<PAGE> 1
As filed with the Securities and Exchange Commission on September 19, 1995.
Registration No. 33-61871
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GENZYME CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 06-1047163
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139 (617) 252-7500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-------------
HENRI A. TERMEER
Chief Executive Officer
Genzyme Corporation
One Kendall Square
Cambridge, Massachusetts 02139
(617) 252-7500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
with copies to:
MAUREEN P. MANNING, ESQUIRE GEOFFREY E. LIEBMANN, ESQUIRE
Palmer & Dodge Cahill Gordon & Reindel
One Beacon Street 80 Pine Street
Boston, Massachusetts 02108 New York, New York 10005
(617) 573-0100 (212) 701-3000
-------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
-------------
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box./ /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
Page 1 of 99 Sequential Pages
Exhibit Index appears on Page 58
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SUBJECT TO COMPLETION, DATED SEPTEMBER 19, 1995
3,000,000 SHARES
GENZYME
TISSUE REPAIR DIVISION COMMON STOCK
($.01 PAR VALUE)
All of the shares of Genzyme Tissue Repair Division Common Stock ("TR
Stock") offered hereby are being sold by Genzyme Corporation (the "Company" or
"Genzyme"). The TR Stock is listed on the Nasdaq National Market under the
symbol "GENZL." On September 18, 1995, the reported last sale price of the TR
Stock on the Nasdaq National Market was $16.00 per share.
The TR Stock is common stock of the Company and is intended to reflect the
value and track the performance of the Genzyme Tissue Repair Division ("GTR"),
which is engaged in the field of tissue repair through the development,
production and marketing of technologically advanced products and services for
the treatment and prevention of serious tissue damage. The TR Stock is one of
two classes of the Company's common stock, the other being Genzyme General
Division Common Stock ("General Division Stock"). The relative voting power of
one share of TR Stock and one share of General Division Stock will fluctuate
based upon the relative Fair Market Values (as defined herein) of one share of
TR Stock and one share of General Division Stock as set forth herein. Subject to
certain conditions, the TR Stock may be exchanged, at the Company's option, for
cash, General Division Stock, or a combination thereof, at a 30% premium over
the then current Fair Market Value of the TR Stock. In the event of a
disposition by the Company of all or substantially all of the assets attributed
to GTR, the Company must exchange the TR Stock for cash, General Division Stock,
or a combination thereof, at a 30% premium over the then current Fair Market
Value of the TR Stock. Dividends on the TR Stock will be payable when, as and if
declared by the Board of Directors of the Company out of the lesser of funds of
the Company legally available therefor and the Available Tissue Repair Dividend
Amount. Genzyme has never paid a cash dividend on any class of its capital stock
and currently intends to retain all earnings for use in its business. Upon a
liquidation of Genzyme (other than in connection with a merger, business
combination or sale of substantially all assets), holders of outstanding General
Division Stock and TR Stock are entitled to receive the assets, if any,
remaining for distribution to common stockholders on a per share basis in
proportion to the respective per share liquidation units of such class, which
are presently one liquidation unit for each share of General Division Stock and
.29 liquidation units for each share of TR Stock. The liquidation unit amounts
will not be adjusted except to avoid dilution in the aggregate liquidation
rights of either class in the event of a stock split or combination, stock
dividend or the like. See "Description of Genzyme Capital Stock."
-------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE TR STOCK, SEE "RISK FACTORS"
BEGINNING ON PAGE 5 HEREIN.
-------------
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.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Company(1)
-------- ------------- -----------
<S> <C> <C> <C>
Per Share . . . . . . . . .
Total (2) . . . . . . . . .
</TABLE>
(1) Before deduction of expenses payable by the Company estimated at $300,000.
(2) The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase a maximum of 450,000
additional shares to cover over-allotments of shares. If the option is
exercised in full, the total Price to Public will be $ , Underwriting
Discounts and Commissions will be $ and Proceeds to Company will be $ .
The Shares are offered by the several Underwriters when, as and if issued
by the Company, delivered to and accepted by the Underwriters and subject to
their right to reject orders in whole or in part. It is expected that the Shares
will be ready for delivery on or about , 1995.
CS FIRST BOSTON
COWEN & COMPANY
PAINEWEBBER INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1995.
<PAGE> 3
[RED HERRING LANGUAGE]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE TR STOCK AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. IN CONNECTION WITH
THIS OFFERING CERTAIN UNDERWRITERS AND THEIR AFFILIATES MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE TR STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. (SEE
"UNDERWRITING.")
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 with
the Exchange Act files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The Company has filed a
registration statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with the Commission
with respect to the TR Stock offered hereby. This Prospectus, which constitutes
part of the Registration Statement, does not contain all the information set
forth in the Registration Statement and reference is made to the Registration
Statement and the exhibits thereto for further information with respect to the
Company and the TR Stock. Such reports, proxy statements, Registration Statement
and exhibits and other information omitted from this Prospectus can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Room 1024, Washington D.C. 20549 and at the Commission's
Regional Offices located at Seven World Trade Center, Suite 1300, New York, NY
10048 and 500 West Madison Street, Suite 1400, Chicago, IL 60661-2511. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates in this Prospectus by reference the
following documents heretofore filed with the Commission pursuant to the
Exchange Act: (i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, as amended by Amendment Nos. 1 and 2 thereto on Form 10-K/A
filed with the Commission on June 15, 1995 and September 13, 1995, respectively;
(ii) the Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1995 and June 30, 1995, AS amended by Amendment No. 1 thereto on Form 10-Q/A
filed with the Commission on September 13, 1995; (iii) the description of TR
Stock contained in the Company's Registration Statement on Form 8-A filed with
the Commission on September 9, 1994, as amended by Form 8-A/A, filed with
Commission on December 14, 1994; (iv) the description of Tissue Repair Division
Common Stock Purchase Rights contained in the Company's Registration Statement
on Form 8-A, filed with the Commission on November 28, 1994; (v) 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; and (VI) the Quarterly Report of Biosurface Technology, Inc.
("BioSurface") on Form 10-Q for the quarter ended September 30, 1994 filed with
the Commission on November 12, 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
termination of the offering made hereby shall be deemed to be incorporated in
this Prospectus by reference and to be a part hereof from the respective dates
of the filing of such documents. Any statement contained herein or in a 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 subsequently filed document which also is,
or is deemed to be, incorporated by reference herein, modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the written or oral
request of any such person, a copy of any and all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents which are not specifically incorporated by
reference into such documents. Requests for such copies should be directed to
the executive offices of the Company, One Kendall Square, Cambridge,
Massachusetts 02139, Attention: Shareholder Services, telephone (617) 252-7526.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements appearing elsewhere in this Prospectus
and in the documents incorporated into this Prospectus by reference. Unless
otherwise indicated or the context otherwise requires, (I) information in this
Prospectus assumes that the Underwriters' over-allotment option will not be
exercised and (II) all references herein to shares of Genzyme Tissue Repair
Division Common Stock ("TR Stock") and Genzyme General Division Common Stock
("General Division Stock") also include the associated Preferred Stock Purchase
Rights Represented by the same certificates. See "Description of Genzyme Capital
Stock." The shares of TR Stock offered hereby involve a high degree of risk.
Investors should carefully consider the information set forth under the heading
"Risk Factors."
THE TISSUE REPAIR DIVISION
Genzyme's Tissue Repair Division ("GTR") focuses on developing, producing
and marketing technologically advanced products and services for the treatment
and prevention of serious tissue damage. GTR's strategy is to create the leading
business in the field of tissue repair by bringing a comprehensive approach to
the treatment of the complex medical problems associated with serious tissue
injury. Genzyme created GTR in December 1994 by acquiring BioSurface and
combining BioSurface's programs with several of Genzyme's programs in the field
of tissue repair. As a result of the combination of programs from BioSurface and
Genzyme, GTR has strong capabilities in three core technologies -- autologous
cell processing, therapeutic protein development, and biomaterials engineering
-- which it is using to develop and market a portfolio of novel products and
services to apply to unmet medical needs in the field of tissue repair. In March
1995, GTR introduced the CARTICEL(SM) Autologous Chondrocyte Service (the
"CARTICEL(SM) Service"), which provides orthopedic surgeons with the cell
culturing services and other support necessary to utilize a patient'sown
(autologous) articular cartilage cells (chondrocytes) to repair articular
cartilage defects in that patient's knee. GTR plans to focus a substantial
portion of its resources in the near term on further developing and marketing
the CARTICEL(SM) Service. GTR also markets the Epicel(SM) Service, which
involves the culturing of autologous skin cells to provide burn victims with a
lifesaving alternative form of permanent skin replacement, and is developing
Vianain(R) Debriding Product for the treatment of burns and skin ulcers and
TGF-B2, a recombinant protein, for the treatment of chronic skin ulcers and
multiple sclerosis.
The CARTICEL(SM) Service has attracted significant interest from the
orthopedic community since publication of the results of GTR'sacademic
collaborators innovative work on knee cartilage repair in the October 6, 1994
issue of the New England Journal of Medicine. As reported in this article, 19 of
23 patients had restored or improved joint function after implantation with
cultured autologous articular cartilage cells. Based on this data and GTR's
ongoing analysis of results obtained in approximately 130 additional patients
treated in Sweden, GTR has concluded that this treatment can provide long term
repair of damaged knee cartilage tissue. GTR believes that its CARTICEL(SM)
Service is the only such therapy currently available. GTR estimates that each
year between 200,000 and 300,000 individuals in the United States and Europe may
be candidates for treatment using the CARTICEL(SM) Service.
GTR is building the infrastructure required to make the CARTICEL(SM)
Service widely available to orthopedic surgeons in the United States and Europe.
Although the CARTICEL(SM) Service is not currently regulated by the United
States Food and Drug Administration ("FDA"), GTR has developed a quality systems
approach to the delivery of this service. Drawing on its seven years of
experience with the Epicel(SM) Service, GTR has validated a commercial scale
cartilage cell processing facility, developed a rigorous surgeon training
program, established standards for patient outcomes data collection, and
assembled an experienced sales and marketing staff. Since the introduction of
the service in March 1995, GTR has trained 55 orthopedic surgeons, has provided
cultured cartilage cells for the treatment of 15 patients, and is processing
cartilage cells for 60 additional patients.
GTR's near term strategy is to concentrate its efforts on building a
substantial business based on the CARTICEL(SM) Service. This will require
significant investments in processing capacity, working capital and market
development. GTR believes that the creation of a substantial business based on
the CARTICEL(SM) Service would establish GTR as a
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<PAGE> 6
leader in the application of biotechnology to the orthopedic market, support
future research and development efforts, and enable GTR to finance acquisitions
of complementary technologies. GTR will continue to build its product portfolio
through development of the Vianain(R) Debriding Product for burns and skin
ulcers, TGF-B2 for chronic skin ulcers and multiple sclerosis, and alternate
versions of the CARTICEL(SM) and Epicel(SM) Services for cartilage resurfacing
and permanent skin replacement, respectively. GTR believes this family of
diverse tissue repair products will offer a comprehensive treatment portfolio in
the currently fragmented field of tissue repair.
THE OFFERING
<TABLE>
<S> <C>
TR Stock offered by the Company . . . . . . . . . . . . . . . . . 3,000,000 shares
TR Stock to be outstanding after the offering . . . . . . . . . . 11,818,362 shares(1)
Use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . To accelerate the market introduction of the CARTICEL(SM)
Service, including for related capital expenditures and working
capital, and to fund other research and development activities
of GTR
Nasdaq National Market symbol . . . . . . . . . . . . . . . . . . GENZL
</TABLE>
-----------------------
(1) Based on shares outstanding on June 30, 1995. Excludes 1,755,577 shares of
TR Stock reserved for issuance upon exercise of outstanding options with a
weighted average exercise price of $5.5648 per share, and 838,230 TR
Designated Shares, 828,381 of which are reserved for issuance upon the
exercise or conversion of outstanding General Division stock options,
warrants and convertible notes. See "Description of Genzyme Capital Stock -
TR Designated Shares and General Designated Shares."
4
<PAGE> 7
RISK FACTORS
RISKS RELATED TO TWO CLASSES OF COMMON STOCK:
Genzyme currently has two classes of common stock outstanding: General
Division Stock and TR Stock. TR Stock and General Division Stock are intended to
reflect the value and track the performance of GTR and all of Genzyme's business
other than the business of GTR, respectively. Prospective investors in TR Stock
should carefully consider the following factors in evaluating such an
investment.
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 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 TR Stock should, therefore, read Genzyme's consolidated financial
statements in conjunction with the financial statements of GTR, which have each
been incorporated herein by reference. See also "Genzyme Tissue Repair Division
Selected Financial Data" and "Additional Financial Data."
NO RIGHTS OR ADDITIONAL DUTIES WITH RESPECT TO THE DIVISIONS; POTENTIAL
CONFLICTS. Holders of General Division Stock and TR 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 GTR, 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 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 two 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 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 either class of common stock or disparities in the
value 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 each class of stock. 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 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 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
Stock will, through December 31, 1996, have .29 votes. On January 1, 1997
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and on January 1 every two years thereafter, the number of votes to which each
share of TR Stock is entitled will be adjusted to equal the ratio of the Fair
Market Value of one share of TR Stock to the Fair Market Value of one share of
General Division Stock as of such date. The term Fair Market Value is defined in
Genzyme's Articles of Organization and under the heading "Description of Genzyme
Capital Stock - Exchange of TR Stock" herein.
Certain matters as to which the holders of common stock are entitled to
vote may involve a divergence or the appearance of a divergence in the interests
of holders of General Division Stock and holders of TR 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 Stock currently have approximately 91%
and 9%, respectively, of the total voting power of Genzyme. The percentages of
the total voting power of Genzyme held by the holders of the General Division
Stock and the TR Stock, upon completion of this offering, will be approximately
89% and 11%, respectively, and, after consummation of both this offering and the
pending offering by the Company of 2,500,000 shares of General Division Stock to
the public (the "General Division Offering"), will be approximately 89.5% and
10.5%, respectively, assuming the over-allotment option granted to the
underwriters in connection with the General Division Offering is not exercised.
As a result, on matters which are submitted to a vote of the holders of both
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 Stock materially changes. The holders of TR 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.
EXCHANGE OF TR STOCK. The Board can, in its sole discretion, determine to
exchange shares of TR Stock for cash or shares of General Division Stock (or any
combination thereof) at a 30% premium over Fair Market Value of the TR Stock at
any time after the later of (i) December 31, 1995 and (ii) the date on which
equity investments in TR Stock by third-party investors or the allocation of
cash or cash equivalents from the General Division to GTR, or any combination of
the two, equal an aggregate of at least $10 million. Thus, upon successful
completion of this offering, the Board could elect to make such an exchange
after December 31, 1995. In addition, following a disposition of all or
substantially all assets of GTR, the shares of TR 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 of the TR Stock as determined by the trading
prices during a specified period prior to public announcement of the
disposition. Consequently, holders of TR Stock may receive a greater or lesser
premium for their shares than any premium paid by a third party buyer of all or
substantially all of the assets of GTR. In addition, any such exchange of shares
of General Division Stock could be made at a time when General Division may be
considered to be undervalued and would dilute the interests of the holders of
General Division Stock. See "Description of Genzyme Capital Stock - Exchange of
TR Stock" and "Management and Accounting Policies Governing the Relationship of
Genzyme Divisions - Open Market Purchases of Shares of any Class."
NO ADJUSTMENT TO LIQUIDATING DISTRIBUTIONS. 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
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 units of such class. Currently, each share of General Division Stock
has one liquidation unit and each share of TR 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 GTR, the per
share liquidating distribution to a holder of TR Stock or General Division Stock
is not likely to correspond to the value of the assets of GTR or the General
Division, respectively, at the time of a dissolution, liquidation or winding up
of Genzyme.
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,
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<PAGE> 9
assets and liabilities and other accounting matters, the reallocation of assets
between divisions and other matters. These policies 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. See "Management and Accounting Policies Governing the
Relationship of Genzyme Divisions."
LIMITED TRADING HISTORY. As discussed above, the General Division Stock and the
TR Stock are intended to reflect the value and track the performance of the
General Division and GTR, respectively. Since the General Division Stock and the
TR 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 GTR 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 Stock for cash and/or shares of General
Division Stock, will have on the market prices of each class of common stock.
RISKS RELATED TO GTR:
An investment in TR Stock involves a high degree of risk. Prospective
investors should carefully consider the following factors in evaluating such an
investment.
EARLY STAGE OF COMMERCIALIZATION OF THE CARTICEL(SM) SERVICE. The proceeds of
this offering will be used primarily to accelerate the market introduction of
the CARTICEL(SM) Service. GTR anticipates that the revenues generated from sales
of the CARTICEL(SM) Service will be used to fund the development of other
products and services. See "Use of Proceeds." Consequently, GTR's future success
depends in large part on the successful commercialization of the CARTICEL(SM)
Service. GTR is engaged in the process of gathering data concerning the efficacy
of the CARTICEL(SM) Service, and GTR plans to continue gathering such data as
the CARTICEL(SM) Service is being marketed. The commercialization of the
CARTICEL(SM) Service could be materially adversely affected if such data were to
raise questions concerning the efficacy, or the duration of the efficacy, of the
CARTICEL(SM) Service.
The commercialization of the CARTICEL(SM) Service by GTR is in its early
stages, and GTR has not yet grown cartilage cell cultures in the quantities that
will be necessary to meet the demands of the market that GTR expects will
develop for the CARTICEL(SM) Service. In order to produce such quantities of
cartilage cells, GTR will need to make substantial expenditures for production
facilities and will need to hire and train additional production and support
staff. Any significant delays encountered in these activities may delay the
commercialization of the CARTICEL(SM) Service and have a material adverse effect
on GTR's results of operations.
GTR is marketing the CARTICEL(SM) Service to orthopedic surgeons. In order
to commercialize the CARTICEL(SM) Service successfully, GTR will need to hire
and train additional sales personnel, which will market the CARTICEL(SM) Service
to surgeons and hospitals directly. The success of the CARTICEL(SM) Service
depends on the success of such sales force in creating demand for the
CARTICEL(SM) Service and the extent to which sufficient numbers of orthopedic
surgeons who are trained by GTR incorporate the CARTICEL(SM) Service into their
existing practices. There can be no assurance that GTR will be successful in
marketing the CARTICEL(SM) Service to such surgeons or that such surgeons will
use the CARTICEL(SM) Service to the extent anticipated by GTR.
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY TECHNOLOGY. GTR has devoted
significant time and resources to develop proprietary know-how related to the
growth of cartilage cells. GTR does not yet have any patent protection covering
the methodologies used in providing the CARTICEL(SM) Service. Consequently, GTR
is unable to prevent a competitor from developing the ability to grow cartilage
cell cultures and from offering a service that is similar or superior to the
CARTICEL(SM) Service. GTR's results of operations could be materially and
adversely affected if a competitor were to develop such know-how. Moreover, even
if GTR were to obtain patent protection for aspects of its CARTICEL(SM) Service,
there can be no assurance that such protection would prevent others from selling
a similar but noninfringing service.
7
<PAGE> 10
Proprietary rights relating to GTR's other products and services are
protected from unauthorized use by third parties only to the extent that they
are covered by patents or are maintained in confidence as trade secrets. Genzyme
has filed for patents and has rights to numerous patents and patent applications
worldwide relating to GTR products and services. 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 GTR. GTR has
also relied upon trade secrets, proprietary know-how and continuing
technological innovation to develop and maintain its competitive position with
respect to its other products and services. There can be no assurance that
others will not independently develop such know-how or otherwise obtain access
to GTR's technology. While GTR'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 GTR's consultants have developed portions of GTR'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 GTR.
Parties not affiliated with Genzyme may hold pending or issued patents
relating to the technology utilized by GTR in its products or services. GTR may,
depending on the final formulation of such products or services, 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 GTR may need to license such
rights or contest the validity of such patents depends on the scope and validity
of such patents and on the design or formulation of GTR's products or services.
The cost and ability to license any such rights and the likelihood of
successfully contesting the validity of such patents are uncertain.
NEED FOR ADDITIONAL FUNDS. Genzyme anticipates that the net proceeds from this
offering, together with existing cash balances and revenues generated from the
CARTICEL(SM) Service and the Epicel(SM) Service, will be sufficient to fund
GTR's operations through 1996. GTR may require additional funds sooner if demand
for the CARTICEL(SM) Service grows more rapidly than anticipated. Significant
additional funds will be required to expand further the CARTICEL(SM) Service,
including for working capital and additional processing capacity, and to fund
the development, clinical testing, and commercialization of GTR's other products
and services. Subject to certain conditions, Genzyme is obligated to allocate up
to $30 million in cash from the General Division to GTR in the period through
June 1998 (the "Funding Commitment"). However, the Funding Commitment will be
reduced or suspended under certain circumstances (including as a result of this
offering). See "Business - Relationship with Genzyme General Division."
In addition, GTR's cash requirements may vary materially from those now
planned as a result of revenue fluctuations, results of research and development
and clinical testing by GTR and its collaborators, competitive advances and
other factors. There can be no assurance that additional funding will be
available on terms that are acceptable to GTR, if at all. Insufficient funds may
require GTR to delay, scale back or eliminate certain of its programs or to
license third parties to commercialize technologies or products that GTR would
otherwise undertake itself. Such actions may adversely affect the market price
of the TR Stock.
GOVERNMENT REGULATION OF TISSUE REPAIR PRODUCTS. The production and sale of
health care products, including many of the products and services to be
developed by GTR, are highly regulated at the state and federal levels. Federal
or state regulation could result in significant expense to GTR, limit GTR's
reimbursement for its services and otherwise materially adversely affect the
results of operations of GTR. See "Business - Government Regulation."
As a matter of policy and discretion, the CARTICEL(SM) and Epicel(SM)
Services are not being actively regulated by the FDA at this time. However, the
FDA has regulated the use of autologous patient tissues in other areas and will
be conducting a public hearing in the fall of 1995 to solicit information on
autologous cell implants for structural repair and reconstruction and to
consider various regulatory approaches in this area. The FDA has indicated that
it will provide GTR with sufficient time to comply with any new regulations that
it may promulgate relating to autologous cells.
8
<PAGE> 11
A federal criminal statute prohibits the transfer of any human organ for
valuable consideration for use in human transplantation but permits recovery of
reasonable costs associated with such activities. This statute has not been
applied to the CARTICEL(SM) or Epicel(SM) Services to date. In addition, certain
states have laws requiring the licensure of tissue and organ banks and laws
governing the sale of human organs and the safety and efficacy of drugs, devices
and biologics, including skin, all of which could be interpreted to apply to
GTR's production and distribution of cultured tissue products. Provisions in
certain states' statutes prohibit the receipt of valuable consideration in
connection with the sale of human tissue by a tissue bank but permit licensed
tissue banks, including companies, to recover their reasonable costs associated
with such sales. One state's Department of Health has notified GTR that it
believes GTR must obtain a license under that state's tissue bank licensure
statute with respect to distribution of the Epicel(SM) Service. The Company is
in the process of applying for such a license.
RELIANCE ON AGREEMENTS WITH KEY COLLABORATORS. GTR's CARTICEL(SM) Service has
been developed based on the work of a group of Swedish physicians, the two
leaders of which are exclusively involved with GTR in the commercialization and
further development of the CARTICEL(SM) Service. These two physicians are
parties to research and development consulting agreements with GTR (the
"Consulting Agreements") which prohibit them from performing consulting services
for others related to cartilage and bone repair without GTR's consent. In
addition, pursuant to the Consulting Agreements, each physician (i) is
prohibited from engaging in any business activity that is in competition with
the products or services being developed, manufactured or sold by GTR during the
term of the Consulting Agreements (currently through 1998) and for a period of
one year after termination thereof, (ii) is subject to non-disclosure
obligations, and (iii) has assigned to GTR all rights to inventions resulting
from work performed by each physician as a consultant to GTR, subject to
royalties payable to the inventing physician. There can be no assurance that the
two physicians will honor their obligations under the Consulting Agreements. In
addition, there can be no assurance that individuals who are familiar with the
know-how underlying GTR's CARTICEL(SM) Service through their association with
these physicians will not disclose such information to GTR's competitors. The
occurrence of either of these events could have a material adverse effect on
GTR's results of operations.
GTR is conducting additional research in connection with its CARTICEL(SM)
Service pursuant to a sponsored research agreement with the University of
Gotenburg in Sweden and certain physicians, including the two referred to above.
The sponsored research agreement requires that all members of the investigative
team maintain the confidentiality of all information pertaining to GTR and its
business that may become known to them in connection with their work under the
agreement. The agreement also states that all inventions conceived or reduced to
practice during the course of the research program will be the property of GTR,
subject to royalties payable to the inventing physician. There can be no
assurance that the sponsored research agreement will be honored by the
individuals performing services thereunder.
GTR OPERATING LOSSES. GTR is expected to experience significant operating losses
at least through the first half of 1997 as the market introduction of its
CARTICEL(SM) Service continues and its research and development and clinical
trial programs progress. There can be no assurance that GTR will ever achieve a
profitable level of operations or that profitability, if achieved, can be
sustained on an ongoing basis. In addition, the management and accounting
policies adopted by the Board provide that to the extent GTR is unable to
utilize its operating losses to reduce its allocated current or deferred income
tax expense, such losses will be reallocated to the General Division on a
quarterly basis. Accordingly, although the actual payment of taxes is a
corporate liability of Genzyme as a whole, separate financial statements are
prepared for each division and any losses on GTR's financial statements that
cannot be utilized currently by GTR will not be carried forward to reduce the
taxes allocable to GTR's earnings in the future. This will result in GTR
recognizing a larger tax expense and reporting lower earnings after taxes in the
future than would have been the case if GTR had retained its losses in the form
of a net operating loss carryforward.
UNCERTAINTY OF PRODUCT DEVELOPMENT; COMPETITION IN THE TISSUE REPAIR FIELD.
GTR's future success is likely to be dependent upon its ability to develop,
produce and market additional products and services, in addition to completing
the market introduction of the CARTICEL(SM) Service and continuing to sell the
Epicel(SM) Service. Several of GTR's products and services are in an early stage
of development.
9
<PAGE> 12
Competition is intense in the development of health care products,
particularly in the development of products through the application of
biotechnology. GTR's products and services will compete in fields characterized
by rapid technological progress. New developments in technology may have a
material adverse effect on the sales potential of GTR's products and services or
render them obsolete. Other companies, many of which have substantially greater
capital resources, marketing experience, research and development staffs and
facilities than Genzyme are currently engaged in the development of products and
services which may be competitive with GTR's products and services. These
companies may succeed in developing products and services that are more
effective than any that have been or may be developed by GTR and may also be
more successful than GTR in marketing these products and services. Genzyme is
aware of numerous companies developing competing products for cartilage repair
and the treatment of burns, chronic wounds and multiple sclerosis. See "Business
- Competition."
UNCERTAINTY REGARDING SUCCESS OF CLINICAL TRIALS. Several of GTR's products,
including TGF-Beta2 and Vianain(R) Debriding Product, are currently in clinical
trials to test safety and efficacy in humans for various conditions. There can
be no assurance that GTR will not encounter problems in clinical trials that
will cause it to delay or suspend clinical trials. In addition, there can be no
assurance that such clinical testing, if completed, will ultimately show these
products to be safe and efficacious.
