GENZYME TRANSGENICS CORP, 424B4, 2000-02-07

GENZYME TRANSGENICS CORP
424B4, 2000-02-07
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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Pursuant to Rule 424(b)(4)
Registration No. 333-94187

Prospectus
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3,500,000 shares

[LOGO]

Common Stock

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THE COMPANY: THE OFFERING:
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- - We have a biotechnology business engaged - We are offering all the shares.
in the application of transgenic - There is an existing trading market for
technology to the development and production these shares. The reported last sales price
of monoclonal antibodies and other on February 3, 2000 was $20.50 per share.
recombinant proteins for therapeutic - We plan to use the majority of our
purposes and a preclinical contract proceeds from the offering for general
research business. corporate purposes.
- - Genzyme Transgenics Corporation,
175 Crossing Boulevard, Suite 410
Framingham, Massachusetts 01702
(508) 620-9700
- - Nasdaq--NM Symbol: GZTC
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7 TO READ ABOUT CERTAIN RISKS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF
OUR COMMON STOCK.

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.

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Per Share Total
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Public offering price....................................... $20.00 $70,000,000
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Underwriting discounts and commission....................... $ 1.20 $ 4,200,000
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Proceeds, before expenses, to us............................ $18.80 $65,800,000
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We have granted the underwriters a 30-day option to purchase up to an additional
525,000 shares of common stock to cover over-allotments at the public offering
price per share less the underwriting discounts and commissions. If the option
is exercised in full, the total underwriting discounts and commissions will be
$4,830,000 and the total proceeds, before expenses, to us will be $75,670,000.

The underwriters expect to deliver the shares of common stock in New York, New
York on February 9, 2000.

Warburg Dillon Read LLC Chase H&Q

The date of this prospectus is February 4, 2000
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TABLE OF CONTENTS

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PROSPECTUS SUMMARY.......................................... 3
RISK FACTORS................................................ 7
USE OF PROCEEDS............................................. 14
MARKET PRICE OF COMMON STOCK................................ 15
DIVIDEND POLICY............................................. 15
CAPITALIZATION.............................................. 16
SELECTED CONSOLIDATED FINANCIAL DATA........................ 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS.................................................... 24
MANAGEMENT.................................................. 37
UNDERWRITING................................................ 39
LEGAL MATTERS............................................... 41
EXPERTS..................................................... 41
WHERE YOU CAN FIND MORE INFORMATION......................... 41
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 41
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PROSPECTUS SUMMARY

THE FOLLOWING IS ONLY A SUMMARY. YOU SHOULD CAREFULLY READ THE MORE DETAILED
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS, AND THE FINANCIAL STATEMENTS
AND THE NOTES TO THE FINANCIAL STATEMENTS INCORPORATED HEREIN BY REFERENCE.
INVESTING IN OUR COMMON STOCK INVOLVES RISK. THEREFORE, CAREFULLY CONSIDER THE
INFORMATION PROVIDED ON PAGES 7-13 UNDER THE HEADING "RISK FACTORS." UNLESS
OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE
UNDERWRITERS' OVERALLOTMENT OPTION WILL NOT BE EXERCISED. WE URGE YOU TO READ
THE ENTIRE PROSPECTUS.

THE COMPANY

We are a leader in the application of transgenic technology to the
development and production of recombinant proteins for therapeutic and other
biomedical uses. To date, we have produced more than 60 such proteins, 45
through collaborations with various commercial and academic organizations and 15
independently. More than half of our transgenic proteins actively under
development are monoclonal antibodies/Ig fusion proteins. For our lead compound,
Antithrombin III, we have completed one of two identical Phase III clinical
studies for the treatment of heparin resistance in patients undergoing
cardiopulmonary bypass procedures. We also own and operate a leading preclinical
contract research organization, Primedica Corporation, which provides services
such as preclinical efficacy and safety testing, IN VITRO testing and
formulation development to pharmaceutical, biotechnology, medical device and
other companies.

Pharmaceutical and biotechnology companies are developing a growing number
of recombinant proteins for therapeutic and diagnostic applications. Many of
these proteins have proven difficult or expensive to produce in the quantities
required using traditional protein production systems, such as bacteria, yeast
or mammalian cell cultures. Moreover, bacteria and yeast systems cannot produce
many complex proteins. While mammalian cell cultures can produce most of these
complex proteins, these cells are generally more difficult and expensive to grow
and often produce lower volumes of protein, or the proteins may not be secreted
by the cells into the culture medium.

We produce recombinant proteins by inserting into the genetic material of an
animal embryo a specific DNA sequence that directs the production of a desired
protein in the milk of transgenic offspring. We believe that transgenic
production offers substantial economic and technological advantages in
comparison to traditional protein production systems. In the case of certain
complex proteins, including Ig fusion proteins, transgenic production may
represent the only technologically and economically feasible method of
commercial production. For proteins currently derived from pooled human plasma,
transgenic production provides an alternative source with reduced risk of
transmission of human viruses and other known adventitious agents. Of the 60
transgenic proteins produced to date, we have expressed 40 proteins at levels
greater than one gram per liter, which is substantially higher than those
typically achieved for comparable proteins in traditional protein production
systems.

Our primary focus is on using transgenic technology to produce monoclonal
antibodies. These therapeutics are likely to be required in relatively large and
repeated doses for chronic diseases such as rheumatoid arthritis, other
autoimmune diseases and cancer. The economic and technological advantages of
transgenic technology make it well suited to produce the large amount of
proteins anticipated for therapeutic use of monoclonal antibodies. By mid-1999,
14 monoclonal antibodies had been approved for use in the United States--nine
for use as human therapeutics and five for diagnostic uses. The projected 1999
revenues for the six highest selling therapeutic
antibodies--ReoPro-Registered Trademark-, Rituxan-Registered Trademark-,
Synagis-Registered Trademark-, Herceptin-Registered Trademark-,
Remicade-Registered Trademark- and Zenapax-Registered Trademark---are
$1.3 billion. More than 30 monoclonal antibody candidates are now in clinical
trials and over 200 are reported to be in preclinical development. We believe
that in many cases the yearly requirement for production of these potential
therapeutics will exceed 100 kilograms and may approach 300 to 1000 kilograms.
Transgenic production may provide the only commercially viable means to meet the
large projected volume requirements of these therapeutics.

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We have several partnerships with pharmaceutical and other biotechnology
companies to develop monoclonal antibodies/Ig fusion proteins transgenically.
Our corporate partners include Bristol-Myers Squibb, Elan, Centocor, Alexion and
BASF Knoll. To date, we have formed more than a dozen collaborations which
generally provide for transgenic production of limited quantities of targeted
proteins in exchange for development fees and milestone payments and, in some
cases, anticipate the payment of royalties on product sales upon
commercialization. Following demonstration of comparability of the transgenic
product to a version of the product produced in cell culture, we intend to
negotiate commercialization agreements that will allow us to participate in the
success of the product through equity, royalties and supply commitments.

Proteins traditionally sourced from human plasma provide other opportunities
for high volume transgenic protein production. We are developing a transgenic
version of ATIII, a protein normally found in human serum, in a joint venture
with Genzyme Corporation. We are also developing Human Serum Albumin, another
plasma protein, with Fresenius AG.

We believe that our current and future partners will elect to employ
transgenic technology for the production of recombinant proteins in cases where
transgenic technology offers economic and technological advantages over other
production systems. These advantages, any one of which may be critical to the
decision to proceed with a particular development project, include:

- lower capital investment;

- improved risk management of capital investment;

- predictability of production;

- lower cost of goods; and

- technological enablement.

Our other business, Primedica, focuses on enabling its clients to meet
regulatory testing and other product development needs quickly and effectively
by offering a fully integrated line of preclinical contract research
organization services. Primedica's laboratories provide high value,
scientifically differentiated services to clients, including preclinical
efficacy testing, experimental surgery, photobiology and reproductive toxicology
testing as well as formulation development. Our Primedica business uses its
technological capabilities to introduce new services that improve the ability of
its customers to develop their products successfully. Primedica's comprehensive
programs link its preclinical and manufacturing support services to reduce the
time and expense of bringing new therapeutics or other products to market.

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THE OFFERING

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Common stock offered
by the Company.............. 3,500,000 shares

Common stock to be outstanding
after the offering.......... 25,947,663 shares(1)(2)

Use of proceeds............... We intend to use the net proceeds that we will receive from
the offering for general corporate purposes, including:
working capital, investment in new technologies, expansion
of existing operations and the redemption of some or all of
the $6.6 million of Series B convertible preferred stock at
cost plus accrued dividends. See "Use of Proceeds."

Nasdaq--NM Symbol............. GZTC
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(1) Based on 22,447,663 shares outstanding as of December 16, 1999. Excludes
2,898,508 shares issuable upon exercise of options outstanding as of
December 16, 1999 and an additional 419,509 shares reserved for issuance
under our various equity plans.

(2) Excludes 1,048,021 shares of common stock issuable upon conversion of
Series B convertible preferred stock that we intend to redeem upon the
closing of this offering, assuming net proceeds from this offering are at
least $19.8 million. The shares of Series B convertible preferred stock are
currently convertible into common stock at a fixed price of $6.30 per share
and can be redeemed by the Company at the original cost plus accrued
dividends.

HOW TO CONTACT US

Our executive offices are located at 175 Crossing Boulevard, Suite 410,
Framingham, Massachusetts, 01702, and our telephone number is (508) 620-9700.
Our World Wide Web site is located at http://www.transgenics.com. Our web site
is not a part of this prospectus.

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SUMMARY CONSOLIDATED FINANCIAL DATA

(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

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FOR THE NINE MONTHS
ENDED FOR THE FISCAL YEARS ENDED
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OCTOBER 3, SEPTEMBER 27, JANUARY 3, DECEMBER 28, DECEMBER 29, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1997 1996 1995 1994
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STATEMENT OF OPERATIONS
DATA:
Revenues:
Services................ $ 41,934 $ 37,216 $ 50,816 $ 43,417 $ 38,496 $ 26,399 $ 4,465
Sponsored transgenic
research and
development........... 11,200 7,479 11,596 19,521 8,338 6,022 4,097
Products................ -- -- -- -- -- -- 909
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Total revenue........... 53,134 44,695 62,412 62,938 46,834 32,421 9,471
Loss from continuing
operations.............. (13,399) (14,555) (19,590) (9,343) (7,746) (5,704) (5,466)
Net loss to common
shareholders............ (13,399) (15,711) (20,746) (9,343) (7,746) (4,133) (5,284)
Earnings per share:
Basic................... $ (0.69) $ (0.88) $ (1.15) $ (0.54) $ (0.52) $ (0.35) $ (0.80)
Diluted................. (0.69) (0.88) (1.15) (0.54) (0.52) (0.35) (0.80)
Shares used in computing
earnings per share:
Basic................... 19,356 17,857 17,979 17,253 14,802 11,789 6,599
Diluted................. 19,356 17,857 17,979 17,253 14,802 11,789 6,599
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OCTOBER 3, 1999
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PRO FORMA AS
ACTUAL PRO FORMA(1) ADJUSTED(1)(2)
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Cash and cash equivalents and short-term investments........ $ 5,577 $11,165 $69,724
Working capital (deficit)................................... (14,706) (9,118) 49,441
Total assets................................................ 80,861 86,449 145,008
Long-term debt.............................................. 13,410 13,410 13,410
Total shareholders' equity.................................. 25,204 30,792 89,351
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(1) Adjusted to reflect the conversion of $5.3 million of Series A convertible
preferred stock into 901,808 shares of common stock and the redemption of
$5.7 million of Series A convertible preferred stock at cost plus 15% with
proceeds from the issuance of $6.6 million of Series B convertible preferred
stock in November 1999; in conjunction with the redemption of the Series A
convertible preferred stock and the issuance of the Series B convertible
preferred stock, the Company will record a dividend to preferred
shareholders of $1,414,000 million in the fourth quarter ended January 2,
2000. Additionally, adjusted to reflect the issuance of 685,545 shares of
common stock to two institutional investors in December 1999 at $8.00 per
share with net proceeds to the Company of approximately $5,428,000 million.
Also adjusted to reflect the exercise of 30,220 stock options at a weighted
average exercise price of $5.28 for total proceeds of $159,566 through
December 16, 1999.

(2) Reflects the sale of the 3,500,000 shares of common stock offered by us
hereby at a public offering price of $20.00 per share and the application of
the net proceeds, including the redemption of all of the outstanding Series
B convertible preferred stock at cost plus accrued dividends upon the
closing of this offering, after deducting the estimated offering expenses
and underwriting discounts and commissions payable by us. See "Use of
Proceeds."

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RISK FACTORS

INVESTING IN SHARES OF OUR COMMON STOCK INVOLVES A HIGH DEGREE OF FINANCIAL
RISK. IN DECIDING WHETHER TO INVEST, YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING
RISK FACTORS AS WELL AS THE OTHER INFORMATION IN THIS PROSPECTUS. THE RISKS SET
OUT BELOW MAY NOT BE EXHAUSTIVE.

KEEP THESE RISK FACTORS IN MIND WHEN YOU READ "FORWARD LOOKING" STATEMENTS
ELSEWHERE IN THIS PROSPECTUS. FORWARD LOOKING STATEMENTS RELATE TO FUTURE EVENTS
AND TIME PERIODS OR OUR EXPECTATIONS. GENERALLY, THE WORDS "ANTICIPATE,"
"EXPECT," "INTEND" AND SIMILAR EXPRESSIONS IDENTIFY FORWARD LOOKING STATEMENTS.
THESE STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, AND FUTURE EVENTS AND
CIRCUMSTANCES COULD DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED IN THE FORWARD
LOOKING STATEMENTS.

WE EXPECT TO INCUR FUTURE OPERATING LOSSES AND MAY NEVER BECOME PROFITABLE.

We have had operating losses since our inception, and we expect losses to
continue for the next several years. From our inception in 1993 to October 3,
1999, we have incurred cumulative losses of approximately $60.3 million. These
losses have resulted principally from the costs of our research activities and
expenses in excess of revenues from our contract research organization ("CRO")
services. Our primary sources of revenue have been our research and development
contracts and CRO services. To date, those revenues have not generated profits.
We expect to continue incurring significant operating losses until our product
sales and CRO service revenues sufficiently fund our operations. We cannot be
certain that we will become profitable.

WE FACE UNCERTAINTY IN RAISING ADDITIONAL FUNDS NECESSARY TO FUND OUR
OPERATIONS.

