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Filed Pursuant to Rule 424(b)(5)
Registration No. 333-31548
PROSPECTUS SUPPLEMENT
TO PROSPECTUS DATED JULY 14, 2000
1,464,100 SHARES
GENZYME
MOLECULAR ONCOLOGY DIVISION
COMMON STOCK
Genzyme Corporation is offering up to 1,464,100 shares of Genzyme Molecular
Oncology Division Stock, $0.01 par value per share, which we refer to as "GZMO
Stock." GZMO Stock is a series of our common stock designed to reflect the
financial performance of our Molecular Oncology division.
We have not engaged an underwriter or placement agent to assist with this
offering. Instead, our employees will sell the shares directly to a limited
number of investors.
We will sell the GZMO Stock for $12.91 per share. GZMO Stock is traded on
the Nasdaq National Market under the symbol "GZMO." On July 13, 2000, the last
sale price for GZMO Stock as reported by the Nasdaq was $13.25 per share. Each
investor must purchase a minimum of 77,500 shares. The minimum investment,
consequently, is approximately $1.0 million.
If we sell all 1,464,100 shares, we will receive gross proceeds of
approximately $18.9 million. We expect to incur approximately $30,000 in
offering expenses, regardless of the number of shares we sell. We will allocate
the net proceeds from the offering to our Molecular Oncology division.
------------------------
INVESTING IN GZMO STOCK INVOLVES SIGNIFICANT RISK. THESE RISKS ARE DESCRIBED
UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 4 OF THE ACCOMPANYING
PROSPECTUS. WE RECOMMEND THAT YOU FOCUS PARTICULARLY ON "RISKS RELATED TO
GENZYME MOLECULAR ONCOLOGY" ON PAGES 16 THROUGH 18; "RISKS RELATED TO GENZYME"
ON PAGES 4 THROUGH 10; AND "RISKS RELATED TO GENZYME TRACKING STOCKS" ON PAGES
10 THROUGH 14.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement and the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
------------------------
We will terminate this offering on August 1, 2000, unless, before that date,
we sell all 1,464,100 shares.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JULY 14, 2000
Genzyme Corporation - One Kendall Square - Cambridge, Massachusetts
02139 - (617) 252-7500
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TABLE OF CONTENTS
<TABLE>
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<S> <C>
PROSPECTUS SUPPLEMENT
Use of Proceeds............................................. S-3
Plan of Distribution........................................ S-4
PROSPECTUS
Genzyme Corporation......................................... 3
Risk Factors................................................ 4
Note Regarding Forward-Looking Statements................... 27
Use of Proceeds............................................. 28
Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends................................................. 28
Description of Debt Securities.............................. 29
Description of Preferred Stock.............................. 38
Description of Genzyme Common Stock......................... 40
Description of Warrants..................................... 52
Description of Management and Accounting Policies........... 54
Plan of Distribution........................................ 59
Legal Matters............................................... 60
Experts..................................................... 60
Where You Can Find More Information......................... 61
</TABLE>
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You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with information that is different. You
should not assume that the information in this prospectus supplement, the
accompanying prospectus or any document incorporated by reference is accurate as
of any date other than the date of the applicable document. We are offering to
sell and seeking offers to buy shares of GZMO Stock only in jurisdictions where
we are permitted to make offers and sales.
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"Genzyme" is a trademark and service mark and "SAGE" is a trademark of
Genzyme. All rights reserved.
S-2
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USE OF PROCEEDS
We estimate the net proceeds from the sale of 1,464,100 shares of GZMO Stock
in this offering would be approximately $18.9 million. We cannot assure that we
will sell all 1,464,100 shares.
The principal purpose of this offering is to fund Genzyme Molecular
Oncology's research and preclinical and clinical development activities. We also
anticipate that the net proceeds will be used for working capital and general
corporate purposes. Genzyme Molecular Oncology may use a portion of the net
proceeds to acquire or invest in complementary businesses, joint ventures,
products or technologies. From time to time Genzyme Molecular Oncology enters
into discussions regarding acquisitions or investments. Genzyme Molecular
Oncology's management will have broad discretion to allocate the proceeds from
this offering to uses that it believes are appropriate. Pending these uses, we
currently intend to invest the net proceeds from this offering in short-term,
interest-bearing securities or deposit accounts.
S-3
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PLAN OF DISTRIBUTION
We are selling the shares of GZMO Stock directly to a limited number of
investors. Our employees are selling the shares without the assistance of an
underwriter or placement agent. Our employees will not receive any compensation
based upon their participation in this offering and, pursuant to Rule 3a4-1 of
the Exchange Act, will not be deemed to be brokers as defined in the Exchange
Act.
At any closing, we will deliver certificates representing the shares
purchased or effect the sale through the book entry facilities of The Depository
Trust Company, in each case against payment of the aggregate purchase price for
the shares purchased.
We determined the per share price through oral discussions with potential
purchasers. The price represents approximately a 10% discount from the average
closing prices as reported by the Nasdaq during a trading period ending prior to
the date of this prospectus supplement.
We expect to incur approximately $30,000 in offering expenses.
S-4
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PROSPECTUS
$500,000,000
GENZYME CORPORATION
DEBT SECURITIES, PREFERRED STOCK, GENZYME GENERAL DIVISION COMMON STOCK,
GENZYME MOLECULAR ONCOLOGY DIVISION COMMON STOCK,
GENZYME SURGICAL PRODUCTS DIVISION COMMON STOCK,
GENZYME TISSUE REPAIR DIVISION COMMON STOCK,
OTHER SERIES OF GENZYME COMMON STOCK AND WARRANTS
We may offer to the public from time to time in one or more series or
issuances:
- debt securities consisting of debentures, notes or other evidences of
indebtedness;
- shares of our preferred stock;
- shares of Genzyme General Division Common Stock, which we refer to as
"GENZ Stock";
- shares of Genzyme Molecular Oncology Division Common Stock, which we refer
to as "GZMO Stock";
- shares of Genzyme Surgical Products Division Common Stock, which we refer
to as "GZSP Stock";
- shares of Genzyme Tissue Repair Division Common Stock, which we refer to
as "GZTR Stock";
- shares of other series of our common stock; or
- warrants to purchase any series of common stock, preferred stock or debt
securities.
GENZ Stock, GZMO Stock, GZSP Stock and GZTR Stock each trade on the Nasdaq
National Market under the symbols "GENZ," "GZMO," "GZSP" and "GZTR." Any GENZ
Stock, GZMO Stock, GZSP Stock, GZTR Stock or other series of our common stock
sold by means of a prospectus supplement to this prospectus may be listed on the
Nasdaq National Market.
This prospectus provides you with a general description of the securities
that we may offer. Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with additional information described under the
heading "Where You Can Find More Information" beginning on page 61 of this
prospectus before you make your investment decision.
SEE RISK FACTORS BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT YOU SHOULD CONSIDER BEFORE INVESTING IN THESE SECURITIES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This prospectus may not be used to sell securities unless it is accompanied
by a prospectus supplement.
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The date of this prospectus is July 14, 2000
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Genzyme Corporation......................................... 3
Risk Factors................................................ 4
Note Regarding Forward-Looking Statements................... 27
Use of Proceeds............................................. 28
Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends................................................. 28
Description of Debt Securities.............................. 29
Description of Preferred Stock.............................. 38
Description of Genzyme Common Stock......................... 40
Description of Warrants..................................... 52
Description of Management and Accounting Policies........... 54
Plan of Distribution........................................ 59
Legal Matters............................................... 60
Experts..................................................... 60
Where You Can Find More Information......................... 61
</TABLE>
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GENZYME CORPORATION
We are a biotechnology company that develops innovative products and
services for significant unmet medical needs. We have four operating divisions:
- Genzyme General, which develops and markets therapeutic products and
diagnostic services and products. It has three therapeutic products on the
market and a strong pipeline of products in development focused primarily
on the treatment of rare genetic diseases;
- Genzyme Molecular Oncology, which is developing cancer products, with a
focus on cancer vaccines and angiogenesis inhibitors. It is shaping these
new therapies through the integration of its gene discovery, gene therapy,
small molecule drug discovery, and protein therapeutic efforts;
- Genzyme Surgical Products, which develops and markets a portfolio of
mechanical devices, biomaterials and biotherapeutics for the
cardiovascular and general surgery markets. It is pioneering the field of
"biosurgery," which is being created by the increasing convergence of
mechanical and biological approaches to surgery and other interventional
procedures; and
- Genzyme Tissue Repair, which develops and markets biological products for
the treatment of orthopedic injuries, such as cartilage damage, and severe
burns.
Each of our four designated series of common stock is intended to reflect
the value and track the performance of one of our divisions.
Our four divisions are not separate companies or legal entities. They are
subsets of Genzyme's operations among which we allocate all of our products,
services, programs, assets and liabilities in our financial statements for
presentation purposes. These separate, division-based financial statements do
not represent any physical segregation of assets or separate division accounts;
they are an accounting presentation only. Assets presented as allocated to a
division remain assets owned by the company and, therefore, remain subject to
liabilities of Genzyme as a whole, including company-wide claims of creditors,
product liability plaintiffs and stockholder litigation.
We were founded in 1981 and became a Massachusetts corporation in 1991. You
can find additional information about us in our filings with the SEC. See "Where
You Can Find More Information" on page 61.
Our principal offices are located at One Kendall Square, Cambridge,
Massachusetts 02139 and our main telephone number is (617) 252-7500.
In this prospectus, the words "we," "us," "our," and "Genzyme" refer to
Genzyme Corporation and all of its operating divisions taken as a whole, and
"our board of directors" or "our board" refer to the board of directors of
Genzyme Corporation.
"Genzyme" is a registered trademark and service mark of Genzyme Corporation.
All rights reserved.
3
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RISK FACTORS
If you purchase securities offered by this prospectus you will take on
financial risk. In deciding whether to invest, you should carefully consider the
following risk factors, the information contained in this prospectus and the
other information to which we have referred you. It is especially important to
keep these risk factors in mind when you read forward-looking statements.
RISKS RELATED TO GENZYME
The following risk factors relate to us generally and affect all of our
divisions. Accordingly, you should consider these risk factors before you
purchase any type of security offered by this prospectus.
A REDUCTION IN REVENUES FROM SALES OF PRODUCTS THAT TREAT GAUCHER DISEASE WOULD
HAVE AN ADVERSE EFFECT ON OUR BUSINESS.
We generate a majority of our product revenues from sales of
enzyme-replacement products for patients with Gaucher disease. We entered this
market in 1991 with Ceredase-Registered Trademark- enzyme. Because production of
Ceredase-Registered Trademark- enzyme was subject to supply constraints, we
developed Cerezyme-Registered Trademark- enzyme, a recombinant form of the
enzyme. Recombinant technology uses specially engineered cells to produce
enzymes, or other substances, by inserting into the cells of one organism the
genetic material of a different species. In the case of
Cerezyme-Registered Trademark- enzyme, Chinese hamster ovary cells are
engineered to produce human alpha glucocerebrosidase. We stopped producing
Ceredase-Registered Trademark- enzyme, except for small quantities, during 1998,
after substantially all the patients who previously used
Ceredase-Registered Trademark- enzyme converted to
Cerezyme-Registered Trademark- enzyme. Sales of Ceredase-Registered Trademark-
enzyme and Cerezyme-Registered Trademark- enzyme totaled $478.5 million for the
year ended December 31, 1999, representing approximately 70% of our product
revenues for that year, and $128.6 million for the three months ended March 31,
2000, representing 70% of our product revenues for that period.
Because our business is highly dependent on Cerezyme-Registered Trademark-
enzyme, a reduction in revenue from sales of this product would have an adverse
effect on our operations and may cause the value of our securities to decline
substantially. Revenues from Cerezyme-Registered Trademark- enzyme would be
impacted negatively if competitors develop alternative treatments for Gaucher
disease and these alternative products gained commercial acceptance. Some
companies have initiated efforts to develop competitive products, and other
companies may do so in the future. Cerezyme-Registered Trademark- enzyme has
orphan drug status, providing it with market exclusivity in the U.S. until
May 2001. We also have patents protecting its manufacturing method until 2010
and its composition until 2013. We cannot predict the effect that the expiration
of orphan drug status and market exclusivity will have on sales of
Cerezyme-Registered Trademark- enzyme after May 2001.
GOVERNMENT REGULATION IMPOSES SIGNIFICANT COSTS AND RESTRICTIONS ON THE
DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS AND SERVICES.
Our ability to successfully satisfy regulatory requirements will
significantly determine our future success. We cannot guarantee that regulatory
agencies will grant any required regulatory approvals or that they will grant
them on a timely basis. The production and sale of healthcare products and
provision of healthcare services are highly regulated. In particular, the FDA
and comparable agencies in foreign countries must approve human therapeutic and
diagnostic products before they are marketed. This approval process can involve
lengthy and detailed laboratory and clinical testing, sampling activities and
other costly and time-consuming procedures. This regulation may delay the time
at which a product or service first can be sold, limit how a product or service
may be used, or adversely impact third party reimbursement. In addition,
therapies that have received, or in the future receive, regulatory approval for
commercial sale may still face subsequent regulatory difficulties. The FDA and
comparable foreign regulatory agencies, for example, may require postmarketing
clinical trials. In addition, regulatory agencies subject a marketed therapy,
its manufacturer and the manufacturer's facilities to continual review and
periodic inspections. The discovery of previously unknown problems
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with a therapy, manufacturer or facility can result in restrictions on the
therapy or manufacturer, including withdrawal of the therapy from the market.
The failure to comply with applicable regulatory approval requirements can
result in, among other things:
- warning letters;
- fines and other civil penalties;
- suspended regulatory approvals;
- refusal to approve pending applications or supplements to approved
applications;
- suspension of product sales in the U.S. and/or exports from the U.S.;
- product recalls; and
- seizure of products.
LEGISLATIVE CHANGES MAY ADVERSELY IMPACT OUR BUSINESS.
Some of our products, including Cerezyme-Registered Trademark- enzyme, have
been designated as orphan drugs under the Orphan Drug Act. The Orphan Drug Act
provides incentives to manufacturers to develop and market drugs for rare
diseases, generally by entitling the first developer that receives FDA marketing
approval for an orphan drug to a seven-year exclusive marketing period in the
U.S. for that product. Legislation periodically has been introduced in recent
years to change the Orphan Drug Act to shorten the period of automatic market
exclusivity and to allow marketing rights to simultaneous developers of the
drug. We cannot be sure whether the Orphan Drug Act will be amended, or if
amended, what effect the changes may have on it.
We have also received orphan drug designation for some of our products that
are still in development, including Fabrazyme enzyme for the treatment of Fabry
disease. We are aware of other companies developing products for the treatment
of Fabry disease. If any of those companies receive FDA approval for their Fabry
disease therapy before we receive FDA approval for Fabrazyme enzyme, the Orphan
Drug Act will preclude us from selling Fabrazyme enzyme in the U.S. for up to
seven years.
In addition, healthcare reform is an area of significant government focus.
Any reform measures, if adopted, could adversely affect:
- the pricing of therapeutic products and medical devices in the U.S. or
internationally; and
- the amount of reimbursement available from governmental agencies or other
third party payers.
BECAUSE THE DEVELOPMENT OF OUR PRODUCTS INVOLVES A LENGTHY AND COMPLEX PROCESS,
IT IS UNCERTAIN WHETHER WE WILL BE ABLE TO COMMERCIALIZE ANY OF OUR PRODUCTS
CURRENTLY IN DEVELOPMENT.
Before we can commercialize our development-stage products, we will need to:
- conduct substantial research and development;
- undertake preclinical and clinical testing; and
- pursue regulatory approvals.
This process involves a high degree of risk and takes several years. Our
product development efforts may fail for many reasons, including:
- the product fails in preclinical studies;
- clinical trials may not support the safety or effectiveness of the
product; or
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- we fail to obtain the required regulatory approvals.
We cannot guarantee that we will successfully develop any particular
product.
ANY MARKETABLE PRODUCTS THAT WE DEVELOP MAY NOT BE COMMERCIALLY SUCCESSFUL.
The commercial success of any marketable product that we develop will depend
on many factors, including:
- regulation by the FDA and other government authorities;
- market acceptance by doctors and hospital administrators;
- the effectiveness of our sales force;
- the effectiveness of our production and marketing capabilities;
- the success of competitive products; and
- the availability of third party reimbursement.
WE MAY REQUIRE SIGNIFICANT ADDITIONAL FINANCING WHICH MAY NOT BE AVAILABLE ON
FAVORABLE TERMS, IF AT ALL.
As of December 31, 1999, we had approximately $653 million in cash and
investments, excluding investments in equity securities.
Although we currently have substantial cash resources and positive cash
flow, we intend to use substantial portions of the available cash for:
- product development and marketing;
- expanding facilities and staff;
- working capital; and
- strategic business initiatives.
We will further reduce available cash reserves to pay principal and interest
on the following debt:
- In May 1998, we issued $250.0 million in convertible notes, the entire
principal amount of which is allocated to Genzyme General. These
convertible notes bear interest at an annual rate of 5.25% and mature on
June 1, 2005. However, the holders of these notes may exchange principal
on the notes for shares of GENZ Stock, GZMO Stock, and GZSP Stock.
- As of December 31, 1999, we owed approximately $23.0 million under a
revolving credit facility with a group of commercial banks. Of this
amount, we have allocated $18.0 million to Genzyme Tissue Repair and
$5.0 million to Genzyme Molecular Oncology. Amounts borrowed under this
revolving credit facility bear interest at a floating rate based upon an
applicable margin above either the prime rate announced by Fleet National
Bank or the London InterBank Offered Rate. We must repay all borrowings
under this facility no later than November 12, 2002. We intend to amend
this facility and to borrow approximately $200 million in connection with
our pending acquisition of Biomatrix Inc.
- In August 1998, we issued $21.2 million in convertible debentures, the
entire principal amount of which is allocated to Genzyme General. These
convertible debentures bear interest at an annual rate of 5% and mature on
August 29, 2003, but the holders of these convertible debentures may
exchange principal, and under some circumstances interest, on the
convertible debentures for shares of GENZ Stock.
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If we use cash to pay or redeem this debt, including the principal and
interest due on it, our cash reserves will be diminished. To satisfy these and
other commitments, we may have to obtain additional financing. We cannot
guarantee that we will be able to obtain any additional financing, extend any
existing financing arrangement, or obtain either on favorable terms.
WE MAY FAIL TO PROTECT ADEQUATELY OUR PROPRIETARY TECHNOLOGY, WHICH WOULD ALLOW
COMPETITORS TO TAKE ADVANTAGE OF OUR RESEARCH AND DEVELOPMENT EFFORTS.
Our long-term success largely depends on our ability to market
technologically competitive products. If we fail to obtain or maintain these
protections, we may not be able to prevent third parties from using our
proprietary rights.
Patents based on our currently pending or our future patent applications may
not issue. In addition, our issued patents may not contain claims sufficiently
broad to protect us against third parties with similar technologies or products,
or provide us with any competitive advantage. Further, our patents, our
collaborators' patents, and those patents for which we have license rights may
be challenged, narrowed, invalidated or circumvented.
The U.S. Patent and Trademark Office and the courts have not established a
consistent policy regarding the breadth of claims allowed in biotechnology
patents. The allowance of broader claims may increase the incidence and cost of
patent interference proceedings and the risk of infringement litigation. On the
other hand, the allowance of narrower claims may limit the value of our
proprietary rights. Any policies that are adopted may result in changes in or
interpretations of the patent laws that adversely affect our patent position.
We also rely upon trade secrets, proprietary know-how, and continuing
technological innovation to remain competitive. We have taken measures to
protect our trade secrets and know-how, including the use of confidentiality
agreements with our employees, consultants and corporate collaborators. It is
possible that these agreements may be breached and that any remedies for a
breach will not make us whole. We also cannot guarantee that other parties will
not independently develop our know-how or otherwise obtain access to our
technology.
WE MAY BE REQUIRED TO LICENSE TECHNOLOGY FROM COMPETITORS IN ORDER TO DEVELOP
AND COMMERCIALIZE SOME OF OUR PRODUCTS AND SERVICES, AND IT IS UNCERTAIN WHETHER
THESE LICENSES WILL BE AVAILABLE.
