**Exhibit 99**

**BioMarin/GenzymeLLCIndex to Consolidated Financial Statements**

|                                                                                                                                                    | ** ** | **Page(s)** |
|----------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|
| Report of Independent Registered Public Accounting  Firm                                                                                           |       | 1           |
| Consolidated Balance Sheets as of December 31,  2006 and 2005                                                                            |       | 2           |
| Consolidated Statements of Operations for the Years  Ended December 31, 2006, 2005 and 2004 (Unaudited)                                  |       | 3           |
| Consolidated Statements of Cash Flows for the Years  Ended December 31, 2006, 2005 and 2004 (Unaudited)                                  |       | 4           |
| Consolidated Statements of Changes in Venturers’  Capital for each of the Years Ended December 31, 2004 (Unaudited), 2005  and 2006 |       | 5           |
| Notes to Consolidated Financial Statements                                                                                                         |       | 6-15        |

 

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**Report ofIndependent Registered Public Accounting Firm**

To the Steering Committee of BioMarin/Genzyme LLC:

In ouropinion, the accompanying consolidated balance sheets and the relatedconsolidated statements of operations, of cash flows and of changes in Venturers’capital present fairly, in all material respects, the financial position ofBioMarin/Genzyme LLC and its subsidiaries (the “Joint Venture”) at December 31,2006 and 2005, and the results of their operations and their cash flows for theyears then ended in conformity with accounting principles generally accepted inthe United States of America. These financial statements are the responsibilityof the Joint Venture’s management. Our responsibility is to express an opinionon these financial statements based on our audits. We conducted our audits ofthese statements in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion.
| /s/ PricewaterhouseCoopers LLP |   |
|--------------------------------|--------|
| Boston, Massachusetts          |   |
| February 27, 2007         |   |

 

1

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**BioMarin/Genzyme LLCConsolidated Balance Sheets(Amounts in thousands)**

| ** **                                       | ** ** | **December 31,** | ** ** |
|--------------------------------------------------|------------|-----------------------|------------|
| ** **                                       | ** ** | **2006**              | ** ** | **2005** | ** ** |
| **ASSETS**                                       |       |                  |       |   |   |
| Current assets:                                  |       |                  |       |   |   |
| Cash and cash equivalents                        |       | $                     | 12,778     |   | $ | 8,127 |   |
| Restricted cash                                  |       | 340                   |       | — |   |
| Accounts receivable                              |       | 25,377                |       | 20,725 |   |
| Due from Genzyme Corporation                     |       | 6,852                 |       | 12,746 |   |
| Inventories                                      |       | 25,564                |       | 30,286 |   |
| Prepaid expenses and other current assets        |       | 545                   |       | 220 |   |
| Total current assets                             |       | 71,456                |       | 72,104 |   |
| Technology  license fees, net                    |       | 211                   |       | 285 |   |
| Total assets                                     |       | $                     | 71,667     |   | $ | 72,389 |   |
| **LIABILITIES AND VENTURERS’ CAPITAL**      |       |                  |       |   |   |
| Current  liabilities:                            |       |                  |       |   |   |
| Due to BioMarin Companies                        |       | $                     | 1,596      |   | $ | 1,070 |   |
| Accrued expenses                                 |       | 6,592                 |       | 4,827 |   |
| Deferred revenue                                 |       | 90                    |       | 573 |   |
| Total liabilities                                |       | 8,278                 |       | 6,470 |   |
| Commitments and contingencies (Note J)           |       | —                |       | — |   |
| Venturers’  capital:                        |       |                  |       |   |   |
| Venturers’ capital—BioMarin Companies  |       | 31,695                |       | 32,960 |   |
| Venturers’ capital—Genzyme Corporation |       | 31,694                |       | 32,959 |   |
| Total Venturers’ capital                    |       | 63,389                |       | 65,919 |   |
| Total liabilities  and Venturers’ capital   |       | $                     | 71,667     |   | $ | 72,389 |   |

 

*The accompanying notes are an integral part ofthese consolidated financial statements.*

2

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**BioMarin/Genzyme LLCConsolidated Statements of Operations(Amounts in thousands)**

