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Prospectus Supplement to Filed Pursuant to Rule 424(b)(3)
Prospectus dated October 12, 1999 Registration Number 333-87449
617,200 SHARES OF GENZYME MOLECULAR ONCOLOGY DIVISION
COMMON STOCK
Genzyme Molecular Oncology Division Common Stock trades on the Nasdaq
National Market under the symbol "GZMO." We refer to this stock as GZMO Stock.
On March 2, 2000 the last sale price for GZMO Stock reported by Nasdaq was
$27.75.
This prospectus relates to sales of up to 617,200 shares of GZMO Stock
by Canadian Medical Discoveries Fund Inc. Canadian Medical Discoveries Fund
acquired these shares when we purchased one-half of its interest in
StressGen/Genzyme LLC.
We will not receive any portion of the proceeds from sales of the
shares.
INVESTING IN SHARES OF GZMO STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER CAREFULLY THE "RISK FACTORS RELATING TO GZMO STOCK" BEGINNING ON PAGE
6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
You should rely only on the information included in this prospectus. We
have not authorized anyone to provide you with different information. You should
not assume that the information in this prospectus is accurate as of any date
other than the date below.
THE DATE OF THIS PROSPECTUS IS MARCH 7, 2000.
GENZYME CORPORATION - ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139 -
(617) 252-7500
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TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
Genzyme Corporation.........................................................3
Where You Can Find More Information.........................................4
Risk Factors Relating to GZMO Stock.........................................6
Selling Securityholder.....................................................18
Plan of Distribution.......................................................19
Legal Matters..............................................................20
Experts....................................................................20
</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
We refer to these series of common stock in this prospectus by their
Nasdaq trading symbols:
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<CAPTION>
SERIES OF COMMON STOCK NASDAQ TRADING SYMBOL
<S> <C>
Genzyme General Division Common Stock GENZ
Genzyme Molecular Oncology Division Common Stock GZMO
Genzyme Surgical Products Division Common Stock GZSP
Genzyme Tissue Repair Division Common Stock GZTR
</TABLE>
For purposes of financial presentation, we allocate programs, products,
assets and liabilities among our divisions; however, Genzyme, the corporation,
continues to own all of the assets and is responsible for all of the liabilities
allocated to each of the divisions.
In this prospectus, the words "we," "us," "our" and "Genzyme" refer to
Genzyme Corporation and all of its business 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.
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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:
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<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 31, 1999 (except for the
financial statements on pages 2-31 of
Exhibit 13.1, which we restated and
filed on June 30, 1999 as Exhibit 99 to
our Form 8-K), as amended by Amendment
No. 1 on Form 10-K/A filed on June 30,
1999
Quarterly Reports on Form 10-Q Filed on May 17, 1999 (except for pages
4-9 and 26-28 to the extent the
financial statements and related
discussion relates to Genzyme General,
which we restated and filed on June 30,
1999 as Exhibit 99 to our Form 8-K),
August 16, 1999 and November 15, 1999.
Current Reports on Form 8-K Filed on March 17, 1999, June 11, 1999,
June 30, 1999, October 21, 1999 and
January 10, 2000
Proxy Statement on Schedule 14A Filed on April 16, 1999
The description of GZMO Stock Filed on June 18, 1997
contained in Genzyme's
Registration Statement on Form 8-A
The description of GZMO Stock Filed on June 11, 1999
purchase rights contained in
Genzyme's Registration Statement
on Form 8-A/A
</TABLE>
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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 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 March 7, 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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RISK FACTORS RELATING TO GZMO STOCK
The following are risks associated with owning shares of GZMO Stock.
You should keep these risk factors in mind when you read
forward-looking statements. These are statements that relate to future periods
and include statements about:
- product development activities and projected expenditures;
- receipt of regulatory approvals;
- plans for sales and marketing;
- projected cash needs;
- financial results; and
- dividend policy.
Generally, the words "anticipates," "expects," "believes," "intends,"
"could," "may" and similar expressions identify forward-looking statements.
Forward-looking statements involve risks and uncertainties, and our actual
results could differ significantly from results discussed in the forward-looking
statements.
A. RISKS RELATED TO GENZYME TRACKING STOCK
GZMO Stock is one of four series of Genzyme tracking stock. The
following are risks related to owning shares of our tracking stock.