THIRD-PARTY REIMBURSEMENT AND HEALTH CARE COST CONTAINMENT INITIATIVES. GTR
expects that a majority of its revenues will be attributable directly or
indirectly to payments received from third- party payors. GTR'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 health
care measures will again be proposed in the present or future Congressional
sessions. Accordingly, the effects on GTR of any such measures that are
ultimately adopted cannot be assessed at this time.
FLUCTUATION IN QUARTERLY RESULTS. The commercialization of the CARTICEL(SM)
Service is in its early stages. Revenues generated from the CARTICEL(SM) Service
are expected to fluctuate as GTR's sales force enrolls orthopedic surgeons for
training, such surgeons are trained by GTR, and the CARTICEL(SM) Service gains
market acceptance. GTR's management is unable to predict the timing or magnitude
of such fluctuations. In addition, GTR's revenues to date have derived primarily
from sales of the Epicel(SM) Service for the treatment of severe burns. Revenues
realized from the Epicel(SM) Service fluctuate from quarter to quarter due to
the dependency of such revenues on many unpredictable factors, including the
number and survival rate of patients for which the Epicel(SM) Service is the
indicated treatment. Since production of the Epicel(SM) Service requires GTR to
maintain extensive tissue culture facilities and a staff of trained personnel, a
significant portion of GTR's costs are fixed and, therefore, fluctuations in
demand can have a material adverse effect on GTR's results of operations.
PRODUCT LIABILITY AND LIMITATIONS OF INSURANCE. GTR may be subject to product
liability claims in connection with the commercial application of its products
and services. While GTR will take what it believes to be appropriate
precautions, there can be no assurance that GTR 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, 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 TR Stock. In addition, the limited number of
shares of TR Stock outstanding may subject the price of the TR Stock to
additional volatility. No cash dividends have been paid to date on the TR Stock,
nor does Genzyme anticipate paying cash dividends on the TR Stock in the
foreseeable future.
10
<PAGE> 13
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.
See "Description of Genzyme Capital Stock - "Anti-Takeover" Provisions."
POTENTIAL DILUTION FROM FUNDING COMMITMENT AND PURCHASE OPTION. Pursuant to the
Funding Commitment and subject to certain conditions, Genzyme is obligated to
allocate up to $30 million in cash from the General Division to GTR in the
period up to June 1998 in exchange for an increase in the TR Designated Shares
at the rate of one share for each $10 allocated. To the extent that the Funding
Commitment is reduced, Genzyme still has an option to allocate, also at $10 per
TR Designated Share, the amount by which the Funding Commitment is reduced (the
"Purchase Option"). Consequently, a maximum of 3,000,000 TR Designated Shares
may be issued in connection with the Funding Commitment or exercise of the
Purchase Option. Genzyme may issue the TR Designated Shares as a stock dividend
to the holders of General Division Stock or issue the TR Designated Shares in a
public or private sale of TR Stock without any allocation of proceeds to GTR.
See "Business - Relationship with Genzyme General Division."
RISKS RELATED TO THE GENZYME GENERAL DIVISION:
Holders of TR Stock are stockholders of Genzyme, which owns all of the
assets and is responsible for all of the liabilities of GTR. Liabilities or
contingencies of the General Division that affect Genzyme's resources or
financial condition could affect the financial condition or results of
operations of GTR. Accordingly, the following risk factors should be considered
carefully in contemplating an investment in TR Stock.
DEPENDENCE ON CEREDASE(R) AND CEREZYME(TM) ENZYME SALES. The General Division'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 FDA marketing approval. During 1994, sales
from these two products totalled $172.0 million, or 72% of the General
Division's 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 to limit
market exclusivity in certain situations.
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 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 the 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
11
<PAGE> 14
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.
FUTURE CAPITAL NEEDS. Although the General Division currently has substantial
cash resources, it has committed to utilize a portion of such funds for certain
purposes, such as making certain payments to third parties in connection with
strategic collaborations and acquisitions. In addition, should Genzyme exercise
its option to acquire Neozyme II Corporation callable common stock or its option
to acquire the partnership interests in Genzyme Development Partners, L.P. using
cash to pay some or all the exercise prices, its cash resources will be
diminished and, as a result, Genzyme's obligation to allocate assets to GTR
pursuant to the Funding Commitment may be suspended or relieved. See "Business -
Relationship with Genzyme General Division."
USE OF PROCEEDS
The net proceeds to be received from the sale of the shares of TR Stock
offered hereby are estimated to be $44,820,000 (approximately be allocated in
full to GTR. While GTR currently has no commitments for use of the net proceeds
of the offering, GTR's management anticipates that the net proceeds, including
interest thereon, will be used to accelerate the market introduction of GTR's
CARTICEL(SM) Service, including for related capital expenditures and working
capital, and to fund other research and development activities of GTR. Until
applied to any of the foregoing uses, the net proceeds of this offering will be
invested in high-quality, short-term interest bearing investments or deposit
accounts.
Genzyme anticipates that the net proceeds from this offering, together with
existing cash balances and revenues generated from the CARTICEL(SM) and
Epicel(SM) Services, will be sufficient to fund GTR's operations through 1996.
GTR may require additional funds sooner if demand for the CARTICEL(SM) Service
grows more rapidly than anticipated. Significant additional funds will be
required to expand further its CARTICEL(SM) Service, including for working
capital and additional processing capacity, and to fund the development,
clinical testing, and commercialization of GTR's other products and services.
12
<PAGE> 15
CAPITALIZATION
The following table sets forth the capitalization of GTR as of June 30,
1995 and as adjusted to reflect the issuance of the shares of TR Stock offered
hereby:
<TABLE>
<CAPTION>
JUNE 30, 1995
-------------------------
(DOLLARS IN THOUSANDS)
AS
ACTUAL ADJUSTED(1)
------- -----------
<S> <C> <C>
Long-term debt .............................. $ 19 $ 19
Division equity (2) ......................... 14,922 59,742
------- -------
Total capitalization ........................ $14,941 $59,761
</TABLE>
----------
(1) As adjusted to reflect the application of the net proceeds of the offering,
estimated to be $41,647,500, assuming 3,000,000 shares are issued at a
price to the public of $16.00, the closing sale price on September 18,
1995.
(2) Excludes 1,755,577 shares of TR Stock reserved for issuance upon exercise
of outstanding options with a weighted average exercise price of $5.5648
per share, and 838,230 TR Designated Shares, 828,381 of which are reserved
for issuance upon the exercise or conversion of outstanding General
Division stock options, warrants and convertible notes.
PRICE RANGE OF TR STOCK
AND DIVIDEND POLICY
The TR Stock is traded in the over-the-counter market and prices are quoted
on the Nasdaq National Market under the symbol GENZL. The following table sets
forth, for the periods indicated, the high and low sale prices for the TR Stock
as reported by Nasdaq.
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
1994:
Fourth Quarter (commencing December 16, 1994)(1) ...... $ 5 3/8 $3 5/8
1995:
First Quarter ......................................... 7 3/4 3 1/2
Second Quarter ........................................ 7 5/8 5 1/8
Third Quarter (through September 18, 1995) ............ 16 5/8 6 1/2
</TABLE>
----------
(1) GTR was formed, and the TR Stock commenced trading, on December 16, 1994.
On September 18, 1995, the closing sale price of TR Stock as reported by
Nasdaq was $16.00 per share. There were approximately 2,719 holders of record of
TR Stock as of August 1, 1995.
Genzyme has never paid a cash dividend on any class of its capital stock
and currently intends to retain all earnings for use in its business.
13
<PAGE> 16
GENZYME TISSUE REPAIR DIVISION
SELECTED FINANCIAL DATA
The following table represents selected historical combined statement of
operations and balance sheet data of GTR. The balance sheet data presented below
as of December 31, 1992, 1993 and 1994 and the statement of operations data
presented below for each of the years in the four-year period ended December 31,
1994 are derived from GTR's financial statements, which have been audited by
Coopers & Lybrand L.L.P., independent accountants. The financial statements as
of December 31, 1993 and 1994 and for each of the years in the three-year period
ended December 31, 1994 and the report of Coopers & Lybrand L.L.P. relating
thereto are incorporated by reference in this Prospectus and the selected
financial data presented below are qualified in their entirety by reference
thereto. The balance sheet data presented below as of December 31, 1990 and 1991
and the statement of operations data presented below for the year ended December
31, 1990 are derived from GTR's unaudited financial statements. The balance
sheet data presented below as of June 30, 1995 and statement of operations data
presented below for the six-month periods ended June 30, 1994 and 1995 are
derived from GTR's unaudited financial statements which are also incorporated
herein by reference. In the opinion of management, the unaudited financial
statements have been prepared on a basis consistent with the audited financial
statements and include all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of the financial position and
results of operations for these periods. The operating results for the six
months ended June 30, 1994 or 1995 are not necessarily indicative of the results
that may be expected for the entire fiscal year. The data should be read in
conjunction with the historical financial statements and notes thereto and
related Management's Discussion and Analysis of Financial Condition and Results
of Operations of GTR presented herein. See also "Incorporation of Certain
Documents by Reference." Amounts are in thousands, except for per share amounts.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -------------------
1990 1991 1992 1993 1994 1994 1995
----- ------ ------ -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF OPERATIONS DATA:
Product revenues ...................................... $ - $ - $ - $ - $ 324 $ - $ 2,277
Revenues from research and development contracts (1) .. 861 2,291 2,666 4,684 - - -
Operating costs and expenses .......................... 467 2,552 3,174 3,506 4,889 1,944 11,827
Purchase of in-process research and development (2) ... - - - 25,000 11,215 - -
Net income (loss) attributable to TR Stock (3) ........ $ 394 $ (211) $ (508) $(24,115) $(15,751) $(1,944) $(8,969)
GTR Common Share Data (3):
Net income (loss) per common
and common equivalent share ...................... $ 0.17 $(0.08) $(0.17) $ (7.43) $ (4.40) $ (0.59) $ (1.03)
Average shares outstanding ......................... 2,282 2,739 3,019 3,245 3,578 3,287 8,721
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
-------------------------------------------------------------- -----------
1990 1991 1992 1993 1994 1995
----- ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
COMBINED BALANCE SHEET DATA:
Cash and investments ............ $ - $ - $ - $ - $24,808 $16,240
Working capital ................. - - (149) - 20,557 12,076
Total assets .................... - - - - 28,435 19,152
Division equity (4) ............. - - (149) - 23,313 14,922
</TABLE>
There were no cash dividends paid.
----------------------------
(1) In July 1993, Genzyme received a technology license fee of $2,000,000 from
Neozyme CORPORATION related to expansion of the field of the Vianain(R)
Debriding Product.
(2) In December 1993, Genzyme exercised its option to purchase the rights to
the Vianain(R) Debriding Product research program funded by Neozyme
Corporation. The transaction was accounted for as a purchase of in-process
research and development and, accordingly, Genzyme charged the $25 million
acquisition cost to GTR's operations in 1993. In December 1994, GTR
acquired BioSurface in a transaction accounted for as a purchase. The
excess of the purchase price over the fair market value of the net assets
acquired, $11.2 million, was charged to in-process research and
development.
(3) Net income (loss) attributable to TR Stock and net income (loss) per common
and common equivalent share for the years ended December 31, 1990, 1991,
1992, 1993 and 1994 and for the six months ended June 30, 1994 give effect
to the provisions of the Management and Accounting Policies adopted by the
Board in connection with the creation of GTR and, accordingly, are pro
forma presentations.
(4) In December 1994, Genzyme issued 5,000,000 shares of TR Stock valued at
$25.3 million in connection with the acquisition of BioSurface.
14
<PAGE> 17
GTR MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Genzyme created GTR in December 1994 by acquiring BioSurface and combining
it with several Genzyme programs and collaborations in the area of tissue
repair. 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 on a
share-for-share basis and a second class of common stock, TR Stock, was created.
The General Division Stock and the TR Stock are intended to reflect the value
and track the performance of the General Division and GTR, respectively, without
diminishing the benefits of remaining a single corporation or precluding future
transactions affecting either division.
Genzyme continues to hold title to all of its assets and be responsible for
all of its liabilities and the holders of the General Division Stock and the TR
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. Accordingly,
Genzyme's consolidated financial statements, which are incorporated herein by
reference, should be read in conjunction with the financial statements of the
General Division or GTR, as appropriate.
Genzyme issued 5,000,000 shares of TR Stock, valued at approximately $25.3
million and representing 50% of the initial equity of GTR, to the stockholders
of BioSurface to effect the acquisition. A total of 5,000,000 additional shares
of TR Stock were either distributed to the holders of General Division Stock on
the basis of .135 of one share of TR Stock for each share of General Division
Stock held on December 16, 1994 or reserved for issuance upon the exercise or
conversion of General Division stock options, warrants and convertible notes
outstanding on December 16, 1994.
The acquisition of BioSurface was accounted for as a purchase. Accordingly,
the associated net assets and operations of BioSurface have been included in
GTR's financial statements and in Genzyme's consolidated financial statements
since the acquisition date.
RESULTS OF OPERATIONS
FIRST SIX MONTHS OF 1995 AS COMPARED TO THE FIRST SIX MONTHS OF 1994
Product revenues for the three and six months ended June 30, 1995 were $1.2
million and $2.3 million, respectively. GTR had no revenues for the comparable
periods in 1994 because prior to Genzyme's acquisition of BioSurface in December
1994, GTR had no products or services on the market. Revenues in 1995 consisted
primarily of sales of the Epicel(SM) Service which are dependent upon numerous
factors, many of which are not in GTR's control. As a result, GTR expects
Epicel(SM) Service sales to fluctuate from period to period. Product revenues
also included $30,000 and $40,000 for the three and six months ended June 30,
1995 from sales of the CARTICEL(SM) Service, which commenced in the first
quarter of 1995.
Gross margins for the three and six months ended June 30, 1995 were 29% and
30%, respectively. GTR incurs direct selling, general and administrative
expenses as well as a selling, general and administrative charge, based on
actual amounts incurred, from the General Division for selling, general and
administrative work performed by the General Division on behalf of GTR. Selling,
general and administrative expenses for the three and six months ended June 30,
1995 were $2.5 million and $4.3 million, respectively, compared to $226,000 and
$389,000, respectively, for the corresponding periods in 1994. The increase was
due to increased support of GTR research and development by the General Division
and to the acquisition of BioSurface in the fourth quarter of 1994.
15
<PAGE> 18
GTR incurs direct research and development expenses as well as a charge for
research and development work performed by the General Division on behalf of
GTR. Research and development expenses for the three and six months ended June
30, 1995 were $3.1 million and $5.9 million, respectively, compared to $903,000
and $1.6 million, respectively, for the corresponding periods in 1994. Solely
for purposes of comparison, research and development expenses related solely to
the operations acquired from BioSurface by Genzyme were $1.7 million and $3.5
million, respectively, for the three and six months ended June 30, 1995.
Excluding research and development expenses related to BioSurface, research and
development expenses increased 53% and 57%, respectively, for the three and six
months ended June 30, 1995, due primarily to increased outside clinical trials
and manufacturing support related to the Vianain(R) Debriding Product.
1994 AS COMPARED TO 1993
Product revenues, which consisted solely of revenues from sales of the
Epicel(SM) Service for the period from December 16, 1994, the acquisition date
of BioSurface, through December 31, 1994, were $324,000.
GTR earned no revenues from research and development contracts in 1994 as
compared to $4.7 million in 1993. Neozyme Corporation funded the development of
the Vianain(R) Debriding Product from 1990 through the end of 1993 when GTR
acquired the development program from Neozyme Corporation. Revenues from
research and development in 1993 also included a $2.0 million technology license
fee related to expansion of the field of the Vianain(R) Debriding Product to
include both burns and ulcers.
General and administrative expenses are borne across Genzyme's entire
activity base and charges to a specific activity, such as research and
development, are a function of total spending within that activity as well as
the size of the overall activity base. GTR also incurs direct selling, general
and administrative charges as a result of the acquisition of BioSurface.
Selling, general and administrative expenses for 1994 increased 38% to $964,000.
Of this increase, 18% corresponds to the increase in spending on research and
development for the same period with the remaining increase resulting from the
operations of BioSurface.
Research and development expenses for 1994 increased 30% to $3.6 million
including $306,000 related to the operations of BioSurface. Excluding the effect
of BioSurface, research and development expenses increased 19% due primarily to
increased outside clinical trials related to the Vianain(R) Debriding Product
and increased manufacturing support.
The excess of the purchase price over the fair market value of the net
assets acquired in the acquisition of BioSurface, $11.2 million, was allocated
to in-process research and development and charged to operations.
1993 AS COMPARED TO 1992
GTR's revenues from research and development contracts for 1993 were $4.7
million, as compared to $2.7 million in 1992, an increase of 76%, due primarily
to a technology license fee of $2.0 million from Neozyme Corporation related to
expansion of the field of the Vianain(R) Debriding Product to include the
treatment of ulcers.
General and administrative expenses decreased 15% to $701,000 in 1993 due
to a lower percentage charge resulting from an increase in Genzyme's overall
activity base.
Research and development expenses for 1993 increased 19% to $2.8 million.
The increase in spending was due primarily to increased outside clinical trials
related to the Vianain(R) Debriding Product and increased manufacturing support.
16
<PAGE> 19
In December 1993, GTR completed the purchase of the rights to the
Vianain(R) Debriding Product technology from Neozyme Corporation and charged the
$25.0 million purchase price to operations as in-process research and
development.
LIQUIDITY AND FINANCIAL RESOURCES
As of June 30, 1995, GTR had approximately $16.2 million of cash, cash
equivalents and investments in marketable securities, a decrease of $8.6 million
from December 31, 1994. The decrease was due to GTR's net loss and an increase
in working capital requirements, net of the portion funded by additional amounts
payable to the General Division and proceeds from the issuance of stock under
stock option and stock purchase plans.
GTR anticipates that, excluding the proceeds from this offering, currently
available funds plus revenues generated from the CARTICEL(SM) and Epicel(SM)
Services will be sufficient to fund GTR's operations through the end of 1995.
Significant additional funds will be required to complete clinical testing and
commercialization of GTR's products and services.
Genzyme is committed to allocate from the assets of the General Division
not less than $30 million to fund the operations of GTR at the rate of $10
million by June 1996, an additional $10 million by June 1997 and a third $10
million by June 1998, subject to certain limitations. See "Business -
Relationship with Genzyme General Division."
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<PAGE> 20
ADDITIONAL FINANCIAL DATA
Genzyme holds title to all of its assets and is responsible for all of its
liabilities, and the holders of the TR Stock have no specific claim against the
assets attributed for financial statement presentation purposes to GTR.
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. Therefore, the following consolidated balance
sheet data of Genzyme and statement of operations data of the General Division
are presented as additional information due to the nature of Genzyme's financial
reporting structure.
The following table represents summary historical consolidated balance
sheet data of Genzyme as derived from the Company's financial statements and
summary historical combined statement of operations data of the General Division
as derived from the General Division's financial statements. The General
Division operating results for the six months ended June 30, 1995 are not
necessarily indicative of the results that may be expected for the entire fiscal
year. The data should be read in conjunction with the historical financial
statements and notes thereto, and related Management's Discussion and Analysis
of Financial Condition and Results of Operations of the Company and the General
Division, respectively, incorporated by reference in this Prospectus. See
"Incorporation of Certain Documents by Reference." Amounts are in thousands,
except for per share amounts.
<TABLE>
<CAPTION>
GENZYME CORPORATION: AT DECEMBER 31, AT JUNE 30,
-------------------------------------------------------- -----------
1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and investments ....................... $ 47,059 $283,473 $248,325 $168,953 $153,460 $102,608
Working capital ............................ 62,252 147,007 166,324 99,605 103,871 134,896
Total assets ............................... 129,625 403,643 481,896 542,052 658,408 638,880
Long-term debt and capital lease obligations
excluding current portion (1) ............. 5,694 104,609 105,369 144,674 126,729 128,321
Stockholders' equity (2) ................... 103,300 268,333 322,613 334,072 418,964 451,308
</TABLE>
THERE WERE NO CASH DIVIDENDS PAID.
<TABLE>
<CAPTION>
FOR THE SIX
GENZYME GENERAL DIVISION: MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------- ----------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF OPERATIONS DATA(3):
Revenues ................................ $ 60,688 $119,624 $ 216,413 $ 265,687 $310,727 $148,660 $179,517
Operating income (loss) (4) ............. (37,582) 8,494 (27,565) (7,633) 49,922 23,824 32,974
Net income (loss) ....................... (26,382) 20,938 (30,012) 8,456 30,194 18,702 21,303
Net income (loss) attributable to
General Division Stock (5) ............. (26,382) 20,938 (29,809) 18,020 32,054 19,499 24,965
General Division Common Share Data (5):
Net income (loss) per common and common
equivalent share ..................... $ (1.56) $ 0.89 $ (1.33) $ 0.69 $ 1.22 $ 0.75 $ 0.89
Average shares outstanding ............ 16,910 23,554 22,370 26,250 26,169 25,988 28,105
</TABLE>
THERE WERE NO CASH DIVIDENDS PAID.
----------
(1) In October 1991, Genzyme issued $100.0 million of its 6 3/4% convertible
subordinated notes due October 2001 and received net proceeds of $97.3
million.
(2) In April 1991, Genzyme completed the sale to the public of 4,025,000 shares
of Genzyme Common Stock for net proceeds of $136.4 million. In December
1994, Genzyme issued 5,000,000 shares of TR Stock valued at $25.3 million
in connection with the acquisition of BioSurface.
(3) In October 1992, Genzyme acquired all the outstanding common shares of
Vivigen, Inc. in a transaction accounted for as a pooling of interests.
Accordingly, the General Division's financial data has been restated to
include Vivigen for all periods presented.
(4) Operating income (loss) includes the purchase of in-process research and
development totaling $20.8 million, $51.1 million and $24.0 million,
respectively, for the years ended December 31, 1990, 1992 and 1993;
goodwill impairment and restructuring costs totaling $26.5 million for the
year ended December 31, 1993; and charges for purchase options and
financing expenses totaling $9.0 million and $16.9 million, respectively,
for the years ended December 31, 1990 and 1992.
(5) Net income (loss) attributable to General Division Stock and net income
(loss) per common and common equivalent share for the years ended December
31, 1990, 1991, 1992, 1993 and 1994 and for the six months ended June 30,
1994 give effect to the provisions of the Management and Accounting
Policies adopted by the Board in connection with the creation of GTR and,
accordingly, are pro forma presentations. The tax benefit generated by GTR
retroactively allocated to the General Division is $0, $0, $0.2 million,
$9.6 million, $1.9 million and $0.8 million for the years ended December
31, 1990, 1991, 1992, 1993 and 1994 and the six months ended June 30, 1994,
respectively. For the six months ended June 30, 1995, the tax benefit
generated by GTR allocated to the General Division is $3.7 million.
18
<PAGE> 21
BUSINESS
OVERVIEW
GTR focuses on developing, producing and marketing technologically advanced
products and services for the treatment and prevention of serious tissue damage.
GTR's strategy is to create the leading business in the field of tissue repair
by bringing a comprehensive approach to the treatment of the complex medical
problems associated with serious tissue injury. Genzyme created GTR in December
1994 by acquiring BioSurface and combining BioSurface's programs with several of
Genzyme's programs in the field of tissue repair. As a result of the combination
of programs from BioSurface and Genzyme, GTR has strong capabilities in three
core technologies -- autologous cell processing, therapeutic protein
development, and biomaterials engineering -- which it is using to develop and
market a portfolio of novel products and services to apply to unmet medical
needs in the field of tissue repair. In March 1995, GTR introduced the
CARTICEL(SM) Service, which provides orthopedic surgeons with the cell culturing
services and other support necessary to utilize a patient'sown articular
chondrocytes to repair articular cartilage defects in that patient's knee. GTR
plans to focus a substantial portion of its resources in the near term on
further developing and marketing the CARTICEL(SM) Service. GTR also markets the
Epicel(SM) Service, which involves the culturing of autologous skin cells to
provide burn victims with a lifesaving alternative form of permanent skin
replacement, and is developing Vianain(R) Debriding Product for the treatment of
burns and skin ulcers and TGF-Beta2, a recombinant protein, for the treatment
of chronic skin ulcers and multiple sclerosis.
The CARTICEL(SM) Service has attracted significant interest from the
orthopedic community since publication of the results of GTR'sacademic
collaborators innovative work on knee cartilage repair in the October 6, 1994
issue of the New England Journal of Medicine. As reported in this article, 19 of
23 patients had restored or improved joint function after implantation with
cultured autologous articular cartilage cells. Based on this data and GTR's
ongoing analysis of results obtained in approximately 130 additional patients
treated in Sweden, GTR has concluded that this treatment can provide long term
repair of damaged knee cartilage tissue. GTR believes that its CARTICEL(SM)
Service is the only such therapy currently available. GTR estimates that each
year between 200,000 and 300,000 individuals in the United States and Europe may
be candidates for treatment using the CARTICEL(SM) Service.
GTR is building the infrastructure required to make the CARTICEL(SM)
Service widely available to orthopedic surgeons in the United States and Europe.
Although the CARTICEL(SM) Service is not currently regulated by the FDA, GTR has
developed a quality systems approach to the delivery of this service. Drawing on
its seven years of experience with the Epicel(SM) Service, GTR has validated a
commercial scale cartilage cell processing facility, developed a rigorous
surgeon training program, established standards for patient outcomes data
collection, and assembled an experienced sales and marketing staff. Since the
introduction of the service in March 1995, GTR has trained 55 orthopedic
surgeons, has provided cultured cartilage cells for the treatment of 15
patients, and is processing cartilage cells for 60 additional patients.
GTR'snear term strategy is to concentrate its efforts on building a
substantial business based on the CARTICEL(SM) Service. This will require
significant investments in processing capacity, working capital and market
development. GTR believes that the creation of a substantial business based on
the CARTICEL(SM) Service would establish GTR as a leader in the application of
biotechnology to the orthopedic market, support future research and development
efforts, and enable GTR to finance acquisitions of complementary technologies.
GTR will continue to build its product portfolio through development of the
Vianain(R) Debriding Product for burns and skin ulcers, TGF-Beta2 for chronic
skin ulcers and multiple sclerosis, and alternate versions of the CARTICEL(SM)
and Epicel(SM) Services for cartilage resurfacing and permanent skin
replacement, respectively. GTR believes this family of diverse tissue repair
products will offer a comprehensive treatment portfolio in the currently
fragmented field of tissue repair.
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<PAGE> 22
PRODUCTS AND SERVICES
GTR's activities can be divided into three main areas: cartilage repair,
consisting of the CARTICEL(SM) Service and CARTICEL II; skin repair, including
the Epicel(SM) Service and the TGF-Beta2 and Vianain(R) Debriding Product
programs; and other tissue repair opportunities in the areas of multiple
sclerosis and bone repair.
