an enzyme replacement therapy
developed by Shire that received marketing approval in the United States in February 2010. In addition, UPLYSO, an enzyme replacement therapy in development by Protalix to treat Gaucher disease, is
available to patients in the United States under an FDA-approved treatment protocol and Protalix has submitted an NDA to the FDA for its therapy. Both the Shire and Protalix therapies are
available to patients in the European Union and other countries through pre-approval access programs.

Replagal
is a competitive enzyme replacement therapy for Fabry disease, the disease addressed by Fabrazyme, which is approved for sale outside of the United States. In August 2010, Shire
reported that
it had withdrawn its BLA for Replagal that it had submitted in December 2009 to the FDA, and for which it had been granted "fast track" designation in February 2010, to consider updating it with
additional clinical data. In addition, Amicus Therapeutics initiated a phase 3 clinical trial in June 2009 of an oral chaperone medication to treat Fabry disease and expects to have preliminary
results by mid-2011.

Myozyme
has marketing exclusivity in the United States until 2013 and in the European Union until 2016 due to its orphan drug status, although companies may seek to overcome the
associated marketing exclusivity. In addition, we are aware of one company pursuing phase 1 clinical studies (after putting a phase 2 study on hold) for a small molecule pharmacologic
chaperone treatment for Pompe disease.

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Renagel and Renvela compete with several other products for the control of elevated phosphorus levels in patients with CKD on hemodialysis, including
PhosLo®, a prescription calcium acetate preparation marketed in the United States and Fosrenol®, a prescription lanthanum carbonate marketed in the United States, Europe,
Canada and Latin America. Generic formulations of PhosLo were launched in the United States in 2008 and 2009. Renagel and Renvela also compete with over-the-counter calcium
carbonate products such as TUMS® and metal-based options such as aluminum and magnesium. Our core patents protecting Renagel and Renvela expire in 2014 in the United States and in Europe
in 2015. However, our Renagel and Renvela patents are the subjects of Abbreviated New Drug Application, or ANDA, filings in the United States by generic drug manufacturers as described in more detail
in this Risk Factors section under the heading,"Some of our products will likely face competition from lower cost generic or follow-on
products."

Current
competition for Synvisc/Synvisc-One includes: Supartz®/Artz®; Hyalgan®; Orthovisc®; Euflexxa®;
Monovisc, which is marketed in Europe and Turkey; and Durolane®, which is marketed in Europe and Canada. Durolane and Euflexxa are produced by bacterial fermentation, which
may provide these products a competitive advantage over avian-sourced Synvisc/Synvisc-One. We believe that single injection products will have a competitive advantage over multiple
injection products. Synvisc-One is currently the only single injection viscosupplementation product approved in the United States, but competitors are seeking FDA approval for their single
injection products. Furthermore, several companies market products that are not viscosupplementation products but which are designed to relieve the pain
associated with osteoarthritis. Synvisc/Synvisc-One will have difficulty competing with competitive products to the extent those products have a similar safety profile and are considered
more efficacious, less burdensome to administer or more cost-effective.

Competition
for Campath for patients with B-CLL includes single agent and combination chemotherapy regimens; Rituxan®/MabThera® (rituximab), which is
marketed globally; Treanda®/Ribomustin® (bendamustine) which is marketed globally; and Arzerra® (ofatumumab), which is marketed in the United States and Europe.
There are also other therapies under clinical study for the treatment of B-CLL, including lumiliximab and lenalidomide. Competition for Clolar for the treatment of pediatric patients 1 to
21 years old with relapsed or refractory ALL after at least two prior regimens includes cytarabine and mitoxantrone, which are available as generics with no significant commercial promotion,
and Arranon®/Atriance® (nelarabine), which is indicated for the treatment of patients with T-cell ALL whose disease has not responded to or has relapsed following
treatment with at least two chemotherapy regimens. T-cell ALL is estimated to represent less than 20% of pediatric ALL patients. In addition, there are anti-cancer agents in
clinical trials for the treatment of relapsed pediatric ALL. Leukine primarily competes with two colony stimulating growth factors, Neupogen® (filgrastim) and Neulasta®
(pegfilgrastim). The primary competition for Fludara is generic versions of fludarabine. Mozobil primarily competes with Neupogen and generic chemo-mobilization regimens.

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

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

Sales of our products and services are dependent, in large part, on the availability and extent of reimbursement from government health
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third-party
payors. These third-party payors may not provide adequate insurance coverage or reimbursement for our products and services, which could reduce demand for our
products and services and impair our financial results.

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



Efforts
by third-party payors to reduce costs could decrease demand for our products and services. In March 2010, the U.S. Congress enacted healthcare reform legislation that
imposes cost containment measures on the healthcare industry. Some states are also considering legislation that would control the prices of drugs. We believe that federal and state legislatures and
health agencies will continue to focus on additional healthcare reform in the future.