HOLDERS OF OUR TRACKING STOCK ARE STOCKHOLDERS OF A SINGLE COMPANY AND
UNFAVORABLE FINANCIAL TRENDS AFFECTING ONE DIVISION COULD NEGATIVELY AFFECT OUR
OTHER DIVISIONS.
Neither Genzyme Molecular Oncology nor our other divisions are separate
legal entities. Holders of GZMO Stock, together with holders of our other series
of 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 GZMO Stock, for
example, does not have any specific rights to the assets allocated to Genzyme
Molecular Oncology 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. You should read both our consolidated
financial statements and the financial statements of Genzyme Molecular
Oncology 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 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. Based on the advice of counsel,
however, we believe 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
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Massachusetts law, if a disinterested and adequately informed board of directors
determines in good 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 such 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 concluded 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
articles of organization 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 holders of GENZ Stock hold a large majority of the
stockholders' voting power. Consequently, on matters requiring common
stockholder approval, the holders of GENZ Stock are likely to decide the
outcome.
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;
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- 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 ITS 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 our 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. We encourage you to review the full
text of our management and accounting policies, which are included in Exhibit
99.1 to the Registration Statement on Form S-3 that we filed with the SEC on
March 3, 2000.
WE MAY ELIMINATE TRACKING STOCK IF A CORPORATE OR SHAREHOLDER 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. More
recently, the Clinton Administration has proposed legislation that would tax
stockholders upon the receipt of tracking stock from the issuing corporation
as a distribution or in a recapitalization. Although Congress has not enacted
either of these proposals into law, if these or similar proposals are enacted
into law or effected through Treasury regulations, we could be taxed on an
amount up to the gain realized in future financings in which we sell tracking
stock, including GZMO Stock. Also, any use of our tracking stock to acquire
other companies could be taxed. 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 our board's option 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.
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 its operating losses or other
projected annual tax benefits to reduce its current or deferred income tax
expense, we may reallocate these losses or benefits to our profitable
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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 full text
of our tax allocation policy, which is included in Exhibit 99.1 to the
Registration Statement on Form S-3 that we filed with the SEC on March 3, 2000.
OUR OTHER DIVISIONS MAY DEVELOP PRODUCTS IN THE FIELD OF ONCOLOGY THAT WILL NOT
BE ALLOCATED TO GENZYME MOLECULAR ONCOLOGY AND MAY COMPETE WITH ITS PRODUCTS.
Our board of directors has adopted a policy that no division may engage
in another division's principal business other than through joint ventures or
other collaborative arrangements with more than one division and third parties.
This non-compete policy, however, does not cover the entire field of oncology.
Therefore, Genzyme General, Genzyme Surgical Products and Genzyme Tissue Repair
may develop oncology products that will not be allocated to Genzyme Molecular
Oncology and that may compete with Genzyme Molecular Oncology's products. We
encourage you to review the full text of our non-compete policy, which is
included in Exhibit 99.1 to the Registration Statement on Form S-3 that we filed
with the SEC on March 3, 2000.
FUTURE SALES OR DISTRIBUTIONS OF DESIGNATED SHARES OF GZMO STOCK MAY
SIGNIFICANTLY DILUTE YOUR OWNERSHIP.
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. Proceeds from a sale or distribution
will not be allocated to the affected divisions and the issuance and sale may
dilute substantially your ownership of the affected divisions. We encourage you
to review the full text of our management and accounting policies, which are
included in Exhibit 99.1 to the Registration Statement on Form S-3 that we filed
with the SEC on March 3, 2000.
B. RISKS RELATED TO GENZYME MOLECULAR ONCOLOGY
The following risks and uncertainties may adversely affect the business
of Genzyme Molecular Oncology:
THE SAGE(TM) TECHNOLOGY GENERATES ONLY MODEST REVENUES AND IT IS UNCERTAIN
WHETHER GENZYME MOLECULAR ONCOLOGY WILL BE ABLE TO DEVELOP AND COMMERCIALIZE
OTHER MARKETABLE PRODUCTS AND SERVICES.
We do not expect Genzyme Molecular Oncology's products and services to
generate significant revenue for several years. Services based on the SAGE(TM)
gene expression technology represent the only product or service that is not at
an early stage of development. To date, these services have generated only
modest revenue, and we compete with several companies in the genomic services
market. Before commercializing any other products and services, Genzyme
Molecular Oncology will need to conduct substantial research and development,
including, in some cases, the replication of pre-clinical studies performed by
its collaborators, undertake preclinical and clinical testing and pursue
regulatory approvals. We cannot guarantee that these efforts will be successful.