CARTILAGE REPAIR - CARTICEL(SM) SERVICE
Scientific Background
Cartilage tissue consists of cartilage cells called chondrocytes, which
secrete and are embedded in a protein and carbohydrate based matrix. Cartilage
tissue can be found in several parts of the body and serves several different
purposes. Articular (hyaline) cartilage is a thin layer of tough opaque tissue
that lines the opposing bone surfaces of all moving joints in the body to
provide almost frictionless movement of the joint. Another type of cartilage
(fibrocartilage) serves a shock-absorbing function in the knee and in the spine
between the vertebrae. Cartilage is also the tissue which gives shape to the ear
and the nose.
Damage to cartilage causes significant medical problems. When articular
cartilage tissue in a joint suffers more than superficial damage, it does not
regenerate and may further deteriorate over time. Even damage which creates a
small defect in articular cartilage can impair joint movement, restrict patient
mobility and cause pain and joint locking. There were an estimated 1.3 million
procedures performed in the United States in 1994 to treat soft tissue damage in
the knee. A substantial number of these procedures involved articular cartilage
damage.
Arthroscopic techniques are currently used to relieve patients' pain and
lessen the chances of further tissue damage, but they do not repair the defect
or stop the degenerative process. One technique involves shaving the margins of
the damaged cartilage and irrigating the joint cavity. Another is to drill holes
through the underlying bone, allowing cells from the bone marrow to migrate into
the defect. These bone marrow cells produce fibrocartilage scar tissue that can
fill the defect but is mechanically inferior to normal articular cartilage and
wears poorly over time. Over a period of several years, this scar tissue may
deteriorate, leading to osteoarthritis, a degenerative joint disease. Patients
with osteoarthritis may require a total joint replacement, which carries a
significant risk of long-term failure. Therefore, joint replacement is generally
not recommended for patients under the age of fifty, who would likely outlive
the prosthesis.
GTR's CARTICEL(SM) Service has been developed based on seven years of
pioneering work by a group of Swedish physicians (the "Swedish Group"). The
Swedish Group, which was the first group in the world to report the use of
cultured autologous cartilage cells to treat cartilage damage, has treated 165
patients with knee cartilage defects. A retrospective review of safety data on
the initial 150 patients treated by the Swedish Group, which was conducted by an
independent data management organization hired by GTR and covered seven years of
data for the earliest patients, indicated no serious adverse events or
post-implantation infection. An ongoing retrospective review by GTR presently
covering 60 of these patients has yielded encouraging data on the efficacy of
the treatment, as measured by joint functionality and arthroscopic and
histological evaluation. In the October 6, 1994 issue of the New England Journal
of Medicine, the Swedish Group published data on the first 23 patients to reach
a two year follow-up evaluation. As reported in this article, 19 of 23 patients
had restored or improved joint function after treatment with cultured autologous
chondrocytes.
Market Opportunity
GTR has estimated the market opportunity for the CARTICEL(SM) Service by
examining the number of surgical procedures used to treat knee injuries. In the
United States in 1994, there were an estimated 1.3 million procedures performed
to treat soft tissue damage in the knee, including ligaments, menisci and
articular cartilage. Approximately
20
<PAGE> 23
500,000 of these procedures were performed specifically to treat articular
cartilage damage of traumatic origin. GTR estimates that roughly 200,000 of
these procedures were performed on clinically significant injuries that would be
suitable for intervention with the CARTICEL(SM) Service.
Data concerning numbers of injuries or surgical procedures in Europe are
generally not available, and accordingly it is difficult to estimate the size of
the European market for the CARTICEL(SM) Service. A GTR commissioned survey of
the European market, which was based on 1993 data, suggests that the
CARTICEL(SM) Service is applicable to at least 56,000 patients in Europe
annually.
The potential market opportunity for the CARTICEL(SM) Service also
encompasses the treatment of other joints. In the United States, there are
currently more than 400,000 arthroscopies performed each year on the shoulder,
ankle, elbow, wrist, hip and spine, some portion of which involve articular
cartilage defects. The Swedish Group has already begun treating patients with
articular cartilage defects in some of these other joints. In addition, GTR is
working to expand the use of the CARTICEL(SM) Service for the management of end
stage degenerative diseases (such as osteoarthritis) and cartilage damage that
are beyond treatment with current techniques, such as shaving the cartilage or
drilling the bone, or the existing CARTICEL(SM) Service. Cartilage diseases,
such as chondromalacia patellae and osteochondritis dessicans, affect an
estimated 200,000 patients in the United States per year, and GTR estimates that
16 million people in the United States suffer from osteoarthritis. In order to
take advantage of these market opportunities, GTR will need to conduct
additional development activities and clinical studies on the use of autologous
chondrocytes for these and other indications. See "Business - Products and
Services - CARTICEL(SM) Development Programs."
GTR believes that the CARTICEL(SM) Service offers an attractive alternative
to existing procedures used to treat severe articular cartilage damage. Existing
treatments do not repair the damage to the cartilage, and consequently, many
patients need to undergo more than one treatment for their injury, and often
never achieve lasting relief from pain. The CARTICEL(SM) Service is designed to
address cartilage damage by repairing the defect and stopping the degenerative
process. GTR believes that the benefits from the CARTICEL(SM) Service will be
long lasting and that a patient may not need to repeat treatment with the
CARTICEL(SM) Service.
GTR believes that the total costs associated with the CARTICEL(SM) Service
are less than the costs of a typical course of treatment ending with knee
replacement surgery. The list price of the CARTICEL(SM) Service is currently
$10,000 per patient. GTR has estimated that the additional costs of the surgical
procedures required to perform a biopsy and implant autologous cartilage cells
will range from $8,000 to $25,000 depending upon the complexity of the repair
required. Although prices may vary depending on the geographic location, GTR
estimates that the average total cost of a knee replacement procedure is
$26,000. However, before undergoing a knee replacement, many patients will have
received therapy and other procedures over the course of several years, adding
substantially to the overall cost of care.
Description of CARTICEL(SM) Service
The CARTICEL(SM) Service is an integrated program of surgeon training,
standardized cartilage cell processing, and rigorous collection and analysis of
outcomes data, which is aimed at providing broad surgeon access and achieving
and maintaining high quality patient outcomes. Although the CARTICEL(SM) Service
is not currently regulated by the FDA, GTR has developed a quality systems
approach to the delivery of this service. Each of the components of the
CARTICEL(SM) Service is described below.
Surgeon Training
The successful commercialization of the CARTICEL(SM) Service is dependent
on it being accepted by and incorporated into routine use by a large number of
orthopedic surgeons. The orthopedic marketplace in the United States is
comprised of approximately 17,000 board certified surgeons. Within major
European countries, there are approximately 18,000 orthopedic surgeons.
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<PAGE> 24
In order to gain access to GTR's cartilage cell processing services,
surgeons must complete comprehensive training in the surgical procedure for
autologous cartilage cell implantation. This training program currently is
composed of clinical, technical and practical orientation modules, providing a
minimum of 16 hours of concentrated exposure to autologous implantation
technology. The three-day training includes lecture presentations, a hands on
bioskills session involving practice of the surgical technique, and an on-site
training session in Sweden for observation of the surgical procedures (biopsy
harvesting, implantation and surgical follow-up) as performed by surgeons well
experienced in this technique. GTR believes that its exclusive ability to
provide surgeons with the opportunity to observe and interact with the Swedish
Group is a significant competitive advantage.
GTR has trained 55 surgeons to date and anticipates training 100 surgeons
by the end of 1995. In order to accommodate the surgeons' limited time
availability, GTR plans to expand training capacity with the addition of a
training site in Cambridge, Massachusetts in the fourth quarter of 1995 and to
modify the training curriculum to concentrate the program into a day and a half.
Upon the completion of this facility and by intensifying the training program,
GTR will have the capacity to train more than 500 surgeons per year. In order to
maintain the high quality standards of the CARTICEL(SM) Service training
program, GTR plans to utilize videotapes of the surgical biopsy and implantation
procedures performed by the Swedish Group and video teleconferencing links to
Sweden to facilitate interaction with members of the Swedish group.
Standardized Cartilage Cell Processing
To initiate the CARTICEL(SM) Service, a small sample of each patient's
healthy knee cartilage tissue is harvested by the surgeon via a minimally
invasive arthroscopic procedure. This cartilage biopsy is then shipped to GTR's
Cambridge processing facility in a specialized container provided by GTR. The
biopsy is processed, under rigorous quality control conditions, to yield a
suspension of the cartilage cells called chondrocytes. When placed in GTR's
proprietary cell culture system these chondrocytes gain the ability to rapidly
propagate. Each patient's cells are typically cultivated for a period of
approximately three weeks, yielding enough cartilage cells to fill the volume of
the cartilage defect diagnosed by the patient's surgeon. After quality control
testing and release, each patients cell's are packaged in a vial and returned to
the surgeon for implantation in a procedure described below. GTR's proprietary
technology allows a patient's cells to be stored indefinitely during the
cultivation process. Delivery of the patient's cells can then be coordinated
with the scheduled implantation procedure which may occur several months after
the biopsy. See "Business - Production."
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The following figure indicates the steps required to implant autologous
cartilage cells:
[The graphic image that appears here consists of four numbered
illustrations. The first illustration shows the structure of the human
knee and an articular cartilage defect depicted with a dark circle
labeled "defect". It is captioned "Healthy cartilage biopsy taken from
patient." There is a line leading from this caption to the area in the
knee from which the cartilage biopsy is taken. The second
illustration, captioned "Biopsy sent to Genzyme Tissue Repair for
processing," portrays a technician examining a biopsy through a
microscope. The next segment is an image of cells in a test tube with
a caption "Cultured cells sent to surgeon." The final segment shows an
illustration of a knee with a periosteal flap sutured on top of the
defect and a syringe inserted underneath the periosteal flap from the
perimeter. This illustration is captioned "Cultured cartilage cells
injected under periosteal flap." There is also a caption to this
illustration which says "periosteal flap, taken from lower leg bone
and sutured on top of defect" and a line indicating the flap sutured
over the area of the defect.]
Step 1: Arthroscopic Biopsy Procedure. The initial surgical procedure is an
arthroscopy. If the physician diagnoses an articular cartilage defect, he
or she will perform a biopsy procedure to retrieve a tiny sample of healthy
cartilage tissue.
Step 2: Biopsy Processing and Cell Culturing. The biopsy tissue is then
sent to the specialized processing facility at GTR. Under strict aseptic
conditions, the cartilage cells from the biopsy are nourished and grown in
culture. Cell culturing usually requires approximately three weeks, during
which time the cartilage cells will grow to many times their original
number. Following culturing, the cells will be ready for return to the
physician for a scheduled surgical implantation.
Steps 3 & 4: Surgical Implantation. To complete the implantation process, a
second surgical procedure is performed. An incision is made in the knee and
the joint is opened. Damaged cartilage tissue is removed, and the area of
the defect is prepared to receive the cultured cells. Another small
incision is then made over the tibia (shin bone) to remove a piece of
periosteum, the thin tissue which covers the bone. The periosteum is
sutured over the cartilage defect to serve as a protective cover for the
cells which are implanted beneath it.
Collection and Analysis of Outcomes Data
The implantation of cultured autologous chondrocytes is an innovative
surgical approach for the repair and treatment of cartilage defects. GTR
believes that clinical data collection for analysis of surgical outcomes will be
critical to document and expand the use of the CARTICEL(SM) Service. Therefore,
GTR has established a registry of patients who receive cartilage cells from the
CARTICEL(SM) Service and requires that each surgeon obtain consent from the
surgeon's institutional review board ("IRB") to collect outcomes data according
to GTR's protocol. In addition, GTR will identify surgeons who perform more
specific long term follow-up data collection and cost effectiveness studies, and
GTR will fund these activities. GTR believes that this registry will be a
valuable resource for ongoing product performance feedback to individual
surgeons and for evaluating new surgical techniques. GTR will encourage
23
<PAGE> 26
publication and presentation of individual case studies or groups of patients by
individual physicians or collaborators taking part in the registry.
GTR has access to the clinical outcomes data from implantation procedures
performed by the Swedish Group over the last eight years. In addition, in order
to support further development of autologous chondrocyte implantation, GTR will
support a controlled multi-center, randomized study with the Swedish Group. The
study is scheduled to begin in the second half of 1995 and will include 60
patients, 40 of whom will be treated with GTR'sCARTICEL(SM) Service and 20 of
whom will receive conventional bone drilling as a control procedure. These
patients will be followed for three years, at which time an arthroscopy and
biopsy will be performed.
Sales and Marketing
GTR markets the CARTICEL(SM) Service directly to orthopedic surgeons in the
United States and Europe. Since the launch of the CARTICEL(SM) Service, GTR has
built its United States and European sales and marketing organization to a total
of 24 sales people. GTR intends to expand its existing sales force to 50 by the
end of 1996 with sales people experienced in the orthopedic market. GTR's sales
force promotes the CARTICEL(SM) Service by contacting and educating orthopedic
surgeons about the CARTICEL(SM) Service and maintaining an ongoing relationship
with each surgeon who receives training from GTR; assisting physicians with
administrative, clinical and reimbursement issues involved in arranging to
perform the biopsy and implantation procedures at hospitals; and assisting
physicians in obtaining the necessary approval from the hospital's IRB to
collect outcomes data in accordance with GTR's protocol. GTR further supports
its sales and marketing efforts by attendance at and participation in orthopedic
congresses and symposia.
CARTICEL(SM) Development Programs
GTR currently has a number of ongoing development programs relating to its
CARTICEL(SM) Service, including work on arthroscopic implantation procedures and
development of the CARTICEL(SM) Service for other applications (referred to as
"CARTICEL II"). The primary objectives of these programs are to: (i) improve
GTR's general knowledge of cartilage repair, (ii) improve the regenerative
ability of the implanted, autologous chondrocytes and (iii) expand the
application of the CARTICEL(SM) Service to the repair of large surface area
defects such as those seen in osteoarthritic joints. The CARTICEL(SM) Service is
currently effective only for the repair of small area defects (less than two
centimeters in diameter).
In response to interest by many of the orthopedic surgeons contacted by
GTR, GTR is refining the CARTICEL(SM) Service to allow the use of arthroscopic
procedures for implanting the cultured cartilage cells. GTR has commenced
discussions with manufacturers of arthroscopic equipment regarding the
development of equipment specifically designed for arthroscopic implantation. To
facilitate arthroscopic implantation, GTR is developing a synthetic
biomaterial-based periosteal patch. GTR believes that such refinements of the
CARTICEL(SM) Service for arthroscopic procedures would be a significant
enhancement of the CARTICEL(SM) Service and would broaden its appeal for many
orthopedic surgeons.
GTR is working to develop CARTICEL II for the management of end stage
degenerative diseases (e.g., osteoarthritis), and cartilage damage which has
progressed beyond treatment with other measures. In addition, CARTICEL II is
being developed to regenerate cartilage in large defects in which PREEXISTING
arthritic conditions are present. Specifically, GTR anticipates that CARTICEL II
will improve the regenerating capacity of autologous chondrocytes implanted in
arthritic joints and reduce healing time through agents that actively stimulate
cartilage regeneration. Additionally, GTR has access to the General Division's
hyaluronic acid technology and will be evaluating its application in the
treatment of osteoarthritis in conjunction with the CARTICEL(SM) Service.
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<PAGE> 27
SKIN REPAIR
Scientific Background
Human skin is comprised of two distinct layers which together protect the
body from the surrounding environment. The epidermis is the body's outermost
protective barrier. It consists predominantly of keratinocytes, epithelial cells
organized in overlapping layers to form a continuous, smooth sheet. Beneath the
epidermis lies the dermis, a vascularized layer whose principal cell type,
fibroblasts, produce a matrix composed of collagen and other extracellular
proteins. Accidents or diseases which affect the skin may cause
partial-thickness wounds, in which the epidermis is destroyed but a portion of
the dermis remains intact, and full-thickness wounds, in which both the
epidermis and the dermis are destroyed. Partial-thickness wounds may heal
without the use of skin grafts because keratinocytes which surround the hair
follicles and sebaceous glands are capable of dividing and migrating toward the
surface, regenerating the epidermis. In full-thickness wounds, the hair
follicles and sebaceous glands are destroyed, leaving no source of keratinocytes
in the injured area. Although small full-thickness wounds can heal from the
edges, larger full- thickness wounds must be treated with skin grafts. The
figure below represents the structure of human skin and indicates the depth of
wounds in the skin:
NORMAL SKIN STRUCTURE
[The graphic image that appears here is a drawing of a cross-section
of skin. The illustration shows the epidermis, dermis, subcutaneous
tissue, capillaries, hair follicle and sebaceous gland. The
illustration also indicates the depth of partial-thickness and
full-thickness wounds.]
Burns
When a patient suffers a severe full-thickness burn injury that completely
destroys the epidermis and the dermis over a large body surface area, the
surgeon must replace the missing skin to enable the patient to survive. At
present, treatment for large full-thickness burns typically involves the use of
temporary dressings to limit infection, reduce pain and prevent loss of body
fluids, followed by grafting a portion of the patient's own undamaged skin onto
the burned area. In conventional skin grafting, surgeons first debride the burn
wound (i.e., remove the necrotic tissue so that the body's normal healing
process can occur) and then remove a sheet of skin containing the entire
epidermis and a portion of the dermis from an unburned donor site on the
patient, and transplant it onto the debrided burn wound.
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The use of conventional skin grafts in burn treatment entails certain
disadvantages. Most importantly, in patients with extensive full-thickness burn
injuries, there is a limited amount of undamaged skin available for use as donor
sites for skin grafts. This shortage prevents rapid closure of the burn wound
and is, therefore, life-threatening. In addition, the harvesting of skin grafts
from a donor site produces a new wound, with attendant complications including
pain, blood loss, scarring and the creation of new sites for potential
infection.
Each year approximately 2,000,000 people in the United States suffer burn
injuries. According to the National Center for Health Statistics, approximately
70,000 of these patients are admitted to hospitals for serious burn injuries.
GTR estimates that approximately 25,000 of the most severely burned patients in
the United States are admitted to one of the 140 specialized burn centers.
Industry analysts estimate that approximately $1 billion is spent in the United
States annually for the treatment of burns.
Chronic Skin Ulcers
Chronic skin ulcers are open, often painful wounds found predominantly on
the lower extremities of elderly patients. Skin ulcers are divided into three
main categories: pressure ulcers, which are common in chronic care hospitals and
nursing homes, afflict approximately 1,500,000 patients per year; venous ulcers
afflict approximately 500,000 patients per year; and diabetic ulcers afflict
approximately 1,000,000 patients per year. Pressure ulcers form in the skin of
immobilized patients who are unable to shift position to relieve the pressure
caused by the body's own weight. Venous ulcers occur in patients with damaged
valves in the veins in their legs which leads to a pooling of blood in the lower
extremities and subsequent breakdown of the skin. Diabetic ulcers result from
circulatory deficiencies and nerve damage associated with diabetes. These wounds
frequently remain unhealed for months or years and may lead to amputation of the
limb.
The treatment of chronic skin ulcers can involve three stages: wound
debridement, tissue growth promotion and re-epithelialization or closure of the
wound. Wound debridement is necessary for the treatment of almost all serious
chronic skin ulcers and is accomplished through a variety of mechanical,
surgical and enzymatic methods. Mechanical debridement is a painful, labor
intensive process that can take many weeks to complete and slows the healing
process by removing viable tissue along with necrotic tissue. Surgical
debridement is a costly process that results in loss of viable tissue and is
complicated by the additional risks of anesthesia. Enzymatic debridement is used
infrequently because currently available enzymatic debridement products are
slow-acting and of limited efficacy. After debridement, traditional approaches
to treatment of chronic skin ulcers usually follow one of two courses. The most
common course of treatment for less advanced ulcers is to clean the wound and to
treat it with protective, but passive, dressings and topical medications to
prevent infection while allowing normal healing to occur. Even when conventional
therapy is successful, it still may require 12 to 20 weeks of repeated
treatments. The second approach utilizes conventional skin grafts and is
typically used for more advanced chronic skin ulcers. However, the difficulty of
healing donor sites created in the grafting process and the risks associated
with general anesthesia in the elderly often prevent the use of conventional
skin grafts in these patients. In addition, both treatment approaches are
expensive and have a high failure rate.
GTR estimates that approximately 2,600,000 cases of chronic or slow healing
skin ulcers are treated in the United States each year at a cost of more than $7
billion, with individual treatment costing up to $40,000 per year.
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<PAGE> 29
GTR Skin Product Portfolio
<TABLE>
<CAPTION>
PRODUCT DESCRIPTION INDICATION STATUS
------- ----------- ---------- ------
<S> <C> <C> <C>
Epicel(SM) Service Autologous cultured Burns -- Permanent skin Burns -- Marketed since
epidermal skin graft replacement 1988
Ulcers -- Tissue growth Ulcers -- Marketed since
promotion and re- third quarter, 1994
epithelialization
TGF-Beta2 Recombinant growth factor Tissue growth promotion Completed initial Phase
II trial; expanded Phase
II trial scheduled to
begin third quarter, 1995
Vianain(R) Debriding Enzyme preparation from Burns -- Wound Burns -- Phase I/II
Product plant extract debridement clinical trials
completed; Phase II
clinical trial in
progress
Ulcers -- Wound
debridement Ulcers -- Completed
pilot trial; Phase I/II
trial to begin in early
1996
</TABLE>
Epicel(SM) Service
Service Description
Skin grafts produced using the Epicel(SM) Service are a life-saving product
indicated for patients who suffer severe, full- thickness burns and need
permanent skin replacement. These epidermal grafts are grown from a patient's
own skin cells and, therefore, are not rejected by the patient's immune system.
Starting with a patient biopsy about the size of a postage stamp, GTR can grow
enough skin grafts in three to four weeks to cover a patient's entire body
surface area. Each skin graft consists of a sheet of cultured skin cells,
approximately 25 square centimeters in size and ranging from two to eight cell
layers thick, attached to a piece of surgical dressing material. A 48 hour shelf
life allows these grafts to be delivered anywhere in the United States, Europe
or Japan from GTR's production laboratories in Cambridge, Massachusetts.
Development Status
Skin grafts produced using the Epicel(SM) Service were first introduced in
1988 and remain the only commercially available laboratory grown skin grafts
shown to provide permanent skin replacement. Most burn wounds involving less
than 60% body surface area are covered with conventional skin grafts within the
three to four weeks it currently takes to grow skin grafts produced using the
Epicel(SM) Service. Therefore, GTR believes that the primary candidates for the
Epicel(SM) Service are the approximately four hundred patients each year in the
United States who survive burn injuries covering more than 60% of their body
surface area. GTR markets the Epicel(SM) Service to burn centers throughout the
United States and in parts of Europe through its own direct sales force. GTR
began marketing the Epicel(SM) Service in Japan in 1995 through its distributor,
Toho Pharmaceuticals Co., Ltd.
GTR introduced the Epicel(SM) Service for the treatment of ulcers in the
third quarter of 1994 in response to physicians purchasing the burn product for
several years for use in the treatment of ulcers. However, GTR is not actively
promoting the Epicel(SM) Service for treating chronic ulcers because it believes
that the Epicel(SM) Service is not likely to be economical for this indication.
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<PAGE> 30
Scientists postulate that autologous epidermal skin grafts stimulate wound
healing, including promotion of granulation tissue, attraction of inflammatory
cells, and re-epithelialization, or closure, of chronic wounds. These scientists
have reported that keratinocytes, which are the primary component of Epicel(SM)
skin grafts, produce over twenty cytokines and matrix proteins, many of which
are known to participate in the wound healing process. In addition, several
investigators have reported actual Epicel(SM) graft take in large chronic
wounds.
Epicel(SM) II
GTR is currently evaluating alternative approaches for use of the
Epicel(SM) Service which will represent an improvement over the clinical utility
and production methods of the Epicel(SM) Service. While treatment with the
Epicel(SM) Service is often a life saving procedure, several limitations in its
clinical utility and production methods have been identified. These limitations
include graft fragility, suboptimal graft cosmesis, variability in graft
acceptance, patient morbidity and mortality as a consequence of the length of
time before the graft is available following skin biopsy, difficult handling
characteristics of grafts, and cost of graft production. GTR is evaluating
several methods to address these limitations, including use of synthetic
membranes and composite skin grafts.
GTR believes that advances in the field of autologous keratinocyte grafting
coupled with one or both of the technologies described above may allow the
expanded use of autologous keratinocyte grafting for the treatment of smaller
burns (burn wounds involving 30-60% body surface area) as well as for treatment
of cutaneous ulcers which involve large surface areas of the skin. In the latter
case, GTR believes an improved autologous keratinocyte graft could effectively
and economically provide final wound closure following effective debridement and
induction of granulation tissue deposition at the wound site.
Transforming Growth Factor Beta 2 ("TGF- Beta2")
Product Description
TGF-Beta2 is one of a family of proteins that play an important role in
the body's ability to promote normal wound healing by stimulating the growth of
connective tissue. GTR has licensed recombinant TGF- Beta2 from Celtrix
Pharmaceuticals, Inc. ("Celtrix") and is collaborating with Celtrix on the use
of TGF-Beta2 to promote the healing of chronic skin ulcers by supplementing the
body's own production of TGF-Beta2. The product will consist of an easy-to-use
collagen sponge which serves as a delivery vehicle permitting the release of a
consistent dose of TGF-Beta2 to the wound surface over time.
Development Status
In January 1994, Celtrix announced the results of the Phase II clinical
trials of the TGF-Beta2 wound healing product in the treatment of venous
ulcers. The results of the clinical trials were consistent with previous
findings which indicated a positive trend in wound healing. These results also
allowed Celtrix to reach the following important conclusions: (i) topically
applied TGF-Beta2 is safe at the doses tested; (ii) the delivery vehicle is
well tolerated and (iii) the ease of treatment enables patients to apply TGF-
Beta2 therapy themselves. However, due to variability in patient response in the
placebo groups, combined with a greater- than-expected placebo effect,
statistical significance was not achieved in this study.
GTR plans to begin a 12 center, double-blinded, randomized Phase II
clinical trial in September 1995. The study will group 200 diabetic patients
suffering from neurotrophic diabetic foot ulcers into one of three TGF- Beta2
coated collagen sponge dose groups, a placebo group or a standard of care
control group.
During the first half of 1995, GTR concentrated its efforts on refining the
formulation and manufacturing process for the TGF-Beta2 collagen sponges for
Phase II clinical trials at Genzyme'sAllston, Massachusetts facility. Genzyme
successfully produced 10,000 sponges using bulk TGF-Beta2 from Celtrix and
collagen slurry from an outside source. Genzyme plans to manufacture TGF-Beta2
for Phase III clinical trials in its own facilities. Upon commercialization, GTR
will make royalty payments to Celtrix based on cumulative product sales. GTR is
also obligated to make milestone payments to Celtrix for product development
related achievements.
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GTR'srights with respect to TGF-Beta2 derive from a license and
development agreement which Genzyme and Celtrix entered into in June 1994 (the
"Celtrix Agreement"). The agreement provides for a collaboration between the
parties to develop and commercialize TGF-Beta2 for any therapeutic uses for any
clinical indication (excluding soft tissue augmentation, vascular prostheses and
all ophthalmic and mucositis indications). Genzyme's rights and obligations
under the Celtrix Agreement have been allocated to GTR. Pursuant to the Celtrix
Agreement, GTR has worldwide commercialization rights, excluding Asia, for all
systemic indications and select other indications of TGF-Beta2. Celtrix may
reacquire rights to indications not pursued by GTR.