We
encounter similar cost containment issues in countries outside the United States. In certain countries, including countries in the European Union and Canada, the coverage of
prescription drugs, pricing and levels of reimbursement are subject to governmental control. Therefore, we may be unable to negotiate coverage, pricing or reimbursement on terms that are favorable to
us. Moreover, certain countries reference the prices in other countries where our products are marketed. Thus, inability to secure adequate prices in a particular country may also impair our ability
to maintain or obtain acceptable prices in existing and potential new markets.

Government
health administration authorities and private payors may also rely on analyses of the cost-effectiveness of certain therapeutic products in determining whether to
provide reimbursement or insurance coverage for such products. Our ability to obtain satisfactory pricing and reimbursement, or the ability of our patients to obtain insurance coverage, 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. The American Recovery and Reinvestment Act of
2009 provided significant funding for the federal government to conduct comparative effectiveness research. Although the U.S. Congress indicated that these studies are intended to improve the quality
of health care, outcomes of such studies could influence reimbursement decisions. If, for example, any of our products or services were determined to be less cost-effective than
alternatives, reimbursement for those products or services could be affected. As in the United States, we expect to see continued efforts to reduce healthcare costs in our international markets. As
another example, the German government has enacted legislation, effective August 2010, that among other things, increases mandatory discounts from 6% to 16% and imposes August 2009 pricing levels on
pharmaceuticals through the end of 2013.

Furthermore,
governmental regulatory bodies, such as the CMS in the United States, may from time-to-time make unilateral changes to reimbursement rates for our
products and services. For example, MIPPA directs CMS to establish a bundled payment system to reimburse dialysis providers treating ESRD patients. On July 26, 2010, CMS issued a final rule
setting forth the dialysis bundled

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payment
system that will begin on January 1, 2011. The final rule delays until 2014 the inclusion of ESRD-related oral drugs such as Renagel/Renvela and other oral phosphate binders
that do not have an IV equivalent, in the bundled payment system. As a result, Renagel/Renvela will continue to be separately reimbursed by Medicare until 2014. However, beginning January 1,
2011, the bundled payment system will include ESRD-related IV drugs and biologics and their oral equivalents, including intravenous Vitamin D analogs and their oral equivalents such
as Hectorol for Infusion and Hectorol capsules.

Changes
to reimbursement rates, including implementation of CMS's bundled payment system the United States, could reduce our revenue by causing healthcare providers to be less willing to
use our products and services. Although we actively seek to ensure 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. In addition, when a new product is approved, the availability of government and private reimbursement for that product is
uncertain as is
the amount for which that product will be reimbursed. We cannot predict the availability or amount of reimbursement for our product candidates.

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 are spending considerable resources building and seeking regulatory approvals for our manufacturing facilities. These facilities may
not prove sufficient to meet demand for our products or we may not have excess capacity at these facilities. For example, we had been operating with lower than usual inventories for Cerezyme and
Fabrazyme because we had allocated capacity for Myozyme production at our Allston facility to meet Myozyme's worldwide growth. When we interrupted production of Cerezyme and Fabrazyme at the facility
in June 2009 in order to sanitize the facility after identifying a virus in a bioreactor used to produce Cerezyme, inventories of Cerezyme and Fabrazyme were not sufficient to avoid product shortages.
We are constructing a new manufacturing facility with capacity for Cerezyme and Fabrazyme in Framingham, Massachusetts, expanding our Allston facility, and adding an additional 4000L bioreactor to
produce Myozyme/Lumizyme at our Geel facility. We are also expanding our fill-finish capacity in Waterford, Ireland and working with Hospira, a third-party contract
manufacturer to transfer all of our Allston-based fill-finish activities to the contract manufacturer. If we experience a delay in completing these capacity expansions or securing
regulatory approval for the new internal capacity or the fill-finish capacity from the contract manufacturer, we will not be able to build inventories in our expected timeframe.

In
addition, we only manufacture bulk Myozyme produced at the 160L scale in our Framingham facility. Because the approved indication for Lumizyme does not cover portions of the Pompe
patient population (such as infantile-onset patients or late-onset patients under the age of eight), we need to continue to limit access to Myozyme produced at this smaller scale. However,
there are some patients in the United States who are currently treated with Myozyme produced at the 160L scale who are eligible for treatment using Lumizyme. If a sufficient number of those patients
do not transition to Lumizyme, our inventory of Myozyme produced at the 160L scale may become constrained.

Building
our facilities is expensive, and our ability to recover these costs will depend on increased revenue from the products produced at the facilities. In addition, to maintain
product supply and to adequately prepare to launch a number of our late-stage product candidates, we must successfully implement a number of manufacturing projects on schedule, operate our
facilities at appropriate production capacity, optimize manufacturing asset utilization, continue our use of third-party contract manufacturers and maintain a state of regulatory compliance.

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

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

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



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

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

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

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example,
we believe that a virus that we detected in one of our bioreactors used at our Allston facility to produce Cerezyme was likely introduced through a raw material used in the manufacturing
process.