Clinical trials, for example, may not support the safety or effectiveness of a
particular product or service. Currently, Genzyme Molecular Oncology's gene
therapy products for melanoma are its only therapeutic products in clinical
development. We may encounter problems in these or other clinical trials that
lead to delay or suspension of the trials.
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GENZYME MOLECULAR ONCOLOGY ANTICIPATES FUTURE LOSSES AND MAY NEVER BECOME
PROFITABLE.
We expect Genzyme Molecular Oncology to have significant operating
losses for the next several years. Genzyme Molecular Oncology plans to spend
substantial amounts of money on, among other things:
- commercialization of the SAGE(TM) technology;
- 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. It may be years before the division generates any revenue from sales
of products or services other than those based on the SAGE(TM) technology.
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 available under a line of credit from Genzyme General and
revenues generated from the SAGE(TM) technology, license agreements and
committed research funding from collaborators, will be sufficient to fund its
operations through 2000. However, Genzyme Molecular Oncology's cash needs may
differ from those planned because of many factors, including:
- the results of research and development and clinical testing;
- the achievement of milestones under existing strategic alliances;
- the ability to establish and maintain additional strategic alliances
and licensing arrangements;
- the enforcement of patent and other intellectual property rights;
- the development of competitive products and services; and
- the 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 the
division 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 delay, reduce or eliminate certain of its
programs. Genzyme Molecular Oncology may also have to give rights to third
parties to attempt to commercialize technologies or products that it would
otherwise 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
certain of its products and services includes entering into various arrangements
with both academic collaborators, and corporate partners and licensees. Genzyme
Molecular Oncology 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 certain important rights to
its corporate partners and licensees.
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While Genzyme Molecular Oncology believes its collaborators and licensees will
want to perform their contractual responsibilities, in some cases the amount and
timing of resources that they devote to their collaborations with the division,
and the ability to terminate the collaboration, will be controlled by the
collaborators. As a result, Genzyme Molecular Oncology cannot guarantee that it
will receive revenues or profits from these arrangements, that any of its
strategic alliances will continue or not terminate early, or that it will be
able to enter into future collaborations.
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 the 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 of Genzyme
Molecular Oncology's melanoma gene therapy products and potential regulatory
delays relating to the testing or approval of its other gene therapy product
candidates. 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 intends to issue a report
in March 2000 on the adverse events reported by investigators using adenoviral
vectors. Any increased scrutiny could delay or increase the costs of Genzyme
Molecular Oncology's product development efforts or clinical trials.
The commercial success of any gene therapy products developed by
Genzyme Molecular Oncology 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.
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 available on acceptable terms. If these licenses are not available,
Genzyme Molecular Oncology's ability to commercialize its products and services
may be impaired.
In its immunotherapy program, Genzyme Molecular Oncology is in the
process of evaluating the therapeutic administration of genes that encode
specific tumor antigens and antigenic peptide products, including MART-1 and
gp100. Genzyme Molecular Oncology is aware of two issued U.S. patents directed
to the gene which encodes MART-1. While Genzyme Molecular Oncology has obtained
rights under one of these patents, it is still in the process of evaluating the
scope and validity of the other. 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 third party applicants
which may cover antigens derived from gp100. Genzyme Molecular Oncology is in
the process of
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evaluating the scope and validity of these patents and patent applications to
determine whether obtaining licenses is necessary.
IF GENZYME MOLECULAR ONCOLOGY FAILS TO OBTAIN ADEQUATE LEVELS OF REIMBURSEMENT
FOR ITS ONCOLOGY PRODUCTS AND SERVICES FROM THIRD-PARTY PAYERS, THE COMMERCIAL
POTENTIAL OF ITS PRODUCTS AND SERVICES WILL BE SIGNIFICANTLY LIMITED.
A substantial portion of Genzyme Molecular Oncology's future revenue
may come 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 health care products. More and more
third party payers are attempting to contain health care costs by:
- challenging the prices charged for health care products and services;
- limiting both coverage and the amount of reimbursement for new
therapeutic products;
- 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 provide inadequate or no
insurance coverage and reimbursement for Genzyme Molecular Oncology's products
and services.
In addition, Congress has occasionally discussed implementing
broad-based measures to contain health care costs. While Congress has not
enacted any legislation specifically designed to contain health care costs, it
is possible that Congress will revisit the issue. We cannot predict what effect
any actual legislation would have on our business.