Vianain(R) Debriding Product
Product Description
The Vianain(R) Debriding Product is a proprietary enzyme preparation
designed to remove necrotic tissue from the wound site. The Vianain(R) Debriding
Product is formulated in a hydrophilic cream delivery vehicle so that it is
highly viscous and easy to apply and cleanse from the wound site. Since the
Vianain(R) Debriding Product is designed to be applied at the bedside by a nurse
or technician, GTR believes that it may also be more cost effective than
currently available debridement methods. GTR intends to use the same proprietary
preparation of the Vianain(R) Debriding Product to remove necrotic tissue from
both burns and skin ulcers.
Development Status
Genzyme completed an initial Phase I/II study involving twenty-five
patients in August 1993. This study was designed to evaluate the safety of
escalating doses of Vianain(R) Debriding Product in burn patients and to develop
preliminary effectiveness parameters. In this Phase I/II safety study, all
patients had moderate to major burn injuries and received a maximum of eight
hours of treatment (i.e., either four, two-hour applications or two, four-hour
applications of Vianain(R) Debriding Product at various enzyme concentrations).
The wounds treated ranged in size from one to ten percent of total body surface
area. The following conclusions were drawn from the Phase I/II study: (i)
topically applied Vianain(R) Debriding Product is safe at the doses tested; (ii)
there is a dose response relationship between Vianain(R) Debriding Product
concentration and debridement results; (iii) the optimal dosing regimen (the
number and length of applications required to achieve satisfactory debridement)
requires further investigation; and (iv) the ability to place skin grafts on
Vianain(R) Debriding Product treated wounds should also be studied.
GTR is nearing completion of a Phase II trial for the burn indication. The
trial is a multi-center debridement/dosing regimen study evaluating 60 patients
with wounds requiring debridement, but not necessarily skin grafting, for wound
closure. The primary objectives of this study are to evaluate the safety and
efficacy of the Vianain(R) Debriding Product as compared to its delivery vehicle
in the removal of necrotic tissue, to determine the number of applications of
Vianain(R) Debriding Product needed to achieve debridement, and to evaluate
whether prompt treatment with Vianain(R) Debriding Product following burn injury
can speed the determination of early burn depth.
A second Phase II single-center study evaluated the ability to transplant
skin grafts to full thickness burn injuries directly following Vianain(R)
Debriding Product treatment in ten patients. Data analysis is ongoing.
Preliminary clinical results indicate that the use of Vianain(R) Debriding
Product does not yield an immediately graftable bed in full thickness burns.
However, it appears to be an efficient debulking agent.
Phase I clinical studies for the Vianain(R) Debriding Product for the
treatment of chronic skin ulcers were completed in June 1995. A total of 15
chronic ulcer patients (8 venous, 5 diabetic, 2 pressure) were treated.
Preliminary results indicate that Vianain(R) Debriding Product is a safe and
effective debriding agent. The product appears to be most effective in venous
ulcers; six out of eight patients experienced at least 90% debridement (the
remaining 2 patients showed 50-89% debridement) and seven patients showed a
significant increase in the amount of healthy granulation tissue present. A
Phase II study is planned for 1996.
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Acticel(SM) Wound Dressings
Acticel(SM) wound dressings are "living bandages" composed of
three-dimensional sheets of living epidermal tissue grown in the laboratory from
donor cells and attached to synthetic dressing materials. Acticel(SM) wound
dressings provide a covering to the wound and act as a barrier to infectious
agents and prevent desiccation of the tissue. In August 1995, GTR completed an
interim analysis of data obtained from the first 77 patients in its clinical
trial of Acticel(SM) wound dressings as a treatment for partial thickness burns.
Although the results from treatment of the second half of this patient group,
which followed a clinical investigators' meeting to discuss patient selection
and use of the product, were at a level sufficient to meet the stated trial
objectives, it did not appear that data for the entire trial would be sufficient
to support a filing of an application for marketing approval.
Based on this analysis, together with GTR's concerns as to the commercial
potential of the current product concept, and in order to focus GTR's near term
efforts on the introduction of the CARTICEL(SM) Service, GTR has elected to
discontinue patient enrollment in the trial. GTR has also determined that it
will undertake a review of the product design and commercial potential of
Acticel(SM) wound dressings prior to initiation of future clinical studies.
OTHER TISSUE REPAIR OPPORTUNITIES
Multiple Sclerosis
Scientific Background
Although the cause of multiple sclerosis ("MS") remains unknown, the
disease is thought to result from a patient's immune system mounting an
inflammatory response and thereby damaging the myelin sheath that forms the
protective covering of nerve tissue. Damage to this sheath, with the subsequent
development of scar tissue or "sclerosis", is believed to disrupt the
transmission of nerve signals and may cause a range of debilitating symptoms,
including fatigue, numbness, pain, slurred speech, blurred vision and,
ultimately, muscle spasm and paralysis. Although patients vary, there are four
typical patterns of the disease: benign (about 20% of cases),
exacerbating/remitting (20-30%), remitting/progressive (about 40%) and
progressive (about 10-20%). MS is rarely fatal. While most patients are
ambulatory, at least between flares, some patients may eventually become
paralyzed and confined to a wheelchair.
Current therapy for MS remains inadequate. Steroids can be used for
temporary, symptomatic relief in mild cases of the disease, but toxicity and
lack of effectiveness limit their usefulness. More recently, a beta
interferon-based immunomodulator for the treatment of MS has been approved by
the FDA based on data showing a modest reduction in the number and severity of
exacerbations in exacerbating/remitting MS patients. However, the effectiveness
of this product in slowing disease progression has not been demonstrated and it
is known to have significant adverse side effects. The Company is aware of two
other products for which NDAs have been filed, one of which is beta
interferon-based. Other therapies (such as cyclosporines, antimetabolites, gold
and radiation) appear to benefit some patients but are also associated with
treatment-limiting side effects.
Scientific evidence strongly suggests that TGF- Beta 2 is a critical factor
in mechanisms that normally control such processes as inflammation and immune
system activation. These control mechanisms are not yet fully understood.
Researchers have observed that MS patients experience a decline in TGF-Beta
levels just prior to an exacerbation and an increase in TGF-Beta levels as they
begin to recover from an attack. Researchers have also observed that beta
interferon therapy is accompanied by an increase in the patient's own TGF-Beta
level. This close tracking of disease activity with TGF-Beta levels has
suggested to researchers at GTR and Celtrix that patients' recovery might be
hastened and exacerbations avoided by supplementing the patients' own TGF-Beta2
with injections of a recombinant TGF-Beta2 product. Evidence to support this
hypothesis is derived from the reports of several investigators who have
observed potent effects of TGF-Beta2 on reducing the frequency and/or intensity
of exacerbations in an animal model of MS.
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Product Description
Recombinant TGF-Beta2 will be formulated as an intravenous injectable for
administration to MS patients for the prevention of autoimmune damage of nerve
tissue.
Development Status
GTR is continuing the work begun by Celtrix on TGF-Beta 2 in people
suffering from multiple sclerosis. In April 1994, Celtrix initiated a Phase I
clinical study with recombinant TGF-Beta2 in individuals with multiple
sclerosis. The study is being conducted by the National Institute of
Neurological Disorders and Stroke. The initial clinical evaluation of TGF-Beta2
in patients with MS is an open-label, ascending-dose safety study involving nine
patients with the progressive form of the disease. It is anticipated that this
initial study, along with on-going preclinical safety and efficacy testing of
TGF-Beta2 in MS animal models, will provide the basis for expanded clinical
studies. GTR will begin toxicity studies of TGF-Beta2 in the second half of 1995
to support future Phase II clinical trials. GTR anticipates results from the
on-going Phase I trial in 1996. GTR has not committed to a development and
commercialization strategy for TGF-Beta2 for MS and may in the future grant a
license to a third-party for this indication.
Bone Repair
Scientific Background
Approximately two million bone fractures occur in the United States every
year, and 500,000 of these experience problems with repair. In these cases,
repair may be inhibited by age or disease. When there is substantial bone loss,
current methods such as autologous bone grafts, cadaver bone grafts and
electrical stimulation vary in efficacy and side-effects. In the United States,
bone augmentation is used in nearly all of the 170,000 spinal fusion procedures
and in about 15% of the 1.3 million trauma fractures. The most recent
alternatives for repair have been hydroxyapatite or collagen-based porous bone
graft substitutes. However, these grafts are osteoconductive, meaning that they
provide a matrix for bone growth but do not contain growth promoting agents.
Current research is focusing on the development of osteoinductive or bone growth
promoting agents.
Product Description
TGF-Beta2 has been shown to promote wound healing in animal models of hard
tissue repair. GTR has been approached by a number of companies in the
orthopedic implant market to evaluate the use of TGF-Beta2 in conjunction with
accelerating the healing process in segmental defect repair and the general use
of implants. GTR is currently collaborating with one orthopedic implant company
to evaluate the use of TGF-Beta2 coated implants in a canine model for the
repair of an induced segmental defect in the humerus. GTR may grant a license
for use of TGF-Beta2 for this indication to a third party.
PRODUCTION
GTR has developed and validated a commercial scale, proprietary chondrocyte
processing system as part of the preparations for the market launch of the
CARTICEL(SM) Service. A total of 54 validation studies were conducted as part of
this process. In addition, GTR has developed hundreds of standard operating
procedures to ensure the safety and quality of its CARTICEL(SM) Service. These
procedures incorporate GTR'squality assurance program, consisting of facility
controls, process controls, and final product testing. Furthermore, each
technician undergoes three months of training prior to handling patient cells.
All production and quality control procedures are intended to ensure
traceability of operations.
The capacity of GTR's cell processing facility is determined by the number
of trained employees, the amount of cell culture equipment available, and the
availability of appropriate infrastructure to support operations under GTR's
quality systems approach. GTR's specialized cell processing facility for both
the Epicel(SM) and CARTICEL(SM) Services in Cambridge, Massachusetts currently
has significant excess capacity in terms of available cell culture equipment.
GTR plans to upgrade this facility during the second half of 1995 to accommodate
additional production and infrastructure staff to support higher processing
volumes. GTR estimates that these modifications will cost approximately $2
million and, when completed in
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1996, will increase capacity to enable GTR to provide the CARTICEL(SM) Service
to approximately 5,000 patients per year. In addition, GTR is conducting
preliminary engineering studies to build additional processing capacity in one
of Genzyme's Framingham, Massachusetts facilities. GTR is currently evaluating
potential processing facilities in Europe.
GTR's process development efforts are directed toward expanding autologous
chondrocyte culture capacity, streamlining processing, improving quality at
lower production costs, and strengthening GTR's proprietary position. This work
includes improving yields, reducing labor associated with harvesting
chondrocytes from cartilage biopsies, developing methods for extending the
viability of both biopsy specimens and final product cell suspensions, and
identifying cell culture systems that will enable GTR to automate much of the
production process for the CARTICEL(SM) Service.
To ensure the safety and quality of the CARTICEL(SM) and Epicel(SM)
Services, GTR has developed a quality assurance program, facility and
environmental controls, process controls and product stability monitoring. GTR
believes that this quality systems approach will facilitate meeting the new
regulatory requirements expected to be imposed by the FDA. See "Government
Regulation."
GTR expects that the Vianain(R) Debriding Product and TGF-Beta2 will be
manufactured for GTR by the General Division of Genzyme, with the costs of such
manufacturing being allocated to GTR.
REIMBURSEMENT
Third-party payors are increasingly attempting to contain health care costs
by limiting both coverage and the level of reimbursement for new therapeutic
products and services. Accordingly, the successful commercialization of the
CARTICEL(SM) Service is dependent upon the ability of GTR's hospital and surgery
center customers to obtain coverage and reimbursement for the costs of the
CARTICEL(SM) Service and associated surgical procedures from these third-party
payors. In order to support the efforts of its CARTICEL(SM) Service customers to
obtain reimbursement, GTR has established a dedicated unit staffed with
professionals experienced with reimbursement and case management issues. To
date, this unit has been successful in obtaining reimbursement approval for 30
proposed or completed implantation procedures from a total of 29 third-party
payors, and is seeking, at various stages of the administrative process, to
obtain reimbursement for the remaining 36 proposed implantation procedures.
GTR sells the Epicel(SM) Service to burn centers. GTR believes that the
cost of the Epicel(SM) Service is a small portion of the total cost of treatment
for severely burned individuals. In most cases, GTR has been successful in
obtaining insurance coverage for the Epicel(SM) Service from private insurers,
workers compensation programs, and managed care organizations. Although
reimbursement for the Epicel(SM) Service is not currently provided by most state
Medicaid programs, a number of states have approved payment for the Epicel(SM)
Service.
GOVERNMENT REGULATION
Prior to launching the CARTICEL(SM) Service, GTR made a determination that
this service did not fit within any existing FDA regulatory classification. In
the absence of specific regulatory guidance, GTR has voluntarily formulated its
own standards for the processing of autologous chondrocytes in its specialized
facility and has developed policies governing surgeon training, patient data
collection and labeling. GTR believes that its quality systems program is
equivalent to the FDA's current Good Manufacturing Practices ("GMP").
In April 1995, the FDA contacted GTR and asked for more information
regarding the regulatory status of the CARTICEL(SM) Service. In order
to clarify the situation, GTR filed a formal request in May 1995 with the FDA
Commissioner's office to review the situation and determine appropriate
regulatory jurisdiction. The FDA was provided with information regarding GTR's
quality standards and the policies that GTR established for the CARTICEL(SM)
Service, as well as answers to specific technical questions. The FDA responded
to GTR's request for designation in July 1995, confirming in its response GTR's
belief that a formal regulatory framework appropriate to the CARTICEL(SM)
Service had not yet been established. Furthermore, the FDA informed GTR that it
intended to hold a public hearing to explore the public health impact of and
consider appropriate regulatory controls for autologous cell implants. The FDA
also informed GTR that it would not regulate the provision of the CARTICEL(SM)
and Epicel(SM) Services prior to the hearing and development of
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regulations, and would allow GTR sufficient time to comply with any new
regulations that may be promulgated. The FDA has subsequently announced that the
public hearing will take place in November 1995 on the subject of autologous
cells for structural and reconstructive purposes as a starting point for the
development of new regulations.
GTR has advocated that appropriate standards for autologous therapies such
as the CARTICEL(SM) and Epicel(SM) Services be instituted. It also has actively
participated in committees with other organizations in the field of autologous
cell production in the United States and Europe to develop industry standards.
GTR's experience in this field has provided it with the opportunity to take an
active role in developing such standards.
A federal criminal statute that prohibits the transfer of any human organ
for valuable consideration for use in human transplantation, but which permits
recovery of reasonable costs associated with such activities, has not been
applied to the CARTICEL(SM) or Epicel(SM) Services. Certain states have laws
requiring the licensure of tissue and organ banks and laws governing the sale of
human organs and the safety and efficacy of drugs, devices and biologics,
including skin, all of which could be interpreted to apply to GTR's production
and distribution of cultured tissue products. Provisions in certain states'
statutes prohibit the receipt of valuable consideration in connection with the
sale of human tissue by a tissue bank but permit licensed tissue banks,
including companies, to recover their reasonable costs associated with such
sales. GTR has received notice from one state's Department of Health requiring
compliance with its tissue bank licensure statute with respect to distribution
of the Epicel(SM) Service. Genzyme is in the process of applying for such a
license.
Federal or state regulation could result in significant expense to GTR,
limit GTR's reimbursement for its services, and otherwise materially adversely
affect GTR's results of operations.
Autologous products are specifically exempt from the European Device
Directive and Pharmaceutical Directive promulgated by the European Union.
Therefore, each European country is free to impose its own regulations on the
marketing of such products. To date, GTR has not encountered any local
registration requirements for market introduction of the CARTICEL(SM) Service.
GTR is currently assessing the regulatory requirements for commercialization of
the CARTICEL(SM) Service in Japan.
GTR is also subject to various federal, state and local laws, regulations
and recommendations relating to safe working conditions, laboratory and
manufacturing practices and the use and disposal of hazardous or potentially
hazardous substances used in connection with GTR's research work and
manufacturing operations. Although GTR believes that its safety procedures
comply with the standards prescribed by federal, state and local regulations,
the risk of contamination, injury or other accidental harm cannot be completely
eliminated. In the event of such an accident, GTR could be held liable for any
damages that result and any liabilities could exceed GTR's resources.
PATENTS AND PROPRIETARY RIGHTS
GTR pursues a policy of obtaining patent protection both in the United
States and in selected foreign countries for subject matter considered
patentable and important to its business. In addition, a portion of GTR's
proprietary position is based upon patents that GTR has licensed. These license
agreements generally require GTR to pay royalties upon commercialization of
products covered by the licensed technology.
GTR has filed and is preparing several patent applications covering its
work in cartilage repair, but does not yet have any patent protection covering
the CARTICEL(SM) Service. See "Risk Factors - Risks Related to GTR - Uncertainty
Regarding Patents and Proprietary Position." GTR possesses substantial know-how
in the field of autologous cell development generally, and for the CARTICEL(SM)
Service in particular. Such know-how includes the production of biopsy kits and
packaging materials, procedures for quality control, sterility, segregation and
manufacturing, and product delivery, and the method by which GTR validates
assays for future development. GTR believes that this significant technological
know-how places it in a competitively advantageous position.
Biotechnology is a rapidly developing field. Many patent applications have
been filed and the scope the courts will give to the claims of patents issued
from such applications and the nature of these claims are unknown. It is
premature to predict what general trend, if any, will emerge as to the breadth
of allowed claims for biotechnology products and related
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<PAGE> 36
uses. The allowance of broader claims will increase the incidence and cost of
interference proceedings in the United States and the risk of infringement
litigation in the United States and abroad. A policy of allowing narrower
claims, conversely, would limit the value of GTR's proprietary rights under
patents or licenses it holds or for which it has applied. It is possible that
interference proceedings will occur with respect to GTR's patent applications.
It is also likely that subject matter patented by others will be required by GTR
to commercialize at least some of GTR's products. No assurance can be given that
licenses under any such patent rights of others will be available on acceptable
terms, if at all.
GTR's proprietary position in the culturing of epidermal tissues was
originally exclusively licensed from Harvard University and has been augmented
by recently obtained additional patents covering cool storage technology and
packaging of skin grafts produced using the Epicel(SM) Service. GTR has also
exclusively licensed, on a worldwide basis except for Italy, recent patents
covering cryopreservation of such skin grafts. GTR has extended this basic
cryopreservation technology by patenting additional developments and
improvements in the United States.
GTR also possesses know-how relating to the large scale production of
cultured epidermal grafts, the growth of other types of mammalian cells
including fibroblasts and epithelial cells, and the formulation of various types
of biomaterials, including hyaluronic acid ("HA"), a naturally-occurring
biopolymer, for use in forming dermal matrices. In addition to HA know-how, GTR
has rights to a series of issued United States patents in tissue repair covering
modified forms of HA.
GTR has pending and issued patents in the United States and other countries
covering the enzymatic formulation of the Vianain(R) Debriding Product and the
hydrophilic cream delivery vehicle for the product.
Celtrix has obtained patents and filed patent applications in the United
States and foreign countries on the composition of TGF-Beta2, its formulation
and its therapeutic applications in wound healing, cancer, immune therapy and
bone therapy. Genzyme allocated the rights under its license with Celtrix to GTR
at the time of GTR' screation in December 1994.
There can be no assurance that patents issued or licensed to GTR will
remain free of challenge by third parties, that GTR may not unintentionally
infringe patents of third parties, or that GTR may not have to alter its product
development methods or procedures to take into account patents issued to others,
causing unexpected costs and delays. There can be no assurance that the pending
applications owned or licensed by GTR will issue in any country or that the
issued patents will provide a material commercial benefit for GTR. See "Risk
Factors - Risks Related to GTR - Uncertainty Regarding Patents and Proprietary
Position."
While GTR seeks a strong patent position, it believes that its competitive
position will also depend on its ability to maintain its trade secrets and
proprietary know-how, to achieve market leadership in key product areas and to
obtain successful clinical results. GTR's employees, advisors and consultants
who have access to GTR proprietary information are required to sign
confidentiality agreements.
COMPETITION
Competition is intense in the development of health care products,
particularly in the development of biotechnology products. Significant long-term
competition may come from major diversified health care and biotechnology
companies and academic research institutions which may have greater research,
development, manufacturing, marketing and financial resources than GTR. GTR
expects its products to compete primarily on the basis of product efficacy,
safety, reliability and price. In addition, GTR believes that the first
biotherapeutic product to reach the market benefits from a competitive advantage
over later entrants in the market. GTR's competitive position will also depend
on its ability to secure regulatory approval for its products, implement
production and marketing plans, obtain patent protection and secure adequate
capital resources.
GTR is aware that three companies, Integra LifeSciences Corp., LifeCell
Corp., and Advanced Tissue Sciences, Inc., in conjunction with Smith & Nephew
PLC, are engaged in research on cultured cartilage products. GTR believes that
none of these firms is developing autologous cartilage products and that, while
none has progressed to clinical trials, each has applied for or acquired patents
in this field.
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<PAGE> 37
GTR is the only commercial provider of cultured skin grafts shown to
provide permanent skin replacement for burn patients in the United States. The
principal competition for skin grafts developed using the Epicel(SM) Service is
conventional skin grafts. However, GTR may face additional competition from
companies using other approaches to cultured skin tissue. Two companies,
Organogenesis, Inc. and Advanced Tissue Sciences, have been granted expedited
FDA review for their skin substitutes, Graftskin and Dermagraft respectively.
Graftskin is tissue composed of donor human epidermal cells, fibroblasts,
bovine collagen and other ingredients. Dermagraft is an artificial mesh with
cultured human fibroblasts which can be used as a dressing until a graft of the
patient s own skin can be used.
Since Dermagraft will still require a skin graft from the patient or
Epicel(SM) to close a full-thickness wound, it will not be competitive with
GTR's Epicel(SM) Service. Integra LifeSciences Corp. has submitted its
collagen based dermal replacement product to the FDA for Pre-Market Approval.
LifeCell Corp. currently has a freeze-dried, enzymatically processed human
cadaver dermis on the market.
The use of growth factors is emerging as a treatment for
partial-thickness or very small full-thickness wounds. A number of companies
are currently conducting or planning to conduct clinical trials with growth
factors, although to date, no recombinant growth factor product has received
FDA approval. Potential competitors include Chiron Corp., in collaboration
with the Ethicon division of Johnson & Johnson, Curative Technologies, Inc.,
and Scios Novo, Inc. Curative Technologies, Inc., also has one product on the
market which does not require FDA approval. Such growth factors may prove to
be complementary to, as well as competitive with, TGF-Beta2. However, GTR does
not believe that growth factors can provide permanent skin replacement to
compete with the Epicel(SM) Service. Additionally, TGF-Beta2 will compete with
interferon-based immunomodulators produced by Chiron Corp. and under
development by Biogen Inc. for the treatment of multiple sclerosis.
Vianain(R) Debriding Product will compete primarily with surgical
debridement of necrotic tissue or mechanical debridement using hydrotherapy and
daily dressing changes to remove necrotic tissue and, to a lesser extent, with
currently available enzymatic debridement products. Surgical and mechanical
debridement procedures are painful, labor intensive and remove viable tissue
along with necrotic tissue while the enzymatic debridement products on the
market are slow-acting and of limited efficacy. Currently commercially
available enzymatic debridement products are manufactured by Knoll
Pharmaceuticals, Parke-Davis, Boots-Flinte, Inc., Lederle Laboratories and
Rystan.
RELATIONSHIP WITH GENZYME GENERAL DIVISION
As a division of Genzyme, GTR has access to the resources and
expertise of Genzyme, including those allocated to the General Division. This
collaborative relationship augments GTR's internal capabilities in several
areas including clinical and regulatory development, manufacturing, sales and
marketing, reimbursement, and access to capital markets. The General Division
has developed extensive worldwide capabilities in these areas and GTR believes
that its access to these resources will allow it to more rapidly develop its
products while reducing the risks inherent in product development. This
relationship has allowed GTR to accelerate its commercialization of its
CARTICEL(SM) Service.
The General Division's clinical and regulatory group has successfully
achieved approval of each of its two New Drug Applications within one year of
filing. The group consists of 60 people and is currently monitoring 20
clinical trial protocols at 118 sites.
The General Division has extensive manufacturing facilities and
process development expertise that will be available to GTR on a cost
reimbursement basis. These facilities include over 575,000 square feet of
manufacturing, research and development and administrative space in the United
States and over 144,000 square feet of facilities in Europe. The General
Division has a wide range of GMP mammalian cell production capabilities and
extensive facilities for the microbial fermentation of proteins and the
production of biomaterials. With its access to these facilities, GTR expects
to be able to avoid some of the capital expense necessary to commercialize its
products under development.
The General Division has worldwide sales and marketing capabilities
and markets the Ceredase(R) and Cerezyme(TM) products directly to physicians,
hospitals and treatment centers in the United States and 37 other countries.
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<PAGE> 38
Genzyme has developed a sophisticated reimbursement operation with
experience in case management, resource information, relationships with payor
groups and government reporting requirements. The reimbursement group has
successfully obtained coverage for over 95% of the patients being treated with
Ceredase(R) for Gaucher disease in the United States. It has established
relationships with insurance companies and the managed care industry and has an
extensive case management program. Its national reimbursement capability
includes state-by-state resource information and national distributor
relationships.
In addition, Genzyme has demonstrated its ability to access capital
markets by raising over $500 million during the past eight years for investment
in its businesses. These financings have included stock offerings, research
and development limited partnerships, special purpose accelerated research and
development corporation financings, a convertible subordinated debt offering
and public offerings in two majority-owned subsidiaries. GTR has ready access
to Genzyme's financing infrastructure.
Genzyme is committed to allocate from the assets of the General
Division not less than $30 million to fund the operations of GTR at the rate of
$10 million by June 1996, an additional $10 million by June 1997 and a third
$10 million by June 1998 (the "Funding Commitment"). Such allocations will
increase the number of TR Designated Shares at the rate of one share for each
$10 so allocated. TR Designated Shares are shares of TR Stock that may be
issued by Genzyme without allocating the proceeds to GTR. The Funding
Commitment will be reduced by a percentage of the gross proceeds received by
GTR through the sale of shares of TR Stock to purchasers other than Genzyme and
certain related parties. Such reduction will be computed in accordance with
the following formula:
R = .5(P/10) X 100
where R equals the percentage of the gross proceeds raised that will
be applied to reduce the Funding Commitment and
P equals the price per share at which shares of TR stock are
sold.
Any such proceeds raised will be applied so as to reduce the Funding Commitment
in chronological order of payments due, with the earliest funding obligations
to be reduced first.
The Funding Commitment will be suspended in its entirety during any
fiscal quarter in which the cash balance of the General Division (consisting of
cash, cash equivalents and marketable debt instruments) is less than $60
million, will be reduced on a pro rata basis during any fiscal quarter in which
such cash balance is between $60 million and $90 million and will be reinstated
when the General Division's cash balance again exceeds $90 million. The
General Division's cash balance at June 30, 1995 was $86.4 million. The
Funding Commitment expires in December 2001.