Third party patent rights and pending patent applications filed by third
parties, if issued, may cover some of the products that we or our strategic
partners are developing or testing. As a result, we or a strategic collaborator
may be required to obtain licenses from the holders of these patents in order to
use, manufacture or sell these products and services, and payments under these
licenses may reduce the profitability of the products. Furthermore, we cannot be
sure that these licenses would be available to us on acceptable terms or at all.
If these licenses are not available, we or our strategic collaborators' ability
to commercialize their products and services may be impaired.
WE MAY INCUR SUBSTANTIAL COSTS AS A RESULT OF LITIGATION OR OTHER PROCEEDINGS
RELATING TO PATENT AND OTHER INTELLECTUAL PROPERTY RIGHTS.
If we or one of our strategic collaborators initiates litigation to enforce
our patent or license rights, or is required to defend these rights in response
to third party claims, it could consume a substantial portion of our resources.
We cannot guarantee that we or our strategic collaborator would prevail in such
litigation. If we do not prevail, we or our strategic collaborators may be
required to:
- pay monetary damages;
- stop commercial activities relating to the affected products or services;
or
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- obtain a license in order to continue manufacturing or marketing the
affected products or services.
If we are required to pay damages or if commercial activities are disrupted,
our business or financial position may be negatively impacted. In addition, if
we or our strategic collaborators are required to obtain a license, we cannot
guarantee that one would be made available to us on acceptable terms or at all.
WE MAY BE LIABLE FOR PRODUCT LIABILITY CLAIMS NOT COVERED BY INSURANCE.
Individuals who use our products or services may bring product liability
claims against us. While we have taken, and continue to take, what we believe
are appropriate precautions, we cannot guarantee that we will avoid significant
liability exposure. We have only limited amounts of product liability insurance,
and cannot be sure that this insurance will provide sufficient coverage against
any product liability claims. If we attempt to obtain additional insurance in
the future, we may not be able to do so on acceptable terms, and any additional
insurance we do obtain may not provide adequate coverage against any asserted
claims. In addition, regardless of merit or eventual outcome, product liability
claims may result in:
- diversion of management time and attention;
- expenditure of large amounts of cash on legal fees, expenses and payment
of damages;
- decreased demand for our products and services; and
- injury to our reputation.
OUR COMPETITORS IN THE BIOTECHNOLOGY AND PHARMACEUTICAL INDUSTRIES MAY HAVE
SUPERIOR PRODUCTS, MANUFACTURING CAPABILITIES OR MARKETING EXPERTISE.
The human health care products and services industry is extremely
competitive. Our competitors include major pharmaceutical companies and other
biotechnology companies. Some of these competitors may have more extensive
research and development, marketing and production capabilities. Some
competitors also may have greater financial resources than us. Our future
success will depend on our ability to develop and market effectively our
products against those of our competitors.
IF WE ARE UNABLE TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGES, OUR PRODUCTS OR
SERVICES MAY BECOME OBSOLETE.
The field of biotechnology is characterized by significant and rapid
technological change. Although we attempt to expand our technological
capabilities in order to remain competitive, research and discoveries by others
may make our products or services obsolete. For example, some of our competitors
may develop a product to treat Gaucher disease that is more effective or less
expensive than Cerezyme-Registered Trademark- enzyme.
IF WE FAIL TO OBTAIN ADEQUATE LEVELS OF REIMBURSEMENT FOR OUR PRODUCTS FROM
THIRD-PARTY PAYERS, THE COMMERCIAL POTENTIAL OF OUR PRODUCTS WILL BE
SIGNIFICANTLY LIMITED.
A substantial portion of our revenue comes from payments by third-party
payers, including government health administration authorities and private
health insurers. Third-party payers may not reimburse patients for newly
approved healthcare products. More and more third party payers are attempting to
contain healthcare costs by:
- challenging the prices charged for healthcare products and services;
- limiting both coverage and the amount of reimbursement for new therapeutic
products;
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- denying or limiting coverage for products that are approved by the FDA,
but are considered experimental or investigational by third party payers;
and
- refusing, in some cases, to provide coverage when an approved product is
used for disease indications in a way that has not received FDA marketing
approval.
Government and other third party payers may not provide adequate insurance
coverage or reimbursement for our products and services, which could impair our
financial results.
In addition, Congress occasionally has discussed implementing broad-based
measures to contain healthcare costs. It is possible that Congress will enact
legislation specifically designed to contain healthcare costs. We cannot predict
the effect that legislation of this type would have on our business.
CHANGES IN THE ECONOMIC, POLITICAL, LEGAL AND BUSINESS ENVIRONMENTS IN THE
FOREIGN COUNTRIES IN WHICH WE DO BUSINESS COULD CAUSE OUR INTERNATIONAL SALES
AND OPERATIONS, WHICH ACCOUNT FOR A SIGNIFICANT PERCENTAGE OF OUR CONSOLIDATED
NET SALES, TO BE LIMITED OR DISRUPTED.
Our international operations accounted for 41% of our consolidated revenues
for each of the years ended December 31, 1999, and 1998 and 37% of our
consolidated revenues in 1997, and we expect that international sales will
continue to account for a significant percentage of our revenues for the
foreseeable future. In addition, we have direct investments in a number of
subsidiaries outside of the U.S., primarily in Europe and Japan. Our
international sales and operations could be limited or disrupted, and the value
of our direct investments may be adversely affected, by any of the following:
- fluctuations in currency exchange rates;
- the imposition of government controls;
- less favorable intellectual property or other applicable laws;
- the inability to obtain any necessary foreign regulatory approvals of
products in a timely manner;
- import and export license requirements;
- political instability;
- trade restrictions;
- changes in tariffs;
- difficulties in staffing and managing international operations; and
- longer payment cycles.
A significant portion of our business is conducted in currencies other than
the U.S. dollar, which is our reporting currency. We recognize foreign currency
gains or losses arising from our operations in the period incurred. As a result,
currency fluctuations among the U.S. dollar and the currencies in which w do
business have caused foreign currency transaction gains and losses in the past
and will likely do so in the future. We cannot predict the effects of exchange
rate fluctuations upon our future operating results because of the number of
currencies involved, the variability of currency exposures and the potential
volatility of currency exchange rates.
SEVERAL ANTI-TAKEOVER PROVISIONS MAY DEPRIVE OUR STOCKHOLDERS OF THE OPPORTUNITY
TO RECEIVE A PREMIUM FOR THEIR SHARES UPON A CHANGE IN CONTROL.
Provisions of Massachusetts law and our charter, by-laws and shareholder
rights plan could delay or prevent a change in control of Genzyme or a change in
our management.
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Our tracking stock structure may also deprive our stockholders of the
opportunity to receive a premium for their shares upon a change in control
because, in order to obtain control of a particular division, an acquiror would
have to obtain control of the entire corporation.
In addition, our board of directors may, in their sole discretion:
- exchange shares of GZMO Stock, GZSP Stock or GZTR Stock for GENZ Stock at
a 30% premium over the market value of the exchanged shares; and
- issue shares of undesignated preferred stock from time to time in one or
more series.
Either of these board actions could increase the cost of an acquisition of
Genzyme and thus discourage a takeover attempt.
RISKS RELATED TO GENZYME TRACKING STOCKS
We have four series of tracking stock: GENZ Stock, GZMO Stock, GZSP Stock
and GZTR Stock. These stocks are designed to reflect the value and track the
performance of our four operating divisions:
- GENZ Stock is designed to track the performance of Genzyme General;
- GZMO Stock is designed to track the performance of Genzyme Molecular
Oncology;
- GZSP Stock is designed to track the performance of Genzyme Surgical
Products; and
- GZTR Stock is designed to track the performance of Genzyme Tissue Repair.
The following are risks related to owning shares of our tracking stock.
Accordingly, you should consider these risk factors before investing in GENZ
Stock, GZMO Stock, GZSP Stock, GZTR Stock or any securities which may be
exchanged for, exercised for or converted into shares of these tracking stocks.
HOLDERS OF OUR TRACKING STOCK ARE STOCKHOLDERS OF A SINGLE COMPANY AND
UNFAVORABLE FINANCIAL TRENDS AFFECTING ONE DIVISION COULD NEGATIVELY AFFECT OUR
OTHER DIVISIONS.
None of our divisions are separate legal entities. Holders of our tracking
stock are stockholders of a single company and face all of the risks of an
investment in Genzyme.
For purposes of financial presentation, we allocate programs, products,
assets and liabilities among our four divisions. Genzyme Corporation, however,
continues to own all of the assets and is responsible for all of the liabilities
of each division. A holder of GENZ Stock, for example, does not have any
specific rights to the assets allocated to Genzyme General in our financial
statements. Furthermore, if we are unable to satisfy one division's liabilities
out of the assets we allocate to that division, we may be required to satisfy
those liabilities with assets we have allocated to another division.
Accordingly, we encourage you to review our consolidated financial statements
and the financial statements of each of our divisions included in the reports
that we file with the SEC.
OUR BOARD OF DIRECTORS MAY TAKE ACTIONS THAT, WHILE IN THE BEST INTERESTS OF
GENZYME AS A WHOLE, HAVE AN UNEQUAL AND ADVERSE EFFECT ON THE HOLDERS OF ONE OR
MORE SERIES OF OUR TRACKING STOCK.
There may be times when the interests of holders of each series of our
common stock diverge or appear to diverge. Massachusetts law does not define a
board of directors' duties in that situation. We believe, however, that a
Massachusetts court would conclude 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 particular group of stockholders. That duty is the
fiduciary duty to act in good faith and in a manner the board reasonably
believes to be in the best interests of the corporation. Under Massachusetts
law, if a disinterested and adequately informed board of directors determines in
good
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faith that an action would be in the corporation's best interests, taking into
account both the interests of holders of each series of tracking stock as well
as the alternatives reasonably available, then the board of directors should be
able to successfully defend against any stockholder claim that the action could
have an unequal effect on different series of tracking stock.
In March 1999, the Delaware Court of Chancery, in two separate cases,
dismissed all stockholder claims that the board of directors had violated its
fiduciary duties under Delaware law by approving actions that had a disparate
impact on holders of different classes of tracking stock. The court indicated in
each case that even where the decision of the board of directors affected
holders of separate classes of tracking stock differently, stockholders must
allege facts sufficient to indicate that a board of directors' approval was not
based on the good faith belief that the approved actions were in the
corporation's best interests. While Delaware case law is not binding on a
Massachusetts court, we believe that a Massachusetts court would be influenced
by these decisions in addressing similar issues. A Massachusetts court hearing a
case, however, may apply principles of Massachusetts law other than those
described above or develop new principles of Massachusetts law to decide the
case.
MEMBERS OF OUR BOARD OF DIRECTORS MAY FAVOR ONE SERIES OF TRACKING STOCK OVER
ANOTHER IF THEY OWN A DISPROPORTIONATE AMOUNT OF THAT SERIES.
A member of our board may own a disproportionate amount of tracking stock in
a particular series, or the value of his or her holdings of a particular series
of stock may be different from the value of his or her holdings in another
series. This disparate stock ownership may cause the board member to favor one
series of stock over another. Nevertheless, we believe that a member of our
board could properly discharge his or her fiduciary responsibilities even if his
or her interests in shares of different series were disproportionate or of
unequal values. Our board members may create committees to review matters that
raise conflict-of-interest issues. If a committee is formed, it would report to
the full board.
HOLDERS OF OUR TRACKING STOCK HAVE LIMITED DECISION-MAKING POWER BECAUSE THEY
HAVE LIMITED SEPARATE VOTING RIGHTS.
Holders of all series of our tracking stock vote together as a single class
on all matters requiring common stockholder approval, including the election of
directors. Holders of one series of tracking stock do not have the right to vote
on matters separately from the other series except in limited circumstances.
These circumstances are dictated by Massachusetts law, our charter and the
management and accounting policies adopted by our board of directors. Therefore,
stockholders of one series of tracking stock generally could not make a proposal
that would require approval only of the holders of that series. Instead, they
would have to obtain approval from all common stockholders.
THE VOTES PER SHARE OF OUR TRACKING STOCKS ARE ADJUSTED EVERY TWO YEARS.
Under our charter, GENZ Stock is entitled to one vote per share, which is
never adjusted. However, the votes per share of our other tracking stocks are
adjusted every two years. Specifically, on January 1, 2001 and every second
anniversary thereafter, the vote per share to which each tracking stock is
entitled is recalculated based on its fair market value divided by the fair
market value of a share of GENZ Stock, with "fair market value" meaning the
average closing price over the 20 consecutive trading days beginning on the 30th
trading day preceding the January 1st adjustment date. At the time of an
adjustment, the per share voting power of any series of our tracking stock
relative to any other series could decrease materially. Additionally, during the
intervening period between adjustments, the per share voting power of each
tracking stock will remain the same even though its market price will fluctuate
relative to--and could become materially greater than--the market prices of the
other tracking stocks.
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THE LIQUIDATION RIGHTS FOR EACH SERIES OF TRACKING STOCK ARE NOT ADJUSTED TO
REFLECT CHANGES IN THE SERIES' MARKET VALUE.
If we dissolve, liquidate or wind up our affairs, other than as part of a
merger, business combination or sale of substantially all of our assets, our
stockholders will receive any remaining assets according to the percentage of
total liquidation units that they hold. The number of liquidation units per
share for each series of our tracking stock is as follows:
- each share of GENZ Stock has 100 liquidation units;
- each share of GZMO Stock has 25 liquidation units;
- each share of GZSP Stock has 61 liquidation units; and
- each share of GZTR Stock has 58 liquidation units.
Although we adjust liquidation units to prevent dilution in the event of
some subdivisions, combinations or distributions of common stock, we do not
adjust them to reflect changes in the relative market value or performance of
the divisions. Accordingly, at the time of a dissolution, liquidation or winding
up, the relative liquidation units attributable to each series of tracking stock
may not correspond to the value of the underlying assets of that division.
OUR BOARD OF DIRECTORS MAY CHANGE OUR MANAGEMENT AND ACCOUNTING POLICIES TO THE
DETRIMENT OF ONE SERIES OF TRACKING STOCK WITHOUT STOCKHOLDER APPROVAL.
Our board of directors has adopted management and accounting policies that
are used to govern our business and to prepare our financial statements. These
policies cover the allocation of corporate expenses, assets and liabilities and
other accounting matters, and the reallocation of assets between divisions and
other matters. Our board generally may modify or rescind these policies or adopt
new ones without stockholder approval. Any revised policies could have different
effects on each series of our tracking stock and could be detrimental to one
series as compared to another. The discretion of our board to make changes is
limited only by the policies themselves and the board's fiduciary duty to all of
our stockholders. You can review the summary of our management and accounting
policies beginning on page 54 of this prospectus. We also encourage you to
review the full text of these policies, which are filed as Exhibit 3 to our
current report on Form 8-K filed with the SEC on June 30, 2000.
OUR BOARD CAN REQUIRE INVESTORS TO EXCHANGE THEIR SHARES OF GENZYME TRACKING
STOCK.
Our board of directors may at any time, in its sole discretion, decide to
exchange shares of GZMO Stock, GZSP Stock or GZTR Stock for any combination of
cash and shares of GENZ Stock at a 30% premium over the exchanged stock's then
current market value. Also at any time that all of a division's assets are held
through a wholly-owned subsidiary, our board can choose to "spin off" that
division by exchanging the outstanding shares of tracking stock corresponding to
that division for shares in the spun off company, whereupon former tracking
stockholders will no longer be stockholders of Genzyme. Furthermore, if we
transfer or sell to a third party all or substantially all of the assets of any
division other than Genzyme General, our board would have to either redeem, make
a dividend payment on or exchange the outstanding shares of that division's
related tracking stock. Our board will have sole discretion in deciding whether
to effect that redemption, dividend payment or exchange using GENZ Stock or any
combination of cash or other property regardless of the form of consideration
paid by the buyer. However, our charter will require that any exchange for GENZ
Stock be at a 10% premium to the exchanged tracking stock's average market price
following public announcement of the sale and that any payment of cash or other
property be equal in value to the sale's after-tax net proceeds.
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Also, our board can exchange shares of GZMO Stock, GZSP Stock, and/or GZTR
Stock into GENZ Stock at no premium to the exchanged stocks' market value in the
event of certain adverse tax developments, as discussed in the immediately
following risk factor.
WE MAY ELIMINATE TRACKING STOCK IF A CORPORATE LEVEL TAX IS IMPOSED ON THE
ISSUANCE OR RECEIPT OF TRACKING STOCK.
In 1999 the Clinton Administration proposed legislation that would have
imposed a corporate level tax on issuances of tracking stock. In 2000, the
Clinton Administration proposed legislation that would tax stockholders upon the
receipt of tracking stock from the issuing corporation as a distribution or in a
recapitalization. Congress has not enacted either of these proposals into law.
If these or similar proposals are enacted into law or effected through Treasury
Department regulations, we could be taxed on an amount up to the gain realized
in future financings in which we sell tracking stock, including GENZ Stock.
Also, any use of our tracking stock to acquire other companies could be taxed to
Genzyme, the stockholders of the target company, or both. We also may be taxed
if we distribute to stockholders "designated" shares of tracking stock, which
are shares designated by the tracked division as issuable at the option of our
board for Genzyme General's benefit. In addition, stockholders could be taxed if
they receive a distribution of designated shares of tracking stock or if they
receive shares of tracking stock in exchange for other Genzyme stock. These or
similarly adverse tax consequences could cause us to eliminate tracking stock
from our capital structure. We cannot predict, however, whether Congress will
enact legislation, or the Treasury Department will issue regulations, effecting
these or similar proposals.
WE CANNOT ASSURE THAT TRACKING STOCK WILL "TRACK" THE PERFORMANCE OF THE
CORRESPONDING DIVISION.
Although we have attempted to design our tracking stocks to "track" the
performance of their corresponding divisions, we cannot assure that the market
prices of these stocks will indeed reflect that performance. The market may
assign values to a tracking stock that are based on factors other than a
corresponding division's reported financial performance. For instance, we cannot
be certain what if any valuation the market might place on the mandatory and
optional exchange features or the differing voting rights and liquidation units
of the tracking stocks. In addition, as discussed above under "Holders of our
tracking stock are stockholders of a single company and unfavorable financial
trends affecting another division could negatively affect our other divisions,"
financial developments in one division, particularly if significant and/or
adverse, may affect other divisions.
THE USE OF OPERATING LOSSES TO LOWER THE REPORTED TAX LIABILITY OF OUR
PROFITABLE DIVISIONS WILL CAUSE LOWER REPORTED EARNINGS IN THE FUTURE FOR THE
DIVISIONS GENERATING THESE OPERATING LOSSES.
Genzyme Corporation, rather than its divisions, is liable for taxes. Under
our management and accounting policies, for financial reporting purposes we
generally allocate taxes among our divisions as if they were separate taxpayers.
However, our board of directors has adopted a policy that provides that if any
of our divisions is unable to use our operating losses or other projected annual
tax benefits to reduce our current or deferred income tax expense, we may
reallocate these losses or benefits to our profitable divisions on a quarterly
basis for financial reporting purposes. This will result in a division with
current losses (such as Genzyme Molecular Oncology, Genzyme Surgical Products
and Genzyme Tissue Repair) reporting lower earnings available to its common
stockholders in the future than would be the case if that division had retained
its historical losses or other benefits in the form of a net operating loss
carryforward. We encourage you to review the summary of our tax allocation
policy on page 54 of this prospectus, and the full text of this policy which is
filed as Exhibit 3 to our current report on Form 8-K filed with the SEC on
June 30, 2000.
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THE NON-COMPETE POLICY AMONG OUR DIVISIONS MAY NOT COVER ALL OF THE ACTIVITIES
OF A PARTICULAR DIVISION.
Our board of directors has adopted a policy regarding competition among our
divisions. This non-compete policy requires that we develop certain products and
services within a given division, as opposed to another division, or through
joint ventures involving a given division, because the product or service is
within the field of activity of that division. This non-compete policy, however,
does not cover the entire field of activity of each division. For example,
Genzyme General Division or Genzyme Molecular Oncology may develop certain
tissue repair products or services. In order words, we cannot guarantee that all
products and services we develop in a given field of activity will be allocated
to a division primarily engaged in that field of activity. We encourage you to
review the summary of our non-compete policy on page 54 of this prospectus and
the full text of this policy, which is filed as Exhibit 3 to our current report
on Form 8-K filed with the SEC on June 30, 2000.