GENZYME MOLECULAR ONCOLOGY MAY FAIL TO PROTECT ADEQUATELY ITS PROPRIETARY
TECHNOLOGY, WHICH WOULD ALLOW COMPETITORS TO TAKE ADVANTAGE OF ITS RESEARCH AND
DEVELOPMENT EFFORTS.
Our long-term success largely depends on our ability to market
technologically competitive products. We can prevent unauthorized third parties
from using proprietary rights relating to our products and services only if
these rights are covered by patents or are kept confidential as trade secrets.
While Genzyme Molecular Oncology's employees, consultants and corporate
partners with access to proprietary information generally are required to enter
into confidentiality agreements, we cannot guarantee that these agreements will
be honored. In addition, some of Genzyme Molecular Oncology's consultants have
developed portions of Genzyme Molecular Oncology's proprietary technology at
universities or in governmental laboratories. These universities or governmental
authorities may claim rights to the intellectual property arising out of the
research performed at the university or governmental laboratory.
Genzyme Molecular Oncology also relies upon trade secrets, proprietary
know-how and continuing technological innovation to remain competitive. We
cannot guarantee that other parties will not independently develop such know-how
or otherwise obtain access to Genzyme Molecular Oncology's technology.
We cannot guarantee that the patents issued or licensed to us will
remain free from challenge by third parties.
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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 initiates or is required to defend itself
in patent litigation, it could consume a substantial portion of Genzyme
Molecular Oncology's resources. Any legal action against Genzyme Molecular
Oncology or its strategic partners claiming damages or seeking to stop
commercial activities relating to the affected products and processes could
subject Genzyme Molecular Oncology to liability for damages.
These actions may also require Genzyme Molecular Oncology or its
strategic partner to obtain a license in order to continue to manufacture or
market the affected products and services. We cannot guarantee that Genzyme
Molecular Oncology or its strategic partner would prevail in any legal action.
If Genzyme Molecular Oncology is required to obtain a license, we cannot
guarantee that one would be made available or made available on acceptable
terms.
REGULATION BY GOVERNMENT AGENCIES IMPOSES SIGNIFICANT COSTS AND RESTRICTIONS ON
THE DEVELOPMENT OF GENZYME MOLECULAR ONCOLOGY'S PRODUCTS AND SERVICES.
Genzyme Molecular Oncology's ability to successfully satisfy regulatory
requirements will significantly determine its future success. We cannot
guarantee that any required regulatory approvals will be granted or that they
will be granted on a timely basis. The production and sale of health care
products and provision of health care 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.
GENZYME MOLECULAR ONCOLOGY'S 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. Major pharmaceutical companies and other biotechnology companies
compete with Genzyme Molecular Oncology. Certain of these competitors may have
superior research and development, marketing and production capabilities. Some
competitors also may have greater financial resources than Genzyme Molecular
Oncology. The future success of the division will depend on its ability to
effectively develop and market its products against those of its competitors.
IF GENZYME MOLECULAR ONCOLOGY IS UNABLE TO KEEP UP WITH RAPID TECHNOLOGICAL
CHANGES, ITS PRODUCTS OR SERVICES MAY BECOME OBSOLETE.
The field of biotechnology is characterized by significant and rapid
technological change. Although Genzyme Molecular Oncology attempts to expand its
technological capabilities in order to remain competitive, research and
discoveries by others may make its products or services obsolete. For example,
certain of Genzyme Molecular Oncology's competitors may develop genomic services
that make the SAGE(TM) technology obsolete.
THE VOLATILITY IN THE PRICE OF GZMO STOCK COULD RESULT IN THE LOSS OF A
SIGNIFICANT AMOUNT OF YOUR INVESTMENT.
The market price for GZMO Stock may vary widely as a result of several factors,
including:
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- announcements of technological innovations or new commercial products
by us or by our competitors;
- governmental regulatory initiatives;
- patent or proprietary rights developments;
- public concern as to the safety or other implications of biotechnology
products; and
- general market conditions.
This volatility could lead to the loss of a significant amount of your
investment.
C. RISKS RELATED TO GENZYME, INCLUDING THE OTHER GENZYME DIVISIONS
Holders of GZMO Stock are stockholders of Genzyme. Liabilities or
contingencies of the divisions of Genzyme other than Genzyme Molecular Oncology
that affect Genzyme's resources or financial condition could affect the
financial condition or results of operations of Genzyme Molecular Oncology.