We
also source some of our manufacturing, fill-finish, packaging and distribution operations to third-party contractors. For example, we have entered into an
agreement with Hospira for the provision of fill-finish manufacturing services for several of our products, including Thyrogen and Fabrazyme, which are currently fill-finished
at our Allston facility. Our inability to coordinate with our third-party contractors, the inability of a third-party contractor to secure sufficient source materials, the lack
of capacity
available at a third-party contractor, problems with manufacturing services provided by a third-party contractor or any other problems with the operations of a
third-party contractor could require us to delay shipment of saleable products, to recall products previously shipped, or 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. In the case of Thyrogen and Fabrazyme, any issues that we encounter with our Hospira relationship could cause us to miss
one or more of the transition deadlines set forth in our FDA consent decree, resulting in the potential disgorgement of a portion of the revenues that we receive from sale of the effected product or
products. Furthermore, any third party we use to manufacture, fill-finish or package our products must also be licensed by the applicable regulatory authorities. As a result, alternative
third-party providers may not be available on a timely basis or at all.

Our financial results are dependent on sales of Cerezyme.

Sales of Cerezyme, our enzyme-replacement product for patients with Gaucher disease, totaled $317.9 million for the six months
ended June 30, 2010, representing approximately 15% of our total revenue. Because our business is dependent on Cerezyme, negative trends in revenue from this product have had, and could
continue to have, an adverse effect on our results of operations and cause the value of our common stock to further decline or fail to recover. In addition, we will lose revenue if alternative
treatments for Gaucher disease gain commercial acceptance, if our marketing activities are restricted, or if coverage, pricing or reimbursement is limited. 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. See"The Cerezyme and Fabrazyme supply constraints resulting from the suspension of production at our Allston facility have created opportunities
for our competitors"above.

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

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



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Furthermore,
payments we make under these arrangements may exacerbate fluctuations in our financial results. In addition, under some of our strategic alliances, including Osiris, PTC and
Isis, we make upfront and milestone payments well in advance of commercialization of products with no assurance that we will ever recoup these payments. We also may make equity investments in our
strategic partners, as we did with EXACT Sciences in January 2009 and Isis in February 2008. Our strategic equity investments are subject to market fluctuations, access to capital and other business
events, such as initial public offerings, the completion of clinical trials and regulatory approvals, which can impact the value of these investments. If any of our strategic equity investments
decline in value and remain below cost for an extended duration, we may be required to write down our investment, as we did with our Isis holdings in June 2010.

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. For the six months ended June 30, 2010, the change in foreign exchange rates had a net favorable impact on our revenue, as compared to a net
unfavorable effect for 2009.

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

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



We
have several ongoing legal proceedings on which we will continue to expend substantial sums. For example, we have initiated patent infringement litigation against several generic
manufacturers. In addition, we are the subject of two consolidated securities class action lawsuits and two consolidated securities derivative lawsuits. We may be subject to additional actions in the
future. For example, the federal government, state governments and private payors are investigating and have filed actions against numerous pharmaceutical and biotechnology companies, including
Genzyme, alleging that the
companies may 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, and third parties with whom we do business sometimes bring breach of contract claims against us or our subsidiaries.

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Some of our products are prescribed by healthcare providers for uses not approved by the FDA, the EMA or comparable regulatory agencies. Although healthcare
providers may lawfully prescribe our products for off-label uses, any promotion by us of off-label uses would be unlawful. Some of our practices intended to make healthcare
providers aware of off-label uses of our products without engaging in off-label promotion could nonetheless be misconstrued 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 commence investigations into our practices and/or take enforcement action against us if they believe we are promoting, or have promoted, our products
for off-label use. For example, the U.S. government has instituted an investigation into Genzyme's sales, marketing and promotion of Seprafilm. We are cooperating with the government in
this inquiry.

We
have only limited amounts of insurance, which may not provide coverage to offset a negative judgment or a settlement payment. We may be unable to obtain additional insurance in the
future, or we may be unable to do so on favorable terms. Our insurers may dispute our claims for coverage. For example, we are seeking from our insurers coverage amounting to approximately
$30 million for reimbursement of portions of the costs incurred in connection with the litigation and settlement related to the consolidation of our tracking stocks. Any additional insurance we
do obtain may not provide adequate coverage against any asserted claims.

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



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

Our international operations accounted for approximately 47% of our consolidated product and service revenue for the three months ended
June 30, 2010. We expect that international product sales will continue to account for a significant percentage of our revenue for the foreseeable future. In addition, we have direct
investments in a number of subsidiaries outside of the United States. Our international sales and operations could be limited or disrupted, and the value of our direct investments may be diminished,
by any of the following:



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Our
international operations and marketing practices are subject to regulation and scrutiny by the governments of the countries in which we operate as well as the United States
government. The United States Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their representatives from offering,
promising, authorizing or making payments to foreign officials for the purpose of obtaining or retaining business. We operate in many parts of the world that have experienced governmental corruption
to some degree. Although we have policies and procedures designed to help ensure that we, our employees and our agents comply with the Foreign Corrupt Practices Act, or FCPA, and other
anti-bribery laws, such policies and procedures may not protect us against liability under the FCPA or other laws for actions taken by our employees, agents and intermediaries with respect
to our business. Failure to comply with domestic or international 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, or the imposition of criminal or civil sanctions, including substantial monetary penalties.