| ** **                                        | ** ** | **For the Years Ended December 31,** | ** ** |
|---------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                        | ** ** | **2006**                                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                        | ** ** | ** **                                                    | ** ** | ** ** | ** ** | **(Unaudited)** | ** ** |
| Revenues:                                         |       |                                                          |       |   |   |   |   |   |   |
| Net product sales                                 |       | $                                                             | 96,291     |   | $ | 76,417 |   |   | $ | 42,583 |   |   |
| Operating costs  and expenses:                    |       |                                                          |       |   |   |   |   |   |   |
| Cost of products sold                             |       | 24,417                                                        |       | 24,513 |   |   | 14,954 |   |   |
| Selling, general and administrative               |       | 22,178                                                        |       | 22,019 |   |   | 26,872 |   |   |
| Research and development                          |       | 13,318                                                        |       | 16,156 |   |   | 20,191 |   |   |
| Total operating costs and expenses                |       | 59,913                                                        |       | 62,688 |   |   | 62,017 |   |   |
| Income (loss)  from operations                    |       | 36,378                                                        |       | 13,729 |   |   | (19,434 | ) |   |
| Interest income                                   |       | 692                                                           |       | 254 |   |   | 151 |   |   |
| Net income (loss)                                 |       | $                                                             | 37,070     |   | $ | 13,983 |   |   | $ | (19,283 | ) |   |
| Net income (loss)  attributable to each Venturer: |       |                                                          |       |   |   |   |   |   |   |
| BioMarin Companies                                |       | $                                                             | 18,535     |   | $ | 6,992 |   |   | $ | (9,641 | ) |   |
| Genzyme  Corporation                              |       | $                                                             | 18,535     |   | $ | 6,991 |   |   | $ | (9,642 | ) |   |

 

*The accompanying notes are an integral part ofthese consolidated financial statements.*

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**BioMarin/GenzymeLLCConsolidated Statements of Cash Flows(Amounts in thousands)**

| ** **                                                                                   | ** ** | **For the Years Ended December 31,** | ** ** |
|----------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                                   | ** ** | **2006**                                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                                                   | ** ** | ** **                                                    | ** ** | ** ** | ** ** | **(Unaudited)** | ** ** |
| **Cash Flows from Operating  Activities:**                                                   |       |                                                          |       |   |   |   |   |   |   |
| Net income (loss)                                                                            |       | $                                                             | 37,070     |   | $ | 13,983 |   |   | $ | (19,283 | ) |   |
| Reconciliation of  net income (loss) to net cash provided by (used in) operating activities: |       |                                                          |       |   |   |   |   |   |   |
| Amortization expense                                                                         |       | 74                                                            |       | 73 |   |   | — |   |   |
| Noncash charge for inventory write down                                                      |       | 185                                                           |       | — |   |   | — |   |   |
| Increase  (decrease) in cash from working capital changes:                                   |       |                                                          |       |   |   |   |   |   |   |
| Accounts receivable                                                                          |       | (4,652                                                        | )          | (4,015 | ) |   | (11,287 | ) |   |
| Inventories                                                                                  |       | 4,537                                                         |       | 8,340 |   |   | (1,349 | ) |   |
| Prepaid expenses and other current assets                                                    |       | (325                                                          | )          | (220 | ) |   | — |   |   |
| Due from (to) BioMarin Companies                                                             |       | 526                                                           |       | (1,090 | ) |   | (1,891 | ) |   |
| Due from (to) Genzyme Corporation                                                            |       | 5,894                                                         |       | (18,958 | ) |   | (652 | ) |   |
| Accrued expenses                                                                             |       | 1,765                                                         |       | 1,906 |   |   | 1,745 |   |   |
| Deferred revenue                                                                             |       | (483                                                          | )          | 115 |   |   | 391 |   |   |
| Cash flows from operating activities                                                         |       | 44,591                                                        |       | 134 |   |   | (32,326 | ) |   |
| **Cash  Flows from Investing Activities:**                                                   |       |                                                          |       |   |   |   |   |   |   |
| Increase in restricted cash                                                                  |       | (340                                                          | )          | — |   |   | — |   |   |
| Purchase of technology licenses                                                              |       | —                                                        |       | (358 | ) |   | — |   |   |
| Cash flows from investing activities                                                         |       | (340                                                          | )          | (358 | ) |   | — |   |   |
| **Cash  Flows from Financing Activities:**                                                   |       |                                                          |       |   |   |   |   |   |   |
| Capital distribution to BioMarin Companies                                                   |       | (19,800                                                       | )          | (3,000 | ) |   | — |   |   |
| Capital distribution to Genzyme Corporation                                                  |       | (19,800                                                       | )          | (3,000 | ) |   | — |   |   |
| Capital contributed by BioMarin Companies                                                    |       | —                                                        |       | — |   |   | 16,045 |   |   |
| Capital contributed by Genzyme Corporation                                                   |       | —                                                        |       | — |   |   | 16,046 |   |   |
| Cash flows from financing activities                                                         |       | (39,600                                                       | )          | (6,000 | ) |   | 32,091 |   |   |
| Increase (decrease) in cash and cash equivalents                                             |       | 4,651                                                         |       | (6,224 | ) |   | (235 | ) |   |
| Cash and cash  equivalents at beginning of period                                            |       | 8,127                                                         |       | 14,351 |   |   | 14,586 |   |   |
| Cash and cash  equivalents at end of period                                                  |       | $                                                             | 12,778     |   | $ | 8,127 |   |   | $ | 14,351 |   |   |

 

*The accompanying notes are an integral part ofthese consolidated financial statements.*