Therefore, you should review the following risks as well as the risks and
uncertainties described under the heading "Management's Discussion and Analysis
of Genzyme Corporation and Subsidiaries' Financial Condition and Results of
Operations -- Factors Affecting Future Operating Results" included on pages 41
through 44 of Exhibit 13.1 of our Annual Report on Form 10-K for the fiscal year
ended December 31, 1998, as amended by Amendment No. 1 on Form 10-K/A filed with
the SEC on June 30, 1999.
A REDUCTION IN REVENUES FROM SALES OF PRODUCTS THAT TREAT GAUCHER DISEASE WOULD
HAVE AN ADVERSE AFFECT ON OUR BUSINESS.
Through Genzyme General, we generate a majority of our product revenues
from sales of enzyme-replacement products for patients with Gaucher disease.
Genzyme General entered this market in 1991 with Ceredase(R) enzyme. Because
production of Ceredase(R) enzyme was subject to supply constraints, the division
developed Cerezyme(R) 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(R) enzyme, Chinese hamster ovary
cells are engineered to produce human alpha glucocerebrosidase. Genzyme General
stopped producing Ceredase(R) enzyme, except for small quantities, during 1998,
after substantially all the patients previously using Ceredase(R) enzyme had
converted to Cerezyme(R) enzyme. Sales of Ceredase(R) enzyme and Cerezyme(R)
enzyme totaled $411.1 million for the year ended December 31, 1998, representing
approximately 67% of our, and 81% of Genzyme General's, product revenues for
that year, and $351.7 million for the nine months ended September 30, 1999,
representing approximately 70% of our, and 84% of Genzyme General's, product
revenues for that period.
Because our business is highly dependent on Cerezyme(R) enzyme, a
reduction in revenue from sales of this product would have an adverse effect on
out operations and may cause the value of our securities to decline
substantially. Revenues from Cerezyme(R) enzyme would be impacted negatively if
competitors developed 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(R) 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(R) enzyme after May 2001.
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WE MAY REQUIRE SIGNIFICANT ADDITIONAL FINANCING WHICH MAY NOT BE AVAILABLE ON
FAVORABLE TERMS, IF AT ALL.
As of September 30, 1999, we had approximately $695.9 million in cash,
cash equivalents and short- and long-term investments, excluding investments in
equity securities.
Although we currently have substantial cash resources and positive cash
flow, we intend to use substantial portions of our available cash for:
- product development and marketing;
- expanding facilities; and
- working capital.
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 1/4% 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.
- 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.
If we use cash to pay or redeem this debt, including the principal and
interest due on it, our 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.
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 40% of our consolidated
revenues for the nine month period ended September 30, 1999, 41% of our
consolidated revenues in 1998 and 36% 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:
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- 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 we 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 articles of organization,
bylaws and stockholder rights plan could delay or prevent a change in control of
Genzyme or a change in our management.
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 its 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 common and 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.
WE COULD EXPERIENCE SYSTEM FAILURES AND DISRUPTIONS OF OUR OPERATIONS AS A
RESULT OF THE YEAR 2000 DATE RECOGNITION PROBLEM.
The year 2000 date recognition problem could cause our computer systems
to fail, resulting in miscalculations and incorrect data. Parties affected by a
disruption in our operations and services could make claims or bring lawsuits
against us. Depending upon the extent and duration of any disruptions
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caused by the year 2000 problem and the specific services affected, these
disruptions could have an adverse affect on our business.
Computer systems which may be affected by this year 2000 problem
include computer systems embedded in production equipment; displays containing
computer systems; business data processing systems; production, management and
planning systems; and personal computers. Consequently, the year 2000 problem
could disrupt our daily commercial activities if we do not take the steps
necessary to address it effectively.
In addition, we cannot assure you that our customers, suppliers and
other third parties that we deal with are or will be year 2000 compliant in a
timely manner. Interruptions in the services provided to us or in the purchases
made by these third parties could also disrupt our operations.
Although, as of the date of this prospectus, we have not experienced
any significant disruption in our operations as a result of the year 2000 date
recognition problem, we cannot guarantee that we will not experience disruptions
in the future.
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SELLING SECURITYHOLDER
This prospectus relates to sales of up to 617,200 shares of GZMO Stock
by Canadian Medical Discoveries Fund Inc. Canadian Medical Discoveries Fund
acquired these shares when we purchased one-half of its interest in
StressGen/Genzyme LLC in October 1999.