FUTURE SALES OR DISTRIBUTIONS OF DESIGNATED SHARES OF GZMO STOCK, GZSP STOCK OR
GZTR STOCK MAY SIGNIFICANTLY DILUTE YOUR OWNERSHIP OF THE AFFECTED SHARES OF
TRACKING STOCK.
Our management and accounting policies require us to sell or distribute any
designated shares of GZMO Stock, GZSP Stock or GZTR Stock that may be created,
subject to certain limitations. Designated shares are created when cash or other
assets are transferred from Genzyme General to a division. Proceeds from a sale
or distribution will not be allocated to the affected divisions and the issuance
and sale may substantially dilute your ownership of tracking stock of the
affected divisions. Circumstances under which the designated shares of tracking
stock will be sold or distributed are described in the section of this document
entitled "DESCRIPTION OF GENZYME COMMON STOCK--GZMO Designated Shares, GZSP
Designated Shares and GZTR Designated Shares."
RISKS RELATING TO GENZYME GENERAL
The following risks and uncertainties may adversely affect the business of
Genzyme General. Accordingly, you should consider these risks before investing
in GENZ Stock or any securities which may be exchanged for, exercised for or
converted into GENZ Stock.
GENZYME GENERAL MAY NOT BE ABLE TO SUCCESSFULLY COMMERCIALIZE
THYROGEN-REGISTERED TRADEMARK- HORMONE AND RENAGEL-REGISTERED TRADEMARK-
CAPSULES.
In January 1999, Genzyme General, together with Knoll Pharmaceutical
Company, launched U.S. sales of Thyrogen-Registered Trademark- recombinant
thyroid stimulating hormone for use in the treatment of thyroid cancer. At about
the same time, Genzyme General, in collaboration with GelTex
Pharmaceuticals, Inc., launched Renagel-Registered Trademark- capsules, a
non-absorbed phosphate binder used in the treatment of end-stage renal disease.
The commercial success of Thyrogen-Registered Trademark- hormone and
Renagel-Registered Trademark- capsules will depend on a number of factors,
including:
- regulation by the FDA;
- the ability to obtain regulatory approvals in foreign countries;
- the development and commercial success of competitive products; and
- the availability of third party reimbursement.
Genzyme General cannot be sure that market penetration of
Thyrogen-Registered Trademark- hormone and Renagel-Registered Trademark-
capsules will increase.
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IF THE STRATEGIC COLLABORATIONS GENZYME GENERAL HAS ENTERED INTO TO DEVELOP AND
COMMERCIALIZE ITS PRODUCTS ARE NOT SUCCESSFUL, GENZYME GENERAL'S RESULTS OF
OPERATIONS WILL BE ADVERSELY IMPACTED.
Several of Genzyme General's strategic initiatives involve collaborations
with other biotechnology companies and arrangements with academic medical
centers. These include:
- a joint venture with GelTex for the commercialization of
Renagel-Registered Trademark- capsules;
- an agreement with Knoll Pharmaceutical Company for the marketing of
Thyrogen-Registered Trademark- hormone in the U.S.;
- an agreement with Biogen, Inc. for the marketing of
AVONEX-Registered Trademark- (Interferon-beta 1a), Biogen's treatment for
relapsing forms of multiple sclerosis, in Japan following regulatory
approval;
- a joint venture with BioMarin for the development and commercialization of
Aldurazyme(TM) enzyme for the treatment of the lysosomal storage known as
mucopolysaccharidosis I;
- a joint venture with Genzyme Transgenics for the development and
commercialization of transgenic antithrombin III, a human protein that
Genzyme Transgenics produces in the milk of genetically modified animals;
- a joint venture with Pharming for the development and commercialization of
human alpha-glucosidase for the treatment of Pompe disease;
- an agreement with Genovo for the development of gene therapy products for
the treatment of lysosomal storage disorders;
- a relationship with Mount Sinai Medical Center for the development of a
therapy for the treatment of Niemann-Pick disease;
- a joint venture with Diacrin to develop and commercialize products and
processes using porcine fetal cells for the treatment of Parkinson's
disease and Huntington's disease; and
- an agreement with Dyax Corp. to develop and commercialize the protein
EPI-KAL2 for the treatment of chronic inflammatory diseases.
Genzyme General plans to enter into additional collaborations in the future.
The success of these arrangements are largely dependent on the efforts and
skills of Genzyme General's collaborators. Genzyme General cannot guarantee
that:
- these agreements will not be terminated;
- its strategic collaborators will devote significant resources to the
collaborations; or
- any of these collaborations will result in the successful development or
commercialization of any products.
OUR OPTION TO PURCHASE LIMITED PARTNERSHIP INTERESTS COULD DILUTE THE RIGHTS OF
HOLDERS OF GENZ STOCK.
We organized Genzyme Development Partners, L.P., a special purpose research
and development entity, in 1989 and transferred to it technology and commercial
rights to our hyaluronic acid-based products designed to prevent the occurrence
and severity of post-operative adhesions. These products, which we refer to as
the Sepra products, are now allocated to Genzyme Surgical Products. We have an
option to purchase the limited partnership interests in the partnership. If this
option is exercised, we may have to issue shares of GENZ Stock or make
substantial cash payments or both. If we make payments in GENZ Stock, the rights
of holders of GENZ Stock could be diluted and the market price of that stock may
fall. If we make cash payments, our cash resources would diminish.
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RISKS RELATED TO GENZYME MOLECULAR ONCOLOGY
The following risks and uncertainties may adversely affect the business of
Genzyme Molecular Oncology. Accordingly, you should consider these risks before
investing in GZMO Stock or any securities which may be exchanged for, exercised
for or converted into GZMO Stock.
GENZYME MOLECULAR ONCOLOGY MAY NEVER BE ABLE TO SUCCESSFULLY DEVELOP OR
COMMERCIALIZE ANY OF ITS CANCER THERAPIES.
Genzyme Molecular Oncology does not have any cancer therapies on the market
and its only therapies in clinical development are its melanoma and breast
cancer vaccines. Before commercializing any cancer therapies, Genzyme Molecular
Oncology will need to conduct substantial research and development, including,
in some cases, the replication of preclinical studies performed by its
collaborators, undertake preclinical and clinical testing and obtain regulatory
approvals. This process involves a high degree of uncertainty and may take
several years. Its product development efforts may fail for many reasons,
including:
- the product fails in preclinical studies;
- clinical trials may not support the safety or effectiveness of the
product; or
- we fail to obtain the required regulatory approvals.
We cannot guarantee that Genzyme Molecular Oncology will successfully
develop any particular product or that any product it successfully develops will
gain market acceptance.
GENZYME MOLECULAR ONCOLOGY ANTICIPATES FUTURE LOSSES AND MAY NEVER BECOME
PROFITABLE.
Genzyme Molecular Oncology has not generated significant revenues to date
and does not expect to do so for several years. As of December 31, 1999, Genzyme
Molecular Oncology had an accumulated deficit of approximately $69.0 million. It
expects to have significant operating losses for the next several years. Genzyme
Molecular Oncology plans to spend substantial amounts of money on, among other
things:
- research and development;
- preclinical and clinical testing; and
- pursuing regulatory approvals.
We cannot guarantee that the efforts underlying these expenditures will be
successful or that Genzyme Molecular Oncology's operations will ever be
profitable.
IF GENZYME MOLECULAR ONCOLOGY FAILS TO OBTAIN THE CAPITAL NECESSARY TO FUND ITS
OPERATIONS, IT WILL BE UNABLE TO FUND DEVELOPMENT PROGRAMS AND COMPLETE CLINICAL
TRIALS.
We anticipate that Genzyme Molecular Oncology's current cash resources,
together with amounts of Genzyme General's cash made available by our board to
Genzyme Molecular Oncology and revenues generated from our SAGE-TM- technology
and license agreements, will be sufficient to fund its operations through 2000.
Genzyme Molecular Oncology's cash needs may differ from those planned, however,
because of many factors, including the:
- results of research and development and clinical testing;
- achievement of milestones under existing strategic collaborations;
- ability to establish and maintain additional strategic collaborations
and licensing arrangements;
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- costs of protecting its intellectual property rights;
- development of competing products and services; and
- ability to satisfy regulatory requirements of the FDA and other
government authorities.
Genzyme Molecular Oncology may require significant additional financing to
continue operations at anticipated levels. We cannot guarantee that it will be
able to obtain any additional financing or find it on favorable terms. If
Genzyme Molecular Oncology has insufficient funds or is unable to raise
additional funds, it may have to delay, reduce or eliminate some of its
programs. Genzyme Molecular Oncology may also have to give third parties rights
to commercialize technologies or products that it would otherwise have sought to
commercialize itself.
GENZYME MOLECULAR ONCOLOGY MAY NOT RECEIVE SIGNIFICANT PAYMENTS FROM
COLLABORATORS DUE TO UNSUCCESSFUL RESULTS IN EXISTING COLLABORATIONS OR A
FAILURE TO ENTER INTO FUTURE COLLABORATIONS.
Genzyme Molecular Oncology's strategy to develop and commercialize some of
its products and services includes entering into various arrangements with
academic and corporate collaborators and licensees. It depends on the success of
these parties in performing research, preclinical and clinical testing and
marketing. These arrangements may require Genzyme Molecular Oncology to transfer
important rights to its corporate collaborators and licensees. These
collaborators and licensees could choose not to devote resources to these
arrangements or, under certain circumstances, may terminate them early. In
addition, these collaborators and licensees, outside of their arrangements with
Genzyme Molecular Oncology, may develop technologies or products that are
competitive with those that Genzyme Molecular Oncology is developing. As a
result, we cannot guarantee that Genzyme Molecular Oncology will receive
revenues from these relationships or that any of its strategic collaborations
will continue or not terminate early. In addition, we cannot guarantee that
Genzyme Molecular Oncology will be able to enter into collaborations in the
future.
GENZYME MOLECULAR ONCOLOGY MAY BE REQUIRED TO LICENSE TECHNOLOGY FROM
COMPETITORS IN ORDER TO DEVELOP AND COMMERCIALIZE SOME OF ITS PRODUCTS AND
SERVICES, AND IT IS UNCERTAIN WHETHER THESE LICENSES WILL BE AVAILABLE.
Third party patent rights and pending patent applications filed by third
parties, if issued, may cover some of the products Genzyme Molecular Oncology is
developing or testing. As a result, Genzyme Molecular Oncology may be required
to obtain licenses from the holders of these patents in order to use or sell
certain products and services. We cannot guarantee that these licenses will be
made available on acceptable terms or at all. If these licenses are not
available, Genzyme Molecular Oncology's ability to commercialize its products
and services may be impaired.
In its cancer vaccine program, Genzyme Molecular Oncology is in the process
of evaluating the therapeutic administration of peptide products and genes that
encode specific tumor antigens, including MART-1 and gp100. Genzyme Molecular
Oncology is aware of two issued U.S. patents directed to the gene that encodes
MART-1. While it has obtained rights under one of these patents, Genzyme
Molecular Oncology is still in the process of evaluating the scope and validity
of the other to determine whether it needs to obtain a license. Genzyme
Molecular Oncology is also evaluating an issued U.S. patent covering the gene
that encodes gp100 and three published Patent Cooperation Treaty applications by
three different applicants that may cover antigens derived from gp100. Genzyme
Molecular Oncology is in the process of evaluating the scope and validity of
these patents and patent applications to determine whether it needs to obtain
licenses.
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GENZYME MOLECULAR ONCOLOGY MAY INCUR SUBSTANTIAL COSTS AS A RESULT OF LITIGATION
OR OTHER PROCEEDINGS RELATING TO PATENT AND OTHER INTELLECTUAL PROPERTY RIGHTS.
If Genzyme Molecular Oncology or one of its strategic collaborators initiate
litigation to enforce Genzyme Molecular Oncology's patent or license rights, or
are required to defend these rights in response to third party claims, its
business or financial position may be negatively affected. Genzyme Molecular
Oncology has licensed its p53 gene therapy rights to Schering-Plough. These
patent rights are the subject of an interference proceeding in the U.S. and an
opposition proceeding in Europe. Adverse determinations in these proceedings may
negatively affect Genzyme Molecular Oncology's ability to receive future
milestones and product royalties under its agreement with Schering-Plough.
ADVERSE EVENTS IN THE FIELD OF GENE THERAPY MAY NEGATIVELY AFFECT REGULATORY
APPROVAL OR PUBLIC PERCEPTION OF GENZYME MOLECULAR ONCOLOGY'S GENE THERAPY
PRODUCTS.
The recent death of a patient undergoing gene therapy using an adenoviral
vector to deliver a therapeutic gene has been widely publicized. This death and
any other adverse events in the field of gene therapy that may occur in the
future may result in greater governmental regulation and potential regulatory
delays relating to the testing or approval of Genzyme Molecular Oncology's gene
therapy products. As a result of this death, the U.S. Senate has commenced
hearings to determine whether additional legislation is required to protect
volunteers and patients who participate in gene therapy clinical trials.
Additionally, the Recombinant DNA Advisory Committee, which acts as an advisory
body to the National Institutes of Health (NIH), has extensively discussed the
use of adenoviral vectors in gene therapy clinical trials and recently issued a
draft report on the safety of adenoviral vectors. While this draft report
recommends that clinical trials using adenoviral vectors should continue with
caution, it also suggested a number of changes in the way gene therapy clinical
trials are conducted. If any new guidelines are adopted by the NIH, Genzyme
Molecular Oncology's gene therapy clinical trials could be delayed or become
more expensive to conduct.
Genzyme Molecular Oncology has reported to the FDA and the NIH that there
have been three deaths in its Phase I/II melanoma cancer vaccine trial at
Massachusetts General Hospital. The principal investigator for this trial
indicated that each of these deaths was due to disease progression and not
related to the patient's treatment. Deaths are not unexpected in a clinical
trial treating patients with advanced stage melanoma because these patients have
short life expectancies. Genzyme Molecular Oncology cannot, however, rule out
the possibility that its cancer vaccines may be a contributing cause of death
for patients in the future.
The commercial success of any gene therapy products that Genzyme Molecular
Oncology develops will depend in part on public acceptance of the use of gene
therapies for the prevention or treatment of human diseases. Public attitudes
may be influenced by claims that gene therapy is unsafe, and gene therapy may
not gain the acceptance of the public or the medical community. Negative public
reaction to gene therapy could result in greater government regulation and
stricter clinical trial oversight and commercial product labeling requirements
of gene therapies and could cause a decrease in the demand for any gene therapy
product that Genzyme Molecular Oncology may develop.
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RISKS RELATED TO GENZYME SURGICAL PRODUCTS
The following risks and uncertainties may adversely affect the business of
Genzyme Surgical Products. Accordingly, you should consider these risks before
investing in GZSP Stock or any securities which may be exchanged for, exercised
for or converted into GZSP Stock.
GENZYME SURGICAL PRODUCTS ANTICIPATES FUTURE LOSSES AND MAY NEVER BECOME
PROFITABLE.
Genzyme Surgical Products expects to have significant operating losses for
the next several years. It plans to spend substantial amounts of money on, among
other things:
- conducting research and development activities;
- pursuing regulatory approvals;
- conducting commercialization activities; and
- providing surgeon education and training.
We cannot guarantee that the efforts underlying these expenditures will be
successful or that Genzyme Surgical Products' operations will ever be
profitable. It may be years before the division generates any revenue from sales
of products currently under development.
IF GENZYME SURGICAL PRODUCTS FAILS TO OBTAIN CAPITAL NECESSARY TO FUND ITS
OPERATIONS, IT WILL BE UNABLE TO FUND DEVELOPMENT PROGRAMS AND COMPLETE CLINICAL
TRIALS.
We anticipate that Genzyme Surgical Products' current cash resources,
together with revenues generated from its products and distribution agreements,
will be sufficient to fund its operations through 2001. However, its cash needs
may differ from those planned because of many factors, including:
- the ability to become profitable;
- the results of research and development efforts;
- the ability to establish strategic collaborations and licensing
arrangements for research and development programs;
- the achievement of milestones under strategic collaborations;
- the ability to establish and maintain additional distribution
arrangements;
- the enforcement of patent and other intellectual property rights;
- market acceptance of novel approaches and therapies;
- the development of competitive products; and
- the ability to satisfy regulatory requirements of the FDA and other
government authorities.
Genzyme Surgical Products may require significant additional financing to
continue operations at anticipated levels. We cannot guarantee that it will be
able to obtain any additional financing or find it on favorable terms. If
Genzyme Surgical Products has insufficient funds or is unable to raise
additional funds, it may have to delay, reduce or eliminate some of its
programs. Genzyme Surgical Products may also have to give third parties rights
to attempt to commercialize technologies or products that it would otherwise
have sought to commercialize itself.
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IF GENZYME SURGICAL PRODUCTS EXERCISES AN OPTION TO PURCHASE INTERESTS IN
GENZYME DEVELOPMENT PARTNERS, ITS CASH RESOURCES MAY DIMINISH AND THE RIGHTS OF
ITS STOCKHOLDERS MAY BE DILUTED.
In 1989, we organized Genzyme Development Partners, L.P., a special purpose
research and development entity. We transferred to the partnership technology
and commercial rights to the Sepra products and entered into a joint venture
with the partnership to develop and commercialize the Sepra products in the U.S.
and Canada. We have an option to purchase the limited partnership interests in
the partnership under certain circumstances for approximately $26 million plus
continuing royalties based on certain sales of the Sepra products. We have
allocated the purchase option to Genzyme Surgical Products. The option's
exercise price is payable in cash, shares of GENZ Stock or a combination of the
two, as determined by Genzyme Surgical Products when it exercises the option.
This option terminates unless Genzyme Surgical Products exercises the option
by November 29, 2000. If Genzyme Surgical Products exercises this option, it
will have to make substantial cash payments or compensate Genzyme General with
designated shares of GZSP Stock for the GENZ Stock used, or both. If the
division makes cash payments, its cash resources would diminish. If it makes the
payment in whole or in part in shares of GENZ Stock, then our board of directors
would need to approve the issuance of GENZ Stock in return for Genzyme General
having reserved for it a number of GZSP designated shares with a fair market
value equal to the fair market value of the shares of GENZ Stock. Those GZSP
designated shares would be shares of GZSP Stock that our board would have the
option to issue from time to time with all proceeds allocable to Genzyme
General. On June 30th of each year, we will have to distribute substantially all
the GZSP designated shares if the number of those shares exceeds 10% of the
number of shares of GZSP Stock then outstanding.
We cannot guarantee that our board would authorize the issuance of shares of
GENZ Stock for payment of the option exercise price and the reservation of any
GZSP designated shares. If our board reserves and subsequently distributes or
otherwise disposes of any GZSP designated shares, this may substantially dilute
the rights of the holders of GZSP Stock and could significantly affect the
market price of GZSP Stock.
If Genzyme Surgical Products does not exercise the option, the partnership
would have the right to sell or otherwise transfer to a third party a license to
background technology that we granted to it. A sale or transfer of this
technology may terminate our joint venture with the partnership to manufacture
and sell the Sepra products in the U.S. and Canada. In addition, failure to
exercise the option would cause the joint venture to become terminable upon 90
days' prior notice by either Genzyme or Genzyme Development Partners.
In addition, Genzyme may propose an acquisition of the partnership or the
limited partnership interests outside of the purchase option. This sort of
acquisition proposal might involve cash, GZSP Stock, GENZ Stock, debt or some
other currency as consideration.
GENZYME SURGICAL PRODUCTS IS DEVOTING SIGNIFICANT RESOURCES TO DEVELOPING NOVEL
PRODUCTS AND TREATMENTS THAT MAY NOT BE COMMERCIALLY SUCCESSFUL.