To the extent that the Funding Commitment is reduced, Genzyme still
has an option to allocate, also at $10 per TR Designated Share, the amount by
which the Funding Commitment is reduced (the "Purchase Option"). For example,
if the Funding Commitment were reduced by $3.0 million before June 1996 as a
result of GTR selling shares of TR Stock to the public, then Genzyme's
obligation under the Funding Commitment would be reduced to $7.0 million by
June 1996 (the $10 million Funding Commitment reduced by a percentage of the
amount raised by GTR in the public offering), and Genzyme would have an option
to allocate, at $10 per TR Designated Share, up to $3.0 million to GTR by such
date. Consequently, a maximum of 3,000,000 TR Designated Shares may be issued
in connection with the Funding Commitment or exercise of the Purchase Option.
If the 3,000,000 shares of TR Stock offered hereby (assuming no
exercise of the underwriters' over-allotment option) are sold in this offering
at a price per share of $16.00, the closing price of the TR Stock on September
18, 1995, the Funding Commitment will be reduced to zero.
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<PAGE> 39
MANAGEMENT
MANAGEMENT OF GENZYME
The current officers and directors of Genzyme are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE
<S> <C> <C>
Henri A. Termeer 49 Chairman of the Board, President and Chief Executive Officer
Geoffrey F. Cox, Ph.D. 51 Senior Vice President, Operations
David D. Fleming 47 Senior Vice President; President, Diagnostics Division
John V. Heffernan 57 Senior Vice President, Human Resources
Elliott D. Hillback, Jr. 51 Senior Vice President; President and CEO of IG Laboratories, Inc.
Mark A. Hofer 42 Senior Vice President and General Counsel
David J. McLachlan 57 Senior Vice President, Finance and Chief Financial Officer
Gregory D. Phelps 46 Senior Vice President; President, Tissue Repair Division
James R. Rasmussen, Ph.D. 48 Senior Vice President, Research
Alan E. Smith, Ph.D. 49 Senior Vice President, Research
Evan M. Lebson 52 Vice President, Treasurer
John M. McPherson, Ph.D. 47 Vice President, Protein Development; Vice President, Research and
Development, Tissue Repair Division
Richard A. Moscicki, M.D. 43 Vice President, Clinical, Medical and Regulatory Affairs
G. Jan van Heek 46 Vice President; President, Therapeutics Division
Constantine E. Anagnostopoulos, Ph.D. 72 Director
Douglas A. Berthiaume 46 Director
Henry E. Blair 52 Director
Robert J. Carpenter 50 Director
Charles L. Cooney 50 Director
Henry R. Lewis 69 Director
</TABLE>
Each officer's term of office extends until the meeting of the Board
of Directors following the next annual meeting of stockholders and until a
successor is elected and qualified or until his or her earlier resignation or
removal.
MR. TERMEER has served as President and a Director of the Company
since October 1983, as Chief Executive Officer since December 1985 and as
Chairman of the Board since May 1988. For ten years prior to joining the
Company, Mr. Termeer worked for Baxter Travenol Laboratories, Inc., a
manufacturer of human health care products. Mr. Termeer is Chairman of the
Board of Directors of IG Laboratories, Inc. ("IG Labs"), Genzyme Transgenics
Corporation ("GTC") and Neozyme II Corporation ("Neozyme II"). Mr. Termeer is
also a director of Abiomed, Inc. and AutoImmune Inc. and is a trustee of
Hambrecht & Quist Healthcare Investors and Hambrecht & Quist Life Sciences
Investors.
DR. COX joined the Company in June 1984 and has served as Senior Vice
President, Operations of the Company since May 1988. Dr. Cox also is
responsible for the Company's pharmaceutical division. For 11 years prior to
joining the Company, Dr. Cox worked for the manufacturing division of British
Fermentation Products, Ltd., a division of Gist-Brocades N.V.
MR. FLEMING joined the Company in April 1984. He has been President
of the Company's diagnostics division since January 1989 and a Senior Vice
President of the Company since August 1989. For 11 years prior to joining the
Company, he worked for Baxter Travenol Laboratories, Inc. Mr. Fleming is also
a director of IG Labs.
MR. HEFFERNAN joined the Company as Vice President, Human Resources in
October 1989 and has served as Senior Vice President, Human Resources since May
1992. Prior to joining the Company, he served for more than five years as
Vice President, Human Resources Corporate Staff of GTE Corporation, a
diversified communications and electronics company.
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<PAGE> 40
MR. HILLBACK has served as Senior Vice President since July 1990.
Since July 1991, he has served as President and Chief Executive Officer of IG
Labs and, since January 1991, as a director of IG Labs. For one year before
joining the Company, he was President and Chief Executive Officer of Cellcor
Therapies, Inc., a biotechnology company. Prior to that, Mr. Hillback was
employed for six years in the human health care products business of The BOC
Group, Inc., most recently as President of its Glasrock Home Health Care
subsidiary. For eleven years prior to joining The BOC Group, Inc., he served
in varying capacities at Baxter Travenol Laboratories, Inc. Mr. Hillback is
also a director of IVF America, Inc., an in vitro fertilization services
company in which IG Labs holds a minority interest.
MR. HOFER joined the Company in August 1989 as Vice President and
General Counsel and has served as Senior Vice President and General Counsel
since May 1992. Prior to joining the Company, he served as Chief Patent
Counsel for Integrated Genetics, Inc. from July 1987 until its acquisition by
the Company in August 1989. From March 1981 until July 1987, he served as
Patent Counsel for Johnson & Johnson specializing in biotechnology.
MR. MCLACHLAN joined the Company in December 1989 and has served as
Senior Vice President, Finance and Chief Financial Officer since that time.
Prior to joining the Company, he served for more than five years as Vice
President of Finance for Adams-Russell Electronics Inc., a defense electronics
manufacturer, and Adams-Russell Co., Inc., a cable television company. Mr.
McLachlan also serves as a director and Chief Financial Officer of IG Labs and
as a director of HearX, Ltd., a company providing products and services to the
hearing impaired.
MR. PHELPS joined the Company as Senior Vice President in November
1991. Since December 16, 1994, he has also served as President of GTR. Prior
to joining the Company, Mr. Phelps served as President and Chief Executive
Officer of Viagene, Inc. from October 1988 to June 1990 and of ZymoGenetics,
Inc. from May 1986 to August 1988, and held various positions at Baxter
Travenol Laboratories, Inc. from 1975 to 1986. Mr. Phelps is also a director
of Neozyme II.
DR. RASMUSSEN joined the Company in June 1984 and served as Senior
Vice President, Research since August 1989. Prior to joining the Company, he
was an Assistant Professor of Chemistry at Cornell University.
DR. SMITH joined the Company in August 1989 as Senior Vice President,
Research. Prior to joining the Company, he served as Vice President-Scientific
Director of Integrated Genetics, Inc. from November 1984 until its acquisition
by the Company in August 1989. From October 1980 to October 1984, Dr. Smith
was head of the Biochemistry Division of the National Institute for Medical
Research, Mill Hill, London, England. Dr. Smith also serves as a director of
GTC.
MR. LEBSON joined the Company in August 1989 as Executive Assistant to
the President and served as Vice President, Financial Operations from April
1990 to August 1991 and as Vice President and Treasurer since then. Prior to
joining the Company, he served as Treasurer and Chief Financial Officer of
Integrated Genetics, Inc. from 1983 until its acquisition by the Company in
August 1989. Mr. Lebson is also Vice President and Treasurer of GTC.
DR. MCPHERSON joined the Company in August 1989 and has served as Vice
President, Therapeutic Protein Development from August 1989 to the present, and
was named an officer in that position in May 1993. Since December 16, 1994, he
has also served as Vice President, Research and Development of the Company's
Tissue Repair Division. Prior to joining the Company, he was, since April
1988, Director, Protein Chemistry of Integrated Genetics, Inc.
DR. MOSCICKI joined the Company in March 1992 as Medical Director,
became Vice President, Medical Affairs in early 1993 and was named Vice
President, Clinical, Medical and Regulatory Affairs in December 1993. Since
1979, he has also been a physician staff member at the Massachusetts General
Hospital and a faculty member at the Harvard Medical School.
MR. VAN HEEK joined the Company in September 1991 as General Manager
of its wholly-owned subsidiary, Genzyme, B.V., and became a Genzyme Vice
President and the President of Genzyme Therapeutics Division in December 1993.
Prior to joining the Company, he was, since 1988, Vice President/General
Manager of the Fenwal Division of Baxter Healthcare Corporation. Mr. van Heek
also has served as President and Treasurer of Neozyme II since March 1992.
38
<PAGE> 41
DR. ANAGNOSTOPOULOS is Managing General Partner of Gateway Associates,
which is the general partner of Gateway Venture Partners III, L.P., a venture
capital partnership. From January 1986 to April 1987, Dr. Anagnostopoulos was
a consultant to Monsanto Company, a producer of pharmaceuticals, chemicals,
plastics and textiles, and to Alafi Capital, a venture capital firm. From 1982
through 1985, he served as Corporate Vice President of Monsanto Company.
MR. BERTHIAUME is a director, President, and Chief Executive Officer
of Waters Corporation, a high technology manufacturer of products used for
analysis and purification, formerly a division of Millipore Corporation. From
May 1991 to August 1994, he was President of the Waters Division of Millipore
Corporation and from 1988 to 1991, he was Chief Financial Officer of Millipore
Corporation.
MR. BLAIR is a consultant to several companies, including Genzyme.
Prior to January 1990, Mr. Blair was Senior Vice President, Scientific Affairs
of Genzyme. Before joining Genzyme in 1981, he was Associate Director of the
New England Enzyme Center at Tufts University School of Medicine. Mr. Blair is
also a director of Genzyme Transgenics Corporation, Dynagen, Inc. and Celtrix
Pharmaceuticals, Inc.
MR. CARPENTER is Chairman of the Board of GelTex Pharmaceuticals,
Inc., a privately held pharmaceutical development company which he co-founded
in November 1991 and where he served as President and Chief Executive Officer
until May 1993. Mr. Carpenter was Chairman of the Board, President, and Chief
Executive Officer of Integrated Genetics, Inc., a biotechnology company that
merged with Genzyme in 1989, and Chairman of the Board of BioSurface from
December 1992 until its acquisition by Genzyme in December 1994. Following the
merger and until 1991, Mr. Carpenter was Executive Vice President of Genzyme,
and Chief Executive Officer and Chairman of the Board of IG Labs. Mr.
Carpenter is presently a director of Apex BioSciences, Inc., Neozyme II
Corporation and IG Labs.
DR. COONEY is a Professor of Chemical and Biochemical Engineering and
Co-Director of the Program on the Pharmaceutical Industry at Massachusetts
Institute of Technology. Dr. Cooney joined the MIT faculty as an Assistant
Professor in 1970 and became a Professor in 1982. Dr. Cooney is also a
principal of BioInformation Associates, Inc., a consulting company.
MR. LEWIS is a consultant to several companies and Chairman of the
Board of Delphax Systems, a manufacturer of high speed non-impact printers, and
a member of the Board of Protein Engineering Corporation, a pharmaceutical
discovery and development company. From 1986 to February 1991, Mr. Lewis was
the Vice Chairman of the Board of Dennison Manufacturing Company, a
manufacturer and distributor of products for the stationery, technical paper,
and industrial and retail systems markets. From 1982 to 1986, Mr. Lewis was a
Senior Vice President of Dennison.
SENIOR MANAGEMENT OF GTR
The senior management of GTR consists of the following individuals:
<TABLE>
<CAPTION>
NAME AGE TITLE
<S> <C> <C>
Gregory D. Phelps 46 President
John M. McPherson, Ph.D. 47 Vice President, Research and Development
Timothy R. Surgenor 35 Executive Vice President
John McCambridge 46 Senior Vice President, Sales and Marketing
</TABLE>
MR. SURGENOR joined the Company in December 1994 when the Company
acquired BioSurface. Mr. Surgenor joined BioSurface in May 1987 and served as
Executive Vice President from November 1992 until December 1994. He served as
Vice President, Finance, and Treasurer of BioSurface from 1990 to 1993.
MR. MCCAMBRIDGE served as Senior Vice President, Sales and Marketing
of BioSurface from December 1987 until joining the Company in December 1994.
From 1985 until December 1987, he served in various marketing capacities at
Empire Blue Cross Blue Shield, an insurance company, most recently as Vice
President, Experience Related Groups.
39
<PAGE> 42
See "Management of Genzyme" for biographical information for Mr.
Phelps and Dr. McPherson.
DESCRIPTION OF GENZYME CAPITAL STOCK
The following descriptions are qualified in their entirety by
reference to the Articles of Organization of Genzyme Corporation.
GENERAL
Genzyme is authorized to issue 150 million shares of capital stock,
consisting of 100 million shares of General Division Stock, 40 million shares
of TR Stock and 10 million shares of Preferred Stock. Each class of common
stock has the voting powers, qualifications and rights described below.
DIVIDENDS
Genzyme's Articles of Organization provide that dividends on the
General Division Stock may be declared and paid only out of the lesser of (a)
funds of Genzyme legally available therefor and (b) the Available General
Dividend Amount, as defined below, and that dividends on the TR Stock may be
paid out of the lesser of (a) funds of Genzyme legally available therefor and
(b) the Available Tissue Repair Dividend Amount, as defined below. Under the
Massachusetts Business Corporations Law (the "MBCL"), the payment of dividends
is permitted if the corporation is not insolvent, the dividend payment does not
render the corporation insolvent, and the dividend payment does not violate the
corporation's Articles of Organization. Subject to such limitations, the Board
may, in its sole discretion, declare and pay dividends exclusively on either
class of common stock, or both, in equal or unequal amounts, notwithstanding
the amounts available for the payment of dividends on each class, the
respective voting and liquidation rights of each class, the amounts of prior
dividends declared on each class or any other factor. Genzyme has never paid a
cash dividend on any class of its capital stock and currently intends to retain
all earnings for use in its business.
As stated above, in addition to the statutory limitations under the
MBCL, dividends on the General Division Stock and TR Stock would be limited to
an amount not in excess of the Available General Dividend Amount or the
Available Tissue Repair Dividend Amount, respectively. The "available dividend
amount" for each of the General Division Stock and the TR Stock is defined to
mean generally the greater of (A) the excess of (1) the greater of (a) the fair
value of the net assets allocated to the division represented by such class of
common stock and (b) an amount equal to stockholders' equity allocated to such
division as of June 30, 1994, increased or decreased, as appropriate, to
reflect, after June 30, 1994, (i) the net income or loss of such division, (ii)
any dividends or other distributions (including by reclassification or exchange)
declared or paid with respect to, or repurchases or issuances of, any shares of
capital stock attributed to such division, but excluding dividends or other
distributions paid in shares of capital stock attributed to such division to the
holders thereof, and (iii) any other adjustments to the stockholders' equity of
such division made in accordance with generally accepted accounting principles,
over (2) the aggregate par value of all outstanding shares of capital stock
attributed to such division or (B) the amount legally available for the payment
of dividends determined in accordance with the MBCL applied as if such division
were a separate corporation.
EXCHANGE OF TR STOCK
Genzyme's Articles of Organization do not provide for either mandatory
or optional exchange or redemption of the General Division Stock, but do provide
that TR Stock may be exchanged for any combination of cash and/or General
Division Stock upon the terms described below. Genzyme cannot predict the
impact of its ability to effect such exchanges on the market prices of the
General Division Stock and TR Stock.
OPTIONAL EXCHANGE. At any time after the later of (A) December 31, 1995 or (B)
the date on which equity investments in TR Stock by third-party investors or
the allocation of cash or cash equivalents from the General Division to GTR, or
any combination of such equity investments and allocations, equals an aggregate
of at least $10 million, the Board may determine to exchange all outstanding
shares of TR Stock for any combination of cash and/or General Division Stock
having a Fair Market Value equal to 130% of the Fair Market Value of TR Stock
as determined by the trading prices during a specified
40
<PAGE> 43
period prior to the first public announcement by Genzyme of such exchange.
Thus, upon such completion of this offering, the Board could elect to make such
an exchange after December 31, 1995.
The foregoing provision allows Genzyme the flexibility to redeem all
outstanding shares of TR Stock and leave outstanding one class of common stock
that would represent the residual equity interest in all of Genzyme's
businesses. Subject to the limitations described above, the optional exchange
could be exercised at any future time if the Board determined that, under the
facts and circumstances then existing, an equity structure consisting of two
classes of common stock was no longer in the best interests of all of Genzyme's
stockholders (including holders of General Division Stock and holders of TR
Stock). Such exchange may be consummated, however, at a time that is
disadvantageous to the holders of either General Division Stock or the holders
of TR Stock. See "Risk Factors - Risks Related to Two Classes of Common Stock
- No Rights or Additional Duties With Respect to the Divisions; Potential
Conflicts."
MANDATORY EXCHANGE. In the event of the Disposition, in one transaction or a
series of related transactions, by Genzyme of all or substantially all of the
properties and assets allocated to GTR (other than in connection with the
Disposition by Genzyme of all or substantially all of its properties and assets
in one transaction or a series of related transactions) to any person, entity or
group (other than (A) any entity in which Genzyme, directly or indirectly, owns
all of the equity interest or (B) certain entities formed in connection with
obtaining financing for the programs or products of GTR), Genzyme is required,
on or prior to the first business day following the 90th day following the
consummation of such Disposition, to exchange each outstanding share of TR Stock
for any combination of cash and/or General Division Stock having a Fair Market
Value equal to 130% of the Fair Market Value of TR Stock as determined by the
trading prices during a specified period prior to the first public announcement
by Genzyme of such disposition. Consequently, holders of TR Stock may receive a
greater or lesser premium for their shares than any premium paid by a
third-party buyer of the assets of GTR. In addition, any such exchange for
shares of General Division Stock could be made at a time that is disadvantageous
to the holders of either General Division Stock or the holders of TR stock.
CERTAIN OTHER EXCHANGE TERMS. "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 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. Genzyme's Articles of Organization contain the definitions of
"Disposition" and "Substantially all of the properties and assets of GTR," as
well as certain provisions with regard to required notices of exchanges of TR
Stock, treatment of fractional shares, rights to dividends, surrender and
exchange of stock certificates, payment of issue and transfer taxes and the
treatment of Convertible Securities.
VOTING RIGHTS
Genzyme's Articles of Organization provide that holders of shares of
General Division Stock and TR Stock vote together as a single class on all
matters as to which common stockholders generally are entitled to vote. On all
such matters, each share of General Division Stock has one vote, and through
December 31, 1996 each share of TR Stock has .29 votes. Holders of outstanding
General Division Stock and TR Stock currently have approximately 91% and 9%,
respectively, of the total voting power of Genzyme. The percentages of the
total voting power of Genzyme held by the holders of the General Division Stock
and the TR STock, upon completion of this offering, will be 89% and 11%,
respectively, and, after consummation of both this offering and the General
Division offering, will be approximately 89.5% and 10.5%, respectively,
assuming the over-allotment option granted to the underwriters in connection
with the General Division Offering is not exercised. On January 1, 1997 and on
January 1 every two years thereafter, the number of votes to which each share
of TR Stock is entitled would be adjusted to equal the ratio of the Fair Market
Value of one share of TR Stock to the Fair Market Value of one share of General
Division Stock as of such date. The voting rights of TR Stock will also be
appropriately adjusted so as to avoid dilution in the aggregate voting rights
of either class in the event the outstanding shares of either class are
subdivided (by stock split, reclassification or otherwise) or combined (by
reverse stock split, reclassification or otherwise), or in the event of the
issuance of shares of either class as a dividend or a distribution to holders
of shares of that class. If shares of only one class of common stock are
outstanding, or if shares of any class of common stock are entitled to vote
separately as a class, each share of that class would have one vote.
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<PAGE> 44
The relative voting rights of General Division Stock and TR Stock are
adjusted from time to time as described above so that a holder's voting rights
may more closely reflect the market value of such holder's equity investment in
Genzyme. Adjustments in the relative voting rights of General Division Stock
and TR Stock may influence an investor interested in acquiring and maintaining
a fixed percentage of Genzyme's voting power to acquire such percentage of both
classes of common stock, and will limit the ability of investors in one class
to acquire for the same consideration relatively greater or lesser voting power
per share than investors in the other class. To the extent the relative market
values of General Division Stock and TR Stock change prior to the first
scheduled adjustment or in between any scheduled adjustments, however, an
investor in one class of common stock may acquire relatively more or less
voting power for the same consideration when compared with investors in the
other class of common stock.
In addition to matters on which the holders of the General Division
Stock and the TR Stock vote together as a single class of stock, Genzyme's
Articles of Organization require the approval by the holders of the affected
class of common stock at a meeting at which a quorum is present and the votes
cast in favor of the proposal exceed those cast against to:
(1) allow any proceeds from the disposition of the properties
or assets allocated to either division to be used in the business of
the other division without fair compensation;
(2) allow any properties or assets allocated to either
division to be used in the business of the other division or for the
declaration or payment of any dividend or distribution on any class of
common stock not attributed to such division without fair
compensation;
(3) issue shares of either class of common stock without
allocating the proceeds of such issuance to the division represented
by such class of common stock (provided, however, that Genzyme may
without such approval issue General Designated Shares and TR
Designated Shares, as each such term is defined below under the
heading "TR Designated Shares and General Designated Shares");
(4) change the rights or preferences of any class of common
stock so as to affect the class adversely; or
(5) effect any merger or business combination involving
Genzyme as a result of which (a) the holders of all classes of common
stock of Genzyme shall no longer own, directly or indirectly, at least
fifty percent (50%) of the voting power of the surviving corporation
and (b) the holders of all classes of common stock of Genzyme do not
receive the same form of consideration, distributed among such holders
in proportion to the market capitalization of each class of common
stock as of the date of the first public announcement of such merger
or business combination.
In addition to the voting rights provided in Genzyme's Articles of
Organization, the approval of the holders of a majority of the outstanding
shares of each class of common stock, voting separately as a class, is required
under the current MBCL to approve any amendment to the Articles of Organization
that would alter or change the powers, preferences or special rights of the
shares of such class so as to affect them adversely. The MBCL does not
currently provide for any other separate voting rights for a class of common
stock. Consequently, because most matters brought to a stockholder vote will
only require the approval of a majority of all of Genzyme's outstanding capital
stock entitled to vote on such matters (including both classes of common stock)
voting together as a single class and because the holders of General Division
Stock currently have more than the number of votes required to approve any such
matter, such holders would be in a position to control the outcome of the vote
on such a matter. See "Risk Factors - Risks Related to Two Classes of Common
Stock -No Additional Separate Voting Rights."
LIQUIDATION RIGHTS
Genzyme's Articles of Organization provide that holders of outstanding
shares of General Division Stock and TR Stock will receive the assets, if any,
remaining for distribution to common stockholders on a per share basis in
proportion to the respective per share liquidation units of each class and such
holders will have no direct claim against any particular assets of Genzyme or
any of its subsidiaries. Each share of General Division Stock will have one
liquidation unit and each share of TR Stock will have .29 liquidation units
(equal to the number of votes to which each share of TR Stock was entitled
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<PAGE> 45
on December 16, 1994). The liquidation units of TR Stock will be appropriately
adjusted so as to avoid dilution in the aggregate liquidation rights of either
class in the event the outstanding shares of either class are subdivided (by
stock split, reclassification or otherwise) or combined (by reverse stock
split, reclassification or otherwise), or in the event of the issuance of
shares of either class as a dividend or a distribution to holders of shares of
that class, but will not otherwise be adjusted.
A merger or business combination involving Genzyme or a sale of all or
substantially all of the assets of Genzyme will not be treated as a
liquidation. However, Genzyme may not, without approval by the holders of the
affected class of Common Stock at a meeting at which a quorum is present and
the votes cast in favor of the action exceed those cast against, effect any
merger or business combination involving Genzyme as a result of which (a) the
holders of all classes of common stock of Genzyme shall no longer own, directly
or indirectly, at least fifty percent of the voting power of the surviving
corporation, and (b) the holders of all classes of common stock of Genzyme do
not receive the same form of consideration, distributed among such holders in
proportion to the market capitalization of each class of common stock as of the
date of the first public announcement of such merger or business combination.
TR DESIGNATED SHARES AND GENERAL DESIGNATED SHARES
Prior to the formation of GTR in December 1994, the Board determined
that the initial pro forma equity interest in GTR would be represented by 10
million shares of TR Stock. This number of shares of TR Stock was established
based on the desired initial trading range of TR Stock, prevailing market
conditions, financial and operating information of GTR and the price-earnings
ratios, market prices of securities and certain financial and operating
information of companies engaged in activities similar to those of GTR. Five
million shares of TR Stock, representing 50% of the initial pro forma equity
interest in GTR, were issued to holders of BioSurface Common Stock in
connection with Genzyme's acquisition of BioSurface. The other 50% of the
initial pro forma equity interest in GTR was represented by five million "TR
Designated Shares." TR Designated Shares are authorized shares of TR Stock
which are not issued and outstanding, but which the Board may from time to time
issue, sell or otherwise distribute without allocating the proceeds or other
benefits of such issuance, sale or distribution to GTR. Genzyme issued
approximately 3,400,000 of such TR Designated Shares as a stock dividend to
holders of General Division Stock of record on December 16, 1994, the date of
the acquisition of BioSurface. The remaining initial TR Designated Shares were
reserved for issuance upon the exercise of General Division stock options and
warrants and the conversion of convertible notes outstanding on December 16,
1994. As of August 1, 1995, there were 1,290,465 TR Designated Shares,
1,280,616 of which were reserved for issuance upon the exercise or conversion
of outstanding stock options, warrants and notes that are exercisable or
convertible into General Division Stock. The shares of TR Stock that are
issuable with respect to the TR Designated Shares are not outstanding shares of
TR Stock, are not eligible to receive dividends, and cannot be voted by
Genzyme.
The number of TR Designated Shares is subject to adjustment. The
number will be (A) adjusted as appropriate to reflect subdivisions (by stock
split or otherwise) and combinations (by reverse stock split or otherwise) of
TR Stock and dividends or distributions of shares of TR Stock to holders of TR
Stock and other reclassifications of TR Stock, (B) decreased by (1) the number
of shares of TR Stock issued by Genzyme, the proceeds of which are allocated to
the General Division, (2) the number of shares of TR Stock issued upon the
exercise or conversion of options, warrants and other securities attributed to
the General Division, and (3) the number of any shares of TR Stock issued by
Genzyme as a dividend or distribution or by reclassification, exchange or
otherwise to holders of General Division Stock (including the 3,400,000 shares
of TR Stock distributed to holders of General Division Stock in December 1994
as described above), and (C) increased by (1) the number of any outstanding
shares of TR Stock repurchased by Genzyme, the consideration for which was
allocated to the General Division, (2) one for each $10.00 reallocated from the
General Division to GTR from time to time in satisfaction of the Funding
Commitment or the Purchase Option of the General Division, up to a maximum $30
million, and (3) the number equal to the fair value (as determined by the
Board) of assets or properties allocated to the General Division that are
reallocated to GTR (other than reallocations that represent sales at fair value
between such divisions or reallocations described in the foregoing clause
(C)(2)) divided by the Fair Market Value of one share of TR Stock as of the
date of the reallocation; Genzyme is prohibited by the Articles of Organization
from taking any action which would have the effect of reducing the number of TR
Designated Shares to a number which is less than zero.
