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PROSPECTUS
Registration No. 33-61853
Filed pursuant to Rule 424(b)(3) under
the Securities Act of 1933, as amended.
GENZYME CORPORATION
33,945 SHARES OF GENERAL DIVISION COMMON STOCK
This Prospectus relates to the offer and sale of up to 33,945 shares
(the "Shares") of General Division Common Stock, $0.01 par value (the "General
Division Stock") of Genzyme Corporation ("Genzyme" or the "Company") by certain
stockholders of the Company (the "Selling Stockholders"). The Shares may be
offered and sold by the Selling Stockholders from time to time in open market
or privately negotiated transactions at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Selling Stockholders may effect such transactions by selling the
Shares to or through broker-dealers and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders or the purchasers of the Shares for whom such
broker-dealers may act as agent or to whom they sell as principal or both
(which compensation to a particular broker-dealer might be in excess of
customary commissions). See "Selling Stockholders" and "Plan of Distribution."
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company.
The General Division Stock of the Company is listed for quotation on
the Nasdaq National Market under the symbol GENZ. On August 15, 1995, the
closing sale price of the General Division Stock, as reported by Nasdaq, was
$61.00 per share.
______________________________
AN INVESTMENT IN THE SECURITIES REGISTERED HEREBY INVOLVES
A HIGH DEGREE OF RISK. SEE "RISK FACTORS."
______________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION; NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
No person is authorized in connection with the offering made hereby to
give any information or to make any representation other than as contained in
this Prospectus, and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company. This
Prospectus is not an offer to sell, or a solicitation of an offer to buy, by
any person in any jurisdiction in which it is unlawful for such person to make
such an offer or solicitation.
The date of this Prospectus is September 5, 1995
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<TABLE>
TABLE OF CONTENTS
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Page
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Available Information . . . . . . . . . . . . . . . . . . . . . . . . . 3
Incorporation of Certain
Documents By Reference. . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Management and Accounting Policies Governing
the Relationship of Genzyme Divisions . . . . . . . . . . . . . . . . . 10
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Legality of General Division Stock . . . . . . . . . . . . . . . . . . . 15
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Reports, proxy
and information statements and other information filed by the Company can be
inspected and copied at the public reference facilities of the Commission, Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following regional offices of the Commission: Suite 1300, 7 World Trade
Center, New York, New York 10007 and Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661, and copies of such materials can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
-------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by Genzyme with the Commission
(File No. 0-14680) under the Exchange Act are incorporated by reference herein,
except as superseded or modified herein:
(1) Genzyme's annual report on Form 10-K for the year
ended December 31, 1994, filed with the Commission on
March 31, 1995, as amended by Amendment No. 1 thereto
on Form 10-K/A filed with the Commission on June 15,
1995.
(2) Genzyme's quarterly report on Form 10-Q for the
quarter ended March 31, 1995, filed with the
Commission on May 15, 1995.
(3) Genzyme's quarterly report on Form 10-Q for the
quarter ended June 30, 1995, filed with the
Commission on August 14, 1995.
(4) The description of General Division Common Stock
contained in Genzyme's Registration Statement on Form
8-B filed on February 28, 1992, as amended by a Form
8-B/A filed on March 31, 1995.
(5) The description of the General Division Common Stock
Purchase Rights contained in Genzyme's Registration
Statement on a Form 8-A filed on March 23, 1989, as
amended by Form 8-A/A filed on November 28, 1994.
(6) The financial statements appearing at pages III-19 to
III-42 of Annex III, pages IV-38 to IV-41 of Annex
IV, pages V-37 to V-41 of Annex V and pages VI-2 to
VI-6 of Annex VI to the Prospectus/Joint Proxy
Statement included in Genzyme's Registration
Statement on Form S-4 (File No. 33-83346), which
became effective on November 9, 1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14, or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the securities offered hereby shall
be deemed incorporated by reference into this Prospectus and to be a part
hereof from the date of filing such documents. Any statement contained in any
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded, for purposes of this Prospectus, to the
extent that a statement contained herein (or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein)
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered upon written or oral request of any such
person, a copy of any or all of the documents which are incorporated herein by
reference, except for certain exhibits to such documents. Requests should be
directed to the executive offices of the
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Company, One Kendall Square, Cambridge, Massachusetts 02139, Attention: Susan
Cogswell, telephone: (617) 252-7526.
RISK FACTORS
RISKS RELATED TO TWO CLASSES OF COMMON STOCK:
Genzyme currently has two classes of common stock outstanding: General
Division Stock and Tissue Repair Division Common Stock ("TR Division Stock").
Prospective investors in General Division Stock should carefully consider the
following factors in evaluating such an investment.
UNIQUE USE OF TRACKING STOCK. In December 1994, the stockholders of Genzyme
approved a reclassification of Genzyme's common stock in which the authorized
shares of Genzyme common stock were redesignated as General Division Stock and
a second class of common stock, TR Division Stock, was created. The General
Division Stock and the TR Division Stock are intended to reflect the value and
"track" the performance of Genzyme's General Division and the Tissue Repair
Division (the "Tissue Repair Division"), respectively. Genzyme created the
Tissue Repair Division in December 1994 by acquiring BioSurface Technology,
Inc. and combining it with several Genzyme programs and collaborations in the
area of tissue repair.
