10-K

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 30, 2001                        Commission File No. 0-21794

GENZYME TRANSGENICS CORPORATION
(Exact name of Registrant as specified in its charter)

MASSACHUSETTS (State or other jurisdiction of incorporation or organization)	04-3186494 (I.R.S. Employer identification No.)
175 CROSSING BOULEVARD FRAMINGHAM, MASSACHUSETTS (Address of principal executive offices)	01702 (Zip Code)

(508) 620-9700
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of each exchange on which registered
None	None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding twelve months and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Aggregate market value of voting stock held by non-affiliates of the Registrant as of March 13, 2002: $78,270,602

Number of shares of the Registrant's Common Stock outstanding as of March 13, 2002: 30,336,417

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held May 22, 2002 are incorporated by reference into Part III of this Form 10-K.

ITEM 1.

BUSINESS

Overview

Genzyme Transgenics Corporation ("GTC" or the "Company") is the leader in the application of transgenic technology to the development in milk of recombinant proteins for therapeutic uses. Currently, GTC is using its technology platform to work toward commercialization in 15 therapeutic protein programs. Twelve of the programs focus on proteins that are proprietary to our partners (external program partnerships) and three focus on proteins that GTC began developing internally (internal program partnerships). The Company generally uses collaboration agreements in developing its programs to provide the opportunity to participate in many more potential therapeutics than would be practical independently. These collaboration agreements also provide current revenues through the achievement of development milestones, and augment GTC's capabilities in areas such as clinical development and product marketing.

GTC's technology platform includes the ability to generate transgenic animals that express specific recombinant proteins in their milk, provide for animal husbandry, breeding and milking, and to purify the milk to a clarified intermediate bulk material that may undergo manufacturing to obtain a clinical grade product. The Company generates transgenic animals through microinjection and nuclear transfer. In microinjection, a specific DNA sequence that directs the production of a desired protein in milk is inserted into the genetic material of an animal embryo. If the developing fetus successfully incorporates this sequence, a transgenic animal may be born. Otherwise a non-transgenic animal may be born. Nuclear transfer involves the incorporation of the specific DNA sequence into at least one cell line developed in a laboratory. This cell line material is transferred to the nucleus of an animal ovum, stimulated to initiate growth, and placed into a surrogate female animal. All animals that are born through this process are transgenic. GTC expects to rely primarily on nuclear transfer techniques in new program development work. The Company uses goats in most of its commercial development programs due to the relatively short generation times and relatively high milk production volume. A goat gestates in approximately five months and reaches sexual maturity in about another seven months. A typical goat will produce about 2 liters a day of milk during most of its natural lactation cycle.

GTC's operations in goat husbandry, breeding, milking and clarification to intermediate bulk material occur at the Company's biopharmaceutical farm production facilities in central Massachusetts. Goat husbandry includes veterinary care with a clinic and medicinal supplies, all established within the farm's biosecurity program. The biosecurity program includes barriers to enhance separation of the animals from uncontrolled contact with wildlife or people as well as specified and monitored feed. Milking is typically performed using modern milking equipment where the milk is processed through tubing, piping and covered vats. Clarification to the intermediate bulk material is typically performed using tangential flow filtration equipment that removes much of the fats and casein from the milk. Manufacturing to clinical grade purity and formulation occur either in the facilities of GTC's partners or in contracted facilities. The Company is exploring expansion of its manufacturing capabilities. In January 2002, GTC completed the purchase of approximately 128 acres of land in eastern New York State that the Company plans to develop over the next several years to provide for herd duplication and additional capacity.

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 applying the capital invested and lower direct production cost per unit. Greater flexibility in the applied capital results from the ability to breed a transgenic herd to the appropriate capacity to satisfy the market size. In contrast, traditional systems have a generally fixed capacity that requires significantly higher incremental investment than a transgenic system to obtain substantially higher capacity. In the case of certain complex proteins that do not express well in traditional systems, transgenic production may represent the only

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technologically and economically feasible method of commercial production. Some immunoglobulin (Ig) fusion proteins and proteins found in human plasma are examples of potential recombinant therapeutic proteins that have not expressed at practical levels in traditional systems. An Ig fusion protein puts a monoclonal antibody (MAB) fragment together with another protein fragment to form a single protein. A MAB is a protein that binds with a specific cell group target.

GTC's focus is on using transgenic technology to commercially develop large volume or difficult to express proteins. The economic and technical advantages of GTC's technology make it well suited to large volume applications. Many MAB and some Ig fusion proteins may become large volume products due to the anticipation of relatively large and repeated doses for chronic diseases such as rheumatoid arthritis, other autoimmune diseases and cancer. By early 2002, 18 monoclonal antibodies had been approved for use in the United States, ten for use as human therapeutics and eight for diagnostic uses. The total 2000 revenues for therapeutic antibodies, including ReoPro®, Rituxan®, Synagis®, Herceptin®, Remicade®, Zenapax®, Mylotarg®, and Campath® exceeded $2.6 billion. Seventy-six companies and institutions list over 180 monoclonal antibodies in preclinical and clinical phases of 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 1,000 kilograms. Transgenic production may provide an economically attractive means to meet the large projected volume requirements for these therapeutics.

The Company has several partnerships with pharmaceutical and other biotechnology companies to develop their MAB and Ig fusion proteins transgenically. GTC's corporate partners developing these types of proteins include Abbott, Abgenix, Alexion, Bristol-Myers Squibb, Centocor, Elan, ImmunoGen, and Progenics. The Company is also developing a protein that is not a MAB or an Ig fusion protein with Merrimack Pharmaceuticals with potential for use in myasthenia gravis. These agreements generally provide for transgenic production of targeted proteins in exchange for development fees and milestone payments, transfer payments for manufacturing and, in some cases, anticipate the payment of royalties on product sales upon commercialization. Following characterization of the transgenic product in preclinical testing and pharmacokinetic studies, GTC will negotiate commercialization agreements that are designed to allow the Company to participate in the success of the product through royalties and supply commitments. GTC has been granted several patents covering the production of monoclonal and assembled antibodies in the milk of transgenic mammals, along with other transgenic process patents, which it believes establish a strong proprietary position in the field.

GTC is also developing its own molecules, for which the Company seeks partners to provide appropriate development support to each related program and to share in the costs of that program. The first of these programs is recombinant human antithrombin III (rhATIII). ATIII is a blood plasma protein that has anticoagulant and anti-inflammatory properties. Blood plasma proteins are difficult for traditional recombinant systems to express. In early 2001, the Steering Committee of the joint venture that was in place at that time for the management of the ATIII program decided to no longer actively pursue development of the treatment of heparin-resistant patients undergoing cardiopulmonary bypass surgery based on discussions with the US Food and Drug Administration (FDA). In late 2001, GTC was granted permission by the European Medicinal Evaluation Agency (EMEA) for clinical studies of rhATIII in those people that have a hereditary deficiency (HD) of ATIII in their blood. In December 2001, GTC began dosing patients in an HD pharmacokinetic study. Assuming this study and ongoing discussions with the regulatory authorities progress as expected, an efficacy trial of rhATIII in the HD indication may begin in late 2002. Assuming that this study progresses as planned, a regulatory filing for approval is possible in 2004. GTC believes that this would make rhATIII the first transgenically produced therapeutic protein to be considered for approval. ATIII is currently produced by human plasma fractionation, with worldwide annual sales of approximately $250 million. Only about $10 million of these sales were in the United States where ATIII was not widely available. The Company is currently in discussions with potential marketing partners for rhATIII.

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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/or decreased blood albumin levels which can result from 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 worldwide sales of approximately $1 billion to $1.5 billion. Since this market is very large, requiring about 400 metric tons of product a year, GTC is developing this program in transgenic cattle to take advantage of the higher milk production of a cow. A cow will generally produce about 20 liters a day of milk during natural lactation periods. During 2001, Fresenius added to its marketing rights for HSA in Europe by exercising its option to HSA marketing rights in North America and Asia, except for Japan. GTC expects to begin clinical grade production later this year to support preclinical and eventually clinical studies that will be conducted by Fresenius. These studies are expected to begin next year.

GTC is also developing a malaria merozoite surface protein (MSP-1) for use in a malaria vaccine. The MSP-1 protein successfully protected Aotus nancymai monkeys in a preclinical vaccine study conducted by the National Institute of Allergy and Infectious Diseases (NIAID). Although MSP-1 can be produced in other recombinant systems, these other systems produce it in very limited quantities or in forms that may not induce the necessary immune response. The NIAID and GTC established a Cooperative Research and Development Agreement (CRADA) to evaluate the feasibility of developing animals capable of producing recombinant versions of MSP-1 in their milk. To express the MSP-1 protein at high quantities, GTC's scientists modified its gene sequence while conserving the overall amino acid sequence of the protein. A U.S. patent has been allowed for this modification. The MSP-1 protein has been expressed at 2-4mg/ml in the milk of mice that have incorporated this gene sequence. It was this product that was used in the preclinical vaccine study. GTC has developed goats at its research facilities that express the MSP-1 protein. The Company is currently seeking additional funding for this program from government and non-profit sources to develop goats capable of producing clinical grade material at its operating facilities.

Transgenic Technology

Overview

Transgenic technology uses in vitro microinjection or nuclear transfer 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. In nuclear transfer, the exogenous DNA is established in a cell line before insertion into an enucleated donor egg. All successful pregnancies resulting from this method will result in transgenic animals. 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, GTC 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 has also used cattle, which have longer generational time periods but produce higher milk volumes.

GTC is now utilizing the nuclear transfer methodology in its programs and has been using it in the HSA program, which has transgenic cattle. Due to the long gestation and maturation periods in cattle, nuclear transfer may shorten the development time by producing a larger number of transgenic animals in one

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generation. GTC has signed an exclusive, worldwide licensing agreement with Advanced Cell Technologies, Inc. (ACT) that allow GTC to utilize ACT's patented nuclear transfer technology for the development of biopharmaceuticals in the milk of transgenic mammals. The Company believes ACT's proprietary technology, when coupled with GTC's transgenic technology, will provide additional patentable approaches to efficiently develop transgenic animals. To date, the Company has produced 20 transgenic cows and continues to produce transgenic cattle with nuclear transfer. The US Patent and Trademark Office (PTO) has granted an interference proceeding between ACT, Geron Corporation and Infigen for one of the patents GTC licenses from ACT. The Company does not know at this time what impact, if any, this interference proceeding may have on its ability to practice nuclear transfer.

Advantages of Transgenic Technology

GTC believes that its current and future partners will elect to employ transgenic technology for the production of recombinant proteins in cases where transgenic technology either uniquely enables development of proteins that are hard to express with traditional methods or 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:

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Lower Capital Investment.  Developing a herd and providing appropriate dairy facilities can be accomplished with substantially less cost than building a cell culture bioreactor facility.



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Flexible Production and Improved Risk Management of Capital Investment.  Transgenic production offers the ability to breed sufficient animals to achieve the appropriate capacity, once the first appropriate animal is identified. If the product's market is larger than originally planned, the incremental investment to breed additional animals is small. In contrast, traditional bioreactor methods are hard assets with a generally fixed capacity. If a bioreactor product's market will support sales significantly higher than the installed capacity can achieve, more bioreactor space needs to be built or acquired at unit costs similar to the original capital investment.



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Lower Cost of Goods.  Economic factors unique to transgenic production lower the ultimate cost of goods in most cases. The lower amortization of the initial capital investment, the lower cost of consumable materials and the simplicity of operations result in the cost of transgenically produced products, in most cases, being substantially lower than that of a cell culture derived product.



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Technological Enablement.  Transgenic technology offers the ability to produce certain biotherapeutics that 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 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 transgenics may be a viable production system for some complex proteins, regardless of the volume required.

Transgenic Development Process

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

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Development of Transgenic Animals.  In this first step, GTC takes the DNA for a desired protein and establishes an appropriate expression vector of this DNA together with the appropriate coding and promoter sequences. The Company then employs either microinjection or nuclear transfer to initiate pregnancies that may produce a transgenic animal. The first animals are then born after the appropriate gestation period.



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Transgenic Evaluation.  GTC and the appropriate partner evaluate the genetic profile of the animal. The animal's production levels under induced or natural lactation are evaluated and the protein is

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characterized. Some initial process development work takes place in which pilot clarification and purification methods are examined.

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Founder.  GTC and the partner select one or more appropriate transgenic animals as founders. A founder is the potential start of a herd to produce a therapeutic protein. 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 a commercially robust purification process 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 animals that are capable of producing sufficient product for use in expanded clinical studies. GTC provides initial quantities of product while working with the partner to develop cost and timing estimates for commercialization. Based on these estimates, the partner will make capital commitments to enable GTC to provide sufficient facility capacities specifically for the partner's product including one or several barns for housing and scaling up the herd and facilities for collection of milk and initial processing. Simultaneously, GTC will begin scaling up the production herd to breed a sufficient number of animals to meet forecasted production 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.

External Program Partnerships

GTC's strategy includes entering into collaboration agreements with biotechnology and pharmaceutical companies to develop their therapeutic proteins transgenically. To date, the Company has formed approximately a dozen collaboration agreements which generally provide for transgenic production of targeted proteins in exchange for development fees and milestone payments, transfer payments for manufacturing and, in some cases, anticipate the payment of royalties on product sales upon commercialization. Following characterization of the transgenic product in preclinical testing and pharmacokinetic studies, GTC will negotiate commercialization agreements that are designed to allow the Company to participate in the success of the product through a mixture of manufacturing margins and royalties appropriate to each situation.

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. Eleven of the twelve external program partnerships are developing MAB or Ig fusion proteins transgenically. One of the twelve external program partnerships is developing a human alpha-fetoprotein transgenically.

Monoclonal Antibodies (MAB) and Immunoglobulin (Ig) Fusion Proteins

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, and have identified 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. These therapies include ReoPro® for use in various acute cardiac conditions, Rituxan® for B-cell non-Hodgkin's lymphoma, Synagis® for treatment of viral respiratory disease in premature babies, Herceptin® for breast cancer, Remicade® for use in Crohn's disease and rheumatoid arthritis and Zenapax® for acute transplant rejection. These clinical successes, together with the availability of drug discovery technologies that identify potential antibody targets and technologies for developing humanized and fully human antibody candidates, will continue to drive the development of new antibody-based therapeutics.

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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 be in the 10's of kilograms, the Company believes that many antibodies will require supplies in the range of 100's or 1000's of kilograms annually. Current cell culture methods (the only traditional method available for producing monoclonal antibodies) may not produce the requisite high volumes needed for antibody therapeutics, or are not economically feasible or require significant capital investment. GTC believes that using transgenic technology will enable the pharmaceutical industry to meet these market demands.

GTC is actively participating in the field of monoclonal antibodies through eight collaborations. GTC is developing transgenic versions of Remicade®and a second undisclosed MAB for Centocor, Antegren® and an undisclosed MAB for Elan, D2E7 for Abbott, 5G1.1 for Alexion, ABX-IL8 for Abgenix, and huN901 for ImmunoGen. The indications for these products include arthritis, Crohn's disease, neurological disorders, nephritis, psoriasis and cancer.

GTC is actively participating in the transgenic development of three immunoglobulin fusion proteins. The Company has two programs with Bristol-Myers Squibb, one for CTLA4Ig and another undisclosed Ig fusion protein, and the PRO542 program with Progenics. The indications for these products are arthritis, organ transplant rejection, autoimmune disorders and HIV/AIDS.

Other External Program Partnerships

GTC is also working with Merrimack Pharmaceuticals, previously known as Atlantic BioPharmaceuticals, to develop ABI.001. ABI.001 has orphan drug status and is expected to enter Phase I trials shortly for the treatment of myasthenia gravis, an autoimmune disease of the voluntary muscles. ABI.001 is a recombinant version of human alpha-fetoprotein. GTC began working with Atlantic BioPharmaceuticals on ABI.001 in 2001. Early in 2002, Atlantic BioPharmaceuticals acquired Merrimack Pharmaceuticals and became known as Merrimack Pharmaceuticals.

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The following chart contains a summary of the Company's active external program partnerships:

Product Name	Product Type	Indication	Development Stage of Cell Culture Product	Development Stage of Transgenic Product	Partner
Remicade®	Monoclonal antibody	Crohn's Disease; Rheumatoid Arthritis	Marketed	Preclinical; Transgenic goats in evaluation	Centocor
Undisclosed	Monoclonal antibody	Undisclosed	Undisclosed	Undisclosed clinical status; Undisclosed transgenic status	Centocor
D2E7	Fully human monoclonal antibody	Rheumatoid Arthritis	Phase III clinicals	Preclinical; Founder	Abbott
Antegren®	Humanized monoclonal antibody	Neurological Disorders	Phase II clinicals	Preclinical; Founder	Elan Pharmaceuticals
Undisclosed	Monoclonal Antibody	Undisclosed	Undisclosed	Preclinical; Transgenic goats in development	Elan Pharmaceuticals
CTLA4Ig	Immunoglobulin fusion/soluble receptor	Rheumatoid Arthritis	Phase II clinicals	Preclinical; Founder	Bristol-Myers Squibb
Undisclosed	Immunoglobulin fusion protein	Organ Transplant Rejection; Autoimmune Disorders	Phase II clinicals	Preclinical; Transgenic goats in evaluation	Bristol-Myers Squibb
5G1.1	Monoclonal antibody	Rheumatoid Arthritis; Nephritis	Phase II clinicals	Preclinical; Transgenic goats in evaluation	Alexion
PRO542	CD4/Immunoglobulin fusion antibody	HIV/AIDS	Phase II clinicals	Preclinical; Transgenic goats in evaluation	Progenics
ABX-IL8	Monoclonal antibody	Skin Cancer	Phase I clinicals	Preclinical; Transgenic goats in evaluation	Abgenix
HuN901	Monoclonal antibody	Small Cell Lung Cancer	Preclinical with IND filed	Preclinical; Transgenic goats in evaluation	ImmunoGen
ABI.001	Human alpha-fetoprotein	Myasthenia Gravis	Preclinical	Preclinical; Transgenic goats in development	Merrimack Pharmaceuticals

Internal Program Partnerships

GTC internally continues the commercial development of three recombinant proteins; ATIII, HSA, and MSP-1. The Company has a partnership with Fresenius AG for the HSA program. GTC expects to enter into additional partnerships with other organizations for the ATIII and malaria vaccine programs at appropriate times to augment the Company's capabilities in areas such as product marketing and clinical studies as well as to help support the cost of development.

Antithrombin III.    ATIII is a protein normally found in human serum that has anticoagulant and anti-inflammatory properties. Decreased levels of ATIII are found in individuals who have either a hereditary or an acquired deficiency of ATIII. The hereditary deficiency condition has an incidence rate of 1 in 2,000 to 1 in 5,000. Individuals with hereditary ATIII deficiency have an increased tendency toward blood clots known as 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

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are acute liver failure, disseminated intravascular coagulation, sepsis and septic shock, burns, multiple organ failure, pre-eclampsia, bone marrow or organ transplantation and hemodialysis.

The Company filed an Investigational New Drug (IND) application with the FDA in 1996 to evaluate use of recombinant human ATIII (rhATIII) 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 that do not respond adequately to these heparin treatments may be described as heparin- resistant.

Two identical, double blinded, randomized placebo-controlled Phase III clinical trials began in the second quarter of 1998. These studies, which included 52 patients each, were designed to assess the activity of rhATIII in reducing the use of fresh frozen plasma to treat heparin-resistant patients while undergoing cardiac surgery requiring CPB. The two studies, conducted at medical centers in Europe and the United States, have been completed, and the primary clinical endpoint was met in both studies with a high degree of statistical significance. Moreover, the drug was well tolerated by patients. There was no detectable antibody formation to rhATIII. There was no statistically significant difference in adverse events reported among the groups of both studies. The most commonly observed trends to adverse events were bleeding and clotting disorders. In the placebo control and rhATIII groups, respectively, these events occurred in 42% and 50% of the patients in the first study, and in 22% and 41% of the patients in the second study.

In late 2000, the Company announced that it expected to re-acquire from Genzyme the rights to rhATIII that it did not already own. In early 2001, the ATIII LLC met with the U.S. Food and Drug Administration to discuss the status of the clinical development program for the rhATIII in the treatment of heparin-resistant patients undergoing cardiopulmonary bypass surgery. The ATIII LLC decided to discontinue development of this indication based on the level of additional data that would have been required to address the clinical development issues raised during the meeting with the FDA. In 2001, GTC reacquired Genzyme's ownership interest the ATIII LLC in consideration of 4% of GTC's future product revenue, three years after approval, up to a total of $30 million.

In late 2001, GTC was granted permission by the EMEA for clinical studies of rhATIII in those people that have an ATIII HD. There are between 1 in 2,000 and 1 in 5,000, people that have low levels of ATIII in their blood. Of this group of people, some have levels so low that they are at risk of developing thrombosis in medical conditions such as pregnancy and surgeries. GTC believes that studying its rhATIII protein in these individuals is a reasonable clinical development plan for this program.

In December 2001, GTC began dosing patients in an HD pharmacokinetic study. Assuming this study and ongoing discussions with the regulatory authorities progress as planned, an efficacy trial of rhATIII in the HD indication may begin in late 2002. Assuming that the efficacy study progresses as planned, a regulatory filing for approval is possible in 2004. GTC believes, based on the publicly available information from its competitors in the area of transgenic technology, that this would make rhATIII the first transgenically produced therapeutic protein to be considered for approval. The Company believes that it will be able to expand rhATIII into other studies for additional indications once it achieves an approval for the HD indication. GTC also expects to begin clinical and regulatory work in the United States for the rhATIII HD indication before approval by the EMEA.

ATIII is currently produced by human plasma fractionation, with worldwide annual sales in all indications of approximately $250 million. Only about $10 million of this was in the United States where plasma derived ATIII was not widely available. The Company is currently in discussions with potential marketing partners for rhATIII.

In addition, in late 1997 and early 1998, GTC and Genzyme established the ATIII LLC joint venture for the marketing and distribution of rhATIII in all territories other than Asia. The ATIII LLC formed a collaboration with Genzyme Molecular Oncology, a division of Genzyme, to jointly develop a form of

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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 rhATIII, outside the field of oncology, may be developed. RhATIII is being developed under a royalty-bearing license from Centeon, a wholly owned subsidiary of Aventis SA and the successor to Behringwerke AG.

Human Serum Albumin.    HSA is the protein principally responsible for maintaining the osmotic pressure in the vascular system, known as oncotic pressure, as well as 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/or 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 worldwide sales of approximately $1 billion to $1.5 billion requiring 400 metric tons of product annually.

In 1999, GTC successfully produced transgenic cattle expressing this protein in their milk at commercially feasible levels. An individual transgenic 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 at bench scale 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. Fresenius has marketing rights to HSA in Europe, North America and Asia, except Japan. GTC expects to begin production of clinical grade HSA later this year in anticipation of preclinical and eventually clinical studies to be conducted by Fresenius starting in 2003.

