GENZYME CORP
S-3/A, 1997-10-30
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)
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<PAGE>   1
 
   
   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 30, 1997.
    
 
                                                      REGISTRATION NO. 333-34913
================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
   
                                 AMENDMENT NO 2
    
 
                                       TO
 
                                    FORM S-3
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                            ------------------------
 
                              GENZYME CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                           <C>
                MASSACHUSETTS                                   06-1047163
         (STATE OR OTHER JURISDICTION                        (I.R.S. EMPLOYER
      OF INCORPORATION OR ORGANIZATION)                   IDENTIFICATION NUMBER)
</TABLE>
 
       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)
                            ------------------------
 
                               PETER WIRTH, ESQ.
                EXECUTIVE VICE PRESIDENT AND CHIEF LEGAL 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:
 
<TABLE>
<S>                                           <C>
           MAUREEN P. MANNING, ESQ.                     GEOFFREY E. LIEBMANN, ESQ.
              PALMER & DODGE LLP                         CAHILL GORDON & REINDEL
              ONE BEACON STREET                               80 PINE STREET
         BOSTON, MASSACHUSETTS 02108                     NEW YORK, NEW YORK 10005
                (617) 573-0100                                (212) 701-3000
</TABLE>
 
                            ------------------------
 
        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>   2
 
     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.
 
   
                 SUBJECT TO COMPLETION, DATED OCTOBER 30, 1997
    
 
                                4,000,000 Shares
 
                                      LOGO
 
                  Genzyme Tissue Repair Division Common Stock
                                ($.01 par value)
                               ------------------
 
   
 All of the shares of Genzyme Tissue Repair Division Common Stock ("GTR Stock")
offered hereby are being sold by Genzyme Corporation ("Genzyme"). The GTR Stock
is listed on the Nasdaq National Market under the symbol "GENZL." On October 28,
   1997, the last reported sale price of the GTR Stock on the Nasdaq National
                          Market was $9.38 per share.
    
 
 The GTR Stock is common stock of Genzyme and is intended to reflect the value
 and track the performance of Genzyme Tissue Repair ("GTR"), which is a leading
   developer of biological products for the surgical repair or replacement of
 damaged tissue. The GTR Stock is one of three series of Genzyme's common stock
 currently outstanding, the others being Genzyme General Division Common Stock
   and Genzyme Molecular Oncology Division Common Stock. See "Description of
Genzyme Capital Stock" for a description of the rights and privileges of shares
                    of each series of Genzyme common stock.
 
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
   AN INVESTMENT IN GTR STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE 6 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 Genzyme estimated at $250,000.
(2) Genzyme has granted the Underwriters an option, exercisable for 30 days from
    the date of this Prospectus, to purchase a maximum of 600,000 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 Genzyme, 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           , 1997.
 
CREDIT SUISSE FIRST BOSTON
                       COWEN & COMPANY
                                            PAINEWEBBER INCORPORATED
 
                The date of this Prospectus is           , 1997.
<PAGE>   3
 
     [The graphic image depicted here consists of a diagram of a human knee and
two photographs of an actual patient's knee before and after autologous
chondrocyte implantation. The diagram shows the structure of the human knee and
depicts an articular cartilage defect labeled "lesion". Three additional
components of the human knee, the "lateral femoral condyle", the "medial femoral
condyle" and the "trochlea" are also depicted and labeled in the diagram. The
first photograph depicts the cartilage defect (1.1 by 4.0 cm) in the medial
femoral condyle of a 22 year old female patient before autologous chondrocyte
implantation. The second photograph shows the cartilage defect, which is now
healed, 46 months after autologous chondrocyte implantation. The borders of the
transplant are indicated by arrows.]
 
     PANEL A: Human knee with defect in the medial femoral condyle.
 
     PANEL B: Cartilage defect in the medial femoral condyle of a 22 year old
female before autologous chondrocyte implantation.
 
     PANEL C: Healed cartilage defect of the same patient 46 months after
autologous chondrocyte implantation.
 
     CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE GTR STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING
TRANSACTIONS, PENALTY BIDS AND PASSIVE MARKET MAKING. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
 
Photographs reprinted with permission of Brittberg et al, The New England
Journal of Medicine; 331:1994. Copyright 1994 Massachusetts Medical Society. All
rights reserved.
 
                                        2
<PAGE>   4
- ------------------------------------------------------------------------------- 
                               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 GTR Stock, Genzyme General
Division Common Stock ("GGD Stock") and Genzyme Molecular Oncology Division
Common Stock ("GMO Stock") also include the associated preferred stock purchase
rights represented by the same certificates. See "Description of Genzyme Capital
Stock." The shares of GTR Stock offered hereby involve a high degree of risk.
Investors should carefully consider the information set forth under the heading
"Risk Factors."
 
                             GENZYME TISSUE REPAIR
 
     Genzyme Tissue Repair is a leading developer of biological products for the
surgical repair or replacement of damaged tissue. GTR's lead product,
Carticel(TM) autologous cultured chondrocytes ("Carticel(TM) ACC"), received
U.S. Food and Drug Administration ("FDA") approval in August 1997 for use in
treating damaged articular knee cartilage. GTR also markets the Epicel(SM)
Service for the treatment of severe burns and is developing two NeuroCell(TM)
products to treat Parkinson's and Huntington's diseases as well as TGF-(Beta)(2)
to treat chronic skin ulcers.
 
     Autologous chondrocyte implantation ("ACI") was developed by GTR's
exclusive collaborators in Sweden in 1987. ACI is a procedure in which a
patient's own (autologous) healthy articular cartilage cells (chondrocytes) are
cultured in the lab and implanted in the same patient's knee joint to repair
cartilage damage due to a variety of injuries, including acute or chronic
trauma. Carticel(TM) ACC, which has been marketed by GTR since 1995, is the only
FDA-approved autologous cultured chondrocyte product. Since 1987, over 1,250
patients have undergone the ACI procedure, including more than 800 using
Carticel(TM) ACC. A substantial body of clinical data from these patients
supports the safety and efficacy of the procedure. GTR's analysis of the first
84 patients treated with Carticel(TM) ACC for which 12-month data are available
indicates that over 80% of patients improved based on clinician and patient
evaluations. See "Business -- Description of Products and Services -- Cartilage
Repair -- Carticel(TM) ACC -- Clinical Results." In contrast, approximately 80%
of patients treated with existing therapies, such as microfracture, drilling and
abrasion, are expected to have poor long-term outcomes.
 
     GTR believes there is a significant market opportunity to treat patients
with articular cartilage damage in the knee. In 1994, there were approximately
189,000 surgical procedures performed in the U.S. to treat damage to articular
knee cartilage. GTR estimates that at least half of these procedures were for
injuries involving damage to the femoral condyle, the area of the knee for which
treatment with Carticel(TM) ACC has been approved by the FDA. GTR estimates that
the European market for knee cartilage repair is similar in size to the U.S.
market.
 
     Carticel(TM) ACC was the first product approved under new FDA regulations
developed for manipulated autologous cell products. GTR believes that the
absence of FDA approval previously limited market acceptance of Carticel(TM) ACC
because many third party payers require such approval for reimbursement. The
recent FDA approval of Carticel(TM) ACC has led to a surge in reimbursement
coverage, and GTR believes that such coverage for the product will continue to
increase. See "Recent Developments" below.
 
     In addition to Carticel(TM) ACC, GTR has a diverse pipeline of other tissue
repair products that also address significant medical problems for which there
are currently no effective therapies. GTR is developing two cellular therapies
for neurodegenerative diseases -- NeuroCell(TM)-PD for the treatment of
Parkinson's disease and NeuroCell(TM)-HD for the treatment of Huntington's
disease. These products involve implantation of fetal porcine (pig) brain cells
into Parkinson's and Huntington's disease patients to replace damaged brain
tissue. The NeuroCell(TM) products are being developed in a joint venture with
Diacrin, Inc. ("Diacrin") and are currently in Phase I clinical trials. GTR also
markets the Epicel(SM) Service, which provides cultured autologous skin cells as
permanent skin replacement for patients with severe burns, and is developing
TGF-(Beta)(2), a recombinant growth factor in Phase II clinical trials, to
treat chronic skin ulcers.
- ------------------------------------------------------------------------------- 
                                        3
<PAGE>   5
 
     GTR's strategy is to use its expertise in cell processing, therapeutic
protein development and biomaterials engineering to develop and sell a portfolio
of novel products and services for unmet medical needs in the orthopedic,
neurology and wound closure markets. GTR believes that, as a division of
Genzyme, its ability to pursue this strategy is enhanced through its access to
Genzyme's infrastructure.
 
                              RECENT DEVELOPMENTS
 
     In August 1997, GTR received FDA approval of Carticel(TM) ACC for use in
treating damaged articular knee cartilage. Since then, GTR has seen a
significant increase in the number of people covered by third party payers that
have approved reimbursement for Carticel(TM) ACC as a matter of policy, as well
as sharp increases in individual reimbursement approvals and new cases of
surgeons seeking treatment for their patients. During the five weeks following
FDA approval, the number of people covered by health plans with broad policy
coverage for Carticel(TM) ACC increased from 15 million to 53 million. In
addition, the average weekly number of reimbursement approvals on an individual
basis increased by 140% and the average number of weekly new cases increased by
54% during this period as compared to the eight weeks prior to FDA approval.
Further, in September 1997 the Spanish national health system approved
Carticel(TM) ACC for use by public hospitals, representing the first broad
approval of the product by a reimbursement authority in Europe.
 
   
     On October 22, 1997, GTR announced that its total revenues for the third
quarter of 1997 were $3.1 million, a 65% increase over the $1.9 million in
revenues reported in the third quarter of 1996. This revenue increase was led by
revenues for Carticel(TM) ACC which increased 135% to $1.7 million, compared to
$726,000 in the third quarter of 1996. Revenues for the Epicel(SM) Service
increased 21% to $1.4 million from $1.1 million in the third quarter of 1996.
GTR's net loss for the third quarter was $11.0 million, or $0.72 per share,
compared to a net loss of $9.9 million, or $0.78 per share in the third quarter
of 1996.
    
 
                                  THE OFFERING
 
<TABLE>
<S>                                                <C>
GTR Stock offered by Genzyme.....................  4,000,000 shares
GTR Stock to be outstanding after the offering...  19,753,169 shares(1)
Use of proceeds..................................  To fund the research and development
                                                   activities of GTR, including its joint
                                                   venture with Diacrin, for working capital,
                                                   for expenses related to the marketing of
                                                   Carticel(TM) ACC and for general corporate
                                                   purposes.
Nasdaq National Market symbol....................  GENZL
</TABLE>
 
- ---------------
(1) Based on shares outstanding on August 31, 1997. Excludes (i) 2,376,433
    shares of GTR Stock reserved for issuance upon exercise of outstanding
    options with a weighted average exercise price of $10.73 per share, (ii)
    921,423 shares of GTR Stock that Genzyme may from time to time issue, sell
    or otherwise distribute without allocating any proceeds to GTR ("GTR
    Designated Shares") and (iii) 2,577,245 shares of GTR Stock currently
    reserved for issuance upon conversion of amounts payable under a convertible
    note of Genzyme (the "GTR Note") in the principal amount of $13 million. The
    actual number of shares issued upon conversion of the GTR Note may be more
    or less than the number currently reserved. See "Risk Factors -- Risks
    Related to GTR -- Dilution."
 
                                        4
<PAGE>   6
 
                           GTR SUMMARY FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                    FOR THE SIX
                                                                                   MONTHS ENDED
                                         FOR THE YEARS ENDED DECEMBER 31,            JUNE 30,
                                        ----------------------------------     ---------------------
                                          1994         1995         1996         1996         1997
                                        --------     --------     --------     --------     --------
<S>                                     <C>          <C>          <C>          <C>          <C>
COMBINED STATEMENT OF OPERATIONS DATA:
Net service sales.....................  $    324     $  5,220     $  7,312     $  3,361     $  4,641
Operating costs and expenses:
  Cost of services sold...............       287        4,731       11,193        5,882        5,991
  Selling, general and
     administrative...................       964       12,927       27,111       12,976       12,658
  Research and development............     3,638       10,938       10,880        4,704        4,996
  Purchase of in-process research and
     development......................    11,215           --           --           --           --
                                        --------     --------     --------     --------     --------
     Total operating costs and
       expenses.......................    16,104       28,596       49,184       23,562       23,645
                                        --------     --------     --------     --------     --------
Operating loss........................   (15,780)     (23,376)     (41,872)     (20,201)     (19,004)
Other income and (expenses):
  Equity in loss of joint venture.....        --           --       (1,727)          --       (3,416)
  Interest and investment income, net
     .................................        29        1,346        1,284          959         (840)
                                        --------     --------     --------     --------     --------
     Total other income and (expenses)
       ...............................        29        1,346         (443)         959       (4,256)
                                        --------     --------     --------     --------     --------
Net loss attributable to GTR Stock....  $(15,751)    $(22,030)    $(42,315)    $(19,242)    $(23,260)
                                        ========     ========     ========     ========     ========
Per GTR common share:
  Net loss............................  $  (4.40)    $  (2.28)    $  (3.38)    $  (1.55)    $  (1.76)
  Weighted average shares outstanding
     .................................     3,578        9,659       12,525       12,411       13,208
</TABLE>
 
   
<TABLE>
<CAPTION>
                                            AT DECEMBER 31,                    AT JUNE 30, 1997
                                   ---------------------------------      ---------------------------
                                    1994         1995         1996        ACTUAL       AS ADJUSTED(1)
                                   -------      -------      -------      -------      --------------
<S>                                <C>          <C>          <C>          <C>          <C>
COMBINED BALANCE SHEET DATA:
Cash and investments.............  $24,808      $47,573      $16,230      $20,900         $ 55,947
Working capital..................   20,557       44,374       14,232       19,834           54,881
Total assets.....................   28,435       52,649       42,593       47,260           82,307
Long-term obligations............       --           --       18,000       30,099           30,099
Division equity..................   23,313       45,926       18,084       11,523           46,570
</TABLE>
    
 
- ---------------
   
(1) As adjusted to reflect the net proceeds of this offering, estimated to be
$35,047,000.
    
 
                                        5
<PAGE>   7
 
                                  RISK FACTORS
 
     Statements made in this Prospectus relating to revenue expectations,
expectations regarding reimbursement for GTR's products, plans for product
development, sales and marketing and the timing of clinical trials and
regulatory approvals, or that otherwise relate to future periods, are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Actual results
could differ materially from those anticipated in the forward-looking statements
as a result of certain risks described below or elsewhere in this Prospectus
(including Genzyme's Annual Report on Form 10-K for 1996 and other documents
incorporated herein by reference). Such risks should be considered carefully in
evaluating an investment in GTR Stock.
 
RISKS RELATED TO GENZYME TRACKING STOCK
 
     Prior to June 18, 1997, Genzyme had outstanding two classes of common
stock, GGD Stock and GTR Stock. Effective June 18, 1997, the GGD Stock and GTR
Stock were redesignated as separate series of a single class of common stock and
a new series of the same class of common stock, GMO Stock, was issued. As a
result, Genzyme currently has three series of common stock outstanding: GGD
Stock, GTR Stock and GMO Stock, which are intended to reflect the value and
track the performance of Genzyme's three operating divisions: Genzyme General
("Genzyme General"), GTR and Genzyme Molecular Oncology ("GMO"). Prospective
investors in GTR Stock should carefully consider the following risks relating to
an investment in Genzyme "tracking stock."
 
     STOCKHOLDERS OF ONE COMPANY; FINANCIAL IMPACTS ON ONE DIVISION COULD AFFECT
THE OTHERS.  Genzyme General, GTR and GMO are each divisions of Genzyme.
Notwithstanding the allocation of Genzyme's products and programs among
divisions for financial statement presentation purposes, Genzyme continues to
hold title to all of the assets and is responsible for all of the liabilities
allocated to each of its divisions. Holders of each series of Genzyme common
stock have no specific claim against the assets attributed for financial
statement presentation purposes to the division whose performance is associated
with the series of stock they hold. Liabilities or contingencies of any division
that affect Genzyme's resources or financial condition could affect the
financial condition or results of operations of the other divisions. Prospective
investors in GTR Stock should, therefore, read Genzyme's consolidated financial
statements in conjunction with the financial statements of GTR.
 
     NO RIGHTS OR ADDITIONAL DUTIES WITH RESPECT TO THE DIVISIONS; POTENTIAL
CONFLICTS.  Holders of each series of Genzyme common stock have only the rights
of stockholders of Genzyme and, except in limited circumstances, do not have any
rights specifically related to the division to which such series of common stock
relates.
 
     The existence of separate series of common stock may give rise to occasions
when the interests of holders of each series of Genzyme common stock may diverge
or appear to diverge. Although Genzyme is aware of no precedent concerning the
manner in which Massachusetts law would be applied to the duties of a board of
directors in the context of multiple series of common stock with divergent
interests, Genzyme believes, based on the advice of counsel, that a
Massachusetts court would hold that a board of directors owes an equal duty to
all stockholders regardless of class or series 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 has been advised 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, taking
into account the interests of the holders of each series of common stock and the
alternatives reasonably available, should represent an appropriate defense to
any challenge by or on behalf of the holders of any series of common stock that
such action could have a disparate effect on different series of common stock.
However, a Massachusetts court hearing a case involving such a challenge may
decide to apply principles of Massachusetts law other than those described
above, or may develop new principles of Massachusetts law, in order to decide
such a case.
 
     Disproportionate ownership interests of members of the Genzyme Board of
Directors (the "Genzyme Board") in any series 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 series of common stock. Nevertheless, Genzyme believes
that a director would be able to discharge his or
 
                                        6
<PAGE>   8
 
her fiduciary responsibilities even if his or her interests in shares of such
series were disproportionate or had disparate values. The Genzyme 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
Genzyme Board on such matters.
 
     NO ADDITIONAL SEPARATE VOTING RIGHTS.  Holders of each series of Genzyme
common stock vote together as a single class on all matters as to which common
stockholders generally are entitled to vote (including the election of
directors). Except in certain limited circumstances provided under Massachusetts
law, in Genzyme's Restated Articles of Organization (the "Genzyme Charter"), and
in the management and accounting policies adopted by the Genzyme Board, holders
of each series of common stock have no right to vote on matters separately.
Accordingly, except in limited circumstances, holders of shares of one series of
common stock could not bring a proposal to a vote of the holders of that series
of common stock only, but would be required to bring any proposal to a vote of
all common stockholders.
 
     On all matters as to which common stockholders generally are entitled to
vote, each share of GGD Stock has one vote, each share of GTR Stock has, through
December 31, 1998, .33 vote and each share of GMO Stock has, through December
31, 1998, .25 vote. On January 1, 1999 and on January 1 every two years
thereafter, the number of votes to which each share of GTR Stock and GMO Stock
is entitled will be adjusted to equal the ratio of the Fair Market Value of one
share of GTR Stock and GMO Stock, respectively, to the Fair Market Value of one
share of GGD Stock as of such date. Fair Market Value as of any date means the
average of the daily closing prices as reported by the Nasdaq National Market
(or the appropriate exchange on which such shares are then traded) for the 20
consecutive trading days commencing on the 30th trading day prior to such date.
In the event such closing prices are unavailable, Fair Market Value will be
determined by the Genzyme Board.
 
     Certain matters as to which the holders of common stock are entitled to
vote may involve a divergence or the appearance of a divergence in the interests
of holders of each series of Genzyme common stock. If, when a stockholder vote
is taken on any matter as to which a separate vote by each series is not
required and the holders of any series of common stock would have more than the
number of votes required to approve any such matter, the holders of that series
would control the outcome of the vote on such matter. Holders of GGD Stock, GTR
Stock and GMO Stock currently have approximately 92.5%, 6.3% and 1.2%,
respectively, of the total voting power of Genzyme. Following completion of this
offering and assuming that the Underwriters' over-allotment option is not
exercised, holders of GGD Stock, GTR Stock and GMO Stock will have approximately
91.1%, 7.7% and 1.2% respectively, of the total voting power of Genzyme. As a
result, on matters which are submitted to a vote of common stockholders, the
preferences of the holders of GGD 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 each series of Genzyme common stock materially
changes. See "Description of Genzyme Capital Stock -- Voting Rights."
 
     EXCHANGE OF GTR STOCK AND GMO STOCK.  The Genzyme Board can, in its sole
discretion, determine to exchange shares of GTR Stock and GMO Stock for cash or
shares of GGD Stock (or any combination thereof) at a 30% premium over Fair
Market Value of the GTR Stock or GMO Stock at any time. In addition, following a
disposition of all or substantially all of the assets of GTR or GMO, the shares
of GTR Stock or GMO Stock, as the case may be, are subject to mandatory exchange
by Genzyme for cash and/or shares of GGD Stock at a 30% premium over Fair Market
Value of such series of common stock as determined by the trading prices during
a specified period prior to public announcement of the disposition.
Consequently, holders of GTR Stock and GMO 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 or GMO. In addition, the right of the
Genzyme Board to exchange shares of GMO Stock or GTR Stock at a 30% premium over
the Fair Market Value of such shares does not preclude the Genzyme Board from
making an offer to exchange such shares on terms other than those provided in
the Genzyme Charter. Although any alternative offer would be subject to
acceptance by the holders of the shares to be exchanged, such offer could be
made at a price representing a discount from the then current market price of
the shares or otherwise on terms less favorable than those provided in the
Genzyme Charter. See "Management and Accounting Policies Governing the
Relationship of Genzyme Divisions -- Open Market Purchases of Shares of Common
Stock."
 
                                        7
<PAGE>   9
 
     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 each series of Genzyme common
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 series. Currently, each share of GGD Stock has 100
liquidation units, each share of GTR Stock has 58 liquidation units and each
share of GMO Stock has 25 liquidation units. Because the liquidation units will
not be adjusted to reflect changes in the relative market value or performance
of each of the divisions of Genzyme, the per share liquidating distribution to a
holder of GGD Stock, GTR Stock or GMO Stock is not likely to correspond to the
value of the assets of Genzyme General, GTR or GMO, respectively, at the time of
a dissolution, liquidation or winding up of Genzyme.
 
     MANAGEMENT AND ACCOUNTING POLICIES SUBJECT TO CHANGE.  The Genzyme Board
has adopted certain management and accounting policies applicable to the
preparation of the financial statements of the divisions of Genzyme, the
allocation of corporate expenses, 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 Genzyme Board without the approval of Genzyme's stockholders,
subject to the Genzyme Board's fiduciary duty to all holders of Genzyme's
capital stock. The Genzyme Board may also adopt additional policies depending
upon the circumstances. See "Management and Accounting Policies Governing the
Relationship of Genzyme Divisions."
 
     USE OF OPERATING LOSSES BY OTHER GENZYME DIVISIONS.  Genzyme's management
and accounting policies provide that to the extent any division of Genzyme is
unable to utilize its operating losses or other projected tax benefits to reduce
its current or deferred income tax expense, such losses or benefits may be
reallocated to another division on a quarterly basis. Accordingly, although the
actual payment of taxes is a corporate liability of Genzyme as a whole, separate
financial statements will be prepared for each division and any losses that
cannot be utilized by a division will not be carried forward to reduce the taxes
allocable to such division's earnings in the future. This could result in a
division with losses (such as GTR and GMO currently) being charged a greater
portion of the total corporate tax liability and reporting lower earnings after
taxes in the future than would have been the case if such division had retained
its losses or other benefits in the form of a net operating loss carryforward.
 
RISKS RELATED TO GTR
 
     Prospective investors should carefully consider the following risks
associated with an investment in GTR Stock.
 
     NO ASSURANCE OF COMMERCIAL SUCCESS OF CARTICEL(TM) ACC.  In August 1997,
the FDA approved GTR's Biologics License Application ("BLA") for Carticel(TM)
ACC. As a condition to such approval, GTR has agreed to conduct two confirmatory
post-marketing studies, one of which will compare the long-term clinical effects
of treatment with Carticel(TM) ACC to certain other available treatments and the
other of which will compare treatment with Carticel(TM) ACC against a placebo
implant. Should these post-marketing studies demonstrate that treatment with
Carticel(TM) ACC is not superior to the alternatives studied, the FDA may
suspend or terminate GTR's license to market the product. If GTR were prohibited
from marketing Carticel(TM) ACC in the U.S., its results of operations would be
materially adversely affected.
 
     The commercial success of Carticel(TM) ACC will also depend materially on
the ability of GTR to increase the approval rate for reimbursement of the
product from third party payers. Although GTR has seen a substantial increase in
the development of broad policy coverage for Carticel(TM) ACC since the August
1997 FDA approval of the product, there can be no assurance that the recent
increase in reimbursement approvals will continue.
 