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<PAGE> 46
Genzyme's Articles of Organization also contain provisions for "General
Designated Shares," which are authorized shares of General Division Stock that
Genzyme may issue without allocating any consideration to the General Division.
Currently, there are no General Designated Shares. However, General Designated
Shares may be created if, for example, the Board determines that programs or
other assets reallocated from GTR to the General Division will be accounted for
as an increase in General Designated Shares rather than as a transfer of cash or
other assets of the General Division having a fair value equal to GTR assets
reallocated. Notwithstanding the foregoing, by agreement with BioSurface,
Genzyme adopted a policy that no Key TR Program (as defined in "Management and
Accounting Policies Covering the Relationship of Genzyme Divisions -
Inter-Division Asset Transfers") may be transferred out of GTR without a class
vote of the holders of TR Stock except in certain limited circumstances, and no
reallocation of other programs or assets of GTR may be accounted for as an
increase in General Designated Shares without a class vote of the holders of TR
Stock. Genzyme has also agreed that this policy will not be changed without a
class vote of the holders of TR Stock. Consequently, any decision by the Board
to account for a reallocation of any programs or assets of GTR as an increase in
General Designated Shares would require a class vote of the holders of TR Stock.
The number of General Designated Shares will be subject to adjustment
in a manner substantially similar to adjustments to the number of TR Designated
Shares.
Whenever 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 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 from the TR Designated Shares
or the General Designated Shares, which shall reduce the number of TR Designated
Shares or General Designated Shares, as the case may be, and the proceeds of
which may be used for any proper corporate purpose. In the event Genzyme
repurchases outstanding shares of any class of common stock, it will identify
the number of shares that are repurchased for consideration that was allocated
to the General Division and the number of shares that are repurchased for
consideration that was allocated to GTR and the number of TR Designated Shares
or General Designated Shares may increase accordingly.
"ANTI-TAKEOVER" PROVISIONS
CONTRACTUAL MEASURES. The Articles of Organization and By-Laws of Genzyme
contain provisions that could discourage potential takeover attempts and
prevent stockholders from changing the Genzyme's management, including
authorization of the Board to issue shares of preferred stock in series,
enlarge the size of the Board and fill any vacancies on the Board, and
restrictions on the ability of stockholders to call a special meeting of
stockholders, bring business before an annual meeting and nominate candidates
for election as directors. Genzyme also has agreements with certain officers
containing change of control provisions.
In addition, Genzyme has a stockholder rights plan. Under this plan,
each outstanding share of General Division Stock and TR Stock also represents a
right that, under certain circumstances, may trade separately from the General
Division Stock and TR Stock, respectively. The rights, which are not currently
exercisable, under certain circumstances will permit their holders (other than
an acquiror) to purchase at a favorable price large amounts of General Division
Stock, TR Stock or securities of a successor to Genzyme with the result that an
acquiror's interest in Genzyme would be substantially diluted. The description
and terms of the rights are set forth in an Amended and Restated Rights
Agreement between Genzyme and American Stock Transfer and Trust Company as
Rights Agent.
BUSINESS COMBINATION STATUTE. Massachusetts' "Business Combination" statute
provides that, if a person acquires 5% or more of the stock of a Massachusetts
corporation without the approval of its board of directors (an "interested
stockholder"), he may not engage in certain transactions with the corporation
for a period of three years. There are certain exceptions to this prohibition;
for example, if the board of directors approves the acquisition of stock or the
transaction prior to the time that the person became an interested stockholder,
or if the interested stockholder acquires 90% of the voting stock of the
corporation (excluding voting stock owned by directors who are also officers
and certain employee stock plans) in one transaction, or if the transaction is
approved by the board of directors and by the affirmative vote of two-thirds of
the outstanding voting stock which is not owned by the interested stockholder,
the prohibition does not apply.
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<PAGE> 47
Genzyme is subject to the Massachusetts Business Combination statute
unless it elects not to be governed by the statute in its Articles of
Organization or By-laws. Genzyme has not made such election and does not
currently intend to make such an election.
CONTROL SHARE ACQUISITION STATUTE. The Massachusetts Control Share Acquisition
statute provides that a person (hereinafter, the "acquiror") who makes a bona
fide offer to acquire, or acquires, shares of stock of a corporation that when
combined with shares already owned, would increase the acquiror's ownership to
at least 20%, 33 1/3%, or a majority of the voting stock of the corporation,
must obtain the approval of a majority in interest of the shares held by all
stockholders, excluding shares held by the acquiror and the officers and inside
directors of the corporation, in order to vote the shares acquired. The
statute does not require the acquiror to consummate the purchase before the
stockholder vote is taken.
The Control Share Acquisition statute permits a Massachusetts
corporation to elect not to be governed by these provisions by including such
an election in its articles of organization or by-laws. The Genzyme By-Laws
contain a provision pursuant to which Genzyme elected not to be governed by the
Massachusetts Control Share Acquisition statute. However, if at a future date
the Board determines that it is in the best interests of Genzyme and its
stockholders that Genzyme be governed by the statute, Genzyme's By- Laws may be
amended to permit it to be governed by such statute. Any such amendment,
however, would apply only to acquisitions crossing the thresholds which occur
after the effective date of such amendment.
MANAGEMENT AND ACCOUNTING POLICIES GOVERNING
THE RELATIONSHIP OF GENZYME DIVISIONS
Genzyme has adopted the following policies to govern the management of
GTR 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 GTR. The purpose of GTR 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
GTR, it is expected that the GTR 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, GTR 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
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<PAGE> 48
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 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 that
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 GTR to the General Division as an increase in the number of
General Designated Shares and a reallocation of assets from the General
Division to GTR as either an increase in the number of TR Designated Shares or
a reduction in the General Designated Shares, if any, except that a reallocation
of assets from GTR 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 Stock.
Notwithstanding the foregoing, no Key TR Program, as defined below,
may be transferred out of GTR without a class vote of the holders of TR 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-Beta2 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 GTR which (a)
constituted 20% or more of the research and development budget of GTR 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 GTR.
The foregoing policies regarding transfers of assets between divisions
may not be changed by the Board without a class vote of the holders of TR Stock.
ACCESS TO TECHNOLOGY AND KNOW-HOW. GTR 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.
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Genzyme distributed approximately 3.4 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 1.6 million 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 GTR.
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
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 Stock without allocating the proceeds to GTR (except upon
exercise or conversion of options, warrants or convertible notes outstanding as
of December 16, 1994) unless (i) the Board determines that GTR has cash
sufficient to fund its operations for at least the next 12 months or (ii) shares
of TR Stock concurrently being sold for the account of GTR will produce proceeds
sufficient to fund GTR's cash needs for the next 12 months.
RESERVATION OF SHARES OF TR STOCK. Genzyme has reserved approximately 2,000,000
shares of TR 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 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 Stock. Such restriction is
intended to prevent Genzyme from using open market purchases to effect a
redemption of the TR Stock without paying the 30% premium required for a
complete redemption of TR Stock Under the terms of Genzyme's Articles of
Organization. See "Description of Genzyme Capital Stock- Exchange of TR
Stock." 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 Genzyme's Articles of
Organization, 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 GTR that compete or
would compete in the market with products being developed or sold by GTR.
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<PAGE> 50
UNDERWRITING
Under the terms and subject to the conditions contained in an
Underwriting Agreement dated , 1995 (the "Underwriting Agreement"),
the Underwriters named below (the "Underwriters"), for whom CS First Boston
Corporation, Cowen & Company and PaineWebber Incorporated are acting as
representatives (the "Representatives"), have severally but not jointly agreed
to purchase from the Company the following respective numbers of shares of TR
Stock:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ------
<S> <C>
CS First Boston Corporation . . . . . . . . . . . . . . .
Cowen & Company . . . . . . . . . . . . . . . . . . . . .
PaineWebber Incorporated . . . . . . . . . . . . . . . . .
---------
Total . . . . . . . . . . . . . . . . . . . . . . 3,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of TR Stock
offered hereby (other than those shares covered by the over-allotment option
described below) if any are purchased. The Underwriting Agreement provides
that, in the event of a default by an Underwriter, in certain circumstances the
purchase commitments of non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Company has granted to the Underwriters an option, expiring at the
close of business on the 30th day after the date of this Prospectus, to
purchase up to 450,000 additional shares at the initial public offering price
less the underwriting discounts and commissions, all as set forth on the cover
page of this Prospectus. Such option may be exercised only to cover
over-allotments in the sale of the shares of TR Stock. To the extent such
option is exercised, each Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares of TR Stock as it was obligated to purchase pursuant to the Underwriting
Agreement.
The Company has been advised by the Representatives that the
Underwriters propose to offer the shares of TR Stock to the public initially at
the public offering price set forth on the cover page of this Prospectus and,
through the Representatives, to certain dealers at such price less a concession
of $ per share, and the Underwriters and such dealers may allow a
discount of $ per share on sales to certain other dealers. After the
initial public offering, the public offering price and concession and discount
to dealers may be changed by the Representatives.
In connection with this offering, CS First Boston Corporation and
certain of the Underwriters and selling group members (if any) and their
respective affiliates may engage in passive market making transactions on the
Nasdaq National Market in accordance with Rule 10b-6A under the Exchange Act
during a period before commencement of offers or sales of the shares of TR
Stock offered hereby. The passive market making transactions must comply with
the applicable volume and price limits and be identified as such.
The Company has agreed that it will not offer, sell, contract to sell,
announce its intention to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under the
Securities Act relating to, any shares of TR Stock or securities convertible
into or exchangeable or exercisable for any shares of TR
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<PAGE> 51
Stock, other than pursuant to employee benefit plans and upon the exercise or
conversion of outstanding warrants and convertible notes, without the prior
written consent of CS First Boston Corporation for a period of 90 days after the
effective date of the Registration Statement. In addition, certain holders of
an aggregate of approximately 700,000 shares of TR Stock have agreed not to
sell, exchange, transfer, pledge or otherwise dispose of their TR Stock for 90
days after the effective date of the Registration Statement without the prior
consent of the Company, and the Company has agreed not to give its consent
without the prior written consent of CS First Boston.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or
contribute to payments which the Underwriters may be required to make in
respect thereof.
CS First Boston Corporation and PaineWebber Incorporated provided
financial advisory services to Genzyme and Biosurface, respectively, in
connection with Biosurface's merger with and into a wholly-owned subsidiary of
Genzyme in December 1994. In addition, the Representatives and certain other
Underwriters have from time to time provided other investment banking services
to the Company for customary fees and may continue to do so in the future. It
is anticipated that the Representatives and certain other Underwriters will
participate in this offering.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the TR Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company prepare
and file a prospectus with the securities regulatory authorities in each
province where trades of TR Stock are effected. Accordingly, any resale of the
TR Stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the TR Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of TR Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company and the dealer from
whom such purchase confirmation is received that (i) such purchaser is entitled
under applicable provincial securities laws to purchase such TR Stock without
the benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
All of the issuer's directors and officers as well as the experts
named herein may be located outside of Canada and, as a result, it may not be
possible for Ontario purchasers to effect service of process within Canada upon
the issuer or such persons. All or a substantial portion of the assets of the
issuer and such persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or such persons in
Canada or to enforce a judgment obtained in Canadian courts against such issuer
or persons outside of Canada.
49
<PAGE> 52
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of TR Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any TR
Stock acquired by such purchaser pursuant to this offering. Such report must
be in the form attached to British Columbia Securities Commission Blanket Order
BOR #88/5, a copy of which may be obtained from the Company. Only one such
report must be filed in respect of the TR Stock acquired on the same date and
under the same prospectus exemption.
LEGAL OPINIONS
The validity of the TR Stock offered hereby will be passed upon for
the Company by Palmer & Dodge, Boston, Massachusetts. Peter Wirth, a partner of
Palmer & Dodge, is Clerk of the Company. Certain legal matters will be passed
upon for the Company by Mark A. Hofer, Esq., Senior Vice President and General
Counsel of the Company. As of August 1, 1995, Mr. Hofer beneficially owned
2,345 and 1,531 shares of General Division Stock and TR Stock, respectively
(including 932 and 125 shares of General Division Stock and TR Stock,
respectively, acquired under the Genzyme Corporation Retirement Savings Plan
(the "Plan") as of December 31, 1994), and held options to purchase 73,393
shares and 13,937 shares of General Division Stock and TR Stock, respectively,
which are exercisable within the 60-day period following August 1, 1995. shares
of General Division Stock and TR Stock beneficially owned by Mr. Hofer, other
than shares subject to stock options and shares acquired under the Plan, are
owned jointly with his wife. Mr. Hofer also beneficially owns 5,000 shares of
the Common Stock of IG Laboratories, Inc., a majority owned subsidiary of
Genzyme. Certain legal matters will be passed upon for the Underwriters by
Cahill Gordon & Reindel (a partnership including a professional corporation),
New York, New York.
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 Amendments Nos. 1 and 2 thereto on Form 10-K/A, that have been
incorporated by reference into this Prospectus, have been incorporated herein in
reliance on the reports 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 on 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.
50
<PAGE> 53
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE SUCH DATE.
_______________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Price Range of TR Stock and Dividend
Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Genzyme Tissue Repair Division
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . 14
GTR Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . 15
Additional Financial Data . . . . . . . . . . . . . . . . . . . . . . . 18
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Description of Genzyme Capital Stock . . . . . . . . . . . . . . . . . 40
Management and Accounting Policies
Governing the Relationship of
Genzyme Divisions . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Notice to Canadian Residents . . . . . . . . . . . . . . . . . . . . . 49
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
GENZYME
3,000,000 Shares
Tissue Repair Division
Common Stock
($.01 par value)
PROSPECTUS
CS First Boston
Cowen & Company
PaineWebber Incorporated
<PAGE> 54
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be borne by the Company in connection with this
offering are as follows:
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . $ 13,384
NASD filing fee . . . . . . . . . . . . $ 4,382
Blue Sky fees and expenses . . . . . . . $ 17,250
Printing expenses . . . . . . . . . . . $ 50,000
Accounting fees and expenses . . . . . . $ 50,000
Legal fees and expenses . . . . . . . . $125,000
Transfer Agent and Registrar fees . . . $ 10,000
Miscellaneous expenses . . . . . . . . . $ 29,984
Total . . . . . . . . . . . . . . . $300,000
</TABLE> ========
All of the above figures, except the SEC registration fee and the NASD
filing fee, are estimates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 67 of chapter 156B of the Massachusetts Business Corporation
Law grants Genzyme the power to indemnify any director, officer, employee or
agent to whatever extent permitted by Genzyme's Articles of Organization,
By-Laws or a vote adopted by the holders of a majority of the shares entitled
to vote thereon, unless the proposed indemnitee has been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his or
her actions were in the best interests of the corporation or, to the extent
that the matter for which indemnification is sought relates to service with
respect to an employee benefit plan, in the best interests of the participants
or beneficiaries of such employee benefit plan. Such indemnification may
include payment by Genzyme of expenses incurred in defending a civil or
criminal action or proceeding in advance of the final disposition of such
action or proceeding, upon receipt of an undertaking by the person indemnified
to repay such payment if he or she shall be adjudicated to be not entitled to
indemnification under the statute.
Article VI of Genzyme's By-Laws provides that Genzyme shall, to the
extent legally permissible, indemnify each person who may serve or who has
served at any time as a director or officer of the corporation or of any of its
subsidiaries, or who at the request of the corporation may serve or at any time
has served as a director, officer or trustee of, or in a similar capacity with,
another organization or an employee benefit plan, against all expenses and
liabilities (including counsel fees, judgments, fines, excise taxes, penalties
and amounts payable in settlements) reasonably incurred by or imposed upon such
person in connection with any threatened, pending or completed action, suit or
other proceeding, whether civil, criminal, administrative or investigative, in
which he or she may become involved by reason of his or her serving or having
served in such capacity (other than a proceeding voluntarily initiated by such
person unless he or she is successful on the merits, the proceeding was
authorized by the corporation or the proceeding seeks a declaratory judgment
regarding his or her own conduct). Such indemnification shall include payment
by Genzyme of expenses incurred in defending a civil or criminal action or
proceeding in advance of the final disposition of such action or proceeding,
upon receipt of an undertaking by the person indemnified to repay such payment
if he or she shall be adjudicated to be not entitled to indemnification under
Article VI, which undertaking may be accepted without regard to the financial
ability of such person to make repayment.
II-1
<PAGE> 55
The indemnification provided for in Article VI is a contract right
inuring to the benefit of the directors, officers and others entitled to
indemnification. In addition, the indemnification is expressly not exclusive
of any other rights to which such director, officer or other person may be
entitled by contract or otherwise under law, and inures to the benefit of the
heirs, executors and administrators of such a person.
Genzyme also has in place agreements with certain officers and
directors which affirm Genzyme's obligation to indemnify them to the fullest
extent permitted by law and contain various procedural and other provisions
which expand the protection afforded by Genzyme's By-Laws.
Section 13(b)(1 1/2) of chapter 156B of the Massachusetts Business
Corporation Law provides that a corporation may, in its articles of
organization, eliminate a director's personal liability to the corporation and
its stockholders for monetary damages for breaches of fiduciary duty, except in
circumstances involving (i) a breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
unauthorized distributions and loans to insiders and (iv) transactions from
which the director derived an improper personal benefit. Section VI.C.5. of
Genzyme's Articles of Organization provides that no director shall be
personally liable to the corporation or its stockholders for monetary damages
for any breach of fiduciary duty as a director, except to the extent that such
exculpation is not permitted under the Massachusetts Business Corporation Law
as in effect when such liability is determined.
ITEM 16. EXHIBITS
1 Underwriting Agreement dated as of _____________, 1995 between Genzyme
and CS First Boston Corporation. Filed herewith.
4.1 Articles of Organization, as amended, of Genzyme. Filed as Exhibit
3.1 to Genzyme's Form 10-K for the year ended December 31, 1994, and
incorporated herein by reference.
4.2 By-laws of Genzyme. Filed as Exhibit 3.2 to Genzyme's Form 8-K dated
December 31, 1991, and incorporated herein by reference.
4.3 Amended and Restated Rights Agreement dated as of October 13, 1994
between Genzyme and American Stock Transfer and Trust Company. Filed
as Exhibit 4 to Genzyme's Form 8-K dated December 29, 1994, and
incorporated herein by reference.
5 Opinion of Palmer & Dodge. Filed herewith.
23.1 Consent of Palmer & Dodge (contained in Exhibit 5).
24.1 Power of Attorney (included in the signature pages to the Registration
Statement of the Registrant filed on August 17, 1995).
24.2 Certified Copy of Board Resolution authorizing signatures pursuant to
Power of Attorney. Filed herewith.
II-2
<PAGE> 56
ITEM 17. UNDERTAKINGS
(a) The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) (1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 57
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cambridge, Commonwealth of Massachusetts, on
September 19, 1995.
GENZYME CORPORATION
By: *
--------------------------------
Henri A. Termeer, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
* Director and Principal September ___, 1995
------------------------------ Executive Officer
Henri A. Termeer
/s/ David J. McLachlan Principal Financial and September 19, 1995
------------------------------ Accounting Officer
David J. McLachlan
* Director September ___, 1995
------------------------------
Constantine E. Anagnostopoulos
* Director September ___, 1995
------------------------------
Douglas A. Berthiaume
* Director September ___, 1995
------------------------------
Henry E. Blair
* Director September ___, 1995
------------------------------
Robert J. Carpenter
* Director September ___, 1995
------------------------------
Charles L. Cooney
* Director September ___, 1995
------------------------------
Henry R. Lewis
</TABLE>
*By: /s/ David J. McLachlan
----------------------
David J. McLachlan
Attorney-in-Fact
II-4
<PAGE> 58
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NO.
------- ----------- --------
<S> <C> <C>
1 Underwriting Agreement dated as of _______________, 1995 between
Genzyme and CS First Boston Corporation. Filed herewith. 59
4.1 Articles of Organization, as amended, of Genzyme. Filed as Exhibit 3.1 to
Genzyme's Form 10-K for the year ended December 31, 1994, and incorporated
herein by reference.
4.2 By-laws of Genzyme. Filed as Exhibit 3.2 to Genzyme's Form 8-K dated
December 31, 1991, and incorporated herein by reference.
4.3 Amended and Restated Rights Agreement dated as of October 13, 1994
between Genzyme and American Stock Transfer and Trust Company. Filed
as Exhibit 4 to Genzyme's Form 8-K dated December 29, 1994, and
incorporated herein by reference.
5 Opinion of Palmer & Dodge. Filed herewith. 98
23.1 Consent of Palmer & Dodge (contained in Exhibit 5).
24.1 Power of Attorney (included in the signature pages to the Registration
Statement of the Registrant filed on August 17, 1995).
24.2 Certified Copy of Board Resolution authorizing signatures pursuant to
Power of Attorney. Filed herewith. 99
</TABLE>
<PAGE> 1
3,000,000 Shares
GENZYME CORPORATION
Tissue Repair Division Common Stock
UNDERWRITING AGREEMENT
September __, 1995
CS First Boston Corporation
Cowen & Company
PaineWebber Incorporated,
As Representatives of the Several Underwriters,
c/o CS First Boston Corporation
Park Avenue Plaza
New York, N.Y. 10055
Dear Sirs:
1. Introductory. Genzyme Corporation, a
Massachusetts corporation ("Company"), proposes to issue and
sell to the Underwriters named in Schedule A (the
"Underwriters") 3,000,000 shares ("Firm Securities") of its
Tissue Repair Division Common Stock, par value $.01 per share
("Securities"), and also proposes to issue and sell to the
Underwriters, at the option of the Underwriters, an aggregate
of not more than additional shares ("Optional
Securities") of its Securities as set forth below. The Firm
Securities and the Optional Securities are herein collectively
called the "Offered Securities". The Company hereby agrees
with the several Underwriters as follows:
2. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, the
several Underwriters that:
(a) The Company and the proposed offering of the
Firm Securities meet the requirements for use of Form S-3,
and a registration statement on Form S-3 (No. 33-61871)
relating to the Offered Securities, including a form of
prospectus, has been filed with the Securities and
Exchange Commission ("Commission") and either (i) has been
declared effective under the Securities Act of 1933
<PAGE> 2
-2-
("Act") and is not proposed to be amended or (ii) is
proposed to be amended by amendment or post-effective
amendment. If such registration statement ("initial
registration statement") has been declared effective,
either (i) an additional registration statement
("additional registration statement") relating to the
Offered Securities may have been filed with the Commission
pursuant to Rule 462(b) ("Rule 462(b)") under the Act and,
if so filed, has become effective upon filing pursuant to
such Rule and the Offered Securities all have been duly
registered under the Act pursuant to the initial
registration statement and, if applicable, the additional
registration statement or (ii) such an additional
registration statement may be proposed to be filed with
the Commission pursuant to Rule 462(b), if so filed, and
will become effective upon filing pursuant to such Rule
and upon such filing the Offered Securities will all have
been duly registered under the Act pursuant to the initial
registration statement and such additional registration
statement. If the Company does not propose to amend the
initial registration statement or if an additional
registration statement has been filed and the Company does
not propose to amend it and if any post-effective
amendment to either such registration statement has been
filed with the Commission prior to the execution and
delivery of this Agreement, the most recent amendment (if
any) to each such registration statement has been declared
effective by the Commission or has become effective upon
filing pursuant to Rule 462(c) ("Rule 462(c)") under the
Act or, in the case of the additional registration
statement, Rule 462(b). For purposes of this Agreement,
"Effective Time" with respect to the initial registration
statement or, if filed prior to the execution and delivery
of this Agreement, the additional registration statement
means (i) if the Company has advised the Representatives
that it does not propose to amend such registration
statement, the date and time as of which such registration
statement, or the most recent post-effective amendment
thereto (if any) filed prior to the execution and delivery
of this Agreement, was declared effective by the
Commission or has become effective upon filing pursuant to
Rule 462(c), or (ii) if the Company has advised the
Representatives that it proposes to file an amendment or
post-effective amendment to such registration statement,
the date and time as of which such registration statement,
as amended by such amendment or post-effective amendment,
as the case may be, is declared effective by the
<PAGE> 3
-3-
Commission. If an additional registration statement has
not been filed prior to the execution and delivery of this
Agreement but the Company has advised the Representatives
that it proposes to file one, "Effective Time" with
respect to such additional registration statement means
the date and time as of which such registration statement
is filed and becomes effective pursuant to Rule 462(b).
"Effective Date" with respect to the initial registration
statement or the additional registration statement (if
any) means the date of the Effective Time thereof. The
initial registration statement, as amended at its
Effective Time, including all material incorporated by
reference therein, including all information contained in
the additional registration statement (if any) and deemed
to be a part of the initial registration statement as of
the Effective Time of the additional registration
statement pursuant to the General Instructions of Form S-3
and including all information (if any) deemed to be a part
of the initial registration statement as of its Effective
Time pursuant to Rule 430A(b) ("Rule 430A(b)") under the
Act, is hereinafter referred to as the "Initial
Registration Statement". The additional registration
statement, as amended at its Effective Time, including the
contents of the initial registration statement and all
other information incorporated by reference therein and
including all information (if any) deemed to be a part of
the additional registration statement as of its Effective
Time pursuant to Rule 430A(b), is hereinafter referred to
as the "Additional Registration Statement". The Initial
Registration Statement and the Additional Registration
Statement are herein referred to collectively as the
"Registration Statements" and individually as a
"Registration Statement". The form of prospectus relating
to the Offered Securities, as first filed with the
Commission pursuant to and in accordance with Rule 424(b)
("Rule 424(b)") under the Act or (if no such filing is
required) as included in a Registration Statement,
including all material incorporated by reference in such
prospectus, is hereinafter referred to as the
"Prospectus". No document has been or will be prepared or
distributed in reliance on Rule 434 under the Act.
(b) If the Effective Time of the Initial
Registration Statement is prior to the execution and
delivery of this Agreement: (i) on the Effective Date of
the Initial Registration Statement, the Initial
Registration Statement conformed in all respects to the
<PAGE> 4
-4-
requirements of the Act and the rules and regulations of
the Commission ("Rules and Regulations") and did not
include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading,
(ii) on the Effective Date of the Additional Registration
Statement (if any), each Registration Statement conformed,
or will conform, in all respects to the requirements of
the Act and the Rules and Regulations and did not include,
or will not include, any untrue statement of a material
fact and did not omit, or will not omit, to state any
material fact required to be stated therein or necessary
to make the statements therein not misleading and (iii) on
the date of this Agreement, the Initial Registration
Statement and, if the Effective Time of the Additional
Registration Statement is prior to the execution and
delivery of this Agreement, the Additional Registration
Statement each conform, and at the time of filing of the
Prospectus pursuant to Rule 424(b) or (if no such filing
is required) at the Effective Date of the Additional
Registration Statement in which the Prospectus is
included, each Registration Statement and the Prospectus
will conform, in all respects to the requirements of the
Act and the Rules and Regulations, and neither of such
documents includes, or will include, any untrue statement
of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary
to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they
are made) not misleading. If the Effective Time of the
Initial Registration Statement is subsequent to the
execution and delivery of this Agreement: on the
Effective Date of the Initial Registration Statement, the
Initial Registration Statement and the Prospectus will
conform in all respects to the requirements of the Act and
the Rules and Regulations, neither of such documents will
include any untrue statement of a material fact or will
omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, and no Additional Registration Statement has
been or will be filed. The two preceding sentences do not
apply to statements in or omissions from a Registration
Statement or the Prospectus in reliance upon and in
conformity with written information relating to any
Underwriter furnished to the Company by such Underwriter
through the Representatives specifically for use therein,
it being understood and agreed that the only such
<PAGE> 5
-5-
information is that described as such in Section 7(b).