In order to develop and bring our transgenic products to market, we and our
partners must commit substantial resources to costly and time consuming
research, preclinical testing and clinical trials. If our businesses do not
become profitable before we exhaust existing resources, we will need to obtain
additional financing, through public or private sources, including debt or
equity financings, or through collaborative or other arrangements with corporate
partners. We may not be able to obtain adequate funds for our operations from
these sources when needed or on acceptable terms. If we raise additional capital
through the sale of equity, or securities convertible into equity, your
proportionate ownership in GTC may be diluted. If we cannot obtain additional
financing, we could be forced to delay, scale back or eliminate some of our
research and development programs. In order to conserve capital or reduce our
reliance on obtaining new capital, we may also elect to delay or forgo timely
expansion, improvement or investment in our CRO services or dispose of the
assets related to those services.

TRANSGENIC TECHNOLOGY IS IN A RELATIVELY EARLY STAGE.

Developing products based on transgenic technology is subject to significant
technological risks. Most of our transgenic proteins are in the early
development stage and will require time consuming and costly development,
testing and regulatory clearance. We have not, nor to our knowledge, has any
other entity completed human clinical trials necessary to receive marketing
authorization for any protein produced in the milk of transgenic animals. We
cannot be certain that we will be able to do so successfully, nor can we assure
that any transgenically produced protein will be safe or effective. In addition,
it is possible that research and discoveries by others will render our
transgenic technology obsolete or noncompetitive.

WE CANNOT MARKET AND SELL OUR TRANSGENIC PRODUCTS IN THE UNITED STATES OR IN
OTHER COUNTRIES IF WE FAIL TO OBTAIN THE NECESSARY REGULATORY APPROVALS.

Obtaining required regulatory approvals for our transgenically produced
products may take several years to complete and may consume substantial capital
resources. We cannot give any assurance that the FDA or any other regulatory
authority will act quickly or favorably on our requests for approval, or

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that the FDA or any other regulatory authority will not require us to provide
additional data that we do not currently anticipate in order to obtain
approvals. We cannot apply for FDA approval to market any of our products under
development until the product successfully completes its preclinical and
clinical trials. Several factors could prevent successful completion or cause
significant delays of these trials, including an inability to enroll the
required number of patients or failure to demonstrate adequately that the
product is safe and effective for use in humans. If safety concerns develop, the
FDA could stop our trials before completion. Moreover, to our knowledge, no
protein produced in the milk of a transgenic animal has reached the stage in the
regulatory process which would allow it to be submitted to the FDA for final
regulatory approval. Because transgenic products represent novel therapeutic
products, the process for regulatory approval is unproven. There may be
additional delays in regulatory approval due to issues arising from the breeding
of transgenic animals and the use of proteins derived from such animals. If we
are not able to obtain regulatory approvals for use of our products under
development, or if the patient populations for which they are approved are not
sufficiently broad, the commercial success of our products could be limited.

WE CANNOT ASSURE THE COMMERCIAL SUCCESS OF TRANSGENIC PRODUCTS.

Even if our transgenically produced products are successfully developed and
approved by the FDA and corresponding foreign regulatory agencies, they may not
enjoy commercial acceptance or success, which would adversely affect our
business and results of operations. Several factors could limit our success,
including:

- possible limited market acceptance among patients, physicians, medical
centers and third party payors;

- our inability to access a sales force capable of marketing the product;

- our inability to supply a sufficient amount of product to meet market
demand;

- the number and relative efficacy of competitive products that may
subsequently enter the market; and

- for a transgenic product designed to replace or supplement currently
marketed non-transgenic products, the relative risk-benefit profile and
cost-effectiveness of the transgenically produced product.

In addition, it is possible that we or our collaborative partners will be
unsuccessful in developing, marketing and implementing a commercialization
strategy for any transgenic products.

IF WE OBTAIN REGULATORY APPROVAL OF OUR TRANSGENIC PRODUCTS, THE PRODUCTS WILL
BE SUBJECT TO CONTINUING REVIEW AND EXTENSIVE REGULATORY REQUIREMENTS WHICH
COULD AFFECT THEIR MANUFACTURE AND MARKETING.

The FDA and foreign regulatory agencies continue to review products even
after they have received initial approval. If and when the FDA or other agency
approves any of our transgenic products under development, the manufacture and
marketing of these products will be subject to continuing regulation, including
compliance with current Quality Systems Regulations and Good Manufacturing
Practices, known as QSR/GMP, adverse event reporting requirements and
prohibitions on promoting a product for unapproved uses. We will also be
required to obtain additional approvals in the event we significantly alter the
product's labeling or manufacturing process. Enforcement actions resulting from
failure to comply with QSR/GMP requirements could result in fines, suspensions
of approvals, recalls of products, operating restrictions and criminal
prosecutions, and affect the manufacture and marketing of our transgenic
products. The FDA or other regulatory agencies could withdraw a previously
approved product from the market upon receipt of newly discovered information,
including a failure to comply with regulatory requirements, the occurrence of
unanticipated problems

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with products following approval, or for other reasons. Any of these withdrawals
could adversely affect our operating results.

WE DEPEND ON COLLABORATION AGREEMENTS FOR OUR REVENUE.

Our revenue stream and our business strategy depend largely on our entering
into transgenic development agreements with third parties. We may not be able to
establish these agreements, and we cannot guarantee that we will establish our
agreements on commercially acceptable terms. Our future agreements may not
ultimately be successful. Even if we enter into transgenic development
agreements, our partners could terminate these agreements or they could expire
before meaningful developmental milestones are reached. The termination or
expiration of any of these agreements could have a material adverse effect on
our business.

Much of the revenue that we may receive under these collaborations will
depend upon our partners' ability to successfully develop and commercially
introduce, market and sell new products derived from our transgenic production
systems. Our partners may develop competitive production technologies or
competitive products outside of their collaborations with us that could have a
material adverse effect on our business.

To date, the scope of our collaboration agreements have generally been
limited to transgenically producing limited quantities of targeted proteins. We
cannot be certain that these initial development projects will be successful or
lead to collaboration agreements to commercially produce any proteins. Depending
upon the terms of any future collaborations, our role in the collaboration will
often be limited to the production aspects of the proteins. As a result, we may
also be dependent on collaborators for other aspects of the development,
preclinical and clinical testing, regulatory approval, sales, marketing and
distribution of any transgenic product.

ASPECTS OF OUR OPERATIONS ARE DEPENDENT ON OUR RELATIONSHIP WITH GENZYME.

We are developing ATIII, our lead compound, in a joint venture in which
Genzyme Corporation ("Genzyme") provides substantial funding. If Genzyme does
not agree to continue that funding, we might not be able to fund ATIII on our
own or obtain funding from another partner on acceptable terms. As of
October 3, 1999, we owed $15.8 million to a commercial bank, which debt is
guaranteed by Genzyme. Genzyme has also established a $6.3 million revolving
line of credit in our favor, on which we do not currently have an outstanding
balance. This credit line will no longer be available if the net proceeds from
this offering equal or exceed $34.6 million. When Genzyme's line of credit or
guaranty expire, we might not be able to negotiate an extension or replacement
of those credit facilities on acceptable terms.

CONCENTRATION OF OWNERSHIP OF OUR STOCK COULD LEAD TO FAILURE TO MAXIMIZE STOCK
PRICE AND CONFLICTS OF INTEREST.

Genzyme is our largest single stockholder. After giving effect to this
offering, Genzyme will beneficially own 28.6% of our outstanding common stock.
In addition, Genzyme owns $6.6 million of Series B convertible preferred stock
that could be converted into an additional 1,048,021 shares of common stock and
warrants to acquire up to 518,324 shares of our common stock. We intend to
redeem the Series B shares upon consummation of this offering, assuming we
receive at least $19.8 million in net proceeds. If we do not redeem the
Series B convertible preferred stock and that stock is converted into shares of
our common stock by Genzyme and if Genzyme exercises its warrants, then Genzyme
would own 32.7% of our common stock after this offering. Genzyme's ownership
interest gives it significant influence over certain matters requiring our
stockholders' approval, including electing directors, adopting or amending
certain provisions of our articles of organization or by-laws and approving or
preventing certain mergers or other similar transactions, such as a sale of

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substantially all of our assets (including transactions that could give our
stockholders the opportunity to realize a premium over the then-prevailing price
for their shares).

Furthermore, Genzyme's ownership position may effectively discourage a third
party from making an acquisition proposal. Accordingly, this may inhibit a
change of control in circumstances that could give the holders of our common
stock the opportunity to realize a premium over the then-prevailing market
price, affect the market price of our common stock, or both. Our stockholders
other than Genzyme will be minority equity holders and will be unable to
significantly influence our management or business policies. Four of eight
members of our board of directors also serve as directors and/or executive
officers of Genzyme. The interests of Genzyme and GTC may differ from time to
time.

OUR BUSINESS MAY FAIL DUE TO INTENSE COMPETITION IN OUR INDUSTRY.

The industries in which we operate are highly competitive and may become
even more competitive. We will need to continue to devote substantial efforts
and expense to research and development in order to maintain a competitive
position. It is possible that developments by others will render our current and
proposed services, products or technologies obsolete. In addition, we may
encounter significant competition for protein development and production
contracts from other companies. Transgenic products may face significant
competition from biological products manufactured in cell culture or by other
traditional protein production methods. Our businesses will compete both against
other companies whose business is dedicated to offering transgenic production or
preclinical testing and development as a service, and with prospective customers
or collaborators who decide to pursue such transgenic production or preclinical
testing and development internally. Many of these competitors have greater
financial and human resources and more experience in research and development
than we have. Competitors that complete clinical trials, obtain regulatory
approvals and begin commercial sales of their products before us will enjoy a
significant competitive advantage. We anticipate that we will face increased
competition in the future as new companies enter the market and alternative
technologies become available.

THE PUBLIC MAY HAVE CONCERNS ABOUT GENETIC ENGINEERING IN ANIMALS AND ANIMAL
TESTING.

Many of our activities involve genetic engineering in animals and animal
testing. These types of activities have been the subject of controversy and
adverse publicity. Animal rights groups and various other organizations and
individuals have attempted to stop genetic engineering activities and animal
testing by pressing for legislation and regulation in these areas. To the extent
the activities of such groups are successful, they may adversely affect our
business.

THE SUCCESSFUL COMMERCIALIZATION OF OUR PRODUCTS WILL DEPEND ON OBTAINING
COVERAGE AND REIMBURSEMENT FOR USE OF THESE PRODUCTS FROM THIRD-PARTY PAYORS.

Sales of pharmaceutical products largely depend on the reimbursement of
patients' medical expenses by government health care programs and private health
insurers. Without the financial support of the government or third party
insurers, the market for transgenic products will be limited. We cannot be sure
that third party payors will reimburse sales of our transgenic products, or
enable us or our partners to sell them at profitable prices.

The federal government and private insurers have considered ways to change,
and have changed, the manner in which health care services are provided and paid
for in the United States. In particular, these third party payors are
increasingly attempting to contain health care costs by limiting both coverage
and the level of reimbursement for new therapeutic products. In the future, it
is possible that the government may institute price controls and further limits
on Medicare and Medicaid spending. These controls and limits could affect the
payments we collect from sales of our products. Internationally, medical
reimbursement systems vary significantly, with some medical centers having fixed
budgets, regardless of levels of patient treatment, and other countries
requiring application for,

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and approval of, government or third party reimbursement. Even if we or our
partners succeed in bringing transgenic products to market, uncertainties
regarding future health care policy, legislation and regulation, as well as
private market practices, could affect our ability to sell our products in
commercially acceptable quantities at profitable prices.

OUR BUSINESS EXPOSES US TO POTENTIAL SERVICE AND PRODUCT LIABILITY.

The nature of our business exposes us to potential product and professional
liability risks which are inherent in the testing, production, marketing and
sale of human therapeutic products. While we have obtained product and
professional liability insurance under an insurance policy arrangement with
Genzyme and Genzyme's affiliates, we cannot be certain that our insurance
coverage will be sufficient to cover any claim. Uninsured product or service
liability could have a material adverse effect on our financial results.
Additionally, it is possible that any insurance will not provide us with
adequate protection against potential liabilities. Potential liability may arise
from our handling of clinical samples containing human blood and tissues, which
may contain human pathogens. It is also possible that liability may arise from
handling animal blood and tissue which may contain zoonotic pathogens. Although
such products are used only in the laboratory, inadvertent human contact may
occur.

QUALIFIED MANAGERIAL AND SCIENTIFIC PERSONNEL ARE SCARCE IN OUR INDUSTRY.

We are highly dependent on the principal members of our scientific and
management staff. Our success will depend in part on our ability to identify,
attract and retain qualified managerial and scientific personnel. There is
intense competition for qualified personnel in our industry. We may not be able
to continue to attract and retain personnel with the advanced technical
qualifications or managerial expertise necessary for the development of our
business. If we fail to attract and retain key personnel, it could have a
material adverse effect on our business, financial condition and results of
operations.

OUR CRO BUSINESS IS DEPENDENT ON CURRENT GOVERNMENT REGULATORY REQUIREMENTS.

The market for our preclinical testing services depends on our maintaining
strict standards for the conduct of laboratory and clinical tests and related
procedures that are promulgated by governmental entities responsible for public
health and welfare, including the FDA and by regulatory authorities in other
countries. The process of obtaining these approvals varies according to the
nature and use of the product and routinely involves lengthy and detailed
laboratory and clinical testing and other costly and time-consuming procedures.
We offer customers of our preclinical testing and development services the
necessary expertise to comply with these complex regulations. If the regulatory
structure were to change in a way which reduced the need for such services, we
could be materially adversely affected.

WE DEPEND ON PATENTS AND PROPRIETARY RIGHTS THAT MAY FAIL TO PROTECT OUR
BUSINESS.

Our success will partly depend on our ability to obtain and maintain patent
or other proprietary protection for our technologies, products and processes
such as:

- compositions of matter or processes;

- processes developed by our employees; or

- uses of compositions of matter discovered through our technology.

We may not be able to obtain the necessary protection. Our success will also
depend on our ability to operate without infringing the proprietary rights of
other parties. Legal standards relating to the validity of patents covering
pharmaceutical and biotechnological inventions and the scope of claims made
under these patents are still developing. There is no consistent policy
regarding the breadth of

11
<PAGE>
claims allowed in biotechnology patents. The patent position of a biotechnology
firm is highly uncertain and involves complex legal and factual questions.

We have been issued six patents and currently have 20 provisional or regular
applications solely owned by us and two regular applications co-owned with
others pending in the United States. Where appropriate there are counterparts in
other countries. We may not receive any issued patents based on pending or
future applications. Our issued patents may not contain claims sufficiently
broad to protect us against competitors with similar technology. Additionally,
our patents, our partners' patents and patents for which we have license rights
may be challenged, narrowed, invalidated or circumvented. Furthermore, rights
granted under patents may not provide us with any competitive advantage.