     Although FDA approval is a critical requirement for most plans to adopt
favorable policy coverage for new treatments, a number of major insurance plans
also base their decisions on technology assessments conducted by individual
plans or by independent associations such as Blue Cross Blue Shield Association
("BCBSA"). The BCBSA Technology Assessment Committee (the "BCBSA Committee") met
in late September 1997 to review the Carticel(TM) ACC treatment. GTR has
received preliminary indications from BCBSA that the BCBSA Committee does not
believe that Carticel(TM) ACC meets all of the published criteria used by BCBSA
to evaluate
 
                                        8
<PAGE>   10
 
new treatments. GTR believes that Carticel(TM) ACC in fact meets all of the
criteria and is in discussions with BCBSA regarding its assessment. While a
favorable review by the BCBSA Committee is not required for individual Blue
Cross/Blue Shield plans to approve policy coverage for a new treatment, it is a
factor in the decision process for many plans. If the BCBSA Committee issues a
report stating that Carticel(TM) ACC does not meet all of BCBSA's criteria for
assessment of new treatments, implementation of policy coverage for Carticel(TM)
ACC by many Blue Cross/Blue Shield plans would be delayed. Since these plans
represent approximately 60 million, or 25%, of insured lives in the U.S., GTR's
ability to access a substantial portion of the market for Carticel(TM) ACC would
also be delayed.
 
     The process used by GTR to grow autologous chondrocytes is not patentable,
and GTR does not yet have significant patent protection covering the other
methodologies used in providing Carticel(TM) ACC. Consequently, GTR is unable to
prevent a competitor from developing the ability to grow cartilage cells and
from offering a product that is similar or superior to Carticel(TM) ACC. GTR's
results of operations could be materially adversely affected if a competitor
were to develop such know-how and obtain FDA approval for an autologous
chondrocyte product. GTR is aware of at least one other company that is
culturing autologous chondrocytes for cartilage repair in Europe. See "Risk
Factors -- Risks Related to GTR -- Intense Competition."
 
     GTR is marketing Carticel(TM) ACC to orthopedic surgeons. The commercial
success of the product depends on the extent to which sufficient numbers of
surgeons who are trained by GTR incorporate the product into their existing
practices. There can be no assurance that GTR will be successful in marketing
Carticel(TM) ACC to such surgeons or that such surgeons will use Carticel(TM)
ACC to the extent anticipated by GTR.
 
     GTR OPERATING LOSSES AND CASH REQUIREMENTS.  GTR is expected to experience
significant operating losses at least through 1998 as the market introduction of
Carticel(TM) ACC continues and its research and development and clinical
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. GTR anticipates that the net proceeds from this
offering, together with existing cash balances allocated to GTR or approved for
reallocation from Genzyme General and cash generated from the sale of
Carticel(TM) ACC and the Epicel(SM) Service, will be sufficient to fund GTR's
operations through the end of 1998. Significant additional funds may be required
to continue operations at anticipated levels beyond 1998, however, and GTR may
be required to delay, scale back or eliminate certain of its programs or to
license third parties to commercialize technologies or products that it would
otherwise undertake itself if it does not have sufficient capital or is not
successful in raising additional capital.
 
     GTR's cash requirements may vary from those now planned as a result of
numerous factors, including revenue fluctuations, reimbursement denials for
GTR's products, results of research and development and clinical testing by GTR
and its collaborators, competing technological and market developments and the
cost and timing of clinical trials and regulatory approvals. In addition, if GTR
commits to fund additional joint ventures or strategic collaborations or uses
cash to effect acquisitions, its cash requirements may increase significantly.
 
     FLUCTUATION IN GTR'S QUARTERLY RESULTS.  Revenues generated from the sale
of Carticel(TM) ACC are expected to fluctuate as GTR enrolls and trains
additional orthopedic surgeons and the product gains market and third party
payer acceptance. GTR's management is unable to predict the timing or magnitude
of such fluctuations, although GTR expects that its revenues from the sale of
Carticel(TM) ACC may be lower in the summer months as fewer operative procedures
are typically performed during those months. Sales of the Epicel(SM) Service for
the treatment of severe burns also comprise a material percentage of GTR's
revenues. 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 GTR is required to maintain extensive
tissue culture facilities and a staff of trained personnel for both Carticel(TM)
ACC and the Epicel(SM) Service, 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.
 
     COLLABORATION WITH DIACRIN, INC. -- NO CURRENTLY APPROVED
XENOTRANSPLANTATION-BASED PRODUCTS; RELIANCE ON CELL TRANSPLANTATION
TECHNOLOGY.  GTR has formed a joint venture with Diacrin to develop and
commercialize products based on transplantable fetal porcine brain cells for the
treatment of Parkinson's disease and Huntington's disease. Human therapeutic
products based on the transplantation of cells obtained from animals
("xenotransplantation") represent a novel therapeutic approach that has not been
subject to extensive
 
                                        9
<PAGE>   11
 
   
clinical testing. Xenotransplantation also poses a risk that viruses or other
animal pathogens will be unintentionally transmitted to a human patient. The
joint venture has been required by the FDA to perform certain assays to
determine whether porcine retrovirus is present in patients that have received
porcine cells. These assays have been performed on samples taken from all
patients who have received NeuroCell(TM)-PD and no porcine retrovirus was
detected in those samples. The joint venture has also been required by the FDA
to perform additional assays on its porcine cellular product to determine if
active porcine retroviruses are present. These assays are in progress and
preliminary results indicate that active porcine retroviruses are not present.
The FDA has advised the joint venture that additional trials for the
NeuroCell(TM) products may not proceed until data from these assays has been
reviewed and found satisfactory by the FDA and the protocol for such trials is
approved. If active retrovirus is detected in these assays, additional assays
may be required to assess the risk to patients of retroviral infection. If such
additional assays are required, commencement of the planned pivotal trial of
NeuroCell(TM)-PD may be delayed. Although GTR expects that the FDA will allow
the joint venture to proceed with the pivotal trial for NeuroCell(TM)-PD before
year-end, there can be no assurance that this will be the case. An inability to
proceed with further trials or a substantial delay in the commencement of
clinical trials for the NeuroCell(TM) products will have a material adverse
effect on GTR's interest in the joint venture.
    
 
     The FDA has issued draft regulatory guidelines to reduce the risk of
contamination of xenotransplanted cellular products with infectious agents.
Although GTR's management believes the processes used to produce the porcine
cell products under development by the joint venture would comply with the
guidelines as drafted, such guidelines may undergo substantial revision before
definitive guidelines are issued by the FDA. There can be no assurance that
definitive guidelines will be issued by the FDA or that processes used by the
joint venture will comply with any guidelines that may be issued.
 
     No xenotransplantation-based therapeutic product has been approved by the
FDA and there can be no assurance that any products developed by the joint
venture will be approved by the FDA or regulatory authorities in other
countries. There can also be no assurance that xenotransplantation-based
products, including the joint venture's product candidates, will be accepted by
the medical community or third party payers or that the degree of such
acceptance will not limit the size of the market for such products.
 
     The success of the joint venture is also dependent upon the successful
development of cell transplantation technology. This technology currently has
limited clinical applications and there can be no assurance that it will result
in the development of any therapeutic products. If the cell transplantation
technology does not result in the development of such products, the joint
venture may be required to change dramatically the scope and direction of its
product development activities.
 
     RELIANCE ON AGREEMENTS WITH KEY COLLABORATORS.  Carticel(TM) ACC has been
developed based on the work of a group of Swedish physicians, the two leaders of
which are performing consulting services for GTR relating to the
commercialization and further development of the product. These two physicians
are parties to research and development consulting agreements with GTR (the
"Consulting Agreements") which prohibit them, without GTR's consent, from
performing consulting services for others in the field of cartilage and bone
repair. 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 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 or that such
agreements will be renewed beyond 1998. In addition, there can be no assurance
that individuals who are familiar with the know-how underlying Carticel(TM) ACC
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 relating to Carticel(TM) ACC 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
 
                                       10
<PAGE>   12
 
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.
 
     INTENSE COMPETITION.  GTR is engaged in a segment of the human health care
products industry that is extremely competitive. Competitors in the U.S. and
elsewhere are numerous and include major pharmaceutical, chemical and
biotechnology companies, many of which have substantially greater capital
resources, marketing experience, research and development staffs and facilities
than GTR. These companies may succeed in developing products that are more
effective than any that have been or may be developed by GTR and may also be
more successful than GTR in producing and marketing these products. GTR is aware
of at least one company that is culturing autologous chondrocytes for cartilage
repair in Europe and numerous additional companies developing competing products
for cartilage repair and the treatment of Parkinson's disease, Huntington's
disease, burns, chronic wounds and multiple sclerosis. See
"Business -- Description of Products and Services -- Cartilage
Repair -- Carticel(TM) ACC -- Competition" and "-- Neurodegenerative
Diseases -- Diacrin/Genzyme LLC -- Competition."
 
     UNCERTAINTY REGARDING PATENTS AND PROTECTION OF PROPRIETARY
TECHNOLOGY.  Genzyme's success depends, to a large extent, on its ability to
maintain a competitive technological position in its product areas. Proprietary
rights relating to Genzyme's products are protected from unauthorized use by
third parties only to the extent that they are covered by patents or are
maintained in confidence as trade secrets. Genzyme has filed for patents and has
rights to numerous patents and patent applications worldwide. While certain of
Genzyme's patents have been allowed or issued, there can be no assurance that
such patents or any additional patents that are allowed or issued, if any, will
effectively protect the proprietary technology of Genzyme. In addition, patent
litigation is widespread in the biotechnology industry and it is not possible to
predict how any such litigation will affect Genzyme.
 
     No consistent policy has emerged from the U.S. Patent and Trademark Office
regarding the breadth of claims allowed in biotechnology patents and, therefore,
the degree of future protection for Genzyme's proprietary rights is uncertain.
The allowance of broader claims may increase the incidence and cost of patent
interference proceedings in the U.S. and the risk of infringement litigation in
the U.S. and abroad. Conversely, the allowance of narrower claims, while
reducing the risk of infringement, may limit the value of Genzyme's proprietary
rights under its patents, licenses and pending patent applications.
 
     Genzyme actively monitors the patent filings of its competitors in an
effort to guide the design and development of its products to avoid
infringement. Notwithstanding these efforts, there can be no assurance that the
patents issued or licensed to Genzyme will remain free of challenge by third
parties. In addition, currently pending patent applications filed by third
parties may, if issued, cover GTR's products and services as ultimately
developed, which could have an adverse impact on GTR's results of operations in
amounts that cannot presently be determined. Genzyme may, depending on the final
formulation of such products and 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 Genzyme may need to license such rights or contest
the validity of such patents depends on the scope and validity of such patents
and ultimately on the final design or formulation of its products and services
under development. The cost and ability to license any such rights and the
likelihood of successfully contesting the validity of such patents are
uncertain.
 
     Genzyme has also relied upon trade secrets, proprietary know-how and
continuing technological innovation to develop and maintain its competitive
position. There can be no assurance that others will not independently develop
such know-how or otherwise obtain access to Genzyme's technology. While
Genzyme's employees, consultants and corporate partners with access to
proprietary information are generally required to enter into confidentiality
agreements, there can be no assurance that these agreements will be honored.
Certain of Genzyme's consultants have developed portions of Genzyme's
proprietary technology at their respective universities or in governmental
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.
 
     REGULATION BY GOVERNMENT AGENCIES.  Many of the products and services GTR
plans to manufacture and sell will require approval by governmental agencies in
the U.S. and elsewhere. In particular, human therapeutic and diagnostic products
are subject to pre-marketing approval by the FDA and comparable agencies in
foreign
 
                                       11
<PAGE>   13
 
countries. The process of obtaining these approvals varies according to the
nature and use of the product and can involve lengthy and detailed laboratory
and clinical testing, sampling activities and other costly and time-consuming
procedures. Regulation of GTR's products and services could also limit GTR's
reimbursement for its products and services and otherwise materially affect the
results of operations of GTR. In addition, there can be no assurance that any of
the required approvals will be granted on a timely basis, if at all. For a
discussion of certain regulatory risks relating to Carticel(TM) ACC, see "Risk
Factors -- Risks Related to GTR -- No Assurance of Commercial Success of
Carticel(TM) ACC."
 
     RAPID TECHNOLOGICAL CHANGE.  The field of biotechnology is expected to
continue to undergo significant and rapid technological change. Although GTR
will seek to expand its technological capabilities in order to remain
competitive, there can be no assurance that research and discoveries by others
will not render GTR's products or services obsolete.
 
     UNCERTAINTY REGARDING SUCCESS OF CLINICAL TRIALS.  Several of GTR's
products, including NeuroCell(TM)-PD and NeuroCell(TM)-HD, are currently in or
will require 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 these 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.  A
majority of GTR's revenues are attributable directly or indirectly to payments
received from third party payers, including government health administration
authorities and private health insurers. Significant uncertainty exists as to
the reimbursement status of newly approved health care products, and third party
payers are increasingly challenging the prices charged for health care products
and services. Third party payers are also increasingly attempting to contain
health care costs by limiting both coverage and the level of reimbursement for
new therapeutic products and by refusing in some cases to provide coverage for
uses of approved products for disease indications for which the FDA has not
granted marketing approval. There can be no assurance that third party insurance
coverage will be available for any products or services developed by GTR. If
adequate coverage and reimbursement are not provided by government and other
third party payers for GTR's products and services, its results of operations
may be materially adversely affected. For a discussion of risks relating to
reimbursement for Carticel(TM) ACC, see "Risk Factors -- Risks Related to
GTR -- No Assurance of Commercial Success of Carticel(TM) ACC."
 
     In addition, Congress has from time to time discussed the possible
implementation of broad based health care cost containment measures. While these
discussions have not led to the enactment of any specific health care cost
containment legislation, it is possible that health care measures will again be
proposed in Congress. The effects on GTR of any such measures that are
ultimately adopted cannot be predicted at this time.
 
     PRODUCT LIABILITY AND LIMITATIONS OF INSURANCE.  GTR may be subject to
product liability claims in connection with the use or misuse of its products
during testing or after commercialization. While GTR has taken, and continues to
take, what it believes are appropriate precautions, there can be no assurance
that GTR will avoid significant liability exposure. Genzyme has only limited
amounts of product liability insurance and there can be no assurance that such
insurance will provide sufficient coverage against any or all potential product
liability claims. If Genzyme attempts to obtain additional insurance in the
future, there can be no assurance that it will be able to do so on acceptable
terms, if at all, or that such insurance will provide adequate coverage against
claims asserted.
 
     POSSIBLE VOLATILITY OF SHARE PRICE AND ABSENCE OF DIVIDENDS.  The market
prices for securities of biotechnology companies have been volatile. Factors
such as announcements of technological innovations or new commercial products by
Genzyme or its competitors, governmental regulation, patent or proprietary
rights developments, public concern as to the safety or other implications of
biotechnology products and market conditions in general may have a significant
impact on the market price of GTR Stock. No cash dividends have been paid to
date on Genzyme common stock, nor does Genzyme anticipate paying cash dividends
on such stock in the foreseeable future.
 
     POSSIBLE ADVERSE EFFECT OF ANTI-TAKEOVER PROVISIONS.  Certain provisions of
Massachusetts law, the Genzyme 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 or a change in its management and thus deprive
stockholders of the opportunity to receive a premium for their shares. In
addition, Genzyme's authorized capital
 
                                       12
<PAGE>   14
 
   
stock includes shares of undesignated common and preferred stock that may be
issued from time to time by the Genzyme Board in one or more series. This
ability to issue or the issuance of additional series of common or preferred
stock could have the effect of discouraging attempts to acquire control of
Genzyme.
    
 
     DILUTION.  Pursuant to an agreement made at the time of formation of GTR,
the Genzyme Board may allocate up to $10 million from Genzyme General to GTR on
or before June 14, 1998 in exchange for 1,000,000 GTR Designated Shares. In
addition, the Genzyme Board has authorized the allocation of up to $20 million
in cash from Genzyme General to GTR (the "GTR Equity Line"). Any amounts
allocated to GTR under the GTR Equity Line will result in an increase in such
number of GTR Designated Shares determined by dividing (i) the amount of cash so
allocated by (ii) the average of the daily closing prices of GTR Stock for the
20 consecutive trading days commencing on the 30th trading day prior to the date
of such allocation. Of the $20 million authorized for allocation to GTR,
approximately $6.0 million had been allocated as of June 30, 1997.
 
     The GTR Designated Shares are not issued or outstanding, but may be issued
from time to time by the Genzyme Board without allocating any proceeds to GTR or
distributed as a stock dividend to the holders of GGD Stock. As of August 31,
1997, there were 921,423 GTR Designated Shares. Pursuant to the management and
accounting policies adopted by the Genzyme Board, Genzyme is required to
distribute or sell the GTR Designated Shares annually to the extent that the
number of such shares (excluding those reserved for GGD optionholders and the
holders of instruments convertible into GGD Stock) exceeds 10% of the shares of
GTR Stock outstanding. Genzyme is unable to predict the effect that the sales or
distributions described in this paragraph may have on the then prevailing market
price of GTR Stock.
 
     In addition, Genzyme currently has reserved 2,577,245 shares of GTR Stock
for issuance upon conversion of amounts payable under the GTR Note. The actual
number of shares issued upon conversion of the GTR Note may be more or less than
the number currently reserved. The GTR Note is convertible into shares of GTR
Stock at a discount to the average of the closing bid prices of GTR Stock as
reported by the Nasdaq National Market for the 25 trading days immediately
preceding the applicable conversion date (the "Conversion Price"). This discount
began at 2% on August 27, 1997 and increases by an additional one percent per
month thereafter until May 27, 1998. After May 27, 1998, the Conversion Price
will be equal to the lesser of: (i) 89% of the Conversion Price calculated as of
the actual conversion date and (ii) 89% of the Conversion Price calculated as of
May 27, 1998. The conversion of amounts payable under the GTR Note at a price
that is less than the price to the public in this offering will result in
dilution to investors in this offering.
 
RISKS RELATED TO OTHER GENZYME DIVISIONS
 
     Holders of GTR 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 other divisions of Genzyme 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 GTR Stock.
 
     DEPENDENCE ON CEREDASE(R)ENZYME AND CEREZYME(R) ENZYME SALES.  Genzyme
General's results of operations are highly dependent upon the sales of
Ceredase(R) enzyme and Cerezyme(R) enzyme. Sales of Ceredase(R) enzyme and
Cerezyme(R) enzyme in 1996 were $264.6 million, representing 62% of consolidated
product sales in 1996.
 
     Genzyme produces Ceredase(R) enzyme from an extract of human placental
tissue supplied by a French company that is the only significant commercial
source of this material. The current supply available is not sufficient to
produce enough Ceredase(R) enzyme to supply all present patients. To address
supply constraints, Genzyme has developed Cerezyme(R) enzyme, a recombinant form
of the enzyme. In October 1996, Genzyme General received FDA approval to
manufacture Cerezyme(R) enzyme in a new, large-scale manufacturing plant located
in Boston, Massachusetts. Once an uninterrupted supply of Cerezyme(R) enzyme can
be produced by the new plant, patients receiving Ceredase(R) enzyme will be
converted to Cerezyme(R) enzyme. Genzyme General will be required to continue
providing Ceredase(R) enzyme until the process of patient conversion is
completed. Any disruption in the supply or manufacturing process of Ceredase(R)
enzyme during the conversion period or, thereafter, in the supply or
manufacturing process of Cerezyme(R) enzyme, may have a material adverse effect
on revenue.
 
     FUTURE CAPITAL NEEDS.  Although Genzyme currently has substantial cash
resources, it has committed to utilize a portion of such funds for certain
purposes, such as (i) completing the market introduction in the U.S. and
 
                                       13
<PAGE>   15
 
Europe of its line of biomaterial products based on hyaluronic acid to limit the
formation of postoperative adhesions, (ii) completing the market introduction of
Carticel(TM) ACC and developing, producing and marketing other products through
GTR, (iii) providing up to $25 million under a line of credit established for
the benefit of GMO and (iv) making certain payments to third parties in
connection with strategic collaborations.
 
   
     Genzyme had approximately $179 million in cash, cash equivalents and short
and long-term investments at June 30, 1997. As of June 30, 1997, approximately
$118 million was outstanding under Genzyme's $225 million revolving credit
facility with a syndicate of commercial banks, $95 million of which was
allocated to Genzyme General, $18 million of which was allocated to GTR and $5
million of which was allocated to GMO. Amounts borrowed under this facility are
payable on November 15, 1999. Genzyme's cash resources will be diminished upon
repayment of amounts borrowed, plus accrued interest, under this credit
facility. In addition, Genzyme privately placed the GTR Note in February 1997 to
fund GTR's operations and in August 1997 Genzyme privately placed $20 million in
debentures convertible into GMO stock (the "GMO Debentures") to fund GMO's
operations. Pursuant to the terms of both the GTR Note and the GMO Debentures,
the holder will, in some circumstances, receive cash from Genzyme. To the extent
Genzyme uses cash to pay the principal and accrued interest on the GTR Note or
GMO Debentures, its cash reserves will also be diminished. As a result, Genzyme
may have to obtain additional financing. There can be no assurance that such
financing will be available on favorable terms, if at all.
    
 
     RISKS INHERENT IN INTERNATIONAL OPERATIONS.  Foreign operations of Genzyme
accounted for 35% of consolidated net sales in 1996 as compared to 35% and 31%
in 1995 and 1994, respectively. In addition, Genzyme has direct investments in a
number of subsidiaries in foreign countries (primarily in Europe and Japan) and
purchases certain raw materials from a French supplier. Financial results of
Genzyme could be adversely affected by fluctuations in foreign exchange rates.
Fluctuations in the value of foreign currencies affect the dollar value of
Genzyme's net investment in foreign subsidiaries, with this fluctuation being
included in a separate component of stockholders' equity. Operating results of
foreign subsidiaries are translated into U.S. dollars at average monthly
exchange rates. In addition, the U.S. dollar value of transactions based in
foreign currency (collections on foreign sales or payments for foreign
purchases) also fluctuates with exchange rates. The largest foreign currency
exposure results from activity in British pounds, French francs, Swiss francs,
Dutch guilders, German marks and Japanese yen.
 
     Genzyme attempts to manage this exposure by entering into forward contracts
with banks to the extent that the timing of currency flows can reasonably be
anticipated and by offsetting matching foreign currency denominated assets with
foreign currency denominated liabilities. Although Genzyme has not hedged net
foreign investments in the past, it may engage in hedging transactions to manage
and reduce its foreign exchange risk, subject to certain restrictions imposed by
the Genzyme Board. There can be no assurance that Genzyme's attempts to manage
its foreign currency exchange risk will be successful.
 
                                USE OF PROCEEDS
 
   
     The net proceeds to be received from the sale of the shares of GTR Stock
offered hereby are estimated to be $35,047,000 ($40,342,000 if the Underwriters'
over-allotment option is exercised in full) and will be allocated in full to
GTR. While GTR currently has no commitments for use of the net proceeds of this
offering, GTR's management anticipates that approximately $21 million of the net
proceeds of this offering will be used to fund the research and development
activities of GTR, including approximately $9 million to fund GTR's obligations
to the joint venture with Diacrin. The balance of such proceeds will be used for
working capital, for expenses related to the marketing of Carticel(TM) ACC and
for general corporate purposes. 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.
    
 
     GTR anticipates that the net proceeds from this offering, together with
existing cash balances allocated to GTR or approved for reallocation from
Genzyme General and cash generated from the sale of Carticel(TM) ACC and the
Epicel(SM) Service, will be sufficient to fund GTR's operations through the end
of 1998. Significant additional funds may be required to continue operations at
anticipated levels beyond such time.
 
                                       14
<PAGE>   16
 
                                 CAPITALIZATION
 
     The following table sets forth the capitalization of GTR as of June 30,
1997 and as adjusted to reflect the issuance of the shares of GTR Stock offered
hereby:
 
   
<TABLE>
<CAPTION>
                                                                         JUNE 30, 1997
                                                                   --------------------------
                                                                   ACTUAL      AS ADJUSTED(1)
                                                                   -------     --------------
                                                                     (DOLLARS IN THOUSANDS)
    <S>                                                            <C>         <C>
    Long-term obligations........................................  $30,099        $ 30,099
    Division equity (2)..........................................   11,523          46,570
                                                                   -------         -------
    Total capitalization.........................................  $41,622        $ 76,669
                                                                   =======         =======
</TABLE>
    
 
- ---------------
   
(1) As adjusted to reflect the application of the net proceeds of this offering,
    estimated to be $35,047,000.
    
 
(2) Excludes (i) 2,382,203 shares of GTR Stock reserved for issuance upon
    exercise of outstanding options with a weighted average exercise price of
    $10.67 per share, (ii) 3,160,939 GTR Designated Shares and (iii) 2,577,245
    shares of GTR Stock currently reserved for issuance upon conversion of
    amounts payable under the GTR Note. The actual number of shares issued upon
    conversion of the GTR Note may be more or less than the number currently
    reserved. See "Risk Factors -- Risks Related to GTR -- Dilution."
 