Although "tracking stock" had been used for the acquisition of
businesses in the past, it had never been used for the acquisition of a
business whose products were in development or which had never generated
operating income or paid dividends, as was the case with the Tissue Repair
Division. Only businesses with historical earnings had previously adopted
tracking stock capital structures. Because different methods of stock
valuation are used for companies with new and developing businesses with a
history of operating losses than are used for those with more mature businesses
and because there are greater uncertainties associated with developing
businesses, Genzyme's capital structure may have substantially different
effects over the long term than those experienced by other companies with
tracking stock capital structures. In addition, because of the unique features
of Genzyme's use of tracking stock, the performance of the General Division
Stock and the TR Division Stock may vary substantially from the performance of
the respective businesses as a result of these factors.
STOCKHOLDERS OF ONE COMPANY; FINANCIAL IMPACTS ON ONE DIVISION COULD AFFECT THE
OTHER. Genzyme continues to hold title to all of its assets and is responsible
for all of its liabilities, and the holders of the General Division Stock and
the TR Division Stock have no specific claim against the assets attributed for
financial statement presentation purposes to the division whose performance is
associated with the class of stock they hold. Liabilities or contingencies of
either division that affect Genzyme's resources or financial condition could
affect the financial condition or results of operations of both divisions.
Prospective investors in General Division Stock should, therefore, read
Genzyme's consolidated financial statements in conjunction with the financial
statements of the General Division.
NO RIGHTS OR ADDITIONAL DUTIES WITH RESPECT TO THE DIVISIONS; POTENTIAL
CONFLICTS. Holders of General Division Stock and TR Division Stock have only
the rights of stockholders of Genzyme, and, except in limited circumstances, do
not have any rights specifically related to the General Division or the Tissue
Repair Division, respectively.
The existence of separate classes of common stock may give rise to
occasions when the interests of holders of General Division Stock and holders
of TR Division Stock may diverge or appear to diverge. Although Genzyme is
aware of no precedent concerning the manner in which Massachusetts law would be
applied to the duties of a board of directors in the context of multiple
classes of common stock with divergent interests, Genzyme believes that a
Massachusetts court would hold that a board of directors owes an equal duty to
all stockholders regardless of class and does not have separate or additional
duties to any group of stockholders. That duty is the fiduciary duty to act in
good faith and in a manner it reasonably believes to be in the best interests
of the corporation. Genzyme believes that, under Massachusetts law, a good
faith determination by a disinterested and adequately informed board of
directors that an
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action is in the best interests of the corporation should represent an
appropriate defense to any challenge by or on behalf of the holders of any
class of stock that such action could have a disparate effect on different
classes of common stock.
Disproportionate ownership interests of members of the Board of
Directors of Genzyme (the "Board") in some or all classes of common stock or
disparate values of some or all of such stock could create or appear to create
potential conflicts of interest when directors are faced with decisions that
could have different implications for different classes. Nevertheless, Genzyme
believes that a director would be able to discharge his or her fiduciary
responsibilities even if his or her interests in shares of such various classes
were disproportionate or had disparate values. The Board may also from time to
time establish one or more committees to review matters presented to it that
raise conflict issues, which committee(s) would report to the full Board on
such matters.
NO ADDITIONAL SEPARATE VOTING RIGHTS. Holders of General Division Stock and
holders of TR Division Stock vote together as a single class on all matters as
to which common stockholders generally are entitled to vote. Except in certain
limited circumstances provided under Massachusetts law, in Genzyme's Articles
of Organization, as amended, and in the management and accounting policies
adopted by the Board, holders of each class of common stock have no rights to
vote on matters as a separate class. Accordingly, except in limited
circumstances, holders of shares of one class of common stock could not bring a
proposal to a vote of the holders of that class of common stock only, but would
be required to bring any proposal to a vote of both classes of common stock.
On all matters as to which common stockholders generally are entitled
to vote, each share of General Division Stock has one vote, and each share of
TR Division Stock will, through December 31, 1996, have .29 votes. On January
1, 1997 and on January 1 every two years thereafter, the number of votes to
which each share of TR Division Stock will be entitled will be adjusted to
equal the ratio of the Fair Market Value of one share of TR Division Stock to
the Fair Market Value of one share of General Division Stock as of such date.
Fair Market Value as of any date means the average of the daily closing
prices as reported by the Nasdaq National Market (or the appropriate exchange
on which such shares are then traded) for the 20 consecutive trading days
commencing on the 30th trading day prior to such date. In the event such
closing prices are unavailable, Fair Market Value will be determined by the
Board.
Certain matters as to which the holders of common stock are entitled to
vote may involve a divergence or the appearance of a divergence of the
interests of holders of General Division Stock and holders of TR Division
Stock. If, when a stockholder vote is taken on any matter as to which a
separate vote by either class is not required and the holders of either class
of common stock would have more than the number of votes required to approve
any such matter, the holders of that class would control the outcome of the
vote on such matter. Holders of General Division Stock and holders of TR
Division Stock currently have approximately 91% and 9%, respectively, of the
total voting power of Genzyme. As a result, on matters which are submitted to
a vote of the holders of all classes of common stock, the preferences of the
holders of General Division Stock are likely to dominate and determine the
outcome of such vote unless and until the relative number of shares outstanding
and/or the market value of General Division Stock and TR Division Stock
materially changes. The holders of TR Division Stock are likely to have
significant influence on the outcome of a matter submitted to the holders of
both classes of common stock only if the holders of General Division Stock are
approximately equally divided with respect to the matter.
MANAGEMENT AND ACCOUNTING POLICIES SUBJECT TO CHANGE. The Board has adopted
certain management and accounting policies applicable to the preparation of the
financial statements of both Divisions, the allocation of corporate expenses,
assets and liabilities and other accounting matters, the reallocation of assets
between Divisions and other matters. These policies, which are set forth
below, may, except as stated therein, be modified or rescinded in the sole
discretion of the Board without the approval of Genzyme's stockholders, subject
to the Board's fiduciary duty to all holders of Genzyme's capital stock,
although there is no present intention to do so. The Board may also adopt
additional policies depending upon the circumstances.