4

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**BioMarin/GenzymeLLCConsolidated Statements of Changes in Venturers’ Capital(Amounts in thousands)**

| ** **                                     | ** ** | **Venturers’ Capital** | ** ** | **Total**                | ** ** |
|------------------------------------------------|------------|----------------------------------|------------|--------------------------|------------|
| ** **                                     | ** ** | **BioMarin  Companies**          | ** ** | **Genzyme  Corporation** | ** ** | **Venturers’  Capital** | ** ** |
| Balance at  December 31, 2003             |       |                             | $          | 24,502                   |       |   |   | $ | 24,502 |   |   | $ | 49,004 |   |
| 2004 capital contributions (unaudited)         |       |                             | 14,107     |                     |       |   | 14,108 |   |   | 28,215 |   |
| 2004 net loss  (unaudited)                     |       |                             | (9,641     | )                        |       |   | (9,642 | ) |   | (19,283 | ) |
| Balance at  December 31, 2004 (unaudited) |       |                             | 28,968     |                     |       |   | 28,968 |   |   | 57,936 |   |
| 2005 capital distributions                     |       |                             | (3,000     | )                        |       |   | (3,000 | ) |   | (6,000 | ) |
| 2005 net income                                |       |                             | 6,992      |                     |       |   | 6,991 |   |   | 13,983 |   |
| Balance at  December 31, 2005             |       |                             | 32,960     |                     |       |   | 32,959 |   |   | 65,919 |   |
| 2006 capital distributions                     |       |                             | (19,800    | )                        |       |   | (19,800 | ) |   | (39,600 | ) |
| 2006 net income                                |       |                             | 18,535     |                     |       |   | 18,535 |   |   | 37,070 |   |
| Balance at  December 31, 2006             |       |                             | $          | 31,695                   |       |   |   | $ | 31,694 |   |   | $ | 63,389 |   |

 

*The accompanying notes are an integral part ofthese consolidated financial statements.*

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**BioMarin/Genzyme LLC Notes to Consolidated Financial Statements**

**A.**   Natureof Business and Organization

BioMarin/GenzymeLLC, or the Joint Venture, is a limited liability company organized under thelaws of the State of Delaware. The Joint Venture is owned:

·       50%by BioMarin Pharmaceutical Inc., which is referred to as BioMarin, andBioMarin Genetics, Inc., a wholly-owned subsidiary of BioMarin.BioMarin and its subsidiary are referred to as the BioMarin Companies; and

·       50%by Genzyme Corporation, which is referred to as Genzyme.

The BioMarin Companies andGenzyme are collectively referred to as the Venturers and individually as aVenturer. The Joint Venture was organized in September 1998 to develop andcommercialize Aldurazyme®, a recombinant form of the human enzyme alpha-L-iduronidase,used to treat a lysosomal storage disorder known as mucopolysaccharidosis I, orMPS I. The Joint Venture commenced operations as of September 4, 1998.

The Joint Venture,BioMarin Companies and Genzyme entered into a Collaboration Agreement dated asof September 4, 1998. Under the terms of the Collaboration Agreement,Genzyme and the BioMarin Companies granted to the Joint Venture a world-wide,exclusive, irrevocable, royalty-free right and license or sublicense todevelop, manufacture and market Aldurazyme for the treatment of MPS I and otheralpha-L-iduronidase deficiencies. All program-related costsare equally funded by BioMarin, on behalf of the BioMarin Companies, andGenzyme. BioMarin and Genzyme are required to make monthly capitalcontributions to the Joint Venture to fund budgeted operating costs, as necessary.If either BioMarin or Genzyme fails to make two or more of the monthly capitalcontributions, and the other party does not exercise its right to terminate theCollaboration Agreement or compel performance of the funding obligation, thedefaulting party’s (or, in the case of default by BioMarin, the BioMarinCompanies’) percentage interest in the Joint Venture and future fundingresponsibility will be adjusted proportionately. No contributions were made in2006 and 2005 because the Joint Venture was profitable in both periods.

The Steering Committee ofthe Joint Venture serves as the governing body of the Joint Venture and isresponsible for determining the overall strategy for the program, coordinatingactivities of the Venturers as well as performing other such functions asappropriate. The Steering Committee is comprised of an equal number ofrepresentatives of each Venturer.

On April 30, 2003,the United States Food and Drug Administration, commonly referred to as theFDA, granted marketing approval for Aldurazyme as an enzyme replacement therapyfor patients with the Hurler and Hurler-Scheie forms of MPS I, and Scheiepatients with moderate to severe symptoms. Aldurazyme has been granted orphandrug status in the United States, which generally provides seven years ofmarket exclusivity. On June 11, 2003, the European Commission grantedmarketing approval for Aldurazyme to treat the non-neurologicalmanifestations of MPS I in patients with a confirmed diagnosis of the disease.Aldurazyme has been granted orphan drug status in the European Union, whichgenerally provides ten years of market exclusivity. In October 2006, Japan’sHealth, Labor and Welfare Ministry granted marketing approval for Aldurazyme,the first specific treatment approved in Japan for patients with MPS I. Aldurazymehas been granted orphan drug status in Japan, which generally provides tenyears of market exclusivity.