                                       15
<PAGE>   17
 
                            PRICE RANGE OF GTR STOCK
                              AND DIVIDEND POLICY
 
     The GTR Stock is traded in the over-the-counter market and prices are
quoted on the Nasdaq National Market ("Nasdaq") under the symbol GENZL. The
following table sets forth, for the periods indicated, the high and low sale
prices for the GTR Stock as reported by Nasdaq.
 
   
<TABLE>
<CAPTION>
                                                                               HIGH   LOW
                                                                               ----   ----
    <S>                                                                        <C>    <C>
    1995
      First Quarter..........................................................   7 3/   3 1/
      Second Quarter.........................................................   7 5/   5 1/
      Third Quarter..........................................................  16 5/8  6 1/
      Fourth Quarter.........................................................  18 1/2 11 3/4
    1996
      First Quarter..........................................................  28 3/4 13 7/8
      Second Quarter.........................................................  17 1/8 10 7/8
      Third Quarter..........................................................  11 7/8  6 5/
      Fourth Quarter.........................................................  11 1/8  6 1/
    1997
      First Quarter..........................................................  14 7/8 7
      Second Quarter.........................................................  13      8 1/
      Third Quarter..........................................................  12 1/2 9
      Fourth Quarter (through October 28, 1997)..............................  10 5/8  8 7/1
</TABLE>
    
 
- ---------------
 
   
     On October 28, 1997, the closing sale price of GTR Stock as reported by
Nasdaq was $9.38 per share. There were 4,432 holders of record of GTR Stock as
of August 31, 1997.
    
 
     Genzyme has never paid a cash dividend on shares of its capital stock; it
has retained all earnings for use in its business. Genzyme expects to continue
to follow the policy of retaining funds for reinvestment in its business.
 
                                       16
<PAGE>   18
 
                             GENZYME TISSUE REPAIR
                            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, 1994, 1995 and 1996 and the statement of
operations data presented below for each of the years in the five-year period
ended December 31, 1996 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, 1995 and 1996 and for each of the years in the
three-year period ended December 31, 1996 and the report of Coopers & Lybrand
L.L.P. relating thereto are incorporated by reference in this Prospectus from
Genzyme's Annual Report on Form 10-K for the year ended December 31, 1996 and
the selected financial data presented below are qualified in their entirety by
reference thereto. The balance sheet data presented below as of June 30, 1997
and statement of operations data presented below for the six-month periods ended
June 30, 1996 and 1997 are derived from GTR's unaudited financial statements
which are also incorporated herein by reference from Genzyme's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997. 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, 1997 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,
                                                      --------------------------------------------------   -------------------
                                                       1992      1993       1994       1995       1996       1996       1997
                                                      ------   --------   --------   --------   --------   --------   --------
<S>                                                   <C>      <C>        <C>        <C>        <C>        <C>        <C>
COMBINED STATEMENT OF OPERATIONS DATA:
Revenues:
  Net service sales.................................  $   --   $     --   $    324   $  5,220   $  7,312   $  3,361   $  4,641
  Related party revenues:
    Technology license fee(1).......................      --      2,000         --         --         --         --         --
    Revenues from research and development
      contracts.....................................   2,666      2,684         --         --         --         --         --
                                                      ------   --------   --------   --------   --------   --------   --------
        Total revenues..............................   2,666      4,684        324      5,220      7,312      3,361      4,641
                                                      ------   --------   --------   --------   --------   --------   --------
Operating costs and expenses:
  Cost of services sold.............................      --         --        287      4,731     11,193      5,882      5,991
  Selling, general and administrative...............     823        701        964     12,927     27,111     12,976     12,658
  Research and development (including research and
    development related to contracts)...............   2,351      2,805      3,638     10,938     10,880      4,704      4,996
  Purchase of in-process research and
    development(2)..................................      --     25,000     11,215         --         --         --         --
                                                      ------   --------   --------   --------   --------   --------   --------
        Total operating costs and expenses..........   3,174     28,506     16,104     28,596     49,184     23,562     23,645
                                                      ------   --------   --------   --------   --------   --------   --------
Operating loss......................................    (508)   (23,822)   (15,780)   (23,376)   (41,872)   (20,201)   (19,004)
Other income and (expenses):
  Equity in loss of joint venture(3)................      --         --         --         --     (1,727)        --     (3,416)
  Investment income.................................      --         --         29      1,386      1,432        964        398
  Interest expense..................................      --         --         --        (40)      (148)        (5)    (1,238)
                                                      ------   --------   --------   --------   --------   --------   --------
        Total other income and (expenses)...........      --         --         29      1,346       (443)       959     (4,256)
                                                      ------   --------   --------   --------   --------   --------   --------
Loss before income taxes............................    (508)   (23,822)   (15,751)   (22,030)   (42,315)   (19,242)   (23,260)
Provision for income taxes..........................      --        (38)        --         --         --         --         --
Tax benefit allocated to Genzyme General............      --       (255)        --         --         --         --         --
                                                      ------   --------   --------   --------   --------   --------   --------
Net loss attributable to GTR Stock(4)...............  $ (508)  $(24,115)  $(15,751)  $(22,030)  $(42,315)  $(19,242)  $(23,260)
                                                      ======   ========   ========   ========   ========   ========   ========
Per GTR common share:
  Net loss(4).......................................  $(0.17)  $  (7.43)  $  (4.40)  $  (2.28)  $  (3.38)  $  (1.55)  $  (1.76)
  Weighted average shares outstanding(4)............   3,019      3,245      3,578      9,659     12,525     12,411     13,208
</TABLE>

 
                                       17
<PAGE>   19
 
   
<TABLE>
<CAPTION>
                                                        AT DECEMBER 31,                      AT JUNE 30, 1997
                                         ---------------------------------------------   ------------------------
                                         1992     1993      1994      1995      1996     ACTUAL    AS ADJUSTED(5)
                                         -----   -------   -------   -------   -------   -------   --------------
<S>                                      <C>     <C>       <C>       <C>       <C>       <C>       <C>
COMBINED BALANCE SHEET DATA:
Cash and investments(6)................  $  --   $    --   $24,808   $47,573   $16,230   $20,900      $ 55,947
Working capital........................   (149)       --    20,557    44,374    14,232    19,834        54,881
Total assets...........................     --        --    28,435    52,649    42,593    47,260        82,307
Long-term obligations(7,8).............     --        --        --        --    18,000    30,099        30,099
Division equity(3,8,9).................   (149)       --    23,313    45,926    18,084    11,523        46,570
</TABLE>
    
 
There were no cash dividends paid.
- ---------------
(1) GTR received a $2.0 million technology license fee from Neozyme Corporation
    ("Neozyme I") in July 1993 related to the expansion of the Vianain(R)
    Debriding Product.
 
(2) GTR acquired (a) the rights to Neozyme I's Vianain(R) development program in
    1993 and (b) all of the outstanding stock of BioSurface Technology, Inc.
    ("BioSurface") in 1994. These acquisitions were accounted for as purchases.
    In-process research and development acquired in connection with the
    acquisitions was charged to operations.
 
(3) In 1996, in connection with the formation of the joint venture with Diacrin,
    the Genzyme Board authorized the allocation of up to $20 million in cash
    from Genzyme General to GTR. Of the $20 million authorized, $1.9 million and
    $4.1 million were allocated in 1996 and the first six months of 1997,
    respectively, resulting in the creation of 231,645 and 401,256 GTR
    Designated Shares, respectively. For the year ended December 31, 1996 and
    the six months ended June 30, 1997, GTR realized net losses from the joint
    venture of $1.7 million and $3.4 million, respectively.
 
(4) Net loss attributable to GTR and net loss per share for the years ended
    December 31, 1992 and 1993 give effect to the management and accounting
    policies adopted by the Genzyme Board in connection with the creation of GTR
    and, accordingly, are pro forma presentations.
 
   
(5) As adjusted to reflect the application of the net proceeds of this offering,
    estimated to be $35,047,000.
    
 
(6) Cash and investments includes cash, cash equivalents and short- and
    long-term investments.
 
(7) As of December 1996, $18.0 million of borrowings were allocated to GTR under
    Genzyme's $225.0 million revolving credit facility to fund operations, all
    of which remained outstanding as of June 30, 1997.
 
(8) On February 28, 1997, GTR raised $13 million through the private placement
    of the GTR Note to an affiliate of Credit Suisse First Boston Corporation.
    The GTR Note is convertible into shares of GTR Stock at a discount to the
    average of the closing bid prices of GTR Stock as reported by the Nasdaq
    National Market for the 25 trading days immediately preceding the applicable
    conversion date (the "Conversion Price"). This discount began at 2% on
    August 27, 1997 and increases by an additional one percent per month
    thereafter until May 27, 1998. After May 27, 1998, the Conversion Price will
    be equal to the lesser of: (i) 89% of the Conversion Price calculated as of
    the actual conversion date and (ii) 89% of the Conversion Price calculated
    as of May 27, 1998. In the first quarter of 1997, GTR recorded $11.5 million
    of proceeds attributed to the value of the debt and $1.5 million attributed
    to the value of the conversion feature (recorded as an increase to division
    equity). The $11.5 million will be accreted to the face value of the debt by
    a charge to interest expense over the term of the initial 15 month
    conversion period.
 
(9) In December 1994, the outstanding shares of Genzyme common stock were
    redesignated as GGD Stock on a share-for-share basis and shares of GTR Stock
    were distributed on the basis of .135 of one share of GTR Stock for each
    share of Genzyme's previous common stock held by shareholders of record on
    December 16, 1994. In December 1994, Genzyme issued 5,000,000 shares of GTR
    Stock valued at $25.3 million in connection with the acquisition of
    BioSurface. In September 1995, GTR completed the sale of 3,000,000 shares of
    GTR Stock for net proceeds of $42.3 million. In each of June 1996 and June
    1997, GTR received $10 million from Genzyme General in exchange for
    1,000,000 GTR Designated Shares issued pursuant to the terms of the purchase
    option agreement between Genzyme General and GTR.
 
                                       18
<PAGE>   20
 
                  GTR MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
RESULTS OF OPERATIONS
 
FIRST SIX MONTHS OF 1997 AS COMPARED TO THE FIRST SIX MONTHS OF 1996
 
     Revenues:  Service revenues for the six months ended June 30, 1997 were
$4.6 million, an increase of 38% over the same period in 1996. Sales of
Carticel(TM) ACC were $2.7 million for the six months ended June 30, 1997 as
compared to $1.3 million for the comparable period in 1996. The growth in
Carticel(TM) ACC sales is primarily attributable to increased acceptance of the
service by surgeons and a continued increase in the number of surgeons trained
in the procedure utilizing the service. Sales of the Epicel(SM) Service were
$1.9 million for the six months ended June 30, 1997 compared to $2.0 million for
the same period in 1996 due to a decrease in the number of burn incidents
requiring the service.
 
     Margins and Operating Expenses:  GTR's cost of services sold exceeded
revenue for the six months ended June 30, 1997 by $1.4 million, compared to $2.5
million for the same period in 1996 primarily due to the higher sales volume and
efficiencies gained in the manufacturing process.
 
     Selling, general and administrative ("SG&A") expenses were $12.7 million
for the six months ended June 30, 1997, a decrease of 2% over the same period in
1996. GTR incurs direct SG&A charges as well as an SG&A charge based on actual
amounts incurred from Genzyme General for SG&A work performed by Genzyme General
on behalf of GTR. For the six months ended June 30, 1997, $4.1 million of SG&A
services were provided by Genzyme General as compared to $4.3 million for the
same period in 1996.
 
     Research and development expenses were $5.0 million for the six months
ended June 30, 1997 as compared to $4.7 million for the same period in 1996.
Increased spending associated with the BLA for Carticel(TM) ACC was offset by a
decline in costs related to the Vianain(R) program. For the six months ended
June 30, 1997, $3.7 million of research and development services were provided
to GTR by Genzyme General, compared to $3.3 million in the corresponding period
of 1996.
 
     Other Income and Expenses:  Investment income declined to $0.4 million for
the six months ended June 30, 1997 from $1.0 million in the same period in 1996,
due primarily to lower average cash balances.
 
     Interest expense for the six months ended June 30, 1997 increased to $1.2
million as a result of a 20% increase in borrowings under Genzyme's revolving
credit facility as compared to June 30, 1996, and the addition of $11.5 million
of debt from the private placement of the GTR Note. See "Liquidity and Capital
Resources" below.
 
     On October 1, 1996, Diacrin/Genzyme LLC was established as a joint venture
between GTR and Diacrin to develop and commercialize products and processes
using fetal porcine cells for the treatment of Parkinson's disease and
Huntington's disease in humans. Under the terms of the joint venture agreement,
GTR is required to provide 80% of the first $50 million in funding for products
to be developed by the joint venture. Thereafter, all costs will be shared
equally between GTR and Diacrin. Profits from the joint venture will be shared
by the two parties. In the six months ended June 30, 1997, GTR provided $4.1
million of funding to, and realized a net loss of $3.4 million from,
Diacrin/Genzyme LLC.
 
1996 AS COMPARED TO 1995
 
     Revenues:  Revenues in 1996 increased 40% to $7.3 million from $5.2 million
in 1995. Sales of Carticel(TM) ACC were $3.1 million, compared to $0.6 million
in 1995, the year in which the service was launched. The increase in
Carticel(TM) ACC sales resulted primarily from the increase in the number of
surgeons trained in the procedure utilizing the service. Sales of the Epicel(SM)
Service in 1996 decreased 9% to $4.2 million, due to a decrease in the number of
burn incidents requiring the service.
 
     Margins and Operating Expenses:  GTR's costs of services sold exceeded
revenues by 53% in 1996, compared to a gross profit of 9% in 1995, due to
increased spending for the expansion of manufacturing capacity.
 
                                       19
<PAGE>   21
 
     SG&A expenses in 1996 were $27.1 million, an increase of 110% over 1995.
The increase resulted from the expenses and staffing to support revenue growth
and increased surgeon training costs relating to Carticel(TM) ACC. GTR incurs
direct SG&A expenses as well as an SG&A charge, based on actual amounts
incurred, from Genzyme General for SG&A work performed by Genzyme General on
behalf of GTR. In 1996, $9.1 million of SG&A services were provided by Genzyme
General, compared to $4.4 million in 1995, due to an increase in the level of
operations related to Carticel(TM) ACC.
 
     Research and development expenses were $10.9 million in each of 1996 and
1995. Increases in expenses associated with the TGF-(BETA)SS(2) program were off
set by decreases in the Vianain(R) program. In 1996, $6.9 million of research
and development services were provided by Genzyme General to GTR, compared to
$4.7 million in 1995.
 
     Other Income and Expenses:  Investment income was $1.4 million in each of
1996 and 1995, due primarily to level average cash balances during the year.
Interest expense in 1996 was $0.1 million, net of capitalized interest on
construction in progress of $0.2 million, compared to $40,000 in 1995. Interest
expense increased in 1996 due to interest on borrowings. See "Liquidity and
Capital Resources" for a description of the borrowings.
 
     As of December 31, 1996, GTR had provided $1.9 million of funding to
Diacrin/Genzyme LLC and realized a net loss of $1.7 million from the joint
venture.
 
1995 AS COMPARED TO 1994
 
     Revenues:  Revenues for 1995 were $5.2 million compared to $0.3 million in
1994. Revenues in 1994 consisted solely of revenues from the sale of the
Epicel(SM) Service for the period from December 16, 1994, the acquisition date
of BioSurface, through December 31, 1994. Revenues for 1995 consisted primarily
of $4.6 million in sales of the Epicel(SM) Service and $0.6 million from sales
of Carticel(TM) ACC.
 
     Margins and Operating Expenses:  Gross margins decreased to 9% in 1995 from
11% in 1994 due to costs associated with the launch of Carticel(TM) ACC. SG&A
expenses for 1995 were $12.9 million, compared to $1.0 million in 1994 comprised
solely of expenses from BioSurface. In 1995, $4.4 million of SG&A services were
provided by Genzyme General to GTR compared to $0.8 million in 1994. The
increases in SG&A expenses and services provided by Genzyme General were due to
a full year of operations from BioSurface and to the launch in both the U.S. and
Europe of Carticel(TM) ACC.
 
     Research and development expenses for 1995 were $10.9 million compared to
$3.6 million in 1994, which included $0.3 million from the operations of
BioSurface. The increase resulted from accelerated clinical trials activity for
certain tissue repair products and increased efforts relating to Carticel(TM)
ACC. In 1995, $4.7 million of research and development services were provided by
Genzyme General to GTR compared to $3.3 million in 1994.
 
     Other Income and Expenses:  Investment income for 1995 was $1.4 million
compared to $29,000 for 1994. The increase over 1994 was due to higher average
cash balances from the allocation of $10 million from Genzyme General and the
net proceeds from a public offering in October 1995. In 1994, $11.2 million of
incomplete technology from the BioSurface acquisition was charged to operations
as in-process research and development.
 
LIQUIDITY AND FINANCIAL RESOURCES
 
     As of June 30, 1997, GTR had cash and cash equivalents of $20.9 million, an
increase of $4.7 million from December 31, 1996. GTR used $18.9 million of cash
for operations in the six months ended June 30, 1997. Investing activities used
$4.6 million of cash in the six months ended June 30, 1997, of which $4.1
million represents GTR's additional investment in Diacrin/Genzyme LLC and $0.5
million represents investments in other noncurrent assets. These expenditures
were financed primarily by $14.0 million of cash allocated to GTR from Genzyme
General, of which $10.0 million represented cash allocated pursuant to Genzyme
General's remaining option to allocate up to $20.0 million of cash to GTR in
exchange for GTR Designated Shares at $10 per share and $4.1 million represented
cash allocated to GTR to fund its investment in Diacrin/Genzyme LLC and $13.0
million of proceeds from the private placement of the GTR Note in February 1997.
Of the $13.0 million in
 
                                       20
<PAGE>   22
 
proceeds from the GTR Note, GTR recorded $11.5 million of proceeds attributable
to the value of the debt and $1.5 million attributable to the value of the
conversion feature (recorded as an increase to division equity). The $11.5
million will be accreted to the face value of the debt by a charge to interest
expense over the term of the initial 15 month conversion period. Proceeds from
the issuance of common stock through exercises of stock options and warrants
contributed $1.1 million in the six months ended June 30, 1997 and as of June
30, 1997, $18.0 million of funds borrowed by GTR in December 1996 under
Genzyme's revolving credit facility remained outstanding.
 
     GTR's funding obligation to Diacrin/Genzyme LLC for 1997 is expected to be
approximately $10 million, of which $4.1 million had been provided by GTR as of
June 30, 1997. GTR's funding obligation to the joint venture for 1998 is
expected to be approximately $10 million.
 
     GTR anticipates that the net proceeds from this offering, together with
existing cash balances allocated to GTR or approved for reallocation from
Genzyme General and cash generated from the sale of Carticel(TM) ACC and the
Epicel(SM) Service, will be sufficient to fund GTR's operations through the end
of 1998. Significant additional funds may be required to continue operations at
anticipated levels beyond 1998, however, and GTR may be required to delay, scale
back or eliminate certain of its programs or to license third parties to
commercialize technologies or products that it would otherwise undertake itself
if it does not have sufficient capital or is not successful in raising
additional capital.
 
                                       21
<PAGE>   23
 
                           ADDITIONAL FINANCIAL DATA
 
     Genzyme holds title to all of its assets and is responsible for all of its
liabilities, and the holders of GTR Stock have no specific claim against the
assets attributed for financial statement presentation purposes to GTR.
Liabilities or contingencies of any division that affect Genzyme's resources or
financial condition could affect the financial condition or results of
operations of all divisions. See "Risk Factors -- Risks Related to Genzyme
Tracking Stock -- Stockholders of One Company; Financial Impacts on One Division
Could Affect the Others." Therefore, the following consolidated balance sheet
data of Genzyme are presented as additional information.
 
     The following table represents summary historical consolidated balance
sheet data of Genzyme as derived from Genzyme's financial statements. The data
should be read in conjunction with the historical financial statements and the
notes thereto, and related Management's Discussion and Analysis of Financial
Condition and Results of Operations of Genzyme incorporated by reference in this
Prospectus. See "Incorporation of Certain Documents by Reference." Amounts are
in thousands, except for per share amounts.
 
<TABLE>
<CAPTION>
                                                                    AT DECEMBER 31,
                                                 ------------------------------------------------------   AT JUNE 30,
                                                   1992       1993       1994       1995        1996         1997
                                                 --------   --------   --------   --------   ----------   -----------
<S>                                              <C>        <C>        <C>        <C>        <C>          <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and investments(1).....................     $248,325   $168,953   $153,460   $326,236   $  187,955    $  178,957
Working capital.............................      166,324     99,605    103,871    352,410      395,605       330,145
Total assets(2).............................      481,896    542,052    658,408    905,201    1,270,508     1,223,987
Long-term debt and capital lease obligations
  excluding current portion(2, 3, 4, 5).....      105,369    144,674    126,729    124,473      241,998       158,314
Stockholders' equity(2, 4, 5, 6)............      322,613    334,072    418,964    705,207      902,309       949,305
</TABLE>
 
- ---------------
(1) Cash and investments includes cash, cash equivalents and short- and
long-term investments.
 
(2) In May 1996, Genzyme acquired Genetrix, Inc. in a tax-free exchange of GGD
    Stock which was accounted for as a purchase. In the aggregate, approximately
    1,380,000 shares of GGD Stock valued at $36.5 million were issued. In July
    1996, Genzyme acquired Deknatel Snowden Pencer, Inc. ("DSP") for cash of
    approximately $252 million financed by cash of $52 million and line of
    credit borrowings of $200 million. In December 1996, Genzyme completed the
    acquisition of all of the callable common stock of Neozyme II Corporation
    for $111.3 million in cash.
 
(3) In June 1996, Genzyme's $15.0 million credit line with a commercial bank was
    increased to $215 million in connection with the acquisition of DSP. In
    November 1996, this credit line was refinanced with a $225 million revolving
    credit facility made available through a syndicate of banks. As of June 30,
    1997, Genzyme had outstanding debt of $118 million under this credit
    facility, of which $95 million was allocated to Genzyme General, $18 million
    was allocated to GTR and $5 million was allocated to GMO. Amounts borrowed
    under this facility are due November 15, 1999. In July 1996, Genzyme made a
    final payment of approximately $7.6 million for a company acquired in 1994.
 
(4) In October 1991, Genzyme issued $100 million of 6 3/4% convertible
    subordinated notes due October 2001 and received net proceeds of $97.3
    million. The notes were converted into shares of GGD Stock in March 1996.
 
(5) On February 28, 1997, GTR raised $13 million through the private placement
    of the GTR Note to an affiliate of Credit Suisse First Boston Corporation.
    The GTR Note is convertible into shares of GTR Stock at a discount to the
    average of the closing bid prices of GTR Stock as reported by the Nasdaq
    National Market for the 25 trading days immediately preceding the applicable
    conversion date (the "Conversion Price"). This discount began at 2% on
    August 27, 1997 and increases by an additional one percent per month
    thereafter until May 27, 1998. After May 27, 1998, the Conversion Price will
    be equal to the lesser of: (i) 89% of the Conversion Price calculated as of
    the actual conversion date and (ii) 89% of the Conversion Price calculated
    as of May 27, 1998. In the first quarter of 1997, GTR recorded $11.5 million
    of proceeds attributed to the value of the debt and $1.5 million attributed
    to the value of the conversion feature (recorded as an increase to division
    equity). The $11.5 million will be accreted to the face value of the debt by
    a charge to interest expense over the term of the initial 15 month
    conversion period.
 
(6) On June 18, 1997, PharmaGenics, Inc. merged with and into Genzyme. As
    consideration for the merger, the stockholders of PharmaGenics received
    approximately 3,929,000 shares of GMO Stock. The aggregate purchase price
    was $27.5 million plus estimated acquisition costs of $2.2 million, assumed
    liabilities of $5.4 million and the recording of a deferred tax liability of
    $7.6 million resulting from the temporary difference between the book and
    tax basis of the completed technology. The portion of the purchase price
    allocated to the completed technology was $20.0 million which will be
    amortized over five years. GMO allocated $7.0 million to in-process
    technology, which represents the value assigned to PharmaGenics's programs
    which are still in the development stage and for which there is no
    alternative use. GMO charged the amount allocated to in-process technology
    to operations in June 1997, the period in which the merger was consummated.
    As compensation to Genzyme General for its contributions to GMO, 6,000,000
    GMO Designated Shares have been reserved for issuance for the benefit of
    Genzyme General or its stockholders.
 
                                       22
<PAGE>   24
 
                                    BUSINESS
 
OVERVIEW
 
     GTR is a leading developer of biological products for the surgical repair
or replacement of damaged tissue. GTR's lead product, Carticel(TM) ACC for
repair of damaged knee cartilage, has been marketed since 1995 in the U.S. and
Europe as an unregulated device and in August 1997 became the first product to
receive FDA approval under new regulations relating to manipulated autologous
structural cell-based products. This approval has led to a surge in
reimbursement coverage for Carticel(TM) ACC, and GTR believes that such coverage
for the product will continue to increase. GTR also markets the Epicel(SM)
Service, which provides cultured autologous skin cells as permanent skin
replacement for patients with severe burns.
 