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LIMITED TRADING HISTORY. As discussed above, the General Division Stock
and the TR Division Stock are intended to reflect the value and track the
performance of the General Division and the Tissue Repair Division,
respectively. Since the General Division Stock and the TR Division Stock have
only a limited trading history, there can be no assurance as to the degree to
which the market price of such classes of common stock will reflect the value
and track the performance of the General Division and the Tissue Repair
Division as reflected in their respective financial statements. In addition,
Genzyme cannot predict the impact that certain terms of the securities, such as
the ability of Genzyme to exchange each share of TR Division Stock for cash or
shares of General Division Stock, will have on the market prices of each class
of common stock.
EXCHANGE OF GENZYME TR DIVISION STOCK. The Board could, in its sole
discretion, determine to exchange shares of TR Division Stock for cash or
shares of General Division Stock (or any combination thereof) at a 30% premium
over Fair Market Value at any time after the later of (i) December 31, 1995 and
(ii) the date on which equity investments in TR Division Stock by third-party
investors or the allocation after the Effective Date of cash or cash
equivalents from the General Division to the Tissue Repair Division, or any
combination of such equity investments and allocations, equal an aggregate of
at least $10 million. In addition, following a disposition of all or
substantially all assets of the Tissue Repair Division, the shares of TR
Division Stock are subject to mandatory exchange by Genzyme for cash and/or
shares of General Division Stock at a 30% premium over Fair Market Value as
determined by the trading prices during a specified period prior to public
announcement of the disposition. Any such optional or mandatory exchange for
shares of General Division Stock could be made at a time when General Division
Stock may be considered to be undervalued and would dilute the interests of the
holders of General Division Stock.
NO ADJUSTMENT TO DISTRIBUTION UPON LIQUIDATION. In the event of a voluntary or
involuntary dissolution, liquidation or winding up of the affairs of Genzyme
(other than pursuant to a merger, business combination or sale of substantially
all assets), holders of outstanding shares of General Division Stock and TR
Division Stock would receive the assets, if any, remaining for distribution to
common stockholders on a per share basis in proportion to the respective per
share liquidation unit of such class. Currently, each share of General
Division Stock has one liquidation unit and each share of TR Division Stock has
.29 liquidation units. Because the liquidation units will not be adjusted to
reflect changes in the relative market value or performance of the General
Division and the Tissue Repair Division, the per share liquidating distribution
to a holder of TR Division Stock or General Division Stock will not necessarily
correspond to the value of the assets of the Tissue Repair Division or General
Division, respectively, at the time of a dissolution, liquidation or winding up
of Genzyme.
RISKS RELATING TO GENZYME:
An investment in General Division Stock involves a high degree of risk.
Accordingly, in addition to the other information contained in this Prospectus,
the following risk factors should be considered carefully in contemplating such
an investment.
DEPENDENCE ON CEREDASE(R) AND CEREZYME(TM) ENZYME SALES. Genzyme's results of
operations and cash flows are highly dependent upon sales of its Ceredase(R)
enzyme, a biotherapeutic product for the treatment of Gaucher disease, and
Cerezyme(TM) enzyme, a recombinant form of the enzyme. Commercial sales of
Ceredase(R) and Cerezyme(TM) began in April 1991 and June 1994, respectively,
following receipt of United States Food and Drug Administration ("FDA")
marketing approval and during 1994, sales from these two products totalled
$172.9 million, or 72% of General Division product sales.
The Ceredase(R) and Cerezyme(TM) products have each been given orphan
drug status by the FDA, which entitles Genzyme to market exclusivity for these
products until April 1998 and May 2001, respectively. Legislation has been
periodically introduced in recent years to amend the Orphan Drug Act. See
"Risk Factors - Regulation by Government Agencies."
LIMITED SUPPLY OF KEY RAW MATERIAL; NECESSITY OF APPROVALS FOR PRODUCTION OF
CEREZYME(TM). Genzyme produces Ceredase(R) enzyme from raw material extracted
from human placental tissue. Pasteur Merieux, located in France, is
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the only significant source of this material. Under its agreement with
Genzyme, Pasteur Merieux is obligated to process at least 50% of its placental
tissue and supply all of its output to Genzyme. Currently, it is processing
all of its available material and supplying the output to Genzyme. If this
agreement were terminated prior to the scheduled expiration in 2001 due to
Pasteur Merieux's inability or failure to perform its obligations thereunder,
or if Pasteur Merieux were to reduce the amount of material it processes,
Genzyme might not be able to obtain alternative sources of such raw material at
a commercially reasonable cost, if at all.
The supply of starting material available for the production of
Ceredase(R) enzyme effectively limits the amount of product that can be
produced. During 1994, Genzyme and its supplier were successful in improving
the yield of enzyme obtained from the starting material, thereby increasing the
amount of product that could be produced. However, there can be no assurance
that further improvements in yield will occur. Any disruption in the supply or
manufacturing process of Ceredase(R) enzyme may have a material adverse effect
on revenue in any period. To address supply constraints, Genzyme has developed
Cerezyme(TM) enzyme, a recombinant form of the enzyme that is not derived from
human placental tissue. In 1994, Genzyme received approval to market this
product in the U.S. and Israel and currently is working to expedite the foreign
approvals needed to market Cerezyme(TM) enzyme elsewhere abroad. Manufacturing
constraints on Cerezyme(TM) enzyme, presently produced in Genzyme's small scale
cell culture plant, will limit the availability of the product for new patients
until receipt of regulatory approval to use Genzyme's large scale mammalian
cell culture manufacturing plant in Allston, Massachusetts for production of
Cerezyme(TM) enzyme.