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

Our long-term success largely depends on our ability to market technologically competitive products. If we fail to obtain
or maintain adequate intellectual property protection in the United States or abroad, we may not be able to prevent third parties from using our proprietary technologies. Our currently pending or
future patent applications may not result in issued patents. Patent applications are typically confidential for 18 months following their earliest filing, and because third parties may have
filed patent applications for technology covered by our pending patent applications without us being aware of those applications, our patent applications may not have priority over patent applications
of others. In addition, our issued patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products, or provide us with any competitive
advantage. If a third party initiates litigation regarding our patents or those patents for which we have license rights, and is successful, a court could declare such patents invalid or unenforceable
or limit the scope of coverage of those patents. Governmental patent offices and courts have not always been consistent in their interpretation of the scope and patentability of the subject matter
claimed in biotechnology patents. Any changes in, or unexpected interpretations of, the patent laws may adversely affect our ability to enforce our patent position.

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

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

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

The
ANDA procedure includes provisions allowing generic manufacturers to challenge the innovator's patent protection by submitting "Paragraph IV" certifications to the FDA in
which the generic manufacturer claims that the innovator's patent is invalid or will not be infringed by the manufacture, use, or sale of the generic product. A patent owner who receives a
Paragraph IV certification may choose to sue the generic applicant for patent infringement. If such patent infringement lawsuit is brought within a statutory 45-day period, then a
30-month stay of FDA approval for the ANDA is triggered. In recent years, generic manufacturers have used Paragraph IV certifications extensively to challenge the applicability of
patents listed in the FDA's Approved Drug Products List with Therapeutic Equivalence Evaluations, commonly referred to as the Orange Book, on a wide array of innovative therapeutic products. We expect
this trend to continue and to implicate drug products with even relatively modest revenues.

Renagel/Renvela
and Hectorol are subjects of ANDAs containing Paragraph IV certifications. Renagel is the subject of ANDAs containing Paragraph IV certifications submitted
by five companies. Our Renvela tablet product is the subject of ANDAs containing Paragraph IV certifications submitted by four companies. Our Renvela powder product is the subject of ANDAs
containing Paragraph IV certifications submitted by three companies. We have initiated patent litigation against four of the five ANDA applicants with respect to Renagel and against all four of
the ANDA applicants with respect to the Renvela tablet. With respect to our Renvela powder product, we have commenced patent litigation against two of the three ANDA applicants. At issue in these
lawsuits is U.S. Patent No. 5,667,775, which expires in 2014 (the " '775 Patent"). See "Legal Proceedings" in Part I., Item 3. of our 2009
Form 10-K. If we are unsuccessful in these lawsuits, a generic manufacturer may launch its generic product prior to the expiration of the '775 Patent, but not before the expiration
in 2013 of our other Orange Book-listed patents covering Renagel and Renvela. Regarding the cases where we have not brought suit, we are currently evaluating the Paragraph IV notice
received from the ANDA applicants.

Our
Hectorol (doxercalciferol) products (vial and capsule) are collectively the subject of ANDAs containing Paragraph IV certifications submitted by seven companies. We have
initiated patent litigation against five of these ANDA applicants. See "Legal Proceedings" in Part I., Item 3. of our 2009 Form 10-K. In all five cases we are pursuing
claims with respect to our U.S. Patent No. 5,602,116 related to the use of Hectorol to treat hyperparathyroidism secondary to ESRD, which expires in 2014 (the " '116 Patent"). In
two of the five cases, we are also pursuing claims with respect to our U.S. Patent No. 7,148,211 related to the formulation of our Hectorol vial product, which expires in 2023 (the
" '211 Patent"). Our Hectorol capsule product is labeled for the treatment of secondary hyperparathyroidism in patients with CKD on dialysis and for those patients not on dialysis. In one
of the four cases relating to our Hectorol capsule products, the ANDA filer is seeking approval of its generic 0.5μg capsule only for the treatment of patients with CKD who
are not on dialysis, thereby attempting to avoid our '116 Patent. If we are unsuccessful in the patent infringement lawsuits that we have chosen to pursue against the ANDA filers, a generic
manufacturer may launch its generic product prior to the expiration of our Orange-Book listed patents covering our Hectorol products.

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As
for the two Hectorol ANDA applicants against whom litigation was not initiated, they submitted Paragraph IV certifications with respect to only the '211 Patent. Because we did
not initiate litigation, the FDA could approve the applicants' generic products upon the later of expiration or invalidation of the '116 Patent or expiration of the 180-day exclusivity, if
any, accorded to the first ANDA filer.

We
also have two biologic products approved under the FDCA, Cerezyme and Thyrogen. This renders them susceptible to potential competition from follow-on or biosimilar
manufacturers via the "505(b)2" pathway of the FDCA. As with an ANDA, the sponsor of a 505(b)2 application is permitted to rely, at least in part, on the safety and efficacy data of the innovator. For
that reason, 505(b)(2) applicants may have a shorter time to approval than an applicant filing an NDA.