We may have to initiate arbitration or litigation to enforce our patent and
license rights. If our competitors file patent applications that claim
technology also claimed by us, we may have to participate in interference or
opposition proceedings to determine the priority of invention. An adverse
outcome could subject us to significant liabilities to third parties and require
us to cease using the technology or to license the disputed rights from third
parties. We may not be able to obtain any required licenses on commercially
acceptable terms or at all.

The cost to us of any litigation or proceeding relating to patent rights,
even if resolved in our favor, could be substantial. Some of our competitors may
be able to sustain the costs of complex patent litigation more effectively than
we can because of their substantially greater resources. Uncertainties resulting
from the initiation and continuation of any pending patent or related litigation
could have a material adverse effect on our ability to compete in the
marketplace.

We rely on certain proprietary trade secrets and know-how that are not
patentable. We have taken measures to protect our unpatented trade secrets and
know-how, including having our employees, consultants and some contractors
execute confidentiality agreements. These agreements could be breached. If so,
it is possible that our remedies for a given breach might be inadequate. It is
also possible that competitors could independently develop or discover our trade
secrets or that the trade secrets could otherwise become known.

WE HAVE OBLIGATIONS TO ISSUE SHARES OF COMMON STOCK IN THE FUTURE WHICH WILL
DILUTE YOUR OWNERSHIP INTEREST AND MAY ADVERSELY AFFECT OUR STOCK PRICE.

Sales of substantial amounts of our common stock in the public market, or
the perception that such sales may occur, could adversely affect the prevailing
market price of the common stock. As of December 16, 1999, there were 22,447,663
shares of common stock outstanding. As of December 16, 1999, options to purchase
an aggregate of 2,898,508 shares of common stock at varying exercise prices were
outstanding; of such total, options for 1,709,402 shares were immediately
exercisable and such shares could be immediately resold into the public market.
All of the 7,428,365 shares of common stock held by Genzyme could be sold into
the public markets upon compliance with Rule 144. In addition, 1,048,021 shares
of common stock are issuable to Genzyme upon conversion of shares of Series B
convertible preferred stock, which shares are entitled to registration rights
and, if not redeemed, will be eligible for sale under Rule 144 in
November 2000. The 518,324 shares issuable to Genzyme upon exercise of
outstanding warrants are also entitled to registration rights, which could
expedite the resale of such shares into the public market. Another 478,000
shares of common stock are reserved for issuance upon exercise of outstanding
warrants, all of which are currently exercisable and 450,000 of which can be
sold into the public market under a currently effective registration statement.

OUR COMMON STOCK MAY HAVE A VOLATILE PUBLIC TRADING PRICE AND LOW TRADING
VOLUME.

The market price of our common stock has been highly volatile and the market
for our common stock has experienced significant price and volume fluctuations,
some of which are unrelated to our

12
<PAGE>
Company's operating performance. Many factors can have a significant adverse
effect on our common stock's market price, including:

- announcements by us or our competitors of technological innovations or new
commercial products;

- developments concerning our proprietary rights, including patent and
litigation matters;

- publicity regarding actual or potential results relating to our or our
partners' products or compounds under development;

- an unexpected termination of one of our partnerships;

- regulatory developments in the United States and other countries;

- general market conditions; and

- quarterly fluctuations in our revenues and other financial results.

ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND BY-LAWS AND MASSACHUSETTS LAW MAY
ADVERSELY AFFECT OUR STOCK PRICE.

Our articles of organization, certain provisions of our by-laws and certain
provisions of Massachusetts law could delay or make more difficult a merger,
tender offer or proxy contest involving us. These provisions may have the effect
of delaying or preventing a change of control without action by the stockholders
and, therefore, could adversely affect the price of our common stock.

OUR MANAGEMENT WILL HAVE BROAD DISCRETION AS TO THE USE OF PROCEEDS OF THIS
OFFERING.

Our management will have broad discretion regarding how we use the net
proceeds of the offering. Investors will be relying on the judgment of
management regarding the application of the proceeds of the offering. The result
and effectiveness of our use of the proceeds are uncertain.

13
<PAGE>
USE OF PROCEEDS

The net proceeds from the sale by the Company of the common stock offered
hereby, at a public offering price of $20.00 per share and after deducting
underwriting discounts and commissions and estimated offering expenses, will be
approximately $65.3 million ($75.2 million if the Underwriters' over-allotment
option is exercised in full). The Company anticipates that these funds will be
used for general corporate purposes, including working capital, investment in
new technologies, expansion of existing operations as well as for the redemption
of some or all of the outstanding Series B convertible preferred stock for up to
$6.6 million, plus accrued dividends. The Company has no present commitments,
agreements, or understandings and is not presently conducting negotiations with
respect to any acquisitions. The Company's management will have broad discretion
to allocate proceeds from this offering to uses that it believes are
appropriate. Pending such uses, the net proceeds of this offering will be
invested in short-term, investment grade, interest-bearing securities. The
principal purpose of this offering is to obtain additional working capital.

14
<PAGE>
MARKET PRICE OF COMMON STOCK

The common stock of GTC began trading in 1993 in the Nasdaq National Market
System under the symbol GZTC. Quarterly high and low sales prices for the common
stock as reported by the Nasdaq National Market System are shown below.

<TABLE>
<CAPTION>
HIGH LOW
-------- ------------
<S> <C> <C>
YEAR ENDED JANUARY 3, 1999:
First Quarter............................................. $13 1/2 $9
Second Quarter............................................ 12 1/4 7 11/16
Third Quarter............................................. 8 4
Fourth Quarter............................................ 7 1/4 2 1/16
YEAR ENDED JANUARY 2, 2000:
First Quarter............................................. $ 6 3/8 $3 3/4
Second Quarter............................................ 5 5/8 3 1/8
Third Quarter............................................. 8 1/2 4 1/2
Fourth Quarter............................................ 13 1/8 5 5/8
YEAR ENDED DECEMBER 31, 2000:
First Quarter (through February 3, 2000).................. $24 1/2 $10
</TABLE>

The closing price of the common stock on February 3, 2000, as reported on
Nasdaq, was $20.50 per share. As of December 16, 1999, there were 807 holders of
record of the Company's common stock.

DIVIDEND POLICY

The Company has never paid a cash dividend on its common stock and currently
expects that future earnings will be retained for use in its business.

15
<PAGE>
CAPITALIZATION

The following table sets forth, as of October 3, 1999, the actual
capitalization of the Company and the capitalization as adjusted for the sale of
the 3,500,000 shares of common stock offered hereby by the Company at a public
offering price of $20.00 per share after deducting underwriting discounts and
commissions and estimated offering expenses. The following table should be read
in conjunction with the Consolidated Financial Statements and related Notes
incorporated herein by reference.

<TABLE>
<CAPTION>
AS OF OCTOBER 3, 1999
----------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA(1) ADJUSTED(1)(2)
-------- ------------ --------------
<S> <C> <C> <C>
Cash and cash equivalents and short term investments...... $ 5,577 $11,165 $ 69,724
------- ------- --------
Long term debt............................................ $13,410 $13,410 $ 13,410
Stockholders' equity:
Common stock, $.01; 40,000,000 shares authorized;
20,830,090 shares issued and outstanding (actual),
22,447,663 shares (pro forma) and 25,947,663 shares
(pro forma as adjusted)............................... 208 224 259
Preferred stock, $.01; 5,000,000 shares authorized:
Series A convertible preferred, of which 11,000 shares
issued and outstanding as of October 3, 1999, none
outstanding (pro forma)............................. -- -- --
Series B convertible preferred, 6,602.53558 shares
issued (pro forma), none outstanding (pro forma as
adjusted)........................................... -- -- --
Dividend on preferred stock............................. (1,156) (2,570) (2,709)
Capital in excess of par value.......................... 86,708 93,694 152,357
Accumulated deficit..................................... (60,263) (60,263) (60,263)
Other................................................... (293) (293) (293)
------- ------- --------
Total stockholders' equity............................ 25,204 30,792 89,351
------- ------- --------
Total capitalization...................................... $38,614 $44,202 $102,761
======= ======= ========
</TABLE>

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

(2) Reflects the sale of the 3,500,000 shares of common stock offered by us
hereby at a public offering price of $20.00 per share and the application of
the net proceeds, including the redemption of all of the outstanding
Series B convertible preferred stock at cost plus accrued dividends upon the
closing of this offering, after deducting the estimated offering expenses
and underwriting discounts and commissions payable by us. See "Use of
Proceeds."

16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The selected financial data set forth below as of January 3, 1999 and
December 28, 1997 and for each of the three fiscal years in the period ended
January 3, 1999, are derived from the Company's consolidated financial
statements incorporated by reference in this prospectus, which have been audited
by PricewaterhouseCoopers LLP, independent accountants. The selected financial
data set forth below as of December 29, 1996 and December 31, 1995 and 1994, and
for the two fiscal years in the period ended December 31, 1995 are derived from
audited consolidated financial statements not incorporated by reference in this
prospectus. The selected financial data set forth below as of October 3, 1999
and for the nine months ended October 3, 1999 and September 27, 1998 are derived
from unaudited consolidated financial statements incorporated by reference in
this prospectus. These unaudited financial statements have been prepared on the
same basis as the audited financial statements and, in the Company's opinion,
include all adjustments and reclassifications (consisting only of normal
recurring adjustments and reclassifications) necessary to present fairly the
financial condition and results of operations for the periods presented. The
results for the nine months ended October 3, 1999 are not necessarily indicative
of the results that may be expected for the full year.

This data should be read in conjunction with the Company's consolidated
financial statements and related notes thereto incorporated by reference in this
prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this prospectus.

17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS ENDED FOR THE FISCAL YEARS ENDED
--------------------------- ------------------------------------------
OCTOBER 3, SEPTEMBER 27, JANUARY 3, DECEMBER 28, DECEMBER 29,
1999 1998 1999 1997 1996
---------- -------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Services....................... $ 41,934 $ 37,216 $ 50,816 $ 43,417 $ 38,496
Sponsored transgenic research
and development.............. 11,200 7,479 11,596 19,521 8,338
Products....................... -- -- -- -- --
---------- ---------- ---------- ---------- -----------
Total revenue.................... 53,134 44,695 62,412 62,938 46,834
Costs and expenses:
Services....................... 35,472 31,751 43,668 36,989 33,356
Transgenic research and
development:
Sponsored.................... 7,805 7,115 10,486 12,558 7,856
Internal..................... 3,347 4,999 6,155 5,282 828
Products....................... -- -- -- -- --
Selling, general and
administrative............... 14,616 11,955 16,184 15,650 11,691
Facility consolidation
costs(1)..................... 1,245 -- -- -- --
Equity in loss of Joint
Venture...................... 2,696 2,717 4,285 811 356
Impairment of investment in
Joint Venture................ -- -- -- -- --
---------- ---------- ---------- ---------- -----------
Total expenses................... 65,181 58,537 80,778 71,290 54,087
---------- ---------- ---------- ---------- -----------
Loss from continuing
operations..................... (12,047) (13,842) (18,366) (8,352) (7,253)
Other income and (expenses):
Interest income................ 39 231 280 136 85
Interest expense............... (1,668) (1,054) (1,379) (1,129) (1,138)
Other income................... 484 100 100 50 587
---------- ---------- ---------- ---------- -----------
Loss from continuing operations
before income taxes............ (13,192) (14,565) (19,365) (9,295) (7,719)
Provision (benefit) for income
taxes........................ 207 (10) 225 48 27
---------- ---------- ---------- ---------- -----------
Loss from continuing
operations..................... $ (13,399) $ (14,555) $ (19,590) $ (9,343) $ (7,746)
Discontinued operations
Income from discontinued
clinical operations (less
applicable taxes of $239 and
$21)......................... -- -- -- -- --
Gain on disposal of clinical
operations (less applicable
income taxes of $3,401)...... -- -- -- -- --
---------- ---------- ---------- ---------- -----------
Net loss......................... $ (13,399) $ (14,555) $ (19,590) $ (9,343) $ (7,746)
Dividends to preferred
shareholders(2)................ -- (1,156) (1,156) -- --
---------- ---------- ---------- ---------- -----------
Net loss to common
shareholders................... $ (13,399) $ (15,711) $ (20,746) $ (9,343) $ (7,746)
========== ========== ========== ========== ===========
Net loss to common shareholders
per weighted average number of
common shares (basic and
diluted):
From continuing operations..... $ (0.69) $ (0.88) $ (1.15) $ (0.54) $ (0.52)
========== ========== ========== ========== ===========
Net loss....................... $ (0.69) $ (0.88) $ (1.15) $ (0.54) $ (0.52)
========== ========== ========== ========== ===========
Weighted average number of shares
outstanding (basic and
diluted)....................... 19,355,861 17,857,278 17,978,677 17,253,292 14,801,725

FOR THE FISCAL YEARS ENDED
-----------------------------
DECEMBER 31, DECEMBER 31,
1995 1994
------------- -------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Services....................... $ 26,399 $ 4,465
Sponsored transgenic research
and development.............. 6,022 4,097
Products....................... -- 909
---------- ----------
Total revenue.................... 32,421 9,471
Costs and expenses:
Services....................... 24,250 5,157
Transgenic research and
development:
Sponsored.................... 5,533 4,214
Internal..................... 861 457
Products....................... -- 841
Selling, general and
administrative............... 8,919 3,596
Facility consolidation
costs(1)..................... -- --
Equity in loss of Joint
Venture...................... 713 582
Impairment of investment in
Joint Venture................ -- 58
---------- ----------
Total expenses................... 40,276 14,905
---------- ----------
Loss from continuing
operations..................... (7,855) (5,434)
Other income and (expenses):
Interest income................ 32 238
Interest expense............... (1,007) (263)
Other income................... 780 --
---------- ----------
Loss from continuing operations
before income taxes............ (8,050) (5,459)
Provision (benefit) for income
taxes........................ (2,346) 7
---------- ----------
Loss from continuing
operations..................... $ (5,704) $ (5,466)
Discontinued operations
Income from discontinued
clinical operations (less
applicable taxes of $239 and
$21)......................... 412 182
Gain on disposal of clinical
operations (less applicable
income taxes of $3,401)...... 1,159 --
---------- ----------
Net loss......................... $ (4,133) $ (5,284)
Dividends to preferred
shareholders(2)................ -- --
---------- ----------
Net loss to common
shareholders................... $ (4,133) $ (5,284)
========== ==========
Net loss to common shareholders
per weighted average number of
common shares (basic and
diluted):
From continuing operations..... $ (0.48) $ (0.83)
========== ==========
Net loss....................... $ (0.35) $ (0.80)
========== ==========
Weighted average number of shares
outstanding (basic and
diluted)....................... 11,788,542 6,598,545
</TABLE>

<TABLE>
<CAPTION>
OCTOBER 3, JANUARY 3, DECEMBER 28, DECEMBER 29, DECEMBER 31, DECEMBER 31,
1999 1999 1997 1996 1995 1994
---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............. $ 5,577 $11,740 $6,383 $8,894 $5,825 816
Short-term investments.... -- -- -- -- -- 2,231
Working capital
(deficit)............... (14,706) (4,319) (8,423) (116) (7,011) (7,858)
Total assets.............. 80,861 83,337 70,980 66,704 58,042 47,993
Long-term liabilities..... 14,180 10,397 10,779 6,742 7,179 9,082
Stockholders' equity...... 25,204 36,204 27,378 35,204 27,288 19,424
</TABLE>

- ------------------------------
(1) During the third quarter of 1999, the Company recognized $1.2 million of
facility consolidation costs associated with the consolidation of
Primedica's Massachusetts operations into a single facility.
(2) In March 1998, the Company completed a private placement of $20 million of
Series A convertible preferred stock and warrants to three institutional
investors. Because of the immediate convertibility of the Series A
preferred stock, the warrants, valued at aproximately $1.2 million, were
recognized as a dividend payment to preferred shareholders during the first
quarter of 1998.