On behalf of the JointVenture, Genzyme is commercializing Aldurazyme in the United States, Canada,the European Union, Latin America and the Asia Pacific regions. Genzymecontinues to launch 

6

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**BioMarin/Genzyme LLC Notes to Consolidated Financial Statements (Continued)**

**A.**   Nature ofBusiness and Organization (Continued)

Aldurazyme on a country-by-country basisas pricing and reimbursement approvals are obtained. The Joint Venture’sapplications for marketing approval are currently pending in several countriesin Latin America, Central and Eastern Europe and the Asia-Pacific Regions. Aldurazymeis manufactured at BioMarin’s facility in Novato, California and is sent toeither Genzyme’s manufacturing facility in Allston, Massachusetts or to a third-partyfacility for the final fill-finish process.

**B.**   Summaryof Significant Accounting Policies

**Basis ofPresentation**

The Joint Venture isconsidered a partnership for federal and state income tax purposes. As such,items of income, loss, deductions and credits flow through to the Venturers.The Venturers have responsibility for the payment of any income taxes on theirproportionate share of the taxable income of the Joint Venture.

The consolidated financialstatements as of December 31, 2006 and 2005, and for the years endedDecember 31, 2006 and 2005 have been audited. As of December 31, 2004and for the year ended December 31, 2004, the Joint Venture did not meetthe criteria of a significant subsidiary to either BioMarin or Genzyme and, asa result, the consolidated financial statements for those periods were notaudited but include all normal and recurring adjustments that the Venturersconsider necessary for the fair presentation of the Joint Venture’s financialposition and operating results.

**Accounting Method**

The consolidated financialstatements have been prepared under the accrual method of accounting inconformity with accounting principles generally accepted in the United Statesof America.

**Fiscal Year End**

The Venturers havedetermined that the fiscal year end of the Joint Venture is December 31.

**Uncertainties**

TheJoint Venture is subject to risks common to companies in the biotechnologyindustry, including:

·       theability of the Joint Venture to manufacture sufficient amounts of its productsfor development and commercialization activities and to do so in a timely andcost-effective manner;

·       theaccuracy of the Joint Venture’s estimates of the size and characteristics ofmarkets to be addressed by the Joint Venture’s products including growthprojections;

·       marketacceptance of the Joint Venture’s products in expanded areas of use and newmarkets;

·       theJoint Venture’s ability to obtain reimbursement for its products from third-partypayors, where appropriate, the extent of such coverage and the accuracy of theJoint Venture’s estimates of the payor mix for its products;

·       theJoint Venture’s ability to successfully obtain timely additional regulatoryapprovals and adequate patent and other proprietary rights protection for itsproducts; and

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**BioMarin/Genzyme LLC Notes to Consolidated Financial Statements (Continued)**

**B.**   Summary of Significant Accounting Policies (Continued)

·       the content and timing ofdecisions made by the FDA and other regulatory agencies regarding the JointVenture’s products and manufacturing facilities.

**Use of Estimates**

Under accountingprinciples generally accepted in the United States of America, the JointVenture is required to make certain estimates and assumptions that affectreported amounts of assets, liabilities, revenues, expenses, and disclosure ofcontingent assets and liabilities in its consolidated financial statements. TheJoint Venture’s actual results could differ from these estimates.

**Cash and Cash Equivalents**

Cash and cash equivalents,consisting principally of money market funds with initial maturities of threemonths or less, are valued at cost plus accrued interest, which the JointVenture believes approximates their fair market value. All of the Joint Venture’scash, excluding its restricted cash, is held on deposit at one financialinstitution.

**Inventories**

Inventoriesare valued at cost or, if lower, fair value. The Venturers determine the costof raw materials using the average cost method and the cost of work in processand finished goods using the specific identification method. The Venturersanalyze the Joint Venture’s inventory levels quarterly and write down to itsnet realizable value:

·       inventorythat has become obsolete;

·       inventorythat has a cost basis in excess of its expected net realizable value;

·       inventoryin excess of expected requirements; and

·       expiredinventory.

The Joint Venturecapitalizes inventory produced for commercial sale, which may result in thecapitalization of inventory prior to regulatory approval. If a product is notapproved for sale, it would likely result in the write off of the inventory anda charge to earnings. At December 31, 2006 and 2005, all of the JointVenture’s inventories are related to Aldurazyme, a product approved for sale.

**Comprehensive Loss**

The Joint Venture reportscomprehensive income (loss) in accordance with Financial Accounting StandardsBoard, or FASB, Statement of Financial Accounting Standards No., or FAS, 130, “ReportingComprehensive Income.” Comprehensive income (loss) for the years ended December 31,2006, 2005 and 2004 (unaudited) does not differ from the reported net income(loss).