UNCERTAINTY OF PRODUCT DEVELOPMENT. Genzyme's future success is largely
dependent upon its ability to develop, manufacture and sell technologically
advanced new products. Such products must be developed, tested and, in most
cases, approved for use by appropriate government agencies. Once approved,
they must be manufactured in commercial quantities and marketed successfully.
Each of these steps, as well as the process taken as a whole, involves
significant time and expense. There can be no assurance that any of Genzyme's
products under development, if and when fully developed and tested, will
perform in accordance with Genzyme's expectations, that necessary regulatory
approvals will be obtained in a timely manner, if at all, or that these
products can be successfully and profitably manufactured and sold.
TECHNOLOGY TRANSFERRED TO SURGICAL AIDS PARTNERSHIP AND NEOZYME II. Genzyme
organized a research and development limited partnership (the "Surgical Aids
Partnership") and Neozyme II Corporation ("Neozyme II"), to which it
transferred technology and commercial rights to certain products that Genzyme
previously had under development. Genzyme has options to purchase the limited
partnership interests in the Surgical Aids Partnership under certain
circumstances and to acquire all of the outstanding shares of the callable
common stock of Neozyme II. It is uncertain at this time whether Genzyme will
exercise either or both of these options. If Genzyme does not exercise these
options, it will have no rights to the related products of Neozyme II and
limited rights in revenues generated from the sale of the Surgical Aids
Partnership's products. If Genzyme does exercise these options, it will be
required to make substantial cash payments or to issue shares of General
Division Stock, or both. Cash payments will diminish Genzyme's capital
resources. Payments in General Division Stock could result in dilution to
holders of General Division Stock and could negatively affect the market price
of such stock.
FUTURE CAPITAL NEEDS. Although Genzyme currently has substantial cash
resources, it has committed to utilize a portion of such funds for certain
purposes, such as completing validation of Genzyme's manufacturing facility in
Allston, Massachusetts, developing manufacturing capacity sufficient to meet
the requirements for commercialization of the Surgical Aids Partnership's
products and making certain payments to third parties in connection with
strategic collaborations and acquisitions. In addition, Genzyme may exercise
its option to acquire Neozyme II callable common stock or its option to acquire
the partnership interests in the Surgical Aids Partnership using cash to pay
some or all the exercise price, thereby substantially depleting current
balances. As a result, Genzyme may have to obtain additional financing. There
can be no assurance that such financing will be available on acceptable terms.
UNCERTAINTY REGARDING PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY.
Genzyme's success depends, to a large extent, on its ability to maintain a
competitive technological position in its product areas. Proprietary rights
relating to Genzyme's products are protected from unauthorized use by third
parties only to the extent that they are covered by
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patents or are maintained in confidence as trade secrets. Genzyme has filed
for patents and has rights to numerous patents and patent applications
worldwide. While certain of Genzyme's patents have been allowed or issued,
there can be no assurance that any additional patents will be allowed or will
issue or that, to the extent issued, such patents will effectively protect the
proprietary technology of Genzyme. Genzyme has also relied upon trade secrets,
proprietary know-how and continuing technological innovation to develop and
maintain its competitive position. There can be no assurance that others will
not independently develop such know-how or otherwise obtain access to Genzyme's
technology. While Genzyme's employees, consultants and corporate partners with
access to proprietary information are generally required to enter into
confidentiality agreements, there can be no assurance that these agreements
will be honored. Certain of Genzyme's consultants have developed portions of
Genzyme's proprietary technology at their respective universities or in
government laboratories. There can be no assurance that such universities or
governmental authorities will not assert rights to intellectual property
arising out of university or government based research conducted by such
consultants. In addition, patent litigation is widespread in the biotechnology
industry and it is not possible to predict how any such litigation will affect
Genzyme.
Parties not affiliated with Genzyme may hold pending or issued patents
relating to the technology utilized by Genzyme in its products presently
available or under development. Genzyme may, depending on the final
formulation of such products, need to acquire licenses to, or contest the
validity of, such patents or any other similar patents that may be issued. The
extent to which Genzyme may need to license such rights or contest the validity
of such patents depends on the scope and validity of such patents and
ultimately on the final design or formulation of its products under
development. The cost and ability to license any such rights and the
likelihood of successfully contesting the validity of such patents are
uncertain.
INTENSE COMPETITION. Genzyme is engaged in a segment of the human health care
products industry that is extremely competitive. Competitors in the United
States and elsewhere are numerous and include major pharmaceutical, chemical
and biotechnology companies, many of which have substantially greater capital
resources, marketing experience, research and development staffs and facilities
than Genzyme. These companies may succeed in developing products that are more
effective than any that have been or may be developed by Genzyme and may also
be more successful than Genzyme in producing and marketing these products.