There were no cash dividends paid for any period presented.

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

GTC is a leader in the application of transgenic technology to the
development and production of monoclonal antibodies and other recombinant
proteins for therapeutic and biomedical uses. To date, the Company has formed
more than a dozen collaboration agreements which generally provide for
transgenic production of limited quantities of targeted proteins in exchange for
development fees and milestone payments. Following demonstration of
comparability of the transgenic product to a product produced in cell cultures,
the Company intends to continue to negotiate commercialization agreements that
are designed to allow the Company to participate in the success of the product
through equity, royalties and supply commitments. GTC also owns and operates a
leading preclinical CRO, Primedica, which provides testing services to
pharmaceutical, biotechnology, medical device and other companies on a fee for
service basis.

RESULTS OF OPERATIONS

NINE MONTHS ENDED OCTOBER 3, 1999 AND SEPTEMBER 27, 1998

REVENUES. Total revenues for the nine-month period ended October 3, 1999
were $53.1 million, compared with $44.7 million in the comparable period of
1998, an increase of $8.4 million, or 19%. Service revenues increased to
$41.9 million during the first nine months of 1999 from $37.2 million in the
comparable period of 1998, an increase of $4.7 million, or 13%. Transgenic
research and development revenue increased to $11.2 million during the first
nine months of 1999 from $7.5 million in the comparable period of 1998, an
increase of $3.7 million, or 50%. The increase is primarily a result of a
$3.5 million milestone payment earned during the third quarter of 1999 in
association with progress on the HSA program.

COSTS AND EXPENSES. Cost of services during the first nine months of 1999
were $35.5 million compared to $31.8 million in the comparable period of 1998,
an increase of $3.7 million, or 12%, due to the increase in revenues. Sponsored
research and development expenses increased to $7.8 million in the first nine
months of 1999 from $7.1 million in the comparable period of 1998, an increase
of $700,000, or 10%. The increase in expense was due to increased activity on
sponsored research programs. Internal research and development expenses
decreased to $3.3 million in the first nine months of 1999 from $5.0 million in
the comparable period of 1998, a decrease of $1.7 million, or 33%. The decrease
is due primarily to reduced expenditures on the cancer vaccine program and a
shifting of resources to sponsored research and development.

GROSS PROFIT. Gross profit, defined as revenues less service costs and
research and development costs, for the first nine months of 1999 increased to
$6.5 million from $830,000 in the comparable period of 1998 due to higher
revenues and milestone payments and a decrease in internal research and
development costs. Gross profit on services for the first nine months of 1999
was $6.5 million, a gross margin of 15%, as compared to $5.5 million, a gross
margin of 15%, in the comparable period of 1998.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
("SG&A") expenses increased to $14.6 million in the first nine months of 1999
from $12.0 million in the comparable period of 1998, an increase of
$2.7 million, or 22%. The increase is primarily due to the increased marketing
effort in the Primedica business, the addition of administrative personnel
required to support the growth in transgenic research and development programs
as well as additional patent related expenditures.

FACILITY CONSOLIDATION COSTS. During the third quarter of 1999, the Company
recognized $1.2 million of facility consolidation and expansion costs associated
with the consolidation and

19
<PAGE>
expansion of Primedica's Massachusetts operations into a single facility. These
costs consisted of facility closure costs of $740,000 and severance and employee
related costs of $505,000. The facility closure costs included write-offs of
leasehold improvements of $415,000 and rental and lease termination costs to be
incurred after the consolidation of $325,000. The rental and lease termination
costs are expected to be paid through December of 2003. Severance costs were
related to the elimination of 12 laboratory positions, one finance position and
seven general and administrative positions. Severance will be paid through 2000.
The Company anticipates the consolidation to increase its ability to perform
higher margin CRO services, while at the same time reducing operating expenses.

OTHER INCOME AND EXPENSES. Interest income decreased to $39,000 in the
first nine months of 1999, from $231,000 in the comparable period of 1998, due
to lower funds available for investment. Interest expense increased to
$1.7 million in the first nine months of 1999 from $1.1 million in the
comparable period of 1998 due to increased borrowings in 1999. Other income
increased to $484,000 in the first nine months of 1999, from $100,000 in the
comparable period of 1998, due to the receipt in 1999 of an insurance
settlement.

EQUITY IN LOSS OF JOINT VENTURE. The Company recognized $2.7 million of
losses incurred on the joint venture between the Company and Genzyme (the "ATIII
LLC") during the first nine months of 1999 as well as during the comparable
period of 1998. The ATIII LLC was formed to develop transgenic Antithrombin III
("ATIII").

YEAR ENDED JANUARY 3, 1999 AS COMPARED TO YEAR ENDED DECEMBER 28, 1997

REVENUES. Total revenues for 1998 were $62.4 million, compared with
$62.9 million in 1997, a decrease of $500,000, or 1%. Service revenues increased
to $50.8 million in 1998 from $43.4 million in 1997, an increase of
$7.4 million, or 17%. Research and development revenues decreased to
$11.6 million in 1998 from $19.5 million in 1997, a decrease of $7.9 million, or
41%. The decrease reflects the impact on revenue of the establishment, in
January 1998, of the ATIII LLC for the development of transgenic ATIII with
Genzyme. Had the ATIII program been structured on the same basis during 1998 as
during 1997, research and development revenues for 1998 would have increased by
approximately $713,000, or 4%.

COSTS AND EXPENSES. Cost of services in 1998 were $43.7 million compared to
$37.0 million in 1997, an increase of 18%, due, primarily, to increased service
volumes. Sponsored research and development expenses decreased to $10.5 million
in 1998 from $12.6 million in 1997, a decrease of $2.1 million, or 16%. The
decrease was due to the impact of the formation of the ATIII LLC. In 1997, the
full cost of the ATIII development program, including subcontractor costs, was
reflected by the Company as sponsored research and development expense and, to
the extent that the program was funded, as sponsored research and development
revenue. With the formation of the ATIII LLC in 1998, all funding and
subcontractor costs were being recorded directly by the ATIII LLC. Costs
incurred by the Company for the ATIII development program were being funded by
the ATIII LLC and, therefore, only these costs were being recorded equally as
sponsored research and development revenue and sponsored research and
development expense. Had the ATIII development program been structured on the
same basis during 1998 as during 1997, the sponsored research and development
expenses would have increased by approximately $6.6 million over the 1997 rate.
Internal research and development expenses increased to $6.2 million in 1998
from $5.3 million in 1997, an increase of $900,000, or 17%. The increase was due
to increased work on the cancer vaccine program and increased activity on
internal research programs.

GROSS PROFIT. Gross profit in 1998 amounted to $2.1 million versus
$8.1 million in 1997. The decrease was primarily due to $4.4 million of
transgenic milestones from the joint venture with Sumitomo Metal
Industries, Ltd. (the "SMIG JV") recorded in 1997 in connection with the ATIII
program, as well as a $1.5 million milestone from Bristol-Myers Squibb in 1997.
Additionally, an

20
<PAGE>
increase of $900,000 in internal research and development was offset by an
increase of $700,000 in services gross profit. Gross profit on services for 1998
was $7.1 million, a gross margin of 14%, versus $6.4 million, a gross margin of
15% in 1997. The decrease in gross margin was due to increased revenue
recognized on contracts not signed until the first quarter of 1997 but for which
costs had previously been incurred and recognized, partially offset by improved
utilization in 1998 due to increased revenues.

SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses increased to
$16.2 million in 1998 from $15.7 million in 1997, an increase of $500,000, or
3%. The increase was due to the increased marketing effort and additional costs
associated with the name change for Primedica as well as the addition of
administrative personnel required to support the growth in transgenic research
and development programs.

OTHER INCOME AND EXPENSES. Interest income increased to $280,000 in 1998,
from $136,000 in 1997, due to an increase in funds available for investment as a
result of proceeds received from the preferred stock offering in the first
quarter of 1998 and the sale of common stock in a registered direct offering in
the second quarter of 1998. Interest expense increased to $1.4 million in 1998,
from $1.1 million in 1997. Of the 1998 total, $1,144,000 represents interest
incurred by the testing service operations, $101,000 represents interest for the
financing of the transgenic production facility and $134,000 represents interest
incurred under the revolving line of credit with Genzyme ("Genzyme Credit
Line").

The Company recognized $100,000 of non-operating income in 1998 compared to
$50,000 in 1997. The 1998 amount represents an earnout payment in connection
with the sale in 1995 of TSI Center for Diagnostic Products Inc.

EQUITY IN LOSS OF JOINT VENTURE. The Company recognized $4.3 million of
joint venture losses incurred on the ATIII LLC during 1998. In 1997, the Company
incurred $811,000 of losses on the SMIG JV.

YEAR ENDED DECEMBER 28, 1997 AS COMPARED TO YEAR ENDED DECEMBER 29, 1996

REVENUES. Total revenues for 1997 were $62.9 million, compared with
$46.8 million in 1996, an increase of $16.1 million, or 34%. Service revenues
increased to $43.4 million in 1997 from $38.5 million in 1996, an increase of
$4.9 million, or 13%. Sponsored research and development revenues increased to
$19.5 million in 1997 from $8.3 million in 1996, an increase of $11.2 million,
or 134%, due primarily to an increase in activity and revenues related to the
funding received from Genzyme in the development of transgenic ATIII, the
achievement of $4.4 million in milestones from the SMIG JV, the achievement of a
$1.5 million milestone from Bristol-Myers Squibb as well as increased commercial
activity.

COSTS AND EXPENSES. Cost of services in 1997 was $37.0 million compared to
$33.4 million in 1996, an increase of $3.6 million, or 11%, due, primarily, to
the increased service volumes. Sponsored research and development expenses
increased to $12.6 million in 1997 from $7.9 million in 1996, an increase of
$4.7 million, or 60%. The increase is due to the operating costs of a new
manufacturing facility for the production of transgenic ATIII clinical trial
material and increased activity in commercial programs. Internal research and
development increased to $5.3 million in 1997 from $828,000 in 1996, an increase
of 538%. The increase was due to the initiation of the cancer vaccine program in
1997 and to increased internal research.

GROSS PROFIT. Gross profit in 1997 amounted to $8.1 million versus
$4.8 million in 1996. Gross profit on services in 1997 was $6.4 million, a gross
margin of 15%, versus $5.1 million, a gross margin of 13%, in 1996. The
improvement in the services margins was primarily due to increased services
revenues.

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<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses increased to
$15.7 million in 1997 from $11.7 million in 1996, an increase of $4.0 million or
34%. The increase was due to an increase in the sales and marketing effort and
to the addition of administrative personnel required to support the growth in
transgenic research and development programs, $434,000 of transaction costs on
uncompleted merger and acquisition activities as well as $326,000 in one-time
personnel-related charges.

OTHER INCOME AND EXPENSES. Interest income increased to $136,000 in 1997,
from $85,000 in 1996, due to the investment of funds from the Company's
secondary public offering and receipt of interest on funds that were held in
escrow in 1996. Interest expense was essentially unchanged year to year at
$1.1 million. Of the 1997 total, $962,000 represented interest incurred by the
testing service operations, $161,000 represented interest for the financing of
the transgenic production facility and $6,000 represented interest incurred
under the Genzyme Credit Line.

The Company recognized $50,000 of non-operating income in 1997 compared to
$587,000 in 1996, a decrease of $537,000 or 91%. Of the 1996 total, $538,000
represented the collection of the final payments of the promissory note received
in connection with the 1995 sale of the TSI Center for Diagnostic Products Inc.

EQUITY IN LOSS OF JOINT VENTURE. The Company recognized $811,000 of joint
venture losses in 1997 compared to $356,000 in 1996. The increase was due to
additional research by the SMIG JV including increased research funding to the
Company.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and cash equivalents of $5.6 million at October 3,
1999. In addition, the Company had approximately $6.3 million available under
the Genzyme Credit Line, $250,000 available under a line of credit with a
commercial bank, $3.2 million available under various capital lease lines and
$664,000 available under a term loan for the transgenic production facility
expansion. The Genzyme credit line will no longer be available if the net
proceeds from this offering equal or exceed $34.6 million.

During the first nine months of 1999, the Company had a $6.2 million net
decrease in cash: $6.7 million of cash used in operations (due primarily to the
net loss of $13.4 million and a decrease in non-cash working capital of
$749,000, offset by an increase in non-cash charges of $7.4 million),
$4.7 million was invested in capital equipment, further expansion of the
transgenic production facility and the expansion of the laboratory facilities,
and $1.9 million was used to pay down long-term debt. Sources of funds during
the period included $4.7 million in net borrowings under a commercial bank
revolving line of credit, $4.6 million of proceeds from issuance of long-term
debt and $820,000 of proceeds were received from the issuance of common stock
under various employee stock plans. The Company had a working capital deficit of
$14.7 million at October 3, 1999 compared to a deficit of $4.3 million at
January 3, 1999.

In November 1999, the Company redeemed all of its outstanding Series A
convertible preferred stock for a cash payment of approximately $6.6 million,
representing cost plus 15%. To fund the redemption, the Company issued
approximately $6.6 million of Series B convertible preferred stock to Genzyme.
The Series B convertible preferred stock carries an initial 11% dividend which
increases to 12% effective July 1, 2000 and is convertible by Genzyme into
common stock at any time at a fixed rate of $6.30 per share. All accrued and
unpaid dividends will be paid upon conversion, liquidation or redemption of the
Series B convertible preferred stock. The Company has the sole right to redeem
the Series B convertible preferred stock for cash at any time at its original
value plus accrued dividends. It is anticipated that the Series B convertible
preferred stock will be redeemed by the Company at cost plus accrued dividends
out of the proceeds of this offering. The Company also raised approximately
$5.4 million through the sale of 685,545 previously registered shares of common
stock at a price of $8.00 per share to two institutional investors in
December 1999.