Genzyme Surgical Products has devoted a significant amount of money to
developing products that will represent alternatives to traditional surgical
procedures or treatments. These products will likely require several years of
aggressive and costly marketing before they might become widely accepted by the
surgical community. Genzyme Surgical Products expects to develop products that
are designed to enable surgeons to perform minimally invasive cardiovascular
surgery. The medical conditions that can be treated with minimally invasive
cardiovascular surgery are currently being treated with widely accepted surgical
procedures such as coronary artery bypass grafting and catheter-based
treatments, including balloon angioplasty, atherectomy and coronary stenting. To
date, minimally invasive cardiovascular surgery has been performed on a limited
basis and its further adoption by the surgical community will partly depend on
Genzyme Surgical Products' ability to educate cardiothoracic surgeons
20
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about its effectiveness and to facilitate the training of cardiothoracic
surgeons in minimally invasive cardiovascular surgery techniques.
Similarly, until recently surgeons have not used products designed to reduce
the incidence and extent of postoperative adhesions. Since 1996, when Sepra
Film-Registered Trademark- bioresorbable membrane was introduced, market
acceptance of anti-adhesion products has been slow. To increase sales of the
Sepra products, Genzyme Surgical Products has had to educate surgeons and
hospital administrators about the problems of, and costs associated with,
adhesions and the benefit of preventing adhesions. It has also had to train
surgeons on the proper handling and use of these products.
We cannot guarantee that Genzyme Surgical Products' efforts in educating and
training the surgical community will result in the widespread adoption of
minimally invasive cardiovascular surgery and anti-adhesion products or that
surgeons adopting these procedures and products will use Genzyme Surgical
Products' products.
ADVERSE EVENTS IN THE FIELD OF GENE THERAPY MAY NEGATIVELY AFFECT REGULATORY
APPROVAL OR PUBLIC PERCEPTION OF GENZYME SURGICAL PRODUCTS' GENE THERAPY
PRODUCTS.
The recent death of a patient undergoing gene therapy using an adenoviral
vector to deliver a therapeutic gene has been widely publicized. This death and
any other adverse events in the field of gene therapy that may occur in the
future may result in greater governmental regulation and potential regulatory
delays relating to the testing or approval of Genzyme Surgical Products' gene
therapy products. As a result of this death, the U.S. Senate has commenced
hearings to determine whether additional legislation is required to protect
volunteers and patients who participate in gene therapy clinical trials.
Additionally, the Recombinant DNA Advisory Committee, which acts as an advisory
body to the National Institutes of Health (NIH), has extensively discussed the
use of adenoviral vectors in gene therapy clinical trials and recently issued a
draft report on the safety of adenoviral vectors. While this draft report
recommends that clinical trials using adenoviral vectors should continue with
caution, it also suggested a number of changes in the way gene therapy clinical
trials are conducted.
The commercial success of any gene therapy products that Genzyme Surgical
Products develops will depend in part on public acceptance of the use of gene
therapies for the prevention or treatment of human diseases. Public attitudes
may be influenced by claims that gene therapy is unsafe, and gene therapy may
not gain the acceptance of the public or the medical community. Negative public
reaction to gene therapy could result in greater government regulation and
stricter clinical trial oversight and commercial product labeling requirements
of gene therapies and could cause a decrease in the demand for any gene therapy
product that Genzyme Surgical Products may develop.
COMPETITION FROM OTHER MEDICAL DEVICE AND TECHNOLOGY COMPANIES COULD HURT
GENZYME SURGICAL PRODUCTS' PERFORMANCE.
The human health care products and services industry is extremely
competitive. Major medical device and technology companies compete or may
compete with Genzyme Surgical Products. These include such companies as:
- Atrium Medical Corporation and Sherwood-Davis & Geck, a division of Tyco
International, Ltd. in the cardiovascular chest drainage and fluid
management market;
- The Ethicon division of Johnson & Johnson Ltd. and U.S. Surgical
Corporation, a division of Tyco, in the cardiovascular closure market;
- CardioThoracic Systems, Inc., Medtronic, Inc., U.S. Surgical, Guidant
Corporation, Baxter Healthcare Corporation and Ethicon in the minimally
invasive cardiovascular surgery market;
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- Ethicon, Lifecore Biomedical, Inc., Life Medical Sciences, Inc. and
Gliatech, Inc. in the anti-adhesion market; and
- Karl Storz Endoscopy America, Inc., Scanlan International, Inc., Pilling
Weck Surgical Instruments and the Codman division of Johnson & Johnson
Ltd. in the reusable instruments market.
These competitors may have superior research and development, marketing and
production capabilities. Some competitors also may have greater financial
resources than Genzyme Surgical Products. The division is likely to incur
significant costs developing and marketing new products without any guarantee
that it will be competitively successful in one or more markets. The future
success of Genzyme Surgical Products will depend on its ability to effectively
develop and market its products against those of its competitors.
THE TREND TOWARD CONSOLIDATION IN THE SURGICAL DEVICES INDUSTRY MAY ADVERSELY
AFFECT GENZYME SURGICAL PRODUCTS' ABILITY TO MARKET SUCCESSFULLY ITS PRODUCTS TO
SOME SIGNIFICANT PURCHASERS.
The current trend among hospitals and other significant consumers of
surgical devices is to combine into larger purchasing groups to increase their
purchasing power and thus reduce their purchase price for surgical devices.
Partly in response to this development, surgical device manufacturers have been
consolidating to be able to offer a more comprehensive product line to these
larger purchasing groups. In order to successfully market its products to larger
purchasing groups, Genzyme Surgical Products may have to expand its product
lines or enter into joint marketing or distribution agreements with other
manufacturers of surgical devices. We cannot guarantee that it will be able to
employ either of these initiatives or that, when employed, these initiatives
will increase the marketability of its products.
GENZYME SURGICAL PRODUCTS MAY NOT RECEIVE SIGNIFICANT PAYMENTS FROM
COLLABORATORS DUE TO UNSUCCESSFUL RESULTS IN EXISTING COLLABORATIONS OR A
FAILURE TO ENTER INTO FUTURE COLLABORATIONS.
Genzyme Surgical Products' strategy to develop and commercialize some of its
products and services includes entering into various arrangements with academic
and corporate collaborators and licensees. It depends on the success of these
parties in performing research, preclinical and clinical testing and marketing.
These arrangements may require Genzyme Surgical Products to transfer important
rights to its corporate collaborators and licensees. These collaborators and
licensees could choose not to devote resources to these arrangements or, under
certain circumstances, may terminate them early. In addition, these
collaborators and licensees, outside of their arrangements with Genzyme Surgical
Products, may develop technologies or products that are competitive with those
that Genzyme Surgical Products is developing. As a result, we cannot guarantee
that Genzyme Surgical Products will receive revenues from these relationships or
that any of its strategic collaborations will continue or not terminate early.
In addition, we cannot guarantee that Genzyme Surgical Products will be able to
enter into collaborations in the future.
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RISKS RELATED TO GENZYME TISSUE REPAIR
The following risks and uncertainties may adversely affect the business of
Genzyme Tissue Repair. Accordingly, you should consider these risks before
investing in GZTR Stock or any securities which may be exchanged for, exercised
for or converted into GZTR Stock.
THE COMMERCIAL SUCCESS OF GENZYME TISSUE REPAIR'S LEAD PRODUCT,
CARTICEL-REGISTERED TRADEMARK- CHONDROCYTES, IS UNCERTAIN.
Carticel-Registered Trademark- cartilage repair is a service used to treat
knee cartilage damage. This service involves a proprietary process for growing
autologous chondrocytes (a patient's own cartilage cells) to replace those that
are damaged or lost. Revenues from Carticel-Registered Trademark- chondrocytes
accounted for approximately 75% of Genzyme Tissue Repair's 1999 revenue. The
commercial success of Carticel-Registered Trademark- chondrocytes will depend on
many factors including:
- POSITIVE RESULTS FROM POST-MARKETING STUDIES.
We have agreed with the FDA to conduct two post-marketing studies to confirm
the effectiveness of Carticel-Registered Trademark- chondrocytes. The first
study compares clinical outcomes of patients in Genzyme Tissue Repair's
registry who did not respond to treatment before being implanted with
Carticel-Registered Trademark-chondrocytes. This study will measure outcomes
before and after implantation with Carticel-Registered Trademark-
chondrocytes. The second study compares the long-term clinical effects of
treatment with Carticel-Registered Trademark-chondrocytes to other available
treatments. If these studies demonstrate that treatment with
Carticel-Registered Trademark- chondrocytes is not superior to the
alternatives studied, the FDA may suspend or withdraw its approval of
Carticel-Registered Trademark- chondrocytes. If Genzyme Tissue Repair cannot
market Carticel-Registered Trademark- chondrocytes in the U.S., its
financial results will be negatively impacted.
- FDA APPROVAL OF RELATED DEVICE.
Genzyme Tissue Repair has developed a device to improve the procedure for
implanting Carticel-Registered Trademark-chondrocytes and plans to file for
marketing approval with the FDA. Genzyme Tissue Repair believes it will
begin marketing this device in 2000. However, we cannot guarantee that the
FDA will approve this device, that this device will improve the procedure
for implanting Carticel-Registered Trademark-chondrocytes, or that this
device will gain commercial acceptance.
- THE AVAILABILITY OF THIRD PARTY REIMBURSEMENT.
Since the FDA approved Carticel-Registered Trademark- chondrocytes, we have
seen a substantial increase in the number of third party payers who cover
it. Some third party payers, however, do not cover Carticel-Registered
Trademark- chondrocytes. We cannot guarantee that any third party payers
will continue to cover it or that additional third party payers will begin
to provide reimbursement.
Although FDA approval is a crucial factor in insurance plans deciding to
cover new treatments, a number of major insurance plans also base such
decisions on their own or third party evaluations of such treatments. One
independent association that conducts evaluations is the Blue Cross Blue
Shield Association. The Blue Cross Blue Shield Association has determined
that its Technology Assessment Committee does not believe that
Carticel-Registered Trademark- chondrocytes meets all of its published
criteria for new treatments. We believe that Carticel-Registered Trademark-
chondrocytes does in fact meet all of such criteria and are discussing the
evaluation with the Blue Cross Blue Shield Association. While individual
Blue Cross Blue Shield plans representing more than 50% of Blue Cross Blue
Shield policyholders have provided policy coverage for Carticel-Registered
Trademark- chondrocytes without a favorable evaluation by the Blue Cross
Blue Shield Association, many Blue Cross Blue Shield plans have delayed
approving Carticel-Registered Trademark- chondrocytes from coverage under
their policies as a direct result of this unfavorable ruling. Since these
remaining plans represent a significant percentage of insured lives in the
U.S., this ruling has delayed our access to a substantial portion of the
market for Carticel-Registered Trademark- chondrocytes.
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- THE SUCCESS OF COMPETITIVE PRODUCTS.
The process we use to grow a patient's cartilage cells is not patentable,
and we do not yet have significant patent protection covering the other
processes used in providing Carticel-Registered Trademark-chondrocytes.
Consequently, we cannot prevent a competitor from developing the ability to
grow cartilage cells and from offering a product or service that is similar
or superior to Carticel-Registered Trademark-chondrocytes. If a competitor
were to develop such ability and obtain FDA approval for a competitive
product or service, Genzyme Tissue Repair's financial results of operations
would be negatively impacted. We are aware of at least two other companies
that are growing autologous cartilage cells for cartilage repair in the
European market. Also, several pharmaceutical and biotechnology companies
are developing alternative treatments for knee cartilage damage. One or more
of these companies may develop products or services superior to the
Carticel-Registered Trademark- chondrocytes.
- MARKET ACCEPTANCE BY ORTHOPEDIC SURGEONS.
We are marketing Carticel-Registered Trademark- chondrocytes to orthopedic
surgeons. We cannot guarantee that we will train enough surgeons who
incorporate it into their practice to make it commercially successful.
- FLUCTUATING REVENUES DUE TO SEASONAL FACTORS.
We expect that the revenues from the sale of the Carticle-Registered
Trademark- chondrocytes will fluctuate based on Genzyme Tissue Repair's
success in penetrating the market, the availability of competitive
procedures and the availability of third party reimbursement. We cannot
predict the timing or magnitude of these fluctuations. Furthermore, we
expect that revenues from Carticle-Registered Trademark-chondrocytes will be
lower in the summer months because fewer operations are typically performed
during those months.
- RELIANCE ON KEY COLLABORATORS.
Carticle-Registered Trademark- chondrocytes were developed based on the work
of a group of Swedish physicians. Genzyme tissue Repair had consulting
agreements with the two leaders of that group. These agreements, however,
expired in 1998, and Genzyme Tissue Repair is currently negotiating renewals
of these agreements. Pending these negotiations, these physicians are
continuing to advise Genzyme Tissue Repair on the commercialization and
further development of Carticel-Registered Trademark-chondrocytes. We cannot
guarantee that the two physicians will sign a new contract.
In addition, individuals who are familiar with the know-how underlying
Carticel-Registered Trademark- chondrocytes through their association with these
physicians may disclose the information to our competitors. This event could
have an adverse effect on Genzyme Tissue Repair's results of operations.
Genzyme Tissue Repair will have a sponsored research agreement with the
University of Gothenburg in Sweden and certain physicians, including the two
physicians who lead the group that developed Carticel-Registered Trademark-
chondrocytes. The purpose of the agreement is to conduct additional research on
Carticel-Registered Trademark- chondrocytes. The agreement will prohibit members
of the research team from disclosing any information relating to Genzyme Tissue
Repair or its business that they acquire in connection with their work under the
agreement. The agreement also will state that all inventions that the members
conceive or reduce to practice during the course of the research program will be
Genzyme Tissue Repair's property, with royalties payable to the inventing
member. We cannot guarantee that these members will honor their obligations
under the sponsored research agreement.
GENZYME TISSUE REPAIR ANTICIPATES FUTURE LOSSES AND MAY NEVER BECOME PROFITABLE.
We expect Genzyme Tissue Repair to have significant operating losses at
least through 2000 as it continues to commercialize Carticel-Registered
Trademark- chondrocytes and to conduct research and development and
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clinical programs. We cannot guarantee that Genzyme Tissue Repair's operations
will ever be profitable.
IF GENZYME TISSUE REPAIR FAILS TO OBTAIN CAPITAL NECESSARY TO FUND ITS
OPERATIONS, IT WILL BE UNABLE TO FUND DEVELOPMENT PROGRAMS AND COMPLETE CLINICAL
TRIALS.
We anticipate that Genzyme Tissue Repair's current cash resources, including
both cash amounts allocated to Genzyme Tissue Repair as well as amounts of
Genzyme General's cash made available to Genzyme Tissue Repair by our board,
will be sufficient to fund Genzyme Tissue Repair's operations through the end of
2000.
In 1999, Genzyme Tissue Repair received $25 million in cash from Genzyme
General in connection with the transfer to Genzyme General of our interest in
Genzyme Tissue Repair's joint venture with Diacrin, Inc. If the joint venture
does not initiate a Phase III clinical trial of NeuroCell-TM--PD by
December 31, 2000, Genzyme Tissue Repair will be required to pay Genzyme General
$20 million plus accrued interest at 13.5%. Genzyme Tissue Repair would be able
to repay this amount in cash, GZTR designated shares, or combination of both, at
its option. GZTR designated shares are shares of GZTR Stock that are not issued
and outstanding, but which our board of directors may issue, sell or distribute
without allocating the proceeds to Genzyme Tissue Repair. If these milestones
are not achieved, and Genzyme Tissue Repair elects to repay Genzyme General in
cash, its cash reserves will be substantially diminished or depleted in their
entirety. If Genzyme Tissue Repair elects to repay Genzyme General in GZTR
designated shares, this would substantially dilute the rights of the holders of
GZTR Stock and could adversely affect the market price of GZTR Stock.
Genzyme Tissue Repair's cash needs may differ from those planned as a result
of various factors, including the:
- ability to satisfy regulatory requirements of the FDA and other government
agencies;
- results of research and development and clinical testing;
- enforcement of patent and other intellectual property rights; and
- development of competitive products and services.
Genzyme Tissue Repair will require substantial additional funds in order to
continue operations at current levels beyond 2000. We cannot guarantee that
Genzyme Tissue Repair will be able to obtain any additional financing or find it
on favorable terms. If Genzyme Tissue Repair has insufficient funds or is unable
to raise additional funds, it may have to delay, reduce or eliminate certain of
its programs. Genzyme Tissue Repair may also have to give rights to third
parties to attempt to commercialize technologies or products that it would
otherwise have sought to commercialize itself.
GENZYME TISSUE REPAIR'S RESULTS FLUCTUATE QUARTERLY AND THIS COULD HAVE AN
ADVERSE EFFECT ON ITS OPERATIONS.
We expect that the revenues from the sale of the Carticel-Registered
Trademark- chondrocytes will fluctuate based on Genzyme Tissue Repair's success
in penetrating the market, the availability of competitive procedures and the
availability of third party reimbursement. We cannot predict the timing or
magnitude of these fluctuations. Furthermore, we expect that revenues from
Carticel-Registered Trademark- chondrocytes will be lower in the summer months
because fewer operations are typically performed during those months.
We also expect that revenues from the sale of Epicel-TM- skin grafts will
continue to fluctuate from quarter to quarter. This fluctuation is a result of
several unpredictable factors, including the number and survival rate of severe
burn patients who are treated with Epicel-TM- skin grafts.
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Since Genzyme Tissue Repair must maintain extensive tissue culture
facilities and a trained staff for both Carticel-Registered Trademark-
chondrocytes and Epicel-TM- skin grafts, a significant portion of its costs are
fixed and, therefore, fluctuations in demand can have an adverse effect on its
results of operations.
GENZYME TISSUE REPAIR RELIES ON KEY COLLABORATORS TO SUPPORT FURTHER RESEARCH
AND DEVELOPMENT OF CARTICEL-REGISTERED TRADEMARK-CHONDROCYTES AND THESE EFFORTS
COULD SUFFER IF IT EXPERIENCES PROBLEMS WITH THESE COLLABORATORS.
Carticel-Registered Trademark- chondrocytes were developed based on the work
of a group of Swedish physicians. Genzyme Tissue Repair had consulting
agreements with the two leaders of that group. These agreements, however,
expired in 1998 and Genzyme Tissue Repair is currently negotiating renewals of
these agreements. Pending these negotiations, these physicians are continuing to
advise Genzyme Tissue Repair on the commercialization and further development
Carticel-Registered Trademark- chondrocytes.
We cannot guarantee that the two physicians will sign a new consulting
agreement or continue to advise Genzyme Tissue Repair.
In addition, individuals who are familiar with the know-how underlying
Carticel-Registered Trademark- chondrocytes through their association with these
physicians may disclose such information to our competitors. Either event could
have an adverse effect on Genzyme Tissue Repair's results of operations.
We have entered into a sponsored research agreement with the University of
Gothenburg in Sweden and certain physicians, including the two physicians
discussed above. The purpose of the agreement is to conduct additional research
on Carticel-Registered Trademark- chondrocytes. The agreement prohibits each
member of the research team from disclosing any information relating to Genzyme
Tissue Repair or its business that they acquire in connection with their work
under the agreement. The agreement also states that all inventions that the
members conceive or reduce to practice during the course of the research program
will be Genzyme Tissue Repair's property, with royalties payable to the
inventing member. We cannot guarantee that these members will honor their
obligations under the sponsored research agreement.
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements about our:
- product development activities and projected expenditures;
- receipt of regulatory approvals;
- plans for sales and marketing;
- projected cash needs;
- financial results; and
- dividend policy.
These forward-looking statements involve a number of risks and uncertainties
that could cause actual results to differ materially from those suggested by the
forward-looking statements. Therefore, you should consider these forward-looking
statements in light of all of the information included or referred to in this
prospectus, including that set forth under the heading "Risk Factors."
Words such as "estimate," "project," "plan," "intend," "expect," "believe,"
"should," "may" and similar expressions are intended to identify forward-looking
statements. These forward-looking statements are found at various places
throughout this prospectus and the other documents incorporated by reference,
including, but not limited to, our Annual Report on Form 10-K for the year ended
December 31, 1999, including any amendments, and our Current Reports on
Form 8-K dated January 10, March 15, March 23, and June 30, 2000.
We caution you not to place undue reliance on these forward-looking
statements, which speak only as of the date of this prospectus. We do not
undertake any obligation to publicly update or release any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this prospectus or to reflect the occurrence of unanticipated events or
developments.