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 (NIH) and the Federal Malaria Vaccine Coordinating Committee to transgenically develop 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 CRADA with the NIH and during 1998 achieved high level expression of the candidate vaccine malaria antigen, MSP-1, in the milk of transgenic mice. The MSP-1 protein successfully protected Aotus nancymai monkeys in a preclinical vaccine study conducted by the NIAID. This study, titled "A recombinant vaccine expressed in the milk of transgenic mice protects Aotus monkeys from a lethal challenge with Plasmodium falciparum", was published in the December 18, 2001 Proceedings of the National Academy of Sciences. The Company is currently seeking additional funding for this program from government and non-profit sources to develop goats capable of producing clinical grade material at its operating facilities.

Sale of Primedica Corporation

In February 2001, the Company sold Primedica Corporation, its contract research organization, to Charles River Laboratories, Inc. (NYSE: CRL). GTC received $26 million in cash and 658,945 shares of CRL common stock valued at $15.9 million. Charles River Laboratories assumed all of Primedica's approximately $9 million of capital leases and long-term debt. The results of GTC's operations and the balance sheet data that are reported in this Form 10-K exclude the results of operations, assets and liabilities of Primedica Corporation.

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Relationship With Genzyme

Equity Position.    Genzyme is the largest single stockholder of the Company, holding 7,744,919 shares of common stock as of December 30, 2001, which represents approximately 26% of the outstanding GTC common stock, Genzyme also holds four common stock purchase warrants exercisable for 145,000, 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, which were the market prices of the common stock at the time the respective Genzyme warrants were issued. The expiration dates of these warrants range from July 2005 through November 2009. All of the shares held by Genzyme (including shares issuable on exercise of Genzyme warrants) are entitled to 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.

R&D Agreement.    Pursuant to a Research and Development Agreement dated May 1, 1993, Genzyme and GTC each agreed to provide to the other research and development services 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 Collaboration.    In January 1998, the Company entered into a collaboration agreement for the development of rhATIII with Genzyme forming the ATIII LLC joint venture. Under the terms of the agreement, Genzyme funded 70% of the development costs of rhATIII up to a maximum of $33 million. The Company funded the remaining 30% of these costs. Development costs in excess of these amounts were to be funded equally by the partners. The $33 million funding level was achieved by Genzyme in 2000.

In late 2000, the Company announced that it expected to re-acquire from Genzyme the rights to rhATIII that it did not already own. In early 2001, the ATIII LLC met with the FDA to discuss the status of the clinical development program for the rhATIII in the treatment of heparin-resistant patients undergoing cardiopulmonary bypass surgery. The ATIII LLC decided to discontinue development of this indication based on the level of additional data that would have been required to address the clinical development issues raised during the meeting with the FDA. In 2001, GTC reacquired Genzyme's ownership interest the ATIII LLC in consideration of 4% of GTC's future product revenue, three years after approval, up to a total of $30 million.

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. This line was originally due to expire in December 2001, but has been extended until March 28, 2002. The Genzyme guaranty was also extended until such time, although GTC has agreed not to draw on the credit line without Genzyme's prior consent. The Company

10

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 collateralize such obligation.

Other Strategic Collaborations

Tufts University School of Veterinary Medicine

Pursuant to an existing cooperation and licensing agreement, Tufts University School of Veterinary Medicine ("Tufts") has agreed to collaborate exclusively with GTC through September 2002 in developing commercial applications for transgenic protein production in milk. Tufts has also granted GTC a perpetual, non-exclusive license to use certain proprietary microinjection technology and a variety of other animal husbandry techniques. Sales of products derived from transgenic goats produced by Tufts technology, or from their offspring, are subject to royalties payable to Tufts. The Company maintains a herd of goats at Tufts' facility in Massachusetts.

SMIG JV

GTC held a 22% interest in a joint venture with Sumitomo Metal Industries Ltd. (the "SMIG JV"). Under this joint venture, GTC 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.

The Company acquired full ownership of the SMIG JV from Sumitomo and thereby reacquired the rights to its technology in the 18 Asian countries included in the joint venture. The 10 year-old joint venture has been dissolved. GTC can now directly develop its technology and the associated products in all 18 Asian countries or enter into separate agreements on a country-by-country or product-by-product basis. The Asian rights were re-acquired by issuing an aggregate of 333,334 shares of GTC common stock valued at approximately $11.1 million plus transaction costs of $143,000 which was capitalized.

Patents and Proprietary Rights

Currently, GTC holds 7 issued United States patents and 40 corresponding foreign patents. In accordance with ongoing research and development efforts, GTC has 27 pending United States patent applications and 62 corresponding foreign applications covering relevant and newly developed portions of its transgenic technology. Several of these pending applications are included in cross-licensing arrangements with other companies that in turn provide access to their proprietary technologies. In addition, GTC holds exclusive and non-exclusive licenses from Genzyme Corporation to rights under a number of issued patents and patent applications in the United States and the corresponding cases abroad for a variety of technologies. Of note is the fact that GTC is licensing a European patent with broad claims covering DNA constructs and their use in the production of proteins in the milk of non-human, transgenic animals. Pending GTC applications providing claim coverage with regard to specific proteins, classes of proteins, techniques to enhance expression and purification technologies remain pending. Recently issued GTC U.S. patents provide claim coverage for protein purification from the milk of transgenic animals, the production of monoclonal and assembled antibodies at commercial levels in the milk of transgenic mammals, the production of ATIII in the milk of transgenic goats and one covering the production of Prolactin in the milk of transgenic animals. GTC has also purchased the U.S. and European rights to a patent that includes claims for the filtration of milk.

GTC has exclusive and nonexclusive licenses to technologies owned by other parties, including DNX, Inc. as to microinjection, Stanford University as to gene transfer, Centeon L.L.C. (the successor to Behringwerke AG) as to ATIII, as well as promoter cross-licenses in place with PPL Therapeutics PLC (PPL), Pharming B.V. (Pharming) and ACT as to cloning and nuclear transfer. 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 U.S. PTO has

11

granted an interference proceeding between ACT and Geron Corporation for one of the patents GTC licenses from ACT. The Company does not know at this time what impact, if any, this may have on its ability to practice nuclear transfer.

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

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 to mammals 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 and rabbits. Pharming is reorganizing under the control of a trustee in receivership proceedings. PPL, based in Scotland, utilizes primarily sheep for transgenic protein production. There are also other companies seeking to develop transgenic technology in other non-mammalian animals and in plants.

Government Regulation

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 and the Environmental Protection Agency. 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, addressing the Manufacture and Testing of Therapeutic Products for Human Use Derived from Transgenic Animals. 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 believes 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, since 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 approval process for the

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Company's protein production programs 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.

Research and Development Costs

During its fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000, GTC spent $22,428,000, $18,976,000 and $15,092,000, respectively, on research and development. These costs include labor, materials and supplies and overhead, as well as certain subcontracted research projects. Also included are the costs of operating the transgenics production facility such as feed and bedding, veterinary costs and utilities.

Employees

As of December 30, 2001, GTC employed 168 people. Of GTC's total employees, 100 were engaged in farm operations, clarification processes, quality assurance and control, 28 were engaged in research and development and 40 were engaged in administration, business development and marketing. Of GTC's employees, approximately 17 have Ph.D. degrees and 5 have D.V.M. degrees. None of GTC's employees are covered by collective bargaining agreements. GTC believes its employee relations are satisfactory.

ITEM 1A.

EXECUTIVE OFFICERS OF THE REGISTRANT

The current executive officers of the Company and their respective ages and positions are as follows:

Name	Age	Position
Geoffrey F. Cox, Ph.D.	58	Chairman of the Board and Chief Executive Officer
John B. Green	47	Senior Vice President, Chief Financial Officer and Treasurer
Harry M. Meade, Ph.D.	55	Senior Vice President, Transgenics Research

Dr. Cox was appointed as Chairman of the Board and Chief Executive Officer of GTC on July 19, 2001. Before joining GTC, Dr. Cox was Chairman and Chief Executive Officer of Aronex Pharmaceuticals, Inc. from 1997 until July 2001. Prior to joining Aronex, Dr. Cox joined Genzyme Corporation in the UK and, in 1988, became Senior Vice President of Operations in the United States. Subsequently, he was promoted to Executive Vice President for Genzyme, responsible for operations and pharmaceutical, diagnostic and genetics business units. Prior to joining Genzyme, Dr. Cox was General Manager of the UK manufacturing operations for Gist-Brocades.

Mr. Green has been the Vice President and Chief Financial Officer of GTC since December 1994 and Treasurer since August 1997. Prior to that, he was Vice President and Assistant Treasurer of TSI from December 1989 until its acquisition by GTC in 1994.

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, before 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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ITEM 2.    PROPERTIES

GTC's corporate headquarters is located in 12,468 square feet of office space in Framingham, Massachusetts under a lease which expires in March 2006. GTC's research facility for the transgenics business is located in approximately 6,300 square feet of laboratory and office space leased from Genzyme in Framingham, Massachusetts. This lease expired in May 1998, at which time the lease automatically renewed, and continues to renew annually, on a year-to-year basis until terminated by either party on 90 days' notice. (See "Item 1—Business—Relationship with Genzyme.")

GTC owns a 383-acre facility in central Massachusetts. This facility contains 106,793 square feet of production, laboratory and administrative space dedicated to its transgenic segment. The facility also currently houses more than 1,900 goats. GTC believes its owned and leased facilities are adequate for significant further development of commercial transgenic products. GTC also currently utilizes animal housing, care and treatment facilities operated by Tufts University School of Veterinary Medicine in Massachusetts. In January 2002, the Company completed the purchase of approximately 128 acres of farm land in eastern New York State to be developed as a second production site.

ITEM 3.    LEGAL PROCEEDINGS

On November 13, 2001, two employees of one of the Company's former subsidiaries filed an action in the Court of Common Pleas for Philadelphia County in Pennsylvania against the Company seeking damages, declaratory relief and certification of a class action relating primarily to their Company stock options. The claims arise as a result of the Company's sale of Primedica Corporation to Charles River Laboratories International, Inc. in February 2001, which the Company believes resulted in the termination of Primedica employees' status as employees of the Company or its affiliates and termination of their options. The plaintiffs contend that the sale of Primedica to Charles River did not constitute a termination of their employment with the Company or its affiliates for purposes of the Company's equity incentive plan and, therefore, that the Company breached its contractual obligations to them and other Primedica employees who had not exercised their stock options. The complaint demands damages in excess of $5 million, plus interest. GTC has filed an answer denying all material allegations in the complaint, and intends to vigorously defend the case. The Company believes that it has meritorious defenses and that, although the ultimate outcome of the matters cannot be predicted with certainty, the disposition of the matter should not have a material effect on the financial position of the Company.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of fiscal year 2001, no matter was submitted to a vote of the security holders of the Company.

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

GTC's common stock commenced trading on July 9, 1993 on the Nasdaq National Market System under the symbol GZTC. Quarterly high and low sales prices for the stock as reported by the Nasdaq National Market System are shown below.

			High		Low
2001:
	1st	Quarter	15	1/2	3	7/8
	2nd	Quarter	10	1/5	4	3/4
	3rd	Quarter	9	3/4	3	1/4
	4th	Quarter	6	3/16	3
2000:
	1st	Quarter	50		10
	2nd	Quarter	31	1/2	12	3/8
	3rd	Quarter	40	3/16	25	1/2
	4th	Quarter	36	1/8	14

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The records held by the transfer agent indicate that on March 13, 2002 there were approximately 853 shareholders of GTC of record.

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.

In November 1999, the Company completed a $6.6 million private placement of Series B Convertible Preferred Stock (the "Series B Preferred Stock") to Genzyme. The proceeds from this placement were used to redeem $6.6 million of the Company's Series A Convertible Preferred Stock (the "Series A Preferred Stock"). In connection with the issuance of Series B Preferred Stock, the Company issued warrants to purchase 85,324 shares of the Company's common stock at $6.30 per share to Genzyme. In February 2000, the Company issued a Notice of Redemption to Genzyme for all outstanding shares of the Company's Series B Preferred Stock. Prior to redemption, Genzyme converted the Series B Preferred Stock into 1,048,021 shares of common stock on February 8, 2000. The Company believes that the issuance of the Series B Preferred Stock, the related warrant and the shares of common stock issued upon conversion of the Series B Preferred Stock qualified as transactions by an issuer not involving a public offering within the meaning of Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), based on the fact there was one holder.

In March 2000, the Company issued a warrant call notice for outstanding warrants to purchase 450,000 shares of common stock that had been issued in connection with the Series A Preferred Stock. Each warrant had an exercise price of $15.1563 per share. As of March 31, 2000, all the warrants were exercised with proceeds to the Company of $6.8 million. The Company believes that the issuance of the common stock upon exercise of the warrants qualified as a transaction by an issuer not involving a public offering within the meaning of Section 4(2) of the Securities Act.

In September 2000, in order to terminate the SMIG JV, the Company issued an aggregate of 333,334 shares of its common stock to Sumitomo Metal Industries, Ltd. and an affiliate ("Sumitomo"). In exchange, Sumitomo transferred to a wholly owned subsidiary of the Company all of the outstanding shares of SMI Genzyme Ltd., a Japanese corporation, held by Sumitomo. As a result, the Company directly and indirectly holds all of the outstanding equity in SMI Genzyme Ltd. The Company believes that the issuance to Sumitomo qualified as a transaction by an issuer not involving a public offering within the meaning of Section 4(2) of the Securities Act.

ITEM 6.    SELECTED FINANCIAL DATA

The selected financial data set forth below as of December 30, 2001 and December 31, 2000 and for each of the three fiscal years in the period ended December 30, 2001 are derived from the Company's consolidated financial statements included elsewhere in this Report, which have been audited by PricewaterhouseCoopers LLP, independent accountants. The selected financial data set forth below as of January 2, 2000, January 3, 1999 and December 28, 1997, and for the years ended January 3, 1999 and December 28, 1997 are derived from audited consolidated financial statements not included in this Report.

This data should be read in conjunction with the Company's consolidated financial statements and related notes thereto under Item 8 of this Report and "Management's Discussion and Analysis of Financial Condition and Results of Operations" under Item 7 of this Report.

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SELECTED FINANCIAL DATA

(Dollars in thousands except per share data)

		For the Fiscal Years Ended
		December 30, 2001			December 31, 2000			January 2, 2000			January 3, 1999			December 28, 1997
Statement of Operations Data:
Revenues:
	Research and development revenue	$	12,767		$	12,880		$	9,334		$	8,278		$	19,521
	Research and development revenue from joint venture		973			3,283			4,491			3,318			—
			13,740			16,163			13,825			11,596			19,521
Costs of revenue and operating expenses:
	Cost of research and development revenue		15,075			15,619			11,402			10,486			12,558
	Research and development		7,353			3,357			3,690			6,155			5,282
	Selling, general and administrative		11,078			9,148			7,875			6,042			7,381
	Equity in loss of joint venture		4,078			4,625			3,797			4,285			811
			37,584			32,749			26,764			26,968			26,032
Loss from continuing operations			(23,844	)		(16,586	)		(12,939	)		(15,372	)		(6,511	)
Other income and (expenses):
	Interest income		3,478			3,770			65			280			116
	Interest expense		(746	)		(1,001	)		(1,232	)		(251	)		(465	)
	Realized gain on sale of CRL stock		2,320			—			—			—			—
	Other income		—			—			484			100			50
Loss from continuing operations		$	(18,792	)	$	(13,817	)	$	(13,622	)	$	(15,243	)	$	(6,810	)
Discontinued operations
	Income (loss) from discontinued contract research operations, net of taxes		—			(324	)		(5,139	)		(4,347	)		(2,533	)
	Gain from sale of discontinued contract research operations		2,236			—			—			—			—
Net loss		$	(16,556	)	$	(14,141	)	$	(18,761	)	$	(19,590	)	$	(9,343	)
Dividends to preferred shareholders			—			(74	)		(1,497	)		(1,156	)		—
Net loss available to common shareholders		$	(16,556	)	$	(14,215	)	$	(20,258	)	$	(20,746	)	$	(9,343	)
Net loss available to common shareholders per weighted average number of common shares (basic and diluted):
	From continuing operations	$	(0.63	)	$	(0.49	)	$	(0.76	)	$	(0.91	)	$	(0.39	)
	From discontinued contract research operations	$	0.08		$	(0.01	)	$	(0.26	)	$	(0.24	)	$	(0.15	)
	Net loss	$	(0.55	)	$	(0.50	)	$	(1.02	)	$	(1.15	)	$	(0.54	)
Weighted average number of shares outstanding (basic and diluted)			29,975,167			28,373,283			19,876,904			17,978,677			17,253,292

	December 30, 2001		December 31, 2000		January 2, 2000		January 3, 1999		December 28, 1997
Balance Sheet Data:
Cash, cash equivalents and marketable securities	$	90,448	$	66,532	$	7,813	$	12,097	$	6,777
Working capital		74,458		88,389		16,715		26,903		22,567
Total assets		120,443		134,403		58,518		60,052		50,187
Long-term liabilities		80		294		6,256		3,063		2,162
Shareholders' equity		101,950		114,843		26,206		36,220		27,378

There were no cash dividends paid to common shareholders for any period presented.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SUMMARY BUSINESS DESCRIPTION

The Company was incorporated in February 1993 and is engaged in the application of transgenic technology to the development and production of recombinant proteins for therapeutic and diagnostic uses.

Discontinued operations

In February 2001, GTC completed the sale of Primedica Corporation ("Primedica") to Charles River Laboratories, Inc. ("CRL"). GTC received $26 million in cash, 658,945 shares of CRL common stock valued at $15.9 million and CRL assumed all of Primedica's approximately $9 million of capital leases and long-term debt (see Note 2 of the "Notes to the Consolidated Financial Statements"). Primedica is reported as a discontinued operation in these financial statements. Accordingly, the results of operations and the balance sheet data exclude the results of operations and assets and liabilities of Primedica and its subsidiaries.

ATIII LLC Joint Venture

In 1997, GTC and Genzyme Corporation ("Genzyme") established the ATIII LLC joint venture ("ATIII LLC") for the marketing and distribution rights of rhATIII in all territories other than Asia. In July 2001, the Company reacquired Genzyme's ownership interest in the ATIII LLC in exchange for a royalty to Genzyme based on the Company's sales of rhATIII, if any, commencing three years after the first commercial sale, up to a cumulative maximum of $30 million. As a result of the reacquisition the accounts of the ATIII LLC, in the amount of $2.3 million, were consolidated for reporting purposes.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements requires that GTC make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to revenue recognition, investments, intangible and long lived assets, income taxes, financing operations, and contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue recognition

The Company records revenue under the EITF 91-6 model in accordance with SAB 101 as this model has been deemed to be the most appropriate for the nature of GTC's business. The Company has made the assumption that it can perform all activities through the development phase of its externally funded programs and can reasonably estimate the time and cost associated with the development phase. There have been no significant changes to GTC's business model during 2001. The results of using this model are such that GTC's revenues are matched to the costs incurred for any given period. The Company believes that the results of using a different model such as substantive milestones, would not be appropriate based on the Company's operations. The Company recognizes revenue and profit as work progresses on contracts using a percentage-of-completion method, which relies on estimates of total expected contract

17

revenue and costs. The Company follows this method when reasonably dependable estimates of the revenue and costs applicable to various stages of a contract can be made. Recognized revenues and profit are subject to revisions as the contract progresses to completion. Material changes in estimated costs to complete, therefore, could have a material impact on revenue recognized in current and future periods.

Valuation of intangible and long lived assets

The Company assesses the impairment of identifiable intangibles and long lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors GTC considers important which could trigger an impairment review include the following:

•

Significant underperformance relative to expected historical or projected future operating results;



•

Significant changes in the manner of GTC's use of the acquired assets or the strategy for GTC's overall business;



•

Significant negative industry or economic trends

If the Company were to determine that the carrying value of intangibles and long lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, it would measure any impairment based on a projected discounted cash flow method using a discount rate determined by GTC's management to be commensurate with the risk inherent in its current business model. There have been no factors currently that would trigger an impairment review, therefore, no impairment reviews have been performed. Net intangible assets amounted to $11.6 million as of December 30, 2001.

Estimating accrued liabilities

Management must make estimates of costs incurred in the period for which services have been performed but not yet invoiced. Material differences may result in the amount and timing of the Company's expenses for any period if management were to make alternate or incorrect judgements or utilize alternate or incorrect estimates.

Accounting for income taxes

As part of the process of preparing GTC's consolidated financial statements, GTC is required to estimate its income taxes in each of the jurisdictions in which GTC operates. This process involves GTC estimating its actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within its consolidated balance sheet. GTC must then assess the likelihood that its deferred tax assets will be recovered from future taxable income and to the extent GTC believes that recovery is not likely, it must establish a valuation allowance. To the extent it establishes a valuation allowance or increase this allowance in a period, it must include an expense within the tax provision in the statement of operations. The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.

Management judgment is required in determining its provision for income taxes, its deferred tax assets and liabilities and any valuation allowance recorded against its net deferred tax assets. GTC has recorded a

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valuation allowance of $50.9 million as of December 30, 2001, due to uncertainties regarding its ability to utilize some of its deferred tax assets, primarily consisting of certain net operating losses carried forward. The valuation allowance is based on its estimates of taxable income by jurisdiction in which it operates and the period over which its deferred tax assets will be recoverable. In the event that actual results differ from these estimates or it adjusts these estimates in future periods it may need to establish a valuation allowance which could materially impact its financial position and results of operations. If results of operations in the future indicate that some or all of the deferred tax assets will be recovered, the reduction of the valuation allowance will be recorded as a tax benefit during one period or over many periods.

YEAR ENDED DECEMBER 30, 2001 AS COMPARED TO YEAR ENDED DECEMBER 31, 2000

Total revenues for 2001 were $13.7 million, compared with $16.2 million in 2000, a decrease of $2.4 million or 15%. The decrease in revenues was primarily due to no longer receiving partial funding from Genzyme for the rhATIII program of the ATIII LLC joint venture.

Cost of research and development revenue decreased to $15.1 million in 2001 from $15.6 million in 2000, a decrease of $.5 million or 3%. Internal research and development program expenses increased to $7.4 million in 2001 from $3.4 million in 2000, an increase of $4 million or 119%. The increase is primarily due to a higher investment in the research and development programs, reflecting continued investment in its technology platform including the areas of molecular biology, protein chemistry and downstream product purification. As a result of the reacquisition of the ATIII LLC joint venture, rhATIII related costs subsequent to July 31, 2001, in the amount of $2.3 million are included in the Company's research and development expenses.

Selling, general and administrative expenses increased to $11.1 million in 2001 from $9.1 million in 2000, an increase of $1.9 million or 21%. The increase is due to an increased investment in information technology personnel-related expenses, higher professional fees and recruiting costs, as well as primarily, to a charge related to contractual obligations in connection with the resignation of the Company's former President and Chief Executive Officer.