The documents which are or will be incorporated by
reference in a Registration Statement or the Prospectus or
from which information is or will be so incorporated by
reference, when they became or become effective or were or
are filed with the Commission, as the case may be,
complied or will comply in all material respects with the
requirements of the Act or the Securities Exchange Act of
1934, as amended ("Exchange Act"), the Rules and
Regulations and the rules and regulations under the
Exchange Act ("Exchange Act Rules and Regulations"), as
applicable.
(c) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of
the Commonwealth of Massachusetts, with power and
authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus; and
the Company is duly licensed or qualified to do business
as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property
or the conduct of its business requires such license or
qualification, except where the failure to be so licensed
or qualified would not have a material adverse effect on
the business, condition (financial or otherwise),
properties, prospects or results of operations of (i) the
Company and the Subsidiaries (as defined below) taken as a
whole (the "Business of the Company") or (ii) the
Company's Tissue Repair Division (the "Business of GTR").
(d) The only "significant subsidiaries" of the
Company, as defined in Rule 1-02(x) of the Commission's
Regulation S-X, that are corporations are the subsidiaries
of the Company listed on Schedule B hereto (the "Corporate
Subsidiaries"). The only other entities in which the
Company has a direct or indirect equity interest (other
than entities which are not "significant subsidiaries" of
the Company, as defined in Rule 1-02(x) of the
Commission's Regulation S-X) are those partnerships listed
on Schedule C hereto (the "Partnerships"). The Corporate
Subsidiaries and the Partnerships are hereinafter
collectively referred to as the "Subsidiaries". Each
Subsidiary has been duly incorporated or organized and is
existing in good standing under the laws of the
jurisdiction of its incorporation or formation, with power
and authority to own its properties and conduct its
business as described in the Prospectus; and each
<PAGE> 6
-6-
Subsidiary is duly licensed or qualified to do business as
a foreign corporation or other entity in good standing in
all other jurisdictions in which its ownership or lease of
property or the conduct of its business requires such
license or qualification, except where the failure to be
so licensed or qualified would not have a material adverse
effect on the Business of the Company or on the Business
of GTR; all of the issued and outstanding capital stock or
partnership interest of each Subsidiary has been duly
authorized and validly issued and, with respect to each
Corporate Subsidiary, is fully paid and nonassessable; and
the capital stock or partnership interest of each
Subsidiary owned by the Company, directly or through
subsidiaries, is owned free from liens, encumbrances and
defects.
(e) The Offered Securities and all other outstanding
shares of capital stock of the Company have been duly
authorized; all outstanding shares of capital stock of the
Company are, and, when the Offered Securities have been
delivered and paid for in accordance with this Agreement
on each Closing Date (as defined below), such Offered
Securities will have been, validly issued, fully paid and
nonassessable and will conform to the description thereof
contained in the Prospectus; and the stockholders of the
Company have no preemptive or similar rights with respect
to the Securities. Except as set forth in the Prospectus,
the Company does not have outstanding, and at the Closing
Date the Company will not have outstanding, any options to
purchase, or any rights or warrants to subscribe for, or
any securities or obligations convertible into, or any
contracts or commitments to issue or sell, (i) any shares
of Securities, or (ii) any shares of capital stock held by
it in any Subsidiary, or any such warrants, convertible
securities or obligations (except shares issued or
issuable pursuant to employee benefit plans after the date
as of which information with respect thereto is given in
the Prospectus).
(f) Except as disclosed in the Prospectus, there are
no contracts, agreements or understandings between the
Company and any person that would give rise to a valid
claim against the Company or any Underwriter for a
brokerage commission, finder's fee or other like payment
with respect to the Offered Securities.
<PAGE> 7
-7-
(g) No holder of securities of the Company has
rights to the registration of any securities of the
Company because of the filing of the Registration
Statement.
(h) The Company has filed a notification form
relating to the issuance of the Offered Securities with
the National Association of Securities Dealers, Inc.
("NASD") in accordance with Schedule D of the NASD
By-laws.
(i) No consent, approval, authorization, or order
of, or filing with, any governmental agency or body or any
court is required for the consummation by the Company of
the transactions contemplated by this Agreement in
connection with the issuance and sale of the Offered
Securities by the Company, except such as have been
obtained and made under the Act and such as may be
required under state securities laws.
(j) The execution, delivery and performance of this
Agreement, and the issuance and sale of the Offered
Securities, will not result in a breach or violation of
any of the terms and provisions of, or constitute a
default under, any statute, any rule, regulation or order
of any governmental agency or body or any court, domestic
or foreign, having jurisdiction over the Company or any
Subsidiary or any of their properties, or any agreement or
instrument to which the Company or any such Subsidiary is
a party or by which the Company or any such Subsidiary is
bound or to which any of the properties of the Company or
any such Subsidiary is subject, or the charter or by-laws
(or comparable instruments) of the Company or any such
Subsidiary, and the Company has full power and authority
to authorize, issue and sell the Offered Securities as
contemplated by this Agreement.
(k) This Agreement has been duly authorized,
executed and delivered by the Company.
(l) Except as disclosed in the Prospectus, the
Company and its Subsidiaries have good and marketable
title to all real properties and all other properties and
assets owned by them, in each case free from liens,
encumbrances and defects that would materially affect the
value thereof or materially interfere with the use made or
to be made thereof by them; and except as disclosed in the
<PAGE> 8
-8-
Prospectus, the Company and its Subsidiaries hold any
leased real or personal property under valid and
enforceable leases with no exceptions that would
materially interfere with the use made or to be made
thereof by them.
(m) The Company and its Subsidiaries possess
adequate certificates, authorities, licenses or permits
issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by them and
have not received any notice of proceedings relating to
the revocation or modification of any such certificate,
authority, licenses or permit that, if determined
adversely to the Company or any of its Subsidiaries, would
individually or in the aggregate have a material adverse
effect on the Business of the Company or on the Business
of GTR.
(n) No labor dispute with the employees of the
Company or any Subsidiary exists or, to the knowledge of
the Company, is imminent that might have a material
adverse effect on the Business of the Company or on the
Business of GTR.
(o) The Company and its Subsidiaries own, possess or
can acquire on reasonable terms adequate trademarks, trade
names and other rights to inventions, know-how, patents,
copyrights, confidential information and other
intellectual property (collectively, "intellectual
property rights") necessary to conduct the business now
operated by them, or presently employed by them, and have
not received any notice of infringement of or conflict
with asserted rights of others with respect to any
intellectual property rights that, if determined adversely
to the Company or any of its Subsidiaries, would
individually or in the aggregate have a material adverse
effect on the Business of the Company or on the Business
of GTR.
(p) Neither the Company nor any of its Subsidiaries
is in violation of any statute, any rule, regulation,
decision or order of any governmental agency or body or
any court, domestic or foreign, relating to the use,
disposal or release of hazardous or toxic substances or
relating to the protection or restoration of the
environment or human exposure to hazardous or toxic
substances (collectively, "environmental laws"), owns or
<PAGE> 9
-9-
operates any real property contaminated with any substance
that is subject to any environmental laws, is liable for
any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to
any environmental laws, which violation, contamination,
liability or claim would individually or in the aggregate
have a material adverse effect on the Business of the
Company or on the Business of GTR; and the Company is not
aware of any pending investigation which might lead to
such a claim.
(q) Except as disclosed in the Prospectus, there are
no pending actions, suits or proceedings against or
affecting the Company, any of its Subsidiaries or any of
their respective properties that, if determined adversely
to the Company or any of its Subsidiaries, would
individually or in the aggregate have a material adverse
effect on the Business of the Company or on the Business
of GTR, or would materially and adversely affect the
ability of the Company to perform its obligations under
this Agreement, or which are otherwise material in the
context of the sale of the Offered Securities; and no such
actions, suits or proceedings are threatened or, to the
Company's knowledge, contemplated.
(r) The financial statements included or
incorporated in each Registration Statement and the
Prospectus present fairly the financial position of the
Company and its consolidated subsidiaries, the General
Division and the Tissue Repair Division as of the dates
shown and their results of operations and cash flows for
the periods shown, and such financial statements have been
prepared in conformity with generally accepted accounting
principles in the United States applied on a consistent
basis and the schedules included in each Registration
Statement present fairly the information required to be
stated therein. The pro forma financial data and other
pro forma financial information included or incorporated
in each Registration Statement and the Prospectus (i)
comply as to form in all material respects with applicable
requirements of Regulation S-X promulgated under the
Exchange Act, (ii) have been prepared in accordance with
the Commission's rules and guidelines with respect to pro
forma financial statements, and (iii) have been properly
computed on the bases described therein; the assumptions
used in the preparation of the pro forma financial data
and other pro forma financial information included or
<PAGE> 10
-10-
incorporated in each Registration Statement and the
Prospectus are reasonable and the adjustments used therein
are appropriate to give effect to the transactions or
circumstances referred to therein. No other financial
statements or schedules of the Company are required by the
Act, the Exchange Act, the Rules and Regulations or the
Exchange Act Rules and Regulations to be included or
incorporated in either Registration Statement or the
Prospectus. Coopers & Lybrand L.L.P. and Price
Waterhouse, who have reported on certain of such financial
statements and schedules, are independent accountants as
required by the Act, the Rules and Regulations, the
Exchange Act and the Exchange Act Rules and Regulations.
(s) There is no document or contract of a character
required to be described in a Registration Statement or
the Prospectus or to be filed as an exhibit to a
Registration Statement which is not described or filed as
required. All contracts so described or filed to which
the Company or any Subsidiary is a party have been duly
authorized, executed and delivered by the Company or such
Subsidiary, constitute valid and binding agreements of the
Company or such Subsidiary and are enforceable against the
Company or such Subsidiary in accordance with the terms
thereof.
(t) Neither the Company nor any of the Subsidiaries
is in violation of its certificate of incorporation,
by-laws or partnership agreement or in default (nor has an
event occurred which with notice or lapse of time or both
would constitute a default or acceleration) in the
performance of any obligation, agreement or condition
contained in any indenture, mortgage, deed of trust,
voting trust agreement, loan agreement, bond, debenture,
note agreement or other evidence of indebtedness, lease,
contract or other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which
any of them or their respective properties is bound or
affected and neither the Company nor any of the
Subsidiaries is in violation of any judgment, ruling,
decree, order, franchise, license or permit known to such
counsel or any statute, rule or regulation applicable to
the business or properties of the Company or any of the
Subsidiaries, where such violation or default would have a
material adverse effect on the Business of the Company or
on the Business of GTR.
<PAGE> 11
-11-
(u) Except as disclosed in the Prospectus, since the
date of the latest audited financial statements included
or incorporated in the Prospectus there has been no
material adverse change, nor any development or event
involving a prospective material adverse change, in the
Business of the Company or in the Business of GTR and
there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its
capital stock.
(v) The Company is not and, after giving effect to
the offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the
Prospectus, will not be an "investment company" as defined
in the Investment Company Act of 1940, as amended.
(w) Neither the Company nor any of its affiliates
does business with the government of Cuba or with any
person or affiliate located in Cuba within the meaning of
Section 517.075, Florida Statutes and the Company agrees
to comply with such Section if prior to the completion of
the distribution of the Offered Securities it commences
doing such business.
(x) Certain holders of Securities, whose names have
been provided to the Representatives and who hold an
aggregate of shares of the Securities, have agreed
not to sell, exchange, transfer, pledge, dispose or
otherwise reduce the risk of ownership of their Securities
for 90 days after the Effective Date of the Initial
Registration Statement (or, if later, of the Additional
Registration Statement), without the prior consent of the
Company, provided that such holders may make bona fide
gifts or distributions without consideration or transfers
by operation of law, so long as any donee or transferee
agrees not to sell, transfer or otherwise dispose of
Securities except as provided above.
(y) The Company and its affiliates have not taken
and will not take, directly or indirectly, any action
designed to cause, or result in, or which has constituted
or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the
Securities to facilitate the sale or resale of the Offered
Securities.
<PAGE> 12
-12-
3. Purchase, Sale and Delivery of Offered
Securities. On the basis of the representations, warranties
and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to the
Underwriters, and the Underwriters agree, severally and not
jointly, to purchase from the Company, at a purchase price of
$ per share, the respective numbers of shares of Firm
Securities set forth opposite the names of the Underwriters in
Schedule A hereto.
The Company will deliver the Firm Securities to the
Representatives for the accounts of the Underwriters, against
payment of the purchase price by certified or official bank
check or checks in New York Clearing House (next day) funds
drawn to the order of the Company at the office of Cahill
Gordon & Reindel, 80 Pine Street, NY, NY, at 9:00 A.M., New
York time, on , 1995, or at such
other time not later than seven full business days thereafter
as CS First Boston Corporation ("CS First Boston") and the
Company determine, such time being herein referred to as the
"First Closing Date". For purposes of Rule 15c6-1 under the
Exchange Act, the First Closing Date (if later than the
otherwise applicable settlement date) shall be the settlement
date for payment of funds and delivery of securities for all
the Offered Securities sold pursuant to the offering. The
certificates for the Firm Securities so to be delivered will be
in definitive form, in such denominations and registered in
such names as CS First Boston requests and will be made
available for checking and packaging at the office of CS First
Boston, Park Avenue Plaza, NY, NY 10055 at least 24 hours prior
to the First Closing Date.
In addition, upon written notice from CS First Boston
given to the Company from time to time not more than 30 days
subsequent to the date of the Prospectus, the Underwriters may
purchase all or less than all of the Optional Securities at the
purchase price per Security to be paid for the Firm Securities.
The Company agrees to sell to the Underwriters the number of
shares of Optional Securities specified in such notice and the
Underwriters agree, severally and not jointly, to purchase such
Optional Securities. Such Optional Securities shall be
purchased for the account of each Underwriter in the same
proportion as the number of shares of Firm Securities set forth
opposite such Underwriter's name bears to the total number of
shares of Firm Securities (subject to adjustment by CS First
Boston to eliminate fractions) and may be purchased by the
Underwriters only for the purpose of covering over-allotments
<PAGE> 13
-13-
made in connection with the sale of the Firm Securities. No
Optional Securities shall be sold or delivered unless the Firm
Securities previously have been, or simultaneously are, sold
and delivered. The right to purchase the Optional Securities
or any portion thereof may be exercised from time to time and
to the extent not previously exercised may be surrendered and
terminated at any time upon notice by CS First Boston to the
Company.
Each time for the delivery of and payment for the
Optional Securities, being herein referred to as an "Optional
Closing Date," which may be the First Closing Date (the First
Closing Date and each Optional Closing Date, if any, being
sometimes referred to as a "Closing Date"), shall be determined
by CS First Boston but shall be not later than five full
business days after written notice of election to purchase
Optional Securities is given. The Company will deliver the
Optional Securities being purchased on each Optional Closing
Date to the Representatives for the accounts of the several
Underwriters, against payment of the purchase price therefor by
certified or official bank check or checks in New York Clearing
House (next day) funds drawn to the order of the Company, at
the above office of Cahill Gordon & Reindel. The certificates
for the Optional Securities being purchased on each Optional
Closing Date will be in definitive form, in such denominations
and registered in such names as CS First Boston requests upon
reasonable notice prior to such Optional Closing Date and will
be made available for checking and packaging at the above
office of CS First Boston at a reasonable time in advance of
such Optional Closing Date.
4. Offering by Underwriters. It is understood that
the several Underwriters propose to offer the Offered
Securities for sale to the public as set forth in the
Prospectus.
5. Certain Agreements of the Company. The Company
agrees with the several Underwriters that:
(a) If the Effective Time of the Initial
Registration Statement is prior to the execution and
delivery of this Agreement, the Company will file the
Prospectus with the Commission pursuant to and in
accordance with subparagraph (1) (or, if applicable and if
consented to by CS First Boston, subparagraph (4)) of
Rule 424(b) not later than the earlier of (A) the second
business day following the execution and delivery of this
<PAGE> 14
-14-
Agreement or (B) the fifteenth business day after the
Effective Date of the Initial Registration Statement. The
Company will advise CS First Boston promptly of any such
filing pursuant to Rule 424(b). If the Effective Time of
the Initial Registration Statement is prior to the
execution and delivery of this Agreement and an additional
registration statement is necessary to register a portion
of the Offered Securities under the Act but the Effective
Time thereof has not occurred as of such execution and
delivery, the Company will transmit the additional
registration statement or, if filed, will transmit a
post-effective amendment thereto with the Commission
pursuant to and in accordance with Rule 462(b) on or prior
to 10:00 P.M., New York time, on the date of this
Agreement or, if earlier, on or prior to the time the
Prospectus is printed and distributed to any Underwriter,
or will make such filing at such later date as shall have
been consented to by CS First Boston.
(b) The Company will advise CS First Boston promptly
of any proposal to amend or supplement the initial or any
additional registration statement as filed or the related
prospectus or the Initial Registration Statement, the
Additional Registration Statement (if any) or the
Prospectus and will not effect such amendment or
supplementation without CS First Boston's consent; and the
Company will also advise CS First Boston promptly of the
effectiveness of each Registration Statement (if its
Effective Time is subsequent to the execution and delivery
of this Agreement) and of any amendment or supplementation
of a Registration Statement or the Prospectus and of the
institution by the Commission of any stop order
proceedings in respect of a Registration Statement and
will use its best efforts to prevent the issuance of any
such stop order and to obtain as soon as possible its
lifting, if issued.
(c) If, at any time when a prospectus relating to
the Offered Securities is required to be delivered under
the Act in connection with sales by any Underwriter or
dealer, any event occurs as a result of which the
Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state
any material fact necessary to make the statements
therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary at
any time to amend the Prospectus to comply with the Act,
<PAGE> 15
-15-
the Company will promptly notify CS First Boston of such
event and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement
which will correct such statement or omission or an
amendment which will effect such compliance. Neither CS
First Boston's consent to, nor the Underwriters' delivery
of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will
make generally available to its securityholders an
earnings statement covering a period of at least 12 months
beginning after the Effective Date of the Initial
Registration Statement (or, if later, the Effective Date
of the Additional Registration Statement) which will
satisfy the provisions of Section 11(a) of the Act. For
the purpose of the preceding sentence, "Availability Date"
means the 45th day after the end of the fourth fiscal
quarter following the fiscal quarter that includes such
Effective Date, except that, if such fourth fiscal quarter
is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of
such fourth fiscal quarter.
(e) The Company will furnish to the Representatives
copies of each Registration Statement (four of which will
be copies of the signed documents certified as to the
authenticity of the signatures and will include all
exhibits), each related preliminary prospectus, and, so
long as delivery of a prospectus relating to the Offered
Securities is required to be delivered under the Act in
connection with sales by any Underwriter or dealer, the
Prospectus and all amendments and supplements to such
documents, in each case as soon as available and in such
quantities as CS First Boston requests. The Prospectus
shall be so furnished on or prior to 10:00 A.M., New York
time, on the business day following the later of the
execution and delivery of this Agreement or the Effective
Time of the Initial Registration Statement. All other
documents shall be so furnished as soon as available. The
Company will pay the expenses of printing and distributing
to the Underwriters all such documents.
(f) The Company will arrange for the qualification
of the Offered Securities for sale under the laws of such
jurisdictions as CS First Boston designates and will
<PAGE> 16
-16-
continue such qualifications in effect so long as required
for the distribution.
(g) During the period of five years hereafter, the
Company will furnish to the Representatives and, upon
request, to each of the other Underwriters, as soon as
practicable after the end of each fiscal year, a copy of
its annual report to stockholders for such year; and the
Company will furnish to the Representatives (i) as soon as
available, a copy of each report and any definitive proxy
statement of the Company filed with the Commission under
the Exchange Act or mailed to stockholders, and (ii) from
time to time, such other information concerning the
Company as CS First Boston may reasonably request.
(h) The Company will pay all expenses incident to
the performance of its obligations under this Agreement
and will reimburse the Underwriters (if and to the extent
incurred by them) for any filing fees and other expenses
(including fees and disbursements of counsel) incurred by
them in connection with qualification of the Offered
Securities for sale under the laws of such jurisdictions
as CS First Boston designates and the reproduction of
memoranda relating thereto, for the filing fee of the
National Association of Securities Dealers, Inc. relating
to the Offered Securities, for any travel expenses of the
Company's officers and employees and any other expenses of
the Company in connection with attending or hosting
meetings with prospective purchasers of the Offered
Securities and for expenses incurred in distributing
preliminary prospectuses and the Prospectus (including any
amendments and supplements thereto) to the Underwriters.
(i) For a period of 90 days after the Effective Date
of the Initial Registration Statement (or, if later, the
Additional Registration Statement), the Company will not
(i) offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the
Commission a registration statement under the Act relating
to, any additional shares of its Securities or securities
convertible into or exchangeable or exercisable for any
shares of its Securities, or publicly disclose the
intention to make any such offer, sale, pledge, disposal
or filing, without the prior written consent of CS First
Boston, except issuances of Securities pursuant to the
conversion or exchange of convertible or exchangeable
securities or the exercise of warrants or options, in each
<PAGE> 17
-17-
case outstanding on the date hereof, grants of employee
stock options pursuant to the terms of a plan in effect on
the date hereof or issuances of Securities pursuant to the
exercise of such options or (ii) consent to any sale,
exchange, transfer, pledge, disposition or other
transaction which would result in a reduction in the risk
of ownership of Securities held by the holders of
Securities referred to in Section 2(x) for which such
consent is required under the agreements referred to
therein, without the prior written consent of CS First
Boston.
6. Conditions of the Obligations of the
Underwriters. The obligations of the several Underwriters to
purchase and pay for the Firm Securities on the First Closing
Date and the Optional Securities to be purchased on each
Optional Closing Date will be subject to the accuracy of the
representations and warranties on the part of the Company
herein, to the accuracy of the statements of Company officers
made pursuant to the provisions hereof, to the performance by
the Company of its obligations hereunder and to the following
additional conditions precedent:
(a) The Representatives shall have received a
letter, dated the date of delivery thereof (which, if the
Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement,
shall be on or prior to the date of this Agreement or, if
the Effective Time of the Initial Registration Statement
is subsequent to the execution and delivery of this
Agreement, shall be prior to the filing of the amendment
or post-effective amendment to the registration statement
to be filed shortly prior to such Effective Time), of
Coopers & Lybrand L.L.P. confirming that they are
independent public accountants within the meaning of the
Act and the applicable published Rules and Regulations
thereunder and stating to the effect that:
(i) in their opinion the financial statements
and schedules examined by them and included or
incorporated in the Registration Statements (the
"Genzyme Financial Statements") comply as to form in
all material respects with the applicable accounting
requirements of the Act and the related published
Rules and Regulations;
<PAGE> 18
-18-
(ii) they have performed the procedures
specified by the American Institute of Certified
Public Accountants for a review of interim financial
information as described in Statement of Auditing
Standards No. 71, Interim Financial Information, on
the unaudited Genzyme Financial Statements (other
than the combined financial statements for the
General Division and the Tissue Repair Division at
and for the three months ended March 31, 1994 and for
the three and six months ended June 30, 1994)
included or incorporated in the Registration
Statements;
(iii) they have read the combined financial
statements for the General Division and the Tissue
Repair Division at and for the three months ended
March 31, 1994 and the three and six months ended
June 30, 1994 and agreed the amounts contained
therein with the Company's accounting records for the
three months ended March 31, 1994 and the three and
six month periods ended June 30, 1994 and they have
inquired of certain officials of the Company who have
responsibility for financial and accounting matters
whether the unaudited combined financial statements
for the General Division and the Tissue Repair
Division at and for the three months ended March 31,
1994 and the three and six months ended June 30, 1994
(1) are in conformity with generally accepted
accounting principles applies on a basis
substantially consistent with that of the audited
combined financial statements included or
incorporated in the Registration Statement, and (2)
comply as to form in all material respects with the
applicable accounting requirements of the Securities
Exchange Act of 1934 and the related published rules
and regulation promulgated thereunder;
(iv) on the basis of the review referred to in
clauses (ii) and (iii) above, a reading of the latest
available interim financial statements of the
Company, the General Division and the Tissue Repair
Division and inquiries of officials of the Company
who have responsibility for financial and accounting
matters and other specified procedures, nothing came
to their attention that caused them to believe that:
<PAGE> 19
-19-
(A) the unaudited Genzyme Financial
Statements included or incorporated in the
Registration Statements do not comply as to form
in all material respects with the applicable
accounting requirements of the Act and the
related published Rules and Regulations or any
material modifications should be made to such
unaudited financial statements for them to be in
conformity with generally accepted accounting
principles;
(B) at the date of the latest available
balance sheets read by such accountants, or at a
subsequent specified date not more than five
days prior to the date of this Agreement, there
was any change in the capital stock or any
increase in short-term indebtedness or long-term
debt of the Company and its consolidated
subsidiaries, the General Division or the Tissue
Repair Division or, at the date of the latest
available balance sheets read by such
accountants, there was any decrease in
consolidated net current assets or net assets,
as compared with amounts shown on the latest
balance sheets included or incorporated in the
Prospectus (other than changes due to option or
warrant exercises); or
(C) for the period from the closing date
of the latest statements of operations included
in the Prospectus to the closing date of the
latest available statements of operations read
by such accountants there were any decreases, as
compared with the corresponding period of the
previous year, in consolidated or combined (by
division) revenues, or operating income, or
income before income taxes, or in the total or
per share amounts of net income and net income
attributable to each division,
except in all cases set forth in clauses (iv)(B) and
(iv)(C) above for changes, increases or decreases
which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(v) they have compared specified dollar amounts
(or percentages derived from such dollar amounts) and
<PAGE> 20
-20-
other financial information contained in the
Registration Statements (in each case to the extent
that such dollar amounts, percentages and other
financial information are derived from the general
accounting records of the Company and its
subsidiaries, the General Division or the Tissue
Repair Division subject to the internal controls of
the Company's accounting system or are derived
directly from such records by analysis or
computation) with the results obtained from
inquiries, a reading of such general accounting
records and other procedures specified in such letter
and have found such dollar amounts, percentages and
other financial information to be in agreement with
such results, except as otherwise specified in such
letter.
For purposes of this subsection, (i) if the Effective Time
of the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement, "Registration
Statements" shall mean the initial registration statement
as proposed to be amended by the amendment or post-
effective amendment to be filed shortly prior to its
Effective Time, (ii) if the Effective Time of the Initial
Registration Statement is prior to the execution and
delivery of this Agreement but the Effective Time of the
Additional Registration is subsequent to such execution
and delivery, "Registration Statements" shall mean the
Initial Registration Statement and the additional
registration statement as proposed to be filed or as
proposed to be amended by the post-effective amendment to
be filed shortly prior to its Effective Time, and (iii)
"Prospectus" shall mean the prospectus included in the
Registration Statements. All financial statements and
schedules included in material incorporated by reference
into the Prospectus shall be deemed included in the
Registration Statements for purposes of this subsection.