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USE OF PROCEEDS
Except as otherwise provided in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of the securities offered by this
prospectus for general corporate purposes, which may include the repayment,
refinancing, redemption or repurchase of existing indebtedness or capital stock,
working capital, capital expenditures, acquisitions of new technologies and
businesses and investments. Additional information on the use of net proceeds
from the sale of securities offered by this prospectus may be set forth in the
prospectus supplement relating to the specific offering.
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth our ratio of earnings to combined fixed
charges and preferred stock dividends on a historical basis for the periods
indicated. For purposes of this calculation, "earnings" consist of income (loss)
before income taxes and fixed charges. "Fixed charges" consist of interest,
amortization of debt issuance costs, preferred stock dividends and the component
of rental expense believed by management to be representative of the interest
factor on those amounts.
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED ENDED
--------------------------------------------------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1997 1998 1998 1999
-------- -------- ------------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges (1)(3)............... 2.6x 3.5x n/a 2.3x 4.4x 3.8x 3.7x
Ratio of Earnings to Fixed
Charges and Preferred Stock
Dividends (2)(3)............. 2.6x 3.5x n/a 2.3x 4.4x 3.8x 3.7x
Coverage Deficiency (3)........ n/a n/a $72.3 million n/a n/a n/a n/a
</TABLE>
------------------------
(1) The ratio of earnings to fixed charges is computed by dividing net income
(loss) before income taxes and extraordinary credits and fixed charges
(excluding interest capitalized during the period), by fixed charges.
(2) The ratio of earnings to fixed charges and preferred stock dividends is
computed by dividing net income (loss) before income taxes and extraordinary
credits and fixed charges (excluding interest capitalized during the
period), by fixed charges and preferred stock dividend requirements. The
preferred stock dividend requirements represent the pretax earnings which
would have been required to cover the dividend requirements on any preferred
stock outstanding. We did not have any preferred stock outstanding during
the periods presented above and accordingly there were no preferred stock
dividend requirements during these periods.
(3) The ratio of earnings to fixed charges is not presented for the year ended
December 31, 1996 because fixed charges in 1996 exceeded earnings by
$72.3 million due primarily to charges for in-process research and
development of $130.6 million.
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DESCRIPTION OF DEBT SECURITIES
We will issue the debt securities (the "Debt Securities") offered by this
prospectus and any accompanying prospectus supplement under an indenture (the
"Indenture") to be entered into between Genzyme and the trustee identified in
the applicable prospectus supplement (the "Trustee"). The terms of the Debt
Securities will include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as in effect on the
date of the Indenture. We have filed a copy of the proposed form of Indenture as
an exhibit to the registration statement in which this prospectus is included.
Each Indenture will be subject to and governed by the terms of the Trust
Indenture Act of 1939.
We may offer under this prospectus up to an aggregate principal amount of
$500,000,000 in Debt Securities. If Debt Securities are issued at a discount, or
in a foreign currency, foreign currency units or composite currency, the
principal amount as may be sold for an initial public offering price of up to
$500,000,000. Unless otherwise specified in the applicable prospectus
supplement, the Debt Securities will represent direct, unsecured obligations of
Genzyme and will rank equally with all of our other unsecured indebtedness.
The following statements relating to the Debt Securities and the Indenture
are summaries and do not purport to be complete, and are subject in their
entirety to the detailed provisions of the Indenture.
GENERAL
We may issue the Debt Securities in one or more series with the same or
various maturities, at par, at a premium, or at a discount. We will describe the
particular terms of each series of Debt Securities in a prospectus supplement
relating to that series, which we will file with the SEC. To review the terms of
a series of Debt Securities, you must refer to both the prospectus supplement
for the particular series and to the description of Debt Securities in this
prospectus.
The prospectus supplement will set forth the following terms of the Debt
Securities in respect of which this prospectus is delivered:
- the title of the series;
- the aggregate principal amount;
- the issue price or prices, expressed as a percentage of the aggregate
principal amount of the Debt Securities;
- any limit on the aggregate principal amount;
- the date or dates on which principal is payable;
- the interest rate or rates (which may be fixed or variable) or, if
applicable, the method used to determine such rate or rates;
- the date or dates from which interest, if any, will be payable and any
regular record date for the interest payable;
- the place or places where principal and, if applicable, premium and
interest, is payable;
- the terms and conditions upon which we may, or the holders may require us
to, redeem or repurchase the Debt Securities;
- the denominations in which such Debt Securities may be issuable, if other
than denominations of $1,000 or any integral multiple of that number;
- whether the Debt Securities are to be issuable in the form of certificated
Debt Securities (as described below) or global Debt Securities (as
described below);
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- the portion of principal amount that will be payable upon declaration of
acceleration of the maturity date if other than the principal amount of
the Debt Securities;
- the currency of denomination;
- the designation of the currency, currencies or currency units in which
payment of principal and, if applicable, premium and interest, will be
made;
- if payments of principal and, if applicable, premium or interest, on the
Debt Securities are to be made in one or more currencies or currency units
other than the currency of denomination, the manner in which the exchange
rate with respect to such payments will be determined;
- if amounts of principal and, if applicable, premium and interest may be
determined by reference to an index based on a currency or currencies or
by reference to a commodity, commodity index, stock exchange index or
financial index, then the manner in which such amounts will be determined;
- the provisions, if any, relating to any collateral provided for such Debt
Securities;
- any addition to or change in the covenants and/or the acceleration
provisions described in this prospectus or in the Indenture;
- any Events of Default, if not otherwise described in this prospectus under
"Events of Default";
- the terms and conditions for conversion into or exchange for shares of
common stock or preferred stock;
- any depositaries, interest rate calculation agents, exchange rate
calculation agents or other agents;
- the terms and conditions, if any, upon which the Debt Securities shall be
subordinated in right of payment to other indebtedness of Genzyme;
- if applicable, whether the Debt Securities will be defeasible; and
- any other terms, which may modify or delete any provision of the Indenture
insofar as it applies to the series.
We may issue discount Debt Securities ("Discount Securities") that provide
for an amount less than the stated principal amount to be due and payable upon
acceleration of the maturity of such Debt Securities in accordance to the terms
of the Indenture. We may also issue Debt Securities in bearer form, with or
without coupons. If we issue Discount Securities or Debt Securities in bearer
form, we will describe U.S. federal income tax considerations and other special
considerations which apply to these Debt Securities in the applicable prospectus
supplement.
We may issue Debt Securities denominated in or payable in a foreign currency
or currencies or a foreign currency unit or units. If we do, we will describe
the restrictions, elections, general tax considerations, specific terms and
other information relating to the Debt Securities and the foreign currency or
currencies or foreign currency unit or units in the applicable prospectus
supplement.
EXCHANGE AND/OR CONVERSION RIGHTS
We may issue Debt Securities which can be exchanged for or converted into
shares of GENZ Stock, GZMO Stock, GZSP Stock, GZTR Stock, other series of common
stock or preferred stock. If we do, we will describe the term of exchange or
conversion in the prospectus supplement relating to these Debt Securities.
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TRANSFER AND EXCHANGE
We may issue Debt Securities that will be represented by either:
- "book-entry securities," which means that there will be one or more global
securities registered in the name of The Depository Trust Company, as
Depository (the "Depository"), or a nominee of the Depository; or
- "certificated securities," which means that they will be represented by a
certificate issued in definitive registered form.
We will specify in the prospectus supplement applicable to a particular
offering whether the Debt Securities offered will be book-entry or certificated
securities. Except as set forth under "--Global Debt Securities and Book Entry
System" below, book-entry Debt Securities will not be issuable in certificated
form.
CERTIFICATED DEBT SECURITIES
If you hold certificated Debt Securities, you may transfer or exchange such
debt securities at the Trustee's office or at the paying agency in accordance
with the terms of the Indenture. You will not be charged a service charge for
any transfer or exchange of certificated Debt Securities, but may be required to
pay an amount sufficient to cover any tax or other governmental charge payable
in connection with such transfer or exchange.
You may effect the transfer of certificated Debt Securities and of the right
to receive the principal of, premium, and/or interest, if any, on the
certificated Debt Securities only by surrendering the certificate representing
the certificated Debt Securities and having us or the Trustee issue a new
certificate to the new holder.
GLOBAL DEBT SECURITIES AND BOOK ENTRY SYSTEM
The Depository has indicated that it would follow the procedures described
below to book-entry Debt Securities.
Beneficial interests in book-entry Debt Securities may be owned only by
participants that have accounts with the Depository for the related global Debt
Security or persons that hold interests through participants. Upon the issuance
of a global Debt Security, the Depository will credit, on its book-entry
registration and transfer system, each participants' account with the principal
amount of the book-entry Debt Securities represented by such global Debt
Security that is beneficially owned by the participant. The accounts to be
credited will be designated by any dealers, underwriters or agents participating
in the distribution of such book-entry Debt Securities. Ownership of book-entry
Debt Securities will be shown on, and the transfer of such ownership interests
will be effected only through, records maintained by the Depository for the
related global Debt Security (with respect to interests of participants) and on
the records of participants (with respect to interests of persons holding
through participants). The laws of some states may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. These laws may impair your ability to own, transfer or pledge beneficial
interests in book-entry Debt Securities.
So long as the Depository for a global Debt Security, or its nominee, is the
registered owner of a global Debt Security, the Depository or its nominee will
be considered the sole owner or holder of the book-entry Debt Securities
represented by the global Debt Security for all purposes under the Indenture.
Except as described below, beneficial owners of book-entry Debt Securities will
not be entitled to have such securities registered in their names, will not
receive or be entitled to receive physical delivery of a certificate in
definitive form representing the securities and will not be considered the
owners or holders of the securities under the Indenture. Accordingly, each
person who beneficially
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owns book-entry Debt Securities and desires to exercise its rights as a holder
under the Indenture, must rely on the procedures of the Depository for the
related global Debt Security. If a person is not a participant, they must rely
on the procedures of the participant through which they own their interest, to
exercise the rights.
We understand, however, that under existing industry practice, the
Depository will authorize the persons on whose behalf it holds a global Debt
Security to exercise certain rights of holders of Debt Securities. Genzyme, the
Trustee, and any of their agents, will treat as the holder of a Debt Security
the persons specified in a written statement of the Depository with respect to
the global Debt Security for purposes of obtaining any consents or directions
required to be given by holders of the Debt Securities under the Indenture.
Payments of principal and, if applicable, premium and interest, on
book-entry Debt Securities will be made to the Depository or its nominee, as the
case may be, as the registered holder of the related global Debt Security.
Genzyme and the Trustee, and any of their agents will not have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in such global Debt
Security or for maintaining, supervising or reviewing any records relating to
the beneficial ownership interests.
We expect that the Depository, upon receipt of any payment of principal of,
premium, if any, or interest, if any, on a global Debt Security, will
immediately credit participants' accounts with payments in amounts proportionate
to the amounts of book-entry Debt Securities held by each participant as shown
on the records of the Depository. We also expect that payments by participants
to owners of beneficial interests in book-entry Debt Securities held through the
participants will be governed by standing customer instructions and customary
practices, as is now the case with the securities held for the accounts of
customers in bearer form or registered in "street name." These payments will be
the responsibility of the participants.
If the Depository is at any time unwilling or unable to continue as
Depository or ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, we will appoint a successor Depository. If we do not
appoint a successor Depository registered as a clearing agency under the
Securities Exchange Act of 1934 within 90 days, we will issue certificated Debt
Securities in exchange for each global Debt Security. In addition, we may at any
time and in our sole discretion determine not to have the book-entry Debt
Securities of any series represented by one or more global Debt Securities. If
this happens, we will issue certificated Debt Securities in exchange for the
global Debt Securities of the effected series. Global Debt Securities will also
be exchangeable by the holders for certificated Debt Securities if an Event of
Default (see "Events of Default" below) with respect to the book-entry Debt
Securities represented by the global Debt Securities has occurred and is
continuing. Any certificated Debt Securities issued in exchange for a global
Debt Security will be registered in such name or names as the Depository shall
instruct the Trustee. We expect that such instructions will be based upon
directions received by the Depository from participants.
We obtained the information in this section concerning the Depository and
the Depository's book-entry system from sources we believe to be reliable, but
we do not take any responsibility for the accuracy of this information.
NO PROTECTION IN THE EVENT OF CHANGE OF CONTROL
The Indenture does not have any covenants or other provisions providing for
a put or increased interest or otherwise that would afford holders of Debt
Securities additional protection in the event of a recapitalization transaction,
a change of control of Genzyme or a highly leveraged transaction. If we offer
any covenants or provisions of this type with respect to any Debt Securities in
the future, we will describe them in the applicable prospectus supplement.
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COVENANTS
Unless otherwise indicated in this prospectus or a prospectus supplement,
the Debt Securities will not have the benefit of any covenants that limit or
restrict our business or operations, the pledging of our assets or the
incurrence by us of indebtedness. We will describe in the applicable prospectus
supplement any material covenants in respect of a series of Debt Securities.
With respect to any series of senior subordinated Debt Securities, we will
agree not to issue debt which is, expressly by its terms, subordinated in right
of payment to any other debt of Genzyme and which is not ranked on a parity
with, or subordinate and junior in right of payment to, the senior subordinated
Debt Securities.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We have agreed in the Indenture that we will not consolidate with or merge
into any other person or convey, transfer, sell or lease our properties and
assets substantially as an entirety to any person, unless:
- the person formed by the consolidation or into or with which we are merged
or the person to which our properties and assets are conveyed,
transferred, sold or leased, is a corporation organized and existing under
the laws of the U.S., any state or the District of Columbia or a
corporation or comparable legal entity organized under the laws of a
foreign jurisdiction and, if we are not the surviving person, the
surviving person has expressly assumed all of our obligations, including
the payment of the principal of and, premium, if any, and interest on the
Debt Securities and the performance of the other covenants under the
Indenture; and
- immediately after giving effect to the transaction, no event of default,
and no event which, after notice or lapse of time or both, would become an
Event of Default, has occurred and is continuing under the Indenture.
EVENTS OF DEFAULT
Unless otherwise specified in the applicable prospectus supplement, the
following events will be Events of Default under the Indenture with respect to
Debt Securities of any series:
- we fail to pay any principal of, or premium, if any, when it becomes due;
- we fail to pay any interest within 30 days after it becomes due;
- we fail to observe or perform any other covenant in the Debt Securities or
the Indenture for 60 days after written notice specifying the failure from
the Trustee or the holders of not less than 25% in aggregate principal
amount of the outstanding Debt Securities of that series;
- we are in default under one or more agreements, instruments, mortgages,
bonds, debentures or other evidences of indebtedness under which we or any
significant subsidiaries then has more than $25 million in outstanding
indebtedness, individually or in the aggregate, and either (a) the
indebtedness is already due and payable in full or (b) the default or
defaults have resulted in the acceleration of the maturity of such
indebtedness;
- any final judgment or judgments which can no longer be appealed for the
payment of more than $25 million in money (not covered by insurance) is
rendered against us or any of our significant subsidiaries and has not
been discharged for any period of 60 consecutive days during which a stay
of enforcement is not in effect; and
- certain events occur involving bankruptcy, insolvency or reorganization of
Genzyme or any of our significant subsidiaries.
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The Trustee may withhold notice to the holders of the Debt Securities of any
series of any default, except in payment of principal or premium, if any, or
interest on the Debt Securities of a series, if the Trustee considers it to be
in the best interest of the holders of the Debt Securities of that series to do
so.
If an Event of Default (other than an Event of Default resulting from
certain events of bankruptcy, insolvency or reorganization) occurs, and is
continuing, then the Trustee or the holders of not less than 25% in aggregate
principal amount of the outstanding Debt Securities of any series may accelerate
the maturity of the Debt Securities. If this happens, the entire principal
amount, plus the premium, if any, of all the outstanding Debt Securities of the
affected series plus accrued interest to the date of acceleration will be
immediately due and payable. At any time after the acceleration, but before a
judgment or decree based on such acceleration is obtained by the Trustee, the
holders of a majority in aggregate principal amount of outstanding Debt
Securities of such series may rescind and annul such acceleration if:
- all Events of Default (other than nonpayment of accelerated principal,
premium or interest) have been cured or waived;
- all overdue interest and overdue principal has been paid; and
- the rescission would not conflict with any judgment or decree.
In addition, if the acceleration occurs at any time when Genzyme has outstanding
indebtedness which is senior to the Debt Securities, the payment of the
principal amount of outstanding Debt Securities may be subordinated in right of
payment to the prior payment of any amounts due under the senior indebtedness,
in which case the holders of Debt Securities will be entitled to payment under
the terms prescribed in the instruments evidencing the senior indebtedness and
the Indenture.
If an Event of Default resulting from certain events of bankruptcy,
insolvency or reorganization occurs, the principal, premium and interest amount
with respect to all of the Debt Securities of any series will be due and payable
immediately without any declaration or other act on the part of the Trustee or
the holders of the Debt Securities of that series.
The holders of a majority in principal amount of the outstanding Debt
Securities of a series will have the right to waive any existing default or
compliance with any provision of the Indenture or the Debt Securities of that
series and to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, subject to certain limitations specified in
the Indenture.
No holder of any Debt Security of a series will have any right to institute
any proceeding with respect to the Indenture or for any remedy under the
Indenture, unless:
- the holder gives to the Trustee written notice of a continuing Event of
Default;
- the holders of at least 25% in aggregate principal amount of the
outstanding Debt Securities of the affected series make a written request
and offer reasonable indemnity to the Trustee to institute a proceeding as
trustee;
- the Trustee fails to institute a proceeding within 60 days of such
request; and
- the holders of a majority in aggregate principal amount of the outstanding
Debt Securities of the affected series do not give the Trustee a direction
inconsistent with such request during such 60-day period.
However, these limitations do not apply to a suit instituted for payment on
Debt Securities of any series on or after the due dates expressed in the Debt
Securities.
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MODIFICATION AND WAIVER
From time to time, we and the Trustee may, without the consent of holders of
the Debt Securities of one or more series, amend the Indenture or the Debt
Securities of one or more series, or supplement the Indenture, for certain
specified purposes, including:
- to provide that the surviving entity following a change of control of
Genzyme permitted under the Indenture will assume all of our obligations
under the Indenture and Debt Securities;
- to provide for uncertificated Debt Securities in addition to certificated
Debt Securities;
- to comply with any requirements of the SEC under the Trust Indenture Act
of 1939;
- to cure any ambiguity, defect or inconsistency, or make any other change
that does not materially and adversely affect the rights of any holder;
- to issue and establish the form and terms and conditions; and
- to appoint a successor Trustee under the Indenture with respect to one or
more series.
From time to time we and the trustee may, with the consent of holders of at
least a majority in principal amount of the outstanding Debt Securities, amend
or supplement the indenture or the Debt Securities, or waive compliance in a
particular instance by us with any provision of the indenture or the Debt
Securities. However, we may not, without the consent of each holder affected by
such action, modify or supplement the indenture or the Debt Securities or waive
compliance with any provision of the indenture or the Debt Securities in order
to:
- reduce the amount of Debt Securities whose holders must consent to an
amendment, supplement, or waiver to the Indenture or such Debt Security;
- reduce the rate of or change the time for payment of interest;
- reduce the principal of or premium on or change the stated maturity;
- make any Debt Security payable in money other than that stated in the Debt
Security;
- change the amount or time of any payment required or reduce the premium
payable upon any redemption, or change the time before which no such
redemption may be made;
- waive a default on the payment of the principal of, interest on, or
redemption payment; or
- take any other action otherwise prohibited by the Indenture to be taken
without the consent of each holder affected by the action.
DEFEASANCE OF DEBT SECURITIES AND CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
The Indenture permits us, at any time, to elect to discharge our obligations
with respect to one or more series of Debt Securities by following certain
procedures described in the Indenture. These procedures will allow us either:
- to defease and be discharged from any and all of our obligations with
respect to any Debt Securities except for the following obligations (which
discharge is referred to as "legal defeasance"):
(1) to register the transfer or exchange of such Debt Securities;
(2) to replace temporary or mutilated, destroyed, lost or stolen Debt
Securities;
(3) to compensate and indemnify the Trustee; or
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(4) to maintain an office or agency in respect of the Debt Securities and
to hold monies for payment in trust; or
- to be released from our obligations with respect to the Debt Securities
under certain covenants contained in the Indenture, as well as any
additional covenants which may be contained in the applicable supplemental
indenture (which release is referred to as "covenant defeasance").