The Company recognized $4.1 million of joint venture losses incurred on ATIII LLC between the Company and Genzyme in 2001 as compared to $4.6 million in 2000. The decrease represents a change in the funding arrangement during 2001. The Company entered into an Interim Funding agreement with Genzyme in January 2001, under which the Company funded all the losses incurred by the joint venture from February 2001. Prior to this, the Company only funded 50% of the losses. The Interim agreement ceased in July 2001 when the Company reacquired Genzyme's ownership interest in the ATIII LLC in exchange for a royalty payable to Genzyme based on the Company's future sales, if any, of rhATIII, commencing three years after the first commercial sale up to a cumulative maximum of $30 million. Following the reacquisition, the results of ATIII LLC are consolidated into the Company's results, in particular research and development expenses.

Interest income decreased to $3.5 million in 2001, from $3.8 million in 2000. The decrease is due to the impact of lower interest rates in 2001.

Interest expense decreased to $746,000 in 2001, from $1 million in 2000 due to lower outstanding borrowings, as well as lower interest rates in 2001.

The realized gain on the sale of securities is a result of the sale, in July 2001, of all of the shares of the CRL common stock received as part of the proceeds from the sale of Primedica.

The gain from the sale of discontinued contract research operations is a result of the sale, in February 2001, of Primedica to CRL.

19

YEAR ENDED DECEMBER 31, 2000 AS COMPARED TO YEAR ENDED JANUARY 2, 2000

Total revenues for 2000 were $16.2 million, compared with $13.8 million in 1999, an increase of $2.3 million or 17%. The increase in revenues is due to a greater number of transgenic programs in 2000 as well as milestone based revenues earned during 2000 in association with progress on previously existing transgenic programs.

Cost of research and development revenue increased to $15.6 million in 2000 from $11.4 million in 1999, an increase of $4.2 million or 37%. The increase in cost of revenue is primarily due to an increase in the number of transgenic programs. Internal research and development expenses decreased to $3.4 million in 2000 from $3.7 million in 1999, a decrease of $.3 million or 9%. The decrease in research and development expenses was primarily due primarily to a shifting of resources in relation to the increase in the number of transgenic programs during 2000.

Selling, general and administrative expenses increased to $9.1 million in 2000 from $7.9 million in 1999, an increase of $1.3 million or 16%. The increase is primarily due to a one-time charge associated with the acceleration of vesting of non-employee stock options.

Interest income increased to $3.8 million in 2000, from $65,000 in 1999, due to the investment of proceeds generated by the secondary public offering in February 2000.

Interest expense decreased to $1 million in 2000, from $1.2 million in 1999. Of the 2001 interest expense total, approximately $306,000 represents interest for the financing of the transgenic production facility and $358,000 represents amortization of deferred financing costs.

The Company did not recognize any non-operating income in 2000. In 1999, the Company recognized $484,000 of non-operating income from the receipt of an insurance settlement.

The Company recognized $4.6 million of losses incurred in connection with the ATIII LLC joint venture in 2000 as compared to $3.8 million in 1999, an increase of 22%. The increase is due to a higher spending rate in 2000.

The Company recognized a loss of $324,000 from discontinued contract research operations in 2000 versus a loss of $5.1 million in 1999. The decrease in the loss is due to an increase in Primedica's revenues in 2000 as a result of an intentional shift in the mix of Primedica services to faster growing service areas such as metabolism and pharmacokinetics, formulation chemistry, analytical chemistry and bioproduction.

RESEARCH AND DEVELOPMENT COSTS

All research and development costs are expensed as incurred. During its fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000, GTC spent $22.4 million, $19 million and $15.1 million, respectively, on research and development. These costs include labor, materials and supplies and overhead, as well as certain subcontracted research projects. Also included are the costs of operating the transgenics production facility such as feed and bedding, veterinary costs and utilities (see Table in Item 1).

In aggregate, the total cost incurred since inception on external program partnerships was $27.1 million at December 30, 2001. The aggregate estimated costs to complete for the external programs through the development phase was $7.3 million at December 30, 2001 with associated minimum revenues of $7.9 million excluding success based milestones. Subsequent to the development phase of the programs, the activities to be performed by the Company, if any, are outside of the Company's control, therefore, the related costs are unknown.

In aggregate, the total cost incurred since inception on internal programs was $22.6 million at December 30, 2001. The costs to complete these programs are not estimatable due to significant variability in clinical trial costs and FDA regulatory processes.

20

NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued FASB Statement No. 141 ("SFAS No. 141"), Business Combinations and FASB Statement No. 142 ("SFAS No. 142"), Goodwill and Other Intangible Assets. SFAS No. 141 requires that all business combinations be accounted for under the purchase method only and that certain acquired intangible assets in a business combination be recognized as assets apart from goodwill. SFAS No. 142 requires that ratable amortization of goodwill be replaced with periodic tests of the goodwill's impairment and that intangible assets other than goodwill be amortized over their useful lives. SFAS No. 141 is effective for all business combinations initiated after June 30, 2001 and for all business combinations accounted for by the purchase method for which the date of acquisition is after June 30, 2001. The provisions of SFAS No. 142 will be effective for fiscal years beginning after December 15, 2001, and will thus be adopted by the Company, as required, in fiscal year 2002. The Company does not expect any significant impact from the adoption of SFAS No. 141 and SFAS No. 142 on the Company's financial statements.

On October 3, 2001, FASB issued FASB Statement No. 144 ("SFAS No. 144" or the "Standard"), Accounting for the Impairment or Disposal of Long-Lived Assets. The objectives of SFAS 144 are to address significant issues relating to the implementation of FASB Statement No. 121 ("SFAS No. 121"), Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and to develop a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and, generally, its provisions are to be applied prospectively. The Company does not expect the above accounting pronouncements to have a significant impact on the Company.

LIQUIDITY AND CAPITAL RESOURCES

In February 2001, the Company completed the sale of its clinical research organization, Primedica, to CRL. Net proceeds to the Company were $39.7 million in cash and CRL stock (see Note 13 of the "Notes to the Consolidated Financial Statements").

The Company had cash, cash equivalents and marketable securities of $90.4 million at December 30, 2001. This amount includes cash and cash equivalents of $26.9 million.

During 2001, the Company had a $14.2 million net decrease in cash and cash equivalents. Sources of funds during the period included $23.9 million of net proceeds from the sale of Primedica, $18.2 million from the sale of the CRL common stock, $45.3 million from the redemption of marketable securities and $2.4 million from the issuance of common stock under various employee stock plans. Uses of funds during the period included $12 million used in operations, $3.4 million invested in capital equipment and further expansion of the transgenic production facility, $4.1 million of funding of the ATIII LLC, $83.6 million used to purchase marketable securities and $974,000 used to pay down long-term debt.

The Company had working capital of $74.5 million at December 30, 2001 compared to $88.4 million at December 31, 2000. The decrease in working capital is due to the funding of operations. As of December 30, 2001 the Company had $15.8 million available under a line of credit with a commercial bank.

The Company's total debt consists of $6 million, which is primarily mortgage financing for its production facilities. There are no other long-term debt commitments and no off-balance sheet financing vehicles.

As programs progress from the development stage to the commercialization stage, the Company expects to incur additional capital expenditures. The Company is preparing plans to expand its existing transgenic production facilities in central Massachusetts as well as to establish a second production site in order to facilitate growth in the number of development programs and the commercialization of ongoing transgenic programs. In January 2002, the Company completed the purchase of approximately 128 acres of farm land

21

in eastern New York State for $426,000, to be developed as a second production site. The Company anticipates investing between $6 million and $10 million in capital expenditures for buildings and equipment over the next 18-24 months.

In July 2001, the Company reacquired Genzyme's ownership interest in the ATIII LLC in exchange for a royalty to Genzyme based on the Company's sales of rhATIII, if any, commencing three years after the first commercial scale, up to a cumulative maximum of $30 million. Accordingly, the Company will be required to fully fund any development costs for ATIII until a development partner is obtained. At this time, these costs are unknown as they are dependent upon a number of factors such as length of time to find a partner, to complete clinical studies and the ultimate receipt of regulatory approval. The Company both filed for and received acceptance of their clinical trial exemption for rhATIII in Europe to begin clinical study of ATIII patients with a hereditary deficiency. A pharmacokinetic trial in Europe began in the fourth quarter of 2001.

The following summarizes the Company's contractual obligations at December 30, 2001, and the effect such obligations are expected to have on its liquidity and cash flow in future periods.

		Total		Within 1 Year		1 to 3 Years		After 3 Years
Contractual Obligations:
	Long-term debt and capital lease obligations	$	5,966	$	5,940	$	26	$	—
	Other lease obligations		2,465		1,087		892		486
	Service agreement with Genzyme (see Note 11 of the "Notes to the Consolidated Financial Statements")		1,012		1,012		—		—
Total contractual cash obligations		$	9,443	$	8,039	$	918	$	486

The Company has a standby letter of credit in the amount of $249,360 in support of a facility lease, none of which had been drawn down at December 30, 2001.

The Company is party to license agreements for certain technologies (see Note 12 of the "Notes to the Consolidated Financial Statements"). Certain of these agreements contain provisions for future royalties to be paid on commercial sales of products developed from the licensed technologies. Currently the amounts payable under these agreements and any resulting commitments on the Company's behalf are unknown and unestimatable since the level of future sales, if any, is uncertain.

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 ability of the Company to enter into 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.

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.

The Company has entered into transactions with related parties (see Note 14 of the "Notes to the Consolidated Financial Statements") in the normal course of business. These transactions are considered to be at arms-length. There are no ongoing contractual or other commitments as a result of these arrangements other than Genzyme.

FACTORS AFFECTING FUTURE OPERATIONS AND RESULTS

"This Annual Report on Form 10-K contains forward-looking statements, including statements regarding our results of operations, research and development programs, clinical trials and collaborations. The words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," or

22

similar expressions are intended to identify "forward-looking statements" within the meaning of Section 21E of the Exchange Act and Section 27A of the Securities Act of 1933, as amended, as enacted by the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts are based on our current expectations, beliefs, assumptions, estimates, forecasts and projections for our business and the industry and markets related to our business. The statements contained in this report are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed in such forward-looking statements. Important factors which may affect future operating results, research and development programs, clinical trials and collaborations include, without limitation, those set forth in Exhibit 99 "Important Factors Regarding Forward-Looking Statements" to this Form 10-K, which is incorporated into this item by this reference."

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has certain financial instruments at December 30, 2001, including a guaranty, a revolving line of credit, a standby letter of credit and a loan outstanding which are sensitive to changes in interest rates. The Company has a guaranty by Genzyme Corporation, obtained in December 1998, of the Company's credit facility with a commercial bank, whose carrying value of $969,000 approximates fair value. Also, the Company has a revolving line of credit with a commercial bank for $15.8 million, which accrues interest at a variable rate and a standby letter of credit of $249,360 in support of a facility lease. At December 30, 2001, nothing is outstanding under the line of credit and nothing has been drawn down on the standby letter of credit. As part of the revolving credit facility, the Company had been issued a $1.5 million standby letter of credit in support of a facility lease for the Company's Primedica subsidiary which was cancelled as a part of the sale of Primedica in February 2001. Additionally, the Company has one loan outstanding. These instruments are not leveraged and are held for purposes other than trading.

For the loan outstanding, the table below presents the principal cash flows that exist by maturity date and the related average interest rate.

	2002	2003	2004	2005	2006	Thereafter	Total
Variable rate debt ($in 000's)	5,735	—	—	—	—	—	—

The interest rate of the variable debt was 2.48% at December 30, 2001. At December 30, 2001, the fair value of this loan approximates carrying value.

Interest rate risk

The Company does not engage in trading market risk sensitive instruments or purchasing hedging instruments or "other than trading" instruments that are likely to expose the Company to market risk, whether interest rate, foreign currency exchange, commodity price or equity price risk. The Company has not purchased options or entered into swaps, or forward or future contracts. The Company's primary market risk is interest rate risk on borrowings under its commercial bank loan, these interest rates are based on the bank's base rate. The aggregate hypothetical loss in earnings for one year on the borrowing held by us at December 30, 2001, assuming a hypothetical 6 percent interest rate is approximately $344,000 after tax. The hypothetical loss was based on financial instruments held by the Company at December 30, 2001. Fixed rate financial instruments were not evaluated.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES

Financial Statements

Response to this item is submitted as a separate section of this report immediately following Item 14.

23

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

This information is set forth in part under the captions "ELECTION OF DIRECTORS" and "SECTION 16 (a) BENEFICIAL REPORTING COMPLIANCE" in the Company's Proxy Statement for the 2002 Annual Meeting of Stockholders to be held on May 22, 2002 (the "Proxy Statement") which are incorporated herein by reference, and the remainder of such information is set forth under the caption "EXECUTIVE OFFICERS OF THE REGISTRANT" in Part I, Item 1A hereof.

ITEM 11. EXECUTIVE COMPENSATION

The information set forth under the caption "EXECUTIVE COMPENSATION" in the Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information set forth under the caption "SHARE OWNERSHIP" in the Proxy Statement is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information set forth under the captions "EXECUTIVE EMPLOYMENT AGREEMENTS" and "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" in the Proxy Statement is incorporated herein by reference. See also, Notes 2, 6 and 11 to the Consolidated Financial Statements included herewith.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

(a)

The Company's Financial Statements and Financial Statement Schedule appear as a separate section of this report immediately following Item 14.

All other schedules have been omitted because the required information is not applicable or not present in amounts sufficient to required submission of the schedule, or because the information required is in the consolidated financial statements or the notes thereto.

The Exhibits to this report are listed below under Part IV, Item 14(c) hereof.

(b)

Reports on Form 8-K

No reports on Form 8-K were filed by the Company during the quarter ended December 30, 2001.

(c)

Exhibits

The exhibits filed as part of this Form 10-K are listed on the Exhibit Index immediately preceding such Exhibits, which Exhibit Index is incorporated herein by reference.

24

FORM 10-K-ITEMS 8, 14 (a) (1), (a) (2), and (d)
GENZYME TRANSGENICS CORPORATION AND SUBSIDIARIES
List Of Financial Statements And Financial Statement Schedule

The following consolidated financial statements of Genzyme Transgenics Corporation and subsidiaries are included in Item 8:

		Page #
	Report of PricewaterhouseCoopers LLP—Independent Accountants	26
	Consolidated Balance Sheets—December 30, 2001 and December 31, 2000	27
	Consolidated Statements of Operations—For the fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000	28
	Consolidated Statements of Shareholders' Equity—For the fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000	29
	Consolidated Statements of Cash Flows—For the fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000	30
	Notes to Consolidated Financial Statements	31
	Report of PricewaterhouseCoopers LLP on Financial Statement Schedule—Independent Accountants	50
	Schedule II—Supplemental Valuation and Qualifying Accounts	51
SIGNATURES		52
EXHIBIT INDEX		53

All other schedules for which provision is made in the applicable regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.

25

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Genzyme Transgenics Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive loss, shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Genzyme Transgenics Corporation and its subsidiaries at December 30, 2001 and December 31, 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 30, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2002

26

GENZYME TRANSGENICS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands except share amounts)

			December 30, 2001			December 31, 2000
ASSETS
Current assets:
	Cash and cash equivalents		$	26,850		$	41,024
	Marketable securities			63,598			25,508
	Accounts receivable and unbilled contract revenue, net of allowance of $361 at December 30, 2001 and December 31, 2000			1,862			2,753
	Other current assets			561			1,098
	Net assets of discontinued contract research operations held for sale			—			37,272
		Total current assets		92,871			107,655
Net property, plant, and equipment				15,957			13,841
Net intangible assets				11,595			12,529
Other assets				20			378
			$	120,443		$	134,403
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	1,923		$	1,073
	Accounts payable—Genzyme			1,852			1,344
	Payable to ATIII LLC			—			1,096
	Accrued expenses			5,078			4,514
	Deferred contract revenue			3,620			4,522
	Current portion of long-term debt and capital leases			5,940			6,717
		Total current liabilities		18,413			19,266
	Long-term debt and capital leases, net of current portion			26			223
	Deferred lease obligation			54			71
		Total liabilities		18,493			19,560
Commitments and contingencies (see Note 3)
Shareholders' equity:
	Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares were issued and outstanding			—			—
	Common stock, $.01 par value; 100,000,000 shares authorized; 30,200,219 and 29,697,151 shares issued and outstanding at December 30, 2001 and December 31, 2000, respectively			302			297
	Capital in excess of par value			197,742			194,255
	Accumulated deficit			(96,322	)		(79,766	)
	Accumulated other comprehensive income			228			57
		Total shareholders' equity		101,950			114,843
			$	120,443		$	134,403

The accompanying notes are an integral part of the consolidated financial statements.

27

GENZYME TRANSGENICS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Dollars in thousands except share and per share amounts)

			For the Fiscal Years Ended
			December 30, 2001			December 31, 2000			January 2, 2000
Revenues:
	Research and development revenue		$	12,767		$	12,880		$	9,334
	Research and development revenue from joint venture			973			3,283			4,491
				13,740			16,163			13,825
Costs of revenue and operating expenses:
	Cost of research and development revenue			15,075			15,619			11,402
	Research and development			7,353			3,357			3,690
	Selling, general and administrative			11,078			9,148			7,875
	Equity in loss of joint venture			4,078			4,625			3,797
				37,584			32,749			26,764
Loss from continuing operations				(23,844	)		(16,586	)		(12,939	)
Other income (expense):
	Interest income			3,478			3,770			65
	Interest expense			(746	)		(1,001	)		(1,232	)
	Realized gain on sale of CRL stock			2,320			—			—
	Other income			—			—			484
Loss from continuing operations				(18,792	)		(13,817	)		(13,622	)
Discontinued operations
	Loss from discontinued contract research operations (less applicable taxes of $248 and $320)			—			(324	)		(5,139	)
	Gain from sale of discontinued contract research operations			2,236			—			—
Net loss			$	(16,556	)	$	(14,141	)	$	(18,761	)
Dividend to preferred shareholders				—			(74	)		(1,497	)
Net loss available to common shareholders			$	(16,556	)	$	(14,215	)	$	(20,258	)
Net loss available per common share (basic and diluted):
	From continuing operations		$	(0.63	)	$	(0.49	)	$	(0.76	)
	From discontinued contract research operations		$	0.08		$	(0.01	)	$	(0.26	)
	Net loss		$	(0.55	)	$	(0.50	)	$	(1.02	)
Weighted average number of common shares outstanding (basic and diluted)				29,975,167			28,373,283			19,876,904
Comprehensive loss:
	Net loss		$	(16,556	)	$	(14,141	)	$	(18,761	)
	Other comprehensive income:
		Unrealized holding gains on available for sale securities		171			57			—
	Total other comprehensive income			171			57			—
Comprehensive loss			$	(16,385	)	$	(14,084	)	$	(18,761	)

The accompanying notes are an integral part of the consolidated financial statements.

28

GENZYME TRANSGENICS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In Thousands)

	Series A Convertible Preferred Stock				Capital in Excess of Par Value Preferred Stock									Capital in Excess of Par Value Common Stock
								Common Stock															Accumulated Other Comprehensive Income
																	Stock Based Compensation			Accumulated Deficit					Total Shareholders' Equity
	Shares		Amount					Shares	Amount		Dividend
Balance, January 3, 1999	20		$	—	$	18,777		18,384	$	184	$	(1,156	)	$	65,716		$	(437	)	$	(46,864	)	$	—		36,220
Net loss																					(18,761	)				(18,761	)
Sale of common stock in a private placement, net of expenses								686		7					5,421											5,428
Common stock sold under Employee Stock Purchase Plan								239		4					992											996
Common stock issuance to the GTC Savings and Retirement Plan								95		1					510											511
Conversion of Series A Preferred Stock	(14	)				(13,035	)	2,830		27					13,008											—
Common stock issuance for ACT License Agreement								217		2					998											1,000
Redemption of Series A Preferred Stock	(6	)				(5,741	)					(861	)													(6,602	)
Issuance of Series B Preferred Stock and related warrants, net of issuance costs	7					6,563						(343	)		343											6,563
Dividend attributed to beneficial conversion												(210	)		210											—
Dividend accrued on Series B Preferred Stock						83						(83	)													—
Stock based compensation															(37	)		153								116
Proceeds from the exercise of stock options								150		1					734											735
Balance, January 2, 2000	7			—		6,647		22,601		226		(2,653	)		87,895			(284	)		(65,625	)		—		26,206
Net loss																					(14,141	)				(14,141	)
Conversion of Series B Preferred Stock, including expenses	(7	)				(6,564	)																			(6,564	)
Payment of dividend						(157	)																			(157	)
Conversion of Series A Preferred Stock								1,048		10		2,727			3,818											6,555
Common stock sold under Employee Stock Purchase Plan								237		2					1,209											1,211
Common stock issuance in to the GTC Savings and Retirement Plan								45		1					566											567
Dividend on Preferred Stock						74						(74	)													—
Proceeds from the exercise of stock options								958		10					6,291											6,301
Stock based compensation															1,531			284								1,815
Unrealized gain on investment																								57		57
Conversion of warrants								450		5					6,815											6,820
Common stock issuance in connection with the acquisition of SMIG								333		3					11,040											11,043
Common stock issuance in connection with the public offering, net of expenses								4,025		40					75,090											75,130
Balance, December 31, 2000	—			—		—		29,697		297		—			194,255			—			(79,766	)		57		114,843
Net loss																					(16,556	)				(16,556	)
Common stock sold under Employee Stock Purchase Plan								102							424											424
Common stock issuance to the GTC Savings and Retirement Plan								50		1					724											725
Proceeds from the exercise of stock options								351		4					1,984											1,988
Stock based compensation															355											355
Unrealized gain on investment																								171		171
Balance, December 30, 2001	—		$	—	$	—		30,200	$	302	$	—		$	197,742		$	—		$	(96,322	)	$	228	$	101,950

The accompanying notes are an integral part of the consolidated financial statements

29

GENZYME TRANSGENICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

			FOR THE FISCAL YEARS ENDED
			December 30, 2001			December 31, 2000			January 2, 2000
Cash flows for operating activities:
	Net loss from continuing operations		$	(18,792	)	$	(13,817	)	$	(13,622	)
	Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
		Depreciation and amortization		2,614			2,070			1,862
		Stock based compensation		355			1,815			116
		Non cash interest income (loss) from marketable securities		305			(815	)		—
		Common stock issuance to GTC savings and retirement plan		725			567			511
		Equity in loss of joint venture		4,078			4,625			3,674
		Realized gain on sale of CRL stock		(2,320	)		—			—
	Changes in assets and liabilities:
		Accounts receivable and unbilled contract revenue		891			(1,828	)		2,437
		Other assets and liabilities		236			(167	)		(1,658	)
		Accounts payable		850			439			(618	)
		Accounts payable—Genzyme Corporation		508			785			(928	)
		Payable to ATIII LLC		(1,096	)		—			—
		Other accrued expenses		564			708			165
		Deferred contract revenue		(902	)		2,139			1,365
		Net cash used by in operating activities		(11,984	)		(3,479	)		(6,696	)
Cash flows for investing activities:
	Purchase of property, plant and equipment			(3,438	)		(1,964	)		(3,276	)
	Investment in joint venture			(4,077	)		(5,680	)		(3,941	)
	Purchase of marketable securities			(83,593	)		(46,636	)		—
	Redemption of marketable securities			45,267			22,000			—
	Proceeds from the sale of CRL stock			18,192			—
	Cash paid for acquisition of SMIG			—			(26	)		—
		Net cash used in investing activities		(27,649	)		(32,306	)		(7,217	)
Cash flows from financing activities:
	Net proceeds from the issuance of common stock			—			75,130			5,428
	Dividends paid			—			(157	)		—
	Redemption of Series A convertible preferred stock			—			—			(6,602	)
	Net proceeds from the exercise of warrants			—			6,820			—
	Net proceeds from the sale of discontinued operations (net of $2,124 expenses)			23,876			—			—
	Net proceeds from employee stock purchase plan			424			1,211			996
	Net proceeds from the exercise of stock options			1,988			6,301			735
	Net proceeds from the issuance of Series B convertible preferred stock and related warrants			—			—			6,563
	Proceeds from long-term debt			—			609			4,544
	Repayment of long-term debt			(974	)		(727	)		(434	)
	Net (payments) borrowings under revolving line of credit			—			(15,750	)		4,654
		Net cash provided by financing activities		25,314			73,437			15,884
Net cash (used) provided by discontinued operations				145			(4,441	)		(6,255	)
Net increase (decrease) in cash and cash equivalents				(14,174	)		33,211			(4,284	)
Cash and cash equivalents at beginning of the period				41,024			7,813			12,097
Cash and cash equivalents at end of period			$	26,850		$	41,024		$	7,813
Supplemental disclosure of cash flow information:
	Cash paid during the period for interest		$	349		$	544		$	1,245
	Assets purchased under capital lease			—			—			111

The accompanying notes are an integral part of the consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000 (all tabular $ in thousands, except per share data)

NOTE 1. NATURE OF BUSINESS

The Company was incorporated in February 1993 and is engaged in the application of transgenic technology to the development and production of recombinant proteins for therapeutic and diagnostic uses.