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<PAGE>
The proceeds of this offering, existing cash balances along with funds
available under the bank and lease lines are expected to be sufficient to fund
the Company's operations through at least 2001.

RECENT ACCOUNTING PRONOUNCEMENTS

SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements," issued in December 1999, summarizes certain of the Staff's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. The statements in the staff accounting bulletins represent
interpretations and practices followed by the Division of Corporation Finance
and the Office of the Chief Accountant in administering the disclosure
requirements of the Federal securities laws.

SEC Staff Accounting Bulletin No. 100, "Restructuring and Impairment
Charges," issued in November 1999, expresses views of the Staff regarding the
accounting for and disclosure of certain expenses commonly reported in
connection with exit activities and business combinations. This includes accrual
of exit and employee termination costs pursuant to Emerging Issues Task Force
(EITF) Issues No. 94-3, LIABILITY RECOGNITION FOR CERTAIN EMPLOYEE TERMINATION
BENEFITS AND OTHER COSTS TO EXIT AN ACTIVITY (INCLUDING CERTAIN COSTS INCURRED
IN A RESTRUCTURING), and No. 95-3, RECOGNITION OF LIABILITIES IN CONNECTION WITH
A PURCHASE BUSINESS COMBINATION, and the recognition of impairment charges
pursuant to Accounting Principles Board (APB) Opinion No. 17, INTANGIBLE ASSETS,
and Statement of Financial Accounting Standards (SFAS) No. 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF.

The impact of these Staff Accounting Bulletins is currently being reviewed
by the Company.

FORWARD LOOKING STATEMENTS

Management's current expectations regarding the sufficiency of the Company's
cash resources are forward looking statements and the Company's cash
requirements may vary materially from such expectations. Such forward looking
statements are dependent on several factors, including the results of the
Company's CRO business, the ability of the Company to enter into any transgenic
research and development collaborations in the future and the terms of such
collaborations, the results of research and development and preclinical and
clinical testing, competitive and technological advances and regulatory
requirements. If the Company experiences increased losses, the Company may have
to seek additional financing through collaborative arrangements or from public
or private sales of its securities, including equity securities. There can be no
assurance that additional funding will be available on terms acceptable to the
Company, if at all. If additional financing cannot be obtained on acceptable
terms, to continue its operations the Company could be forced to delay, scale
back or eliminate certain of its research and development programs or to delay
or forgo timely expansion, improvement or investment in CRO services or to
dispose of the assets related to those services.

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<PAGE>
BUSINESS

OVERVIEW

Genzyme Transgenics Corporation ("GTC" or the "Company") is a leader in the
application of transgenic technology to the development and production of
recombinant proteins for therapeutic and other biomedical uses. To date, GTC has
produced more than 60 such proteins, 45 through collaborations with various
commercial and academic organizations and 15 independently. More than half of
the transgenic proteins actively under development by the Company are monoclonal
antibodies/ Ig fusion proteins. For its lead compound, Antithrombin III
("ATIII"), the Company has completed one of two identical Phase III clinical
studies for the treatment of heparin resistance in patients undergoing
cardiopulmonary bypass ("CPB") procedures. GTC also owns and operates a leading
preclinical contract research organization ("CRO"), Primedica Corporation
("Primedica"), which provides services such as preclinical efficacy and safety
testing, IN VITRO testing and formulation development to pharmaceutical,
biotechnology, medical device and other companies.

GTC produces recombinant proteins by inserting into the genetic material of
an animal embryo a specific DNA sequence that directs the production of a
desired protein in the milk of transgenic offspring. The Company believes that
transgenic production offers substantial economic and technological advantages
in comparison to traditional protein production systems, such as cell culture
and microbial systems. These advantages include reduced capital expenditures,
greater flexibility in timing capital investment and lower direct production
cost per unit. In the case of certain complex proteins, including Ig fusion
proteins, transgenic production may represent the only technologically and
economically feasible method of commercial production. For proteins currently
derived from pooled human plasma, transgenic production provides an alternative
source with reduced risk of transmission of human viruses and other known
adventitious agents. Of the 60 transgenic proteins produced to date, GTC has
expressed 40 proteins at levels of one gram per liter or higher in mice, 11 of
which have also been expressed in goats at levels greater than one gram per
liter. These expression levels are substantially higher than those typically
achieved for comparable proteins in traditional protein production systems.

The Company's primary focus is on using transgenic technology to produce
monoclonal antibodies. These therapeutics are likely to be required in
relatively large and repeated doses for chronic diseases such as rheumatoid
arthritis, other autoimmune diseases and cancer. The economic and technological
advantages of transgenic technology make it well suited to produce the large
amount of proteins anticipated for therapeutic use of monoclonal antibodies. By
mid-1999, 14 monoclonal antibodies had been approved for use in the United
States--nine for use as human therapeutics and five for diagnostic uses. The
projected 1999 revenues for the six highest selling therapeutic
antibodies--ReoPro-Registered Trademark-, Rituxan-Registered Trademark-,
Synagis-Registered Trademark-, Herceptin-Registered Trademark-,
Remicade-Registered Trademark- and Zenapax-Registered Trademark---are
$1.3 billion. More than 30 monoclonal antibody candidates are now in clinical
trials and over 200 are reported to be in preclinical development. The Company
believes that in many cases the yearly requirement for production of these
potential therapeutics will exceed 100 kilograms and may approach 300 to 1000
kilograms. Transgenic production may provide the only commercially viable means
to meet the large projected volume requirements of these therapeutics.

The Company has several partnerships with pharmaceutical and other
biotechnology companies to develop monoclonal antibodies/Ig fusion proteins
transgenically. GTC's corporate partners include Bristol-Myers Squibb, Elan,
Centocor, Alexion and BASF Knoll. To date, the Company has formed more than a
dozen collaboration agreements which generally provide for transgenic production
of limited quantities of targeted proteins in exchange for development fees and
milestone payments and, in some cases, anticipate the payment of royalties on
product sales upon commercialization. Following demonstration of comparability
of the transgenic product to a version of the product produced in cell culture,
the Company intends to negotiate commercialization agreements that are designed
to allow the

24
<PAGE>
Company to participate in the success of the product through equity, royalties
and supply commitments. The Company has been granted several patents covering
the production of monoclonal and assembled antibodies in the milk of transgenic
mammals, which it believes establish a strong proprietary position in the field.

Proteins traditionally sourced from human plasma provide other opportunities
for high volume transgenic protein production. The Company is developing a
transgenic version of ATIII, a protein normally found in human serum, in a joint
venture with Genzyme Corporation ("Genzyme"). When bound to other blood proteins
that function to regulate clotting, ATIII acts as an anticoagulant. Worldwide
sales of plasma derived ATIII to treat hereditary and acquired ATIII deficiency
are approximately $230 million. The Company believes transgenic ATIII may
represent a more attractive product than plasma sourced ATIII in light of safety
considerations, the limited volume of ATIII available from plasma and the
impracticality of producing sufficient quantities of recombinant ATIII by cell
culture methods. The Company has developed a goat herd producing a transgenic
version of ATIII, which is now in clinical evaluation in two identical, double
blinded Phase III clinical trials. The first of these studies was completed in
late 1999, and the primary clinical endpoint was met. Patient enrollment in the
second study is expected to be completed in the first quarter of 2000. These
clinical trials have targeted treatment of heparin resistant heart disease
patients undergoing cardiopulmonary bypass surgeries, with a strategy of seeking
approvals for broader indications after receipt of initial marketing approval.

Another plasma protein under development by GTC is Human Serum Albumin
("HSA"), which is being developed with Fresenius AG. The therapeutic use of HSA
is indicated in situations of blood loss and decreased blood albumin levels
which can occur during shock, serious burns, pre- and post-operative conditions,
congestive heart failure and gastric, liver and intestinal malfunctions. HSA is
currently produced by human plasma fractionation, with current worldwide sales
of approximately $1.0 billion. During 1999, the Company achieved several
milestones under this collaboration, including demonstration of expression of
HSA in the milk of transgenic cattle at a concentration that is consistent with
making it a commercially viable product. The Company is also developing
transgenic production processes for other proteins, including a malaria
merozoite surface protein ("MSP-1") for use in a malaria vaccine.

GTC's other business, Primedica, is focused on enabling its clients to meet
regulatory testing and other product development needs quickly and effectively
by offering a fully integrated line of preclinical CRO services. Primedica's
laboratories provide high value, scientifically differentiated services to
clients, including preclinical efficacy testing, experimental surgery,
photobiology and reproductive toxicology testing as well as formulation
development. Primedica uses its technological capabilities to introduce new
services that improve the ability of its customers to develop their products
successfully. Primedica's comprehensive programs link its preclinical and
manufacturing support services to reduce the time and expense of bringing new
therapeutics or other products to market.

TRANSGENIC BUSINESS

OVERVIEW

A growing number of recombinant proteins are being developed by
pharmaceutical and biotechnology companies for therapeutic and diagnostic
applications. Many of these proteins have proven difficult or expensive to
produce in the quantities required using traditional protein production systems,
such as bacteria, yeast or mammalian cell cultures. Moreover, bacteria and yeast
systems cannot produce many complex proteins. While mammalian cell cultures can
produce most of these complex proteins, these cells are generally more difficult
and expensive to grow and often produce lower volumes of protein, or the
proteins may not be secreted by the cells into the culture medium, thereby
complicating recovery and purification. Proteins produced by the Company through
transgenic

25
<PAGE>
technology have been expressed at concentrations substantially higher than those
typically achieved using traditional production methods.

Transgenic technology uses IN VITRO microinjection or other techniques to
introduce a genetically engineered segment of exogenous DNA (an "expression
vector") into the genetic material of a fertilized egg or early stage animal
embryo. Two types of genetic instructions are incorporated into the expression
vector: the coding sequence and the promoter sequence. Coding sequences instruct
the cells of the animal to express a specified protein. Promoter sequences
direct the expression of proteins at appropriate times and by specific tissues
or cell types. GTC utilizes promoter sequences that direct the expression of
specific proteins in the mammary gland during lactation. After microinjection of
the exogenous DNA, the modified embryo is then transferred to a recipient
female. Transgenes are successfully integrated into the genetic makeup of only a
small percentage of the embryos that are microinjected; therefore multiple
microinjection candidates are required. If successful, the resulting animal,
when mature and lactating, will express the desired protein. Once established in
the first generation of transgenic animals, the transgene is transmitted like
other genetic traits to future generations through traditional breeding with
either non-transgenic or other transgenic animals. To date, the Company has
produced such proteins principally using goats, which offer an attractive
combination of large milk volumes, relatively short generational time periods
and ease of handling and milking.

GTC believes that for certain proteins required in extremely large amounts,
such as HSA, transgenic cows might be required. Due to the long gestation and
maturation periods of large dairy animals, microinjection is an inefficient
method to produce transgenic cows. Therefore, the Company believes that cloning
may accelerate transgenic biopharmaceutical development because cloning offers a
method of producing a large number of transgenic animals in one generation. GTC
has signed an exclusive, worldwide licensing agreement with Advanced Cell
Technologies, Inc. ("ACT") allowing GTC to utilize ACT's patented technology for
the development of biopharmaceuticals in the milk of all cloned transgenic
mammals. The Company believes ACT's proprietary technology, when coupled with
GTC's transgenic technology, will provide additional patentable approaches to
efficiently create cloned transgenic animals. To date, the Company together with
ACT has cloned eight cows.

ADVANTAGES OF TRANSGENIC TECHNOLOGY

The Company believes that its current and future partners will elect to
employ transgenic technology for the production of recombinant proteins in cases
where transgenic technology offers economic and technological advantages over
other production systems. These advantages, any one of which may be critical to
the decision to proceed with a particular development project, include:

- LOWER CAPITAL INVESTMENT. Creating a herd and providing appropriate dairy
facilities can be accomplished with substantially less cost than building
a cell culture bioreactor facility.

- IMPROVED RISK MANAGEMENT OF CAPITAL INVESTMENT. Transgenic herd production
offers capacity flexibility and relatively short lead times for scale up.
As a result, in contrast to the need for early commitment to bioreactor
production capacity, the Company's partners can delay those commitments
(and the corresponding capital investment) to later stages of the
development project when they may have more definitive product and market
information.

- PREDICTABILITY OF PRODUCTION. In contrast to cell culture production
systems, transgenic production systems exhibit greater predictability of
yield at large volume production. This offers GTC's partners greater
assurance of the ability to produce product quantities sufficient for
advanced clinical trials and product launch.

- LOWER COST OF GOODS. Economic factors unique to transgenic production
lower the ultimate cost of goods in most cases. High protein expression
levels in transgenic animals and efficiency in

26
<PAGE>
purification result in the cost of transgenically produced products, in
most cases, being substantially lower than that of a cell culture derived
product. As further improvements are made in the downstream purification
process, GTC anticipates that the cost of the transgenically produced
product will decline even further.

- TECHNOLOGICAL ENABLEMENT. Transgenic technology offers the ability to
produce certain biotherapeutics which cannot be made in a commercially
feasible manner in any other system. The suitability of transgenic
production for high-volume proteins requiring more than 100 kilograms per
year is widely acknowledged. In addition, GTC has achieved the same
consistent expression rates with complex molecules, which may not be
producible in cell cultures at all. This accomplishment, in conjunction
with the favorable economics of herd development, means that for some
complex proteins with low-volume demand, transgenics may be as viable a
production system as it is for other proteins that require 1000 kilograms
or more annually.

TRANSGENIC DEVELOPMENT PROCESS

GTC's development of a typical transgenic protein is designed to proceed in
a logical sequence of three major steps:

- FIRST STEP. Using the DNA provided by the partner, GTC develops founder
goats transgenic for a particular protein. The Company employs a standard
DNA microinjection process to produce a transgenic goat. The first animals
are born five months after microinjection.

- SECOND STEP. GTC and the partner collaborate on the development of a pilot
downstream process to purify the protein, after which GTC provides
preclinical and clinical samples. After GTC provides protein samples from
transgenic milk to the partner for initial purification and
characterization, GTC and the partner begin a collaborative effort to
establish commercially robust purification process techniques for the
protein. This enables substantial amounts of material to be delivered for
preclinical studies and initial human clinical studies. Next, GTC
initiates an initial scale up of the transgenic herd making 6 to 10
animals that are capable of producing sufficient product for use in
expanded clinical studies.