     GTR is developing two cellular therapies for neurodegenerative
diseases -- NeuroCell(TM)-PD for the treatment of Parkinson's disease and
NeuroCell(TM)-HD for the treatment of Huntington's disease. These products
involve implantation of fetal porcine brain cells into Parkinson's and
Huntington's disease patients to replace damaged brain tissue. The NeuroCell(TM)
products are being developed in a joint venture with Diacrin and are currently
in Phase I clinical trials.
 
     GTR's development portfolio includes an ongoing Phase II clinical trial of
TGF-(Beta)(2) for the treatment of chronic skin ulcers as well as research into
improved methods of repairing and replacing cartilage and skin. GTR's strategy
is to use its expertise in cell processing, therapeutic protein development and
biomaterials engineering to develop and sell a portfolio of novel products and
services for unmet medical needs in the orthopedic, neurology and wound closure
markets. GTR believes that, as a division of Genzyme, its ability to pursue this
strategy is enhanced through its access to Genzyme's infrastructure.
 
DESCRIPTION OF PRODUCTS AND SERVICES
 
CARTILAGE REPAIR -- CARTICEL(TM) ACC
 
     Background and Market Opportunity
 
     Cartilage tissue consists of cells called chondrocytes, which secrete and
are embedded in a protein and carbohydrate based matrix. There are two types of
cartilage: hyaline and fibrous. Hyaline (also known as articular) cartilage is
the shiny white tissue that lines the ends of bones to provide the almost
frictionless motion of the various joints in the human body. Fibrous cartilage
serves a shock-absorbing function in the knee and in the spine between the
vertebrae. When articular cartilage tissue in a joint is damaged, it does not
regenerate and may further deteriorate over time. Even damage that creates a
small defect in articular cartilage can impair joint movement, restrict mobility
and cause pain and joint locking. Over time, chronic injuries to articular
cartilage may lead to debilitating osteoarthritis and can severely hinder a
person's ability to engage in the activities of daily living.
 
     Many patients with articular cartilage damage undergo surgery to smooth the
surface of the damaged area and to remove loose fragments of cartilage in an
attempt to alleviate pain and swelling. Other common surgical procedures, such
as microfracture, drilling and abrasion, allow bone marrow cells to infiltrate
the defect, resulting in the formation of fibrous cartilage, which is less
durable and resilient than articular cartilage and often does not allow for
smooth joint movement. These procedures may provide only temporary relief,
especially if the patient's pre-injury activity level is maintained. More severe
and chronic forms of knee cartilage damage can lead to greater deterioration of
the joint cartilage and may eventually require total knee joint replacement.
 
     GTR believes there is a significant market opportunity to improve the
clinical outcomes for patients with articular cartilage damage in the knee.
Based on a review of existing literature and physician surveys conducted by GTR,
GTR estimates that approximately 41% of patients undergoing common treatments
for damaged articular knee cartilage will seek further treatment within one
year. Approximately 80% of patients treated with existing therapies such as
those noted above are expected to have poor outcomes ten years after treatment,
including 26% who will have undergone extensive additional surgeries such as
total knee replacement.
 
     In 1994, there were an estimated 1.3 million procedures performed in the
U.S. to treat soft tissue damage in the knee, including articular cartilage,
ligaments and menisci. Of these, approximately 189,000 involved a diagnosis or
treatment of clinically significant articular cartilage defects in patients
between the ages of 14 and 54. GTR believes that at least half of these defects
were located on the femoral condyle (the lower end of the thigh bone), which is
the area of the knee for which use of Carticel(TM) ACC has been approved by the
FDA. Based on its experience to date, GTR estimates that the European market for
cartilage repair is similar in size to the U.S. market.
 
                                       23
<PAGE>   25
 
     Description of Carticel(TM) ACC
 
     GTR employs a proprietary process to grow a patient's own ("autologous")
cartilage cells for use in repairing damaged knee cartilage. This process begins
when an orthopedic surgeon provides GTR with a biopsy of healthy cartilage taken
arthroscopically from the patient. Technicians at GTR's cell processing
facilities in Cambridge and Framingham, Massachusetts use proprietary methods to
grow new cartilage cells from the sample for that patient over a period of 21
days. In vitro studies have shown that this process allows the cartilage cells
to multiply while retaining their ability to form hyaline cartilage. If
necessary during the cell culturing process, GTR can freeze and store the
patient's cells for up to 24 months. Upon scheduling of the implantation
procedure by the surgeon, the cells are then delivered to the hospital, where
the surgeon implants them into the defect. In this procedure, known as
autologous chondrocyte implantation ("ACI"), the surgeon removes damaged tissue
and prepares the defect for introduction of the cultured cells. A small piece of
periosteum, the membrane that covers bone, is taken from the patient's lower leg
and sutured over the defect to hold the cells in place. The cultured cells are
then implanted under the periosteum.
 
     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 GTR for
processing," portrays a technician examining a biopsy through a microscope. The
next segment is a drawing 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.
 
                                       24
<PAGE>   26
 
     In addition to cartilage cell processing, GTR trains orthopedic surgeons,
collects and analyzes outcomes data and assists physicians and patients in
obtaining reimbursements from third party payers.
 
     Surgeon Training
 
     GTR's comprehensive surgeon training program consists of lectures and
hands-on bioskills sessions involving practice of the surgical procedures
(including biopsy harvesting, implantation and surgical follow up), as well as
an orientation on reimbursement and billing procedures. GTR conducts physician
training at its facilities in Cambridge, Massachusetts and Naarden, the
Netherlands and has begun to conduct surgeon training in conjunction with
academic institutions in the U.S. and Europe. As of September 30, 1997, GTR had
trained 1,161 U.S. surgeons and 648 European surgeons.
 
     Clinical Results
 
     A substantial body of clinical data supports the safety and efficacy of
ACI. The ACI procedure was initially developed by GTR's exclusive collaborators
at the University of Gotenburg and Sahlgrenska University Hospital in Gotenburg,
Sweden. The Swedish group published its initial clinical data regarding ACI in
the October 6, 1994 edition of the New England Journal of Medicine. That article
reported that 19 of the first 23 patients with damaged articular cartilage in
the knee had restored or improved joint function at least two years after
treatment with the ACI procedure, based on the surgeon's evaluation of the
patient's overall knee condition.
 
     Since initiating the clinical use of ACI in Sweden in October 1987, the
Swedish group has treated over 450 patients with the procedure. The clinical
outcomes of these patients provide a substantial resource for evaluating the
safety and efficacy of the procedure. These data were not collected through a
protocol established in advance of treatment and therefore the exact type and
amount of follow-up data available on each patient varies. In addition to the
450 patients treated in Sweden, more than 800 patients had been treated in the
U.S. and Europe with Carticel(TM) ACC as of September 30, 1997. In order to
document clinical outcomes of patients treated with Carticel(TM) ACC, GTR has
established a prospective, standardized registry of information on patients
treated.
 
     Based on analysis of clinical outcomes from more than 1,250 patients
treated with ACI, GTR believes that it is a safe and effective procedure for the
repair of damaged articular cartilage. GTR also believes that outcomes for
patients treated with Carticel(TM) ACC, unlike those for patients treated with
other therapies, may improve over time, as a result of the continued maturation
of the implanted cartilage cells.
 
     SWEDISH OUTCOMES DATA -- FDA ANALYSIS
 
     As part of the BLA, GTR submitted to the FDA a review of the clinical
outcomes for the first 153 patients treated in Sweden between October 1987 and
May 1995. This review focused on the safety of the procedure and was completed
by an independent clinical research organization. A team of FDA medical
reviewers visited Sweden in November 1996 and conducted an independent
evaluation of the data from this series of patients.
 
                                       25
<PAGE>   27
 
     The FDA's analysis included 52 of the 153 patients. Patients included in
the review had received treatment for cartilage defects on the femoral condyle
(with and without simultaneous treatment of a damaged anterior cruciate ligament
("ACL")) or as a result of osteochondritis dissecans ("OCD"), a separation of
bone and cartilage fragments from the surface of the knee joint. The median
follow-up period for this analysis was 25 months, with a range of 18 to 94
months. The FDA reviewers assigned each patient to one of three outcome
categories -- "resumed all activities," "some improvement" or "no
improvement" -- based on a review of self-assessment questionnaires completed by
the patient or, if a questionnaire was not available, the reviewers' own
interpretation of supporting medical documents. The reviewers' assessment
focused on a comparison of the patient's condition prior to surgery with that at
the time of evaluation. Patients whose cartilage defects were located in other
areas of the knee, who had cartilage defects in multiple locations or whose
outcomes were judged by the reviewers to be "unknown" or "unevaluable" were
excluded from this analysis. A total of 73% of the 52 patients included in the
FDA analysis showed at least some improvement according to the medical
reviewer's grading system. The following table summarizes the results of the FDA
medical reviewers' analysis:
 
<TABLE>
<CAPTION>
                                                         CLINICAL OUTCOME
                                          ----------------------------------------------
                                          RESUMED ALL        SOME
    INDICATION                            ACTIVITIES      IMPROVEMENT     NO IMPROVEMENT     TOTAL
    ----------                            -----------     -----------     --------------     -----
    <S>                                   <C>             <C>             <C>                <C>
    Femoral condyle.....................     7 (29%)         8 (33%)           9 (38%)         24
    Femoral condyle with ACL............     4 (25%)         9 (56%)           3 (19%)         16
    OCD.................................     6 (50%)         4 (33%)           2 (17%)         12
                                            -------         -------           -------          --
              TOTAL.....................    17 (33%)        21 (40%)          14 (27%)         52
</TABLE>
 
     The reviewers also noted that there appeared to be some association between
those patients who demonstrated complete or substantial filling of the defect
upon arthroscopic examination and those patients whose functional outcomes were
categorized as "resumed all activities" or "some improvement."
 
     SWEDISH OUTCOMES DATA -- COLLABORATORS' ANALYSIS
 
     GTR's exclusive Swedish collaborators, Lars Peterson, M.D., Ph.D. and
Anders Lindahl, M.D., Ph.D., conducted additional analyses of long-term outcomes
from ACI, which were presented at a meeting of the American Academy of
Orthopedic Surgeons in February 1997. This presentation reported the results of
a study of 92 of the first 100 patients treated with ACI in Sweden who had
reached at least a two-year follow-up. The study included data on some patients
for whom clinical follow-up was completed in December 1996 (after the FDA
medical reviewers completed their review).
 
     Of the 92 patients studied, 59 had defects on the femoral condyle (with and
without simultaneous treatment of a damaged ACL) or as a result of OCD. The
median time of follow-up was 34 months, with a range from 26 to 107 months. The
results of this study showed that 96% of those patients with a single defect on
the femoral condyle were judged by the surgeon to have had good to excellent
results based on an assessment of five different established knee outcome rating
scales. A retrospective analysis of the medical records of the patients in this
study, using the five rating scales, revealed that prior to treatment with the
ACI procedure their knees were, on average, in poor condition. The results of
this evaluation are tabulated below.
 
<TABLE>
<CAPTION>
    INDICATION                                   NUMBER OF PATIENTS       CLINICAL ASSESSMENT
    ----------                                   ------------------     ----------------------- 
    <S>                                          <C>                    <C>
    Femoral condyle............................          24             23 (96%) Good/Excellent
    Femoral condyle with ACL...................          16             12 (75%) Good/Excellent
    OCD........................................          19             17 (89%) Good/Excellent
                                                         --             ----------------------- 
              TOTAL............................          59             52 (88%) Good/Excellent
                                                           
</TABLE>
 
     As part of this study, Dr. Peterson and his colleagues took 25 biopsies of
the ACI grafts from 14 out of the 92 patients. The examination revealed that 13
of the 25 biopsies (from 12 of the 14 patients) were composed of hyaline-like
cartilage (similar to the kind normally found on joint surfaces) with a surface
layer of fibrous cartilage (believed to be the remnants of periosteum that was
used to hold the autologous cells in place). Six biopsies were composed of a
combination of hyaline-like and fibrous cartilage, and the remaining six
biopsies were composed solely of fibrous cartilage. At the February 1997
meeting, Dr. Peterson expressed his belief that
 
                                       26
<PAGE>   28
 
the existence of hyaline-like repair tissue was associated with improved
clinical outcomes, while the existence of fibrous repair tissue was associated
with poor outcomes. Additional data will need to be collected to prove the
statistical validity of a correlation between histology and clinical outcomes.
 
     CARTICEL(TM) ACC REGISTRY AND OUTCOMES DATA
 
     In order to document clinical outcomes of patients treated with
Carticel(TM) ACC, GTR has established a prospective, standardized registry of
information on patients treated. Demographic data on each patient as well as
clinician and patient evaluations of overall knee condition and symptomatology
are collected at the time of initial diagnosis (pre-treatment), at the time of
chondrocyte implantation, at six months post-implantation and then annually
starting at 12 months post-treatment. The registry also includes data on adverse
events. All outcomes data collection is coordinated by an independent clinical
research firm.
 
     Reports of results from the registry are generated twice each year and are
reviewed by an independent board of orthopedic surgeons. Each surgeon who
participates in the registry program receives a summary of his or her own
patients' outcomes as well as a summary of the aggregate outcomes of all
patients in the registry.
 
     At a meeting of the American Orthopaedic Society for Sports Medicine held
in June 1997, a member of GTR's independent board of orthopedic surgeons
presented data from the third periodic registry report. The report included
analysis on 84 patients who had been treated more than 12 months prior to the
time of data collection and 191 patients who had been treated at least six
months prior to data collection. These patients had defects on the femoral
condyle as well as on other locations in the knee. The report reflects
participation by approximately 80% of eligible surgeons and patients. Prior to
treatment with Carticel(TM) ACC, more than 75% of patients in the report had
failed to improve following one or more prior attempts at cartilage repair using
traditional techniques. Approximately 32% had undergone three or more prior
cartilage repair procedures.
 
     Comparison of mean patient outcomes at six and 12 months post-treatment to
baseline condition showed statistically significant improvement at both six
months and 12 months following treatment with Carticel(TM) ACC. Mean overall
patient condition was judged to have improved significantly between the six
month and 12 month evaluations by both clinician and patient. These improvements
were seen in four key measures: clinician and patient evaluations of overall
knee condition, patient reported pain and knee examination results (swelling in
the knee).
 
     The following table summarizes assessments of overall patient condition by
the clinician and patient at 12 months compared to such patients' condition
before surgery, for the patients in the registry for whom such data were
available:
 
<TABLE>
<CAPTION>
                                CLINICIAN'S EVALUATION                       PATIENT'S EVALUATION
                        ---------------------------------------     ---------------------------------------
INDICATION              IMPROVEMENT     NO CHANGE     WORSENING     IMPROVEMENT     NO CHANGE     WORSENING
- ----------              -----------     ---------     ---------     -----------     ---------     ---------
<S>                     <C>             <C>           <C>           <C>             <C>           <C>
Femoral condyle.......    49 (82%)        8 (13%)       3 (5%)        54 (89%)        2 (3%)        5  (8%)
Other locations in
  knee................    16 (76%)        4 (19%)       1 (5%)        16 (76%)        1 (5%)        4 (19%)
</TABLE>
 
     GTR has compiled safety data on 460 patients who have undergone treatment
with Carticel(TM) ACC. Eighty eight percent (88%) of these patients reported no
complications, and less than 5% reported adverse events determined by the
surgeons to be at least possibly related to treatment with Carticel(TM) ACC. The
most frequently reported adverse events were "overgrown" tissue at the site of
the cartilage repair, adhesions, superficial wound infection, inflammation of
membranes in the joint and post-operative bruising.
 
     Commercial Results in the U.S.
 
     Prior to receipt of FDA approval to market Carticel(TM) ACC on August 22,
1997, GTR's revenues from Carticel(TM) ACC had been largely dependent on GTR's
ability to obtain insurance authorizations on an individual patient basis. GTR
believes that the absence of regulatory approval had limited broader policy
coverage of the product since reimbursement authorities and insurance companies
often require regulatory approval prior to providing reimbursement coverage.
Since August 22, 1997, however, GTR has seen a sharp increase in reimbursement
approvals and new cases of surgeons seeking treatment for their patients. The
average weekly number of reimbursement approvals on an individual basis was 140%
higher during the five weeks following
 
                                       27
<PAGE>   29
 
FDA approval than it was during the preceding eight weeks. In addition, the
average weekly number of new patients identified by surgeons as potentially
treatable with Carticel(TM) ACC was 54% higher during the five weeks following
FDA approval than it was during the preceding eight weeks. GTR believes these
increases are due primarily to the FDA approval of Carticel(TM) ACC.
 
     As of September 30, 1997, approximately 50% of the 1,161 surgeons trained
in the therapeutic use of Carticel(TM) ACC in the U.S. had sent at least one
patient biopsy to GTR for processing and had initiated a request for insurance
coverage. As of such date, approximately 19% of trained U.S. surgeons had
subsequently performed their first patient treatment with Carticel(TM) ACC.
Surgeon surveys indicate that the primary barrier to patient treatment is the
difficulty experienced to date in obtaining reimbursement.
 
     As of September 30, 1997, trained surgeons in the U.S. had identified over
3,200 patients whose cartilage injuries are potentially treatable with
Carticel(TM) ACC and had sent cartilage biopsies from 2,671 of these patients to
GTR for processing. Of the patients from whom biopsies were taken, approximately
634 had been treated and over 400 were known by GTR to be seeking treatment as
of September 30, 1997. GTR believes the remainder of these patients may have
either been treated with an alternative method, were asymptomatic or were not
seeking treatment due to the difficulty in obtaining reimbursement.
 
     Through September 30, 1997, GTR had recorded approximately $6.4 million in
revenues from U.S. sales of Carticel(TM) ACC since its market introduction in
March 1995.
 
     The following table summarizes the early results of the commercialization
of Carticel(TM) ACC in the U.S.:
 
<TABLE>
<CAPTION>
                                            AT DECEMBER 31,     AT DECEMBER 31,     AT SEPTEMBER 30,
                                                 1995                1996                 1997
                                            ---------------     ---------------     ----------------
    <S>                                     <C>                 <C>                 <C>
    Biopsies performed....................        253                1,511                2,671
    Completed patient treatments..........         60                  311                  634
    Coverage approvals....................         72                  373                  734
</TABLE>
 
     Commercial Results in Europe
 
     GTR also markets Carticel(TM) ACC in eight countries in Europe. To support
its sales efforts in Europe, GTR has nine European employees engaged in medical
marketing, surgeon training and medical and regulatory affairs. As of September
30, 1997, GTR had trained 648 surgeons in the therapeutic use of Carticel(TM)
ACC and 169 patients in Europe had been treated with the product. To date,
Germany, Scandinavia and Spain have represented the largest markets for
Carticel(TM) ACC in Europe.
 
     Unlike the U.S., the European Union has no regulatory structure for
manipulated autologous cells and GTR has not encountered to date any
registration requirements for market introduction of Carticel(TM) ACC in
individual countries. See "Government Regulation and FDA Approval" below. As in
the U.S., however, utilization of Carticel(TM) ACC in Europe has been largely
dependent on GTR's ability to obtain appropriate reimbursement coverage for the
product, which is based on decisions made by individual government controlled or
regulated health financing authorities. Due to the absence of a regulatory
structure for Carticel(TM) ACC in Europe, GTR is currently engaged in a series
of discussions with these authorities regarding reimbursement coverage for the
product. GTR believes that regulatory approval of Carticel(TM) ACC in the U.S.
and the availability of additional outcomes data from patients treated with the
product will facilitate the development of broader reimbursement coverage and
utilization of Carticel(TM) ACC in Europe.
 
     Through September 30, 1997, GTR had recorded approximately $1.7 million in
revenues from European sales of Carticel(TM) ACC since its market introduction
in March 1995.
 
     Government Regulation and FDA Approval
 
     Based on discussions with the FDA's Center for Devices and Radiological
Health, GTR introduced Carticel(TM) ACC in March 1995 as an unregulated device.
In the absence of specific regulation, GTR operated under a self-imposed set of
rigorous quality standards for autologous cell culturing services. These
standards included internal and external assessments of the manufacturing and
quality system.

 
                                       28
<PAGE>   30
 
     In May 1996, the FDA published a new guidance document that provided for
the regulation of products such as Carticel(TM) ACC that use manipulated
autologous structural cells. GTR submitted a BLA for Carticel(TM) ACC in March
1996 in anticipation of the regulations.
 
     During late 1996, the FDA conducted a thorough review of the Swedish
clinical data that formed the basis for GTR's BLA for Carticel(TM) ACC. In March
1997, an FDA advisory panel determined by a vote of 11 to zero, with one
abstention, that the ACI procedure using Carticel(TM) ACC provided a clinical
benefit to patients with damage to the articular cartilage in the knee.
 
     In August 1997, the FDA granted GTR a biologics license for the manufacture
of Carticel(TM) ACC for use in repairing clinically significant cartilage
defects of the femoral condyle. Carticel(TM) ACC is not indicated for the
treatment of cartilage damage associated with osteoarthritis.
 
     This license is the first and, to date, the only biologics license granted
by the FDA under the new regulations relating to manipulated autologous
structural cells, and represents the culmination of a two-year effort by GTR
working with the FDA to develop an appropriate regulatory framework for
Carticel(TM) ACC. Under these regulations, companies that are not currently
marketing autologous cultured chondrocytes would likely be required to provide a
prospective randomized blinded control study comparing the treatment to
alternative treatments. GTR estimates that it could take eight years for any
competitor to complete a study of this nature that would demonstrate the
clinical efficacy of its proposed treatment. As a result of the new FDA
regulations for manipulated autologous cells, GTR believes that it is
substantially ahead of its competition in introducing ACI products for repair of
articular cartilage defects to the market.
 
     GTR is also required by the FDA to conduct two confirmatory post-marketing
studies to gain a better understanding of the role of implanted cells in ACI and
to assess longer term clinical results. Each of these studies is required to
demonstrate that Carticel(TM) ACC is superior to the alternatives studied. The
first, a five year, randomized study, will compare outcomes of patients treated
with Carticel(TM) ACC to those of patients treated with abrasion and
microfracture - two common alternative treatments for articular cartilage
defects. Approximately 300 patients will be evaluated in the study at 15 to 20
sites in the U.S. The study is expected to begin by the end of 1997 and be
completed in 2003. The second study will be a smaller scale study in which
patients will undergo the ACI biopsy and implantation procedure, but will
randomly be assigned to receive either Carticel(TM) ACC or a placebo. This study
is expected to include approximately 80 patients at eight centers and is
targeted to last three to five years, not including a 36-month follow-up.
 
     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 Carticel(TM) ACC. During
September 1997, the Spanish national health system approved Carticel(TM) ACC for
use by public hospitals, representing the first broad approval of the product by
a reimbursement authority in Europe. GTR is currently assessing the regulatory
requirements for commercialization of Carticel(TM) ACC in Japan.
 
     Reimbursement
 
     As of September 30, 1997, 54 third party payers in the U.S., covering
approximately 53 million lives, had approved broad policy coverage or
established protocols for covering patients treated with Carticel(TM) ACC. This
compares to 39 plans, covering 15 million lives, that had approved such coverage
or established protocols prior to GTR having received FDA approval for
Carticel(TM) ACC. When third party payers have denied reimbursement for
Carticel(TM) ACC, the most frequently cited reason has been that the product is
considered to be "experimental." Although definitions and criteria vary, a
product or procedure is generally defined as experimental due to the absence of
peer reviewed data and/or the lack of FDA approval. GTR therefore believes that
reimbursement coverage for Carticel(TM) ACC will continue to increase as a
result of the recent approval of the product by the FDA.
 
     GTR is promoting the development of broader reimbursement coverage for
Carticel(TM) ACC by continuing to target significant third party payers
nationwide. To date, GTR's specialized sales staff has made substantial
 
                                       29
<PAGE>   31
 
contact with over 200 third party payers in the U.S. GTR anticipates that a
number of major insurance plans will adopt favorable policies based on FDA
approval alone or in combination with technology assessments to be conducted by
individual insurance plans or by independent associations.
 
     GTR has also been working to improve the reimbursement rate for Blue
Cross/Blue Shield patients. Prior to Carticel (TM) ACC receiving FDA approval,
approximately 25% of Blue/Cross Blue Shield patients who had sought coverage had
received reimbursement approval for the product. Immediately following receipt
of FDA approval, Blue Cross of California notified GTR that it had adopted a
review protocol for Carticel (TM) ACC and, to date, five Blue Cross/Blue Shield
Plans representing 8 million insured lives in the U.S. have approved policy
coverage or adopted review protocols for Carticel(TM) ACC. GTR recently met with
the BCBSA Committee to review the Carticel(TM) ACC treatment. While a favorable
review by the BCBSA Committee is not required for individual Blue Cross/Blue
Shield plans to approve policy coverage for a new treatment, a finding by the
BCBSA Committee that a treatment satisfies its criteria would facilitate
reimbursement reviews by the individual Blue Cross/Blue Shield plans.
 