In February 2001, Genzyme Transgenics Corporation ("GTC" or the "Company") completed the divestiture of its wholly-owned contract research organization ("CRO") subsidiary, Primedica Corporation ("Primedica"). Accordingly, Primedica is reported as a discontinued operation in these financial statements.

Genzyme is the Company's largest single stockholder. As a result of various equity transactions, Genzyme owned 26% of the Company's outstanding common stock at December 30, 2001, and 27% on a fully diluted basis.

The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, development by the Company or its competitors of new technological innovations, raising additional capital, dependence on key personnel, protection of proprietary technology and compliance with FDA and other government regulations. The accompanying financial statements have been presented on the assumption that the Company is a going concern. The Company has incurred losses and negative operating cash flow in each of the fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000. The Company had working capital of $74.5 million at December 30, 2001.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The consolidated financial statements include the results of the Company and its wholly-owned subsidiaries. All significant inter-company transactions have been eliminated and the Company operates in one business segment.

The Company accounted for its 22% investment in the joint venture between SMI Genzyme Ltd. and Sumitomo Metals Industries Ltd. ("SMIG JV") using the equity method. In September 2000, the Company acquired full ownership of the SMIG JV by issuing an aggregate of 333,334 shares of its common stock valued at approximately $11.1 million, plus transaction costs of $143,000. As a result, the Company directly and indirectly holds all of the outstanding equity of the SMIG JV which is now a wholly-owned subsidiary of the Company (see Note 13).

The Company accounted for its 50% investment in the ATIII LLC under the equity method through February 2001. In July 2001, the Company completed the reacquisition of Genzyme's ownership interest in ATIII LLC and the results of ATIII LLC were thereafter consolidated for reporting purposes (see Note 13).

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant estimates and assumptions in these financial statements include revenue recognition, account

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receivable and unbilled reserves, accrued expenses and tax valuation reserves. Actual results could differ materially from those estimates.

Cash and Cash Equivalents

Cash equivalents, consisting principally of money market funds with initial maturities of three months or less, are valued at market value.

Marketable Securities

Marketable securities, which include the Company's investment in equity securities, have been classified as available for sale and are stated at market value based on quoted market prices. Gains and losses on sales of securities are calculated using the specific identification method. Marketable securities at December 30, 2001 can be summarized as follows:

		Amortized Cost		Estimated Fair Value
Government backed obligations		$	40,521	$	43,729
Corporate obligations			23,007		19,869
	Total marketable securities	$	63,528	$	63,598

At December 30, 2001 and December 31, 2000, the marketable securities had an associated $228,000 and $57,000 of unrealized gain included in other comprehensive income and equity. No marketable securities were held at January 2, 2000. The Company had a realized gain of $2.3 million on the sale of the CRL stock in 2001. All other realized gains on available for sale securities in 2001 and 2000 were immaterial. There were no realized gains in 1999. At December 30, 2001, the contractual maturities of the Company's investments available for sale range from 4 months to 36 months. All of the Company's investments are classified as short-term, which is consistent with their intended use.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and trade accounts receivable. The Company is subject to the concentration of credit risk of its commercial bank that holds the revolving line of credit and term loan. At December 30, 2001 and December 31, 2000, approximately 94% and 99%, respectively, of cash, cash equivalents and marketable securities were held by one United States highly rated financial institution. Total credit facilities at one commercial bank are $24.6 million at December 30, 2001 and December 31, 2000.

The Company performs ongoing credit evaluations of its customers' financial conditions and maintains reserves for potential credit losses. There has been minimal writeoff activity for fiscal 2001, 2000 and 1999.

At December 30, 2001 and December 31, 2000, five customers and three customers, respectively, accounted for 100% of accounts receivable. For the year ended December 30, 2001, four customers accounted for 72% of the revenue, three customers accounted for 59% of the revenue for the year ended December 31, 2000 and five customers accounted for 86% of the revenue for the year ended January 2, 2000. The majority of the outstanding accounts receivable balance at December 30, 2001 has been subsequently collected.

Property, Plant and Equipment

Property, plant and equipment are stated at cost and depreciated using the straight-line method over estimated useful lives of three to thirty years. Leasehold improvements are amortized using the straight-line method over the life of the improvement or the remaining term of the lease, whichever is

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shorter. The direct costs of the New Zealand goats ("Livestock") and related costs to bring them to the United States are capitalized and amortized using the straight-line method over three years.

The following is the summary of property, plant and equipment and related accumulated amortization and depreciation as of December 30, 2001 and December 31, 2000.

	Years of Life	December 30, 2001		December 31, 2000
Land	—	$	987	$	909
Buildings	20 - 30		12,848		11,120
Livestock	3		2,523		2,146
Leasehold improvements	lease life		942		860
Laboratory, manufacturing and office equipment	3 - 10		3,985		2,349
Laboratory, manufacturing and office equipment—capital lease	3 - 10		1,143		1,143
Construction in process	—		158		621
		$	22,586	$	19,148
Less accumulated amortization and depreciation			6,629		5,307
Net property, plant and equipment		$	15,957	$	13,841

Depreciation and amortization expense was $1,237,000, $1,274,000, and $1,013,000 for the fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000, respectively. Accumulated amortization for equipment under capital lease was $616,000 and $455,000 at December 30, 2001 and December 31, 2000, respectively.

In January 2002, the Company completed the purchase of approximately 128 acres of farm land in eastern New York for $426,000, to be developed as a second production site.

Non Cash Transactions

During fiscal 1999, the Company purchased $111,000 of fixed assets and financed these additions with capital lease obligations. The Company issued common stock valued at $1,000,000 in connection with a license agreement with Advanced Cell Technology, Inc. This license has been recorded as a long term asset and is being amortized over 10 years.

During fiscal 2000, the Company acquired full ownership of the SMIG JV by issuing an aggregate of 333,334 shares of its common stock valued at approximately $11.1 million, plus transaction costs of $143,000 (see Note 13).

During fiscal 2001, in connection with the sale of the Primedica subsidiary, the Company accelerated options to employees of the discontinued operations valued at $284,000, received CRL common stock from the sale of the discontinued operations valued at $15.9 million and CRL assumed all of Primedica's debt of approximately $9 million. The Company, in December 2001, issued 22,500 shares to a Director for services considered to be outside the scope of his services as a member of the Company's Board of Directors. The valuation of these options was determined to be $71,000 using the Black-Scholes option pricing model. The options were fully vested on the date of grant, the compensation expense of $71,000 for these Director options was recognized in full during 2001.

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Long-Lived Assets

The Company reviews long-lived assets for impairment by comparing the cumulative undiscounted cash flows from the assets with their carrying amount. Any write-downs are to be treated as permanent reductions in the carrying amount of the assets. Management's policy regarding long-lived assets is to evaluate the recoverability of its assets when the facts and circumstances suggest that these assets may be impaired. This analysis relies on a number of factors, including operating results, business plans, budgets, economic projections and changes in management's strategic direction or market emphasis. The test of such recoverability is a comparison of the asset value to its expected cumulative net operating cash flow over the remaining life of the asset.

Accrued Expenses

Accrued expenses included the following:

		At December 30, 2001		At December 31, 2000
Accrued payroll and benefits		$	1,689	$	1,544
Other			3,389		2,970
	Total accrued expenses	$	5,078	$	4,514

There have been various employee terminations for which the Company recorded expenses of $975,000 and $179,000 in 2001 and 2000, respectively. These costs have been included in the Company's selling, general and administrative expenses. At December 30, 2001 and December 31, 2000, approximately $315,000 and $278,000 had been paid out of the reserve, respectively. At December 30, 2001, $659,000 remained in accrued expenses in relation to termination costs.

Revenue Recognition and Contract Accounting

The Company enters into licensing and development agreements with collaborative partners for the transgenic development in milk of recombinant proteins for therapeutic uses. The terms of the agreements typically include non-refundable license fees, funding of research and development, payments based upon the achievement of certain milestones and royalties on future product sales, if any.

Non-refundable license fees, milestones and collaborative research and development revenues under collaborative agreements, where the Company has continuing involvement, are recognized as revenue over the period of continuing involvement, using the model similar to the one prescribed by Emerging Issues Task Force Issue No. 91-6 (EITF 91-6). Under that model, revenue is recognized for non-refundable license fees, milestones and collaborative research and development using the lesser of non-refundable cash received or the result achieved using percentage of completion accounting. Under percentage of completion accounting, revenue is based on the cost of effort since the contract's commencement up to the reporting date, divided by the total expected research and development costs from the contract's commencement to the end of the research and development period, multiplied by the total expected contractual payments under the arrangement. Where milestones are performance based, or where the Company is uncertain as to their achievement since they rely on new technologies or are dependent on an outcome outside of the Company's control, revenue is recognized once the milestone is achieved or the outcome can be determined with an appropriate degree of certainty. Revisions in cost estimates and expected contractual payments as contracts progress have the effect of increasing or decreasing profits in the current period. Payments received in advance of being earned are recorded as deferred revenue. When there are two or more distinct phases embedded into one contract such as development and commercialization, the contract is considered a multiple element arrangement. When management can conclude as to the fair value of the related items, up front license fees and milestone payments are recognized over the initial phase of the contract only.

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Profits expected to be realized are based on the total contract sales value and the Company's estimates of costs at completion. The sales value is based on achievable milestones and is revised throughout the contract as the Company demonstrates achievement of milestones. The Company's estimates of costs include all costs expected to be incurred to fulfill performance obligations of the contracts. Estimates of total contract costs are reviewed and revised throughout the lives of the contracts, with adjustments to profits resulting from such revisions being recorded on a cumulative basis in the period in which the revisions are made. All revenue recognition decisions are made based upon the current facts and circumstances and are reassessed on at least a quarterly basis.

Unbilled contract revenue represents milestones which had not been billed at the balance sheet date. Deferred contact revenue represents amounts received from customers that exceed the amount of revenue recognized to date. Research and development revenues consisted of $973,000, $3,283,000 and $4,491,000 for the fiscal years ended 2001, 2000 and 1999, respectively, from the ATIII LLC (see Note 13) and the remainder of the revenue was from commercial clients.

Research and Development Costs

All research and development costs are expensed as incurred. During its fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000, GTC spent $22.4 million, $19 million and $15.1 million, respectively, on research and development of which $15.1 million, $15.6 million and $11.4 million, respectively, was related to external programs. Of the total spent on research and development, $2.3 million, $3.3 million and $4.5 million, respectively, was spent on the ATIII LLC. These costs include labor, materials and supplies and overhead, as well as certain subcontracted research projects. Also included are the costs of operating the transgenics production facility such as feed and bedding, veterinary costs and utilities.

Net Loss per Common Share

The Company applies Statement of Financial Accounting Standards No. 128, ("SFAS 128") Earnings Per Share in calculating earnings per share ("EPS"). Common stock equivalents of the Company consist of warrants (see Note 6), stock options (see Note 7), stock to be issued under the 401-K retirement plan (see Note 7), convertible debt (see Note 5) and convertible preferred stock (see Note 6). The Company was in a net loss position in 2001, 2000 and 1999, therefore 3.1 million, 3 million and 4.8 million common stock equivalents, respectively, were not used to compute diluted loss per share, as the effect was antidilutive.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities using the expected enacted tax rates for the year in which the differences are expected to reverse. The measurement of deferred tax assets is reduced by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

New Accounting Pronouncement

In July 2001, the Financial Accounting Standards Board ("FASB") issued FASB Statement No. 141 ("SFAS No. 141"), Business Combinations and FASB Statement No. 142 ("SFAS No. 142"), Goodwill and Other Intangible Assets. SFAS No. 141 requires that all business combinations be accounted for under the purchase method only and that certain acquired intangible assets in a business combination be recognized as assets apart from goodwill. SFAS No. 142 requires that ratable amortization of goodwill be replaced with periodic tests of the goodwill's impairment and that intangible assets other than goodwill be amortized over their useful lives. SFAS No. 141 is effective for all business combinations initiated after June 30, 2001

35

and for all business combinations accounted for by the purchase method for which the date of acquisition is after June 30, 2001. The provisions of SFAS No. 142 will be effective for fiscal years beginning after December 15, 2001, and will thus be adopted by the Company, as required, in fiscal year 2002. The Company does not expect any significant impact from the adoption of SFAS No. 141 and SFAS No. 142 on the Company's financial statements.

On October 3, 2001, FASB issued FASB Statement No. 144 ("SFAS No. 144" or the "Standard"), Accounting for the Impairment or Disposal of Long-Lived Assets. The objectives of SFAS 144 are to address significant issues relating to the implementation of FASB Statement No. 121 ("SFAS No. 121"), Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and to develop a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and, generally, its provisions are to be applied prospectively. The Company does not expect the above accounting pronouncements to have a significant impact on the Company.

NOTE 3. COMMITMENTS & CONTINGENCIES

The Company leases equipment and facilities under various operating and capital leases (see Note 5). The deferred lease obligation represents the cumulative difference between actual facility lease payments and lease expense recognized ratably over the lease period. Rent expense for the fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000 was approximately $1,037,000, $723,000 and $823,000, respectively.

At December 30, 2001, the Company's future minimum payments required under these leases are as follows:

		Operating		Capital		Total
2002		$	1,087	$	224	$	1,311
2003			499		26		525
2004			393		—		393
2005			343		—		343
2006			143		—		143
Thereafter			—		—		—
	Total	$	2,465		250	$	2,715
Less amount representing interest					19
Present value of minimum lease payments				$	231

The Company is a party to license agreements for certain technologies (see Note 12). Certain of these agreements contain provisions for the future royalties to be paid on commercial sales of products developed from the licensed technologies. Currently the amounts payable under these agreements and any resulting commitments on the Company's behalf are unknown and unestimatable since the level of future sales, if any, is uncertain.

Under a Service Agreement with Genzyme (see Note 11), the Company is committed to make a minimum annual payment of $1,011,996 in 2002.

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NOTE 4. INTANGIBLE ASSETS

Intangible assets consist of:

	Amortization Life	December 30, 2001			December 31, 2000
Asian marketing rights for SMIG	15 years	$	11,210		$	11,210
License agreement with ACT	10 years		1,862			1,862
		$	13,072		$	13,072
Less accumulated amortization			(1,477	)		(543	)
Intangible assets, net		$	11,595		$	12,529

Amortization expense was $934,000, $436,000 and $187,000 in 2001, 2000 and 1999, respectively.

NOTE 5. BORROWINGS

In December 1998, the Company obtained credit facilities (the "Credit Line", the "Term Loan" and the "Standby Letter of Credit") from a commercial bank which has been extended until March 28, 2002. Under the Credit Line, the Company may borrow up to $16 million, of which $249,360 may be utilized for the Standby Letter of Credit. At December 30, 2001, nothing is outstanding under the Credit Line and nothing has been drawn down on the Standby Letter of Credit. A Standby Letter of Credit with a face amount of $1.5 million was issued under the Credit Line to support a facility lease for the Company's Primedica subsidiary which was cancelled as a part of the sale of Primedica, in February 2001. As of December 30, 2001 and December 31, 2000, $5,734,796 and $6,429,570, respectively, was outstanding on the $7.1 million Term Loan and at December 30, 2001, no additional amounts were available for borrowing. The Term Loan was payable in quarterly payments through December 2001 with a balloon payment for the remaining balance which is due March 28, 2002. The Term Loan is guaranteed by Genzyme and such guaranty was also extended until March 28, 2002, although GTC has agreed not to draw on the credit line without Genzyme's prior consent.

At the Company's option, interest on loans under the Credit Line (other than the standby letter of credit) and the Term Loan accrues either at the Prime rate or at an adjusted libor rate. The interest rate on the Term Loan was 2.48% and 7% at December 30, 2001 and December 31, 2000, respectively. The weighted average interest rate on all outstanding lines of credit was approximately 0.7% and 5.1% for the fiscal years ended December 31, 2000 and January 2, 2000, respectively. During 2001, no amounts were outstanding under the line. Under the terms of the credit facilities, the Company is not permitted to pay any dividends.

In connection with the Credit Line, Genzyme provided a guaranty to the bank under which Genzyme would become primarily liable under the credit line in event of a default by the Company. In consideration of Genzyme's agreement to provide such a guaranty, the Company granted a first lien on all assets of the Company to Genzyme as well as warrants to purchase 288,000 shares of the Company's common stock for a period of ten years, exercisable at $4.875 per share (market price at the effective date of the Credit Line).

Under the various debt agreements, a restrictive covenant commencing with the fiscal quarter ending on March 31, 2000, states that the Company could not, as at the last day of each fiscal quarter, permit its consolidated earnings before interest, taxes, depreciation and amortization for the period of four consecutive fiscal quarters ending or most recently ended prior to such date to be less than zero.

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The Company's long-term debt consisted of the following:

		December 30, 2001
Term loan, with quarterly payments of $177,500 through March 28, 2002, interest varies as described above, collateralized by real estate.		$	5,735
Capital lease obligations, with monthly payments of $16,719 through December 2002 and September 2003, interest from 9.79% to 16.4%, collateralized by property.			231
		$	5,966
	Less current portion		5,940
	Amount due in 2003 (none due thereafter)	$	26

Based on the borrowing rates currently available to the Company for loans with similar terms and average maturities, the value of the notes payable approximates fair value. Cash paid for interest for the fiscal years ended December 30, 2001, December 30, 2000, and January 2, 2000 was $349,000, $544,000 and $1,245,000, respectively. Interest expense in the amount of $657,000, $0 and $105,000 was capitalized in 2001, 2000 and 1999, respectively.

NOTE 6. STOCKHOLDERS' EQUITY

Authorized Shares

The Company's authorized capital stock consists of 100,000,000 shares of common stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01 per share of which 20,000 shares have been designated as Series A Preferred Stock at December 31, 2000 and 12,500 have been designated as Series B Preferred Stock at December 31, 2000. In March 2001, the Company's Board of Directors restored all unissued or reacquired shares of the Company's Series A Preferred Stock and Series B Preferred Stock to the status of authorized but undesignated and unissued shares of preferred stock.

Shareholder Rights Plan (the "Plan")

On May 31, 2001, the Board of Directors adopted a Shareholder Rights Plan as set forth in the Shareholder Rights Agreement, dated May 31, 2001, between the Company and American Stock Transfer and Trust Company, as Rights Agent (the "Rights Agreement"). A series of preferred stock of the Company designated as Series C Junior Participating Cumulative Preferred Stock, par value $.01 per share (the "Series C Preferred Stock"), has been created in accordance with the Rights Agreement. The Plan is designed to deter coercive takeover tactics, including the accumulation of shares in the open market or through private transactions, and to prevent an acquirer from gaining control of the Company without offering a fair and adequate price and terms to all of the Company's shareholders. As such, the Plan enhances the Board of Directors' ability to protect shareholder interests and ensure that shareholders receive fair and equal treatment in the event any proposed takeover of the Company is made in the future. Pursuant to the Agreement, the Board of Directors declared a dividend distribution of one preferred stock purchase right for each outstanding share of the Company's common stock to shareholders of record as of June 1, 2001. The preferred stock purchase rights are attached to, and will trade with, the Company's common stock. The purchase rights are currently exercisable upon the occurrence of certain triggering events described in the Rights Agreement.

Preferred Stock Placements

During fiscal 1999, several institutional investors converted 9,000 shares of the Series A Preferred Stock, $.01 par value per share, into 1,927,503 shares of the Company's common stock at conversion prices

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ranging from $3.34 to $5.98 per share. After these conversions, 11,000 shares of the Series A Preferred Stock remained outstanding.

In November 1999, the Company issued a redemption call on the outstanding $11 million of Series A Preferred Stock. The holders of the Series A Preferred Stock converted $5.3 million into 901,807 common shares at a conversion price of $5.83 per share. The remaining amount was redeemed in cash by the holders at 115% of par value. The 15% premium was recognized as a dividend payment to preferred shareholders in the amount of $861,000, or $0.15 per share.

In conjunction with the redemption call, the Company issued $6.6 million of Series B Preferred Stock to Genzyme. The Series B Preferred Stock carried an initial dividend of 11% and was convertible by the holder into common stock at a fixed rate of $6.30 per common share. All accumulated or accrued and unpaid dividends were required to be paid upon conversion, liquidation or redemptions of the Series B Preferred Stock. The Company had the sole right to redeem unconverted Series B Preferred Stock for cash at any time at its original value plus accrued dividends. The Series B Preferred Stock was converted into common stock in February 2000.