- THIRD STEP. GTC initiates herd scale up, with the manufacturing phase
following in sufficient time to fill the pipeline for product launch.
Concurrently with the production of initial quantities of product, GTC and
the partner develop cost and timing estimates for commercialization. The
partner will then make capital commitments to enable GTC to provide
certain facility capacities specifically for the partner's product. This
may include a barn or several barns for housing and scaling the herd with
attached facilities for the collection of milk and initial processing
steps. Simultaneously, GTC will begin the scale up of the production herd
to allow a sufficient number of animals to enter the production herd to
meet forecasted product requirements. GTC anticipates that its future
commercial supply agreements will provide for the transfer of intermediate
bulk to the customer or designated processor for further processing to
finished product.

DEVELOPMENT PROGRAMS

GTC's strategy is to commercially produce proteins using transgenic
technology primarily by entering into collaboration agreements with
biotechnology and pharmaceutical companies. To date, the Company has formed more
than a dozen collaboration agreements which generally provide for transgenic
production of limited quantities of targeted proteins in exchange for
development fees and milestone payments and, in some cases, anticipate the
payment of royalties on product sales upon commercialization. Following
demonstration of comparability of the transgenic product, the Company intends to
negotiate commercialization agreements that are designed to allow the Company to
participate in the success of the product through equity, royalties and supply
commitments.

27
<PAGE>
The products covered by these partnerships encompass a broad range of
indications and are currently in various stages of development. Many of GTC's
collaborators are marketing or engaging in clinical trials with product sourced
through traditional protein production systems and are considering transitioning
to a transgenically produced product. In most of these collaborations, GTC
benefits from the partner's preclinical development experience in working with a
particular protein, and in cases where a recombinant or plasma-derived product
is in clinical trials or on the market, the Company believes the regulatory
approval process for the transgenic product will be facilitated by the partner's
experience with the initial product.

MONOCLONAL ANTIBODIES

Monoclonal antibodies represent one of the biotechnology industry's greatest
successes. Medical researchers have now developed a better understanding of the
critical variables for specificity and binding of the antibody, targets likely
to affect disease progression and clinical conditions amenable to treatment with
systemic biologic intervention. As a result, the last several years have
witnessed the clinical success, regulatory approval and commercial launch of
several breakthrough monoclonal antibody therapies, including
ReoPro-Registered Trademark- for use in various acute cardiac conditions,
Rituxan-Registered Trademark- for B-cell non-Hodgkin's lymphoma,
Synagis-Registered Trademark- for treatment of viral respiratory disease in
premature babies, Herceptin-Registered Trademark- for breast cancer,
Remicade-Registered Trademark- for use in Crohn's disease and rheumatoid
arthritis and Zenapax-Registered Trademark- for acute transplant rejection.
These clinical successes, the availability of technologies for making fully
humanized molecules and drug discovery technologies that identify potential
antibody targets, will continue to drive the development of new antibody-based
therapeutics.

Therapeutic antibodies are typically administered in larger doses than other
protein therapeutics and in repeated doses to treat chronic illnesses. Their
continued success is driving the need for commercially feasible production
methods yielding significantly higher quantities than currently available using
traditional protein production methods. While the annual worldwide requirement
of a typical recombinant protein may approach 10 kilograms, the Company believes
that many antibodies will require supplies in excess of 100 kilograms annually.
Current cell culture methods (the only traditional method available for
producing monoclonal antibodies) generally cannot produce the requisite high
volumes needed for antibody therapeutics, are not economically feasible and
require significant capital investment. The Company believes that the high
expression levels which can be achieved using transgenic technology will enable
the pharmaceutical industry to meet these market demands.

GTC is actively participating in the field of monoclonal antibodies through
a number of collaborations. The Company is developing a transgenic version of
Remicade-Registered Trademark- in a collaboration with Centocor. Also, GTC is
developing transgenic versions of eight additional monoclonal antibodies/Ig
fusion molecules, the cell culture versions of which are currently in clinical
trials, including D2E7 and MAK195 for BASF, CTLA4Ig and an Ig fusion molecule
for Bristol-Myers Squibb, Antegren for Elan, BR96 for Seattle Genetics, PRO542
for Progenics and a therapeutic recombinant protein for Alexion. The indications
for these products include arthritis, HIV/AIDS, cancer and autoimmune diseases.
The status of the cell culture and transgenic versions of these products is
shown in the chart below. In these partnerships, the Company provides material
for the partners' clinical trials, while the partners retain the risk and
expense of conducting the trials.

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The following chart contains a summary of the Company's most active
monoclonal antibody/Ig fusion protein development programs:

<TABLE>
<CAPTION>
DEVELOPMENT STAGE
PRODUCT OF CELL CULTURE DEVELOPMENT STAGE OF
NAME PRODUCT TYPE INDICATION PRODUCT TRANSGENIC PRODUCT PARTNER
- ------- ------------------ ----------------------- ------------------ ----------------------- ---------------
<S> <C> <C> <C> <C> <C>
Remicade Monoclonal Crohn's Disease; Marketed Preclinical; Transgenic Centocor
- -Registered antibody Rheumatoid Arthritis goats in development
Trademark-

D2E7 Fully human Rheumatoid Arthritis Phase II clinicals Preclinical; Transgenic BASF/Knoll
monoclonal goats in development
antibody

Antegren Humanized Neurological Disorders Phase II clinicals Preclinical; Transgenic Elan
- -Registered monoclonal goats in development Pharmaceuticals
Trademark- antibody

CTLA4Ig Immunoglobulin Rheumatoid Arthritis Phase II clinicals Preclinical; Transgenic Bristol-Myers
fusion/soluble goats in development Squibb
receptor

Undisclosed Immunoglobulin Organ Transplant Phase II clinicals Preclinical; Transgenic Bristol-Myers
fusion protein Rejection; Autoimmune goats in development Squibb
Disorders

Undisclosed Monoclonal Undisclosed Undisclosed Preclinical; Transgenic Alexion
antibody goats in development

PRO542 CD4/Immunoglobulin HIV/AIDS Phase II clinicals Preclinical; Transgenic Progenics
fusion antibody mice in development

Undisclosed Monoclonal Undisclosed Research Research/partnership Millennium
antibodies and for development of Pharmaceuticals
therapeutic therapeutic drug
proteins targets
</TABLE>

PLASMA DERIVED PROTEINS

ANTITHROMBIN III. ATIII is a protein normally found in human serum, that
when bound to heparin, acts as an anticoagulant. Decreased levels of ATIII are
found in individuals who have either a hereditary or an acquired deficiency of
ATIII. The hereditary deficiency has an incidence rate of 1 in 2,000 to 1 in
20,000. Individuals with hereditary ATIII deficiency have an increased tendency
toward blood clots (thromboses) and are treated with ATIII replacement therapy
during periods when they are at high risk for clots, such as during surgery.
Acquired ATIII deficiency may occur if there is a decrease in the amount of
ATIII produced, an increase in the rate of ATIII consumption or an abnormal loss
of ATIII from the circulation. Examples of conditions in which acquired ATIII
deficiency may occur are acute liver failure, disseminated intravascular
coagulation, sepsis and septic shock, burns, multiple organ failure, bone marrow
or organ transplantation and hemodialysis.

GTC believes transgenic ATIII may represent a more attractive therapeutic
than the current plasma derived product in light of the risks of viral
transmission from pooled plasma products in general, the limited volume of ATIII
currently available from plasma and the impracticality of producing sufficient
quantities of ATIII in cell culture systems. The Company also believes that a
lower cost, higher volume alternative to plasma derived ATIII may further expand
the therapeutic use of ATIII.

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<PAGE>
The Company filed an Investigational New Drug application ("IND") with the
FDA and is evaluating use of transgenic ATIII as a potential treatment for ATIII
deficiency that occurs in certain patients with heart disease. Patients
undergoing cardiopulmonary bypass ("CPB") surgery require anticoagulation with
heparin to prevent clotting, which can occur when blood comes into contact with
the tubing of the heart-lung machine performing the heart's function during
surgery. Patients with heparin resistance generally do not respond adequately to
these heparin treatments. Treatments of these patients with fresh frozen plasma
is one option to restore heparin sensitivity and achieve adequate
anticoagulation to permit initiation of CPB. ATIII deficiency is a key factor in
heparin resistance because heparin requires ATIII for effective anticoagulation.
The Company has adopted a clinical strategy of initially targeting heparin
resistant patients undergoing CPB with the plan of seeking approvals for
transgenic ATIII in broader indications after initial marketing approval is
obtained. A Phase II clinical study was completed which confirmed the safety
profile of transgenic ATIII at all doses administered and supported its ability
to enhance anticoagulation in cardiopulmonary bypass surgery patients. The study
also demonstrated that transgenic ATIII at doses of 50 units per kilogram or
higher maintained ATIII activity at 100% or greater for the duration of CPB.

Two identical, double blinded, randomized placebo-controlled Phase III
clinical trials began in the second quarter of 1998. These studies, which
include 52 patients each, were designed to assess the activity of ATIII in
restoring heparin sensitivity among heparin-resistant patients undergoing
cardiac surgery requiring CPB. The first study, conducted at six medical centers
in Germany and the United Kingdom, has been completed, and the primary clinical
endpoint was met. Seventy-nine percent of the patients who received ATIII did
not require administration of fresh frozen plasma before undergoing CPB surgery
in comparison to only eight percent of the placebo group. In addition to
achieving statistical significance on the primary endpoint, the trial also
achieved statistical significance on two out of three secondary endpoints.
Secondary endpoints included maintenance of normal ATIII levels and changes in
two biochemical markers of coagulation: D-dimer and fibrin monomer. Moreover,
the drug was well tolerated by patients. Patient enrollment in the second study,
which is being conducted in the United States and Europe, is expected to be
completed in the first quarter of 2000.

GTC and Genzyme have established the ATIII LLC joint venture for the
marketing and distribution of transgenic ATIII in all territories other than
Asia (which is covered by a joint venture between GTC and Sumitomo Metal
Industries Ltd.). Under the terms of the joint venture agreement, Genzyme will
fund 70% of the development costs of transgenic ATIII up to a maximum of
$33 million. The Company will fund the remaining 30% of these costs. Development
costs in excess of these amounts will be funded equally by the partners. Each of
the Company and Genzyme will also make capital contributions to the ATIII LLC
sufficient to pay 50% each of all new facility costs to be incurred. In addition
to the funding, both partners will contribute manufacturing, marketing and other
resources to the ATIII LLC at cost. Genzyme and GTC each own 50% of the venture,
although Genzyme is obligated to make certain milestone payments to GTC if and
when transgenic ATIII has been approved by the FDA and certain sales levels have
been reached. Profits and losses are shared according to ownership percentages.
The agreement covers all territories other than Asia.

The ATIII LLC has initiated a collaboration with Genzyme Molecular Oncology,
a division of Genzyme, to jointly develop a form of transgenic ATIII for
potential application as an angiogenesis inhibitor in the field of oncology.
This research stage collaboration is based on a discovery by Dr. Judah Folkman
from Children's Hospital, Boston, Massachusetts that certain conformations of
ATIII, referred to as anti-angiogenic ATIII, inhibit angiogenesis IN VITRO and
inhibit tumor growth in mice. Potential anti-angiogenic applications of
transgenic ATIII, outside the field of oncology, may be developed by the ATIII
LLC.

ATIII LLC is developing transgenic ATIII under a royalty-bearing license
from Centeon, a wholly owned subsidiary of Aventis SA and the successor to
Behringwerke AG.

30
<PAGE>
HUMAN SERUM ALBUMIN. HSA is the protein principally responsible for
maintaining oncotic pressure, plasma volume and the balance of fluids in blood.
It is critical to the transport of amino acids, fatty acids and hormones in the
blood stream. The therapeutic use of HSA is indicated in situations of blood
loss and decreased blood albumin levels which can occur during shock, serious
burns, pre- and post-operative conditions, congestive heart failure and gastric,
liver and intestinal malfunctions. HSA is currently produced by human plasma
fractionation, with current worldwide sales of approximately $1.0 billion.

GTC has expressed transgenic HSA in mice at levels equivalent to or greater
than 35 grams per liter and, in 1999, successfully produced transgenic cattle
expressing this protein in their milk at commercially feasible levels. An
individual cow is expected to produce 80 kilograms of albumin annually. GTC
believes that this level of production should provide the Company with the
ability to produce HSA at costs competitive with albumin sourced from human
blood, and in the amounts required to meet market demand. GTC has refined its
purification process for transgenic HSA and developed a detailed economic model
for its commercial production. The Company has entered into an agreement with
Fresenius AG of Bad Homburg, Germany, to further develop and commercialize
transgenic HSA.

OTHER DEVELOPMENT PROJECTS

MALARIA VACCINE. GTC's transgenic expression system has the potential to
express the correct, immunogenic protein for use as a malaria vaccine both
economically and on a large scale. Malaria is a disease that has an annual
incidence of more than 300 million people worldwide and results in several
million deaths annually. GTC is working with the National Institutes of Health
(the "NIH") and the Federal Malaria Vaccine Coordinating Committee to express a
malaria protein, which is considered a promising vaccine candidate and to
examine the options for commercializing the vaccine. The Company has entered
into a Collaborative Research and Development Agreement with the NIH and during
1998 achieved high level expression of the candidate vaccine malaria antigen,
MSP-1, in the milk of transgenic mice. Primate immunogenicity studies are
planned for early 2000.

SECOND GENERATION BIOPHARMACEUTICALS. GTC has a program to identify and
develop unique transgenic constructs which may represent line extensions for
recombinant biotherapeutics. Approved recombinant therapeutics, many of which
have established significant markets, may become vulnerable to competition from
novel versions which may be more cost effective and/or demonstrate improved
efficacy, allow more convenient routes of administration, or have extended
clinical applications. GTC is in discussions with both generic and proprietary
pharmaceutical and biotechnology companies with strategic and product-specific
interests in the second generation biopharmaceuticals program. In 1998, GTC
signed an initial collaboration agreement with Eli Lilly to evaluate a novel
second generation biotherapeutic for which GTC provided intellectual property
and know how. While good scientific progress has been achieved in the program,
Lilly has elected not to prioritize the project as a development candidate. The
project and the data derived from Lilly's evaluation have reverted to the
Company. GTC is in discussions with other parties to develop this candidate
product.

PRIMEDICA CORPORATION CRO SERVICES

GTC acquired its CRO capabilities through the acquisitions of TSI
Corporation in October 1994 and BioDevelopment Laboratories, Inc. in June 1995.
In February 1998, GTC reorganized its CRO businesses under its wholly owned
subsidiary, Primedica, to provide a unified identity and a dedicated structure
for further growth of its CRO business. Primedica conducts its CRO services
through four laboratories: Primedica Worcester (Massachusetts), Primedica
Redfield (Arkansas), Primedica Rockville (Maryland), as well as Primedica Argus
(Pennsylvania). This business currently employs more than 550 people.