**Transactions with Affiliates**

Genzyme is commercializingAldurazyme in the United States, Canada, the European Union, Latin America andthe Asia Pacific regions and, as a result, conducts sales and collects cashfrom product sales in those territories on behalf of the Joint Venture. Themajority of the Joint Venture’s operating expenses consist of project expensesincurred by the Venturers, either for internal operating costs or for third-party

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**BioMarin/Genzyme LLC Notes to Consolidated Financial Statements (Continued)**

**B.**   Summary of Significant Accounting Policies (Continued)

obligationsincurred by the Venturers on behalf of the Joint Venture which are then chargedto the Joint Venture. All charges to the Joint Venture are subject to approvalby the Steering Committee. The determination of the amount of internaloperating costs incurred by each Venturer on behalf of the Joint Venturerequires significant judgment by each Venturer. As a result, the consolidated financialstatements for the Joint Venture may not be indicative of the results thatwould have occurred had the Joint Venture obtained all of its manufacturing,commercialization and research and development services from third-partyentities. Genzyme Corporation owed the Joint Venture $6.9 million at December 31,2006 and $12.7 million at December 31, 2005 consisting of cash received onbehalf of the Joint Venture for net product sales, net of project expensesincurred on behalf of the Joint Venture. The Joint Venture owed BioMarinCompanies a total of $1.6 million at December 31, 2006 and $1.1million at December 31, 2005 for project expenses incurred on behalf ofthe Joint Venture.

**Translation of Foreign Currencies**

TheJoint Venture translates the financial transactions performed by Genzyme’sforeign subsidiaries on behalf of the Joint Venture from local currency intoU.S. dollars using the average exchange rate prevailing during eachperiod. The Joint Venture includes any gains and losses on these transactionsin selling, general and administrative expenses in its results of operations.Selling, general and administrative expenses includes foreign currencytransaction net gains of $1.6 million in 2006, net losses of $2.4 millionin 2005 and net gains of $0.3 million in 2004 (unaudited).

**Derivative Instruments**

Inaccordance with FAS 133, “Accounting for Derivative Instruments and HedgingActivities,” the Joint Venture recognizes all derivative instruments as eitherassets or liabilities in its balance sheet and measures those instruments atfair value. Subsequent changes in fair value are reflected in current earningsor other comprehensive income, depending on whether the derivative instrumentis designated as part of a hedge relationship and, if it is, the type of hedgerelationship.

**Revenue Recognition**

The Joint Venturerecognizes revenue from product sales when persuasive evidence of anarrangement exists, the product has been delivered to the customer, title andrisk of loss have passed to the customer, the price to the buyer is fixed ordeterminable and collection from the customer is reasonably assured. Revenuetransactions are evidenced by customer purchase orders, customer contracts incertain instances, invoices and related shipping documents.

The timing of productshipments and receipts can have a significant impact on the amount of revenuethat the Joint Venture recognizes in a particular period. Also, Aldurazyme issold in part through distributors. Inventory in the distribution channelconsists of inventory held by distributors, who are the Joint Venture’scustomers, and inventory held by retailers, such as pharmacies and hospitals.The Joint Venture’s revenue in a particular period can be impacted by increasesor decreases in distributor inventories. If distributor inventories increasedto excessive levels, the Joint Venture could experience reduced purchases insubsequent periods. To determine the amount of Aldurazyme inventory in theJoint Venture’s U.S. distribution channel, the Joint Venture receives data onsales and inventory levels directly from its primary distributors for theproduct. As of December 31, 2006, the Joint Venture believes the 

9

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**BioMarin/Genzyme LLC Notes to Consolidated Financial Statements (Continued)**

**B.**   Summary of Significant Accounting Policies (Continued)

amountof Aldurazyme inventory held by U.S. distributors is sufficient to meet thecurrent forecast of demand for the product in the United States.

TheJoint Venture records reserves for rebates payable under Medicaid and payorcontracts, such as managed care organizations, as a reduction of revenue at thetime product sales are recorded. The Joint Venture’s Medicaid and payor rebatereserves have two components:

·       anestimate of outstanding claims for end-user sales that have occurred, butfor which related claim submissions have not been received; and

·       anestimate of future claims that will be made when inventory in the distributionchannel is sold to end-users.

Becausethe second component is calculated based on the amount of inventory in thedistribution channel, the Joint Venture’s assessment of distribution channelinventory levels impacts its estimated reserve requirements. The Joint Venture’scalculation also requires other estimates, including estimates of sales mix, todetermine which sales will be subject to rebates and the amount of suchrebates. The Joint Venture updates its estimates and assumptions each periodand records any necessary adjustments to its reserves. Accrued expenses for theJoint Venture includes a reserve for Medicaid and payor rebates payable of$2.3 million at December 31, 2006 and $1.6 million at December 31,2005.