POTENTIAL CONFLICTS OF INTEREST OF DIRECTORS. Certain directors of Genzyme are
also directors of other companies in the biotechnology and pharmaceutical
industries or provide consulting or similar services to other companies doing
business in such industries. As such, those directors may be subject to
conflicts of interest with respect to business opportunities that may be of
interest to two or more of the entities with which they have fiduciary or
contractual relationships. In addition, the scope of research and development
being conducted by Genzyme is very broad, and such other entities may be
engaged in research and development activities with respect to products that
may compete directly with products marketed by Genzyme in the future. Each
director of Genzyme has been advised that he has an obligation to disclose any
competitive relationship and any interest that he or a company with which he is
affiliated may have in any transaction involving Genzyme. Should the Board be
presented with any matters in which a director has such a conflicting interest,
the decision would be made by the Board or a committee thereof without
participation by the interested director. Notwithstanding this policy, it is
possible that a conflict of interest may affect the actions of a director in
performing his duties on the Board.
RAPID TECHNOLOGICAL CHANGE. The field of biotechnology is expected to continue
to undergo significant and rapid technological change. Although Genzyme will
seek to expand its technological capabilities in order to remain competitive,
there can be no assurance that research and discoveries by others will not
render Genzyme's products or processes obsolete.
REGULATION BY GOVERNMENT AGENCIES. Most of the products Genzyme plans to
manufacture and sell will require approval by governmental agencies in the
United States and elsewhere. In particular, human therapeutic and diagnostic
products are subject to pre-marketing approval by the FDA and comparable
agencies in foreign countries. The process of obtaining these approvals varies
according to the nature and use of the product and can involve lengthy and
detailed
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laboratory and clinical testing, sampling activities and other costly
and time-consuming procedures. There can be no assurance that any of the
required approvals will be granted on a timely basis, if at all.
Certain of Genzyme's products, including its Ceredase(R) and
Cerezyme(TM) enzymes, have been designated as orphan drugs under the Orphan
Drug Act, which provides incentives to manufacturers to develop and market
drugs for rare diseases. The Orphan Drug Act generally entitles the first
developer to receive FDA marketing approval for an orphan drug to a seven-year
exclusive marketing period in the United States for that product. However,
legislation has been periodically introduced in recent years to amend the
Orphan Drug Act. Such legislation has generally been directed to shortening
the period of automatic market exclusivity and granting certain marketing
rights to simultaneous developers of a drug. The effect on Genzyme of any
amendments ultimately adopted cannot be assessed at this time.
Although Genzyme has filed for or received orphan drug designation for
various other products, Genzyme believes that the commercial success of these
products will depend more significantly on the associated safety and efficacy
profile and on the price and other characteristics of each product relative to
competitive or alternative treatments than on any exclusivity afforded by the
Orphan Drug Act. Additionally, these products may be protected by patents and
other means. Nonetheless, it is not possible to predict precisely what effect
a lessening of the market exclusivity protection afforded by the Orphan Drug
Act would have on Genzyme's results of operations.
FOREIGN SALES ACTIVITIES. Foreign sales accounted for 37% of the General
Division's total revenues in 1994, and Genzyme anticipates that foreign sales
will continue to represent a significant percentage of Genzyme's revenues.
Accordingly, a substantial portion of Genzyme's revenues may be subject to
currency fluctuations and other risks associated with foreign operations. In
addition, the strength of the United States dollar in relation to certain
foreign currencies may adversely affect Genzyme's sales to foreign customers.
THIRD-PARTY REIMBURSEMENT AND HEALTH CARE COST CONTAINMENT INITIATIVES. A
majority of Genzyme's revenues are attributable directly or indirectly to
payments received from third-party payors. Genzyme's revenues and
profitability may be affected by ongoing efforts of third-party payors to
contain such costs. In addition, during 1994, the Clinton administration and
Congress proposed the implementation of broad-based health care cost
containment measures. While these proposals were not implemented, it is likely
that renewed health care measures will again be proposed in the present or
future Congressional sessions. Accordingly, the effects on Genzyme of any such
measures that are ultimately adopted cannot be assessed at this time.
PRODUCT LIABILITY AND LIMITATIONS OF INSURANCE. Genzyme could be subject to
product liability claims in connection with the use or misuse of its products
during testing or after commercialization. While Genzyme has taken, and
continues to take, what it believes are appropriate precautions, there can be
no assurance that Genzyme will avoid significant liability exposure. Genzyme
has only limited amounts of product liability insurance. If Genzyme attempts
to obtain additional insurance in the future, there can be no assurance that it
will be able to do so on acceptable terms, if at all, or that such insurance
will provide adequate coverage against claims asserted.
POSSIBLE VOLATILITY OF SHARE PRICE AND ABSENCE OF DIVIDENDS. The market prices
for securities of biotechnology companies have been volatile. Factors such as
announcements of technological innovations or new commercial products by
Genzyme or its competitors, governmental regulation, patent or proprietary
rights developments, public concern as to the safety or other implications of
biotechnology products and market conditions in general may have a significant
impact on the market price of General Division Stock. No cash dividends have
been paid on General Division Stock to date and Genzyme does not anticipate
paying cash dividends on either class of its common stock in the foreseeable
future. See "Risk Factors - Risks Related to Two Classes of Common Stock."
CHANGE IN CONTROL. Certain provisions of Genzyme's charter and by-laws and the
terms of Genzyme's Stockholder Rights Plan may have the effect of delaying,
deferring or preventing a change in control of Genzyme, thereby possibly having
the effect of depriving stockholders of the opportunity to receive a premium
for their shares. Certain provisions of Massachusetts law may have a similar
effect.
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<PAGE> 10
MANAGEMENT AND ACCOUNTING POLICIES GOVERNING
THE RELATIONSHIP OF GENZYME DIVISIONS
Genzyme has adopted the following policies to govern the management of
the Tissue Repair Division and its relationship to the General Division.