31
<PAGE>
Primedica believes that it has a broader set of value-added services than
any of its competitors and is differentiated by its ability to offer
comprehensive development programs. Primedica has the ability to perform
virtually all of the safety, efficacy and quality control testing, as well as to
provide the regulatory affairs expertise necessary to bring a client's early
research-stage product through preclinical testing. Fields in which Primedica
provides contract services include:

- PRODUCT SAFETY TESTING. Primedica conducts safety studies using
toxicological, pathological and specialty endpoints, such as physiologic,
pharmacologic and mechanistic evaluations and is a recognized world leader
in conducting and evaluating reproductive and developmental toxicology
studies.

- METABOLISM AND PHARMACOKINETICS. Primedica's metabolism group evaluates
the distribution and impact of a drug and its metabolites using
sophisticated sampling techniques, metabolite profiling and
identification, tissue distribution studies and other techniques to
determine tissue half-life, clearance rates and potential sites of drug
toxicity after systemic exposure.

- COMPREHENSIVE MANUFACTURING SERVICES. Primedica specializes in
biopharmaceutical process development and manufacturing for
small-to-moderate batch sizes. These services include early cell line
development and optimization, production, down stream processing and fill
and finish services.

- DELIVERY AND DEVELOPMENT TECHNOLOGY SERVICES. These services include
targeted and controlled drug delivery, feasibility and preformulation
support, as well as formulation development for various routes of
administration.

Primedica believes the key to sustaining superior performance in this field
will be in providing services in close, collaborative relationship in which
customers are able to receive scientific services from Primedica at levels equal
to or greater than that which they could receive from an in-house department.
Toward this end, Primedica has also made significant investments in people,
technology and programs since GTC's acquisition of the CRO services.

RELATIONSHIP WITH GENZYME

EQUITY POSITION. Genzyme is the largest single stockholder of the Company,
currently holding 7,428,365 shares of common stock, which will represent
approximately 28.6% of the outstanding GTC common stock after giving effect to
this offering. In addition, Genzyme also holds $6,602,536 of Series B
convertible preferred stock which carries an initial dividend of 11% and is
convertible into common stock at a fixed rate of $6.30 per share. It is
anticipated that the Series B Preferred stock will be redeemed by the Company at
cost plus accrued dividends out of the proceeds from this offering. Genzyme also
holds four common stock purchase warrants exercisable for 145,000, up to
288,000, 55,833 and 29,491 shares of GTC common stock at prices of $2.84, $4.88,
$6.30 and $6.30 per share, respectively, the market price of the common stock at
the time the respective Genzyme warrants were issued. All of the shares held by
Genzyme (including shares issuable on exercise of Genzyme warrants) are entitled
to certain registration rights.

TECHNOLOGY TRANSFER AGREEMENT. Under the Technology Transfer Agreement
dated May 1, 1993, Genzyme transferred substantially all of its transgenic
assets and liabilities to GTC, assigned its relevant contracts and licensed to
the Company technology owned or controlled by it and relating to the production
of recombinant proteins in the milk of transgenic animals (the "Field") and the
purification of proteins produced in that manner. The license is worldwide and
royalty free as to Genzyme, although GTC is obligated to Genzyme's licensors for
any royalties due them. As long as Genzyme owns less than 50% of GTC, Genzyme
may use the transferred technology, or any other technology it subsequently
acquires relating to the Field, for internal purposes only without any royalty
obligation to the Company.

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<PAGE>
R&D AGREEMENT. Pursuant to a Research and Development Agreement dated
May 1, 1993, Genzyme and GTC agreed to provide research and development services
to the other relating, in the case of GTC, to transgenic production of
recombinant proteins and, in the case of Genzyme, to the purification of such
proteins. Each company receives payments from the other equal to the performing
party's fully allocated cost of such services, which can be no less than 80% of
the annual budgets established by the parties under the agreement on a month to
month basis, plus, in most cases, a fee equal to 10% of such costs. The
agreement expired on December 31, 1998 and the parties are continuing under this
agreement on a month-to-month basis.

ATIII LLC. In January 1998, the Company entered into a collaboration
agreement for the development of transgenic ATIII with Genzyme forming the ATIII
LLC joint venture. Under the terms of the agreement, Genzyme will fund 70% of
the development costs of transgenic ATIII up to a maximum of $33 million. The
Company will fund the remaining 30% of these costs. Development costs in excess
of these amounts will be funded equally by the partners. The Company and Genzyme
will also make capital contributions to the ATIII LLC sufficient to pay 50% each
of all new facility costs to be incurred. In addition to the funding, both
partners will contribute manufacturing, marketing and other resources to the
ATIII LLC at cost. Genzyme and GTC each own 50% of the venture, although Genzyme
is obligated to make certain milestone payments to GTC if and when transgenic
ATIII has been approved by the FDA and certain sales levels have been reached.
Profits and losses are shared according to ownership percentages. The agreement
covers all territories other than Asia.

SERVICES AGREEMENT. Under a services agreement between GTC and Genzyme, GTC
pays Genzyme a fixed monthly fee for basic laboratory and administrative support
services. The monthly fee is adjusted annually, based on the services to be
provided and changes in Genzyme's cost of providing the services. The services
agreement is self-renewing annually and may be terminated upon 90 days notice by
either party.

CREDIT LINE GUARANTY, TERM LOAN GUARANTY AND LIEN. Genzyme guarantees a
credit line and term loan with a commercial bank up to $24.6 million, expiring
in December 2001. The Company has agreed to reimburse Genzyme for any liability
Genzyme may incur under such guaranty and has granted Genzyme a first lien on
all of the Company's assets to secure such obligation.

OTHER STRATEGIC COLLABORATIONS

LONZA LTD.

In May 1999, GTC entered into a letter of intent with Lonza Ltd. of Basel,
Switzerland to develop a commercial relationship whereby Lonza would provide to
GTC on a project by project basis, downstream purification capabilities
including process development and final product purification, thereby enabling
GTC to provide a complete package of services to its partners. Under the terms
of the letter of intent, once a GTC partner commits to production, Lonza will
provide the capital for purification facilities and equipment on commercial
terms typical for the biopharmaceutical manufacturing industry. GTC is currently
negotiating a definitive master agreement with Lonza which GTC anticipates will
incorporate the key business and financial terms contained in the letter of
intent including equity investments by Lonza in GTC upon the achievement of
certain milestones.

TUFTS UNIVERSITY SCHOOL OF VETERINARY MEDICINE

Pursuant to a cooperation and licensing agreement, Tufts University School
of Veterinary Medicine has agreed to work exclusively with GTC until
September 2000 in developing commercial applications of transgenic protein
production in milk. Tufts has also granted GTC a perpetual, non-exclusive
license to use certain proprietary microinjection technology and animal
husbandry techniques. Sales of products derived from transgenic goats produced
by Tufts, or from their offspring, are subject to

33
<PAGE>
royalties payable to Tufts. The Company maintains a herd of approximately 100
goats at Tufts' facility in Massachusetts.

SMIG JV

GTC holds a 22% interest in a joint venture with Sumitomo Metal
Industries Ltd. (the "SMIG JV"). GTC has granted to the SMIG JV an exclusive
license in Asia to use GTC's transgenic technology to make, use and sell
transgenic products, including ATIII, until the later of 2008 or the expiration
of any applicable Japanese patent, subject to various reciprocal royalty
obligations.

PATENTS AND PROPRIETARY RIGHTS

GTC has filed 20 patent applications which cover relevant portions of its
transgenic technology, several of which are covered by cross-licensing
agreements. GTC holds exclusive and nonexclusive licenses from Genzyme to rights
under a number of patent applications on file in the United States and
corresponding foreign patent applications relating to certain aspects of its
technology. GTC has a broad patent issued by the European Patent Office which
covers a DNA construct and its use in the production of proteins in the milk of
non-human, transgenic mammals. Other GTC applications as to specific proteins,
classes of proteins, techniques to enhance expression and purification
technologies remain pending. During 1998, the U.S. Patent and Trademark Office
awarded GTC four patents, one covering the purification of proteins from the
milk of transgenic animals, two more relating to the production of monoclonal
and assembled antibodies at commercial levels in the milk of transgenic mammals
and one covering the production of ATIII in the milk of transgenic goats.

GTC has exclusive and nonexclusive licenses to technologies owned by other
parties, including DNX, Inc. as to microinjection, Stanford University as to
gene transfer and Centeon L.L.C., as the successor to Behringwerke AG, as to
ATIII, as well as promoter cross-licenses in place with PPL Therapeutics PLC
("PPL") and Pharming B.V. ("Pharming"). Certain of the licenses require GTC to
pay royalties on sales of products which may be derived from or produced using
the licensed technology. The licenses generally extend for the life of any
applicable patent.

The Company also relies upon trade secrets, know how and continuing
technological advances to develop and maintain its competitive position. In an
effort to maintain the confidentiality and ownership of trade secrets and
proprietary information, the Company requires employees, consultants and certain
collaborators to execute confidentiality and invention assignment agreements
upon commencement of a relationship with the Company.

COMPETITION

TRANSGENICS

Many companies, including biotechnology and pharmaceutical companies, are
actively engaged in seeking efficient methods of producing proteins for
therapeutic or diagnostic applications. Two other companies known to GTC are
extensively engaged in the application of transgenic technology for the
production of proteins for therapeutic use in humans: Pharming and PPL.
Pharming, based in the Netherlands, is primarily engaged in the development of
recombinant proteins in the milk of transgenic cows, which are most suitable for
extremely high volume protein production. PPL, based in Scotland, utilizes
primarily sheep for transgenic protein production.

CRO SERVICES

The worldwide markets for CRO services, manufacturing support services and
related development services are highly fragmented, involving several hundred
companies, as well as universities and governmental bodies. Competition in these
markets is based primarily on technological capabilities and

34
<PAGE>
reputation for quality of products and services offered and perceived financial
stability. In certain market segments, price is also a significant competitive
factor.

GOVERNMENT REGULATION

TRANSGENICS

The manufacturing and marketing of GTC's potential products and certain
areas of research related to them are subject to regulation by governmental
authorities in the United States, including the FDA, the U.S. Department of
Agriculture (the "USDA") and the Environmental Protection Agency (the "EPA").
Comparable authorities are involved in other countries.

To GTC's knowledge, no protein produced in the milk of a transgenic animal
has been submitted for final regulatory approval. However, the FDA issued its
Points to Consider in August 1995. Points to Consider, which are not regulations
or guidelines, are nonbinding published documents that represent the current
thinking of the FDA on a particular topic. Earlier in 1995, comparable
guidelines were issued by European regulatory authorities. GTC believes that its
programs satisfactorily address the issues raised by these documents and
generally views them as a very positive milestone in the acceptance of the
transgenic form of production. Based on discussions with the FDA and others, GTC
expects that the basic United States regulatory framework for the transgenic
production of recombinant proteins in animals will be similar to that described
in the Points to Consider.

The FDA licenses biological products under the authority of the Public
Health Service ("PHS") Act. With respect to therapeutic biological products,
generally, the standard FDA approval process includes preclinical laboratory and
animal testing, submission of an IND to the FDA and completion of appropriate
human clinical trials to establish safety and effectiveness. Prior to passage of
the FDA Modernization Act of 1997 ("FDAMA"), applicants for a license to market
a biological product filed both an establishment license application (an "ELA")
and a product license application (a "PLA"). Since the passage of FDAMA, the FDA
has taken actions to make the licensing process for biological products more
consistent with the process for the approval of new drugs. Accordingly, after
October 20, 2000, all manufacturers seeking a license to market a biological
product in interstate commerce must file a single Biological License Application
(a "BLA"). PLAs and ELAs filed in the interim will be administratively handled
by the FDA as a BLA. If a manufacturer successfully demonstrates that the
biological product meets PHS standards, that is, that the product is safe, pure
and potent and that the facility in which it is manufactured meets standards
designed to ensure that the product continues to be safe, pure and potent, the
manufacturer will receive a biological license to market the product in
interstate commerce. The Company has already submitted an IND for ATIII to the
FDA and it is continuing Phase III clinical trials in the United States and
Europe. GTC expects to submit a BLA for ATIII; however, the approval process for
other proteins may be undertaken either by the Company, by a collaborator for
which the Company is producing proteins, or jointly, depending upon the nature
of the relationship involved.

CRO SERVICES

Primedica and its customers are subject to a variety of regulatory
requirements intended to ensure the quality and integrity of their products and
services. The industry standard for conducting non-clinical testing is embodied
in regulations called Good Laboratory Practices ("GLPs"). GLPs have been adopted
by the EPA and the FDA and a number of foreign regulatory bodies. To help ensure
compliance, the Company maintains a strict quality assurance program at each
site to audit test data and conduct regular inspections of testing procedures
and facilities. Primedica also complies with FDA-established current GMPs.

Primedica also maintains certain licenses and permits issued by federal,
state and local authorities relating to the operation of its current laboratory
and testing facilities, including those required for

35
<PAGE>
hazardous waste disposal, the purchase, use and disposal of radioactive isotopes
and the use of animals in testing and research. These licenses and permits
include licenses from the U.S. Nuclear Regulatory Commission for the purchase,
use and disposal of small amounts of short-lived radioactive isotopes for
research purposes. Primedica also has registered with the Massachusetts
Department of Environmental Protection and the EPA as a Small Quantity Hazardous
Waste Generator in connection with its disposal of certain organic hazardous
wastes used in connection with its molecular biology and biomedical research.
These wastes are disposed of through a licensed hazardous waste transporter. The
use and disposal of chemicals is regulated under the Toxic Substances Control
Act and other state and federal legislation.

Each of Primedica's laboratories is licensed by the USDA and state and local
authorities to house and use laboratory animals for biomedical research
purposes. The ability to continue using animals in testing and research is
dependent on continued compliance with the requirements of such licenses.
Primedica's Argus, Worcester and Rockville laboratories are also registered with
the U.S. Public Health Service to conduct biomedical research on laboratory
animals funded by the NIH and other federal agencies. Primedica's Argus,
Worcester and Redfield laboratories are also licensed by federal and state drug
enforcement agencies to procure and use controlled substances in research
programs involving laboratory animals.

The Company's operations are also subject to federal, state and local laws,
rules, regulations and policies governing the use, generation, manufacture,
storage, air emission, effluent discharge, handling and disposal of certain
materials and waste, including, but not limited to, animal waste and waste
water.