     Although GTR believes Carticel(TM) ACC meets each of the published criteria
used by BCBSA to evaluate new treatments, GTR has received preliminary
indications from BCBSA that the BCBSA Committee does not yet agree. No formal
assessment has been issued, however, and GTR is continuing discussions with
BCBSA regarding the BCBSA Committee's assessment. If the BCBSA Committee issues
a report stating that Carticel(TM) ACC does not meet all of BCBSA's criteria for
assessment of new treatments, implementation of reimbursement coverage for
Carticel(TM) ACC by Blue Cross/Blue Shield plans that have not already approved
coverage for the product would be delayed. Since these plans represent
approximately 60 million, or 25%, of insured lives in the U.S., GTR's ability to
access a substantial portion of the market for Carticel(TM) ACC would also be
delayed. In the absence of positive assessment by the BCBSA Committee, GTR will
continue to work with individual Blue Cross/Blue Shield plans to obtain policy
coverage.
 
     Workers' compensation insurers provide not only medical coverage to
patients but also compensation for lost income due to disability. Since patients
with knee injuries, such as cartilage damage, frequently become functionally
disabled, knee injuries represent a significant source of expenses for these
plans. Treatment with Carticel(TM) ACC has enjoyed a high rate of coverage by
workers' compensation insurance plans. As of September 30, 1997, approximately
85% of patients seeking coverage for Carticel(TM) ACC in the U.S. had been
approved by this type of payer. GTR is engaged in discussions with several of
the largest workers' compensation plans to develop policy coverage for treatment
with Carticel(TM) ACC and to implement programs to identify patients who may
currently be disabled who could benefit from the product.
 
     Sales and Marketing
 
     Successful commercialization of Carticel(TM) ACC is dependent on its being
accepted by and incorporated into routine use by a large number of orthopedic
surgeons. GTR markets Carticel(TM) ACC directly to orthopedic surgeons in the
U.S. and Europe. GTR's sales and marketing staff devoted to Carticel(TM) ACC in
the U.S. and Europe totals 91 persons. Of these, 26 are field sales
representatives in the U.S., 10 are field sales representatives in Europe and 21
are reimbursement specialists in the U.S. The remainder are engaged in medical
marketing or surgeon training. GTR's sales and marketing staff is drawn from
other orthopedic sales forces, other biotechnology sales forces and third party
payers.
 
     In 1995, there were approximately 16,800 board certified orthopedic
surgeons in the U.S. GTR estimates that half of these surgeons account for over
80% of the treatments performed on soft tissue knee injuries such as the repair
of articular cartilage. GTR's sales force targets those orthopedic surgeons most
likely to use Carticel(TM) ACC by focusing on specific markets. Because
different regions of the U.S. have varying types of third party payers,
physician practices and patient populations, GTR has developed a regionalized
marketing program for its sales force. This allows GTR to make focused regional
efforts to further expand use of Carticel(TM) ACC.
 
     GTR's sales force promotes Carticel(TM) ACC in these markets by contacting
and educating orthopedic surgeons about the service and maintaining an ongoing
relationship with each surgeon who receives training from GTR, assisting
physicians with administrative, clinical and implantation procedures at
hospitals and assisting physicians in obtaining the necessary approval from the
hospital's IRB to collect outcome data in accordance
 
                                       30
<PAGE>   32
 
with GTR's protocol. GTR further supports its sales and marketing efforts by
attendance at and participation in orthopedic congresses and symposia.
 
     Competition
 
     GTR is aware of one other company, Verigen, Inc., that is culturing
autologous chondrocytes for cartilage repair in Europe. In addition to Verigen,
GTR knows of three other companies, Advanced Tissue Sciences, Inc., in
conjunction with Smith & Nephew PLC, Integra LifeSciences Corp. and LifeCell
Corp., that are engaged in research on cultured cartilage products. In addition,
a surgical technique known as osteochondral grafting may be competitive to
Carticel(TM) ACC. This procedure, which can be performed arthroscopically,
involves transferring plugs of low weight bearing cartilage and bone to the area
of a defect. Smith & Nephew, Arthrex, Inc. and Innovasive Devices, Inc. are
known to have programs relating to this procedure. GTR's competitors may have
substantially greater resources than GTR. In addition, these competitors may
develop products and services that are more effective than Carticel(TM) ACC or
which cost less, and they may be more successful than GTR in producing and
marketing their products and services.
 
     Development Programs
 
     GTR currently has a number of ongoing development programs supporting
Carticel(TM) ACC. GTR is conducting basic research and development into the
biology of cartilage and the cartilage repair process. The objective of this
research is to identify biologic materials that promote more rapid regeneration
of articular cartilage, to develop new methods for the repair of arthritic
joints and large surface area cartilage defects and to enable the ACI procedure
to be performed less invasively. GTR is also committing resources to meet
requirements specified by the FDA for validation of certain product
manufacturing parameters.
 
NEURODEGENERATIVE DISEASES -- DIACRIN/GENZYME LLC
 
     In October 1996, Diacrin/Genzyme LLC was established as a joint venture
between GTR and Diacrin to develop and commercialize two cellular therapies for
neurodegenerative diseases -- NeuroCell(TM)-PD for the treatment of Parkinson's
disease and NeuroCell(TM)-HD for the treatment of Huntington's disease. The
NeuroCell(TM) programs involve implantation of fetal porcine brain cells into
Parkinson's and Huntington's disease patients to replace damaged brain tissue
and both are in Phase I clinical trials. Under the terms of the joint venture
agreement, GTR is required to provide $40 million of the first $50 million in
funding for products to be developed by the joint venture. Thereafter, all costs
will be shared equally between GTR and Diacrin. Sales and marketing will be
performed by GTR and the joint venture will be responsible for manufacturing the
products. Profits from the joint venture will be shared equally by the two
parties.
 
     Current transplantation technology generally requires the recipient to be
immunosuppressed in order to prevent graft rejection. With both NeuroCell(TM)
products, GTR believes that rejection of the porcine cells can be prevented with
the commonly used immunosuppressive drug cyclosporin. The joint venture also has
a license to use patented technology developed at Massachusetts General Hospital
in Boston to protect the NeuroCell(TM) products from the host's immune system
without the need for chronic, lifetime administration of immunosuppressive
drugs. In December 1996, the FDA granted orphan drug designation to
NeuroCell(TM)-PD for use in advanced Parkinson's patients and to
NeuroCell(TM)-HD for all Huntington's patients. Each received a designation for
use of the product both with and without antibody pretreatment to prevent
rejection.
 
     NeuroCell(TM)-PD
 
     Parkinson's disease is a neurodegenerative disease characterized by the
death of nerve cells in the brain that normally produce dopamine, the substance
that helps smooth and coordinate movement. The loss of these nerve cells results
in a variety of motor symptoms such as rigidity and slow movements, tremors,
falls and difficulties with speech and swallowing. In addition to decreased
quality of life, Parkinson's disease may result in premature death. The most
common therapy consists of administration of the drug levodopa (L-dopa), which
the brain converts to dopamine. Therapy with L-dopa is initially effective but
often loses its efficacy in six to 12 years and provides little benefit in the
late stages of the disease.
 
                                       31
<PAGE>   33
 
     In 1996, there were approximately 500,000 people afflicted with Parkinson's
disease in the U.S. These patients can be classified according to the severity
of their disease, with 115,000 to 155,000 being classified as advanced stage
patients whose disease has progressed to the point where the patient requires
significant assistance in daily living or is bedridden or wheelchair bound.
NeuroCell(TM)-PD is aimed at significantly improving the clinical condition of
these patients so that they can function independently.
 
     Enrollment in a Phase I study of 12 patients at Lahey Hitchcock Clinic in
Burlington, Massachusetts and Boston University Medical Center was completed in
October 1996. Patients in this trial are being evaluated at periodic intervals
to assess long term clinical outcomes. The results at six months post-treatment
showed marked improvement in symptoms and restored efficacy of L-dopa in ten of
the 12 patients. An analysis of the ten evaluable patients also demonstrated
statistically significant improvement in mean scores on the Unified Parkinson's
Disease Rating Scale (UPDRS) six months post-treatment. Without treatment,
scores on UPDRS generally deteriorate over time as the disease progresses. These
results are similar to those obtained by other researchers treating Parkinson's
patients with human fetal cells. Commercialization of treatments using human
fetal cells is not practical, however, because of ethical concerns, supply
constraints and inconsistent quality.
 
     A histological study published in the March 1997 issue of Nature Medicine
showed that NeuroCell(TM)-PD cells transplanted into one of the patients in the
Phase I trial survived for more than seven months and showed signs of
reconnecting nerve tissue damaged by the disease. The study marks the first
documentation of survival of cells transplanted from another species into the
human brain and of the appropriate growth of non-human neurons for a potential
therapeutic response. The patient, a 69-year old man, died of a pulmonary
embolism unrelated to treatment with NeuroCell(TM)-PD. The brain of the patient
showed minimal signs of inflammation or rejection of the foreign tissue.
 
   
     Based upon Phase I results, the joint venture is seeking approval from the
FDA to start a pivotal 32-patient Phase II/III trial of NeuroCell(TM)-PD in late
1997. The joint venture has also been required by the FDA to perform additional
assays on its porcine cellular product to determine if active porcine
retroviruses are present. These assays are in progress and preliminary results
indicate that active porcine retroviruses are not present. The FDA has advised
the joint venture that additional trials for the NeuroCell(TM) products may not
proceed until data from these assays has been reviewed and found satisfactory by
the FDA and the protocol for such trials is approved. If such additional assays
are required, commencement of the planned pivotal trial of NeuroCell(TM)-PD may
be delayed. See "Risk Factors -- Risks Related to GTR -- Collaboration with
Diacrin, Inc. -- No Currently Approved Xenotransplantation -- Based Products;
Reliance on Cell Transplantation Technology." If the protocol for the Phase
II/III trial is approved by the FDA, 16 patients would receive NeuroCell(TM)-PD,
cyclosporin and corticosteroids and 16 would receive imitation surgery and
placebo forms of the drugs. This trial would be double blinded, randomized and
conducted at four or more neurological centers.
    
 
     NeuroCell(TM)-HD
 
     Huntington's disease is a fatal genetic disorder that is usually not
evident until middle age. The genetic defect causes the loss of specific neurons
in the brain which produce a substance important to the performance of rapid,
coordinated movements and certain aspects of cognition. The disease is generally
characterized by uncontrolled movements, gait and postural defects and dementia.
Like Parkinson's disease, it is a progressive disease often leading to
institutionalized care. Currently there is no effective therapy for Huntington's
disease. Treatment is palliative with tranquilizers and anti-psychotic drugs
being the only options. The NeuroCell(TM)-HD approach to treating this disease
consists of implanting fetal porcine cells into a patient's brain in an effort
to replace the function of the neurons damaged by Huntington's disease. In 1994,
there were approximately 25,000 patients suffering from Huntington's disease in
the U.S. and an additional 1,500 are estimated to become symptomatic each year.
 
     NeuroCell(TM)-HD is in a 12-patient Phase I clinical trial at Lahey
Hitchcock Clinic, Boston University Medical Center, Brigham and Women's Hospital
in Boston and Rush Presbyterian in Chicago. All 12 patients were treated as of
the end of the first quarter of 1997. Patients in this trial are being evaluated
at periodic intervals to assess long-term clinical outcomes. The results
analyzed at three months post-treatment showed no observable
 
                                       32
<PAGE>   34
 
improvements in patient outcomes. GTR believes, however, that such improvements
may require a longer period to become evident.
 
     Reimbursement
 
     GTR believes that NeuroCell(TM)-PD and NeuroCell(TM)-HD, if approved, would
address patient populations insured under private plans as well as under the
Medicare/Medicaid system. At present, many private payers have been providing
coverage for certain experimental surgical therapies for Parkinson's disease on
a case by case, cost-recovery basis. GTR believes that for patients under 65,
porcine neural implants may receive this type of coverage. For those patients
covered by Medicare, new payment codes and/or rates may need to be established.
While GTR expects to pursue a program to obtain optimal reimbursement from all
payers, there can be no guarantee that such coverage will be obtained in the
timeframe required.
 
     Competition
 
     While there are currently no effective long term therapies for advanced
Parkinson's disease and no effective treatments for Huntington's disease, GTR is
aware of other companies and institutions pursuing research and development of
alternative treatments for the diseases. Experimental therapies under
development for Parkinson's disease include surgical destruction of certain
portions of the brain (pallidotomy), gene therapy, the use of growth factors and
neuroprotectant therapy. There can be no assurance that research and development
by others will not render the NeuroCell(TM)-PD and NeuroCell(TM)-HD programs
obsolete or uneconomical or result in therapies superior to these programs, or
that these programs will be preferred to any newly developed technologies.
 
EPICEL(SM) SERVICE
 
     GTR's Epicel(SM) Service, which provides cultured autologous skin cells as
permanent skin replacement for patients with severe burns, was first introduced
in 1987. These epidermal grafts are grown from a patient's own (autologous) 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 U.S., Europe or Japan from GTR's
production laboratories in Cambridge, Massachusetts.
 
     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 400
patients each year in the U.S. who survive burn injuries covering more than 60%
of their body surface area. GTR also markets the Epicel(SM) Service in parts of
Europe through its own direct sales force and in Japan through a distributor.
 
     The Epicel(SM) Service has been on the market as an unregulated medical
device. As with Carticel(TM) ACC, GTR has operated the service under a
self-imposed set of rigorous quality standards for autologous cell culturing
services. Beginning December 1, 1997, GTR will be required to file an
application with the FDA under new regulations governing the therapeutic use of
manipulated autologous structural cells. As part of the public hearing process
for the development of these regulations, GTR presented information regarding
its autologous cell culturing procedures for both Carticel(TM) ACC and the
Epicel(SM) Service and, following receipt of the biologics license for
Carticel(TM) ACC, initiated discussions with the FDA regarding the Epicel(SM)
Service. GTR expects that the FDA will permit the service to remain on the
market until its regulatory status is resolved.
 
     GTR recorded revenues from the Epicel(SM) Service of approximately $4.2
million and $3.3 million for the year ended December 31, 1996 and the nine
months ended September 30, 1997, respectively.
 
                                       33
<PAGE>   35
 
TRANSFORMING GROWTH FACTOR BETA 2 ("TGF-SS(2)")
 
     TGF-SS(2) 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-(LOGO)(2) from Celtrix
Pharmaceuticals, Inc. ("Celtrix"). The product will consist of an easy-to-use
collagen sponge which serves as a bioresorbable delivery vehicle that releases
TGF-(LOGO)(2) at the wound site.
 
     Chronic skin ulcers are open, often painful wounds found predominantly on
the lower extremities of elderly patients. In the fourth quarter of 1995, GTR
began a 12 center, double-blinded, randomized Phase II clinical trial involving
200 diabetic patients suffering from foot ulcers. Study participants are being
assigned to one of three TGF-(LOGO)(2) impregnated collagen sponge dose groups,
a placebo group or a standard of care control group. The study is expected to be
completed by the end of 1998. GTR is currently seeking a corporate partner to
fund further development of this product.
 
     GTR has also been developing recombinant TGF-(LOGO)(2) for formulation as
an intravenous injectable product for administration to multiple sclerosis
("MS") patients for the prevention of autoimmune damage to nerve tissue. A Phase
I study completed in 1995 in chronic progressive MS patients showed reduced
renal function in patients treated with TGF-(LOGO)(2). This result was
reversible after cessation of treatment. GTR believes that treatment protocols
can be developed that will not result in reduced renal function. GTR is seeking
a corporate partner to fund further development of the product for MS patients.
 
     GTR's rights with respect to TGF-(LOGO)(2) derive from a license and
development agreement which Genzyme and Celtrix entered into in June 1994 (the
"Celtrix Agreement"). 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-(LOGO)(2). GTR is obligated to make
milestone payments to Celtrix for product development related achievements and
to pay royalties based on cumulative product sales. Celtrix may reacquire rights
to indications not pursued by GTR.
 
VIANAIN(R) DEBRIDING PRODUCT
 
     Vianain(R) Debriding Product is a proprietary enzyme preparation designed
to remove necrotic tissue from burn wounds and chronic skin ulcers. Phase I
clinical studies of Vianain(R) Debriding Product in burn patients and Phase I
clinical studies of the product for the treatment of chronic skin ulcers were
completed in 1995. Preliminary results from these studies indicated that
Vianain(R) Debriding Product was a safe and effective debriding agent, although
it did not yield an immediately graftable wound bed in burn patients. The FDA
has taken the position, however, that debriding agents must improve wound
healing in addition to removing tissue in order to obtain marketing approval.
GTR has been advised that the FDA is reviewing its position and may consider
approving agents that provide safe and effective debridement without additional
therapeutic benefit. GTR will evaluate further development of Vianain(R)
Debriding Product following resolution of the FDA's position on the approval
criteria for debriding agents.
 
PRODUCTION
 
     GTR has developed and validated a commercial scale, propriety chondrocyte
processing system for Carticel(TM) ACC that was reviewed and approved by the FDA
in connection with the BLA. See "Business -- Cartilage Repair -- Carticel(TM)
ACC -- Change in Government Regulation."
 
     GTR produces materials for Carticel(TM) ACC in specialized facilities
located in Cambridge and Framingham, Massachusetts designed for production of
cell based therapies and which have been approved by the FDA. Under current
production methods, these facilities have the combined capacity to process over
13,000 cartilage biopsies per year. GTR has also designed process improvements
directed towards expanding autologous chondrocyte culture capacity, streamlining
processing, improving quality and lowering production costs while strengthening
GTR's proprietary position. This work includes improving yields, reducing labor
costs associated with harvesting chondrocytes from cartilage biopsies,
developing methods for extending the viability of both biopsy specimens and
final product cell suspensions and balancing the space required for growing
cells with requirements for feeding and inspecting. GTR also produces materials
for the Epicel(SM) Service at its Cambridge facility.
 
                                       34
<PAGE>   36
 
PATENTS AND PROPRIETARY RIGHTS
 
     Genzyme pursues a policy of obtaining patent protection both in the U.S.
and in selected foreign countries for subject matter considered patentable and
important to its business. In addition, a portion of Genzyme's proprietary
position is based upon patents licensed to Genzyme. These license agreements
generally require Genzyme to pay royalties upon commercialization of products
covered by the licensed technology. Genzyme's patent position and proprietary
technology are subject to certain risks and uncertainties. See "Risk Factors --
Risks Related to GTR -- Uncertainty Regarding Patents and Proprietary Position."
 
     Genzyme received its first patent in the tissue repair field in October
1995 for its method of freezing cells. In addition, Genzyme has filed and is
preparing several patent applications covering GTR's work in cartilage repair.
GTR possesses substantial know-how in the field of autologous cell processing
generally, and for Carticel(TM) ACC in particular. Such know-how includes the
production of biopsy kits and packaging materials, procedures for quality
control, sterility, segregation and manufacturing, 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.
 
     Diacrin/Genzyme LLC has an exclusive license in the field of Parkinson's
and Huntington's diseases to a patent involving technology being developed at
Massachusetts General Hospital for treatment of cells to prevent rejection of
NeuroCell(TM)-PD and NeuroCell(TM)-HD without the need for immunosuppressive
drugs. Diacrin also has patents pending in the U.S. and other countries relating
to fetal porcine cells. Diacrin/Genzyme LLC will obtain exclusive worldwide
licenses to such patents in the field of Parkinson's and Huntington's diseases
as they are issued.
 
     Genzyme's proprietary position in the culturing of epidermal tissues was
originally exclusively licensed from Harvard University and has been augmented
with additional patents obtained by Genzyme covering cool storage technology and
packaging of skin grafts produced using the Epicel(SM) Service. Genzyme is also
the exclusive licensee, on a worldwide basis except for Italy, of patents
covering cryopreservation of such skin grafts. Genzyme has extended this basic
cryopreservation technology by patenting additional developments and
improvements in the U.S.
 
     Celtrix has obtained patents and filed patent applications in the U.S. and
foreign countries on the composition of TGF-(LOGO)(2) and its formulation.
Genzyme has an exclusive worldwide license (excluding Asia) from Celtrix for
therapeutic applications in wound healing, cancer, immune therapy and bone
therapy.
 
     While Genzyme 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. Genzyme's employees, advisors
and consultants who have access to GTR proprietary information are required to
sign confidentiality agreements.
 
GOVERNMENT REGULATION
 
     Material developments relating to the regulation of Carticel(TM) ACC, the
NeuroCell(TM) products and the Epicel(SM) Service are described above under
"Business -- Description of Products and Services -- Cartilage
Repair -- Carticel(TM) ACC -- Government Regulation," "-- Neurodegenerative
Diseases -- Diacrin/Genzyme LLC" and "-- Epicel(SM) Service."
 
     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 Carticel(TM) ACC or the Epicel(SM) Service. 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. The application of these or other regulations to GTR could result in
significant expense to GTR, limit GTR's reimbursement for its services and
otherwise materially adversely affect GTR's results of operations.
 
                                       35
<PAGE>   37
 
     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.
 
RELATIONSHIP WITH OTHER DIVISIONS OF GENZYME
 
     The relationship between GTR and Genzyme General is governed by a series of
policies adopted by the Genzyme Board. For a complete description of these
policies, see "Management and Accounting Policies Governing the Relationship of
Genzyme Divisions."
 
     As a division of Genzyme, GTR has access to the resources and expertise of
Genzyme, including those allocated to Genzyme General. This relationship has
allowed GTR to accelerate commercialization of Carticel(TM) ACC. GTR believes
that access to Genzyme General's research and development capabilities and
corporate development expertise will allow GTR to more rapidly develop its
existing products and services and take advantage of new opportunities in the
field of tissue repair.
 
     Pursuant to an arrangement made at the time of formation of GTR, Genzyme
has an option to allocate up to $10 million in cash from Genzyme General to GTR
on or before June 14, 1998 in exchange for 1,000,000 GTR Designated Shares. In
addition, the Genzyme Board has also approved the GTR Equity Line, which
provides for the allocation of up to $20 million in cash from Genzyme General to
GTR. Any amounts allocated to GTR under the GTR Equity Line will result in an
increase in the number of GTR Designated Shares. The increase will be determined
by dividing (i) the amount of cash so allocated by (ii) the average of the daily
closing prices of GTR Stock for the 20 consecutive trading days commencing on
the 30th trading day prior to the date of such allocation. Of the $20 million
authorized for allocation to GTR, approximately $6.0 million had been allocated
as of June 30, 1997.
 
                                       36
<PAGE>   38
 
                                   MANAGEMENT
 
SENIOR MANAGEMENT OF GTR
 
     The senior management of GTR consists of the following individuals:
 
<TABLE>
<CAPTION>
NAME                                         AGE                        TITLE
- ----                                         ---                        -----                       
<S>                                          <C>    <C>
Timothy R. Surgenor........................  37     President
Russell N. Herndon.........................  39     Senior Vice President
John M. McPherson, Ph.D. ..................  49     Senior Vice President, Research and Development
Jean George................................  39     Vice President, Sales and Marketing
</TABLE>
 
     MR. SURGENOR joined Genzyme as Executive Vice President of GTR in December
1994 when Genzyme acquired BioSurface and became President of GTR in September
1996. 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. HERNDON joined Genzyme in September 1989 as Quality Assurance Manager,
became Manager of Regulatory Affairs in September 1990, Director of Regulatory
Affairs in September 1991, and was named Vice President of Regulatory Affairs in
October 1994. Since April 1997, he has served as Senior Vice President of GTR
with responsibility for GTR's operations, program management and regulatory
affairs.
 
     DR. MCPHERSON joined Genzyme in August 1989 and has served as Vice
President, Therapeutic Protein Development from November 1989 to May 1993, as
Vice President, Biotherapeutic Product Development from May 1993 to September
1996 and as Senior Vice President, Protein Development since then. He was
appointed Vice President, Research and Development of GTR in December 1994.
Prior to joining Genzyme, he was, since April 1988, Director, Protein Chemistry
of Integrated Genetics, Inc.
 
     MS. GEORGE joined Genzyme in February 1988 as Business Development Manager
and became Director, Biotherapeutic Products in 1991. She served on the project
team that managed the acquisition of BioSurface and the formation of GTR. Ms.
George was named Vice President, Marketing in December 1994 and since June 1997
has served as Vice President, Sales and Marketing.
 