In order to exercise either defeasance option, we must deposit with the
Trustee or other qualifying trustee, in trust for that purpose:
- money;
- U.S. Government Obligations (as described below) or Foreign Government
Obligations (as described below) which through the scheduled payment of
principal and interest in accordance with their terms will provide money;
or
- a combination of money and/or U.S. Government Obligations and/or Foreign
Government Obligations sufficient in the written opinion of a
nationally-recognized firm of independent accountants to provide money;
which in each case specified above, provides a sufficient amount to pay the
principal of, premium, if any, and interest, if any, on the Debt Securities of a
series, on the scheduled due dates or on a selected date of redemption in
accordance with the terms of the Indenture.
In addition, defeasance may be effected only if, among other things:
- in the case of either legal or covenant defeasance, we deliver to the
Trustee an opinion of counsel, as specified in the Indenture, stating that
as a result of the defeasance neither the trust nor the Trustee will be
required to register as an investment company under the Investment Company
Act of 1940;
- in the case of legal defeasance, we deliver to the Trustee an opinion of
counsel stating that we have received from, or there has been published
by, the Internal Revenue Service a ruling to the effect that, or there has
been a change in any applicable federal income tax law with the effect
that (and the opinion shall confirm that), the holders of outstanding Debt
Securities will not recognize income, gain or loss for U.S. federal income
tax purposes solely as a result of such legal defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same
manner, including as a result of prepayment, and at the same times as
would have been the case if legal defeasance had not occurred;
- in the case of covenant defeasance, we deliver to the Trustee an opinion
of counsel to the effect that the holders of the outstanding Debt
Securities will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of covenant defeasance and will be subject to
U.S. federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if covenant defeasance had not
occurred; and
- certain other conditions described in the Indenture are satisfied.
If we fail to comply with our remaining obligations under the Indenture and
applicable supplemental indenture after a covenant defeasance of the Indenture
and applicable supplemental indenture, and the Debt Securities are declared due
and payable because of the occurrence of any undefeased Event of Default, the
amount of money and/or U.S. Government Obligations and/or Foreign Government
Obligations on deposit with the Trustee could be insufficient to pay amounts due
under the Debt Securities of the affected series at the time of acceleration. We
will, however, remain liable in respect of these payments.
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The term "U.S. Government Obligations" as used in the above discussion means
securities which are direct obligations of or non-callable obligations
guaranteed by the United States of America for the payment of which obligation
or guarantee the full faith and credit of the United States of America is
pledged.
The term "Foreign Government Obligations" as used in the above discussion
means, with respect to Debt Securities of any series that are denominated in a
currency other than U.S. dollars (1) direct obligations of the government that
issued or caused to be issued such currency for the payment of which obligations
its full faith and credit is pledged or (2) obligations of a person controlled
or supervised by or acting as an agent or instrumentality of such government the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by that government, which in either case under clauses (1) or (2),
are not callable or redeemable at the option of the issuer.
REGARDING THE TRUSTEE
We will identify the Trustee with respect to any series of Debt Securities
in the prospectus supplement relating to the applicable Debt Securities. You
should note that if the Trustee becomes a creditor of the Company, the Indenture
and the Trust Indenture Act of 1939 limit the rights of the Trustee to obtain
payment of claims in certain cases, or to realize on certain property received
in respect of any such claim, as security or otherwise. The Trustee and its
affiliates may engage in, and will be permitted to continue to engage in, other
transactions with us and our affiliates. If, however, the Trustee, acquires any
"conflicting interest" within the meaning of the Trust Indenture Act of 1939, it
must eliminate such conflict or resign.
The holders of a majority in principal amount of the then outstanding Debt
Securities of any series may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee. If an Event of
Default occurs and is continuing, the Trustee, in the exercise of its rights and
powers, must use the degree of care and skill of a prudent person in the conduct
of his or her own affairs. Subject to that provision, the Trustee will be under
no obligation to exercise any of its rights or powers under the Indenture at the
request of any of the holders of the Debt Securities, unless they have offered
to the Trustee reasonable indemnity or security.
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DESCRIPTION OF PREFERRED STOCK
We currently have authorized 6,600,000 shares of undesignated preferred
stock, none of which were issued and outstanding as of the date of this
prospectus. Under Massachusetts law and our charter, our board is authorized,
without stockholder approval to issue shares of preferred stock from time to
time in one or more series.
Subject to limitations prescribed by Massachusetts law and our charter and
by-laws, the board can determine the number of shares constituting each series
of preferred stock and the designation, preferences, voting powers,
qualifications, and special or relative rights or privileges of that series.
These may include such provisions as may be desired concerning voting,
redemption, dividends, dissolution or the distribution of assets, conversion or
exchange, and other subjects or matters as may be fixed by resolution of the
board or an authorized committee of the board.
Our board could authorize the issuance of shares of preferred stock with
terms and conditions which could have the effect of discouraging a takeover or
other transaction which holders of some, or a majority, of these shares might
believe to be in their best interests or in which holders of some, or a
majority, of these shares might receive a premium for their shares over the
then-market price of the shares.
If we offer a specific series of preferred stock under this prospectus, we
will describe the terms of the preferred stock in the prospectus supplement for
such offering and will file a copy of the certificate establishing the terms of
the preferred stock with the SEC. This description will include:
- the title and stated value;
- the number of shares offered, the liquidation preference per share and the
purchase price;
- the dividend rate(s), period(s) and/or payment date(s), or method(s) of
calculation for such dividends;
- whether dividends will be cumulative or non-cumulative and, if cumulative,
the date from which dividends will accumulate;
- the procedures for any auction and remarketing, if any;
- the provisions for a sinking fund, if any;
- the provisions for redemption, if applicable;
- any listing of the preferred stock on any securities exchange or market;
- whether the preferred stock will be convertible into any series of Genzyme
common stock, and, if applicable, the conversion price (or how it will be
calculated) and conversion period;
- whether the preferred stock will be exchangeable into Debt Securities,
and, if applicable, the exchange price (or how it will be calculated) and
exchange period;
- voting rights, if any, of the preferred stock;
- whether interests in the preferred stock will be represented by depositary
shares;
- a discussion of any material and/or special U.S. federal income tax
considerations applicable to the preferred stock;
- the relative ranking and preferences of the preferred stock as to dividend
rights and rights upon liquidation, dissolution or winding up of the
affairs of the company;
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- any limitations on issuance of any class or series of preferred stock
ranking senior to or on a parity with the series of preferred stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
Genzyme; and
- any other specific terms, preferences, rights, limitations or restrictions
of the preferred stock.
The preferred stock offered by this prospectus will, when issued, be fully
paid and nonassessable and will not have, or be subject to, any preemptive or
similar rights.
Unless we specify otherwise in the applicable prospectus supplement, the
preferred stock will, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of Genzyme, rank as follows:
- senior to all classes or series of Genzyme common stock, and to all equity
securities issued by Genzyme the terms of which specifically provide that
they rank junior to the preferred stock with respect to those rights;
- on a parity with all equity securities issued by Genzyme that do not rank
senior or junior to the preferred stock with respect to those rights; and
- junior to all equity securities issued by Genzyme the terms of which do
not specifically provide that they rank on a parity with or junior to the
preferred stock with respect to these rights (including any entity with
which Genzyme may be merged or consolidated or to which all or
substantially all the assets of Genzyme may be transferred or which
transfers all or substantially all of the assets of Genzyme).
As used for these purposes, the term "equity securities" does not include
convertible debt securities.
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DESCRIPTION OF GENZYME COMMON STOCK
AUTHORIZED COMMON STOCK
We are authorized to issue 390,000,000 shares of common stock of which:
- 200,000,000 shares have been designated GENZ Stock;
- 40,000,000 shares have been designated GZMO Stock;
- 60,000,000 shares have been designated GZSP Stock;
- 40,000,000 shares have been designated GZTR Stock; and
- 50,000,000 remain undesignated as to series.
Under Massachusetts law and our charter, our board is authorized to issue
undesignated shares of common stock from time to time in one or more series.
Subject to limitations prescribed by Massachusetts law and our charter and
by-laws, the board may determine the number of shares constituting each series
of common stock and the designation, preferences, voting powers, qualifications,
and special or relative rights or privileges of that series. These may include
provisions concerning dividends, dissolution or the distribution of assets,
conversion or exchange, and other subjects or matters as may be fixed by
resolution of the board or an authorized committee of the board.
If we offer a specific series of newly designated common stock under this
prospectus, we will describe the terms of the common stock in the prospectus
supplement for such offering and will file a copy of the certificate
establishing the terms of the common stock with the SEC. This description will
describe:
- the title and stated value;
- the number of shares offered and the purchase price;
- the dividend rights;
- any listing of the common stock on any securities exchange or market;
- any conversion or exchange provisions;
- voting rights
- liquidation rights; and
- other specific terms, preferences, rights, limitations or restrictions of
the common stock.
We may also issue shares of GENZ Stock, GZMO Stock, GZSP Stock and GZTR
Stock. Below is a summary of the current terms of Genzyme common stock. For a
more complete understanding of the terms of our capital stock you should read
our charter and by-laws, which are incorporated by reference in this document.
See "Where You Can Find More Information" on page 61.
The common stock offered by this prospectus will, when issued, be fully paid
and nonassessable and will not have, or be subject to, any preemptive or similar
rights.
Throughout this description of our capital stock, unless otherwise stated,
the "fair market value" of any series of our common stock means its average per
share closing price for the 20 consecutive trading days beginning on the 30(th)
trading day before the shares are valued.
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OVERVIEW OF GENZYME'S "TRACKING STOCK" CAPITAL STRUCTURE
We have four series of common stock--GENZ Stock, GZMO Stock, GZSP Stock and
GZTR Stock--which we refer to as "tracking stock." Tracking stock is common
stock of Genzyme that, unlike typical common stock, is designed to track the
financial performance of a specific subset of our company's business operations
and its related pool of assets, rather than operations and assets of the entire
company. For instance, operations and assets dedicated to our cancer treatment
business are referred to as our Genzyme Molecular Oncology division. That
division is not a separate company or legal entity; consequently, the division
does not and could not issue stock. Instead, GZMO Stock is a series of Genzyme
common stock with terms intended to tie the value of the GZMO Stock primarily to
the operations and assets allocated to Genzyme Molecular Oncology.
Our current four divisions, and the tracking stocks intended to track those
divisions, are as follows:
- GENZ Stock is designed to reflect the value and track the performance of
the Genzyme General division;
- GZMO Stock is designed to reflect the value and track the performace of
the Genzyme Molecular Oncology division;
- GZSP Stock is designed to reflect the value and track the performace of
the Genzyme Surgical Products division; and
- GZTR Stock is designed to reflect the value and track the performace of
the Genzyme Tissue Repair division.
The chief mechanism intended to cause a series of our tracking stock to
track the financial performance of the stock's corresponding division are
provisions in our charter. Our charter, for example, limits the size of
potential dividends that our board would otherwise be permitted to declare on a
share of stock by reference to the net asset value and earnings and losses of a
particular division.
Our charter also contains a mandatory payment provision governing the GZMO
Stock, GZSP Stock and GZTR Stock. If all or substantially all of the assets
allocated to one of those divisions are sold to a third party, then we must
redeem or pay a dividend on the corresponding tracking stock. The redemption or
dividend payment must equal in value the net after-tax proceeds received from
the sale. Alternatively, rather than make a redemption or dividend payment, our
board can exchange the stock associated with the division for GENZ stock at a
10% premium to the tracking stock's average market price following announcement
of the sale.
We aid investors in evaluating the net worth and earnings performance of
each division by
- defining in our charter, those assets, liabilities and operations that
will initially comprise each division; and
- publishing quarterly financial statements that break out the assets and
liabilities and results of operations of each tracked division for the
reported periods.
The financial statements include audited annual and unaudited quarterly
financial statements and separate management's discussion and analysis for each
division and Genzyme Corporation.
The separate financial statements do not represent any physical segregation
of assets among divisions or separate division accounts. They are an accounting
presentation only, for the purpose of permitting investors to assess the
financial performance of the operations and assets allocated to each division.
Our board has also adopted a set of policies for handling financial
transactions among divisions and between divisions and third parties. The main
purpose of these policies is to provide for consistent
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management and accounting of transactions. The policies are also publicly
disclosed to assist investor financial analysis. Our board retains the
discretion to revise these policies at any time.
While tracking stock is designed to reflect a division's performance, it
remains common stock of our entire company. Therefore, a tracking stockholder is
a common stockholder subject to risks of investing in the business, assets and
liabilities of Genzyme as a whole. For instance, the assets devoted to each
division are subject to company-wide claims of creditors, product liability
plaintiffs and stockholder litigation. Also, in the event of a Genzyme
liquidation, insolvency or similar event, a tracking stockholder would have no
direct claim against the assets allocated to the tracked division; the
stockholder would only have the rights of a common stockholder in the combined
assets of Genzyme, subject also to the Genzyme charter's allocation of
liquidation units as discussed below under the heading "Liquidation Rights." See
also "RISK FACTORS--RISKS RELATED TO GENZYME TRACKING STOCKS--HOLDERS OF OUR
TRACKING STOCK ARE STOCKHOLDERS OF A SINGLE COMPANY AND UNFAVORABLE FINANCIAL
TRENDS AFFECTING ANOTHER DIVISION COULD NEGATIVELY AFFECT OUR OTHER DIVISIONS."
DIVIDENDS
We have never paid cash dividends on our stock. Currently, we intend to
retain our earnings to finance future growth. Therefore, we do not expect to pay
any cash dividends on our common stock in the near future.
We can declare and pay dividends on a series of its common stock only in
amounts permitted by our charter, and only if we have funds legally available
for that purpose. Under state law, we can pay a dividend if we are solvent,
would remain solvent after paying the dividend, and the payment would not
violate our charter. Subject to these limitations, our board may, in its sole
discretion, declare and pay dividends exclusively on any series of our common
stock in equal or unequal amounts.
Our charter sets the amount available for dividends payable on a tracking
stock. The amount available is the excess of either:
- the fair value of the net assets allocated to the tracking stock's
corresponding division; or, if greater,
- the equity amount initially allocated to that division as adjusted to
reflect:
-- the net income or loss attributable to the division;
-- any dividends or other distributions, including by reclassification or
exchange, declared or paid on shares of capital stock attributable to
the division, excluding those paid with a stock attributable to a
division to holders of that stock;
-- repurchases or issuances of capital stock attributed to the division;
and
-- any other adjustments made to stockholders' equity of the division
consistent with GAAP;
over the sum of:
- the total par value of all outstanding shares of capital stock attributed
to the division; and
- unless our charter permits otherwise, the total amount of preferential
payments that would be due to holders of preferred stock attributed to the
division, if any, upon our dissolution less that preferred stock's
aggregate par value and any amount needed by the division to pay debts
allocated to the divison as they become due.
If the above-described available dividend amount is less than would
otherwise be available under Massachusetts law, assuming that the division were
a separate corporation, then the greater amount permitted by law shall be the
available dividend amount.
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EXCHANGE OF GZMO STOCK, GZSP STOCK AND GZTR STOCK
We may exchange any series of our tracking stock, other than GENZ Stock, for
cash, securities, other property and/or GENZ Stock upon the terms described
below.
OPTIONAL EXCHANGE
Under our charter, our board may, at any time, exchange all outstanding
shares of GZMO Stock, GZSP Stock and/or GZTR Stock for any combination of cash
and/or GENZ Stock having a fair market value equal to 130% of the fair market
value of the series to be exchanged. Fair market value will be determined as of
the day we first publicly announce the exchange.
We could exercise the optional exchange at any future time if our board
determines that, considering current facts and circumstances, an equity
structure consisting of several series of common stock is no longer in the best
interests of all of our stockholders. We could make an exchange, however, at a
time that is disadvantageous to the holders of a particular series of its common
stock. Our board's right to exchange at any time all outstanding shares of GZMO
Stock, GZSP Stock or GZTR Stock for any combination of cash and/or GENZ Stock
with a fair market value 30% greater than the fair market value of the stock
being exchanged does not prevent our board from offering to exchange the shares
on other terms. Although the holders of the shares to be exchanged would have to
approve any alternative offer, we could make the offer on terms less favorable
than those of this optional exchange provision.
If at any time we receive an opinion of tax counsel that an "adverse tax
event" has occurred due to a "tax law change," we may exchange the GZMO Stock,
GZSP Stock or GZTR Stock for GENZ Stock, and not for cash, at its fair market
value. This means that the holders of the exchanged stock would not receive any
premium in the exchange.
The phrase "adverse tax event," with respect to any series of our common
stock, means an event making it more likely than not, for U.S. federal income
tax purposes, that:
- Genzyme or our stockholders are, or will be in the future, taxed upon
issuance of shares of that series; or
- shares of that series or of GENZ Stock are not, or will not be in the
future, treated solely as Genzyme's common stock.
The phrase "tax law change" means either:
- any enactment of or change in federal, state or other tax laws or
regulations, including any proposed changes announced by a legislative
committee or administrative agency; or
- any official or administrative pronouncement, action or judicial decision
interpreting or applying the tax laws or regulations.
For purposes of tax counsel's opinion, it may be assumed that any
legislative or administrative proposals will be adopted or enacted as proposed.
A third optional exchange provision provides that at any time at which all
of the assets allocated to a division (excluding Genzyme General) --and only
that division's assets-- are held by a wholly-owned subsidiary (or subsidiaries)
of Genzyme, our board can redeem all outstanding shares of the division's
corresponding tracking stock in exchange for the subsidiary's stock. This type
of transaction is commonly referred to as a "spin off" of a line of business to
existing shareholders. The end result, in the case of GZMO Stock, for example,
would be that Genzyme Molecular Oncology would exist as a separate corporate
entity, owned by stockholders who had formerly held GZMO Stock. If at the time
of the spin off, any shares of tracking stock corresponding to the spun off
division were designated for the benefit of Genzyme General, then an appropriate
number of shares of the spun off corporation would be issued to Genzyme and
allocated to Genzyme General.
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MANDATORY EXCHANGE
Under our charter, following the sale of all or substantially all of the
assets of Genzyme Molecular Oncology, Genzyme Surgical Product or Genzyme Tissue
Repair, as the case may be, our board would be required to authorize, chosen at
its sole discretion, one of the following mandatory payments to holders of the
tracking stock corresponding to the sold division:
- PAYMENT METHOD 1. A pro rata dividend payment of cash, securities (other
than Genzyme common stock) or other property to those tracking
stockholders in an amount equal to the after-tax net proceeds of the sale.
- PAYMENT METHOD 2. A redemption of all or a portion of the outstanding
stock corresponding to that division. If all of the assets allocated to
the division were sold, we would redeem all outstanding stock
corresponding to that division for cash, securities (other than Genzyme
common stock) or other property in an amount equal to the sale's net
proceeds. If substantially all (but not all) of the assets allocated to
that division were sold, we would redeem a pro rata portion of the stock
corresponding to that division in an amount equal to the sale's net
proceeds.
- PAYMENT METHOD 3. An exchange of each share of stock corresponding to
that division for shares of GENZ Stock equal to 110% of the average
closing price of the exchanged stock. The average closing price of each
stock would be calculated during the 10-day trading period beginning on
the fifth trading day AFTER our announcement of the sale's estimated net
proceeds.
Our board's decision may be made at any time prior to 20 business days after
the date on which we announce the estimated net proceeds received from the sale.
The redemption or dividend payment under methods 1 and 2 described above could
be in the form of cash, securities or other property, but not Genzyme common
stock, and need not be in the same form as the cash, securities and/or other
property paid by the third party purchasing the assets. An exchange under method
3, on the other hand, could be completed only with GENZ Stock.
To determine the amount of cash, securities or other property distributable
to stockholders after the sale of the associated division's assets, two
calculations would be made. First, the net proceeds of the sale would be
computed. Net proceeds would equal the gross proceeds of the sale, less taxes,
transactional costs, liabilities allocated to another Genzyme division because
of the sale, and amounts payable to any holders of preferred stock that
corresponds to the division. Second, the amount of net proceeds allocable for
distribution to the division's corresponding tracking stockholders would be
calculated. This amount is the product of the net proceeds multiplied by a
fraction. The fraction equals the outstanding shares of the division's
corresponding tracking stock divided by the sum of those outstanding shares plus
the shares corresponding to the division then designated for the benefit of
Genzyme General. (For an explanation of designated shares, see "GZMO Designated
Shares, GZSP Designated Shares and GZTR Designated Shares" below.)