RESEARCH AND DEVELOPMENT COSTS

During its fiscal years ended January 3, 1999, December 29, 1997 and
December 29, 1996, GTC spent $16,641,000, $17,840,000 and $8,684,000,
respectively, on research and development. These costs include labor, materials
and supplies and overhead, the cost of operating the transgenics production
facility, as well as certain subcontracted research projects.

EMPLOYEES

As of December 16, 1999, GTC employed 707 people, of which 122 are in
transgenics and 585 are in Primedica. Of GTC's total employees, 478 were engaged
in operations, 57 were engaged in research and development and 172 were engaged
in marketing and general administration. Of GTC's employees, approximately 51
have Ph.D. degrees, 1 has an M.D. degree and 16 have D.V.M. degrees. None of
GTC's employees are covered by collective bargaining agreements. GTC believes
its employee relations are satisfactory.

36
<PAGE>
MANAGEMENT

The Company's executive officers and directors and their respective ages and
positions are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ------------------------------------------
<S> <C> <C>
James A. Geraghty......................... 45 Chairman of the Board

Sandra Nusinoff Lehrman, M.D.............. 52 President and Chief Executive Officer

John B. Green............................. 45 Vice President, Chief Financial Officer
and Treasurer

Harry M. Meade............................ 53 Vice President, Transgenics Research

Michael W. Young.......................... 48 Vice President, Commercial Development

Peter H. Glick............................ 36 President, Primedica Corporation

Henry E. Blair............................ 56 Director

Francis J. Bullock........................ 64 Director

Alan W. Tuck.............................. 51 Director

Alan E. Smith............................. 54 Director

Robert W. Baldridge....................... 65 Director

Henri A. Termeer.......................... 53 Director
</TABLE>

MR. GERAGHTY was the President and Chief Executive Officer of GTC from the
date of its incorporation in February 1993 until July 1998. Since that time,
Mr. Geraghty has served as President of Genzyme Europe. He has been a director
of GTC since February 1993 and has been Chairman of the Board since
January 1998. Mr. Geraghty joined Genzyme in September 1992, where he was a Vice
President for Corporate Development and the General Manager of the transgenics
business unit until the incorporation of the Company.

DR. LEHRMAN has been the President and Chief Executive Officer of GTC since
July 1998. Prior to joining GTC, from 1983 to 1994 Dr. Lehrman held several
positions at Wellcome PLC, the last being International Director, Biotechnology
and Vice President, General Manager of Burroughs Wellcome Mfg., Inc., a
biopharmaceutical production subsidiary. She also served as Vice President, Drug
Development for Triangle Pharmaceuticals, Inc., an antiviral development company
until July 1996 and President of CytoTherapeutics, Inc., a biotechnology
company, before joining GTC.

MR. GREEN has been the Vice President and Chief Financial Officer of GTC
since December 1994 and Treasurer since August 1997. He has also served as Vice
President and Treasurer of TSI, a wholly owned subsidiary of GTC, since
March 1993 and as its Chief Financial Officer since December 1994. Prior to
that, he was Vice President and Assistant Treasurer of TSI from December 1989.

DR. MEADE has been Vice President, Transgenics Research for GTC since
August 1994 and has served as Research Director of GTC since May 1993. Prior to
joining GTC, Dr. Meade was a Scientific Fellow at Genzyme, where he was
responsible for directing the transgenic molecular biology program. From 1981 to
March 1990, when he joined Genzyme, Dr. Meade was a Senior Scientist at
Biogen, Inc., a biotechnology company, where he worked on the technology
relating to the production of proteins in milk and was an inventor on the first
issued patent covering this process.

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<PAGE>
MR. YOUNG has served as Vice President, Commercial Development since
November 1995 when he joined GTC. Prior to joining GTC, Mr. Young was Vice
President of Business Development for PerSeptive Biosystems from 1993 and Vice
President of Marketing of Verax Corporation from 1986 to 1993.

MR. GLICK has been President of Primedica Corporation, a wholly-owned
subsidiary of GTC, since February 1998 and served as Vice President, Marketing
and Corporate Development of GTC from June 1995 to February 1998. Prior to that
he was Vice President, Corporate Development of GTC from October 1994 and of TSI
from June 1993. From January 1994 to January 1996, he also served as President
of Primedica's Rockville Laboratories subsidiary. From November 1991 to
May 1993, he was Director, Corporate Development of TSI. Prior to joining TSI,
he was a strategy consultant at Bain & Company.

MR. BLAIR is President, Chief Executive Officer and Chairman of the Board of
Dyax Corp., a privately-held bioseparation, pharmaceutical discovery and
development company and a consultant to several companies, including Genzyme.
Prior to January 1990, Mr. Blair was Senior Vice President, Scientific Affairs
of Genzyme. Mr. Blair is also a director of Genzyme and Celtrix
Pharmaceuticals, Inc.

DR. BULLOCK has been a senior consultant with Arthur D. Little, Inc. since
September 1993, prior to which he was Senior Vice President, Research
Operations, of Schering-Plough Research Institute, a position he held from 1981
until August 1993.

MR. TUCK is Chief Strategic Officer of Organogenesis Inc., a tissue
engineering firm. From September 1996 until July 1997, Mr. Tuck was Executive
Vice President and Chief Strategic Officer of Biocode, Inc., a privately-held
biotechnology company focused on covert product marketing and, from
September 1996 until March 1997, was Chief Strategic Officer of Immulogic
Pharmaceutical Corporation, a publicly-held biotechnology company focused on
diseases of the immune system. From February 1992 though May 1996, Mr. Tuck was
President and Chief Executive Officer of T Cell Sciences, Inc. Mr. Tuck is also
a director of Apogee Technology, Inc., a high technology audio company.

DR. SMITH has been the Senior Vice President, Research of Genzyme since
August 1989 and its Chief Scientific Officer since September 1996.

MR. BALDRIDGE is Vice Chairman of the Board of Directors of the Company.
Mr. Baldridge served as a director of TSI Corporation from November 1990 until
its acquisition by the Company in October 1994 and was Chairman and Chief
Executive Officer of TSI from April 1993 to October 1994. Mr. Baldridge has
provided consulting services to the Company since October 1994 pursuant to a
Consulting Agreement and has served as an independent financial and management
consultant since June 1988.

MR. TERMEER has served as President of Genzyme since October 1983, Chief
Executive Officer of Genzyme since December 1985 and Chairman of the Board of
Genzyme since May 1988. Mr. Termeer is a director of Abiomed, Inc.,
AutoImmune Inc., Geltex Pharmaceuticals, Inc. and Diacrin, Inc., as well as
trustee of Hambrecht & Quist Healthcare Investors and Hambrecht & Quist
Healthcare Life Sciences Investors.

38
<PAGE>
UNDERWRITING

The Company has entered into an underwriting agreement with the underwriters
named below. Warburg Dillon Read LLC and Hambrecht & Quist LLC are acting as
representatives of the underwriters.

The underwriting agreement provides for the purchase of a specific number of
shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the commitment
of any other underwriter to purchase shares. Subject to the terms and conditions
of the underwriting agreement, each underwriter has severally agreed to purchase
the number of shares of common stock set forth opposite its name below.

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ---- ----------------
<S> <C>
Warburg Dillon Read LLC..................................... 1,695,000
Hambrecht & Quist LLC....................................... 1,130,000
CIBC Oppenheimer Corp....................................... 150,000
Lehman Brothers Inc......................................... 150,000
PaineWebber Incorporated.................................... 150,000
Dain Rauscher Wessels....................................... 75,000
Pacific Growth Equities, Inc................................ 75,000
U.S. Bancorp Piper Jaffray Inc.............................. 75,000
---------
Total................................................... 3,500,000
=========
</TABLE>

This is a firm commitment underwriting. This means that the underwriters
have agreed to purchase all of the shares offered by this prospectus, other than
those covered by the over-allotment option described below, if any are
purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated, depending on
the circumstances.

The representatives have advised GTC that the underwriters propose to offer
the shares directly to the public at the public offering price that appears on
the cover page of this prospectus. In addition, the representatives may offer
some of the shares to certain securities dealers at such price less a concession
of $0.72 per share to certain other dealers. The underwriters may also allow to
dealers, and such dealers may reallow, a concession not in excess of $0.10 per
share to certain other dealers. After the shares are released for sale to the
public, the representatives may change the offering price and other selling
terms at various times.

The Company has granted the underwriters an over-allotment option. This
option, which is exercisable for up to 30 days after the date of this
prospectus, permits the underwriters to purchase a maximum of 525,000 additional
shares of the common stock to cover over-allotments. If the underwriters
exercise all or part of this option, they will purchase shares covered by the
option at the public offering price that appears on the cover page of this
prospectus, less the underwriting discount. To the extent that the underwriters
exercise the over-allotment option in part and not in full, the underwriters
will purchase shares from GTC on a pro rata basis. If this option is exercised
in full, the total price to the public will be $80.5 million and the total
proceeds to the Company before offering expenses will be approximately
$75.7 million, at an offering price of $20.00 per share. The underwriters have
severally agreed that, to the extent the overallotment option is exercised, each
of the underwriters will purchase a number of additional shares proportionate to
its initial amount reflected in the above table.

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<PAGE>
The following table provides information regarding the amount of the
discount to be paid to the underwriters by the Company:

<TABLE>
<CAPTION>
NO EXERCISE OF FULL EXERCISE OF
OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
--------------------- ---------------------
<S> <C> <C>
Per Share.............................................. $ 1.20 $ 1.20
Total.................................................. $4,200,000 $4,830,000
</TABLE>

The Company estimates that the total expenses of this offering, excluding
the underwriting discount, will be approximately $500,000.

The Company has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act.

The Company and its directors, executive officers and Genzyme have agreed
pursuant to certain "lock-up" agreements with the underwriters that, subject to
certain exceptions, they will not offer, sell, contract to sell, pledge, grant
any option to sell, or otherwise dispose of, directly or indirectly, any shares
of common stock or securities convertible into or exercisable or exchangeable
for common stock for a period of 90 days after the date of this prospectus
without the prior written consent of Warburg Dillon Read LLC. Warburg Dillon
Read LLC, in its sole discretion, may release the shares subject to the lock-up
agreements in whole or in part at any time with or without notice. However,
Warburg Dillon Read LLC has no current plan to do so.

Rules of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for or purchase shares before the distribution of the shares
is completed. However, the underwriters may engage in the following activities
in accordance with the rules:

- STABILIZING TRANSACTIONS. The representatives may make bids for or
purchases of the shares for the purpose of pegging, fixing or maintaining
the price of the shares, so long as stabilizing bids do not exceed a
specified maximum.

- OVERALLOTMENTS AND SYNDICATE COVERING TRANSACTION. The underwriters may
create a short position in the shares by selling more shares than are set
forth on the cover page of this prospectus. If a short position is created
in connection with this offering, the representatives may engage in
syndicate covering transactions by purchasing shares in the open market.
The representatives may also elect to reduce any short position by
exercising all or part of the overallotment option.

- PENALTY BIDS. If the representatives purchase shares in the open market in
a stabilizing transaction or syndicate covering transaction, they may
reclaim a selling concession from the underwriters and selling group
members who sold those shares as part of this offering.

Stabilization and syndicate covering transactions may cause the price of the
shares to be higher than it would be in the absence of these transactions. The
imposition of a penalty bid might also have an effect on the price of the shares
if it discourages resales of the shares.

Neither GTC nor the underwriters make any representation or prediction as to
the effect that the transactions described above may have on the price of the
shares. These transactions may occur on the Nasdaq National Market or otherwise.
If these transactions are commenced, they may be discontinued without notice at
any time.

Warburg Dillon Read LLC provided financial advisory services to GTC in
connection with a potential transaction involving Primedica, a subsidiary of the
Company, in 1998 and 1999.

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LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for the Company by Palmer & Dodge LLP, Boston, Massachusetts. Lynnette C.
Fallon, a partner of Palmer & Dodge LLP, is the Clerk of the Company. Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts, will pass
upon certain legal matters in connection with this offering for the
underwriters.

EXPERTS

The financial statements of Genzyme Transgenics Corporation and ATIII LLC
incorporated in this prospectus by reference to the Annual Report on Form 10-K
for the year ended January 3, 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.

WHERE YOU CAN FIND MORE INFORMATION

The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files periodic reports, proxy statements and other
information with the Commission. Reports, proxy and information statements filed
pursuant to Sections 14(a) and 14(c) of the Exchange Act and other information
filed with the Commission can be inspected and copied at the Commission's Public
Reference Room at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. Information regarding the operation of the Public Reference Room may be
obtained by calling the Commission at 1-800-SEC-0330. In addition, the Company
is required to file electronic versions of such material with the Commission
through the Commission's Electronic Data Gathering, Analysis and Retrieval
(EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Copies of certain information filed by the Company with the
Commission are also available on the Company's Web Site at
http://www.transgenics.com. The Company's Web Site is not part of this
prospectus. Genzyme Transgenics Corporation common stock is listed on the Nasdaq
National Market. Reports and other information concerning the Company can be
inspected at the offices of the Nasdaq National Market.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission (File
No. 0-21794), pursuant to the Exchange Act, are incorporated herein by
reference:

- Annual Report on Form 10-K for the fiscal year ended January 3, 1999,
filed with the Commission on April 5, 1999.

- Quarterly Report on Form 10-Q for the quarter ended October 3, 1999, filed
with the Commission on November 17, 1999.

- Quarterly Report on Form 10-Q for the quarter ended July 4, 1999, filed
with the Commission on August 18, 1999.

- Quarterly Report on Form 10-Q for the quarter ended March 4, 1999, filed
with the Commission on May 19, 1999.

- Current Report on Form 8-K, filed with the Commission on December 9, 1999.

- Definitive Proxy Statement for the 1999 Annual Meeting of Stockholders,
filed with the Commission on April 28, 1999.

- The description of the GTC common stock contained in the Company's
Registration Statement on Form 8-A, filed on May 19, 1993, including any
amendment or reports filed for the purpose of updating such description.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this prospectus and prior to
the termination of this offering of the

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securities offered hereby shall be deemed incorporated by reference into this
prospectus and to be a part hereof from the date of filing such documents. Any
statement contained in any document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded, for purposes of
this prospectus, to the extent that a statement contained herein (or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein) modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this prospectus.

The Company will provide, without charge, to each person to whom a copy of
this prospectus is delivered, upon written or oral request of any such person, a
copy of any or all of the documents which are incorporated herein by reference,
including exhibits. Requests should be directed to: Genzyme Transgenics
Corporation, 175 Crossing Boulevard, Framingham, MA 01702, Attn:
Brenda A. Martin, (508) 620-9700.

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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF THE TIME SUBSEQUENT TO THE DATE OF SUCH
INFORMATION.

3,500,000 Shares

[LOGO]

Common Stock

Warburg Dillon Read LLC

Chase H&Q

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