Other
of our products, including Fabrazyme, Aldurazyme, Myozyme, Campath and Leukine (so-called "biotech drugs") were approved in the United States under the Public Health
Service Act, or PHSA. The PHSA was amended by the March 2010 enactment of healthcare reform legislation, which, among other things, establishes an abbreviated approval pathway for "biosimilar"
products. This approval process differs from the ANDA approval process in a number of significant ways. In particular, a biosimilar product could not be approved based on the safety and efficacy data
of one of our products until 12 years after initial approval of our product. Biosimilar legislation has also been adopted in the European Union.

If
an ANDA filer or any biosimilar manufacturer were to receive approval to sell a generic or biosimilar version of one of our products, that product would become subject to increased
competition and our revenue for that product would be adversely affected.

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

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

Legislative or regulatory changes may adversely impact our business.

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. In addition, we may need to revise our research and
development plans if a program or programs no longer are commercially viable. Such changes could cause our stock price to decline or experience periods of volatility.

The
pricing and reimbursement environment for our products may change in the future and become more challenging due to among other reasons, new healthcare legislation or fiscal
challenges faced by government health administration authorities. In the United States, enactment of health reform legislation in March 2010 is expected to adversely affect our revenues through, among
other provisions, the imposition of fees on certain elements of our businesses and an increase in the Medicaid rebate.

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On
September 27, 2007, the Food and Drug Administration Amendment Act of 2007 was enacted, giving the FDA enhanced authority over products already approved for sale, 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 or distribution of approved products.

Credit and financial market conditions may exacerbate certain risk affecting our business.

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

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

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

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

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

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

To
the extent valid third-party patent rights cover our products or services, we or our strategic collaborators would be required to seek licenses from the holders of these patents in
order to manufacture, use or sell these products and services, and payments under them would reduce our profits from these products and services. We may not be able to obtain these licenses on
favorable

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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 seek out these products in these lower priced markets.
The ability of patients and other customers to obtain these lower priced imports has grown significantly as a result of the Internet, an expansion of pharmacies in Canada and elsewhere that target
American purchasers, an increase in U.S.-based businesses affiliated with these Canadian pharmacies and other factors. Most of these foreign imports are illegal under current U.S. 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.

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

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

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

As of June 30, 2010, we had $974.2 million 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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In
May 2010, we announced a $2.0 billion stock repurchase program. In June 2010, we executed an accelerated share repurchase agreement with Goldman Sachs for the repurchase of
$1.0 billion of our
common stock, which we financed with the net proceeds of our $1.0 billion senior note offering. We plan to repurchase the additional $1.0 billion before June 2011.

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

We
continue to believe that our available cash, investments and cash flow from operations, together with our revolving credit facility and other available debt financing, will be
adequate to meet our operating, investing and financing needs in the foreseeable future.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to potential loss from exposure to market risks represented principally by changes in foreign exchange rates, interest
rates and equity prices. At June 30, 2010, we held a number of financial instruments, including investments in marketable securities, debt instruments, and derivative contracts in the form of
foreign exchange forward contracts. We do not hold derivatives or other financial instruments for speculative purposes.

Foreign Exchange Risk

As a result of our worldwide operations, we may face exposure to potential 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 foreign exchange forward contracts to further reduce our exposure to changes in exchange rates, primarily to offset the earnings effect from
short-term foreign currency assets and liabilities. We also hold a limited amount of foreign currency denominated equity securities. As of June 30, 2010, we estimate the potential
loss in fair value of our foreign currency contracts and foreign equity holdings that would result from a hypothetical 10% adverse change in exchange rates to be $4.4 million, as compared to
$4.8 million as of December 31, 2009. Since the contracts hedge mainly transactional exchange exposures, most changes in the fair values of the contracts would be offset by changes in
the underlying values of the hedged items.

Interest Rate Risk

We are exposed to potential loss due to changes in interest rates. Our principal interest rate exposure is to changes in U.S. interest
rates. Instruments with interest rate risk include short- and long-term investments in fixed income securities and fixed rate senior notes. To estimate the potential loss due to changes in
interest rates, we performed a sensitivity analysis using the instantaneous adverse

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change
in interest rates of 100 basis points across the yield curve. On this basis, we estimate the potential loss in fair value to be $83.0 million as of June 30, 2010, as compared to
$6.5 million as of December 31, 2009. The change is due to the impact of the interest rate sensitivity analysis on our $1.0 billion in senior unsecured notes which were issued in
June 2010. We had no comparable debt in December, 2009.

Equity Price Risk

We hold investments in a limited number of U.S. and European equity securities. We estimated the potential loss in fair value due to a
10% decrease in the equity prices of each marketable security held at June 30, 2010 to be $12.3 million, as compared to $15.5 million at December 31, 2009. The decrease is
primarily due to the write-down of our investment in Isis to its market value in June. This estimate assumes no change in foreign exchange rates from quarter-end spot rates.

ITEM 4.    CONTROLS AND PROCEDURES

As of June 30, 2010, we evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the
effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2010.