MANAGEMENT OF GENZYME
 
     The current executive officers and directors of Genzyme are as follows:
 
<TABLE>
<CAPTION>
NAME                                         AGE                         TITLE
- ----                                         ---                         -----                        
<S>                                          <C>    <C>
Henri A. Termeer...........................  51     Chairman of the Board, President and Chief
                                                      Executive Officer
Earl M. Collier, Jr........................  50     Executive Vice President
David J. McLachlan.........................  59     Executive Vice President, Finance and Chief
                                                      Financial Officer
G. Jan van Heek............................  48     Executive Vice President
Peter Wirth................................  47     Executive Vice President and Chief Legal Officer
David D. Fleming...........................  49     Group Senior Vice President, Diagnostics
John V. Heffernan..........................  59     Senior Vice President, Human Resources
Richard A. Moscicki, M.D...................  45     Senior Vice President, Clinical, Medical and
                                                      Regulatory Affairs and Chief Medical Officer
Alan E. Smith, Ph.D........................  51     Senior Vice President, Research and Chief
                                                      Scientific Officer
Constantine E. Anagnostopoulos, Ph.D.......  74     Director
Douglas A. Berthiaume......................  48     Director
Henry E. Blair.............................  54     Director
Robert J. Carpenter........................  52     Director
Charles L. Cooney..........................  52     Director
Henry R. Lewis.............................  71     Director
</TABLE>
 
                                       37
<PAGE>   39
 
     Each officer's term of office extends until the meeting of the Genzyme
Board 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 of Genzyme since October 1983, Chief
Executive Officer since December 1985 and Chairman of the Board since May 1988.
For ten years prior to joining Genzyme, Mr. Termeer worked for Baxter Travenol
Laboratories, Inc., a manufacturer of human health care products. Mr. Termeer is
Chairman of the Board of Genzyme Transgenics Corporation ("GTC") and, until its
acquisition by Genzyme in December 1996, was Chairman of the Board of Neozyme II
Corporation ("Neozyme II"). Mr. Termeer is also a director of Abiomed, Inc.,
AutoImmune Inc., Diacrin, Inc. and GelTex Pharmaceuticals, Inc., and a trustee
of Hambrecht & Quist Healthcare Investors and of Hambrecht & Quist Life Sciences
Investors.
 
     MR. COLLIER joined Genzyme in July 1996 as Senior Vice President, Health
Systems and has served as Executive Vice President since July 1997. Mr. Collier
is responsible for Genzyme's surgical products business. Prior to joining
Genzyme, Mr. Collier was President of Vitas HealthCare Corporation (formerly
Hospice Care Incorporated), a provider of health care services, from October
1991 until August 1995. Prior to that, Mr. Collier was a partner in the
Washington, D.C. law firm of Hogan & Hartson, which he joined in 1981.
 
     MR. MCLACHLAN joined Genzyme in December 1989 and has served as Executive
Vice President, Finance since September 1996. Mr. McLachlan served as Senior
Vice President, Finance from 1989 to September 1996 and has held the position of
Chief Financial Officer since 1989. Prior to joining Genzyme, 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 of HearX, Ltd., a
company providing products and services to the hearing impaired.
 
     MR. VAN HEEK joined Genzyme 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's therapeutics business unit in December 1993. From
September 1996 through July 1997, Mr. van Heek served as Group Senior Vice
President, Therapeutics and since July 1997 has served as Executive Vice
President with responsibility for Genzyme's specialty therapeutics and tissue
repair businesses and international operations. Prior to joining Genzyme, he
was, since 1988, Vice President/General Manager of the Fenwal Division of Baxter
Healthcare Corporation. Mr. van Heek also served as President and Treasurer of
Neozyme II from March 1992 to January 1996.
 
     MR. WIRTH joined Genzyme in January 1996 and has served as Executive Vice
President and Chief Legal Officer since September 1996. Mr. Wirth also oversees
Genzyme's corporate development activities. From January 1996 to September 1996,
Mr. Wirth served as Senior Vice President and General Counsel of Genzyme. Mr.
Wirth was also a partner of Palmer & Dodge LLP, a Boston, Massachusetts law
firm, from 1982 through September 1996. Mr. Wirth remains of counsel to Palmer &
Dodge LLP and is a director of Transkaryotic Therapies, Inc., a gene therapy
company.
 
     MR. FLEMING joined Genzyme in April 1984 and has served as Group Senior
Vice President, Diagnostics since September 1996. Prior to that date he served
as President of Genzyme's diagnostics business unit beginning in January 1989
and as a Senior Vice President of Genzyme beginning in August 1989. For 11 years
prior to joining Genzyme, he worked for Baxter Travenol Laboratories, Inc.
 
     MR. HEFFERNAN joined Genzyme as Vice President, Human Resources in October
1989 and has served as Senior Vice President, Human Resources since May 1992.
Prior to joining Genzyme, he served for more than five years as Vice President,
Human Resources Corporate Staff of GTE Corporation, a diversified communications
and electronics company.
 
     DR. MOSCICKI joined Genzyme 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 September 1996, he has
served as Senior Vice President, Clinical Medical and Regulatory Affairs and
Chief Medical Officer. Since 1979, he has also been a physician staff member at
the Massachusetts General Hospital and a faculty member at the Harvard Medical
School.


 
                                       38
<PAGE>   40
 
     DR. SMITH joined Genzyme in August 1989 as Senior Vice President, Research
and has also served as Chief Scientific Officer since September 1996. Prior to
joining Genzyme, he served as Vice President-Scientific Director of Integrated
Genetics, Inc. from November 1984 until its merger with Genzyme 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 and from 1972 to October 1980, he was a member of the scientific staff
at the Imperial Cancer Research Fund in London. Dr. Smith also serves as a
director of GTC.
 
     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 Chairman, 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 November 1990
to August 1994, he was President of the Waters Division of Millipore
Corporation.
 
     MR. BLAIR is the Chief Executive Officer of Dyax Corp., a privately-held
bioseparation, pharmaceutical discovery and development company, and 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 GTC and
Celtrix Pharmaceuticals, Inc.
 
     MR. CARPENTER is President and Chief Executive Officer of VacTex, Inc., a
privately held biotechnology company which he co-founded in November 1995, and
Chairman of GelTex Pharmaceuticals, Inc., a publicly 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. 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 Laboratories, Inc.
Mr. Carpenter is also a director of Apex BioSciences, Inc. and, prior to its
acquisition by Genzyme in December 1996, was a director of Neozyme II.
 
     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 ("MIT"). 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 a member of the Board of
Directors of Delphax Systems, a manufacturer of high speed non-impact printers.
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 Manufacturing
Company.
 
                                       39
<PAGE>   41
 
                      DESCRIPTION OF GENZYME CAPITAL STOCK
 
     The following descriptions are qualified in their entirety by reference to
the Restated Articles of Organization of Genzyme.
 
INTRODUCTION
 
     Genzyme is authorized to issue 390 million shares of common stock, of which
40 million shares have been designated GTR Stock, 200 million shares have been
designated GGD Stock, 40 million shares have been designated GMO Stock and 110
million shares remain undesignated as to series. In addition, Genzyme is
authorized to issue 10 million shares of preferred stock. Each designated series
of Genzyme common stock has the voting powers, qualifications and rights
described below.
 
DIVIDENDS
 
     Genzyme has never paid any cash dividends on shares of its capital stock.
Genzyme currently intends to retain its earnings to finance future growth and,
therefore, does not anticipate paying any cash dividends on Genzyme common stock
in the foreseeable future.
 
     Dividends on each series of Genzyme common stock may be declared and paid
only out of the lesser of funds of Genzyme legally available therefor and the
Available GTR Dividend Amount (with respect to the GTR Stock), the Available GGD
Dividend Amount (with respect to the GGD Stock) or the Available GMO Dividend
Amount (with respect to the GMO Stock). Under the Massachusetts Business
Corporation 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 Genzyme
Board may, in its sole discretion, declare and pay dividends exclusively on any
series of Genzyme common stock, in equal or unequal amounts, notwithstanding the
amounts available for the payment of dividends on each series, the respective
voting and liquidation rights of each series, the amounts of prior dividends
declared on each series or any other factor.
 
     As stated above, in addition to the statutory limitations under the MBCL,
dividends on the GTR Stock, GGD Stock and the GMO Stock are limited to an amount
not in excess of the Available GTR Dividend Amount, the Available GGD Dividend
Amount or the Available GMO Dividend Amount, respectively. The "Available
Dividend Amount" with respect to a particular series of Genzyme common stock is
defined to mean generally the greater of
 
        (i) the excess of
 
           (a) the greater of
 
                (X) the fair value of the net assets allocated to the division
           represented by such series of Genzyme common stock and
 
                (Y) an amount equal to stockholders' equity allocated to such
           division as of June 30, 1994, in the case of the GGD Stock and the
           GTR Stock, and September 30, 1996, in the case of the GMO Stock,
           increased or decreased, as appropriate, to reflect, after such date
 
                    (1) the net income or loss of such division,
 
                    (2) 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
 
                    (3) any other adjustments to the stockholders' equity of
               such division made in accordance with generally accepted
               accounting principles, over
 
           (b) the aggregate par value of all outstanding shares of capital
       stock attributed to such division and
 
                                       40
<PAGE>   42
 
          (ii) the amount legally available for the payment of dividends
     determined in accordance with Massachusetts law applied as if such division
     were a separate corporation.
 
EXCHANGE OF GTR STOCK AND GMO STOCK
 
     The GTR Stock or the GMO Stock may be exchanged for any combination of cash
and/or GGD Stock upon the terms described below. Genzyme cannot predict the
impact on the market prices for each class of Genzyme common stock of its
ability to effect such exchanges.
 
     Optional Exchange.  The Genzyme Board may at any time exchange all
outstanding shares of GTR Stock or GMO Stock for any combination of cash and/or
GGD Stock having a Fair Market Value equal to 130% of the Fair Market Value of
the GTR Stock or GMO Stock, as the case may be, such Fair Market Value being
determined by the trading prices during a specified period prior to the first
public announcement by Genzyme of such exchange.
 
     The foregoing provision allows Genzyme the flexibility to redeem all
outstanding shares of GTR Stock and/or GMO Stock and leave outstanding one or
two series of Genzyme common stock that would, collectively, represent the
residual equity interest in all of Genzyme's businesses. The optional exchange
could be exercised at any future time if the Genzyme Board determined that,
under the facts and circumstances then existing, an equity structure consisting
of three series of common stock was no longer in the best interests of all of
Genzyme's stockholders. Such exchange may be completed, however, at a time that
is disadvantageous to the holders of a particular series of Genzyme common
stock. The right of the Genzyme Board to exchange at any time all outstanding
shares of GTR Stock or GMO Stock for any combination of cash and/or GGD Stock
having a Fair Market Value equal to 130% of the Fair Market Value of the GTR
Stock or the GMO Stock does not preclude the Genzyme Board from making an offer
to exchange such shares on terms other than those provided in the Genzyme
Charter. Although any alternative offer would be subject to acceptance by
holders of the shares to be exchanged, such offer could be made on terms less
favorable than those provided in the Genzyme Charter. See "Risk Factors -- Risks
Related to Genzyme Tracking 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 or GMO (other than in connection with the
sale by Genzyme of all or substantially all of its properties and assets) to any
person, entity or group (other than (i) a wholly-owned subsidiary of Genzyme or
(ii) any entity formed at the direction of Genzyme in connection with obtaining
financing for the programs or products of GTR or GMO, as the case may be),
Genzyme will be required to exchange each outstanding share of GTR Stock or GMO
Stock for any combination of cash and/or GGD Stock having a Fair Market Value
equal to 130% of the Fair Market Value of GTR Stock or GMO Stock, as the case
may be, as determined by the trading prices during a specified period prior to
the first public announcement by Genzyme of such disposition. See "Risk
Factors -- Risks Related to Genzyme Tracking Stock -- Exchange of GTR Stock and
GMO Stock."
 
VOTING RIGHTS
 
     Holders of shares of each series of Genzyme common stock vote together as a
single class on all matters as to which common stockholders generally are
entitled to vote (including the election of directors). On all such matters,
each share of GGD Stock has one vote, each share of GTR Stock has, through
December 31, 1998, .33 vote, and each share of GMO Stock has, through December
31, 1998, .25 vote. Holders of outstanding GGD Stock, GTR Stock and GMO Stock
currently have approximately 92.5%, 6.3% and 1.2%, respectively, of the total
voting power of Genzyme. Following completion of this offering and assuming that
the Underwriters' over-allotment option is not exercised, holders of GGD Stock,
GTR Stock and GMO Stock will have approximately 91.1%, 7.7% and 1.2%,
respectively, of the total voting power of Genzyme. On January 1, 1999 and on
each January 1 every two years thereafter, the number of votes to which each
share of GTR Stock and GMO Stock is entitled will be adjusted to equal the ratio
of the Fair Market Value of one share of GTR Stock or GMO Stock, as the case may
be, to the Fair Market Value of one share of GGD Stock as of such date. If no
shares of GGD Stock are outstanding on such date, then all other series of
Genzyme common stock outstanding on such date will have
 
                                       41
<PAGE>   43
 
a number of votes such that each share of the series of common stock that has
the highest Fair Market Value per share on such date (the "Base Series") will
have one vote, and each share of each other series of outstanding common stock
will have the number of votes determined according to the immediately preceding
sentence, treating, for such purpose, the Base Series as the GGD Stock in such
sentence.
 
     The voting rights of the GTR Stock and the GMO Stock will be appropriately
adjusted so as to avoid dilution in the aggregate voting rights of any series of
Genzyme common stock in the event the outstanding shares of any series 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 any series as a dividend or a distribution to holders of
shares of such series. If shares of only one series of Genzyme common stock are
outstanding, or if shares of any series of Genzyme common stock are entitled to
vote separately as a class, each share of that series would have one vote.
 
     The relative voting rights of each series of Genzyme common 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 each class of Genzyme
common stock may influence an investor interested in acquiring and maintaining a
fixed percentage of Genzyme's voting power to acquire such percentage of all
series of Genzyme common stock, and will limit the ability of investors in one
series to acquire for the same consideration relatively greater or lesser voting
power per share than investors in the other series. To the extent the relative
market values of each series of Genzyme common stock change prior to the first
such adjustment or in between any adjustments, however, an investor in one
series of Genzyme common stock may acquire relatively more or less voting power
for the same consideration when compared with investors in another series of
Genzyme common stock.
 
     In addition to voting together as a single class of stock, the Genzyme
Charter requires the approval by the holders of the affected series of Genzyme
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:
 
          (i) allow any proceeds from the disposition of the properties or
     assets allocated to any division to be used in the business of the other
     division without fair compensation,
 
          (ii) allow any properties or assets allocated to any division to be
     used in the business of another division or for the declaration or payment
     of any dividend or distribution on any series of Genzyme common stock not
     attributed to such division without fair compensation,
 
          (iii) issue shares of any series of Genzyme common stock without
     allocating the proceeds of such issuance to the division represented by
     such series of Genzyme common stock (provided, however, that Genzyme may
     without such approval issue GTR Designated Shares and GMO Designated
     Shares),
 
          (iv) change the rights or preferences of any series of Genzyme common
     stock so as to affect the series adversely or
 
          (v) effect any merger or business combination involving Genzyme as a
     result of which (a) the holders of all series of Genzyme common stock 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 series
     of Genzyme common stock do not receive the same form of consideration,
     distributed among such holders in proportion to the market capitalization
     of each series of Genzyme 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 the Genzyme Charter, the
approval of the holders of a majority of the outstanding shares of each series
of Genzyme common stock, voting together as a single 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 series so as to affect them adversely. The MBCL does not currently provide
for any other separate voting rights for a series 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 all series of common stock) voting together as a
single class and because the holders of GGD Stock will initially have more than
the number of votes required
 
                                       42
<PAGE>   44
 
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
Genzyme Tracking Stock -- No Additional Separate Voting Rights."
 
LIQUIDATION RIGHTS
 
     In the event of a voluntary or involuntary dissolution, liquidation or
winding up of the affairs of Genzyme, after Genzyme has satisfied or made
provision for its debts and obligations and for payment to the holders of shares
of any series of capital stock having preferential rights to receive
distributions of the net assets of Genzyme, the holders of Genzyme common stock
are entitled to receive the net 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 series and will have no direct claim against any
particular assets of Genzyme or any of its subsidiaries. Each share of GGD Stock
has 100 liquidation units, each share of GTR Stock has 58 liquidation units and
each share of GMO Stock has 25 liquidation units. The liquidation units of the
GTR Stock and the GMO Stock will be appropriately adjusted so as to avoid
dilution in the aggregate liquidation rights of any series in the event the
outstanding shares of any series 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 any
series as a dividend or a distribution to holders of shares of that series, 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. Genzyme may not, however, without approval by the
holders of the GTR Stock and the GMO Stock voting as separate series of stock,
effect any merger or business combination involving Genzyme as a result of which
(i) the holders of all series of Genzyme common stock shall no longer own,
directly or indirectly, at least fifty percent of the voting power of the
surviving corporation and (ii) the holders of each series of Genzyme common
stock do not receive the same form of consideration, distributed among such
holders in proportion to the market capitalization of each series of common
stock as of the date of the first public announcement of such merger or business
combination.
 
GTR DESIGNATED SHARES AND GMO DESIGNATED SHARES
 
     GTR Designated Shares and GMO Designated Shares are authorized shares of
GTR Stock and GMO Stock, respectively, which are not issued and outstanding, but
which the Genzyme 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 or GMO, respectively. The shares of GTR Stock and
GMO Stock that are issuable with respect to the GTR Designated Shares and the
GMO Designated Shares, respectively, are not outstanding shares of GTR Stock or
GMO Stock, are not eligible to receive dividends and cannot be voted by Genzyme.
 
     As of August 31, 1997, there were 921,423 GTR Designated Shares,
representing a potential 15.1% equity interest in GTR. The number of GTR
Designated Shares from time to time will be:
 
          (i) adjusted as appropriate to reflect subdivisions (by stock split or
     otherwise) and combinations (by reverse stock split or otherwise) of the
     GTR Stock and dividends or distributions of shares of GTR Stock to holders
     of GTR Stock and other reclassifications of GTR Stock;
 
          (ii) decreased by (a) the number of any shares of GTR Stock issued by
     Genzyme, the proceeds of which are allocated to Genzyme General, (b) the
     number of any shares of GTR Stock issued upon the exercise or conversion of
     securities convertible into GTR Stock that are attributed to Genzyme
     General and (c) the number of any shares of GTR Stock issued by Genzyme as
     a dividend or distribution or by reclassification, exchange or otherwise to
     holders of GGD Stock; and
 
          (iii) increased by (a) the number of any outstanding shares of GTR
     Stock repurchased by Genzyme, the consideration for which was allocated to
     Genzyme General, (b) one for each $10.00 reallocated from Genzyme General
     to GTR from time to time in satisfaction of the purchase option of Genzyme
     General set forth in section 4.18 of the Agreement and Plan of
     Reorganization among Genzyme, Phoenix Acquisition Corporation and
     BioSurface Technology, Inc. dated as of July 25, 1994, up to a maximum $30
     million, and (c) the number of shares of GTR Stock equal to the fair value
     (as determined by the Genzyme Board) of assets or properties allocated to
     Genzyme General that are reallocated to GTR (other than reallocations that
 
                                       43
<PAGE>   45
 
     represent sales at fair value between such divisions or reallocations
     described in clause (b) above) divided by the Fair Market Value of one
     share of GTR Stock as of the date of such reallocation.
 
The Genzyme Charter prohibits the taking of any action which would have the
effect of reducing the number of GTR Designated Shares to a number which is less
than zero.
 
     As of August 31, 1997, there were 6,000,000 GMO Designated Shares,
representing a potential 60.4% equity interest in GMO. The number of GMO
Designated Shares from time to time will be:
 
        (i) adjusted as appropriate to reflect subdivisions (by stock split or
     otherwise) and combinations (by reverse stock split or otherwise) of the
     GMO Stock and dividends or distributions of shares of GMO Stock to holders
     of GMO Stock and other reclassifications of GMO Stock;
 
        (ii) decreased by (a) the number of any shares of GMO Stock issued by
     Genzyme, the proceeds of which are allocated to Genzyme General, (b) the
     number of any shares of GMO Stock issued upon the exercise or conversion of
     securities convertible into GMO Stock that are attributed to Genzyme
     General and (c) the number of any shares of GMO Stock issued by Genzyme as
     a dividend or distribution or by reclassification, exchange or otherwise to
     holders of GGD Stock; and
 
        (iii) increased by
 
             (a) the number of any outstanding shares of GMO Stock repurchased
        by Genzyme, the consideration for which was allocated to Genzyme
        General;
 
             (b) the number of shares of GMO Stock equal to the fair value (as
        determined by the Genzyme Board) of assets or properties allocated to
        Genzyme General that are reallocated to GMO (other than reallocations
        that represent sales at fair value between such divisions) divided by
        the Fair Market Value of one share of GMO Stock as of the date of such
        reallocation;
 
   
             (c) with respect to amounts drawn under an equity line of credit
        approved by the Genzyme Board providing for the allocation of up to $25
        million in cash from Genzyme General to GMO (the "GMO Equity Line"), a
        number equal to the sum of the quotients obtained by dividing (A) the
        amount of each advance under the GMO Equity Line by (B) $7.00 plus or
        minus a daily proration of the difference between the price to the
        public in the initial public offering of GMO Stock (the "GMO IPO") and
        $7.00, assuming straight line appreciation or depreciation in the value
        of the GMO Stock over the period from the closing date of the
        acquisition of PharmaGenics, Inc. to the closing date of the GMO IPO;
        and, thereafter, upon each advance made under the GMO Equity Line, a
        number equal to the quotient obtained by dividing (X) the amount of each
        such advance by (Y) the Fair Market Value of the GMO Stock on the date
        of such advance; or
    
 
             (d) the number of shares of GMO Stock into which the Genzyme Board
        elects to convert the promissory note dated February 10, 1997 issued by
        PharmaGenics, Inc. to Genzyme.
 
The Genzyme Charter prohibits the taking of any action which would have the
effect of reducing the number of GMO Designated Shares to a number which is less
than zero.
 
     Whenever additional shares of any series 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 GTR Designated
Shares or the GMO Designated Shares, which shall reduce the number of GTR
Designated Shares or GMO 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 GTR Stock or GMO Stock, it will identify the
number of shares that are repurchased for consideration that was allocated to
Genzyme General and the number of GTR Designated Shares or GMO Designated Shares
may increase accordingly.
 
"ANTI-TAKEOVER" PROVISIONS
 
     Contractual Measures.  The Genzyme Charter and the By-Laws of Genzyme (the
"By-Laws") contain provisions that could discourage potential takeover attempts
and prevent stockholders from changing Genzyme's
 
                                       44
<PAGE>   46
 
management, including authorization of the Genzyme Board to issue shares of
common stock and preferred stock in series, enlarge the size of the Genzyme
Board and fill any vacancies on the Genzyme 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 GTR Stock, GGD Stock and GMO Stock also represents a right
that, under certain circumstances, may trade separately from the GTR Stock, GGD
Stock and GMO 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 GTR Stock, GGD
Stock and GMO 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.  The 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 or she 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.
 
     Genzyme is subject to the Massachusetts Business Combination statute unless
it elects not to be governed by the statute in the Genzyme Charter or the
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 (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 incorporation or by-laws. The 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 Genzyme
Board determines that it is in the best interests of Genzyme and its
stockholders that Genzyme be governed by the statute, the 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.
 
     See "Risk Factors -- Risks Related to GTR -- Possible Adverse Effect of
Anti-Takeover Provisions."
 
DETERMINATIONS BY THE GENZYME BOARD
 
     Any determination made by the Genzyme Board in good faith under any of the
provisions described above will be final and binding on all stockholders of
Genzyme.
 
TRANSFER AGENT AND REGISTRAR
 
     American Stock Transfer and Trust Company is the registrar and transfer
agent for each series of Genzyme common stock.
 
                                       45
<PAGE>   47
 
                  MANAGEMENT AND ACCOUNTING POLICIES GOVERNING
                     THE RELATIONSHIP OF GENZYME DIVISIONS
 
     The Genzyme Board has adopted the following policies to govern the
management of Genzyme General, GTR and GMO. Except as otherwise provided in the
policies, the Genzyme Board may further modify or rescind the policies in its
sole discretion without approval of the stockholders, subject only to the
Genzyme Board's fiduciary duty to Genzyme's stockholders. The Genzyme Board may
also adopt additional policies depending upon the circumstances. Any
determination of the Genzyme Board to modify or rescind the policies, or to
adopt additional policies, including any such decision that would have disparate
impacts upon holders of the common stock representing the three divisions, would
be governed by the principles of Massachusetts law discussed under "Risk
Factors -- Risks Related to Genzyme Tracking Stock -- No Rights or Additional
Duties with Respect to the Divisions; Potential Conflicts." In addition,
generally accepted accounting principles require that any change in policy be
preferable (in accordance with such principles) to the previous policy.
 