In connection with the issuance of the Series B Preferred Stock, the Company also issued to Genzyme 10-year warrants to purchase 85,324 shares of the Company's common stock at an exercise price of $6.30 per share. In connection with both the warrants issued and a beneficial conversion feature, the Company recorded a dividend of $636,000, or $7.45 per share, to preferred shareholders in the fourth quarter of 1999.

Common Stock Placements

In December 1999, the Company completed a privately negotiated sale of 685,545 shares of common stock at $8.00 per share under a previously filed shelf registration to two purchasers raising approximately $5.5 million in new equity.

In February 2000, the Company completed a public offering of 3.5 million shares of common stock at $20 per share. The Company granted the underwriters an option to purchase an additional 525,000 shares of its common stock to cover over-allotments which was exercised. In total, the Company issued 4,025,000 shares, including underwriter's overallotment, with net proceeds to the Company of $75 million. Subsequent to the completion of the secondary public offering, the Company paid down its revolving credit lines in the amount of $15.8 million. Following this pay down, the full $15.8 million was available for borrowing under these credit lines.

In conjunction with the offering, the Company issued a Notice of Redemption to Genzyme for all outstanding shares of the Company's Series B Preferred Stock. Prior to the effectiveness of this redemption, Genzyme converted the Series B Preferred Stock into 1,048,021 shares of common stock. The Company paid a cash dividend of $157,000 in conjunction with the conversion.

In March 2000, the Company issued a warrant call notice for the 450,000 warrants issued in connection with the Series A Preferred Stock. Each warrant had an exercise price of $15.16 per share. All of the warrants were exercised with proceeds to the Company of $6.8 million.

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A summary of the outstanding GTC warrants as of December 30, 2001, of which 538,324 are currently exercisable, is as follows:

Common Shares Issuable for	Exercise Price Per Share		Warrant Expiration Date
145,000	$	2.84375	July 3, 2005
20,000	$	8.75000	June 26, 2007
288,000	$	4.87500	December 28, 2008
55,833	$	6.30000	November 12, 2009
29,491	$	6.30000	November 22, 2009
538,324

In September 2000, the Company terminated the SMIG JV by issuing an aggregate of 333,334 shares of its common stock valued at approximately $11.1 million, plus transaction costs of $143,000 (see Note 13).

As of December 30, 2001, the Company has reserved 4,406,076 shares of common stock, subject to adjustment, for future issuance under the various classes of warrants, Stock Option and Employee Stock Purchase Plans (see Note 7).

NOTE 7.    EMPLOYEE BENEFIT PLANS

Stock Options and Purchase Plan

In May 1993, the Board of Directors adopted and the stockholders approved the 1993 Equity Incentive Plan (the "Equity Plan"), the 1993 Director Stock Option Plan (the "Director Plan") and the 1993 Employee Stock Purchase Plan (the "Purchase Plan"). In March 2001, the Board of Directors voted to terminate the Director Plan and amend the Equity Plan.

Under the Equity Plan, 2,015,000 shares of common stock were issued or reserved for issuance pursuant to incentive stock options, non-statutory stock options, restricted stock awards, stock appreciation rights or stock units in accordance with specific provisions to be established by a committee of the Board of Directors at the time of grant. To date, all options have been issued at 85% or greater of the fair value at the grant date. The Equity Plan also permits the Company to assume outstanding options in an acquisition without using shares reserved under the Plan. The number of shares reserved for future issuance under this plan was increased several times over the ensuing years to 5,540,000 at December 30, 2001, this amount includes 200,000 shares transferred from the Director Plan upon its termination.

In March 2001, the Equity Plan was amended to (i) establish that non-employee directors are eligible for grants under the 1993 Equity Plan, (ii) provide for automatic grant of options to non-employee directors (other than a Chairman of the Board) on his or her election or re-election to the Board of Directors, such options to be exercisable for 7,500 shares of each year in the term of office to which such director is elected or re-elected, and having an exercise price equal to the opening price on the date of grant, commencing with the first election or re-election of a non-employee director in 2001 and (iii) provide for automatic grants of options to a non-employee Chairman of the Board on election or re-election to the Board of Directors, such options to be exercisable for 15,000 shares for each year in term of office to which such director is elected or re-elected, and having an exercise price equal to the opening price on the date of grant, commencing with the first election or re-election of a non-employee Chairman in 2001.

Under the Equity Plan, an option's maximum term is ten years and it vests ratably 20% on the date of issuance and 20% thereafter on the anniversary of the grant.

Under the Purchase Plan, 1,300,000 shares of common stock were reserved for the grant of purchase rights to employees in one or more offerings in accordance with provisions to be established by a committee of the Board of Directors prior to commencement of any offering period. Participants may purchase shares of

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common stock at not less than 85% of the lower of the market value at the beginning of each offering or on the purchase date. Purchase dates occur every three months for a period of two years from the offering date. Participants may not carry over balances from one purchase date to the next. Offering dates occur every six months. A total of 104,385 shares of common stock remained available for issuance under the plan at December 30, 2001. The purchases of common stock under the plan during fiscal 2001 and fiscal 2000 were 101,847 shares at an aggregate purchase price of approximately $426,000 and 236,530 shares at an aggregate purchase price of approximately $1,211,000, respectively. No compensation expense has been recorded related to the Purchase Plan.

The Company applies APB Opinion 25 and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for options granted to employees with exercise prices equal to or greater than the fair market value at the grant date. The Company applies the disclosure only provisions of Statement of Financial Accounting Standards No. 123 ("SFAS 123"), Accounting for Stock Based Compensation. Had compensation cost for the Company's stock-based compensation plans to employees been determined based on the fair value at the grant dates as calculated in accordance with SFAS 123, the Company's net loss and loss per share for the years ended December 30, 2001, December 31, 2000, and January 2, 2000 would have been increased to the pro forma amounts indicated below:

	December 30, 2001						December 31, 2000						January 2, 2000
	Net Loss			Net Loss Available Per Common Share (basic and diluted)			Net Loss			Net Loss Available Per Common Share (basic and diluted)			Net Loss			Net Loss Available Per Common Share (basic and diluted)
As Reported	$	(16,556	)	$	(0.55	)	$	(14,141	)	$	(0.50	)	$	(18,761	)	$	(1.02	)
Pro Forma		(19,259	)		(0.64	)		(18,442	)		(0.65	)		(21,552	)		(1.16	)

The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future amounts. SFAS 123 does not apply to awards prior to 1995, and additional awards in future years are anticipated.

A summary of the status of the Company's stock option plans as of December 30, 2001, December 31, 2000 and January 2, 2000 and changes during the years ending on those dates is presented below:

		Shares		Weighted Average Exercise Price
Balance at January 3, 1999		2,513,435		$	7.1560
	Granted at Fair Value	616,090		$	4.7849
	Exercised	(151,626	)	$	4.9580
	Cancelled	(151,702	)	$	7.7554
Balance at January 2, 2000		2,826,197		$	6.7266
	Granted at Fair Value	681,487		$	19.8971
	Exercised	(961,162	)	$	6.5434
	Cancelled	(91,617	)	$	9.7429
Balance at December 31, 2000		2,454,905		$	10.3534
	Granted at Fair Value	1,124,333		$	6.4637
	Exercised	(347,554	)	$	5.7314
	Cancelled	(1,078,240	)	$	11.1560
Balance at December 30, 2001		2,153,444		$	8.6850

At December 30, 2001, December 31, 2000 and January 2, 2000, there were 1,298,463, 1,354,984 and 1,678,156 shares exercisable at a weighted average exercise price of $8.2781, $8.5198 and $6.6906, respectively.

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The following table summarizes information about stock options outstanding at December 30, 2001:

Range of Exercise Prices		Number Outstanding	Remaining Contractual Life	Weighted-Average Exercise Price		Number Exercisable	Weighted-Average Exercise Price
$	2.7500 - $  5.0313	613,735	8.21	$	4.6067	282,629	$	4.3063
$	5.2500 - $  7.5000	521,313	4.06	$	6.8409	488,593	$	6.8849
$	7.5400 - $  8.8100	440,870	8.92	$	8.1967	141,460	$	8.2188
$	8.8750 - $17.3125	478,626	6.94	$	12.3683	345,381	$	11.2338
$	17.7500 - $37.7500	98,900	8.57	$	28.0653	40,400	$	28.1395
$	2.7500 - $37.7500	2,153,444	7.08	$	8.6850	1,298,463	$	8.2871

At December 30, 2001, 1,609,618 shares were available for grant.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumption: an expected life of five years, expected volatility of 90% for fiscal 2001 and 80% for each of fiscal 2000 and 1999, respectively, a dividend yield of 0% and a risk-free interest rate of 4.69% and 3.95% for fiscal 2001, 6.18% for fiscal 2000 and 5.82% for fiscal 1999.

The fair value of the employees' purchase rights was estimated using the Black-Scholes model with the following weighted-average assumptions: a dividend yield of 0%, expected volatility of 90% for fiscal 2001 and 80% for each of fiscal 2000 and 1999, an expected life of five years for fiscal 2001, 2000 and 1999 and a risk-free interest rate of 4.64% for fiscal 2001, 4.99% for fiscal 2000 and 4.81% for fiscal 1999. The average fair value of those purchase rights granted during fiscal 2001, 2000 and fiscal 1999 was $3.30, $3.01and $2.10, respectively.

Other

All employees of the Company, subject to certain eligibility requirements, can participate in the Company's defined contribution plan. Currently, the Company may match up to 50% of each participating employee's contributions to the plan to a maximum of 3% of salary. The Company may also contribute an additional 2% of each employee's salary as a retirement contribution. All contributions are at the discretion of the Board of Directors. Expense recognized under this plan was approximately $243,000, $185,000 and $125,000 for the fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000, respectively.

NOTE 8.    INCOME TAXES

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using future expected enacted rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized.

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The income tax (benefit) provision from continuing operations consisted of the following:            

		2001			2000			1999
Current:
	Federal	$	—		$	—		$	—
	State		—			—			—
Total Current		$	—		$	—		$	—
Deferred:
	Federal		(6,783	)		(4,423	)		(5,137	)
	State		(641	)		(928	)		(1,009	)
	Change in Valuation Allowance		7,424			5,351			6,146
Total Deferred		$	—		$	—		$	—

The provision for income taxes for continuing operations was at rates different from the U.S. Federal statutory income tax rate for the following reasons:

	Fiscal Years Ended
	December 30, 2001		December 31, 2000		January 2, 2000
Federal tax—expense (benefit)	(34.0	)%	(34.0	)%	(34.0	)%
State taxes—net	(3.5	)	(5.9	)	(7.4	)
Research and development tax credits	(4.9	)	(1.7	)	(3.8	)
Other	1.6		3.6		—
Change in valuation allowance	40.8		38.0		45.2
Effective tax rate	0	%	0	%	0	%

The components of the deferred tax assets and liabilities at December 30, 2001 and December 31, 2000 respectively, are as follows (dollars in thousands):

	December 30, 2001			December 31, 2000
Deferred Tax Assets/(Liabilities):
Advance payments	$	1,458		$	4,689
Accrued compensation		861			1,465
Other accruals		498			768
Tax credits		3,333			2,369
Net operating loss carryforwards		45,702			43,756
Depreciation		(997	)		(690	)
Other		9			27
Total deferred tax asset		50,864			52,384
Valuation allowance		(50,864	)		(52,384	)
	$	—		$	—

As of December 30, 2001, the Company had federal net operating loss ("NOL") and research and experimentation credit carryforwards of approximately $123 million and $2.1 million, respectively, which may be available to offset future federal income tax liabilities and expire at various dates starting 2004 and going through 2021. The Company has recorded a deferred tax asset of approximately $4.8 million reflecting the benefit of deductions from the exercise of stock options. This deferred asset has been fully reserved until it is more likely than not that the benefit from the exercise of stock options will be realized. The benefit from this $4.8 million deferred tax asset will be recorded as a credit to additional paid-in

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capital if and when realized. As required by Statement of Financial Accounting Standards No. 109, management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of net operating loss and research and experimentation credit carryforwards. Management has determined that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets and, as a result, a valuation allowance of approximately $51 million has been established at December 30, 2001.

Ownership changes, as defined in the Internal Revenue Code, may have limited the amount of net operating loss carryforwards that can be utilized annually to offset future taxable income. Subsequent ownership changes could further affect the limitation in future years.

NOTE 9.    GEOGRAPHICAL INFORMATION

Net revenues to external customers are based on the location of the customer.

Geographic information for net revenues to external customers, by fiscal year, is presented in the table below:

	United States		Japan		Europe		Total
2001	$	8,913	$	31	$	4,796	$	13,740
2000		14,368		30		1,765		16,163
1999		10,238		62		3,525		13,825

Of the Company's long-lived assets, $10.2 million of intangible assets are located in a subsidiary in the Cayman Islands and the remaining $1.4 million are located in the United States.

NOTE 10.    UNAUDITED RESULTS OF QUARTERLY OPERATIONS

2001	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Revenue	$	2,934		$	2,261		$	5,498		$	3,047
Operating loss		(5,869	)		(6,841	)		(479	)		(5,603	)
Discontinued contract research operations		(2,236	)		—			—			—
Net loss		(3,633	)		(6,841	)		(479	)		(5,603	)
Net loss per share—basic and diluted		(0.12	)		(0.23	)		(0.02	)		(0.19	)

2000	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Revenue	$	3,570		$	4,167		$	3,169		$	5,257
Operating profit (loss)		3,127			(3,950	)		(4,826	)		(5,005	)
Discontinued contract research operations		(469	)		84			557			1,102
Net loss		(2,963	)		(3,150	)		(3,875	)		(4,451	)
Net loss per share—basic and diluted		(0.11	)		(0.11	)		(0.13	)		(0.15	)

NOTE 11.    ARRANGEMENTS WITH GENZYME CORPORATION

From the Company's inception, certain facilities and support services, including both research and administrative support, have been provided by Genzyme. For these services, the Company was charged $1,238,880, $826,000 and $1,605,000 for the fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000, respectively. These charges represent an allocation of the Company's proportionate share of Genzyme's overhead costs using formulae which management believes are reasonable based upon the Company's use of the facilities and services. Also included in this amount are other costs for all periods

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presented, including payroll costs, that are directly attributable to the Company and have been paid by Genzyme and charged to the Company.

Equity Position

Genzyme is the largest single stockholder of the Company, holding 7,744,919 shares of common stock as of December 30, 2001, which represents approximately 26% of the outstanding GTC common stock, Genzyme also holds four common stock purchase warrants exercisable for 145,000, 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, which were the market prices 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 registration rights.

In April 1993, the Company entered into several agreements under which Genzyme has agreed to provide various services, facilities and funding to the Company as described below:

Services Agreement

Under the Services Agreement, the Company receives certain basic support services in exchange for a fixed monthly payment ($75,417 per month during 2001) adjusted annually. These basic services include laboratory support, as well as assistance with certain administrative functions including purchasing, data processing, risk management, corporate communications and treasury activities. If the Company requests additional services from Genzyme, the Company has agreed to pay Genzyme fully allocated costs of those services. The Services Agreement is automatically renewed each year thereafter unless terminated by either party not less than 90 days prior to the end of any annual period. Under the Services Agreement, the Company made payments of $905,000, $730,000 and $446,000 for the fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000, respectively, and is committed to make a minimum annual payment of $1,011,996 in 2002.

Sublease Agreement

Under the Sublease Agreement, the Company has leased certain laboratory, research and office space from Genzyme through May 1998 in exchange for fixed monthly rent payments which approximate the estimated current rental value for such space. In addition, the Company reimburses Genzyme for its pro rata share of appropriate facilities' operating costs such as maintenance, cleaning, utilities and real estate taxes. The sublease is automatically renewed each year and renewals are subject to earlier termination of the sublease by either party after the initial five-year term. Under the Sublease Agreement, the Company made payments for the fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000, of $368,000, $146,000 and $137,000, respectively, and is committed to make a minimum annual rental payment of $489,108 in 2002.

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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Research and Development Agreement

Pursuant to a Research and Development Agreement dated May 1, 1993, Genzyme and GTC each agreed to provide to the other research and development services 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 Company provided development services to Genzyme for which it recognized revenues of $11,000 for the fiscal year ended January 3, 1999. The Company also receives research and development services from Genzyme, for which it incurred costs of $43,000, $121,000 and $423,000 in 2001, 2000 and 1999, respectively. The agreement expired on December 31, 1998 and the parties are continuing under this agreement on a month-to-month basis.

ATIII Collaboration

In January 1998, the Company entered into a collaboration agreement for the development of rhATIII with Genzyme forming the ATIII LLC joint venture. Under the terms of the agreement, Genzyme funded 70% of the development costs of rhATIII up to a maximum of $33 million. The Company funded the remaining 30% of these costs. Development costs in excess of these amounts were to be funded equally by the partners. The $33 million funding level was achieved by Genzyme in 2000.

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. This line was originally due to expire in December 2001, but has been extended until March 28, 2002. The Genzyme guaranty was also extended until such time, although GTC has agreed not to draw on the credit line without Genzyme's prior consent. 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 collateralize such obligation

Series B Convertible Preferred Stock

In November 1999, the Company completed a $6.6 million private placement of Series B Preferred Stock to Genzyme. The proceeds from this placement were used to redeem $6.6 million of the Company's Series A Preferred Stock. In connection with the issuance of the Series B Preferred Stock, the Company issued warrants to purchase 85,324 shares of the Company's common stock at $6.30 per share to Genzyme. In February 2000, Genzyme converted the Series B Preferred Stock into 1,048,021 shares of the Company's common stock.

NOTE 12.    OTHER SIGNIFICANT AGREEMENTS

Tufts University School of Veterinary Medicine ("Tufts")

Since 1988, pursuant to a cooperation agreement, the Company has funded an ongoing program to develop transgenic animals at Tufts. During the term of the agreement, which extends through August 1, 2004, Tufts has agreed to work exclusively with the Company for commercial applications within the field of transgenic protein production in milk. The Company paid Tufts $488,000, $242,000 and $313,000 for the fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000, respectively. Sales of products derived from transgenic goats produced by Tufts, or from their offspring, are subject to royalties payable to Tufts.

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Advanced Cell Technologies, Inc. ("ACT")

In June 1999, GTC signed an exclusive, worldwide licensing agreement with ACT allowing GTC to utilize ACT's patented nuclear transfer technology for the development of biopharmaceuticals in the milk of transgenic mammals. The Company believes ACT's proprietary technology, when coupled with GTC's transgenic technology, will provide additional patentable approaches to efficiently develop transgenic animals. GTC paid an upfront license fee of $1,862,000 upon execution of the agreement, which included $1 million of GTC common stock, which is classified as an intangible asset (see Note 4). In addition, GTC is required to pay royalties to ACT based upon sales by GTC where ACT's nuclear transfer technology is used.

Pharming B.V. ("Pharming")

In 1994, GTC entered into a license agreement with Pharming to allow GTC to use Pharming's technology in the production of transgenic cattle. Under the terms of the agreement, GTC is required to pay royalties to Pharming on sales by GTC of products developed using Pharming's transgenic technology in cattle.

Genzyme Corporation ("Genzyme")

In May 1993, under a Technology Transfer Agreement, 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 its proteins produced in that manner. The license is worldwide and royalty free as to Genzyme, although GTC is obligated to Genzymes' 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.

The Leland Stanford Junior University ("Stanford")

In October 2001, GTC signed an Option to Patent License Agreement (the "Option") with Stanford to acquire a license from Stanford for the purpose of conducting research on potential commercial applications and preliminary product development. The term of the Option is until October 2002 which may be extended to October 2003 by payment of an extension fee. The Company paid Stanford $10,000 for the fiscal year ended December 30, 2001 and has no further obligation unless they choose to extend the Option.

NOTE 13.    JOINT VENTURES

GTC owned 22% of the SMIG JV joint venture with Sumitomo Metal Industries ("Sumitomo") to develop proteins produced transgenically. In September 2000, the Company acquired full ownership of the SMIG JV by issuing an aggregate of 333,334 shares of its common stock valued at approximately $11.1 million, plus transaction costs of $143,000. In exchange, Sumitomo transferred to a wholly-owned subsidiary of the Company all of the outstanding shares of SMI Genzyme Ltd., a Japanese corporation, held by Sumitomo. As a result, the Company directly and indirectly holds all of the outstanding equity in SMI Genzyme Ltd., and has the exclusive marketing rights to transgenic technology in 18 Asian countries, including Japan. The value of the transaction was accounted for as a purchase. Accordingly, the entire purchase price of $11.2 million has been allocated to the value of the marketing rights, which are being amortized over the estimated economic useful life of these rights estimated at 15 years. Accumulated amortization of the marketing rights at December 30, 2001 was $996,000.

On January 1, 1998, a definitive collaboration agreement for the ATIII LLC joint venture between the Company and Genzyme was executed. Under the terms of the agreement, Genzyme was required to fund 70% of the development costs, excluding facility costs, up to $33 million including costs incurred in 1997.

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The Company was required to fund the remaining 30% of these costs. Development costs in excess of these amounts were to be funded equally by the partners. The Company and Genzyme were also to make capital contributions to ATIII LLC sufficient to pay 50% each of all new facility costs to be incurred. In addition to the funding, both partners were to contribute manufacturing, marketing and other resources to ATIII LLC at cost. Under the agreement to establish the joint venture, Genzyme and the Company were the only members and owned 3.7% and 96.3% interest, respectively. In accordance with the executed purchase agreement, the Company sold and assigned a 46.3% ownership interest to Genzyme so that Genzyme and GTC each owned 50% of the venture. The purchase price was $12,500,010, payable as follows: an initial payment of $10 upon execution of the purchase agreement, $2.5 million after the second consecutive quarter in which net sales of collaboration products for such quarter exceed $5 million, and $10 million on the first full approval, if and when approved by the Food and Drug Administration ("FDA") of a major market country or by the European Union's European Medicines Evaluation Agency ("EMEA") of (i) a BLA filed by ATIII LLC for the use of transgenic ATIII for the treatment of sepsis or (ii) an amendment to the BLA previously filed by ATIII LLC and approved by the FDA of a major market country or by the EMEA to add sepsis as an indication for transgenic ATIII. Profits and losses are shared according to ownership percentages. These agreements cover all territories other than Asia. The Company accounted for its 50% ownership of the ATIII LLC under the equity method. For the fiscal years ended December 30, 2001, December 31, 2000 and January 2, 2000, the Company recognized research and development revenue and related expenses of $973,000, $3,283,000 and $4,491,000, respectively, under ATIII LLC.

In July 2001, the Company completed the reacquisition of Genzyme's ownership interest in ATIII LLC. In consideration, Genzyme will receive a royalty based on 4% of the Company's sales of ATIII, if any, in all territories except Asia, commencing three years after the first commercial sale and subject to a cumulative maximum of $30 million.