In establishing the value of the cash, property and/or securities that
comprise the gross proceeds of a sale:
- cash will be valued at face value;
- securities will be valued at the average of their intra-day high and low
trading prices (or if there is no market for the security, at their fair
value determined by our board) on the date of the sale; and
- property, other than cash and securities, will be valued at its fair value
on the date of the sale, as determined by our board.
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Similarly, the value of cash, property and/or securities (other than GENZ
Stock distributed under Payment Method 3) distributed to stockholders will be
established in the same manner and as of the date of the sale. Interest earned
up until the record date on any cash net proceeds distributed to stockholders
will be included in that distribution payment.
Our board must announce the estimated net proceeds of the sale no later than
20 business days after the sale is completed. Within 20 business days following
that announcement, our board must choose and announce which of the three payment
methods it will use. Within 60 business days after the announcement of the
payment method selected, we must complete the distribution to the stockholders.
Under the terms of the GZMO Stock, GZSP Stock and GZTR Stock, there are four
types of asset sales that will not trigger a mandatory payment to stockholders:
- a sale of assets to an entity controlled, as determined by the board, by
Genzyme;
- a sale of assets primarily for equity in a buyer that our board determines
is engaged primarily in a business similar or complementary to that of the
division;
- a distribution to a division's corresponding tracking stockholders of
Genzyme's equity interest (which is allocated entirely to that division)
in one or more Genzyme subsidiaries that hold all of the assets allocated
to that division (and only those assets)--namely, a "spin off" of our
ownership of the division to that division's corresponding stockholders;
and
- a sale of a assets allocated to a division conditioned on the affirmative
vote of that division's corresponding stockholders voting together as a
single class.
TERMINATION OF CASH EXCHANGE FEATURE
Under our charter, if we receive an opinion of tax counsel at any time that,
because of a tax law change, our right to exchange GZMO Stock, GZSP Stock or
GZTR Stock for cash would cause an adverse tax event, then our board may by
majority vote elect to terminate our right to exchange that tracking stock for
cash. If our board elects to terminate this right, then we will only have the
right to exchange that tracking stock for GENZ Stock, and not for cash. In the
case of the mandatory exchange feature, elimination of the cash exchange right
will result in the mandatory exchange provision requiring us to exchange the
tracking stock corresponding to a division whose associated assets are being
sold into shares of GENZ Stock based on both stocks' fair market value as of the
date of the sale's announcement and at no premium.
VOTING RIGHTS
Stockholders of all series of our common stock vote together as one class on
all matters on which common stockholders generally are entitled to vote,
including the election of directors. The following chart shows the number of
votes per share to which each series of common stock is entitled on such
matters, as well as each series' relative voting power based on the number of
shares outstanding on June 28, 2000:
<TABLE>
<CAPTION>
NUMBER OF VOTES PER SHARE APPROXIMATE PERCENTAGE
SERIES SHARES OUTSTANDING (UNTIL DECEMBER 31, 2000) OF TOTAL VOTING POWER
------ ------------------ ------------------------- ----------------------
<S> <C> <C> <C>
GENZ Stock........................ 84,777,979 1.00 88.7%
GZMO Stock........................ 13,624,432 0.08 1.1
GZSP Stock........................ 14,900,715 0.61 9.4
GZTR Stock........................ 28,654,782 0.06 1.8
</TABLE>
You can calculate the percentage of a series' total voting power at any time, by
dividing that series' number of votes by the total number of votes held by all
series.
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On January 1, 2001 and on January 1st every two years afterward, our charter
requires us to adjust the number of votes per share to which GZMO Stock, GZSP
Stock and GZTR Stock are entitled as follows:
<TABLE>
<S> <C> <C>
fair market value of a share of GZMO Stock
Number of votes per = ---------------------------------------
share of GZMO Stock fair market value of a share of GENZ Stock
fair market value of a share of GZSP Stock
Number of votes per = ---------------------------------------
share of GZSP Stock fair market value of a share of GENZ Stock
fair market value of a share of GZTR Stock
Number of votes per = ---------------------------------------
share of GZTR Stock fair market value of a share of GENZ Stock
</TABLE>
If no shares of GENZ Stock are outstanding on that date, then of the series that
are outstanding, the one with the highest fair market value per share becomes
the "base" series. That series becomes the denominator in the formula above and
has one vote per share. Each other series then has the number of votes per share
determined under the above formulas, after replacing GENZ Stock in the
denominator with the new base series.
Our charter provides for adjustment of the voting rights of the GZMO Stock,
GZSP Stock and GZTR Stock to avoid dilution of any series' voting rights in the
event the outstanding shares of any series are subdivided or combined by stock
split, reverse stock split, reclassification or otherwise, or a stock dividend
or distribution is issued to stockholders of that series. If shares of only one
series are outstanding, or if shares of any series are entitled to vote
separately as a class, each share of that series will have one vote.
The purpose of the periodic adjustments to the relative voting rights of
each series is to ensure that a holder's voting rights more closely reflect the
market value of the holder's investment in Genzyme. These adjustments to voting
rights may influence the investment activities of an investor interested in
acquiring and maintaining a fixed percentage of Genzyme's voting power. The
adjustments will limit the ability of an investor in one series to obtain for
the same consideration more or less voting power per share than investors in
another series. If the relative market values of each series of common stock
change before the first adjustment or in between any adjustments an investor in
one series may acquire relatively more or less voting power for the same
consideration when compared with investors in another series.
While generally all our common stockholders vote together as a single class,
our charter requires that holders of a series affected by any of the following
proposals approve the proposal at a meeting at which both a quorum is present
and the votes in favor of the proposal exceed those against it:
- to allow any proceeds from a disposition of the properties or assets
allocated to a division to be used in the business of another division
without fair compensation;
- to allow any properties or assets allocated to a division to be used in
the business of another division or to declare or pay any dividend or
distribution on any series of common stock not attributed to that division
without fair compensation;
- to issue shares of any series of common stock without allocating the
proceeds of the issuance to the division represented by that series
except, however, for "designated" shares;
- to change the rights or preferences of any series in a manner that affects
the series adversely; or
- to effect any merger or business combination in which (a) stockholders of
all series together will no longer own, directly or indirectly, at least
fifty percent (50%) of the voting power of the surviving corporation, and
(b) stockholders of all series will not receive the same form of
consideration, distributed among stockholders in proportion to the market
capitalization of each
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series of our common stock as of the date of the first public announcement
of the merger or business combination.
If, however, we receive an opinion of tax counsel at any time that, because
of a tax law change, the special voting rights described above would cause an
adverse tax event, then we may, by vote of a majority of all of our common stock
outstanding voting as one class--without need of an additional, separate series
vote--eliminate the special voting rights of the GZMO Stock, GZSP Stock and/or
GZTR Stock.
Under Massachusetts law, any amendment to our charter that would adversely
alter or change the powers, preferences or special rights of any series of
common stock must be approved by a majority of the outstanding shares of each
affected series, voting together as a single class.
The following types of charter amendments are considered to adversely affect
a series of stock under Massachusetts law:
- alteration or abolishment any of any preferential right of stock having
preferences;
- creation, alteration or abolishment of any redemption right of the stock;
- alteration or abolishment of any preemptive right of the stock;
- creation or alteration (other than abolishment) of any restriction on
transfer of the stock; and
- exclusion or limitation of the stockholder's right to vote on a matter
except a limitation by virtue of voting rights given to new shares being
authorized of a new or existing class of stock.
Massachusetts law 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 require only the approval of a majority of all of our
outstanding capital stock entitled to vote and because the GENZ stockholders
currently have more than the number of votes required to approve a matter, GENZ
stockholders currently are in a position to control the outcome of most votes.
LIQUIDATION RIGHTS
If we voluntarily or involuntarily dissolve, liquidate or wind up our
affairs, common stockholders will be entitled to receive any net assets
remaining for distribution after we have satisfied or made provision for our
debts and obligations and for payment to any stockholders with preferential
rights to receive distributions of our net assets. We will distribute any
remaining assets to common stockholders on a per share basis in proportion to
each series' respective per share liquidation units. Common stockholders will
have no direct claim against any particular assets of Genzyme or its
subsidiaries. Each series has the following number of liquidation units per
share:
<TABLE>
<CAPTION>
NUMBER OF
SERIES LIQUIDATION UNITS
------ -----------------
<S> <C>
GENZ Stock.................................................. 100
GZMO Stock.................................................. 25
GZSP Stock.................................................. 61
GZTR Stock.................................................. 58
</TABLE>
We will adjust the liquidation units of the GZMO Stock, GZSP Stock and GZTR
Stock only to avoid dilution in the aggregate liquidation rights of any series
in the event the outstanding shares of any series are subdivided or combined by
stock split, reverse stock split, reclassification or otherwise, or a dividend
or distribution is given to stockholders of that series. A merger or business
combination or a sale of all or substantially all of our assets will not be
treated as a liquidation.
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We may not, however, without approval from each series voting as a separate
class, effect a merger or business combination involving Genzyme that results
in:
- stockholders of all series no longer owning, directly or indirectly, at
least 50% of the voting power of the surviving corporation; and
- stockholders of each series not receiving the same form of consideration
distributed among stockholders in proportion to the market capitalization
of each series of common stock as of the date of the first public
announcement of the merger or business combination.
GZMO DESIGNATED SHARES, GZSP DESIGNATED SHARES AND GZTR DESIGNATED SHARES
Designated shares are authorized but unissued shares which our board may
from time to time issue, sell or otherwise distribute without allocating the
proceeds or other benefits of the issuance, sale or distribution to the division
tracked by the shares. Until the shares are issued by our board, designated
shares are not outstanding shares of stock, and, therefore, may not receive
dividends and cannot be voted by Genzyme.
GZMO DESIGNATED SHARES
On June 30, 2000, there were 2,000,198 GZMO designated shares, which, if
issued, would represent 12.8% of the outstanding shares of GZMO Stock. The
number of GZMO designated shares from time to time will be:
- adjusted to reflect subdivisions or combinations by stock split, reverse
stock split or otherwise of the GZMO Stock and dividends or distributions
of shares of GZMO Stock to GZMO stockholders and other reclassifications
of GZMO Stock;
- decreased by
- the number of any designated shares of GZMO Stock that we issue;
- the number of any shares of GZMO Stock issued upon the exercise or
conversion of securities convertible into GZMO Stock that are
attributed to Genzyme General; and
- the number of any shares of GZMO Stock that we issue as a dividend or
distribution or by reclassification, exchange or otherwise to GENZ
stockholders; and
- increased by
- the number of any outstanding shares of GZMO Stock that we repurchase,
the consideration for which was paid by Genzyme General; and
- the number of shares of GZMO Stock equal to the fair value, as
determined by our board, of assets or properties allocated to Genzyme
General that are reallocated to Genzyme Molecular Oncology (excluding
reallocations that represent sales at fair value between those
divisions) divided by the fair market value of one share of GZMO Stock
on the date of that reallocation.
GZSP DESIGNATED SHARES
On June 30, 2000, there were 1,164,839 GZSP designated shares, which, if
issued, would represent 7.2% of the outstanding shares of GZSP Stock. The number
of GZSP designated shares from time to time may be:
- adjusted to reflect subdivisions or combinations by stock split, reverse
stock split or otherwise of the GZSP Stock and dividends or distributions
of shares of GZSP Stock to GZSP stockholders and other reclassifications
of GZSP Stock; and
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- decreased by
- the number of any designated shares of GZSP Stock that we issue;
- the number of any shares of GZSP Stock issued upon the exercise or
conversion of securities convertible into GZSP Stock that are
attributed to Genzyme General; and
- the number of any shares of GZSP Stock we issue as a dividend or
distribution or by reclassification, exchange or otherwise to GENZ
stockholders; and
- increased by
- the number of any outstanding shares of GZSP Stock that we repurchase,
the consideration for which was paid by Genzyme General;
- the number of shares of GZSP Stock equal to the fair value, as
determined by our board, of assets or properties allocated to Genzyme
General that are reallocated to Genzyme Surgical Products (excluding
reallocations that represent sales at fair value between those
divisions) divided by the fair market value of one share of GZSP Stock
as of the date of that reallocation; and
- the number of shares of GZSP Stock equal to (1) the aggregate fair
market value of any shares of GENZ Stock issued to the limited partners
of Genzyme Development Partners in connection with our exercise on
behalf of Genzyme Surgical Products of its purchase option to reacquire
all of the limited partnership interests of that partnership divided by
(2) the fair market value of one share of GZSP Stock on the date of the
exercise.
GZTR DESIGNATED SHARES
On June 30, 2000, there were 2,958,840 GZTR designated shares, which, if
issued, would represent 9.4% of the outstanding shares of GZTR Stock. The number
of GZTR designated shares from time to time will be:
- adjusted as appropriate to reflect subdivisions or combinations by stock
split, reverse stock split or otherwise of the GZTR Stock and dividends or
distributions of shares of GZTR Stock to GZTR stockholders and other
reclassifications of GZTR Stock; and
- decreased by
- the number of any designated shares of GZTR Stock that we issue;
- the number of any shares of GZTR Stock issued upon the exercise or
conversion of securities convertible into GZTR Stock that are
attributed to Genzyme General; and
- the number of any shares of GZTR Stock issued as a dividend or
distribution or by reclassification, exchange or otherwise to GENZ
stockholders; and
- increased by
- the number of any outstanding shares of GZTR Stock that we repurchase,
the consideration for which was paid by Genzyme General; and
- the number of shares of GZTR Stock equal to the fair value, as
determined by our board, of assets or properties allocated to Genzyme
General that are reallocated to Genzyme Tissue Repair (excluding
reallocations that represent sales at fair value between those
divisions), divided by the fair market value of one share of GZTR Stock
on the date of the reallocation.
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Our charter prohibits us from taking any action that would reduce the number
of designated shares of any series of common stock below zero.
DETERMINATIONS BY GENZYME'S BOARD
Any determination made by our board in good faith under any of the
provisions described above will be final and binding on all stockholders.
"ANTI-TAKEOVER" PROVISIONS
CONTRACTUAL MEASURES
Our charter and by-laws contain provisions that could discourage potential
takeover attempts and prevent stockholders from changing our management. For
example, our board is authorized to issue shares of common stock and preferred
stock in series, enlarge our board's size and fill any vacancies on our board.
Also, stockholders face restrictions on calling a special meeting of
stockholders, bringing business before an annual meeting and nominating
candidates for election as directors. We also have agreements with some of our
officers that contain change of control provisions.
In addition, we have a stockholder rights plan. Under the plan, each
outstanding share of our common stock carries with it a right, currently
unexercisable, that if triggered permits the holder to purchase large amounts of
our or any successor entity's securities at a discount and/or trade those
purchase rights separately from the common stock. The rights are triggered when
a person acquires, or makes a tender or exchange offer to acquire, 15% of our
common stock's voting power. The plan, however, prohibits the 15%-acquiror, or
its affiliates, from exercising its Genzyme shares' purchase rights. As a
result, the acquiror's interest in Genzyme is substantially diluted.
The rights are described more completely in a rights agreement between
Genzyme and American Stock Transfer & Trust Company as rights agent. The
agreement is an exhibit to our Form 8-A/A filed with the SEC on June 11, 1999,
and is incorporated in this document by reference.
BUSINESS COMBINATION STATUTE
Under the Massachusetts Business Combination statute, if a person acquires
5% or more of the outstanding voting stock of a Massachusetts corporation
without the approval of its board of directors, that person becomes an
interested stockholder and he or she may not engage in business combination
transactions with the corporation for three years. There are exceptions to this
prohibition, including:
- if the board of directors approves the acquisition of stock or the
transaction before the time that the person became an interested
stockholder;
- if the interested stockholder acquires 90% of the outstanding voting stock
of the company, excluding voting stock owned by directors who are also
officers and some employee stock plans, in one transaction; or
- if the transaction is approved by the board and by two-thirds of the
outstanding voting stock not owned by the interested stockholder.
We are subject to the Massachusetts Business Combination statute unless we
elect, with stockholder approval, not to be. We have not elected to be exempt
and do not currently intend to do so.
CONTROL SHARE ACQUISITION STATUTE
The Massachusetts Control Share Acquisition statute provides that each and
any time a person offers to acquire, or acquires, shares of stock permitting it
to control at least 20%, 33 1/3% or a majority
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of the voting power of a corporation, it cannot vote those acquired shares
unless the acquiror obtains the approval of a majority in interest of the shares
held by all stockholders, excluding shares held by the acquiror, officers of the
corporation, and directors who are also employees of the corporation. The
statute does not require that the acquiror have already purchased the shares
before the stockholder vote.
As permitted under Massachusetts law, we have elected not to be governed by
the Massachusetts Control Share Acquisition statute. However, the statute
permits our board to elect at a future date to be governed by the statute by
amending our by-laws accordingly. Any such amendment, however, would apply only
to acquisitions that occur after the effective date of the amendment.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company is the registrar and transfer agent
for each series of our common stock. Its telephone number is (212) 936-5100.
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DESCRIPTION OF WARRANTS
GENERAL
We may issue warrants to purchase Debt Securities (the "Debt Warrants"),
preferred stock (the "Preferred Stock Warrants") or one or more series of
Genzyme common stock (the "Common Stock Warrants" and, collectively with the
Debt Warrants and the Preferred Stock Warrants, the "Warrants"). Warrants may be
issued independently or together with any other securities offered by this
prospectus and may be attached to or separate from the other securities. If
Warrants are issued, they will be issued under warrant agreements to be entered
into between us and a bank or trust company, as warrant agent (the "Warrant
Agent"), all of which will be described in the prospectus supplement relating to
the Warrants being offered.
DEBT WARRANTS
We will describe the terms of the Debt Warrants offered in the applicable
prospectus supplement, the Warrant Agreement relating to the Debt Warrants and
the Debt Warrant certificates representing the Debt Warrants, including the
following:
- the title;
- the aggregate number offered;
- their issue price or prices;
- the designation, aggregate principal amount and terms of the Debt
Securities purchasable upon exercise, and the procedures and conditions
relating to exercise;
- the designation and terms of any related Debt Securities and the number of
such Debt Warrants issued with each Debt Security;
- the date, if any, on and after which the Debt Warrants and the related
Debt Securities will be separately transferable;
- the principal amount of Debt Securities purchasable upon exercise, and the
price at which such principal amount of Debt Securities may be purchased
upon exercise;
- the commencement and expiration dates of the right to exercise;
- the maximum or minimum number which may be exercised at any time;
- a discussion of the material U.S. federal income tax considerations
applicable to exercise; and
- any other terms, procedures and limitations relating to exercise.
Debt Warrant certificates will be exchangeable for new Debt Warrant
certificates of different denominations, and Debt Warrants may be exercised at
the corporate trust office of the Warrant Agent or any other office indicated in
the applicable prospectus supplement. Before exercising their Debt Warrants,
holders will not have any of the rights of holders of the securities purchasable
upon such exercise and will not be entitled to payments of principal of, or
premium, if any, or interest, if any, on the securities purchasable upon such
exercise.
OTHER WARRANTS
The applicable prospectus supplement will describe the following terms of
Preferred Stock Warrants or Common Stock Warrants offered under this prospectus:
- the title;
- the securities issuable upon exercise;
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- the issue price or prices;
- the number of such Warrants issued with each share of preferred stock or
common stock;
- any provisions for adjustment of (1) the number or amount of shares of
preferred stock or common stock receivable upon exercise of the Warrants
or (2) the exercise price;
- if applicable, the date on and after which the Warrants and the related
preferred stock or common stock will be separately transferable;
- if applicable, a discussion of the material U.S. federal income tax
considerations applicable to the exercise of the Warrants;
- any other terms, including terms, procedures and limitations relating to
exchange and exercise;
- the commencement and expiration dates of the right to exercise; and
- the maximum or minimum number which may be exercised at any time.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder to purchase for cash such principal
amount of Debt Securities or shares of preferred stock or common stock at the
applicable exercise price set forth in, or determined as described in, the
applicable prospectus supplement. Warrants may be exercised at any time up to
the close of business on the expiration date set forth in the applicable
prospectus supplement. After the close of business on the expiration date,
unexercised Warrants will become void.