There
were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred
during the quarter ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

Federal Securities Litigation

In July 2009 and August 2009, two purported securities class action lawsuits were filed in the U.S. District Court for the District of
Massachusetts against us and our President and Chief Executive Officer. The lawsuits were filed on behalf of those who purchased our common stock during the period from June 26, 2008 through
July 21, 2009 and allege violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Each of the lawsuits is
premised upon allegations that we made materially false and misleading statements and omissions by failing to disclose instances of viral contamination at two of our manufacturing facilities and our
receipt of a list of inspection observations from the FDA related to one of the facilities, which detailed observations of practices that the FDA considered to be deviations from GMP. The plaintiffs
seek unspecified damages and reimbursement of costs, including attorneys' and experts' fees. In November 2009, the lawsuits were consolidated inIn Re Genzyme Corp. Securities
Litigationand a lead plaintiff was appointed. In March 2010, the plaintiffs filed a consolidated amended complaint that extended the class period from October 24, 2007
through November 13, 2009. In June 2010, we filed a motion to dismiss the class action. If the action is not dismissed, we intend to defend this lawsuit vigorously.

Shareholder Demand Letters

Since August 2009, we have received ten letters from shareholders demanding that our board of directors take action on behalf of
Genzyme Corporation to remedy alleged breaches of fiduciary duty by our directors and certain executive officers. The demand letters are primarily premised on allegations regarding our disclosures to
shareholders with respect to manufacturing issues and

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compliance
with GMP and our processes and decisions related to manufacturing at our Allston facility. Several of the letters also assert that certain of our executive officers and directors took
advantage of their knowledge of material non-public information about Genzyme to illegally sell stock they personally held in Genzyme. Our board of directors has designated a special
committee of three independent directors to oversee the investigation of the allegations made in the demand letters and to recommend to the independent directors of the board whether any action should
be instituted on behalf of Genzyme Corporation against any officer or director. The committee has retained independent legal counsel. If the independent members of our board of directors were to make
a determination that it was in our best interest to institute an action against any officers or directors, any monetary recovery would be to the benefit of Genzyme Corporation. The special committee's
investigation is ongoing.

Shareholder Derivative Actions

In December 2009, two actions were filed by shareholders derivatively for Genzyme's benefit in the U.S. District Court for the District
of Massachusetts against our board of directors and certain of our executive officers after a ninety day period following their respective demand letters had elapsed (the "District Court Actions"). In
January 2010, a derivative action was filed in Massachusetts Superior Court (Middlesex County) by a shareholder who has not issued a demand letter and in February and March 2010, two additional
derivative actions were filed in Massachusetts Superior Court (Suffolk County and Middlesex County, respectively) by two separate shareholders after the lapse of a ninety day period following the
shareholders' respective demand letters (collectively, the "State Court Actions").

The
derivative actions in general are based on allegations that our board of directors and certain executive officers breached their fiduciary duties by causing Genzyme to make
purportedly false and misleading or inadequate disclosures of information regarding manufacturing issues, compliance with GMP, ability to meet product demand, expected revenue growth, and approval of
Lumizyme. The actions also allege that certain of our directors and executive officers took advantage of their
knowledge of material non-public information about Genzyme to illegally sell stock they personally held in Genzyme. The plaintiffs generally seek, among other things, judgment in favor of
Genzyme for the amount of damages sustained by Genzyme as a result of the alleged breaches of fiduciary duty, disgorgement to Genzyme of proceeds that certain of our directors and executive officers
received from sales of Genzyme stock and all proceeds derived from their service as directors or executives of Genzyme, and reimbursement of plaintiffs' costs, including attorneys' and experts' fees.
The District Court Actions have been consolidated inIn Re Genzyme Derivative Litigationand the plaintiffs have agreed to a joint stipulation staying
these cases until our board of directors has had sufficient time to exercise its duties and complete an appropriate investigation, which is ongoing. On July 9, 2010, one of the State Court
Actions was dismissed without prejudice for plaintiffs' failure to serve process on the defendants. The Middlesex Court also ordered transfer and consolidation of the remaining two State Court Actions
in the Suffolk Superior Court Business Litigation Session. The court has indicated that discovery in that action also will be stayed for some period pending the board of director's completion of its
ongoing investigation in response to the shareholders demand.

Fabrazyme Patent Litigation

In October 2009, Shelbyzyme LLC filed a complaint against us in the U.S. District Court for the District of Delaware alleging
infringement of U.S. patent 7,011,831 by "making, using, selling and promoting a method for the treatment of" Fabry disease. The '831 patent, which is directed to a method for treating Fabry disease,
was issued in March 2006 and expired in March 2009. The plaintiffs seek damages for past infringement, including treble damages for alleged willful infringement and reimbursement of costs, including
attorney's fees. We intend to defend this lawsuit vigorously.