NOTE 14.    OTHER RELATED PARTY TRANSACTIONS

Arthur D. Little, Inc. ("ADL")

In November 2000, the Company entered into a consulting agreement with ADL for strategic and technical assessment and due diligence within the ordinary course of business. The Company paid ADL $963,000 and $150,000 for fiscal years ended December 30, 2001 and December 31, 2000, respectively. A Director of the Company is also a Senior Consultant of ADL.

Board of Directors

Other than the Chairman of the Board, all Directors who are not employees of GTC or Genzyme receive an annual retainer of $12,000, payable quarterly. One Director, who also served as Chairman of the Board, received $43,200 in 2001, 2000 and 1999 as compensation for consulting services. Another Director received $0, $99,000 and $132,000 in 2001, 2000 and 1999, respectively, as compensation for consulting services. The Company, in December 2001, issued 22,500 shares to a Director for services considered to be outside the scope of his services as a member of the Company's Board of Directors. Executive Officers of GTC who are also Directors do not receive additional compensation for their service as Directors.

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NOTE 15.    DISCONTINUED OPERATIONS

In February 2001, the Company completed the sale of Primedica to CRL. Accordingly, Primedica is reported herein as a discontinued operation.

	December 31, 2000		January 2, 2000
Revenues from discontinued operations before taxes	$	71,986	$	54,959
Provision for taxes		247		320
Revenues from discontinued operations, net of taxes	$	71,739	$	54,639

The assets of Primedica are as follows:

	December 31, 2000
Current assets	$	22,248
Property, plant and equipment, net		24,633
Other assets		16,660
Current liabilities		(19,903	)
Other liabilities		(6,366	)
Net assets of discontinued operations	$	37,272

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REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Shareholders
of Genzyme Transgenics Corporation:

Our audits of the consolidated financial statements referred to in our report dated February 14, 2002 appearing in the 2001 Annual Report to Shareholders of Genzyme Transgenics Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2002

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Schedule II—Supplemental Valuation and Qualifying Accounts

Years ended December 30, 2001, December 31, 2000 and January 2, 2000:

Deferred tax asset valuation allowance

	Balance at Beginning of Period		Charged to (benefits) Costs and Expenses		Balance at End of Period
December 30, 2001	$	52,384	(1,520	)	$	50,864
December 31, 2000	$	43,615	8,769		$	52,384
January 2, 2000	$	32,701	10,914		$	43,615

Allowance for unbilled receivable and doubtful accounts

	Balance at Beginning of Period		Charged to Costs and Expenses		Write-offs	Balance at End of Period
December 30, 2001	$	316	—		—	$	316
December 31, 2000	$	316	(175	)	175	$	316
January 2, 2000	$	—	—		—	$	—

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Framingham, Massachusetts on the 21^st day of March 2002.

GENZYME TRANSGENICS CORPORATION
By:	/s/  GEOFFREY F. COX Geoffrey F. Cox Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature	Title	Date
/s/  GEOFFREY F. COX Geoffrey F. Cox	Chairman of the Board and Chief Executive Officer	March 21, 2002
/s/  JOHN B. GREEN John B. Green	Chief Financial and Accounting Officer (Principal Financial and Accounting Officer)	March 21, 2002
/s/  JAMES A. GERAGHTY James A. Geraghty	Director	March 21, 2002
/s/  ROBERT W. BALDRIDGE Robert W. Baldridge	Director	March 21, 2002
/s/  HENRI A. TERMEER Henri A. Termeer	Director	March 21, 2002
/s/  HENRY E. BLAIR Henry E. Blair	Director	March 21, 2002
/s/  ALAN W. TUCK Alan W. Tuck	Director	March 21, 2002
/s/  FRANCIS J. BULLOCK Francis J. Bullock	Director	March 21, 2002

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EXHIBIT INDEX

to Form 10-K for the Year Ended December 30, 2001

Exhibit No.	Description
3.1.1	Restated Articles of Organization of GTC, filed with the Secretary of the Commonwealth of Massachusetts on December 27, 1993. Filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 0-21794) (the "GTC 1993 10-K") and incorporated herein by reference.
3.1.2	Articles of Amendment to the Restated Articles of Organization filed with the Secretary of the Commonwealth of Massachusetts on October 3, 1994. Filed as Exhibit 3.1.2 to GTC's Annual Report on Form 10-K for the year ended December 28, 1997 (File No. 0-21794) (the "GTC 1997 10-K") and incorporated herein by reference.
3.1.3	Articles of Amendment to the Restated Articles of Organization filed with the Secretary of Commonwealth of Massachusetts on June 26, 1997. Filed as Exhibit 3 to GTC's Quarterly Report on Form 10-Q for the quarter ended June 29, 1997 (File No. 0-21794) (the "GTC June 1997 10-Q") and incorporated herein by reference.
3.1.4	Articles of Amendment to the Restated Articles of Organization of the Company filed with the Secretary of the Commonwealth of Massachusetts on June 1, 2000. Filed as Exhibit 4.1.5 to the Company's Registration Statement on Form S-8 filed with the Commission on June 2, 2000 (File No. 333-38490) and incorporated herein by reference.
3.1.5	Certificate of Vote of Directors Establishing a Series of a Class of Stock of GTC and designating the Series C Junior Participating Cumulative Preferred Stock. Filed as Exhibit 3.1 to GTC's Current Report on Form 8-K filed on June 1, 2001 (File No. 0-21794) (the "GTC June 2001 8-K") and incorporated herein by reference.
3.2	By-Laws of the Company, as amended. Filed as Exhibit 3.1 to the Company's Form 10-Q for the quarter ended July 4, 1999 (File No. 000-21794) (the "GTC July 1999 10-Q") and incorporated herein by reference.
4.1	Specimen Common Stock Certificate. Filed as Exhibit 4.1 to the Company's Registration Statement on Form S-1 (File No. 33-62782) (the "GTC S-1") and incorporated herein by reference.
4.2	Common Stock Purchase Warrant, dated July 3, 1995, issued to Genzyme Corporation ("Genzyme"). Filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the period ended July 2, 1995 (File No. 0-21794) (the "GTC July 1995 10-Q") and incorporated herein by reference.
4.3	Common Stock Purchase Warrant, dated as of June 26, 1997, issued to Government Land Bank d/b/a The MassDevelopment ("MassDevelopment"). Filed as Exhibit 4 to the GTC June 1997 10-Q and incorporated herein by reference.
4.4	Common Stock Purchase Warrant, dated as of December 28, 1998, issued to Genzyme. Filed as Exhibit 4.11 to the original filing of the Company's Annual Report on Form 10-K for the year ended January 3, 1999 (the "GTC 1999 10-K") and incorporated herein by reference.
4.5	Registration Rights Agreement between the Company and certain Stockholders named therein. Filed as Exhibit 10.53 to the GTC 1997 10-K and incorporated herein by reference.

53

4.6	Warrant to Purchase Common Stock, dated November 22, 1999, issued to Genzyme. Filed as Exhibit 8 to Genzyme's Amendment No. 6 to Schedule 13D (File No. 055-48837) filed with the Commission on November 24, 1999 and incorporated herein by reference.
4.7	Shareholder Rights Agreement, dated as of May 31, 2001, between GTC and American Stock Transfer and Trust Company, as Rights Agent. Files as Exhibit 4.1 to GTC June 2001 8-K and incorporated herein by reference.
10.1	Technology Transfer Agreement between GTC and Genzyme, dated as of May 1, 1993. Filed as Exhibit 2.1 to the GTC S-1 and incorporated herein by reference.**
10.2	Research and Development Agreement between GTC and Genzyme, dated as of May 1, 1993. Filed as Exhibit 10.1 to the GTC S-1 and incorporated herein by reference.
10.3	Services Agreement between GTC and Genzyme, dated as of May 1, 1993. Filed as Exhibit 10.2 to the GTC S-1 and incorporated herein by reference.
10.4	Sublease Agreement between GTC and Genzyme, dated as of May 1, 1993. Filed as Exhibit 10.3 to the GTC S-1 and incorporated herein by reference.
10.5	License Agreement between GTC and Genzyme, as successor to IG Laboratories, Inc., dated as of May 1, 1993. Filed as Exhibit 10.4 to the GTC S-1 and incorporated herein by reference.
10.6.1	Mortgage and Security Agreement, dated as of June 30, 1995, between GTC and Genzyme. Filed as Exhibit 10.6 to the GTC July 1995 10-Q and incorporated herein by reference.
10.6.2	First Amendment to Mortgage and Security Agreement, dated as of December 15, 1995, between GTC and Genzyme. Filed as Exhibit 10.7.2 to the Company's Annual Report on Form 10-K for the year ended December 29, 1996 (File No. 000-21794) and incorporated herein by reference.
10.6.3	Second Amendment to Mortgage and Security Agreement, dated as of December 28, 1998, between the GTC and Genzyme. Filed as exhibit 10.7.3 to the Company's Annual Report on Form 10-K for the year ended January 2, 2000 (File No. 0-21794) (the "GTC 1999 10-K") and incorporated herein by reference
10.7*	GTC Amended and Restated 1993 Equity Incentive Plan. Filed herewith.
10.8*	GTC 1993 Employee Stock Purchase Plan, as amended through May 28, 1997. Filed as Exhibit 10.4 to the GTC June 1997 10-Q and incorporated herein by reference.
10.10	GTC Form of Confidential and Proprietary Information Agreement signed by GTC employees. Filed as Exhibit 10.9 to the GTC S-1 and incorporated herein by reference.
10.11	GTC Form of Agreement Not to Compete. Filed as Exhibit 10.10 to the GTC S-1 and incorporated herein by reference.
10.12	Form of Indemnification Agreement between GTC and its directors. Filed as Exhibit 10.12 to the original filing of the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (the "GTC 1994 10-K") and incorporated herein by reference. Such agreements are materially different only as to the signing directors and the dates of execution.
10.13	License Agreement between GTC and Biogen, Inc., dated December 26, 1990. Filed as Exhibit 10.12 to the GTC S-1 and incorporated herein by reference.**

54

10.14.1	Cooperation and Licensing Agreement between GTC and Tufts University, dated September 6, 1988, as amended through May 13, 1993 (the "Cooperation and Licensing Agreement"). Filed as Exhibit 10.18 to the GTC 1994 10-K and incorporated herein by reference.**
10.14.2	Amendment No. 7, dated April 1, 1993, to Cooperation and Licensing Agreement. Filed as Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the period ended October 1, 1995 (File No. 0-294) (the "GTC October 1995 10-Q") and incorporated herein by reference.
10.14.3	Amendment No. 8, dated October 21, 1993, to Cooperation and Licensing Agreement. Filed as Exhibit 10.7 to the GTC October 1995 10-Q and incorporated herein by reference.
10.14.4	Amendment No. 9, dated December 1, 1993, to Cooperation and Licensing Agreement. Filed as Exhibit 10.8 to the GTC October 1995 10-Q and incorporated herein by reference.**
10.14.5	Amendment No. 10, dated November 1, 1993, to Cooperation and Licensing Agreement. Filed as Exhibit 10.9 to the GTC October 1995 10-Q and incorporated herein by reference.
10.14.6	Amendment No. 11, dated May 25, 1995, to Cooperation and Licensing Agreement. Filed as Exhibit 10.10 to the GTC October 1995 10-Q and incorporated herein by reference.
10.15	United States Patent No. 4,873,191 Sublicense Agreement between DNX, Inc. and Genzyme Regarding Transgenic Experimental Animals and Transgenic Mammary Production Systems, dated February 1, 1990; and letter of amendment, dated April 19, 1991. Filed together as Exhibit 10.17 to the GTC S-1 and incorporated herein by reference.**
10.16	Lease dated March 26, 1999 between Genzyme Transgenics Corporation and NDNE 9/90 Corporate Center LLC. Filed as Exhibit 10.1 to GTC's July 1999 10-Q and incorporated herein by reference.
10.17.1	Second Amended and Restated Convertible Debt Agreement, dated as of December 28, 1998, between the GTC and Genzyme. Filed as Exhibit 10.37 to Genzyme's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 0-14680) and incorporated herein by reference.
10.17.2	Amended and Restated Convertible Revolving Credit Note in the amount of $6,300,000, dated as of December 28, 1998, executed by GTC to Genzyme. Filed as Exhibit 10.29.2 to the original filing of the GTC 1999 10-K and incorporated herein by reference.
10.17.3	Amended and Restated Reimbursement Agreement, dated as of December 28, 1998, 1995, among GTC, certain of its subsidiaries and Genzyme. Filed as Exhibit 10.57.4 to the original filing of the GTC 1999 10-K and incorporated herein by reference.
10.17.4	Amended and Restated Security Agreement, dated as of December 28, 1998, among GTC, certain of its subsidiaries and Genzyme. Filed as exhibit 10.28.4 to the GTC 1999 10-K and incorporated herein by reference.
10.17.5	Hazardous Materials Indemnity Agreement, December 28, 1998, between the GTC and Genzyme. Filed as exhibit 10.28.5 to the GTC 1999 10-K and incorporated herein by reference.

55

10.18*	Amended and Restated Employment Agreement, dated as of August 28, 1997, between the Company and John B. Green. Filed as Exhibit 10.2 to the GTC September 1997 10-Q and incorporated herein by reference.
10.19*	Employment Agreement, dated as of March 27, 1996, between GTC and Harry Meade. Filed as Exhibit 10.44 to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1996 and incorporated herein by reference.
10.20	Amendment Agreement, dated as of April 23, 1997, between GTC and Pharming B.V. Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 30, 1997 (File No. 0-21794) (the "GTC March 1997 10-Q") and incorporated herein by reference.
10.21	Exclusive Development and License Agreement, dated as of June 8, 1999, between the Company and Advanced Cell Technology, Inc. Filed herewith.**
10.22	Development and Commercialization Agreement, dated as of September 25, 1997, between the Company and B. Braun Melsungen AG. Filed as Exhibit 10.6 to the GTC September 1997 10-Q and incorporated herein by reference.**
10.23	Unconditional Guaranty, dated as of May 22, 1997, executed by the Company in connection with the Loan Agreement, dated as of May 22, 1997, between Redfield and SFNB. Filed as Exhibit 10.49.7 to the GTC 1997 10-K and incorporated herein by reference.
10.24	Guaranty, dated as of June 26, 1997, executed by the Company in connection with the Loan Agreement, dated as of June 26, 1997, between Mason and MassDevelopment. Filed 10.8.4 as Exhibit to the GTC June 1997 10-Q and incorporated herein by reference.
10.25.1	Purchase Agreement between GTC and Genzyme dated as of January 1, 1998, transferring an interest in ATIII LLC from Genzyme to GTC. Filed as Exhibit 10.52.2 to the GTC 1997 10-K and incorporated herein by reference.**
10.25.2	Purchase Agreement between the Company and Genzyme Corporation, dated as of July 31, 2001. Filed as Exhibit 10.1 to GTC's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (File No. 0-21794) (the "GTC September 2001 10-Q") and incorporated herein by reference. **
10.25.3	Services Agreement between the Company and Genzyme, dated as of July 31, 2001. Filed as Exhibit 10.2 to the GTC September 2001 10-Q and incorporated herein by reference. **
10.25.4	Amended and Restated Collaboration Agreement among the Company, Genzyme and ATIII LLC, dated as of July 31, 2001. Filed as Exhibit 10.2 to the GTC September 2001 10-Q and incorporated herein by reference. **
10.26*	Amendment No. 1 to Employment Agreement between the Company and John B. Green. Filed as Exhibit 10.3 to the GTC September 1998 10-Q and incorporated herein by reference.
10.27*	Consulting Agreement between the Company and James A. Geraghty. Filed as Exhibit 10.4 to the GTC September 1998 10-Q and incorporated herein by reference.
10.28.1	Credit Agreement between GTC and Fleet National Bank, dated as of December 28, 1998. Filed as Exhibit 10.57.1 to the original filing of the GTC 1999 10-K and incorporated herein by reference.

56

10.28.2	Revolving Credit Note in the amount of $17,500,000, dated as of December 28, 1998, executed by GTC and issued to Fleet National Bank. Filed as Exhibit 10.57.2 to the original filing of the GTC 1999 10-K and incorporated herein by reference.
10.28.3	Term Note in the amount of $7,100,000, dated as of December 28, 1998, executed by GTC and issued to Fleet National Bank. Filed as Exhibit 10.57.3 to the original filing of the GTC 1999 10-K and incorporated herein by reference.
10.28.4	First Amendment to Credit Agreement dated as of November 12, 1999 between Fleet National Bank and GTC. Filed as exhibit 10.51.4 to the GTC 1999 10-K and incorporated herein by reference.
10.28.5	Second Amendment to Credit Agreement, dated as of December 27, 2001, between GTC and Fleet National Bank. Filed herewith.
10.28.6	Third Amendment to Credit Agreement and Amendment to Revolving Credit Note and Term Note, dated as of January 11, 2002, between GTC and Fleet National Bank. Filed herewith.
10.29*	Separation Agreement and General Release, dated as of May 16, 2001, between GTC and Sandra Nusinoff Lehrman. Filed as Exhibit 10.1 to GTC's Quarterly Report on Form 10-Q for the quarter ended July 1, 2001 (File No. 0-21794) and incorporated herein by reference.
10.30*	Executive Employment Agreement, dated as of July 18, 2001, between GTC and Geoffrey F. Cox. Filed as Exhibit 10.2 to the GTC September 2001 10-Q and incorporated herein by reference.
21	List of Subsidiaries. Filed herewith.
23	Consent of PricewaterhouseCoopers LLP. Filed herewith.
99	Important Factors Regarding Forward-Looking Statements. Filed herewith.

*

Indicates a management contract or compensatory plan.

**

Certain confidential information contained in the document has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended, or Rule 24b-2 promulgated under the Securities and Exchange Act of 1934, as amended

57

NOTES

58

QuickLinks

ITEM 1.
ITEM 1A.

ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ITEM 6. SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

REPORT OF INDEPENDENT ACCOUNTANTS
GENZYME TRANSGENICS CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands except share amounts)
GENZYME TRANSGENICS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Dollars in thousands except share and per share amounts)
GENZYME TRANSGENICS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
Schedule II—Supplemental Valuation and Qualifying Accounts Years ended December 30, 2001, December 31, 2000 and January 2, 2000: Deferred tax asset valuation allowance
Allowance for unbilled receivable and doubtful accounts
SIGNATURES
EXHIBIT INDEX to Form 10-K for the Year Ended December 30, 2001
NOTES

EX-10.7

                                                                    Exhibit 10.7

1.   ADOPTED BY THE BOARD OF DIRECTORS ON MAY 1, 1993; APPROVED BY THE
     STOCKHOLDERS ON JUNE 25, 1993.
2.   AMENDED BY THE BOARD OF DIRECTORS ON SEPTEMBER 24, 1993 (NO STOCKHOLDER
     APPROVAL REQUIRED).
3.   AMENDED BY THE BOARD OF DIRECTORS ON OCTOBER 24, 1994, MARCH 17, 1995 AND
     APRIL 6, 1995; APPROVED BY THE STOCKHOLDERS ON MAY 19, 1995.
4.   AMENDED BY THE BOARD OF DIRECTORS ON MARCH 13, 1996; APPROVED BY THE
     STOCKHOLDERS ON MAY 15, 1996.
5.   AMENDED BY THE BOARD OF DIRECTORS ON MARCH 3, 1997; APPROVED BY THE
     STOCKHOLDERS ON MAY 28, 1997.
6.   AS AMENDED BY THE BOARD OF DIRECTORS ON MARCH 4, 1998; APPROVED BY THE
     STOCKHOLDERS ON MAY 27, 1998.
7.   AS AMENDED BY THE BOARD OF DIRECTORS ON MARCH 3, 1999; APPROVED BY THE
     STOCKHOLDERS ON MAY 25, 1999.
8.   AS AMENDED BY THE BOARD OF DIRECTORS ON MARCH 1, 2000; APPROVED BY THE
     STOCKHOLDERS ON MAY 24, 2000.
9.   AS AMENDED BY THE BOARD OF DIRECTORS ON MARCH 7, 2001 AND RATIFIED DECEMBER
     18, 2001.


                         GENZYME TRANSGENICS CORPORATION

                 AMENDED AND RESTATED 1993 EQUITY INCENTIVE PLAN

Section 1.  PURPOSE

     The purpose of the Genzyme Transgenics Corporation 1993 Equity Incentive
Plan (the "Plan") is to attract and retain key employees, consultants and
non-employee directors, to provide an incentive for them to assist the Company
to achieve long-range performance goals, and to enable them to participate in
the long-term growth of the Company.

Section 2.  DEFINITIONS

     "Affiliate" means any business entity in which the Company owns directly or
indirectly 50% or more of the total combined voting power or has a significant
financial interest as determined by the Committee.

     "Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock or Stock Unit awarded under the Plan.

     "Board" means the Board of Directors of the Company.

     "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

     "Committee" means either any one of one or more committees of the Board
appointed by the Board to administer the Plan, the members of which are
"Non-Employee Directors" within



the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended,
or any successor provision (the "Rule") to the extent necessary to comply with
the Rule.

     "Common Stock" or "Stock" means the Common Stock, $0.01 par value, of the
Company.

     "Company" means Genzyme Transgenics Corporation.

     "Designated Beneficiary" means the beneficiary designated by a Participant,
in a manner determined by the Committee, to receive amounts due or exercise
rights of the Participant in the event of the Participant's death. In the
absence of an effective designation by a Participant, designated Beneficiary
shall mean the Participant's estate.

     "Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Committee
in good faith or in the manner established by the Committee from time to time.

     "Incentive Stock Option" means an option to purchase shares of Common Stock
awarded to a Participant under Section 6 which is intended to meet the
requirements of Section 422 of the Code or any successor provision.

     "Non-Employee Director" means a director of the Company who is not an
employee of the Company or of any subsidiary of the Company.

     "Nonstatutory Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 or 7 which is not intended to be
an Incentive Stock Option.

     "Option" means an Incentive Stock Option or a Nonstatutory Stock Option.

     "Participant" means a person selected by the Committee to receive an Award
under the Plan.

     "Performance Cycle" or "Cycle" means the period of time selected by the
Committee during which performance is measured for the purpose of determining
the extent to which an award of Performance Shares has been earned.

     "Performance Shares" mean shares of Common Stock which may be earned by the
achievement of performance goals awarded to a Participant under Section 9.

     "Reporting Person" means a person subject to Section 16 of the Securities
Exchange Act of 1934, as amended, or any successor provision.

     "Restricted Period" means the period of time selected by the Committee
during which an award of Restricted Stock may be forfeited to the Company.

     "Restricted Stock" means shares of Common Stock subject to forfeiture
awarded to a Participant under Section 10.

                                        2


     "Stock Appreciation Right" or "SAR" means a right to receive any excess in
value of shares of Common Stock over the exercise price awarded to a Participant
under Section 8.

     "Stock Unit" means an award of Common Stock or units that are valued in
whole or in part by reference to, or otherwise based on, the value of Common
Stock, awarded to a Participant under Section 11.