Except as otherwise stated below, the policies may be modified or rescinded in
the sole discretion of the Board without approval of Genzyme stockholders,
subject only to the Board's fiduciary duty to Genzyme's stockholders. The
Board may also adopt additional policies depending upon the circumstances. Any
determination of the Board to modify or rescind such policies, or to adopt
additional policies, including any such decision that would have disparate
impacts upon holders of the two classes of common stock, would be governed by
the principles of Massachusetts law discussed under "Risk Factors - Risks
Related to Two Classes of Common Stock - No Rights or Additional Duties with
Respect to the Divisions; Potential Conflicts." In addition, generally accepted
accounting principles require that any change in policy be preferable (in
accordance with such principles) to the previous policy.
PURPOSE OF THE TISSUE REPAIR DIVISION. The purpose of the Tissue Repair
Division is to create a business with a comprehensive approach to the field of
tissue repair by developing and commercializing a portfolio of novel products
for the treatment and prevention of serious tissue injury (excluding products
developed on behalf of Genzyme Development Partners, L.P.). In addition to the
programs initially assigned to the Tissue Repair Division, it is expected that
the Tissue Repair Division portfolio will expand through the addition of
complementary products and programs developed either internally or externally
to the Division, including acquiring or in-licensing from outside of Genzyme.
Other than the method of financing, the Tissue Repair Division is operated and
managed similarly to other Genzyme Divisions.
REVENUE ALLOCATION. Revenues from the sale of a Division's products are
credited to that Division. The cost of research done by one Division for the
benefit of another Division is charged to the Division for which the work is
done in the manner described in the following paragraph. The Division
performing the research does not recognize revenue as a result of such
research.
EXPENSE ALLOCATION. All direct expenses are charged to the Division for the
benefit of which they are incurred. Corporate and general and administrative
expenses and other shared services or other indirect costs are allocated to
each Division in a reasonable and consistent manner based on utilization by the
Division of the services to which such costs relate. To the extent borrowings
are deemed to occur between Divisions, inter-division accounts will be
established with interest imputed at the rate then available to Genzyme for
short-term borrowings.
TAX ALLOCATIONS. Income taxes are allocated to each Division based upon the
financial statement income, taxable income, credits and other amounts properly
allocable to such Division under generally accepted accounting principles as if
each Division were a separate taxpayer; provided, however, that as of the end
of any fiscal quarter of Genzyme, any projected tax benefit attributable to any
Division that cannot be utilized by such Division to offset or reduce its
current or deferred income tax expense may be allocated to any other Division
without any compensating payment or allocation.
ACQUISITIONS OF PROGRAMS, PRODUCTS OR ASSETS. Upon the acquisition by Genzyme
from a third party of any additional programs, products or assets (whether by
acquisition of assets or stock, merger, consolidation or otherwise), the
aggregate cost of the acquisition and the programs, products or assets acquired
will be allocated among the Divisions to which such programs, products or
assets are assigned. Such assignment and allocation will be made by the Board
taking into account such matters as the Board and its financial advisors, if
any, deem relevant. Any such determination by the Board will be final and
binding on all holders of all classes of common stock.
DISPOSITION OF PROGRAMS, PRODUCTS OR ASSETS. Upon any sale, transfer,
assignment or other disposition by Genzyme of any product, program or asset not
consisting of all or substantially all of the assets of a Division, all
proceeds from such disposition will be allocated to the Division to which the
program, product or asset had been allocated, and such proceeds will be used
for the benefit of such Division. If a program, product or asset is allocated
to more than one
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<PAGE> 11
Division, the proceeds of the disposition will be allocated among such
Divisions based on their respective interests in such program, product or
asset. Such allocation will be made by the Board taking into account such
matters as the Board and its financial advisors, if any, deem relevant. Any
such determination by the Board will be final and binding on all holders of all
classes of common stock.
INTER-DIVISION ASSET TRANSFERS. The Board may at any time and from time to
time reallocate any program, product or other asset from one Division to any
other Division. All such reallocations will be done at fair market value,
determined by the Board, taking into account, in the case of a program under
development, the commercial potential of such program, the phase of clinical
development of such program, the expenses associated with realizing any income
from such program, the likelihood and timing of any such realization and other
matters that the Board and its financial advisors deem relevant. The
consideration for such reallocation may be paid by one Division to another in
cash or, in lieu of cash or other consideration, the Board may elect to account
for a reallocation of assets from the Tissue Repair Division to the General
Division as an increase in the certain shares of General Division Stock that
Genzyme may issue without allocating any consideration to the General Division
(the "General Designated Shares") and a reallocation of assets from the General
Division to the Tissue Repair Division as either an increase in the certain
shares of TR Division Stock that Genzyme may issue without allocating any
consideration to the Tissue Repair Division (the "TR Designated Shares") or a
reduction in the General Designated Shares, if any, except that a reallocation
of assets from the Tissue Repair Division to the General Division may not be
accounted for as an increase in General Designated Shares without a class vote
of the holders of the TR Division Stock.
Notwithstanding the foregoing, no Key TR Program, as defined below, may
be transferred out of the Tissue Repair Division without a class vote of the
holders of the TR Division Stock unless the Board determines that such Key TR
Program has application outside of the field of tissue repair (in which case it
may be transferred out only for the non-tissue repair applications). A "Key TR
Program" is any of the following: (i) Vianain(R) Debriding Product for
debridement of necrotic or damaged tissue; (ii) TGF-#2 for all indications
licensed from Celtrix Pharmaceuticals, Inc. as of December 16, 1994; (iii)
Epicel(SM) cultured epithelial cell autografts for tissue replacement or
repair; (iv) Acticel(SM) cultured epithelial cell allografts for tissue
replacement or repair; (v) CARTICEL(SM) Autologous Chondrocyte Service; and
(vi) any additional tissue repair program or product being developed from time
to time in the Tissue Repair Division which (a) constituted 20% or more of the
research and development budget of the Tissue Repair Division in any of three
most recently completed fiscal years or (b) has had a cumulative investment of
$8 million or more in research and development expenses by the Tissue Repair
Division.