TheJoint Venture records allowances for product returns, if appropriate, as areduction of revenue at the time product sales are recorded. Several factorsare considered in determining whether an allowance for product returns isrequired, including:

·       thenature of Aldurazyme. Aldurazyme serves as a treatment, rather than a cure, forMPS I and, therefore, must be administered/infused to the patient on a weeklybasis. Aldurazyme treats a small patient population, and the Joint Venture hasinsight into the patients receiving treatment. In addition, Aldurazyme has beengranted Orphan Drug status in the United States, European Union and Japan. As aresult, Aldurazyme is not currently subject to significant external riskfactors such as technological obsolescence or competition;

·       thecustomers’ limited return rights. Due to the nature, purpose and means of useof Aldurazyme, customers do not have the right to return the product in theordinary course of business, other than for defects. Aldurazyme, like all biotechnologyproducts, must meet stringent FDA regulations and therefore is subjected tostrict quality testing before it is sold. As a result, the Joint Ventureexpects the incidence of defects to be de minimus. Coupled with the inabilityto return the product, there is a high cost to the product which detersAldurazyme customers from carrying significant amounts of inventory;

·       theJoint Venture and Genzyme’s experience of returns for similar products. Genzymehas extensive experience with other lysosomal storage disorder products in themarket, similar to Aldurazyme. These products are marketed and distributedthrough similar means and to similar customers. Genzyme’s experience with theseproducts is directly applicable to Aldurazyme and supports the Joint Venture’sconclusions related to returns; and

·       theJoint Venture’s estimate of distribution channel inventory, based on sales andinventory level information provided by the primary distributors forAldurazyme, as described above.

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**BioMarin/Genzyme LLC Notes to Consolidated Financial Statements (Continued)**

**B.**   Summary of Significant Accounting Policies (Continued)

Based on these factors,the Joint Venture has concluded that product returns will be minimal andtherefore, an allowance for product returns for Aldurazyme is not necessary at December 31,2006 or 2005. In the future, if any of these factors and/or the history ofproduct returns changes, an allowance for product returns may be required.

EmergingIssues Task Force Issue No. 01-09, “Accounting for ConsiderationGiven by a Vendor to a Customer or a Reseller of the Vendor’s Products,”specifies that cash consideration (including a sales incentive) given by avendor to a customer is presumed to be a reduction of the selling prices of thevendor’s products or services and, therefore, should be characterized as areduction of revenue. That presumption is overcome and the consideration shouldbe characterized as a cost incurred if, and to the extent that, both of thefollowing conditions are met:

·       thevendor receives, or will receive, an identifiable benefit (goods or services) inexchange for the consideration; and

·       the vendor can reasonablyestimate the fair value of the benefit received.

The Joint Venture records certainfees paid to its distributors for services as operating expense where thecriteria set forth above are met. The fees incurred for these services were$0.7 million in 2006, $0.8 million in 2005 and $1.0 million in 2004(unaudited).

**Research and Development**

Research and developmentcosts are expensed in the period incurred. These costs are primarily comprisedof development efforts performed by the Venturers or payments to third partiesmade by the Venturers, both on behalf of the Joint Venture, during therespective periods.

**Income Taxes**

The Joint Venture isorganized as a pass-through entity and accordingly, the consolidatedfinancial statements do not include a provision for income taxes. Taxes, ifany, are the liability of the BioMarin Companies and Genzyme, as Venturers.

**Accounting forStock-Based Compensation**

FAS 123R, “Share-Based Payment, an amendment of FASBStatement Nos. 123 and 95,” was effective January 1, 2006 andrequires companies to recognize stock-based compensation expense in theirfinancial statements for all share-based payment awards made to employees anddirectors based upon grant date fair value of those awards. The Joint Venturecurrently has no employees and, as a result, is not currently subject to theprovisions of FAS 123R or Staff Accounting Bulletin No., or SAB, 107,“Share-Based Payment.” In addition, the Steering Committee has determined thatthe stock-based compensation expenses do not currently qualify as programexpenses and, therefore, the Venturers are not permitted to charge any portionof their respective stock-based compensation expenses to the Joint Venture. Inthe future, if the Joint Venture has its own employees or if the SteeringCommittee determines that stock-based compensation expenses should be includedin program costs, then the Joint Venture will become subject to the provisionsof FAS 123R.

11

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**BioMarin/Genzyme LLC Notes to Consolidated Financial Statements (Continued)**

**B.**   Summary of Significant Accounting Policies (Continued)

**Recent Accounting Pronouncements**

*FAS 151, “Inventory Costs, an amendment of ARB No. 43,Chapter 4.”*   In November 2004, the FASBissued FAS 151, “Inventory Costs, an amendment of Accounting Research Bulletin,or ARB, No. 43, Chapter 4,” which clarifies that abnormal amounts of idlefacility expense, freight, handling costs, and wasted material (spoilage)should be recognized as current period changes in all circumstances. The JointVenture adopted FAS 151 effective January 1, 2006 and it did not have amaterial impact on the Joint Venture’s financial position or results ofoperations.