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Other Matters

We are party to a legal action brought by Kayat pending before the District Court in Nicosia, Cyprus. Kayat alleges that we breached a
1996 distribution agreement under which we granted Kayat the right to distribute melatonin tablets in the Ukraine, primarily by not providing products or by providing non-conforming
products. Kayat further claims that due to the alleged breach, it suffered lost profits that Kayat claims it would have received under agreements it alleges it had entered into with subdistributors.
Kayat also alleges common law fraud and violations of Mass. Gen. L. c. 93A and the Racketeer Influenced and Corrupt Organizations Act. Kayat filed its suit on August 8, 2002 and a trial
began in Cyprus in December 2009. Kayat seeks damages for
its legal claims and for expenses it claims it has incurred, including legal fees and advertising, promotion and other out-of-pocket expenses. We believe we acted appropriately
in all regards, including properly terminating the agreement when we decided to exit the melatonin business, and we intend to defend this lawsuit vigorously.

ANDA Litigation

As disclosed in our 2009 Form 10-K, we have initiated patent litigation against a number of companies that submitted
to the FDA ANDAs containing Paragraph IV certifications seeking approval to market generic versions of Renagel, Renvela and Hectorol. One of the ANDA filers, Sandoz, Inc., or Sandoz, is
seeking approval to market generic 400mg and 800mg sevelamer hydrochloride tablets after the expiration of the patents protecting Renagel that expire in 2013. In July 2009, we filed a complaint
against Sandoz in the U.S. District Court for the District of Maryland alleging that Sandoz's proposed generic products infringe U.S. Patent No. 5,667,775, which expires in 2014 (the
" '775 Patent") Sandoz filed an answer and counterclaims alleging that the '775 Patent and U.S. Patent No. 6,733,780, which expires in 2020 (the " '780 Patent") are
invalid and/or not infringed by Sandoz's proposed generic sevelamer hydrochloride products. In the first quarter of 2010, the court granted our motion to dismiss Sandoz's counterclaims with respect to
the '780 Patent. We also are subject to other legal proceedings and claims arising in connection with our business. Although we cannot predict the outcome of these proceedings and claims, we do
not believe the ultimate resolution of any of these existing matters would have a material adverse effect on our consolidated financial position or results of operations.

We
have also initiated new ANDA litigation on our Renvela® products. On May 24, 2010 we sued Watson Laboratories Inc., Watson, in the U.S. District Court for
the District of Maryland, alleging patent infringement of our Orange Book listed '775 patent. Watson is seeking to enter the market with a generic version of our 800 mg
Renvela® tablet prior to the September 16, 2014 expiry of the '775 patent.

During
May and June, 2010, we sued Impax Laboratories Inc., Lupin Ltd. and Watson in the U.S. District Court for the District of Maryland for patent infringement of the
'775 patent based on their ANDA applications seeking approval of generic versions of our 0.8 g and 2.4 g Renvela® sachet products. In each of these actions, the
generic defendant is seeking to enter the market prior to the expiry of the '775 patent.

We
have also recently initiated three new ANDA lawsuits with respect to our Hectorol® products. With regard to our Hectorol® for Injection product, on
May 21, 2010, we filed a complaint against Sandoz, in the U.S. District Court for the District of Delaware alleging patent infringement of our Orange Book listed patents U.S. 5,602,116 and U.S.
7,148,211. This action was based on notice provided to us by Sandoz of their ANDA, which seeks to market a generic version of our Hectorol® for Injection product, as supplied in amber
glass vials, prior to the expiration of both of these patents in February, 2014 and September, 2023, respectively. We have
previously brought suit against Sandoz in June, 2009, in the same court, alleging patent infringement of U.S. 5,602,116 by their proposed generic version of our Hectorol® for Injection
product, as supplied in glass ampules.

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With
regard to our Hectorol® Capsule product, we have brought patent infringement actions, on the same two patents and in the same court, against Anchen
Pharmaceuticals, Inc., or Anchen, and Roxane Laboratories, Inc., or Roxane, on June 10, 2010 and July 23, 2010, respectively. Anchen is seeking to market generic versions
of all three strengths (0.5 mcg, 1.0 mcg and 2.5 mcg) of our capsule product. We have previously initiated ANDA litigation against Roxane based on their earlier ANDA seeking
approval of generic versions of our 0.5 mcg and 2.5 mcg products; this latest lawsuit relates to their newest attempt to produce a generic version of our 1.0 mcg product.

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

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 Form 10-Q.

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

The following table provides information about our repurchases of our equity securities during the quarter ended June 30, 2010:

Period

Total
Number of
Shares
Purchased

Average
Price
Paid per
Share

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

Approximate
Dollar Value
of Shares that
May Yet Be
Purchased
Under the
Plans or
ProgramsApril 1, 2010-April 30, 2010




$





$
711,797,363May 1, 2010-May 31, 2010




$





$
711,797,363
(1)June 1, 2010-June 30, 2010


15,555,123

$
51.43


15,555,123

$
1,000,000,000
(2)Total


15,555,123

$
51.43


15,555,123


(1)In
May 2007, our board of directors authorized the expenditure of up to $1.50 billion to repurchase 20,000,000 shares of our outstanding common stock
over a three year period that began in June 2007 and ended in June 2010. We did not purchase any additional shares of our common stock under this program during the second quarter.(2)In
April 2010, our board authorized a $2.0 billion share repurchase plan consisting of the near-term purchase of $1.0 billion of
our common stock and the purchase of an additional $1.0 billion of our common stock by June 2011. In June 2010, we entered into an agreement with Goldman Sachs under which we will repurchase
$1.0 billion worth of our common stock. Our effective per share purchase price will be based generally on the average of the daily volume weighted average prices per share of our common stock,
less a discount, calculated during a period of up to four months. In connection with this agreement, we paid $1.0 billion to Goldman Sachs and received 15.6 million shares of our common
stock. The total number of shares ultimately repurchased will not be known until the calculation period ends and a final settlement occurs. Upon final settlement, we will either receive a settlement
amount of additional shares of our common stock or be required to remit a settlement amount, payable, at our option, in cash or