PURPOSE OF THE TISSUE REPAIR AND MOLECULAR ONCOLOGY DIVISIONS
 
     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.).
The purpose of GMO is to create a focused, integrated oncology business that
will develop and commercialize novel therapeutic and diagnostic products and
services based upon molecular tools and genomic information. In addition to the
programs initially assigned to each of GTR and GMO, it is expected that the
product and service portfolio of each division will expand through the addition
of complementary programs, products and services developed either internally or
externally to the division, including acquiring or in-licensing programs,
products and services from outside of Genzyme. Each of GTR and GMO will be
operated and managed similarly to Genzyme General.
 
REVENUE ALLOCATION
 
     Other than revenues received in connection with transactions subject to the
policy regarding Other Interdivision Transactions, revenues from the sale of a
division's products and services shall be credited to that division.
 
EXPENSE ALLOCATION
 
     Other than expenses incurred in connection with transactions subject to the
policy regarding Other Interdivision Transactions, all direct expenses shall be
charged to the division for the benefit of which they are incurred. Corporate
and general and administrative expenses or other indirect costs will be
allocated to each division in a reasonable and consistent manner based on
utilization by the division of the services to which such costs relate.
 
TAX ALLOCATIONS
 
     Income taxes shall be allocated to each division based upon the financial
statement income, taxable income, credits and other amounts properly allocable
to such division under generally accepted accounting principles as if each
division were a separate taxpayer; provided, however, that as of the end of any
fiscal quarter of Genzyme, any projected tax benefit attributable to any
division that cannot be utilized by such division to offset or reduce its
current or deferred income tax expense may be allocated to the other divisions
in proportion to their taxable income without any compensating payment or
allocation.
 
ACQUISITIONS OF PROGRAMS, PRODUCTS OR ASSETS
 
     Upon the acquisition by Genzyme from a third party of any 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 shall be allocated among the divisions of
Genzyme. In the case of material acquisitions, such allocation shall be made in
a manner determined by the Genzyme Board to be fair and reasonable to each
division and to holders of the common stock representing each division, taking
into account
 
                                       46
<PAGE>   48
 
such matters as the Genzyme Board and its financial advisors, if any, deem
relevant. Any such determination by the Genzyme Board will be final and binding
on all holders 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 shall be allocated to
the division to which the program, product or asset had been allocated. If the
program, product or asset was allocated to more than one division, the proceeds
of the disposition shall be allocated among such divisions based on their
respective interests in such program, product or asset. Such allocation shall be
made in a manner determined by the Genzyme Board to be fair and reasonable to
such divisions and to holders of the common stock representing such divisions,
taking into account such matters as the Genzyme Board and its financial
advisors, if any, deem relevant. Any such determination by the Genzyme Board
will be final and binding on all holders of common stock.
 
INTERDIVISION ASSET TRANSFERS
 
     The Genzyme 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 shall be done at fair market value, determined by the Genzyme
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
Genzyme Board and its financial advisors, if any, deem relevant. The
consideration for such reallocation may be paid by one division to another in
cash or other consideration with a value equal to the fair market value of the
assets being reallocated or, in the case of a reallocation of assets from
Genzyme General to GTR or to GMO, the Genzyme Board may elect to account for
such reallocation as an increase in the Designated Shares representing the
division to which such assets are reallocated in accordance with the provisions
of the Genzyme Charter.
 
     Notwithstanding the foregoing, no Key GTR Program or Key GMO Program, as
defined below, may be transferred out of GTR or GMO, respectively, without a
class vote of the holders of the common stock representing the division from
which such Key GTR Program or Key GMO Program is to be removed unless the
Genzyme Board determines that (i) in the case of a Key GTR Program, such Key GTR
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) and (ii) in
the case of a Key GMO Program, such Key GMO Program has application outside of
the field of oncology (in which case it may be transferred out only for the
nononcology applications; provided, however, that the SAGE Service (as defined
below) may not be transferred out of GMO for any application without the
approval of the holders of GMO Stock voting as a separate class).
 
     A "Key GTR Program" is any of the following:
 
          (i) Vianain(R) for debridement of necrotic or damaged tissue;
 
          (ii) TGF-(Beta)(2) for all indications licensed from Celtrix
     Pharmaceuticals, Inc. as of December 16, 1994;
 
          (iii) Epicel(SM) cultured epithelial cell autografts for tissue
     replacement or repair;
 
          (iv) Acticel(SM) cultured epithelial cell allografts for tissue
     replacement or repair;
 
          (v) Carticel(TM) autologous cultured chondrocytes; 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 one of the 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.
 
     A "Key GMO Program" is any of the following:
 
          (i) use of the Serial Analysis of Gene Expression technology licensed
     from the Johns Hopkins University for third parties (the "SAGE Service");
 
                                       47
<PAGE>   49
 
          (ii) the clinical program developing adenovirus vectors containing the
     tumor antigens Ad-MART 1 or Ad-gp100 for the treatment of melanoma;
 
          (iii) the "suicide" gene therapy research program developing
     adenovirus and lipid vectors containing genes to enhance chemotherapy for
     oncology indications;
 
          (iv) the research program developing adenovirus and lipid vectors
     containing tumor suppressor genes for oncology indications;
 
          (v) the research program developing adenovirus and lipid vectors
     containing genes to regulate the immune system for oncology indications,
     including heat shock proteins;
 
          (vi) the research program developing antibody-based gene therapy for
     the treatment of tumors; and
 
          (vii) any additional program, product or service being developed from
     time to time in GMO which (a) constituted 20% or more of the research and
     development budget of GMO in any one of the three most recently completed
     fiscal years or (b) has had a cumulative investment of $8 million or more
     in research and development expenses by GMO.
 
     The foregoing policies regarding transfers of assets between divisions will
not be changed by the Genzyme Board without the approval of the holders of the
GTR Stock and the GMO Stock, each voting as a separate class; provided, however,
that if a policy change affects GTR or GMO alone, only holders of shares
representing the affected division will be entitled to a class vote on such
matter.
 
OTHER INTERDIVISION TRANSACTIONS
 
     This policy shall cover interdivision transactions other than asset
transfers, which shall be subject to the policy regarding Interdivision Asset
Transfers. From time to time, a division may engage in transactions directly
with one or more other divisions or jointly with one or more other divisions and
one or more third parties. Such transactions may include agreements by one
division to provide products and services for use by another division and joint
ventures or other collaborative arrangements involving more than one division to
develop new products and services jointly and with third parties. Such
transactions shall be subject to the following conditions:
 
          (i) Research performed by one division for the benefit of another
     division will be charged to the division for which work is performed on a
     cost basis. Such costs shall be allocated in the manner described above
     under "Expense Allocation," and the division performing the research will
     not recognize revenue as a result of performing such research.
 
          (ii) Corporate and general and administrative services will be
     provided by each division to any other division requesting such services on
     a cost basis and such costs shall be allocated in the manner described
     above under "Expense Allocation."
 
          (iii) Other than research, corporate and general and administrative
     services, interdivision transactions shall be on terms and conditions that
     would be obtainable in transactions negotiated at arm's length with
     unaffiliated third parties.
 
          (iv) Any interdivision transaction (a) to be performed on terms and
     conditions that deviate from the policies set forth in subparagraphs (i),
     (ii) or (iii) above and (b) that is material to one or more of the
     participating divisions will require approval by the Genzyme Board, which
     approval shall include a determination by the Genzyme Board that the
     transaction is fair and reasonable to each participating division and to
     holders of the common stock representing each such division.
 
          (v) If a division (the "Purchasing Division") requires any product or
     service from which another division (the "Selling Division") derives
     revenues from sales to third parties (a "Commercial Product or Service"),
     the Purchasing Division may solicit from the Selling Division a bid to
     provide such Commercial Product or Service in addition to any bids
     solicited by the Purchasing Division from third parties. Subject to the
     determination by the Genzyme Board that the bid of the Selling Division is
     fair and reasonable to each division and to holders of common stock
     representing each division and that the Purchasing Division will accept the
     Selling Division's bid, the Purchasing Division may accept any bid deemed
     to offer the most
 
                                       48
<PAGE>   50
 
     favorable terms and conditions for providing the Commercial Product or
     Service sought by the Purchasing Division.
 
          (vi) Loans may be made from time to time between divisions. Any such
     loan of $1 million or less will mature within 18 months and interest will
     accrue at the best borrowing rate available to Genzyme for a loan of like
     type and duration. Amounts borrowed in excess of $1 million will require
     approval of the Genzyme Board, which approval shall include a determination
     by the Genzyme Board that the material terms of such loan, including the
     interest rate and maturity date, are fair and reasonable to each
     participating division and to holders of the common stock representing such
     division.
 
ACCESS TO TECHNOLOGY AND KNOW-HOW
 
     Each of Genzyme General, GTR and GMO will 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 GTR DESIGNATED SHARES AND GMO DESIGNATED SHARES
 
     (i) The GTR Designated Shares and the GMO Designated Shares may be (a)
issued upon the exercise or conversion of outstanding stock options, warrants or
convertible securities allocated to Genzyme General, (b) subject to the
restrictions set forth below under "Issuance of Additional Shares of Any Series
of Common Stock," sold for any valid business purpose or (c) distributed as a
dividend to the holders of shares of GGD Stock, all as determined from time to
time by the Genzyme Board, subject to the following policies regarding annual
distributions.
 
     (ii) If, as of May 31 of each year starting May 31, 1997, the number of GTR
Designated Shares on such date (not including those reserved for issuance with
respect to stock options, stock purchase rights, warrants or other securities
convertible into or exercisable for shares of GGD Stock outstanding on such date
("GGD Convertible Securities") as a result of anti-dilution adjustments required
by the terms of such instruments or approved by the Genzyme Board) exceeds ten
percent (10%) of the number of shares of GTR Stock then issued and outstanding,
then substantially all GTR Designated Shares will be distributed to holders of
record of GGD Stock subject to reservation of a number of such shares equal to
the sum of:
 
          (a) the number of GTR Designated Shares reserved for issuance upon the
     exercise or conversion of GGD Convertible Securities and
 
          (b) the number of GTR Designated Shares reserved by the Genzyme Board
     as of such date for sale not later than six months after such date, the
     proceeds of which sale will be allocated to Genzyme General.
 
     (iii) If, as of November 30 of each year starting November 30, 1998, the
number of GMO Designated Shares on such date (not including those reserved for
issuance with respect to GGD Convertible Securities as a result of anti-dilution
adjustments required by the terms of such instruments or approved by the Genzyme
Board) exceeds ten percent (10%) of the number of shares of GMO Stock then
issued and outstanding, then substantially all GMO Designated Shares will be
distributed to holders of record of GGD Stock, subject to reservation of a
number of such shares equal to the sum of:
 
          (a) the number of GMO Designated Shares reserved for issuance upon the
     exercise or conversion of GGD Convertible Securities and
 
          (b) the number of GMO Designated Shares reserved by the Genzyme Board
     as of such date for sale not later than six months after such date, the
     proceeds of which sale will be allocated to Genzyme General;
 
provided, however, that if, prior to November 30, 1998, Genzyme has completed an
initial public offering of GMO Stock, Genzyme may defer the distribution of GMO
Designated Shares provided in this policy until the later of November 30, 1998
or 360 days after the date such offering is completed.
 
                                       49
<PAGE>   51
 
ISSUANCE AND SALE OF ADDITIONAL SHARES OF COMMON STOCK
 
     When additional shares 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 shall reduce the number of
Designated Shares of such division. Notwithstanding the foregoing, Genzyme will
not sell any GTR Designated Shares or GMO Designated Shares (except upon
exercise or conversion of options, warrants or convertible securities issued by
Genzyme General that were adjusted as a result of a dividend of GTR Stock or GMO
Stock paid to holders of GGD Stock) unless (i) the Genzyme Board determines that
GTR or GMO, as the case may be, has cash sufficient to fund its operations for
at least the next 12 months or (ii) shares of GTR Stock or GMO Stock, as the
case may be, are concurrently being sold for the account of GTR or GMO,
respectively, in an amount that will produce proceeds sufficient to fund such
division's cash needs for the next 12 months.
 
OPEN MARKET PURCHASES OF SHARES OF COMMON STOCK
 
     Genzyme may make open market purchases of any series of its common stock in
accordance with applicable securities law requirements; provided, however, that
in no event shall any such purchases be made if as an immediate result thereof
the number of Designated Shares representing a division will exceed 60% of the
number of shares of such division outstanding plus such number of Designated
Shares. Notwithstanding the foregoing, within 90 days of any open market
purchase of the common stock representing any division, Genzyme may not exercise
the right provided under the Genzyme Charter to exchange shares representing
such division for cash and/or shares of GGD Stock.
 
CLASS VOTING
 
     In addition to any stockholder approval required by Massachusetts law,
whenever the approval of the holders of the common stock representing a division
is required to take any action pursuant to these policies or the Genzyme
Charter, such requirement shall be satisfied if a meeting of the holders of the
common stock representing such division 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 or services outside of GTR or GMO which
compete or would compete with products or services being developed or sold by
GTR or GMO, respectively, other than through joint ventures or other
collaborative arrangements involving more than one division to develop new
products and services jointly and with third parties, which transactions shall
be subject to the conditions set forth in the policy regarding Other
Interdivision Transactions.
 
                                       50
<PAGE>   52
 
                                  UNDERWRITING
 
     Under the terms and subject to the conditions contained in an Underwriting
Agreement dated             , 1997 (the "Underwriting Agreement"), the
underwriters named below (the "Underwriters"), for whom Credit Suisse First
Boston Corporation, Cowen & Company and PaineWebber Incorporated are acting as
representatives (the "Representatives"), have severally but not jointly agreed
to purchase from Genzyme the following respective numbers of shares of GTR
Stock:
 
<TABLE>
<CAPTION>
                                                                                NUMBER OF
                UNDERWRITER                                                      SHARES
                -----------                                                     ---------
    <S>                                                                         <C>
    Credit Suisse First Boston Corporation....................................
    Cowen & Company...........................................................
    PaineWebber Incorporated..................................................
                                                                                   ------
              Total...........................................................
                                                                                   ======
</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 GTR 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.
 
     Genzyme 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
600,000 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 GTR 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 GTR
Stock as it was obligated to purchase pursuant to the Underwriting Agreement.
 
     Genzyme has been advised by the Representatives that the Underwriters
propose to offer the shares of GTR 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. Thereafter the public
offering price and concession and discount to dealers may be changed by the
Representatives.
 
   
     Genzyme has agreed that it will not offer, sell, contract to sell, announce
its intention to sell, pledge, hypothecate, grant any option to purchase or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of GTR Stock or securities convertible into or exchangeable or
exercisable for any shares of GTR Stock, or publicly disclose the intention to
make any such offer, sale, pledge, disposition or filing other than pursuant to
the conversion or exchange of convertible or exchangeable securities or the
exercise of warrants or options, in each case outstanding on the date of the
Underwriting Agreement, grants of employee, director or consultant stock options
pursuant to the terms of a plan in effect on the date of the Underwriting
Agreement or issuances of GTR Stock pursuant to the exercise of such options
without the prior written consent of Credit Suisse First Boston Corporation for
a period of 90 days after the date of this Prospectus.
    
 
     Genzyme 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.
 
     This offering is being conducted in accordance with the applicable
provisions of Rule 2720 of the National Association of Securities Dealers, Inc.
Conduct Rules because Proprietary Convertible Investment Group, Inc. ("PCIG"),
an affiliate of Credit Suisse First Boston Corporation, holds subordinated debt
of Genzyme. Rule 2720 requires that the public offering price of the GTR Stock
offered hereby not be higher than that recommended by a "qualified independent
underwriter" meeting certain qualifications. Accordingly, PaineWebber
Incorporated is
 
                                       51
<PAGE>   53
 
acting as the qualified independent underwriter in pricing the offering and
conducting due diligence. The public offering price of the GTR Stock offered
hereby is no higher than that recommended by PaineWebber Incorporated.
PaineWebber Incorporated will not receive any compensation in connection with
its acting as a qualified independent underwriter. In addition, no NASD member
participating in the distribution will be permitted to confirm sales to accounts
over which it exercises discretionary authority without the prior specific
written consent of the customer.
 
     The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions,
penalty bids and "passive" market making in accordance with Regulation M under
the Securities Exchange Act of 1934. Over-allotment involves syndicate sales in
excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the GTR Stock so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the GTR Stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Representatives to reclaim a selling concession from a
syndicate member when the shares of GTR Stock sold by such syndicate member are
purchased in a syndicate covering transaction or to cover syndicate short
positions. In "passive" market making, market makers in the GTR Stock who are
Underwriters or prospective underwriters may, subject to certain limitations,
make bids for or purchases of the GTR Stock until the time, if any, at which a
stabilizing bid is made. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the GTR Stock to be higher
than it would otherwise be in the absence of such transactions. These
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.
 
     Credit Suisse First Boston Corporation and PaineWebber Incorporated
provided financial advisory services to Genzyme and BioSurface, respectively, in
connection with Genzyme's acquisition of BioSurface in December 1994. The
Representatives also acted as underwriters in Genzyme's public offerings of GGD
Stock and GTR Stock in 1995. PaineWebber Incorporated provided financial
advisory services to PharmaGenics, Inc. in connection with its acquisition by
Genzyme in June 1997. In February 1997 Credit Suisse First Boston (Hong Kong)
Limited, an affiliate of Credit Suisse First Boston Corporation, purchased debt
securities of Genzyme convertible into GTR Stock and in August 1997 Credit
Suisse First Boston Corporation acted as placement agent for an offering of debt
securities convertible into GMO Stock. Proprietary Convertible Investment Group,
Inc., an affiliate of Credit Suisse First Boston Corporation, owns 50% of such
securities. In addition, the Representatives and certain other Underwriters have
from time to time provided other investment banking services to Genzyme for
customary fees and may continue to do so in the future.
 
                          NOTICE TO CANADIAN RESIDENTS
 
RESALE RESTRICTIONS
 
     The distribution of the GTR Stock in Canada is being made only on a private
placement basis exempt from the requirement that Genzyme prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of GTR Stock are effected. Accordingly, any resale of the GTR 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. Canadian purchasers are advised to seek legal advice prior to any
resale of the GTR Stock.
 
REPRESENTATIONS OF PURCHASERS
 
   
     Each purchaser of GTR Stock in Canada who receives a purchase confirmation
will be deemed to represent to Genzyme and the dealer from whom such purchase
confirmation is received that (i) such purchaser is entitled under applicable
provincial securities laws to purchase such GTR 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, (iii) such
purchaser has reviewed the text above under "Resale Restrictions," (iv) if such
purchaser is located in Ontario, a dealer registered as an international dealer
in Ontario may sell the GTR Stock to such
    
 

                                       52
<PAGE>   54
 
   
purchaser and (v) if such purchaser is located in Quebec, such purchaser is a
"sophisticated purchaser" within the meaning of Section 43 of the Securities Act
(Quebec.)
    
 
RIGHTS OF ACTION (ONTARIO PURCHASERS)
 
     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.
 
   
     The foregoing summary is subject to the express provisions of the
Securities Act (Ontario) and the regulations thereunder and reference is made
thereto for the complete text of such provisions. Such provisions may contain
limitations and statutory defenses on which Genzyme may rely.
    
 
   
     The rights discussed above are in addition to and without derogation from
any other right or remedy which investors may have at law.
    
 
ENFORCEMENT OF LEGAL RIGHTS
 
     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 Canadian 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.
 
NOTICE TO BRITISH COLUMBIA RESIDENTS
 
     A purchaser of GTR 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 GTR
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
#95/17, a copy of which may be obtained from Genzyme. Only one such report must
be filed in respect of the GTR Stock acquired on the same date and under the
same prospectus exemption.
 
TAXATION AND ELIGIBILITY FOR INVESTMENT
 
     Canadian purchasers of GTR Stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the GTR Stock
in the particular circumstances and with respect to the eligibility of the GTR
Stock for investment by the purchaser under relevant Canadian legislation.
 
   
LANGUAGE OF DOCUMENTS
    
 
   
     Canadian purchasers hereby acknowledge that it is their express wish that
all documents evidencing or relating in any way to the sale of the GTR Stock be
drawn up in the English language only. Les acheteurs Canadiens reconnaissent par
les presentes que c'est leur volonte expresse que tous les documents faisant foi
ou se repportant de quelque maniere a la vente des valeurs mobilieres de GTR
soient rediges en anglais seulement.
    
 
                                 LEGAL OPINIONS
 
   
     The validity of the GTR Stock offered hereby will be passed upon for
Genzyme by Palmer & Dodge LLP, Boston, Massachusetts. Certain legal matters will
be passed upon for the Underwriters by Cahill Gordon & Reindel (a partnership
including a professional corporation), New York, New York.
    
 

                                       53
<PAGE>   55

 
                                    EXPERTS
 
     The consolidated balance sheets of Genzyme as of December 31, 1995 and 1996
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1996
included in Genzyme's Annual Report on Form 10-K for the year ended December 31,
1996, as amended, and the financial statement schedule appearing therein,
incorporated by reference into this Prospectus, have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
 
     The combined balance sheets of Genzyme General and GTR as of December 31,
1995 and 1996, and the related combined statements of operations and cash flows
for each group for each of the three years in the period ended December 31, 1996
included in Genzyme's Annual Report on Form 10-K for the year ended December 31,
1996, as amended, and the financial statement schedule appearing therein, have
also been incorporated by reference herein in reliance on the respective reports
of Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and accounting.
 
     The combined balance sheets of GMO as of December 31, 1995 and 1996, and
the related combined statements of operations and deficit accumulated during the
development stage, cash flows and division equity for the period from December
1, 1994 (Date of Inception) through December 31, 1994, for the years ended
December 31, 1995 and 1996 and cumulative for the period from December 1, 1994
(Date of Inception) through December 31, 1996, have also been incorporated by
reference herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
 
     The audited financial statements of PharmaGenics, Inc. included in
Genzyme's Current Report on Form 8-K filed on June 30, 1997 and incorporated by
reference in this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated herein by reference in reliance upon the authority
of said firm as experts in giving said reports.
 
                             AVAILABLE INFORMATION
 
     Genzyme has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act with respect to the GTR Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete, but do provide an
accurate summary of the material terms thereof. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement and any amendments
thereto, including exhibits filed or incorporated by reference as a part
thereof, are available for inspection and copying at the Commission's offices as
described below.
 
     Genzyme is subject to the informational requirements of the Exchange Act,
and, in accordance therewith, files periodic reports, proxy statements and other
information with the Commission. Reports, proxy and information statements filed
pursuant to Sections 14(a) and 14(c) of the Exchange Act and other information
filed with the Commission, as well as copies of the Registration Statement, can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Midwest
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60611;
and Northeast Regional Office, 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can also be obtained at prescribed rates
from the Public Reference Section of the Commission at its principal office at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Such material
may also be accessed electronically by means of the Commission's home page on
the Internet at http://www.sec.gov.
 
                                       54
<PAGE>   56
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
     Genzyme hereby incorporates in this Prospectus by reference the following
documents heretofore filed with the Commission (File No. 0-14680) pursuant to
the Exchange Act: (i) Genzyme's Annual Report on Form 10-K for the year ended
December 31, 1996, as amended by Form 10-K/A filed on June 30, 1997; (ii)
Genzyme's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997
and June 30, 1997; (iii) Genzyme's Current Reports on Form 8-K filed with the
Commission on February 4, 1997, April 1, 1997 and June 30, 1997; (iv) the
description of GTR Stock and GTR Stock Purchase Rights contained in Genzyme's
Registration Statement on Form 8-A filed with the Commission on June 18, 1997.
 
     All documents filed by Genzyme 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.
 
     Genzyme 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 Genzyme Corporation, One Kendall Square, Cambridge,
Massachusetts 02139, Attention: Shareholder Services, telephone (617) 252-7526.
 