Warrants may be exercised by delivering to the corporation trust office of
the Warrant Agent or any other officer indicated in the applicable prospectus
supplement (a) the Warrant certificate properly completed and duly executed and
(b) payment of the amount due upon exercise. As soon as practicable following
the exercise, we will forward the Debt Securities or shares of preferred stock
or common stock purchasable upon the exercise. If less than all of the Warrants
represented by a Warrant certificate are exercised, a new Warrant certificate
will be issued for the remaining Warrants.
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DESCRIPTION OF MANAGEMENT AND ACCOUNTING POLICIES
OVERVIEW
Because each of our operating divisions are part of a single company, our
board has adopted policies to address issues that may arise among divisions and
to govern the management of and the relationships between each division. The
issues addressed by the policies include:
- the financing of each division;
- competition among the divisions;
- inter-divisional business transactions;
- access to technology and know-how;
- corporate opportunities; and
- the allocation of debt, corporate overhead, interest, taxes and other
charges among the divisions.
We have summarized below the policies as they relate to our four divisions.
We recommend that you read the full text of the policies, which is contained in
Exhibit 3 to our current report on Form 8-K filed with the SEC on June 30, 2000.
With a few exceptions that are noted, our board may modify or rescind the
policies, or adopt additional policies, in its sole discretion without approval
of the stockholders, subject only to our board's fiduciary duty to our
stockholders.
PURPOSE OF GENZYME GENERAL, GENZYME MOLECULAR ONCOLOGY, GENZYME SURGICAL
PRODUCTS AND GENZYME TISSUE REPAIR
The purpose of Genzyme General is to develop and market therapeutic products
and diagnostic services and products. The purpose of Genzyme Molecular Oncology
is to create a focused, integrated oncology business that will develop and
commercialize novel therapeutic and diagnostic products and services based on
molecular tools and genomic information. The purpose of Genzyme Surgical
Products is to create a business with a comprehensive approach to and portfolio
of devices, biomaterials, biotherapeutics and other products for the field of
biosurgery. The purpose of Genzyme Tissue Repair 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). In addition to the programs initially assigned to each of
the divisions, we expect 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
outside of Genzyme. We will operate and manage each of the divisions similarly
to Genzyme General except as provided in these policies.
REVENUE ALLOCATION AND RECOGNITION
We credit revenues received from third parties in connection with the
products and services allocated to a particular division. When products and
services that are normally sold by a division to third parties are used by other
divisions, we record interdivisional revenue and interdivisional purchases,
which we describe in detail in our policy "Other Interdivisional Transactions."
EXPENSE ALLOCATION
We charge all direct expenses to the division that has incurred the
expenses. Our policy "Other Interdivisional Transactions" addresses expenses
other than direct expenses.
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ASSET ALLOCATION
We allocate assets that are exclusively dedicated to the production of goods
and services of a particular division to that division. We address the use of
production assets by more than one division in our policy "Other Interdivisional
Transactions."
TAX ALLOCATIONS
We allocate income taxes to each division based upon the financial statement
income, taxable income, credits and other amounts properly allocable to it under
generally accepted accounting principles as if it were a separate taxpayer. As
of the end of any fiscal quarter, however, if a division cannot use any
projected annual tax benefit attributable to it to offset or reduce its current
or deferred income tax expense, we may allocate the tax benefit to the other
divisions in proportion to their taxable income without any compensating payment
or allocation.
ACQUISITIONS OF PROGRAMS, PRODUCTS OR ASSETS
If we acquire any programs, products or assets from a third party, we will
allocate among our divisions the aggregate cost of the acquisition and the
programs, products or assets acquired. In the case of material acquisitions, we
will make the allocation in a manner that our board determines to be fair and
reasonable to each division and to holders of the common stock representing each
division, taking into account matters that our board and its financial advisors,
if any, deem relevant. Our policies provide that the determinations by our board
will be final and binding on all holders of common stock.
DISPOSITION OF PROGRAMS, PRODUCTS OR ASSETS
If we dispose of any programs, products or assets that do not consist of all
or substantially all of the assets allocated to a division, we will allocate all
proceeds to the division to which the program, product or asset had been
allocated. If a program, product or asset was allocated to more than one
division, we will allocate the proceeds among the divisions based on their
interests in the program, product or asset. We will make the allocation in a
manner that our board determines to be fair and reasonable to each of the
divisions and to holders of the common stock representing each of the divisions,
taking into account matters that our board and its financial advisors, if any,
deem relevant. Our policies provide that the determinations by our board will be
final and binding on all holders of common stock.
INTERDIVISIONAL ASSET TRANSFERS
Our board may at any time reallocate any program, product or other asset
from one division to any other division. We will make reallocations at fair
market value, determined by our board, taking into account the following
criteria in the case of a program under development:
- the commercial potential of the program;
- the phase of clinical development of the program;
- the expenses associated with realizing any income from the program and the
likelihood and timing of the realization; and
- other matters that our board and its financial advisors, if any, deem
relevant.
One division may pay another division the consideration for a reallocation
in cash or other consideration with a value equal to the fair market value of
the reallocated assets. In the case of a reallocation of assets from Genzyme
General to another division, our board may elect instead to account for the
reallocation as an increase in the designated shares representing the division
to which the assets are reallocated in accordance with the provisions of our
charter.
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These policies regarding transfers of assets between divisions will not be
changed by our board without the approval of the holders of the common stock
representing each of the divisions voting as a separate class. If, however, the
policy change affects one or more, but not all of the divisions, only holders of
shares of the affected division(s) will be entitled to vote on the matter.
OTHER INTERDIVISIONAL TRANSACTIONS
Our divisions 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. These transactions may include agreements by one division to provide
products and services for use by another division, license agreements and joint
ventures or other collaborative arrangements involving more than one division to
develop new products and services jointly and with third parties. The division
providing the products or services does not recognize revenue unless the
division provides those products or services to unrelated third parties as part
of its ordinary conduct of business. The transactions will be subject to the
following conditions:
- We will charge research and development (including clinical and regulatory
support), distribution, sales, marketing, and general and administrative
services (including allocated space) performed by one division for another
division to the division for which the services are performed on a cost
basis. We charge all direct expenses to the division that has incurred the
expenses. We will allocate direct labor and indirect costs in reasonable
and consistent manners based on the use by a division of relevant
services.
- We will charge the manufacturing of goods and services by one division
exclusively for another division to the division for which it is performed
on a cost basis. We will include in manufacturing costs an interest charge
on the gross fixed assets used in the manufacturing process. We will
determine gross fixed assets for the facility used at the beginning of
each fiscal year. The interest rate will be our short term borrowing rate
at the beginning of each fiscal year. We will allocate direct labor and
indirect costs in reasonable and consistent manners based on the benefit
received by a division of related goods and services.
- Other than transactions involving research and development, distribution,
sales, marketing, general and administrative services, which are addressed
above, all interdivisional transactions will be on terms and conditions
obtainable in arm's length transactions with third parties.
- Our board must approve interdivisional transactions that are performed on
terms and conditions other than as described above and that are material
to one or more of the participating divisions. In giving its approval, our
board must determine that the transaction is fair and reasonable to each
participating division and to holders of the common stock representing
each participating division.
- Divisions may make loans to other divisions. Any 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 a similar type and
duration. Our board must approve any loan in excess of $1 million. In
giving its approval, our board must determine 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 each such division.
- All material interdivisional transactions will be set forth in a written
agreement signed by an authorized member of the management team of each
division involved in the transaction.
ACCESS TO TECHNOLOGY AND KNOW-HOW
Each division will have unrestricted access to all of our technology and
know-how that may be useful in that division's business, subject to any
obligations or limitations that apply to us.
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DISPOSITION OF DESIGNATED SHARES OF GZMO STOCK, GZSP STOCK, AND GZTR STOCK
Our Board may from time to time and in its sole discretion dispose of
designated shares of GZMO Stock, GZSP Stock, and GZTR Stock in the following
manner:
- issue the designated shares upon the exercise or conversion of outstanding
stock options, warrants or convertible securities allocated to Genzyme
General;
- sell the designated shares for any valid purpose, subject to the
restrictions set forth in our policy entitled "Issuance and Sale of
Additional Shares of Common Stock," which is set forth below; and
- distribute the designated shares as a dividend to the holders of shares of
GENZ Stock.
GZMO DESIGNATED SHARES. We will distribute substantially all of the
designated shares of GZMO Stock to holders of record of GENZ Stock, if as of
November 30 of each year, the number of GZMO designated shares exceeds 10% of
the number of shares of GZMO stock then issued and outstanding. We will,
however, reserve for issuance a number of shares equal to the sum of:
- the number of GZMO designated shares reserved for issuance with respect to
securities convertible into GENZ Stock which include stock options, stock
purchase rights, warrants or other securities convertible into or
exercisable for shares of GENZ Stock then outstanding as a result of
anti-dilution adjustments required by the terms of these instruments or
approved by our board, plus
- the number of GZMO designated shares reserved by our Board as of that date
for sale not later than six months afterwards, with the proceeds to be
allocated to Genzyme General.
GZSP DESIGNATED SHARES. We will distribute substantially all of the
designated shares of GZSP Stock to holders of record of GENZ Stock if, as of
June 30 of each year, starting on June 30, 2000 the number of GZSP designated
shares exceeds 10% of the number of shares of GZSP Stock then issued and
outstanding. We will, however, reserve a number of shares equal to the sum of:
- the number of GZSP designated shares reserved for issuance with respect to
securities convertible into GENZ Stock which then outstanding as a result
of anti-dilution adjustments required by the terms of these instruments or
approved by our board, plus
- the number of GZSP designated shares reserved by our board as of that date
for sale not later than six months afterwards, with the proceeds to be
allocated to Genzyme General.
GZTR DESIGNATED SHARES. We will distribute substantially all designated
shares of GZTR Stock to holders of record of GENZ Stock, if as of May 31 of each
year, the number of GZTR designated shares exceeds 10% of the number of shares
of GZTR stock then issued and outstanding. We will, however, reserve for
issuance a number of shares equal to the sum of:
- the number of GZTR designated shares reserved for issuance with respect to
securities convertible into GENZ Stock then outstanding as a result of
anti-dilution adjustments required by the terms of these instruments or
approved by our board, plus
- the number of GZTR designated shares reserved by our Board as of that date
for sale not later than six months afterwards, with the proceeds to be
allocated to Genzyme General.
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ISSUANCE AND SALE OF ADDITIONAL SHARES OF COMMON STOCK
When we issue additional shares of our common stock, we will identify both:
- the number of shares issued and sold for the account of the division to
which they relate and the corresponding proceeds, which we will allocate
to and reflect in the financial statements of that division; and
- the number of shares issued and sold for the account of Genzyme General,
which will reduce the number of designated shares of that division.
We will not, however, sell any designated shares of a division, 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 GZSP Stock, GZMO
Stock, or GZTR Stock paid to holders of GENZ Stock, unless either:
- our board determines that the division has sufficient cash to fund its
operations for at least the next 12 months; or
- we are then selling shares of a division for its own account in an amount
that will produce proceeds sufficient to fund that division's cash needs
for the next 12 months.
OPEN MARKET PURCHASES OF SHARES OF COMMON STOCK
We may purchase our common stock in the open market in accordance with
applicable securities law requirements. We will not, however, purchase our GZMO
Stock, GZSP Stock or GZTR Stock if, as an immediate result, the number of
designated shares will exceed 60% of the sum of the number of that series'
shares outstanding and the number of its designated shares. Additionally, we may
not, within 90 days of any open market purchase of shares of any of those
series, exercise the right provided under our charter to exchange shares of that
series for cash and/or shares of GENZ Stock.
CLASS VOTING
Where we have provided that the approval of the holders of a series of our
tracking stock is required to take any action pursuant to these policies or our
charter, the requirement may be satisfied if the action is approved by a
majority of the votes cast at a meeting of that series at which a quorum is
present. This is in addition to any stockholder approval required by
Massachusetts law.
NON-COMPETE
Our divisions may not materially engage in each other's principal businesses
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. These permissible transactions are subject to the conditions set
forth above in our policy entitled "Interdivisional Asset Transfers". The
divisions may compete in a business which is not a principal business of another
division. Our board may determine in its good faith business judgment whether
particular activities of one division constitute a material engagement in the
principal businesses of another division.
CORPORATE OPPORTUNITIES
Our board will review any matter which involves the allocation of a material
corporate opportunity to any of the divisions, or in part to one division and in
part to another division. Our board will make its determination with regard to
the allocation and benefit of an opportunity in accordance with its good faith
business judgment of the best interests of Genzyme and all of its stockholders
as a whole. In making this allocation, our board may consider, among other
factors:
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- whether a particular corporate opportunity is principally related to the
business of a particular division;
- whether one division, because of its managerial or operational expertise,
will be better positioned to undertake the corporate opportunity;
- whether one division, because of its allocated financial resources, will
be better positioned to undertake the corporate opportunity; and
- existing contractual agreements and restrictions.
PLAN OF DISTRIBUTION
We may sell the securities being offered by us in this prospectus:
- directly to purchasers;
- through agents;
- through dealers;
- through underwriters; or
- through a combination of any of these methods of sale.
We and our agents and underwriters may sell the securities being offered by
us in this prospectus from time to time in one or more transactions:
- at a fixed price or prices, which may be changed;
- at market prices prevailing at the time of sale;
- at prices related to such prevailing market prices; or
- at negotiated prices.
We may solicit directly offers to purchase securities. We may also designate
agents from time to time to solicit offers to purchase securities. Any agent
that we designate, who may be deemed to be an "underwriter" as that term is
defined in the Securities Act of 1933, may then resell such securities to the
public at varying prices to be determined by such agent at the time of resale.
If we use underwriters to sell securities, we will enter into an
underwriting agreement with the underwriters at the time of the sale to them.
The names of the underwriters will be set forth in the prospectus supplement
which will be used by them together with this prospectus to make resales of the
securities to the public. In connection with the sale of the securities offered,
the underwriters may be deemed to have received compensation from us in the form
of underwriting discounts or commissions. Underwriters may also receive
commissions from purchasers of the securities.
Underwriters may also use dealers to sell securities. If this happens, the
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents.
Any underwriting compensation paid by us to underwriters in connection with
the offering of the securities offered in this prospectus, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable prospectus supplement.
Underwriters, dealers, agents and other persons may be entitled, under
agreements that may be entered into with us, to indemnification by us against
certain civil liabilities, including liabilities under the Securities Act of
1933, or to contribution with respect to payments which they may be required to
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make in respect of such liabilities. Underwriters and agents may engage in
transactions with, or perform services for, us in the ordinary course of
business.
If so indicated in the applicable prospectus supplement, we will authorize
underwriters, dealers, or other persons to solicit offers by certain
institutions to purchase the securities offered by us under this prospectus
pursuant to contracts providing for payment and delivery on a future date or
dates. The obligations of any purchaser under these contracts will be subject
only to those conditions described in the applicable prospectus supplement, and
the prospectus supplement will set forth the price to be paid for securities
pursuant to those contracts and the commissions payable for solicitation of the
contracts.
Any underwriter may engage in over-allotment, stabilizing and syndicate
short covering transactions and penalty bids in accordance with Regulation M of
the Securities Exchange Act of 1934. Over-allotment involves sales in excess of
the offering size, which creates a short position. Stabilizing transactions
involve bids to purchase the underlying security so long as the stabilizing bids
do not exceed a specified maximum. Syndicate short covering transactions involve
purchases of securities in the open market after the distribution has been
completed in order to cover syndicate short positions. Penalty bids permit the
underwriters to reclaim selling concessions from dealers when the securities
originally sold by such dealers are purchased in covering transactions to cover
syndicate short positions. These transactions may cause the price of the
securities sold in an offering to be higher than it would otherwise be. These
transactions, if commenced, may be discontinued by the underwriters at any time.
Each series of securities offered under this prospectus will be a new issue
with no established trading market, other than the GENZ Stock, GZMO Stock, GZSP
Stock and GZTR Stock, which are each listed on the Nasdaq National Market. Any
shares of GENZ Stock, GZMO Stock, GZSP Stock, GZTR Stock or other series of
Genzyme Common Stock sold pursuant to a prospectus supplement will be listed on
the Nasdaq National Market or on the exchange on which the series of stock
offered is then listed, subject to official notice of issuance. Any underwriters
to whom we sell securities for public offering and sale may make a market in the
securities that they purchase, but the underwriters will not be obligated to do
so and may discontinue any market making at any time without notice. We may
elect to list any of the securities we may offer from time to time for trading
on an exchange or on the Nasdaq National Market, but we are not obligated to do
so.
The anticipated date of delivery of the securities offered hereby will be
set forth in the applicable prospectus supplement relating to each offering.
LEGAL MATTERS
Our counsel, Palmer & Dodge LLP, Boston, Massachusetts, will give us an
opinion on the legality and validity of the securities offered by this
prospectus and any accompanying prospectus supplement.
EXPERTS
The financial statements of Genzyme Corporation, Genzyme Molecular Oncology
and Genzyme Tissue Repair incorporated in this prospectus by reference to the
Annual Report on Form 10-K for the year ended December 31, 1999, as amended, and
the financial statements of the Genzyme Retirement Savings Plan incorporated in
this prospectus by reference to the Form 10-K/A as filed on June 28, 2000 have
been so incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information that we file with the SEC at the SEC's public reference rooms at the
following locations:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, 7 World Trade Center Citicorp Center
N.W Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</TABLE>
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. These SEC filings are also available to the public from
commercial document retrieval services and at the Internet world wide web site
maintained by the SEC at "http://www.sec.gov." Reports, proxy statements and
other information concerning Genzyme may also be inspected at the offices of The
Nasdaq Stock Market, which is located at 1735 K Street, N.W., Washington, D.C.
20006.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we disclose important information to you by
referring you to other documents that we filed separately with the SEC. The
information incorporated by reference is considered part of this prospectus, and
information that we file later with the SEC will automatically update and
supersede this information.
This prospectus incorporates by reference the documents set forth below that
we have previously filed with the SEC. These documents contain important
business and financial information about us that is not included in or delivered
with this prospectus.
<TABLE>
<CAPTION>
FILINGS (FILE NO. 0-14680) DATE FILED
-------------------------- ---------------------------------------------
<S> <C>
Annual Report on Form 10-K Filed on March 30, 2000 as amended by
Amendment No. 1 on Form 10-K/A filed on
June 28, 2000
Quarterly Reports on Form 10-Q Filed on May 15, 2000
Current Reports on Form 8-K Filed on January 10, 2000, March 15, 2000,
March 23, 2000 and June 30, 2000
Proxy Statement on Schedule 14A Filed on April 18, 2000
The description of GENZ Stock, GZMO Stock and Filed on June 30, 2000
GZTR Stock contained in Genzyme's
Registration Statement on Form 8-A/A
The description of GENZ Stock purchase Filed on June 11, 1999
rights, GZMO Stock purchase rights, GZSP
Stock purchase rights and GZTR Stock purchase
rights contained in Genzyme's Registration
Statement on Form 8-A/A
The description of GZSP Stock contained in Filed on June 30, 2000
Genzyme's Registration Statement on Form
8-A/A
</TABLE>
We also incorporate by reference additional documents that we may file with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
sale of all of the securities covered
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by this prospectus. These include periodic reports, such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
Documents incorporated by reference are available from us without charge,
excluding all exhibits, except that if we have specifically incorporated by
reference an exhibit in this prospectus, the exhibit will also be provided
without charge. You may obtain documents incorporated by reference in this
prospectus by requesting them in writing or by telephone from us at the
following address and telephone number.
Genzyme Corporation
Shareholder Relations
One Kendall Square
Cambridge, Massachusetts 02139
(617) 252-7526
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information that is different from what is contained in this prospectus. This
prospectus is dated July 14, 2000. You should not assume that the information
contained in this prospectus is accurate as of any date other than that date.
Neither the delivery of this prospectus nor the sale of securities creates any
implication to the contrary.
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