(b) The Representatives shall have received a
letter, dated the date of delivery thereof (which, if the
Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement,
shall be on or prior to the date of this Agreement or, if
the Effective Time of the Initial Registration Statement
is subsequent to the execution and delivery of this
Agreement, shall be prior to the filing of the amendment
or post-effective amendment to the registration statement
<PAGE> 21
-21-
to be filed shortly prior to such Effective Time), of
Price Waterhouse confirming that they are independent
public accountants within the meaning of the Act and the
applicable Rules and Regulations thereunder and containing
statements and information satisfactory to the
Representatives with respect to the financial information
relating to BioSurface Technology, Inc. included or
incorporated in the Registration Statements.
(c) If the Effective Time of the Initial
Registration Statement is not prior to the execution and
delivery of this Agreement, such Effective Time shall have
occurred not later than 10:00 P.M., New York time, on the
date of this Agreement or such later date as shall have
been consented to by CS First Boston. If the Effective
Time of the Additional Registration Statement (if any) is
not prior the execution and delivery of this Agreement,
such Effective Time shall have occurred not later than
10:00 P.M., New York time, on the date of this Agreement
or, if earlier, the time the Prospectus is printed and
distributed to any Underwriter, or shall have occurred at
such later date as shall have been consented to by CS
First Boston. If the Effective Time of the Initial
Registration Statement is prior to the execution and
delivery of this Agreement, the Prospectus shall have been
filed with the Commission in accordance with the Rules and
Regulations and Section 5(a) of this Agreement. Prior to
such Closing Date, no stop order suspending the effective-
ness of a Registration Statement shall have been issued
and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Company or the
Representatives, shall be contemplated by the Commission.
(d) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change,
or any development or event involving a prospective
change, in the Business of the Company or in the Business
of GTR which, in the judgment of a majority in interest of
the Underwriters including the Representatives, is
material and adverse and makes it impractical or
inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered
Securities; (ii) any downgrading in the rating of any debt
securities of the Company by any "nationally recognized
statistical rating organization" (as defined for purposes
of Rule 436(g) under the Act), or any public announcement
that any such organization has under surveillance or
<PAGE> 22
-22-
review its rating of any debt securities of the Company
(other than an announcement with positive implications of
a possible upgrading, and no implication of a possible
downgrading, of such rating); (iii) any suspension or
limitation of trading in securities generally on the New
York Stock Exchange, or any setting of minimum prices for
trading on such exchange, or any suspension of trading of
any securities of the Company on any exchange or in the
over-the-counter market; (iv) any banking moratorium
declared by U.S. Federal or New York authorities; or
(v) any outbreak or escalation of major hostilities in
which the United States is involved, any declaration of
war by Congress or any other substantial national or
international calamity or emergency if, in the judgment of
a majority in interest of the Underwriters including the
Representatives, the effect of any such outbreak,
escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of
the public offering or the sale of and payment for the
Offered Securities.
(e) The Representatives shall have received an
opinion, dated such Closing Date, of Palmer & Dodge,
counsel for the Company, to the effect that:
(i) Each of the Company and its Corporate
Subsidiaries incorporated in a state of the United
States (the "Domestic Corporate Subsidiaries") is a
corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of
its incorporation, and each of the Company's
subsidiaries that is a partnership (together with the
Domestic Corporate Subsidiaries, the "Domestic
Subsidiaries") is duly organized, validly existing
and in good standing under the laws of the
jurisdiction of its formation. Each of the Company
and the Domestic Subsidiaries is duly qualified to do
business as a foreign corporation or other entity in
good standing in all jurisdictions in which the
nature of the activities conducted by it or the
character of the assets owned or leased by it makes
such qualification necessary, except where the
failure to be so qualified would not have a material
adverse effect on the Business of the Company or on
the Business of GTR. Each of the Company and the
Domestic Subsidiaries has full power and authority to
own or lease all the assets owned or leased by it and
<PAGE> 23
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to conduct its business as described in the
Prospectus.
(ii) The outstanding shares of the Company's
capital stock have been duly authorized and validly
issued and are fully paid and non-assessable and are
not subject to any preemptive or similar right.
(iii) The Offered Securities sold to the
Underwriters pursuant to this Agreement have been
duly authorized and validly issued by the Company and
upon issuance and delivery against payment therefor
as provided in this Agreement will be fully paid and
non-assessable; and no holder thereof is or will be
subject to personal liability by reason of being such
a holder.
(iv) The issuance of the Offered Securities by
the Company is not subject to preemptive rights of
any holder of securities of the Company.
(v) There are no contracts, agreements or
understandings known to such counsel between the
Company and any person granting such person the right
to require the Company to file a registration
statement under the Act with respect to any
securities of the Company owned or to be owned by
such person or to require the Company to include such
securities in the securities registered pursuant to
the Registration Statement or in any securities being
registered pursuant to any other registration
statement filed by the Company under the Act.
(vi) No consent, approval, authorization or
order of, or any filing or declaration with, any
court or governmental agency or body is required in
connection with the authorization, issuance,
transfer, sale or delivery of the Offered Securities
by the Company, in connection with the execution,
delivery and performance of this Agreement by the
Company or in connection with the taking by the
Company of any action contemplated thereby, except
such as have been obtained under the Act and the
Rules and Regulations and such as may be required
under state securities laws.
<PAGE> 24
-24-
(vii) The authorized capital stock of the Company
is as set forth in the Prospectus. The description
of the Securities contained in the Prospectus
conforms in all material respects to the terms
thereof contained in the Company's articles of
organization. Except as set forth on Schedule B
attached hereto, the Company is the sole record
owner, directly or indirectly, of all of the capital
stock of each of its Domestic Corporate Subsidiaries.
(viii) The Company and the offering of the Firm
Securities meet the requirements for the use of Form
S-3, and the Registration Statement (as amended on
the date of such opinion) and the Prospectus
(including any documents incorporated by reference
into the Prospectus, at the time they were filed)
comply or complied in all material respects as to
form with the requirements of the Act, the Rules and
Regulations, the Exchange Act and the Exchange Act
Rules and Regulations (except that such counsel need
express no opinion as to financial statements,
schedules and other financial and statistical data
contained in such Registration Statement or the
Prospectus or incorporated by reference therein).
(ix) Such counsel has participated in the
preparation of the Registration Statement and the
Prospectus. Except as explicitly provided in such
opinion, such counsel has not undertaken to verify
independently the facts disclosed in the Registration
Statement and the Prospectus (including any documents
incorporated by reference therein). However, in the
course of such participation nothing has come to such
counsel's attention which has caused them to believe
that, both as of the Effective Date of the Initial
Registration Statement (or, if later, of the
Additional Registration Statement) and as of the
First Closing Date and the Optional Closing Date,
either the Registration Statement or the Prospectus,
or any amendment or supplement thereto including any
documents incorporated by reference into the
Prospectus, contained or contains any untrue
statement of a material fact or omitted or omits to
state a material fact required to be stated therein
or necessary to make the statements therein, in light
of the circumstances in which they were made, not
misleading (except that such counsel need express no
<PAGE> 25
-25-
opinion as to financial statements, schedules and
other financial or statistical data contained in the
Registration Statement or the Prospectus or
incorporated by reference therein).
(x) The Initial Registration Statement was
declared effective under the Act as of the date and
time specified in such opinion, the Additional
Registration Statement (if any) was filed and became
effective under the Act as of the date and time (if
determinable) specified in such opinion, the
Prospectus either was filed with the Commission
pursuant to the subparagraph of Rule 424(b) specified
in such opinion on the date specified therein or was
included in the Initial Registration Statement or the
Additional Registration Statement (as the case may
be), and, to the best of such counsel's knowledge, no
order suspending the effectiveness of the
Registration Statement has been issued and no
proceeding for that purpose has been instituted or is
threatened, pending or contemplated.
(xi) Such counsel has reviewed all contracts or
other documents referred to in the Registration
Statement and the Prospectus (excluding any contracts
referred to in the documents incorporated by
reference therein) and the descriptions thereof
(insofar as such descriptions constitute a summary of
the legal matters referred to therein) are accurate
in all material respects. Such counsel does not know
of any contracts or other documents required to be so
summarized or disclosed or filed as an exhibit to the
Registration Statement or to any document
incorporated by reference therein which have not been
so summarized or disclosed or filed.
(xii) All descriptions in the Prospectus of
statutes and regulations (excluding statutes and
regulations relating to FDA matters and organ
transplant or tissue bank licensure laws) and, to the
best of such counsel's knowledge, of legal or
governmental proceedings are accurate and fairly
present the information required to be shown therein.
(xiii) The Company has full corporate power and
authority to enter into this Agreement, and this
<PAGE> 26
-26-
Agreement has been duly authorized, executed and
delivered by the Company.
(xiv) The execution and delivery of this
Agreement by the Company, the consummation by the
Company of the transactions therein contemplated and
the compliance by the Company with the terms of this
Agreement do not and will not result in the creation
or imposition of any lien, charge or encumbrance upon
any of the assets of the Company or any of the
Subsidiaries pursuant to the terms or provisions of,
or result in a breach or violation of any of the
terms or provisions of, or constitute a default or
result in the acceleration of any obligation under,
the articles of organization or by-laws of the
Company or any of its Domestic Corporate
Subsidiaries, or, in the case of each of the
partnerships, its partnership agreement, or any
indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note
agreement or other evidence of indebtedness, lease,
contract or other agreement or instrument known to us
to which the Company or any of the Company's Domestic
Subsidiaries is a party or by which any of the
Company's or any of the Company's Domestic
Subsidiaries' properties is bound or affected, or any
judgment, ruling, decree or order known to such
counsel or any statute, rule or regulation applicable
to the business or properties of the Company or any
of the Company's Domestic Subsidiaries (except that
such counsel need express no opinion as to the
securities or Blue Sky laws of any jurisdiction other
than the United States).
(xv) Delivery of certificates for the Offered
Securities will pass valid and marketable title
thereto free and clear of any liens, encumbrances or
claims to each Underwriter that has purchased such
Securities in good faith without knowledge or reason
to know of any adverse claims thereto and such
counsel is not aware, after due inquiry, of any
adverse claim with respect thereto.
(xvi) Except as disclosed in the Prospectus, such
counsel knows of no actions, suits or proceedings
pending or threatened against or affecting the
Company or any of its Subsidiaries or any of their
<PAGE> 27
-27-
respective properties wherein an unfavorable ruling,
decision or finding might individually or in the
aggregate materially and adversely affect the
Business of the Company or the Business of GTR, or
materially and adversely affect the ability of the
Company to perform its obligations under this
Agreement, or which are otherwise material in the
context of the sale of the Offered Securities.
(xvii) To the best of such counsel's knowledge,
neither the Company nor any of the Domestic
Subsidiaries is in violation of its certificate of
incorporation, by-laws or partnership agreement or in
default (nor has an event occurred which with notice
or lapse of time or both would constitute a default
or acceleration) in the performance of any
obligation, agreement or condition contained in any
indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note
agreement or other evidence of indebtedness, lease,
contract or other agreement or instrument known to
such counsel to which the Company or any of the
Domestic Subsidiaries is a party or by which any of
them or their respective properties is bound or
affected and neither the Company nor any of the
Domestic Subsidiaries is in violation of any
judgment, ruling, decree, order, franchise, license
or permit known to such counsel or any statute, rule
or regulation applicable to the business or
properties of the Company or any of the Domestic
Subsidiaries, where such violation or default might
have a material adverse effect on the Business of the
Company or on the Business of GTR.
(xviii) The Company is not and, after giving effect
to the offering and sale of the Offered Securities
and the application of the proceeds thereof as
described in the Prospectus, will not be an
"investment company," as such term is defined in the
Investment Company Act of 1940, as amended.
(xix) The Offered Securities have been approved
for listing on the Nasdaq National Market subject to
notice of issuance.
In rendering the foregoing opinion, such counsel may
rely, to the extent they deem such reliance proper, on the
<PAGE> 28
-28-
opinions (in form and substance reasonably satisfactory to
Underwriters' counsel) of other counsel reasonably
acceptable to Underwriters' counsel as to matters governed
by the laws of jurisdictions other than the United States,
the Commonwealth of Massachusetts or the General
Corporation Law of the State of Delaware, and as to
matters of fact, upon certificates of officers of the
Company and of government officials; provided that such
counsel shall state that the opinion of any other counsel
is in form satisfactory to such counsel and, in such
counsel's opinion, such counsel and the Representatives
are justified in relying on such opinions of other
counsel. Copies of all such opinions and certificates
shall be furnished to counsel to the Underwriters on the
Closing Date. Such counsel may state that they are not
passing on matters relating to patents and trademarks.
(f) The Representatives shall have received an
opinion, dated such Closing Date, of Mark A. Hofer, Esq.,
Senior Vice President and General Counsel of the Company,
to the effect that
(i) Such counsel has studied and agrees with
the statements in the Prospectus under the captions
"Risk Factors -- Uncertainty Regarding Patents and
Protection of Proprietary Technology," "Risk
Factors -- Government Regulation of Tissue Repair
Products," "Business -- Government Regulation" and
"Business -- Patents and Proprietary Rights" and in
the December 31, 1994 Annual Report on Form 10-K of
the Company under the captions "Business -- General
Division -- Patents and Proprietary Technology,"
"Business -- General Division -- Government
Regulation," "Business -- Tissue Repair Division --
Patents and Proprietary Rights," "Business -- Tissue
Repair Division -- Government Regulation" and "Legal
Proceedings."
(ii) Except as disclosed in the sections of the
Prospectus mentioned above and the documents
incorporated by reference in the Prospectus, such
counsel does not know of any pending or threatened
legal or governmental proceeding relating to patents
or proprietary know-how owned or used by the Company
or others, to which the Company or any of its
subsidiaries is a party or to which any of the
properties of the Company or any of its subsidiaries
<PAGE> 29
-29-
are subject which, if adversely decided, would have a
material adverse effect on the Business of the
Company or on the Business of GTR.
(iii) Except as disclosed in the sections of the
Prospectus mentioned above and the documents
incorporated by reference in the Prospectus, such
counsel has no knowledge of any infringement or
alleged infringement by the Company or any of its
Subsidiaries of patent rights of others which could
have a material adverse effect on the Business of the
Company or on the Business of GTR.
(iv) To the best of such counsel's knowledge,
each of the Company and its Subsidiaries possesses
all governmental licenses, permits, consents, orders,
approvals and other authorizations necessary to carry
on its business as described in the Prospectus,
except for those the absence of which do not have a
material adverse effect on the Business of the
Company or on the Business of GTR.
(v) Such counsel has reviewed all contracts or
other documents referred to in the Registration
Statement and the Prospectus (including any contracts
referred to in the documents incorporated by
reference therein) and the descriptions thereof
(insofar as such descriptions constitute a summary of
the legal matters referred to therein) are accurate
in all material respects. Such counsel does not know
of any contracts or other documents required to be so
summarized or disclosed or filed as an exhibit to the
Registration Statement or to any document
incorporated by reference therein which have not been
so summarized or disclosed or filed.
(g) The Representatives shall have received from
Cahill Gordon & Reindel, counsel for the Underwriters,
such opinion or opinions, dated such Closing Date, with
respect to the incorporation of the Company, the validity
of the Offered Securities delivered on such Closing Date,
the Registration Statements, the Prospectus and other
related matters as the Representatives may require, and
the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them
to pass upon such matters. In rendering such opinion,
Cahill Gordon & Reindel may rely as to the incorporation
<PAGE> 30
-30-
of the Company and all other matters governed by
Massachusetts law upon the opinion of Palmer & Dodge
referred to above.
(h) The Representatives shall have received a
certificate, dated such Closing Date, of the President or
any Vice-President and a principal financial or accounting
officer of the Company in which such officers, to the best
of their knowledge after reasonable investigation, shall
state that: the representations and warranties of the
Company in this Agreement are true and correct; the
Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date; no stop order
suspending the effectiveness of any Registration Statement
has been issued and no proceedings for that purpose have
been instituted or are contemplated by the Commission; the
Additional Registration Statement (if any) satisfying the
requirements of subparagraphs (1) and (3) of Rule 462(b)
was filed pursuant to Rule 462(b), including payment of
the applicable filing fee in accordance with Rule 111(a)
or (b) under the Act, prior to the time the Prospectus was
printed and distributed to any Underwriter; as of such
date, there was no change in the capital stock of the
Company (including changes due to option or warrant
exercises) as compared with the amount shown on the latest
balance sheets included or incorporated in the Prospectus;
and, subsequent to the date of the most recent financial
statements included or incorporated in the Prospectus,
there has been no material adverse change, nor any
development or event involving a prospective material
adverse change, in the Business of the Company or in the
Business of GTR except as set forth in or contemplated by
the Prospectus or as described in such certificate.
(i) The Representatives shall have received (i) a
letter, dated such Closing Date, of Coopers & Lybrand
L.L.P. which meets the requirements of subsection (a) of
this Section, except that the specified date referred to
in such subsection will be a date not more than five days
prior to such Closing Date for the purposes of this
subsection and (ii) a letter, dated such Closing Date, of
Price Waterhouse which meets the requirements of
subsection (b) of this Section.
The Company will furnish the Representatives with such
conformed copies of such opinions, certificates, letters and
<PAGE> 31
-31-
documents as the Representatives reasonably request. CS First
Boston may in its sole discretion waive on behalf of the
Underwriters compliance with any conditions to the obligations
of the Underwriters hereunder, whether in respect of an
Optional Closing Date or otherwise.
7. Indemnification and Contribution. (a) The
Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under
the Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration Statement,
the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating
or defending any such loss, claim, damage, liability or action
as such expenses are incurred; provided, however, that the
Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement in
or omission or alleged omission from any of such documents in
reliance upon and in conformity with written information
relating to any Underwriter furnished to the Company by such
Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such
information furnished by any Underwriter consists of the
information described as such in subsection (b) below; and
provided, further, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any
preliminary prospectus the indemnity agreement contained in
this subsection (a) shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses,
claims, damages or liabilities purchased Offered Securities if
such untrue statement or omission or alleged untrue statement
or omission made in such preliminary prospectus is eliminated
or remedied in the Prospectus (as amended or supplemented if
the Company shall have furnished any amendments or supplements
thereto to the Underwriters) and such loss, claim, damage or
liability of such Underwriter results from the fact that there
was not furnished to such person, at or prior to the written
confirmation of the sale of such Offered Securities to such
<PAGE> 32
-32-
person, a copy of the Prospectus (as so amended or
supplemented) if the Company had previously furnished copies
thereof to such Underwriter.
(b) Each Underwriter will severally and not jointly
indemnify and hold harmless the Company against any losses,
claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any
Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus, or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information relating to such
Underwriter furnished to the Company by such Underwriter
through the Representatives specifically for use therein, and
will reimburse any legal or other expenses reasonably incurred
by the Company in connection with investigating or defending
any such loss, claim, damage, liability or action as such
expenses are incurred, it being understood and agreed that the
only such information furnished by any Underwriter consists of
the following information in the Prospectus furnished on behalf
of each Underwriter: the last paragraph at the bottom of the
cover page concerning the terms of the offering by the
Underwriters, the legends concerning overallotments and
stabilizing and passive market making on the inside front cover
page and the concession and reallowance figures appearing in
the fourth paragraph under the caption "Underwriting" and the
information contained in the fifth paragraph under the caption
"Underwriting".
(c) Promptly after receipt by an indemnified party
under this Section of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is
to be made against the indemnifying party under subsection (a)
or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any
indemnified party otherwise than under subsection (a) or (b)
above. In case any such action is brought against any
indemnified party and it notifies the indemnifying party of the
<PAGE> 33
-33-
commencement thereof, the indemnifying party will be entitled
to participate therein and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs
of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of
which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release
of such indemnified party from all liability on any claims that
are the subject matter of such action.
(d) If the indemnification provided for in this
Section is unavailable or insufficient to hold harmless an
indemnified party under subsection (a) or (b) above, then each
indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or
(b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand
and the Underwriters on the other from the offering of the
Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other
in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities as well as any
other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total
underwriting discounts and commissions received by the
Underwriters. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information
<PAGE> 34
-34-
supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or
omission. The amount paid by an indemnified party as a result
of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending
any action or claim which is the subject of this subsection
(d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the
Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages
which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute
are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this
Section shall be in addition to any liability which the Company
may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations
of the Underwriters under this Section shall be in addition to
any liability which the respective Underwriters may otherwise
have and shall extend, upon the same terms and conditions, to
each director of the Company, to each officer of the Company
who has signed a Registration Statement and to each person, if
any, who controls the Company within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or
Underwriters default in their obligations to purchase Offered
Securities hereunder on either the First or any Optional
Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters
agreed but failed to purchase does not exceed 10% of the total
number of shares of Offered Securities that the Underwriters
are obligated to purchase on such Closing Date, CS First Boston
may make arrangements satisfactory to the Company for the
purchase of such Offered Securities by other persons, including
any of the Underwriters, but if no such arrangements are made
<PAGE> 35
-35-
by such Closing Date, the non-defaulting Underwriters shall be
obligated severally, in proportion to their respective
commitments hereunder, to purchase the Offered Securities that
such defaulting Underwriters agreed but failed to purchase on
such Closing Date. If any Underwriter or Underwriters so
default and the aggregate number of shares of Offered
Securities with respect to which such default or defaults occur
exceeds 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing
Date and arrangements satisfactory to CS First Boston and the
Company for the purchase of such Offered Securities by other
persons are not made within 36 hours after such default, this
Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Company, except as provided
in Section 9 (provided that if such default occurs with respect
to Optional Securities after the First Closing Date, this
Agreement will not terminate as to the Firm Securities or any
Optional Securities purchased prior to such termination). As
used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section.
Nothing herein will relieve a defaulting Underwriter from
liability for its default.
9. Survival of Certain Representations and
Obligations. The respective indemnities, agreements,
representations, warranties and other statements of the Company
or its officers and of the several Underwriters set forth in or
made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter, the
Company or any of their respective representatives, officers or
directors or any controlling person, and will survive delivery
of and payment for the Offered Securities. If this Agreement
is terminated pursuant to Section 8 or if for any reason the
purchase of the Offered Securities by the Underwriters is not
consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5
and the respective obligations of the Company and the
Underwriters pursuant to Section 7 shall remain in effect, and
if any Offered Securities have been purchased hereunder the
representations and warranties in Section 2 and all obligations
under Section 5 shall also remain in effect. If the purchase
of the Offered Securities by the Underwriters is not
consummated for any reason other than solely because of the
termination of this Agreement pursuant to Section 8 or the
occurrence of any event specified in clause (iii), (iv) or (v)
of Section 6(d), the Company will reimburse the Underwriters
<PAGE> 36
-36-
for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in
connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be
in writing and, if sent to the Underwriters, will be mailed,
delivered or telegraphed and confirmed to the Representatives
c/o CS First Boston Corporation, Park Avenue Plaza, New York,
N.Y. 10055, Attention: Investment Banking Department --
Transactions Advisory Group, or, if sent to the Company, will
be mailed, delivered or telegraphed and confirmed to it at One
Kendall Square, Cambridge, MA 02139, Attention:
; provided, however, that any notice to an
Underwriter pursuant to Section 7 will be mailed, delivered or
telegraphed and confirmed to such Underwriter.
11. Successors. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their
respective successors and the officers and directors and
controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
12. Representation of Underwriters. The
Representatives will act for the several Underwriters in
connection with this financing, and any action under this
Agreement taken by the Representatives jointly or by CS First
Boston will be binding upon all the Underwriters.
13. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be
an original, but all such counterparts shall together
constitute one and the same Agreement.
14. Applicable Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of
New York, without regard to principles of conflicts of laws.
The Company hereby submits to the non-exclusive
jurisdiction of the Federal and state courts in the Borough of
Manhattan in The City of New York in any suit or proceeding
arising out of or relating to this Agreement or the
transactions contemplated hereby.
<PAGE> 37
-37-
If the foregoing is in accordance with the
Representatives' understanding of our agreement, kindly sign
and return to the Company one of the counterparts hereof,
whereupon it will become a binding agreement between the
Company and the several Underwriters in accordance with its
terms.
Very truly yours,
GENZYME CORPORATION
By
[Insert title]
The foregoing Underwriting Agreement is
hereby confirmed and confirmed and
accepted as of the date first above
written.
CS FIRST BOSTON CORPORATION
COWEN & COMPANY
PAINEWEBBER INCORPORATED
Acting on behalf of themselves and as
the Representatives of the several
Underwriters.
By CS FIRST BOSTON CORPORATION
By ____________________________
[Insert title]
<PAGE> 38
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Underwriter Firm Securities
<S> <C>
CS First Boston Corporation...........................
Cowen & Company.......................................
PaineWebber Incorporated..............................
Total.....................................
</TABLE>
<PAGE> 39
SCHEDULE B
[subsidiary information]
<PAGE> 1
EXHIBIT 5
PALMER & DODGE
ONE BEACON STREET
BOSTON, MASSACHUSETTS 02108
Telephone: (617) 573-0100 Facsimile: (617) 227-4420
September 19, 1995
Genzyme Corporation
One Kendall Square
Cambridge, Massachusetts 02139
We are rendering this opinion in connection with the Registration
Statement on Form S-3 (the "Registration Statement") filed by Genzyme
Corporation (the "Company") with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, on or about the date hereof. The
Registration Statement relates to the registration of shares of the Company's
Tissue Repair Division Common Stock, $0.01 par value (the "Shares"). We
understand that the Shares are to be offered and sold in the manner described
in the Registration Statement.
We have acted as your counsel in connection with the preparation of
the Registration Statement and are familiar with the proceedings taken by the
Company in connection with the authorization and issuance of the Shares. We
have examined such documents as we consider necessary to render this opinion.
Based upon the foregoing, we are of the opinion that the Shares have
been duly authorized, and upon issuance and delivery against payment therefor,
will be validly issued, fully paid and nonassessable.
We hereby consent to the use of our name under the caption "Legal
Opinions" in the Registration Statement and to the filing of this opinion as an
exhibit to the Registration Statement.
Very truly yours,
/s/ Palmer & Dodge
<PAGE> 1
EXHIBIT 24.2
GENZYME CORPORATION
Certificate of Clerk
I, Peter Wirth, being the duly elected and acting Clerk of Genzyme
Corporation (the "Company"), a Massachusetts corporation, hereby certify that
the following is a true, correct and complete copy of a vote duly adopted by
the Board of Directors of the Company by unanimous written consent dated August
15, 1995; and that said vote has not been amended or rescinded and is now in
full force and effect.
VOTED: That any officer of the Company executing, on behalf of the
Company or in any other capacity, the Registration Statement
and any and all amendments to such Registration Statement and
other documents to be filed with the Commission in connection
therewith is hereby authorized to execute the same through or
by Henri A. Termeer, David J. McLachlan, Mark A. Hofer, Evan
M. Lebson or Peter Wirth, as attorney-in-fact, pursuant to a
power of attorney reflecting such authorization.
WITNESS my signature this 18th day of September, 1995.
/s/ Peter Wirth
------------------
Peter Wirth, Clerk