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common
stock. Shares purchased under this agreement will be deemed authorized shares that are no longer outstanding


ITEM 6.    EXHIBITS

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

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

GENZYME CORPORATIONDated: August 9, 2010

By:

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


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GENZYME CORPORATION AND SUBSIDIARIES

FORM 10-Q, JUNE 30, 2010

EXHIBIT INDEX

EXHIBIT NO.

DESCRIPTION**2.1

License and Asset Purchase Agreement dated as of March 30, 2009 and related Letter Agreements between Genzyme Corporation and Bayer Schering Pharma AG, and License Agreement dated as of May 29, 2009 between
Genzyme Corporation and Alcafleu Management GmbH & Co. KG. Filed herewith.*3.1

Restated Articles of Organization of Genzyme Corporation, as amended. Filed as Exhibit 3.1 to Genzyme's Form 8-K filed on June 22, 2010.*3.2

By-laws of Genzyme Corporation, as amended. Filed as Exhibit 3.2 to Genzyme's Form 8-K filed June 22, 2010.*4.1

Indenture dated as of June 17, 2010 by and between Genzyme Corporation and The Bank on New York Mellon Trust Company, N.A., as Trustee. Filed as Exhibit 4.1(a) to Genzyme's Form 8-K filed on June 17,
2010.*4.1.1

First Supplemental Indenture dated as of June 17, 2010 by and among Genzyme Corporation, the Subsidiary Guarantor(s) party thereto from time to time and The Bank of New York Mellon Trust Company, N.A., as Trustee
(including forms of 3.625% Senior Note due 2015 and 5.000% Senior Note due 2010). Filed as Exhibit 4.1(b) to Genzyme's Form 8-K filed on June 17, 2010.10.1

First Amendment to Lease dated May 21, 2010, by and between FC 64 Sidney, Inc. and Genzyme Corporation. Filed herewith.*10.2

Registration Rights Agreement dated June 17, 2010 by and among Genzyme Corporation, Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co. and Banc of America Securities LLC. Filed as
Exhibit 10.1 to Genzyme's Form 8-K filed on June 17, 2010.10.3

Master Confirmation dated June 17, 2010 between Genzyme Corporation and Goldman, Sachs & Co. Filed herewith.**10.3.1

Supplemental Confirmation dated June 17, 2010 between Genzyme Corporation and Goldman, Sachs &Co. Filed herewith.*10.4

Consent Decree dated May 24, 2010 between Genzyme Corporation and the United States Food and Drug Administration. Filed as Exhibit 99.1 to Genzyme's Form 8-K filed on May 24, 2010.*10.5

Amended and Restated agreement dated April 14, 2010 between Genzyme, Relational Investors LLC, Ralph V. Whitworth and the other parties identified therein. Filed as Exhibit 99.1 to Genzyme's Form 8-K
filed on April 15, 2010.*10.6

Agreement dated June 9, 2010 by and among Genzyme Corporation, Icahn Partners LP, Icahn Partners Master Fund LP, Icahn Partners Master Fund II L.P., Icahn Partners Master Fund III L.P. and High
River Limited Partnership. Filed as Exhibit 99.1 to Genzyme's Form 8-K filed on June 9, 2010.***10.7

2004 Equity Incentive Plan, as amended. Filed herewith.***10.8

2007 Director Equity Plan, as amended. File herewith.**10.9

Master Supply Agreement dated as of June 30, 2010 among Genzyme Corporation, Genzyme Ireland Limited and Hospira Worldwide, Inc. Filed herewith.**10.10

License Agreement dated as of January 1, 1995 and First Amendment thereto, dated as of October 7, 2003, between Genzyme Corporation and Mount Sinai School of Medicine of the City University of New York. Filed
herewith.31.1

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


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EXHIBIT NO.

DESCRIPTION31.2

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.****101

The following materials from Genzyme Corporation's Form 10-Q for the quarter ended June 30, 2010, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations,
(ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows and (iv) Notes to Unaudited, Consolidated Financial Statements.


*Previously
filed with the SEC and incorporated herein by reference. Exhibits filed with Forms 10-Q and 8-K of Genzyme
Corporation were filed under Commission File No. 0-14680.**Confidential
treatment has been requested and/or granted for the deleted portions of the exhibit.***Management
contract or compensatory plan or arrangement in which our executive officers or directors participate.****To
be furnished in an amendment to this Form 10-Q to be filed by September 8, 2010, as permitted by Rule 405 of Regulation S-T.


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