The shares of GZMO Stock registered may be offered from time to time
pursuant to this prospectus. Our registration of the GZMO Stock does not
necessarily mean that the selling securityholder will sell all of its shares.
The selling securityholder did not beneficially own any shares of GZMO
Stock prior to the issuance of the 617,200 shares of GZMO Stock. On March 2,
2000, the selling securityholder owned 309,200 shares of GZMO Stock,
representing approximately 0.02% of the 13,515,575 shares of GZMO Stock
outstanding as of that date.
Other than as an investor in StressGen/Genzyme LLC, the selling
securityholder has not had a material relationship with Genzyme during the past
three years.
Individuals and entities who receive shares from the selling
securityholder as a gift or in connection with a pledge may sell up to 500 of
those shares using this prospectus.
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PLAN OF DISTRIBUTION
The selling securityholder may offer the shares of GZMO Stock at
various times in transactions:
- in the over-the-counter market;
- on any exchange where GZMO Stock is then listed;
- with broker-dealers or third parties other than in the over-the-counter
market or on an exchange (including block sales);
- in connection with short sales;
- in connection with writing call options or in other hedging
arrangements; or
- involving a combination of such methods.
The selling securityholder may sell its shares at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, at fixed prices or at a combination of such
prices.
The selling securityholder may use dealers, agents or underwriters to
sell its shares. If this happens, the dealers, agents or underwriters may
receive compensation in the form of discounts or commissions from the selling
securityholder or from the purchaser(s) of shares or from both (which
compensation to a particular broker might be in excess of customary
compensation).
The selling securityholder and any dealers, agents or underwriters that
participate with the selling securityholder in the distribution of the shares
may be deemed to be "underwriters" (as this term is defined in the Securities
Act of 1933). Any commissions paid or any discounts or concessions allowed to
any such persons, and any profits received on the resale of such shares of GZMO
Stock offered by this prospectus, may be deemed to be underwriting commissions
or discounts under the Securities Act of 1933.
To the extent required, we will amend or supplement this prospectus to
disclose material arrangements regarding the plan of distribution. If, for
example, the selling securityholder sell shares in an underwritten offering, a
prospectus supplement accompanying this prospectus will set forth, to the extent
required, the aggregate number of shares being offered, the name or names of the
underwriters, whether the underwriters are acting as principals or agents, any
underwriting discounts, concessions or commissions allowed or reallowed or paid
to dealers. When the underwriters act as principals in an underwritten offering,
the shares will be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. In this case, the shares may be offered to the public
either through underwriting syndicates represented by one or more managing
underwriters or directly by one or more firms acting as underwriters. When the
underwriters act as principals in connection with an underwritten sale of
shares, the underwriters may receive compensation from the selling
securityholder in the form of underwriting discounts, concessions or commissions
and/or commissions from purchasers of the shares for whom they may act as
agents. Underwriters may sell shares to or through dealers, and these 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.
Underwriters may be entitled under agreements with us to
indemnification by us against certain civil liabilities, including liabilities
under the Securities Act of 1933, or to contribution from us for
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payments such underwriters may be required to make in connection with certain
civil liabilities. These underwriters may engage in transactions with, or
perform services for, us for customary compensation.
We have agreed to pay for most of the expenses incident to the offer
and sale of the shares offered by the selling securityholder using this
prospectus. The selling securityholder, however, will pay any underwriting
discounts and selling commissions.
To comply with the securities laws of certain jurisdictions, the shares
offered by this prospectus may need to be offered or sold in such jurisdictions
only through registered or licensed brokers or dealers.
LEGAL MATTERS
Our counsel, Palmer & Dodge LLP, Boston, Massachusetts, has given us
an opinion on the validity of the shares offered by this prospectus.
EXPERTS
The financial statements of Genzyme Corporation, Genzyme Tissue Repair
and Genzyme Molecular Oncology incorporated in this prospectus on Form S-3 by
reference to the Annual Report on Form 10-K for the year ended December 31,
1998, as amended, the financial statements of Genzyme Surgical Products
incorporated in this prospectus on Form S-3 by reference to the Form 8-K as
filed on June 11, 1999, the financial statements of Genzyme General incorporated
in this prospectus on Form S-3 by reference to the Form 8-K as filed on June 30,
1999, and the financial statements of the Genzyme Retirement Savings Plan
incorporated in this prospectus on Form S-3 by reference to the Form 10-K/A as
filed on June 30, 1999, 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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