The foregoing policies regarding transfers of assets between Divisions
may not be changed by the Board without a class vote of the holders of the TR
Division Stock.
ACCESS TO TECHNOLOGY AND KNOW-HOW. The Tissue Repair Division and the General
Division each have free access to all technology and know-how of Genzyme that
may be useful in such Division's business, subject to any obligations or
limitations applicable to Genzyme.
DISPOSITION OF TR DESIGNATED SHARES. The TR Designated Shares may be (i)
issued upon the exercise of outstanding stock options and warrants and the
conversion of outstanding convertible notes allocated to the General Division,
(ii) subject to the restrictions set forth in the following paragraph, sold for
any valid business purpose, or (iii) distributed as a dividend to the holders
of shares of General Division Stock, all as determined from time to time by the
Board in its sole discretion. Genzyme distributed approximately 3.3 million of
the initial 5.0 million TR Designated Shares as a stock dividend to holders of
Genzyme common stock of record on December 16, 1994, and reserved the remaining
initial TR Designated Shares for issuance upon the exercise or conversion of
stock options, warrants and convertible notes outstanding as of December 15,
1994. To the extent that any such remaining initial TR Designated Shares are
not used for such purposes, the Board may issue them for any other valid
business purposes without crediting any proceeds to the Tissue Repair Division.
ISSUANCE OF ADDITIONAL SHARES OF ANY CLASS OF GENERAL DIVISION STOCK. If
additional shares of any class of common stock are issued and sold by Genzyme,
Genzyme will identify (i) the number of such shares issued and sold for the
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<PAGE> 12
account of the Division to which they relate, the proceeds of which will be
allocated to and reflected in the financial statements of such Division and
(ii) the number of such shares issued and sold that will reduce the number of
Designated Shares from such Division and the proceeds of which may be used for
any valid business purpose. Notwithstanding the foregoing, Genzyme will not
sell any shares of TR Division Stock without allocating the proceeds to the
Tissue Repair Division (except upon exercise or conversion of options, warrants
or convertible notes outstanding as of December 15, 1994) unless (i) the Board
determines that the Tissue Repair Division has cash sufficient to fund its
operations for at least the next 12 months or (ii) shares of TR Division Stock
concurrently being sold for the account of the Tissue Repair Division will
produce proceeds sufficient to fund the Tissue Repair Division's cash needs for
the next 12 months.
RESERVATION OF SHARES OF GENZYME TR DIVISION STOCK. Genzyme has reserved
approximately 2,000,000 shares of TR Division Stock for issuance to Genzyme
employees pursuant to grants made after December 15, 1994 under one or more
employee incentive plans.
OPEN MARKET PURCHASES OF SHARES OF ANY CLASS. Genzyme may make open market
purchases of any class of its common stock in accordance with applicable
securities law requirements; provided, however, that such purchases of TR
Division Stock may not be made if as an immediate result thereof the number of
TR Designated Shares would represent more than 60% of the number of TR
Designated Shares plus the number of outstanding shares of TR Division Stock.
Such restriction is intended to prevent Genzyme from using open market
purchases to effect a redemption of the TR Division Stock without paying the
30% premium required for a complete redemption of TR Division Stock under the
terms of Genzyme's Articles of Organization. In addition, within 90 days of
any open market purchase of any class of common stock, Genzyme may not exchange
shares of such class for cash or shares of any other class of common stock.
CLASS VOTING. In addition to any shareholder approval required by
Massachusetts law, whenever the approval of the holders of a class of common
stock is required to take any action pursuant to these policies or the Genzyme
Charter, such requirement will be satisfied if a meeting of the holders of such
class is held at which a quorum is present and the votes cast in favor of the
proposed action exceed the votes cast against.
NON-COMPETE. Genzyme will not develop products outside of the Tissue Repair
Division that compete or would compete in the market with products being
developed or sold by the Tissue Repair Division.
RECENT DEVELOPMENTS
The shares of General Division Stock offered hereby were issued to the
Selling Stockholders in connection with the acquisition by Genzyme Transgenics
Corporation ("GTC"), an affiliate of the Company, of Biodevelopment
Laboratories, Inc. on July 3, 1995. See "Selling Stockholders." Under a
Securities Exchange Agreement executed by the Company and GTC in connection
with such acquisition, Genzyme acquired 475,467 shares of GTC's common stock
from the Selling Stockholders in exchange for Genzyme's issuance to such
holders of an aggregate of 33,945 shares of General Division Stock. Genzyme
currently holds approximately 48.2% of the outstanding common stock of GTC, a
company engaged in the application of transgenic technology to the development
and production of recombinant proteins for therapeutic and diagnostic uses.
On July 3, 1995, Genzyme guaranteed the obligations of GTC under a
$7,500,000 revolving credit facility between GTC and a commercial bank in
exchange for a security interest in all of the assets of GTC and a warrant to
purchase 145,000 shares of GTC common stock at an initial exercise price of
$2.84375 per share.