Section 3.  ADMINISTRATION

     The Plan shall be administered by the Committee. The Committee shall have
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the operation of the Plan as it shall from time to time
consider advisable, and to interpret the provisions of the Plan. The Committee's
decisions shall be final and binding. To the extent permitted by applicable law,
the Committee may delegate to one or more executive officers of the Company the
power to make Awards to Participants who are not Reporting Persons and all
determinations under the Plan with respect thereto, provided that the Committee
shall fix the maximum amount of such Awards for the group and a maximum for any
one Participant.

Section 4.  ELIGIBILITY

     All employees, and in the case of Awards other than Incentive Stock
Options, consultants of the Company, Non-Employee Directors or any Affiliate
capable of contributing significantly to the successful performance of the
Company, other than a person who has irrevocably elected not to be eligible, are
eligible to be Participants in the Plan.

Section 5.  STOCK AVAILABLE FOR AWARDS

     (a) Subject to adjustment under subsection (b), Awards may be made under
the Plan for up to 4,140,000(1) shares of Common Stock. If any Award in respect
of shares of Common Stock expires or is terminated unexercised or is forfeited
for any reason or settled in a manner that results in fewer shares outstanding
than were initially awarded, including without limitation the surrender of
shares in payment for the Award or any tax obligation thereon, the shares
subject to such Award or so surrendered, as the case may be, to the extent of
such expiration, termination, forfeiture or decrease, shall again be available
for award under the Plan, subject, however, in the case of Incentive Stock
Options, to any limitation required under the Code. Common Stock issued through
the assumption or substitution of outstanding grants from an acquired company
shall not reduce the shares available for Awards under the Plan. Shares issued
under the Plan may consist in whole or in part of authorized but unissued shares
or treasury shares.

     (b) In the event that the Committee determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger,

- ----------
(1)This member includes 224,350 shares reserved for issuance upon the exercise
of outstanding options to purchase shares of common stock of TSI Corporation,
which options were assumed by the Company in October 1994 in connection with the
Company's acquisition of TSI Corporaiton.

                                        3


consolidation, split-up, spin-off, combination, exchange of shares, warrants or
rights offering to purchase Common Stock at a price substantially below fair
market value, or other similar transaction affects the Common Stock such that an
adjustment is required in order to preserve the benefits or potential benefits
intended to be made available under the Plan, then the Committee, subject, in
the case of Incentive Stock Options, to any limitation required under the Code,
shall equitably adjust any or all of (i) the number and kind of shares in
respect of which Awards may be made under the Plan, (ii) the number and kind of
shares subject to outstanding Awards, and (iii) the award, exercise or
conversion price with respect to any of the foregoing, and if considered
appropriate, the Committee may make provision for a cash payment with respect to
an outstanding Award, provided that the number of shares subject to any Award
shall always be a whole number.

Section 6.  STOCK OPTIONS

     (a) Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Nonstatutory Stock Options and determine the number
of shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code, or any successor provision, and any regulations
thereunder.

     (b) The Committee shall establish the option price at the time each Option
is awarded, which price shall not be less than 100% of the Fair Market Value of
the Common Stock on the date of award.

     (c) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may specify in the applicable Award or
thereafter. The Committee may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.

     (d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be made in whole or in part in cash or, to the extent permitted
by the Committee at or after the award of the Option, by delivery of a note or
shares of Common Stock owned by the optionee, including Restricted Stock, valued
at their Fair Market Value on the date of delivery, or such other lawful
consideration as the Committee may determine.

     (e) The Committee may provide for the automatic award of an Option upon the
delivery of shares to the Company in payment of an Option for up to the number
of shares so delivered.

Section 7.  STOCK OPTIONS FOR NON-EMPLOYEE DIRECTORS

     (a) GRANT OF OPTIONS AND OPTION TERMS

         (1) AUTOMATIC GRANT OF OPTIONS FOR NON-EMPLOYEE DIRECTORS (OTHER THAN
CHAIRMAN OF THE BOARD). Upon the election or re-election of Non-Employee
Directors (other than Chairman of the Board), such director shall automatically
be granted an Option to purchase

                                        4


7,500 shares of Common Stock for each year of the term of office to which he or
she is elected. If such director is elected on a date other than the date of an
annual meeting of stockholders (whether elected by the Board or the stockholders
and whether to fill a vacancy or otherwise), such director shall automatically
be granted Options to purchase 7,500 shares of Common Stock for each year or
portion thereof of the term of office to which he or she is elected.

         (2) AUTOMATIC GRANT OF OPTIONS FOR A NON-EMPLOYEE DIRECTOR CHAIRMAN OF
BOARD. Upon the election or re-election of a Non-Employee Director Chairman of
the Board, such director shall automatically be granted an Option to purchase
15,000 shares of Common Stock for each year of the term of office to which he or
she is elected. If such director is elected on a date other than the date of an
annual meeting of stockholders (whether elected by the Board or the stockholders
and whether to fill a vacancy or otherwise), such director shall automatically
be granted Options to purchase 15,000 shares of Common Stock for each year or
portion thereof of the term of office to which he or she is elected.

         (3) ONE-TIME AUTOMATIC GRANT OF ADDITIONAL SHARES FOR NON-EMPLOYEE
DIRECTORS. For each Non-Employee Director whose term began before 2001 and
expires in 2002, such director shall automatically be granted an Option to
purchase 2,500 shares of Common Stock.

         (4) NONSTATUTORY STOCK OPTIONS. All Options granted under this Section
7(a) shall be nonstatutory options not entitled to special tax treatment under
Section 422 of the Code.

         (5) DATE OF GRANT. The "Date of Grant" for Options granted under
Section 7(a)(1) or (2) shall be the date of election or re-election as a
Non-Employee Director, commencing with the first election or re-election in
2001. In the case of the one-time grant provided under Section 7(a)(3) above,
the "Date of Grant" shall be the annual meeting of stockholders held in 2001.

     (b) OPTION PRICE. The Option price for each Option granted under this Plan
shall be the current fair market value of a share of Common Stock of the Company
as determined by the last sale price for the Company's Common Stock as reported
by the National Association of Securities Dealers Automated Quotations National
Market System for the business day immediately preceding the Date of Grant.

     (c) TERM OF OPTION. The term of each Option granted under this section
shall be ten years from the Date of Grant.

     (d) EXERCISABILITY OF OPTIONS. Options granted under this Plan to a
Non-Employee Director on election or re-election shall become exercisable with
respect to 7,500 shares on the Date of Grant and on each annual meeting of
stockholders of the Company following the Date of Grant if and only if the
director is a member of the Board at the opening of business on that date (e.g.,
an Option to purchase 22,500 shares of Common Stock granted at the 2001 annual
meeting would become exercisable with respect to 7,500 shares at each of the
2001, 2002 and 2003 annual meetings). Options granted pursuant to the one-time
grant provided under Section 7(a)(3) above shall become exercisable on the Date
of Grant.

                                        5


     (e) GENERAL EXERCISE TERMS. Non-Employee Directors holding exercisable
Options under this section who cease to serve as members of the Board may,
during their lifetime, exercise the rights they had under such Options at the
time they ceased being a director for the full unexpired term of such Option.
Any rights that have not yet become exercisable shall terminate upon cessation
of membership on the Board. Upon the death of a director, those entitled to do
so shall have the right, at any time within twelve months after the date of
death, to exercise in whole or in part any rights which were available to the
director at the time of his or her death. The rights of the Participant may be
exercised by the Participant's guardian or legal representative in the case of
disability and by the beneficiary designated by the Participant in writing
delivered to the Company or, if none has been designated, by the Participant's
estate or his or her transferee on death in accordance with this Section 7, in
the case of death. Options granted under this Section 7 shall terminate, and no
rights thereunder may be exercised, after the expiration of the applicable
exercise period. Notwithstanding the foregoing provisions of this Section 7, no
rights under any Options may be exercised after the expiration of ten years from
their Date of Grant.

Section 8.  STOCK APPRECIATION RIGHTS

     (a) Subject to the provisions of the Plan, the Committee may award SARs in
tandem with an Option (at or after the award of the Option), or alone and
unrelated to an Option. SARs in tandem with an Option shall terminate to the
extent that the related Option is exercised, and the related Option shall
terminate to the extent that the tandem SARs are exercised. SARs shall have an
exercise price of not less than the Fair Market Value of the Common Stock on the
date of award, or in the case of SARs in tandem with Options, the exercise price
of the related Option.

     (b) An SAR related to an Option which can only be exercised during limited
periods following a change in control of the Company, may entitle the
Participant to receive an amount based upon the highest price paid or offered
for Common Stock in any transaction relating to the change in control or paid
during the thirty-day period immediately preceding the occurrence of the change
in control in any transaction reported in the stock market in which the Common
Stock is normally traded.

Section 9.  PERFORMANCE SHARES

     (a) Subject to the provisions of the Plan, the Committee may award
Performance Shares and determine the number of such shares for each Performance
Cycle and the duration of each Performance Cycle. There may be more than one
Performance Cycle in existence at any one time, and the duration of Performance
Cycles may differ from each other. The payment value of Performance Shares shall
be equal to the Fair Market Value of the Common Stock on the date the
Performance Shares are earned or, in the discretion of the Committee, on the
date the Committee determines that the Performance Shares have been earned.

     (b) The Committee shall establish performance goals for each Cycle, for the
purpose of determining the extent to which Performance Shares awarded for such
Cycle are earned, on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time select. During any Cycle, the
Committee may adjust the performance goals for such Cycle as it deems equitable
in recognition of unusual or non-recurring events affecting the Company,

                                        6


changes in applicable tax laws or accounting principles, or such other factors
as the Committee may determine.

     (c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares which have been
earned on the basis of performance in relation to the established performance
goals. The payment values of earned Performance Shares shall be distributed to
the Participant or, if the Participant has died, to the Participant's Designated
Beneficiary, as soon as practicable thereafter. The Committee shall determine,
at or after the time of award, whether payment values will be settled in whole
or in part in cash or other property, including Common Stock or Awards.

Section 10. RESTRICTED STOCK

     (a) Subject to the provisions of the Plan, the Committee may award shares
of Restricted Stock and determine the duration of the Restricted Period during
which, and the conditions under which, the shares may be forfeited to the
Company and the other terms and conditions of such Awards. Shares of Restricted
Stock shall be issued for no cash consideration or such minimum consideration as
may be required by applicable law.

     (b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during
the Restricted Period. Shares of Restricted Stock shall be evidenced in such
manner as the Committee may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and unless otherwise determined by the Committee, deposited by the Participant,
together with a stock power endorsed in blank, with the Company. At the
expiration of the Restricted Period, the Company shall deliver such certificates
to the Participant or if the Participant has died, to the Participant's
Designated Beneficiary.

Section 11. STOCK UNITS

     (a) Subject to the provisions of the Plan, the Committee may award Stock
Units subject to such terms, restrictions, conditions, performance criteria,
vesting requirements and payment rules as the Committee shall determine.

     (b) Shares of Common Stock awarded in connection with a Stock Unit Award
shall be issued for no cash consideration or such minimum consideration as may
be required by applicable law.

Section 12. GENERAL PROVISIONS APPLICABLE TO AWARDS

     (a) LIMITATIONS ON TRANSFERABILITY. Options shall not be transferable by
the recipient other than by will or the laws of descent and distribution and are
exercisable during such person's lifetime only by such person or by such
person's guardian or legal representative; provided that the Committee may in
its discretion waive such restriction in any case.

     (b) DOCUMENTATION. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and conditions thereof
and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers

                                        7


necessary or advisable to achieve the purposes of the Plan or comply with
applicable tax and regulatory laws and accounting principles.

     (c) COMMITTEE DISCRETION. Each type of Award may be made alone, in addition
to or in relation to any other type of Award. The terms of each type of Award
need not be identical, and the Committee need not treat Participants uniformly.
Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of award or at any time thereafter.

     (d) SETTLEMENT. The Committee shall determine whether Awards are settled in
whole or in part in cash, Common Stock, other securities of the Company, Awards
or other property. The Committee may permit a Participant to defer all or any
portion of a payment under the Plan, including the crediting of interest on
deferred amounts denominated in cash and dividend equivalents on amounts
denominated in Common Stock.

     (e) DIVIDENDS AND CASH AWARDS. In the discretion of the Committee, any
Award under the Plan may provide the Participant with (i) dividends or dividend
equivalents payable currently or deferred with or without interest, and (ii)
cash payments in lieu of or in addition to an Award.

     (f) TERMINATION OF EMPLOYMENT. Except as otherwise provided under Section
7, the Committee shall determine the effect on an Award of the disability,
death, retirement or other termination of employment of a Participant and the
extent to which, and the period during which, the Participant's legal
representative, guardian or Designated Beneficiary may receive payment of an
Award or exercise rights thereunder.

     (g) CHANGE IN CONTROL. In order to preserve a Participant's rights under an
Award in the event of a change in control of the Company, the Committee in its
discretion may, at the time an Award is made or at any time thereafter, take one
or more of the following actions: (i) provide for the acceleration of any time
period relating to the exercise or realization of the Award, (ii) provide for
the purchase of the Award upon the Participant's request for an amount of cash
or other property that could have been received upon the exercise or realization
of the Award had the Award been currently exercisable or payable, (iii) adjust
the terms of the Award in a manner determined by the Committee to reflect the
change in control, (iv) cause the Award to be assumed, or new rights substituted
therefor, by another entity, or (v) make such other provision as the Committee
may consider equitable and in the best interests of the Company. Notwithstanding
anything above to the contrary, with respect to Options granted to Non-Employee
Directors, upon a change of control, any deferred exercise period shall be
automatically accelerated and each Participant of an outstanding Option granted
under Section 7(a) shall be entitled to receive upon exercise and payment in
accordance with the terms of the Option the same shares, securities or property
as he would have been entitled to receive upon the occurrence of such event if
he had been, immediately prior to such event, the holder of the number of shares
of Common Stock purchasable under his Option; provided, however, that in lieu of
the foregoing the Board may upon written notice to each such Participant of an
outstanding Option or right under the Plan, provide that such Option or right
shall terminate on a date not less than twenty days after the date of such
notice unless theretofore exercised.

                                        8


     (h) WITHHOLDING. The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required by
law to be withheld in respect of Options under the Plan no later than the date
of the event creating the tax liability. The Company and its Affiliates may, to
the extent permitted by law, deduct any such tax obligations from any payment of
any kind otherwise due to the Participant. In the Committee's discretion, the
Participant may pay any taxes due with respect to an Option in whole or in part
in shares of Common Stock, including shares retained from the Option creating
the tax obligation, valued at their Fair Market Value on the date of retention
or delivery.

     (i) FOREIGN NATIONALS. Awards may be made to Participants who are foreign
nationals or employed outside the United States on such terms and conditions
different from those specified in the Plan as the Committee considers necessary
or advisable to achieve the purposes of the Plan or comply with applicable laws.

     (j) AMENDMENT OF AWARD. The Committee may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the same or
a different type, changing the date of exercise or realization and converting an
Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.

Section 13. MISCELLANEOUS

     (a) LIMITATION ON NUMBER OF SHARES GRANTED. Notwithstanding any other
provision of the Plan, the aggregate number of shares of Common Stock subject to
Options and SARs that may be granted within any fiscal year to any one Eligible
Person under the Plan shall not exceed that number of shares equal to 20% of the
total number of shares reserved for issuance under the Plan, except for grants
to new hires during the fiscal year of hiring which shall not exceed that number
of shares equal to 30% of the total number of shares reserved for issuance under
the Plan.

     (b) NO RIGHT TO EMPLOYMENT OR DIRECTORSHIP. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or the right
to continue as a director of the Company, as the case may be. The Company
expressly reserves the right at any time to dismiss a Participant free from any
liability or claim under the Plan, except as expressly provided in the
applicable Award.

     (c) NO RIGHTS AS SHAREHOLDER. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
shareholder with respect to any shares of Common Stock to be distributed under
the Plan until he or she becomes the holder thereof. A Participant to whom
Common Stock is awarded shall be considered the holder of the Stock at the time
of the Award except as otherwise provided in the applicable Award.

     (d) EFFECTIVE DATE. Subject to the approval of the shareholders of the
Company, the Plan shall be effective on May 1, 1993. Prior to such approval,
Awards may be made under the Plan expressly subject to such approval.

                                        9


     (e) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that no amendment shall be made
without shareholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement.

     (f) GOVERNING LAW. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts.

                                       10

EX-10.21

                                                                   Exhibit 10.21

                   EXCLUSIVE DEVELOPMENT AND LICENSE AGREEMENT

                                     BETWEEN

                         GENZYME TRANSGENICS CORPORATION

                                       AND

                         ADVANCED CELL TECHNOLOGY, INC.

     This Exclusive Development and License Agreement (the "Agreement") is made
and entered into as of June 8, 1999 (the "Effective Date") by and between
Genzyme Transgenics Corporation, a Massachusetts corporation with its principal
place of business at Five Mountain Road, Framingham, Massachusetts 01701 ("GTC")
and Advanced Cell Technology, Inc., a Delaware corporation with its principal
place of business at One Innovation Drive, Worcester, Massachusetts 01605
("ACT," and together with GTC, the "parties"). As set forth below, the
University of Massachusetts (the "University") has agreed to be bound by certain
provisions of this Agreement.

                                    RECITALS

     A. ACT owns or has licensed with a sublicensable interest the ACT Patent
Rights and the ACT Technology (as defined below).

     B. Pursuant to an existing Development Agreement (as defined below) between
GTC and ACT, ACT has been engaged in certain animal cloning activities on behalf
of GTC.

     C. GTC and ACT now desire to supersede the Development Agreement and
replace it with this Agreement under which (i) certain cloning work begun under
or contemplated by the Development Agreement will be completed, (ii) ACT will
grant an exclusive license to GTC to use the ACT Patent Rights and ACT
Technology in the GTC Field (as such terms are defined below), and (iii) GTC
will grant an exclusive license to ACT to use the GTC Patent Rights and GTC
Technology in the ACT Field (as such terms are defined below).

     D. The sublicense of ACT's rights under the UMASS Patent Rights (as defined
below) to GTC under this Agreement shall be subject to the relevant terms of the
UMASS License (as defined below).

     THEREFORE, the parties agree as follows:

1.   DEFINITIONS. As used in this Agreement, the following terms shall have the
meanings set forth below.

     1.1 "ACT DEVELOPMENTS" means Developments that are conceived, discovered,
invented, developed, created, made or reduced to practice solely by ACT.

     1.2 "ACT FIELD" means (i) human somatic cell nuclear transfer applications
for therapeutic purposes and (ii) the cloning of animals for agricultural
purposes, for the production

                                       -1-


of recombinant proteins, peptides and polypeptides for human transplantation,
cells for human transplantation and tissues for human transplantation, but
excluding the GTC Field.

     1.3 "ACT LICENSED PROPERTY" means the ACT Patent Rights and the ACT
Technology provided, however, that ACT Licensed Property shall not include ACT
Patent Rights or ACT Technology (i) acquired after the Effective Date as a
result of or in connection with a merger or acquisition with or by another
entity, or (ii) obtained on terms which prohibit the license contemplated by
Section 3.1.

     1.4 "ACT PATENT RIGHTS" means any and all patents and patent applications
in the GTC Field, including methods of doing business with respect to the GTC
Field, owned or licensed by ACT in which ACT has a licensable interest and which
exist as of the Effective Date or which come into existence during the term of
this Agreement, together with reissues, extensions (or other governmental acts
which effectively extend the period of exclusivity by the patent holder),
substitutions, confirmations, registrations, revalidations, additions,
continuations, continuations-in-part, divisions, or foreign counterparts of or
to the foregoing patent rights. ACT Patent Rights include, without limitation,
the patents and patent applications listed on SCHEDULE A-1 attached to this
Agreement, which schedule will be revised from time to time after the Effective
Date to reflect changes thereto.

     1.5 "ACT PRODUCT" means any product that cannot be developed, manufactured,
used, or sold without (i) infringing one or more claims under the ACT Patent
Rights, or (ii) using or incorporating some portion of the ACT Licensed
Property.

     1.6 "ACT SERVICE" means any service that cannot be developed or performed
without using at least one process that (i) infringes one or more claims under
the ACT Patent Rights, or (ii) uses some portion of the ACT Licensed Property.

     1.7 "ACT TEAM" means a team of at least two individuals supplied by ACT to
supply expertise in the areas of [*****].

     1.8 "ACT TECHNOLOGY" means the following which are owned or controlled by
ACT during the term of this Agreement which are useful, necessary or required to
clone animals for the production of biopharmaceutical agents in milk:
confidential information, knowledge and data, including but not limited to,
inventions (whether patentable or not), trade secrets, ideas, designs, drawings,
know-how, processes, techniques and like technological information in the GTC
Field. Additionally, ACT Technology shall include any process described within
the ACT Patent Rights.

     1.9 "AFFILIATE" means any corporation, company, partnership, joint venture
and/or firm which controls, is controlled by or is under common control with a
party. For purposes of this definition, "control" means (a) in the case of
corporate entities, direct or indirect ownership

- ----------
***** Confidential Treatments has been requested for the marked portion.

                                       -2-


of more than fifty percent (50%) of the stock or shares entitled to vote for
the election of directors; and (b) in the case of non-corporate entities,
direct or indirect ownership of more than fifty percent (50%) of the equity
interest with the power to direct the management and policies of such
noncorporate entities.

     1.10 "CONFIDENTIAL INFORMATION" includes, without limitation, any
scientific, technical, trade or business information disclosed by one party to
the other, or by GTC to the University, whether directly or through ACT, which
is specifically designated by the disclosing party as confidential or
proprietary. "Confidential Information" does not include information which (a)
was known to the receiving party at the time it was disclosed, other than by
previous disclosure by the disclosing party, as evidenced by written records at
the time of disclosure; (b) is at the time of disclosure or later becomes
publicly known other than through a breach of this Agreement; (c) is lawfully
and in good faith made available to the receiving party by a third party who, to
the receiving party's knowledge after inquiry, did not derive it from the
disclosing party and who imposed no obligation of confidence on the receiving
party; or (d) is developed by the receiving party independent of any disclosure
by the disclosing party.

     1.11 "DEVELOPMENT AGREEMENT" means the Development and Commercialization
Agreement between GTC and ACT dated September 25, 1997, together with any
amendments thereto as of the Effective Date.

     1.12 "DEVELOPMENTS" include, without limitation, discoveries, business
methods, inventions, developments, patents and patent rights, know-how, trade
secrets, techniques, methodologies, modifications, innovations, improvements,
writings, documentation, data and rights (whether or not protectible under
state, federal, or foreign patent, trademark, copyright or similar laws) that
were or are conceived, discovered, invented, developed, created, made or reduced
to practice by ACT or GTC, as applicable, in the performance of the Development
Agreement or during the term of this Agreement.

     1.13 "FDA" means the United States Food and Drug Administration.