                                       55
<PAGE>   57
 
- --------------------------------------------------------------------------------
 
     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>
Prospectus Summary....................    3
Risk Factors..........................    6
Use of Proceeds.......................   14
Capitalization........................   15
Price Range of GTR Stock and Dividend
  Policy..............................   16
Genzyme Tissue Repair Selected
  Financial Data......................   17
GTR Management's Discussion and
  Analysis of Financial Condition and
  Results of Operations...............   19
Additional Financial Data.............   22
Business..............................   23
Management............................   37
Description of Genzyme Capital
  Stock...............................   40
Management and Accounting Policies
  Governing the Relationship of
  Genzyme Divisions...................   46
Underwriting..........................   51
Notice to Canadian Residents..........   52
Legal Opinions........................   53
Experts...............................   54
Available Information.................   54
Incorporation of Certain Documents
  by Reference........................   55
</TABLE>
    
 

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

                                     [LOGO]
 

                                4,000,000 Shares
                         Genzyme Tissue Repair Division
                                  Common Stock
                                ($.01 par value)




                                   PROSPECTUS




                           CREDIT SUISSE FIRST BOSTON
 
                                COWEN & COMPANY
 
                            PAINEWEBBER INCORPORATED
 




- --------------------------------------------------------------------------------
<PAGE>   58
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     The expenses to be borne by Genzyme in connection with this offering of GTR
Stock are estimated as follows:
 
<TABLE>
    <S>                                                                         <C>
    SEC registration fee......................................................  $ 15,152
    NASD fees and expenses....................................................  $  4,500
    Printing and engraving expenses...........................................  $ 50,000
    Accounting fees and expenses..............................................  $ 60,000
    Legal fees and expenses...................................................  $100,000
    Transfer Agent and Registrar fees.........................................  $ 10,000
    Miscellaneous expenses....................................................  $ 10,348
         Total................................................................  $250,000
                                                                                ========
</TABLE>
 
     All of the above figures, except the SEC registration 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 Restated 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 Genzyme 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 Genzyme or of any of its subsidiaries, or
who at the request of Genzyme 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 Genzyme or
the proceeding seeks a declaratory judgment regarding his or her own conduct);
provided that no indemnification shall be provided for any such person with
respect to any matter as to which he or she shall have been finally adjudicated
in any proceeding not to have acted in good faith in the reasonable belief that
his or her action was in the best interests of Genzyme or, to the extent such
matter relates to service with respect to any employee benefit plan, in the best
interests of the participants or beneficiaries of such employee of such employee
benefit plan; and provided, further, that as to any matter disposed of by a
compromise payment by such person, pursuant to a consent decree or otherwise,
the payment and indemnification thereof have been approved by Genzyme, which
approval shall not unreasonably be withheld, or by a court of competent
jurisdiction. 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>   59
 
     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. Article VI.C.5. of
Genzyme's Restated Articles of Organization provides that no director shall be
personally liable to Genzyme 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
 
     See Exhibit Index immediately following the signature page.
 
ITEM 17.  UNDERTAKINGS
 
     (a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 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 herein, 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 of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 15 hereof, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange 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) The undersigned Registrant hereby undertakes that:
 
          (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 part of this
     registration statement as of the time it was declared effective.
 
          (2) For the purposes 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-2
<PAGE>   60
 
                                   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 for filing on Form S-3 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Cambridge, Commonwealth of
Massachusetts, on October 29, 1997.
    
 
                                            GENZYME CORPORATION
 
                                            By:     /s/ DAVID J. MCLACHLAN
 
                                              ----------------------------------
                                                     DAVID J. MCLACHLAN,
                                              Executive Vice President, Finance
                                                 and Chief Financial Officer
 
   
     Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
    
 
   
<TABLE>
<CAPTION>
                SIGNATURE                                 TITLE
- ------------------------------------------  ---------------------------------
<C>                                         <S>                                <C>
                    *                       Director and Principal Executive   October 29, 1997
- ------------------------------------------  Officer
             HENRI A. TERMEER
 
          /s/ DAVID J. MCLACHLAN            Principal Financial and            October 29, 1997
- ------------------------------------------  Accounting Officer
            DAVID J. MCLACHLAN
 
                    *                       Director                           October 29, 1997
- ------------------------------------------
      CONSTANTINE E. ANAGNOSTOPOULOS
 
                    *                       Director                           October 29, 1997
- ------------------------------------------
          DOUGLAS A. BERTHIAUME
 
                    *                       Director                           October 29, 1997
- ------------------------------------------
              HENRY E. BLAIR
 
                    *                       Director                           October 29, 1997
- ------------------------------------------
           ROBERT J. CARPENTER
 
                                            Director                            October  , 1997
- ------------------------------------------
            CHARLES L. COONEY
 
                    *                       Director                           October 29, 1997
- ------------------------------------------
              HENRY R. LEWIS
 
       * By: /s/ DAVID J. MCLACHLAN
- ------------------------------------------
           DAVID J. MCLACHLAN,
             Attorney-in-Fact
</TABLE>
    
 
                                      II-3
<PAGE>   61
 
                                 EXHIBIT INDEX
 
   
<TABLE>
<CAPTION>
EXHIBIT                                                                                SEQUENTIAL
  NO.                                     DESCRIPTION                                   PAGE NO.
- -------                                   -----------                                  ----------
<S>         <C>                                                                        <C>
 
  1.1       Underwriting Agreement dated as of October   , 1997 between Genzyme and
            Credit Suisse First Boston Corporation. Filed herewith.

  4.1       Restated Articles of Organization of Genzyme. Filed as Exhibit 1 to
            Genzyme's Registration Statement on Form 8-A filed with the Commission
            on June 18, 1997, and incorporated herein by reference.

  4.2       Series Designation for Genzyme Molecular Oncology Division Common
            Stock. Filed as Exhibit 2 to Genzyme's Registration Statement on Form
            8-A filed with the Commission on June 18, 1997, and incorporated herein
            by reference.

  4.3       Series Designation for the Series A, Series B and Series C Junior
            Participating Preferred Stock of Genzyme. Filed as Exhibit 3 to
            Genzyme's Registration Statement on Form 8-A filed with the Commission
            on June 18, 1997, and incorporated herein by reference.

  4.4       By-Laws of Genzyme. Filed as Exhibit 3.2 to Genzyme's Form 8-K dated
            December 31, 1991, and incorporated herein by reference.

  4.5       Amended and Restated Rights Agreement dated as of June 12, 1997 between
            Genzyme and American Stock Transfer and Trust Company. Filed as Exhibit
            5 to Genzyme's Registration Statement on Form 8-A filed with the
            Commission on June 18, 1997, and incorporated herein by reference.

  5.1       Opinion of Palmer & Dodge LLP. Previously filed.

 23.1       Consent of Coopers & Lybrand L.L.P., independent accountants to Genzyme
            Corporation. Filed herewith.

 23.2       Consent of Arthur Andersen LLP, independent accountants to
            PharmaGenics, Inc. Filed herewith.

 23.3       Consent of Palmer & Dodge LLP. Included in Exhibit 5.1.

 24.1       Power of Attorney. Previously filed.
</TABLE>
    

<PAGE>   1


                                4,000,000 SHARES

                               GENZYME CORPORATION

                   GENZYME TISSUE REPAIR DIVISION COMMON STOCK


                             UNDERWRITING AGREEMENT


                                                               October   , 1997


Credit Suisse First Boston Corporation
Cowen & Company
PaineWebber Incorporated,
     As Representatives of the Several Underwriters,
         c/o Credit Suisse First Boston Corporation
                 Eleven Madison Avenue
                 New York, N.Y. 10010-3629

Dear Sirs:

          1.  INTRODUCTORY. Genzyme Corporation, a Massachusetts corporation
("Company"), proposes to issue and sell to the Underwriters named in Schedule A
(the "Underwriters") 4,000,000 shares ("Firm Securities") of Genzyme 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 600,000 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. 333-34913) 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 ("Act") and is not proposed to be amended or (ii) is
     proposed to be amended by amendment or post-effective amend-

<PAGE>   2


                                      -2-

     ment. 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) and, if so filed, 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 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


<PAGE>   3


                                      -3-


     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 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), 


<PAGE>   4


                                      -4-


     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 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
     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 

<PAGE>   5

                                      -5-


     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 condition
     (financial or otherwise), business, properties, or results of operations of
     the Company and the Subsidiaries (as defined below) taken as a whole or of
     the Company's Tissue Repair Division ("GTR").

          (d) The only "significant subsidiaries" of the Company, as defined in
     Rule 1-02(x) of the Commission's Regulation S-X, are the subsidiaries
     of the Company listed on Schedule B hereto (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 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 condition (financial or
     otherwise), business, properties, or results of operations of the Company
     and the Subsidiaries taken as a whole or 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 

<PAGE>   6

                                      -6-


     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.

          (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 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.


<PAGE>   7

                                      -7-


          (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 material real properties
     and all other material 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 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 condition (financial or otherwise), business, properties, or results of
     operations of the Company and the Subsidiaries taken as a whole or of GTR.

          (n) The Company has been granted a valid Biologics License by the U.S.
     Food & Drug Administration for its 

<PAGE>   8

                                      -8-


     Carticel autologous cultured chondrocytes and related manufacturing
     facilities and such Biologics License has not been materially altered,
     suspended or terminated.

          (o) 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 condition (financial or
     otherwise), business, properties, or results of operations of the Company
     and the Subsidiaries taken as a whole or of GTR.

          (p) 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 condition (financial or otherwise), business,
     properties, or results of operations of the Company and the Subsidiaries
     taken as a whole or of GTR.

          (q) 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 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 condition (financial or otherwise), business, properties, or results of
     operations of the Company and the Subsidiaries taken as a whole or of GTR;
     and the Company is not aware of any pending investigation which might lead
     to such a claim.


<PAGE>   9

                                      -9-


          (r) 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 condition (financial
     or otherwise), business, properties, or results of operations of the
     Company and the Subsidiaries taken as a whole or 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.

          (s) 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 Genzyme
     General Division ("Genzyme General"), GTR and the Genzyme Molecular
     Oncology Division ("GMO"), 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
     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 Arthur Andersen LLP, who
     have reported on certain of such financial statements and schedules, are
     inde-

<PAGE>   10


                                      -10-



     pendent accountants as required by the Act, the Rules and Regulations, the
     Exchange Act and the Exchange Act Rules and Regulations.

          (t) 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.

          (u) Neither the Company nor any of the Subsidiaries is in violation of
     its charter, 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 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 condition (financial or otherwise), business,
     properties, or results of operations of the Company and the Subsidiaries
     taken as a whole or of GTR.

          (v) 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 condition
     (financial or otherwise), business, properties, or results of operations of
     the Company and the Subsidiaries taken as a whole or 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.

<PAGE>   11


                                      -11-



          (w) 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.

          (x) 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.

          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
wire transfers to an account at a bank acceptable to Credit Suisse First Boston
Corporation ("CSFBC") or by certified or official bank check or checks in
Federal (same 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
October , 1997, or at such other time not later than seven full business days
thereafter as CSFBC 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 CSFBC requests and
will be made available for checking and packaging at the office of Credit Suisse
First Boston Corporation, Eleven Madison Avenue, NY, NY 10010-3629 at least 24
hours prior to the First Closing Date.

          In addition, upon written notice from CSFBC given to the Company from
time to time not more than 30 days subsequent 

<PAGE>   12


                                      -12-



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 CSFBC to eliminate fractions) and may be
purchased by the Underwriters only for the purpose of covering over-allotments
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 CSFBC 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 CSFBC
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 wire transfer to an account at a bank acceptable
to CSFBC or by certified or official bank check or checks in Federal (same 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 CSFBC requests upon reasonable notice prior to such
Optional Closing Date and will be made available for checking and packaging at
the above office of CSFBC 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.

<PAGE>   13


                                      -13-



          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 CSFBC,
     subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the
     second business day following the execution and delivery of this Agreement
     or (B) the fifteenth business day after the Effective Date of the Initial
     Registration Statement. The Company will advise CSFBC 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 CSFBC.

          (b) The Company will advise CSFBC 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 CSFBC's consent; and the
     Company will also advise CSFBC 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 

<PAGE>   14

                                      -14-



     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, the
     Company will promptly notify CSFBC 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 CSFBC'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 in such quantities as CSFBC requests. The
     Prospectus shall be so furnished on or prior to 3:00 P.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 avail-

<PAGE>   15


                                      -15-


     able. 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 CSFBC
     designates and will continue such qualification 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 
     CSFBC may reasonably request.

          (h) The Company will pay all expenses incident to the performance of
     its obligations under this Agreement, for any filing fees and other
     expenses (including fees and disbursements of counsel) incurred in
     connection with qualification of the Offered Securities for sale under the
     laws of such jurisdictions as CSFBC designates and the reproduction of
     memoranda relating thereto, for the filing fee incident to, and the
     reasonable fees and disbursements of counsel of the Underwriters in
     connection with, the review by the National Association of Securities
     Dealers, Inc. of 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 offer, sell, contract to sell, announce
     its intention to sell, pledge, hypothecate, grant any option to purchase 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 

<PAGE>   16

                                      -16-


     for any shares of its Securities, or publicly disclose the intention to
     make any such offer, sale, pledge, disposition or filing, without the prior
     written consent of CSFBC, except issuances of Securities pursuant to the
     conversion or exchange of convertible or exchangeable securities or the
     exercise of warrants or options, in each case outstanding on the date
     hereof, grants of employee, director or consultant 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.

          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;

               (ii) they have performed the procedures specified by the American
          Institute of Certified Public Accountants for a review of interim
          financial infor-

<PAGE>   17


                                      -17-


          mation as described in Statement of Auditing Standards No. 71, Interim
          Financial Information, on the unaudited Genzyme Financial Statements
          included or incorporated in the Registration Statements;

               (iii) on the basis of the review referred to in clause 
          (ii) above, a reading of the latest available interim financial
          statements of the Company, Genzyme General, GTR and GMO 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:

                    (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 three business days prior to the date of this Agreement,
               there was any change in the capital stock of the Company, other
               than changes due to the issuance of common stock in connection
               with the exercise of stock options, stock warrants or the
               employee stock purchase plan, or any increase in long term debt
               of the Company and its consolidated subsidiaries, Genzyme
               General, GTR or GMO, at the date of the latest available balance
               sheets read by such accountants, there was any decrease in net
               current assets of the Company and its consolidated subsidiaries,
               Genzyme General, GTR or GMO, as compared with amounts shown on
               the latest balance sheets included or incorporated in the
               Prospectus; or

                    (C) for the period from the closing date of the latest
               statements of operations 

<PAGE>   18

                                      -18-


               included or incorporated 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 total revenues or
               in net income,

          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

               (iv) they have compared specified dollar amounts (or percentages
          derived from such dollar amounts) and 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, Genzyme General, GTR or GMO 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

<PAGE>   19

                                      -19-


     into the Prospectus shall be deemed included in the Registration Statements
     for purposes of this subsection.

          (b) 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
     CSFBC. If the Effective Time of the Additional Registration Statement (if
     any) 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, 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 CSFBC. 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
     effectiveness 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.

          (c) 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 condition (financial or otherwise),
     business, properties, or results of operations of the Company and the
     Subsidiaries taken as a whole or 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 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 

<PAGE>   20


                                      -20-


     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.

          (d) The Representatives shall have received an opinion, dated such
     Closing Date, of Palmer & Dodge LLP, counsel for the Company, to the effect
     that:


   
               (i) Each of the Company and Genzyme Securities Corporation
          ("GSC") and Deknatel Snowden Pencer, Inc. ("DSP" and together with
          GSC, the "Domestic Subsidiaries") is a corporation duly organized,
          validly existing and in good standing under the laws of the
          jurisdiction of its incorporation. Each of the Company and GSC is
          duly qualified to do business as a foreign corporation 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 condition
          (financial or otherwise), business, properties, or results of
          operations of the Company and subsidiaries taken as a whole or 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
          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 

<PAGE>   21


                                      -21-


          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
          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) 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.

               (vi) 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. The Company is
          the sole record owner, directly or indirectly, of all of the capital
          stock of each of its Domestic Subsidiaries.

               (vii) 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 through 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 

<PAGE>   22


                                      -22-



          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).

               (viii) 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 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).

               (ix) 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 

<PAGE>   23


                                      -23-

          been instituted or is threatened, pending or contemplated.

               (x)    Such counsel has reviewed all contracts or other 
          agreements of the Company referred to in the Registration Statement
          and the Prospectus (including the contracts referred to in the
          documents incorporated by reference therein set forth in such opinion,
          as agreed upon between such counsel and counsel for the Underwriters)
          and the descriptions thereof (insofar as such descriptions constitute
          a summary of the legal matters referred to therein) are accurate in
          all material respects (except that such counsel need express no
          opinion as to any descriptions thereof appearing in the financial
          statements, schedules and other financial or statistical data
          contained in the Registration Statement or the Prospectus or
          incorporated by reference therein). 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.

               (xi)   All descriptions in the Prospectus of statutes and
          regulations (excluding statutes and regulations relating to FDA
          matters, organ transplant or tissue bank licensure laws and Canadian
          statutes and regulations) are accurate. Such counsel has reviewed the
          transcript of the FDA advisory panel proceeding described in the third
          paragraph under the caption "Business -- Carticel ACC Registry and
          Outcomes Data -- Government Regulation and FDA Approval" and the
          description of such proceeding is accurately summarized.

               (xii)  The Company has full corporate power and authority to
          enter into this Agreement, and this Agreement has been duly
          authorized, executed and delivered by the Company.

               (xiii) 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 GSC pursuant to the terms or provisions of, or result in a breach
          or 

<PAGE>   24


                                      -24-


          violation of any of the terms or provisions of, or constitute a
          default or result in the acceleration of any obligation under, the
          charter or by-laws of the Company or the Domestic Subsidiaries or, to
          the knowledge of such counsel, 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 GSC is a party or by
          which either the Company's or GSC's respective 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 GSC (except that such counsel need
          express no opinion as to the securities or Blue Sky laws of any
          jurisdiction other than the United States).

               (xiv)  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.

               (xv)   Such counsel is not aware of any legal or governmental
          proceeding pending or threatened against the Company or the
          Subsidiaries of a character required to be disclosed in the Prospectus
          or any document incorporated therein by reference by the Securities
          Act, the Rules and Regulations of the Exchange Act or the applicable
          rules of the Commission thereunder, other than those that may be
          described therein, nor is such counsel aware of any such proceeding in
          which an unfavorable ruling, decision or finding might individually or
          in the aggregate materially and adversely affect the ability of the
          Company to perform its obligations under this Agreement.



   
    
<PAGE>   25


                                      -25-

   
    
   
               (xvi) 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.
    


   
          In rendering the foregoing opinion, such counsel may rely, to the
     extent they deem such reliance proper, on the 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, trademarks and FDA
     regulatory matters except as specifically set forth above.
    



   
    
<PAGE>   26

                                      -26-

   
    


   
          (e) 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 of the Company and all other matters
     governed by Massachusetts law upon the opinion of Palmer & Dodge LLP
     referred to above.
    

   
          (f) 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 (excluding changes
     due to option or warrant exercises, the July 1997 dividend of GTR
     Designated Shares (as such term is defined in the Prospectus) and the
     August 1997 offering of debt securities convertible into GMO Stock) 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 condition
     (financial or otherwise), busi-
    

<PAGE>   27


                                      -27-


     ness, properties, or results of operations of the Company or of GTR except
     as set forth in or contemplated by the Prospectus or as described in such
     certificate.

   
          (g) The Representatives shall have received a certificate, dated such
     Closing Date, of the principal financial or accounting officer of DSP in
     which such officer shall state that, to the best of his knowledge after
     reasonable investigation, 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 DSP 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 charter or by-laws of DSP or, to
     the knowledge of such officer, 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 DSP is a party or by which its properties is bound or
     affected, or any judgment, ruling, decree or order known to such officer or
     any statute, rule or regulation applicable to the business or properties of
     DSP (other than the securities or blue sky laws of any jurisdiction other
     than the United States), except as set forth in or contemplated by the
     Prospectus or as described in such certificate.
    

   
          (h) The Representatives shall have received 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 three business days prior
     to such Closing Date for the purposes of this subsection.
    

   
          (i) The Company shall have filed a notification form relating to the
     issuance of the Offered Securities with the NASD in accordance with the
     NASD By-laws.
    

     The Company will furnish the Representatives with such conformed copies of
     such opinions, certificates, letters and documents as the Representatives
     reasonably request. CSFBC may in its sole discretion waive on behalf of the
     Underwriters compliance with any conditions to the obliga-

<PAGE>   28


                                      -28-


     tions 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 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 alleged untrue statement in or
omission or alleged omission from 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 the Offered Securities concerned, to the extent that a
prospectus relating to such Offered Securities was required to be delivered by
such Underwriter under the Act in connection with such purchase and any such
loss, claim, damage or liability of such Underwriter results from the fact that
there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Offered Securities to such person, a copy of
the (exclusive of material incorporated by reference) 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, 

<PAGE>   29


                                      -29-


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 (i) 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 legend concerning over-allotments
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 [eighth] and [ninth]
paragraphs under the caption "Underwriting".

          (c) Promptly after receipt by an indemnified party under this Section 
or Section 9 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 or Section 9, 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 or Section 9. In case any
such action is brought against any indemnified party and it notifies the
indemnifying party of the 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 

<PAGE>   30


                                      -30-



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 or Section 9, as the case may be, 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. An
indemnifying party will not be liable for any settlement of any action or claim
effected without its written consent; provided, however, that such consent will
not be unreasonably withheld.

          (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
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 

<PAGE>   31


                                      -31-


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 or Section 9 
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 or the QIU (as hereinafter defined) 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, CSFBC 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 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 

<PAGE>   32


                                      -32-


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 CSFBC 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
nondefaulting Underwriter or the Company, except as provided in Section 10
(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.  QUALIFIED INDEPENDENT UNDERWRITER. The Company hereby confirms 
that at its request PaineWebber Incorporated has without compensation acted as
"qualified independent underwriter" (in such capacity, the "QIU") within the
meaning of Rule 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. in connection with the offering of the Offered
Securities. The Company will indemnify and hold harmless the QIU against any
losses, claims, damages or liabilities, joint or several, to which the QIU 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 the QIU's acting (or alleged failing to act) as such "qualified independent
underwriter" and will reimburse the QIU for any legal or other expenses
reasonably incurred by the QIU in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
except to the extent such losses, claims, damages or liabilities are the result
of the QIU's gross negligence or intentional misconduct.

          10. 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 

<PAGE>   33


                                      -33-


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 and the obligations of the Company pursuant
to Section 9 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(c), the Company will reimburse the Underwriters 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.

          11. 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 Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, 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: Executive Vice President, Finance; PROVIDED,
HOWEVER, that any notice to an Underwriter pursuant to Section 7 will be mailed,
delivered or telegraphed and confirmed to such Underwriter.

          12. 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.

          13. 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 CSFBC will be binding
upon all the Underwriters.

          14. 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.


<PAGE>   34


                                      -34-


          15. 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>   35


                                      -35-


          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 _______________________________
                                              Name:
                                              Title:


The foregoing Underwriting Agreement is 
hereby confirmed and confirmed and
accepted as of the date first above written.

CREDIT SUISSE FIRST BOSTON CORPORATION
COWEN & COMPANY
PAINEWEBBER INCORPORATED

Acting on behalf of themselves and as 
the Representatives of the several
underwriters.

By CREDIT SUISSE FIRST BOSTON CORPORATION

   By ____________________________
      Name:
      Title:


<PAGE>   36






                                   SCHEDULE A

<TABLE>
<CAPTION>

                                                                   Number of
                     Underwriter                               Firm Securities
                     -----------                               ---------------
<S>                                                               <C>
Credit Suisse First Boston Corporation...................
Cowen & Company..........................................
PaineWebber Incorporated.................................


                           Total.........................         4,000,000
                                                                  ---------
</TABLE>




<PAGE>   37





                                   SCHEDULE B


                       SIGNIFICANT SUBSIDIARIES OF GENZYME


<TABLE>
<CAPTION>

                                                          Jurisdiction
Names                       Ownership                     of Incorporation
- -----                       ---------                     ----------------

<S>                            <C>                        <C>
Genzyme Limited                100%                       U.K.

Genzyme Securities             100%                       Massachusetts
 Corporation

Deknatel Snowden               100%                       Delaware
 Pencer, Inc.
</TABLE>




<PAGE>   1

                                                                   Exhibit 23.1


                          CONSENT OF INDEPENDENT ACCOUNTANTS


We consent to the incorporation by reference in this Registration Statement on
Form S-3 of our reports dated February 27, 1997 on our audits of the
consolidated financial statements and financial statement schedule of Genzyme
Corporation, the combined financial statements and financial statement schedule
of Genzyme General Division and the combined financial statements and financial
statement schedule of Genzyme Tissue Repair Division as of December 31, 1995
and 1996 and for each of the three years in the period ended December 31, 1996,
which reports are included in Genzyme Corporation's 1996 Annual Report on Form
10-K as amended.

We also consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated April 7, 1997 on our audits of the
combined financial statements of Genzyme Molecular Oncology Division as of
December 31, 1995 and 1996 and for the period from December 1, 1994 (Date of
Inception) through December 31, 1994, for the years ended December 31, 1995 and
1996 and cumulative for the period from December 1, 1994 (Date of  Inception)
through December 31, 1996, which report is included in Genzyme Corporation's
Current Report on Form 8-K filed with Securities and Exchange Commission on
June 30, 1997.

We also consent to the reference to our firm in the Registration Statement
under the captions "Experts" and "Selected Financial Data."



                                                  /s/ Coopers & Lybrand L.L.P.
                                                  ----------------------------
                                                  Coopers & Lybrand L.L.P.


Boston, Massachusetts
October 27, 1997 

<PAGE>   1
                            [ARTHUR ANDERSEN LOGO]

                                                                    EXHIBIT 23.2

                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated March 3, 1997
relating to the financial statements of PharmaGenics, Inc. included in Genzyme
Corporation's report on Form 8-K dated June 18, 1997.

                                     
                                                   /s/ Arthur Andersen LLP
                                                  ------------------------
                                                       ARTHUR ANDERSEN LLP

   
Roseland, New Jersey
October 27, 1997
    



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