SELLING STOCKHOLDERS
The Selling Stockholders are the former stockholders of Biodevelopment
Laboratories, Inc. ("BDL"), a Delaware corporation acquired by GTC on July 3,
1995. Pursuant to the acquisition and related agreements, the former
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<PAGE> 13
stockholders of BDL received shares of GTC common stock, a portion of
which shares were then exchanged by such holders for the shares of General
Division Stock offered hereby.
<TABLE>
The following table sets forth the name of each Selling Stockholder and
the number of shares of General Division Stock owned by each such holder. All
of such shares may be offered and sold by the Selling Stockholders in this
offering.
<CAPTION>
Name of Selling Stockholders Number of Shares Owned
- ---------------------------- ----------------------
Prior to Offering
-----------------
<S> <C>
Joseph J. Guarnieri 17,696
Massachusetts Capital Resource Corp. 4,848
John B. Green and Steven M. Niemi as Trustees of
the BIODEVELOPMENT Laboratories, Inc. 401(k) Plan,
FBO Joseph J. Guarnieri 3,291
Michael W. Lovell 1,664
Dean A. McCausland 1,462
John B. Green and Steven M. Niemi as Trustees of
the BIODEVELOPMENT Laboratories, Inc. 401(k) Plan,
FBO Anthony P. Graffeo 1,339
Henry J. Esber 919(1)
Cindy L. Berman 728
Anthony P. Graffeo 535
Denise Hayes 420
James Paul Shea 373
Kenneth S. Loveday 324
James N. Kyranos 118
John B. Green and Steven M. Niemi as Trustees of
the BIODEVELOPMENT Laboratories, Inc. 401(k) Plan,
FBO Joseph K. Swinarski 91
Kathleen M. O'Brien 55
John B. Green and Steven M. Niemi as Trustees of
the BIODEVELOPMENT Laboratories, Inc. 401(k) Plan,
FBO Janet T. Monticone 18
Peter Markham 15
</TABLE>
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<PAGE> 14
<TABLE>
<S> <C>
John B. Green and Steven M. Niemi as Trustees of
the BIODEVELOPMENT Laboratories, Inc. 401(k) Plan,
FBO Mary E. P. Goad 15
John B. Green and Steven M. Niemi as Trustees of
the BIODEVELOPMENT Laboratories, Inc. 401(k) Plan,
FBO Kathleen E. Meaney 15
Mary E. P. Goad 8
Kathleen F. Meaney 5
John B. Green and Steven M. Niemi as Trustees of
the BIODEVELOPMENT Laboratories, Inc. 401(k) Plan,
FBO Peter Markham 5
Janet T. Monticone 1
TOTAL 33,945
<FN>
(1) Mr. Esber beneficially owns an additional 58 shares of General
Division Stock and seven shares of TR Division Stock, all of
which were acquired by Mr. Esber before the acquisition of BDL
by GTC and are not included in the number of shares registered
in this offering.
</TABLE>
PLAN OF DISTRIBUTION
The Company has filed with the Commission the Registration Statement,
of which this Prospectus forms a part, with respect to the resale of the Shares
from time to time by the Selling Stockholders in open market or privately
negotiated transactions. The Company has agreed to keep the Registration
Statement effective until the earlier of (i) the date on which no Selling
Stockholder holds any of the shares of General Division Stock offered hereby,
and (ii) the first anniversary of the effective date of the Registration
Statement.
The Company has been advised that the Selling Stockholders may sell the
Shares at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Shares to or through
broker-dealers and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders or the
purchasers of the Shares for whom such broker-dealers may act as agent or to
whom they sell as principal, or both (which compensation to a particular
broker-dealer might be in excess of customary commissions). Each Selling
Stockholder will be responsible for all brokerage commissions and other amounts
payable with respect to any sale of Shares with respect to such Selling
Stockholder and any legal, accounting or other expenses incurred.
In the event of an underwritten public offering for the account of
Genzyme, the Selling Stockholders may, upon the written request of the managing
underwriter of such offering, be prohibited from selling any of the shares
offered hereby for a period beginning 14 days prior to the effective date of
the registration statement relating to such public offering and ending 90 days
after such effective date.
The Selling Stockholders and any broker-dealers who act in connection
with the sale of Shares hereunder may be deemed to be "underwriters," as such
term is defined in the Securities Act, and any commissions received by them or
profit on any resale of the Shares as principal might be deemed to be
underwriting discounts and commissions under the Securities Act.
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<PAGE> 15
The Company has agreed to indemnify the Selling Stockholders against
certain liabilities, including certain liabilities under the Securities Act.
LEGALITY OF GENERAL DIVISION STOCK
The validity of the shares of General Division Stock offered hereby was
passed upon for the Company by Palmer & Dodge, Boston, Massachusetts. Peter
Wirth, the Clerk of the Company, is a partner of Palmer & Dodge.
EXPERTS
The consolidated financial statements and financial statement schedule
of Genzyme Corporation, the combined financial statements of Genzyme General
Division and the combined financial statements of Genzyme Tissue Repair
Division as of December 31, 1993 and 1994 and for each of the three years in
the period ended December 31, 1994 included in Genzyme's Annual Report on Form
10-K, as amended by Amendment No. 1 thereto on Form 10-K/A, that have been
incorporated into this registration statement, have been incorporated herein in
reliance on the report of Coopers & Lybrand, L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The financial statements and financial statement schedules of
BioSurface Technology, Inc. as of December 31, 1992 and 1993 and for each of
the three years in the period ended December 31, 1993, appearing at pages
III-19 to III-42 of Annex III to the Company's Registration Statement of Form
S-4 (File No. 33-83346), that have been incorporated by reference into this
Prospectus have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of that firm as
experts in accounting and auditing.
15