*FAS 157, “Fair ValueMeasurements.”*   In September 2006, the FASBissued FAS 157, “Fair Value Measurements,” which provides enhancedguidance for using fair value to measure assets and liabilities. FAS 157establishes a common definition of fair value, provides a framework formeasuring fair value under accounting principles generally accepted in theUnited States and expands disclosure requirements about fair valuemeasurements. FAS 157 is effective for the Joint Venture as of January 1,2008. The Joint Venture is currently evaluating the impact, if any, theadoption of FAS 157 will have on its financial position and results ofoperations.

**C.**   DerivativeFinancial Instruments

TheJoint Venture periodically enters into foreign currency forward contracts, allof which have a maturity of less than 45 days. These contracts have not beendesignated as hedges and accordingly, unrealized gains or losses on thesecontracts are reported in current earnings. The notional settlement value offoreign currency forward contracts outstanding at December 31, 2006 is$12.8 million. At December 31, 2006, these contracts  had a fair value of approximately $15,000,representing an unrealized loss, which has been recorded in selling, generaland administrative expenses in the Joint Venture’s consolidated statement ofoperations for the year ended December 31, 2006 and in accrued expenses inour consolidated balance sheet as of December 31, 2006. The Joint Venturedid not enter into any foreign currency forward contracts in 2005.

**D.**   AccountsReceivable

TheJoint Venture’s trade receivables primarily represent amounts due fromdistributors and healthcare service providers. The Joint Venture statesaccounts receivable at fair value, after reflecting an allowance for doubtfulaccounts for estimated losses resulting from the inability of its customers tomake payments. The Joint Venture believes that its credit risk associated withtrade receivables is mitigated by the following factors:

·       theproduct is sold to a number of customers over a broad geographic range;

·       theJoint Venture performs credit evaluations of its customers on an ongoing basis;and

·       theJoint Venture performs a detailed, monthly review of the receivable aging andspecific customer balances.

The Joint Venture did notrecord an allowance for doubtful accounts at either December 31, 2006 or2005. To date, due to the customers’ credit worthiness, the monthly review ofthe receivable balances and the customers’ need to maintain a supply ofAldurazyme and Genzyme’s similar products, the Joint Venture has not written-offany receivables and no allowance for doubtful accounts has been necessary. Inthe future, if the financial condition of any of the Joint Venture’s customerswere to deteriorate and result 

12

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**BioMarin/Genzyme LLC Notes to Consolidated Financial Statements (Continued)**

**D.**   Accounts Receivable (Continued)

in animpairment of the customer’s ability to make payments, an allowance fordoubtful accounts may be required.

**E.**   Inventories(amounts in thousands)

| ** **                          | ** ** | **December 31,** | ** ** |
|-------------------------------------|------------|-----------------------|------------|
| ** **                          | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Raw materials                       |       | $                     | 410        |   | $ | 1,082 |   |
| Work in process—bulk  material |       | 11,025                |       | 10,424 |   |
| Finished products                   |       | 14,129                |       | 18,780 |   |
| Total                               |       | $                     | 25,564     |   | $ | 30,286 |   |

 

The Joint Venture recordeda charge of $0.2 million in 2006 to write off expired inventory. There were nosimilar charges in 2005 or 2004.

The Joint Venturecapitalizes inventory produced for commercial sale, which may result in thecapitalization of inventory that has not yet been approved for sale. If aproduct is not approved for sale, it would likely result in the write off ofthe inventory and a charge to earnings. At December 31, 2006 and 2005, allof the Joint Venture’s inventories are related to Aldurazyme, a productapproved for sale.

**F.**   RestrictedCash

In2006, the Joint Venture entered into a series of foreign currency forwardcontracts all of which have a maturity of less than 45 days. In connection withthese contracts, the Joint Venture is obligated to deposit cash based on theoutstanding amount of the hedge contract and foreign exchange movement duringthe length of the contract in a restricted cash account with the financialinstitution issuing the contracts. The amount of restricted cash on depositwill be adjusted ratably, from time to time, in accordance with any changes inthe amount outstanding under these contracts. As of  December 31, 2006, the Joint Venture had$0.3 million of restricted cash related to these contracts for which there areno comparable amounts in 2005.

**G.**   TechnologyLicense Fees

In 2005, the Joint Venture paid $0.4 million fortechnology license fees, which will be amortized over their estimated usefullives, which range from approximately four to five years. Total amortizationexpense for the Joint Venture’s technology license fees was approximately$74,000 for the year ended December 31, 2006 and approximately $73,000 forthe year ended December 31, 2005.

The estimated futureamortization expense for the Joint Venture’s technology license fees for theremaining three succeeding fiscal years is as follows:

| **Year Ended December 31,** | ** ** | ** ** | ** ** | **Estimated  Amortization  Expense** | ** ** |
|--------------------------------------------|------------|------------|------------|--------------------------------------|------------|
| 2007                                       |       |       | $          | 73,575                               |       |   |
| 2008                                       |       |       | 73,575     |                                 |       |
| 2009                                       |       |       | 63,906     |                                 |       |

 

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**BioMarin/Genzyme LLC Notes to Consolidated Financial Statements (Continued)**

**H.**   AccruedExpenses:

Accruedexpenses consist of the following (amounts in thousands):

| ** **             | ** ** | **December 31,** | ** ** |
|------------------------|------------|-----------------------|------------|
| ** **             | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Royalties              |       | $                     | 3,676      |   | $ | 3,032 |   |
| Rebates                |       | 2,348                 |       | 1,597 |   |
| Other                  |       | 568                   |       | 198 |   |
| Total accrued expenses |       | $                     | 6,592      |   | $ | 4,827 |   |

 

**I.**   Venturers’Capital

The Joint Venturedistributed a total of $19.8 million in 2006 and $3.0 million in 2005 ofcash to each Venturer in accordance with the terms of the CollaborationAgreement.

As of December 31, 2006,Venturers’ capital is comprised of capital contributions made by the Venturersto fund budgeted costs and expenses of the Joint Venture in accordance with theCollaboration Agreement and income (losses) allocated to the Venturers, net ofcash distributions to the Venturers. All funding is shared equally by the twoVenturers. As of December 31, 2006, the BioMarin Companies and Genzymehave each provided a total of $84.4 million of funding to the JointVenture, net of $22.8 million of cash distributed by the Joint Venture toeach Venturer. The Venturers did not make any capital contributions to theJoint Venture in 2006 because the Joint Venture had sufficient cash to meet itsfinancial obligations.

**J.**   Commitmentsand Contingencies

The Joint Venture may becomesubject to legal proceedings and claims arising in connection with itsbusiness. There were no asserted claims against the Joint Venture as of December 31,2006.

**K.**   SegmentInformation

The Joint Venture operates in one business segment—humantherapeutics. Disclosures about revenues by geographic area and revenues frommajor customers are presented below.

The following tablecontains revenue information by geographic area (amounts in thousands):

| ** ** | ** ** | **For the Years Ended December 31,** | ** ** |
|------------|------------|---------------------------------------------------------------|------------|
| ** ** | ** ** | **2006**                                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** ** | ** ** | ** **                                                    | ** ** | ** ** | ** ** | **(Unaudited)** | ** ** |
| Revenues:  |       |                                                          |       |   |   |   |   |   |   |
| U.S.       |       | $                                                             | 24,795     |   | $ | 20,408 |   |   | $ | 12,568 |   |   |
| Europe     |       | 58,123                                                        |       | 49,189 |   |   | 27,468 |   |   |
| Other      |       | 13,373                                                        |       | 6,820 |   |   | 2,547 |   |   |
| Total      |       | $                                                             | 96,291     |   | $ | 76,417 |   |   | $ | 42,583 |   |   |

 

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**BioMarin/Genzyme LLC Notes to Consolidated Financial Statements (Continued)**

**K.**   Segment Information (Continued)

The Joint Venture’sresults of operations are solely dependent on sales of Aldurazyme. BioMarinmanufactures Aldurazyme at a single manufacturing facility in Novato,California. The fill-finish process is completed at either Genzyme’smanufacturing facility in Allston, Massachusetts or at a third party. Thepercentage of sales of Aldurazyme to distributors, as compared to totalrevenues in 2006, 2005 and 2004 (unaudited), were as follows:

| ** **                  | ** ** | **% of Total Revenues** | ** ** |
|-----------------------------|------------|----------------------------------------|------------|
| ** **                  | ** ** | **2006**                               | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                  | ** ** | ** **                             | ** ** | ** ** | ** ** | **(Unaudited)** | ** ** |
| Sales to Distributors:      |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| U.S. distributors           |       |                                   | 11         | % |   |   | 11 | % |   |   | 12 | % |   |
| European distributors       |       |                                   | 8          | % |   |   | 6 | % |   |   | 6 | % |   |
| Other distributors          |       |                                   | 3          | % |   |   | 3 | % |   |   | — | % |   |
| Total sales to distributors |       |                                   | 22         | % |   |   | 20 | % |   |   | 18 | % |   |

 

The percentage of sales ofAldurazyme to two U.S. distributors, as compared to total revenues in 2006,2005 and 2004 (unaudited), were as follows:

| ** **                       | ** ** | **% of Total Revenues** | ** ** |
|----------------------------------|------------|----------------------------------------|------------|
| ** **                       | ** ** | **2006**                               | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                       | ** ** | ** **                             | ** ** | ** ** | ** ** | **(Unaudited)** | ** ** |
| Sales to U.S.  Distributors:     |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Distributor A                    |       |                                   | 4          | % |   |   | 6 | % |   |   | 7 | % |   |
| Distributor B                    |       |                                   | 7          | % |   |   | 5 | % |   |   | 5 | % |   |
| Total sales to U.S. distributors |       |                                   | 11         | % |   |   | 11 | % |   |   | 12 | % |   |

 

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