     1.14 "GTC DEVELOPMENTS" means Developments that are conceived, discovered,
invented, developed, created, made or reduced to practice solely by GTC.

     1.15 "GTC FIELD" means the cloning of animals for all purposes related to
the production of biopharmaceutical agents in milk, including, but not limited
to, proteins, peptides and polypeptides for pharmaceutical, nutraceutical or
other use.

     1.16 "GTC LICENSED PROPERTY" means all GTC Patent Rights and GTC
Technology, provided, however, that GTC Licensed Property shall not include GTC
Patent Rights or GTC Technology (i) acquired as a result of or in connection
with a merger or acquisition with or by another entity, or (ii) obtained on
terms which prohibit the license contemplated by Section 3.2.

     1.17 "GTC PATENT RIGHTS" means any and all patents and patent applications
in the field of cloning technology, including methods of doing business with
respect to cloning technology, owned or licensed by GTC in which GTC has a
licensable interest and which exist as of the Effective Date or which come into
existence during the term of this Agreement, together with reissues, extensions
(or other governmental acts which effectively extend the

                                       -3-


period of exclusivity by the patent holder), substitutions, confirmations,
registrations, revalidations, additions, continuations, continuations-in-part,
divisions, or foreign counterparts of or to the foregoing patent rights. GTC
Patent Rights include, without limitation, the patents and patent applications
to be listed on SCHEDULE A-2 to be attached to this Agreement, which schedule
will thereafter be revised from time to time to reflect changes thereto.

     1.18 "GTC PRODUCT" means any product that cannot be developed,
manufactured, used, or sold without (i) infringing one or more claims under the
GTC Patent Rights, or (ii) using or incorporating some portion of the GTC
Licensed Property.

     1.19 "GTC SERVICE" means any service that cannot be developed or performed
without using at least one process that (i) infringes one or more claims under
the GTC Patent Rights, or (ii) uses some portion of the GTC Licensed Property.

     1.20 "GTC TEAM" means a team of two individuals supplied by GTC to supply
expertise in transgenic expression of hSA in the milk of cattle.

     1.21 "GTC TECHNOLOGY" means the following which are owned or controlled by
GTC during the term of this Agreement in the field of cloning technology:
confidential information, knowledge and data, including but not limited to,
inventions (whether patentable or not), trade secrets, ideas, designs, drawings,
know-how, processes, techniques and like technological information.
Additionally, GTC Technology shall include any process described within the GTC
Patent Rights.

     1.22 "hSA COWS" means cows (including, without limitation, transgenic eggs,
semen, and embryos and progeny thereof) that are produced under the hSA Program
(a) with or by use of the ACT Patent Rights or ACT Technology, (b) are
transfected with GTC's recombinant [*****], (c) contain the hSA transgene and
express hSA in their milk as set forth in the hSA Program Summary attached as
SCHEDULE B, and (d) are used for the sole purpose of transgenic production of
the Milk Products.

     1.23 "hSA PROGRAM" means the production, through application of the ACT
Technology, of hSA Cows which contain the hSA transgene and express hSA in their
milk, as set forth in the hSA Program Summary attached as SCHEDULE B.

     1.24 "hSA PROGRAM SUMMARY" means the program summary attached to this
Agreement as SCHEDULE B.

     1.25 "JOINT DEVELOPMENTS" means all Developments conceived, discovered,
invented, developed, created, made or reduced to practice jointly by both
parties in the ACT Field or GTC Field.

- ----------
***** Confidential Treatments has been requested for the marked portion.

                                       -4-


     1.26 "JOINT PATENT RIGHTS" means any and all patents and patent
applications covering Joint Developments which exist as of the Effective Date or
which come into existence during the term of this Agreement, together with
reissues, extensions (or other governmental acts which effectively extend the
period of exclusivity by the patent holder), substitutions, confirmations,
registrations, revalidations, additions, continuations, continuations-in-part,
divisions, or foreign counterparts of or to the foregoing patent rights. Joint
Patent Rights include, without limitation, the patents and patent applications
to be listed on SCHEDULE A-3 to be attached to this Agreement, which schedule
will thereafter be revised from time to time to reflect changes thereto.

     1.27 "MILK PRODUCTS" means the milk of the hSA Cows and the hSA expressed
in such milk.

     1.28 "NAMED COMPETITORS" means Pharming, B.V., PPL Therapeutics, Inc.,
Roslin Bio-Med, Infigen, Inc., and Nexia Biotechnologies, Inc., and their
respective successors, assigns, subsidiaries and affiliates.

     1.29 "NET SALES" means the total invoice price charged on all sales (i) by
ACT of GTC Products and/or Services, or (ii) by GTC of ACT Products and/or
Services, as applicable, in any country after deducting, to the extent not
already deducted, normal and customary trade, dealer, quantity, and cash
discounts actually allowed; allowances for credits granted on account of
rejections, returns, or price reductions; governmental sales taxes and other
charges imposed on such sales; and freight, insurance, customs, duties, and
other landing charges. In the event any product is sold as a component of a
combination of functional elements, net sales price for purposes of determining
royalty payments on such combination shall be calculated by multiplying the
average per unit net sales price of the product portion of the combination when
sold separately in the applicable country during the accounting period in which
the sale was made by the number of units of product sold as part of such
combination product. In addition, Net Sales of a party shall include the amount
of any milestone payment received based on the performance of such party in
connection with the development (i) of GTC Products and/or Services by ACT or
(ii) of ACT Products and/or Services by GTC, as applicable.

     1.30 "NUTRACEUTICAL" means any food or other preparation intended for oral
consumption by humans whose primary function, when taken into the human body,
(a) serves to nourish or build up tissues or supply energy and/or (b) maintains,
restores or supports adequate nutritional status or nutritional metabolic
function.

     1.31 "UMASS LICENSE" means the Exclusive License Agreement between ACT and
the University dated April 16, 1996, together with any amendments thereto.

     1.32 "UMASS PATENT RIGHTS" means ACT Patent Rights licensed by ACT from the
University under the UMASS License.

2.   THE DEVELOPMENT AGREEMENT.

     2.1  SUPERSESSION. The Development Agreement is hereby terminated by mutual
agreement and all of its provisions are superseded in their entirety.

                                       -5-


     2.2  MUTUAL RELEASE. GTC and ACT each release each other and all of each
other's officers, directors, agents and employees from any and all claims,
demands, actions, causes of action, suits, covenants, contracts or agreements,
including without limitation GTC's claim(s) of Performance Failures by ACT under
the Development Agreement, and any and all expenses, costs, losses or damages
which either GTC or ACT now has or at any time has had against the other based
on or arising out of any provisions of the Development Agreement that are
terminated hereby.

3.   GRANT OF RIGHTS.

     3.1  GRANTS FROM ACT TO GTC.

          (a) LICENSE GRANT. Subject to the terms of this Agreement, ACT hereby
grants to GTC an exclusive, royalty-bearing, worldwide license, with the limited
right to sublicense, under its commercial rights in the ACT Licensed Property
and in the Joint Patent Rights to develop, make, have made, import, use, and
sell ACT Products in the GTC Field and to develop and perform ACT Services in
the GTC Field. To the extent this grant includes a sublicense of any UMASS
Patent Rights, such sublicense is subject to the relevant terms of the UMASS
License as it may be amended from time to time, provided that in the event of
any inconsistency between the UMASS License and Section 3.1(e) hereof, Section
3.1(e) hereof shall govern.

          (b) SUBLICENSES. The parties acknowledge that it may be mutually
advantageous for GTC to sublicense the ACT Licensed Property to third parties,
including without limitation the Named Competitors. GTC shall have the right to
grant sublicenses of its rights under Section 3.1(a) subject to the limitations
set forth in this Section 3.1(b).

              i. Any sublicenses by GTC of the UMASS Patent Rights may not
transfer the right to grant further sublicenses and shall be subject to the
consent of the University, which consent will be granted at the sole discretion
of the University, provided that such consent shall not be unreasonably withheld
or delayed in the following circumstances:

                 (1) Consent to sublicense will not be unreasonably withheld or
delayed by the University where GTC has determined that defending its right to
practice under the UMASS Patent Rights is not commercially prudent, and it is
therefore commercially necessary for GTC to grant a sublicense in exchange for
rights to third party technology to enable GTC to practice the UMASS Patent
Rights.

                 (2) Consent to sublicense will not be unreasonably withheld or
delayed by the University where it is commercially necessary for GTC to grant a
sublicense to enable GTC's customers to maintain adequate production of products
within the GTC Field; provided that reasonable efforts are first used to avoid
sublicensing the right to practice the UMASS Patent Rights. If it has been
determined that sublicensing is commercially necessary, GTC shall limit the
scope of any such sublicensing to the delivery to such customers of transgenic
animals for use in the production of GTC Products and any sublicensing of the
right to practice nuclear transfer technology would occur only after all other
reasonable alternatives have been exhausted, e.g., supplying transgenic animals,
embryos, or cell lines.

                                       -6-


                 (3) Consent to sublicense will not be unreasonably withheld or
delayed by the University where GTC proposes to grant a sublicense for research
purposes only.

              ii.  Any sublicenses by GTC to third parties who will have the
right to grant further sublicenses, any sublicenses by GTC of ACT Technology,
and any sublicenses by GTC to the Named Competitors shall also be subject to
ACT's consent, which consent shall not be unreasonably withheld or delayed,
provided that if GTC engages in sublicense discussions with the Named
Competitors, GTC agrees to consult with ACT, to permit ACT to participate in
such discussions, and to permit ACT to review copies of the proposed sublicense
agreements. For purposes of the preceding sentence, ACT's consent may be
reasonably withheld only if it can show that the proposed sublicense would be
materially adverse to its business interests.

              iii. Any sublicenses by GTC of ACT Patent Rights only to third
parties other than the Named Competitors whose rights under the ACT Licensed
Property are limited to their own research and commercial activities and who
will have no right to grant further sublicenses ("End Users") are expressly
permitted hereunder and shall not require the consent of ACT.

              iv.  GTC shall promptly furnish ACT with a fully executed copy of
all sublicense agreements of GTC (other than sublicense agreements to End Users)
and shall promptly furnish the University with a fully executed copy of all
sublicense agreements of GTC involving the UMASS Patent Rights, all of which
shall be deemed Confidential Information subject to the provisions of Section
10.

              v.   All sublicense agreements executed by GTC pursuant to this
Section 3.1(b) shall expressly bind the sublicensee to Sections 3.1(c), 9 (to
the extent applicable), 10, 12, and 14 of this Agreement and shall provide for
the automatic assignment of the relevant provisions of such agreements to ACT if
this Agreement is terminated as described in Section 7.2 below.

          (c) RETAINED RIGHTS. To the extent the University, the federal
government or any other parties have rights in the ACT Licensed Property
pursuant to Article 2 of the UMASS License, the license granted hereunder is
subject to such rights.

          (d) NUTRACEUTICALS. The licenses granted in Section 3.1(a) shall be
co-exclusive with ACT for ACT Products consisting of or incorporating
Nutraceuticals, PROVIDED, HOWEVER, that GTC shall have a right of first refusal
with respect to any license or any other collaboration or partnering agreement
that ACT intends to enter into with any other party in the GTC Field for
products consisting of or incorporating Nutraceuticals. ACT shall give GTC prior
written notice providing full particulars of any such proposed transaction, and
GTC shall have a period of thirty (30) days to notify ACT in writing of its
willingness to enter into such transaction on substantially the terms proposed.
If, by the end of such thirty (30)-day period GTC has not so notified ACT, ACT
shall be free to enter into such transaction, but only on substantially the same
terms offered to GTC in writing.

          (e) THE UMASS LICENSE. GTC acknowledges that a portion of the ACT
Patent Rights licensed to GTC hereunder are owned by the University and are
licensed to ACT

                                       -7-


under the UMASS License. ACT and the University represent and warrant to GTC and
GTC agrees that, in the event the UMASS License is terminated for any reason
pursuant to the provisions of the UMASS License, (i) any sublicenses granted by
GTC hereunder with respect to any UMASS Patent Rights shall remain in effect in
accordance with their terms, (ii) GTC will thereafter make any payments due to
ACT with respect to such sublicenses directly to the University, and (iii)
promptly following such termination, GTC and the University will enter into a
direct license agreement reflecting the applicable terms of this Agreement and
the UMASS License. ACT acknowledges that any payments so made by GTC to the
University shall be credited against any payments due and payable to ACT
hereunder. For the avoidance of doubt, ACT and the University agree that the
references to "Sublicensees" in Section 8.5 of the UMASS License shall not apply
to GTC and shall not be construed as vitiating clause (i) of this Section
3.1(e). ACT and the University agree that the provisions of Section 2.2 of the
UMASS Agreement providing for the automatic assignment to the University of
sublicenses granted by ACT under said Section 2.2 shall not apply to the
sublicense by ACT to GTC under this Agreement, and that the provisions of this
Section 3.1(e) shall govern in the event that the UMASS License is terminated.
ACT and the University agree that GTC will not be bound by any amendment to the
UMASS License that affects GTC's rights under this Agreement in any material
respect, unless GTC agrees in writing to such amendment.

     3.2  GRANTS FROM GTC TO ACT.

          (a) LICENSE GRANT. Subject to the terms of this Agreement, GTC hereby
grants to ACT an exclusive, royalty-bearing, worldwide license in the ACT Field,
with the limited right to sublicense, under its commercial rights in the GTC
Licensed Property and in the Joint Patent Rights, to develop, make, have made,
import, use, and sell GTC Products in the ACT Field and to develop and perform
GTC Services in the ACT Field.

          (b) SUBLICENSES. The parties acknowledge that it may be mutually
advantageous for ACT to sublicense the GTC Licensed Property to the Named
Competitors. ACT shall have the right to grant sublicenses of its rights under
Section 3.2(a) subject to the limitations set forth in this Section 3.2(b).

              i.   Any sublicenses by ACT to third parties who will have the
right to grant further sublicenses, any sublicenses by ACT of GTC Technology,
and any sublicenses by ACT to the Named Competitors shall be subject to GTC's
consent, which consent shall not be unreasonably withheld or delayed, PROVIDED
THAT if ACT engages in sublicense discussions with the Named Competitors, ACT
agrees to consult with GTC and permit GTC to participate in such discussions.

              ii.  Any sublicenses by ACT of GTC Patent Rights only to third
parties other than the Named Competitors whose rights under the GTC Licensed
Property are limited to their own research and commercial activities and who
will have no right to grant further sublicenses ("End Users") are expressly
permitted hereunder and shall not require the consent of GTC.

                                       -8-


              iii. ACT shall promptly furnish GTC with a fully executed copy of
all sublicense agreements of ACT (other than sublicense agreements to End
Users), which shall be deemed Confidential Information subject to the provisions
of Section 10.

              iv.  All sublicense agreements executed by ACT pursuant to this
Section 3.2(b) shall expressly bind the sublicensee to Sections 9 (to the extent
applicable), 10, 12, and 14 of this Agreement and shall provide for the
automatic assignment of the relevant provisions of such agreements to GTC if
this Agreement is terminated as described in Section 7.2 below.

4.   OBLIGATIONS RELATING TO COMMERCIALIZATION.

     4.1  GTC DILIGENCE REQUIREMENTS. GTC shall use diligent efforts, or shall
cause its sublicensees to use diligent efforts, to develop ACT Products or ACT
Services and to introduce ACT Products or ACT Services into the commercial
market; thereafter, GTC or its sublicensees shall make ACT Products or ACT
Services reasonably available to the public.

     4.2  ACT DILIGENCE REQUIREMENTS. ACT shall use diligent efforts, or shall
cause its sublicensees to use diligent efforts, to develop GTC Products or GTC
Services and to introduce GTC Products or GTC Services into the commercial
market; thereafter, ACT or its sublicensees shall make GTC Products or GTC
Services reasonably available to the public.

     4.3  SUMMARY REPORTS.

          (a) REPORTS BY GTC. GTC shall maintain complete and accurate records
of ACT Products and ACT Services that are made, used, sold or performed by GTC
under this Agreement. Not later than May 1st of each year following the
Effective Date, GTC shall furnish ACT and the University with an executive
summary report on the progress of its efforts during the prior year to develop
and commercialize ACT Products or ACT Services, including without limitation
research and development efforts, efforts to obtain regulatory approval,
marketing efforts (including ACT Products and ACT Services made, used, sold or
performed) and sales figures, provided that such reports shall be deemed
Confidential Information subject to the provisions of Section 10 of this
Agreement.

          (b) REPORTS BY ACT. ACT shall maintain complete and accurate records
of GTC Products and GTC Services that are made, used, sold or performed by ACT
under this Agreement. Not later than May 1st of each year following the
Effective Date, ACT shall furnish GTC with an executive summary report on the
progress of its efforts during the prior year to develop and commercialize GTC
Products or GTC Services, including without limitation research and development
efforts, efforts to obtain regulatory approval, marketing efforts (including GTC
Products and GTC Services made, used, sold or performed) and sales figures,
provided that such reports shall be deemed Confidential Information subject to
the provisions of Section 10 of this Agreement.

5.   DEVELOPMENTS.

     5.1  GTC DEVELOPMENTS. GTC agrees, on a periodic basis (not less than
semiannually), to provide to ACT and the University a written report of all GTC
Developments,

                                       -9-


provided that such reports shall be deemed Confidential Information subject
to the provisions of Section 10 of this Agreement, and all such Developments,
whether or not patentable, relevant to the ACT Field, are and shall be
considered GTC Licensed Property and automatically licensed to ACT pursuant to
Section 3.2.

     5.2  ACT DEVELOPMENTS. ACT agrees, on a periodic basis (not less than
semiannually), to provide to GTC a written report of all ACT Developments,
provided that such reports shall be deemed Confidential Information subject to
the provisions of Section 10 of this Agreement, and all such Developments,
whether or not patentable, relevant to the GTC Field, are and shall be
considered ACT Licensed Property and automatically licensed to GTC pursuant to
Section 3.1.

     5.3  TECHNICAL ASSISTANCE. Each party shall make reasonably available to
the other party, upon request, qualified technical personnel of such party for
the purpose of providing technical assistance to facilitate the transfer to the
other party of technology licensed to the other party hereunder, the reasonable
PER DIEM charges and expenses of which shall be borne by the party requiring
such assistance.

6.   CLONING PROGRAMS.

     6.1  hSA PROGRAM. ACT agrees to use commercially reasonable efforts to
produce, [*****].

     6.2  NEW CLONING PROGRAMS OR OTHER SERVICES. In the event GTC wishes ACT to
engage in a new cloning program or to perform other services for GTC, the
parties will negotiate a written, mutually agreed upon budgeted level of effort,
including any compensation to be paid by GTC to ACT, and any other relevant
terms and conditions for any such cloning program or other services.

     6.3  RESPONSIBILITIES OF ACT FOR THE hSA PROGRAM.

          (a) CONDUCT OF THE hSA PROGRAM. The ACT Team (and any other necessary
and qualified technical and managerial staff) and the GTC Team shall collaborate
as set forth in Schedule B to ensure the transfection of [*****].

          (b) PROVISION OF FACILITIES. ACT shall, through its subcontractor
Trans Ova or such other subcontractor as is mutually agreed upon by the parties,
provide all facilities and equipment acceptable to GTC which are necessary for
the conduct of the hSA Program, including space, housing and utilities services
necessary to maintain [*****] and livestock. All bovine stock for the hSA
Program will be housed at a facility controlled by ACT's subcontractor, Trans
Ova or such other subcontractor as is mutually agreed upon by the parties until
such stock is determined to have the capability to express the hSA protein in
milk or such stock reaches the age of six (6) months, whichever is earlier. Upon
determination that such stock has expressed the hSA protein in milk pursuant to
SCHEDULE B or such stock reaches the

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                                      -10-


age of six (6) months, whichever is earlier. Upon determination that such stock
has expressed the hSA protein in milk pursuant to SCHEDULE B or such stock
reaches the age of six (6) months, whichever is earlier, all such bovine stock
for the hSA Program will be housed at a facility identified by GTC, and GTC
shall then be responsible for the conduct of the hSA Program with respect to
such stock, including space, housing and utilities services necessary to
maintain [*****] and livestock. The foregoing notwithstanding, in the case of
stock which has not expressed the hSA protein at the age of six (6) months, GTC
may instruct ACT to destroy the stock in lieu of assuming responsibility for
such stock.

          (c) SOURCES OF CATTLE. ACT shall provide heifers selected in
accordance with good agricultural practice ("GAP") criteria mutually agreed upon
by ACT and GTC as necessary to conduct the hSA Program. All hSA Cows used and/or
produced by ACT under this Agreement shall be free from bovine spongiform
encephalopathy and/or other infectious agents reasonably identified as
detrimental to the commercialization of Milk Products. If, at any time during
the term of this Agreement, ACT and/or GTC have any reason to believe (or have
any reason to conclude that a governmental regulatory authority believes) that
bovine spongiform encephalopathy and/or such other infectious agents have or may
be detected in cattle in the United States, ACT will promptly institute
procedures mutually agreed upon by the parties to ensure the health of the hSA
Cows used and/or produced by ACT under this Agreement.

          (d) [*****]

          (e) CARE OF ANIMALS. ACT, through its subcontractor Trans Ova or such
other subcontractor as is mutually agreed upon by the parties, shall have sole
responsibility for the care and maintenance (including all required feed and
veterinary care) of all bovine stock used and generated during the hSA Program,
as defined in the hSA Program Summary, PROVIDED, HOWEVER, that upon
determination that such stock has expressed the hSA protein in milk pursuant to
SCHEDULE B or such stock reaches the age of six (6) months, whichever is
earlier, all such bovine stock for the hSA Program will be housed at a facility
identified by GTC and GTC shall then be responsible for the conduct of the hSA
Program with respect to such stock, including space, housing and utilities
services necessary to maintain [*****] and livestock. The foregoing
notwithstanding, in the case of stock which has not expressed the hSA protein at
the age of six (6) months, GTC may instruct ACT to destroy the stock in lieu of
assuming responsibility for such stock.

          (f) ANIMAL WELFARE REGULATIONS. The hSA Program shall undergo
applicable animal welfare and animal research committee review and approval by
GTC and ACT in accordance with applicable legal and regulatory standards.

          (g) COMPLIANCE WITH OTHER REGULATIONS. ACT and GTC shall mutually
conduct and manage all aspects of the hSA Project in full compliance with USDA,
FDA and other regulatory requirements for the production of clinical-grade
proteins/products in the milk

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                                      -11-


of transgenic animals. Each party shall have the ongoing right to audit the
other party's compliance with this Section and other Sections of the Agreement
to ensure such compliance.

     6.4  RESPONSIBILITIES OF GTC FOR THE hSA PROGRAM.


          (a) THE hSA PROGRAM. The GTC Team shall consult with the ACT Team
regarding the transfection of [*****] into [*****] and the selection of [*****].

          (b) [*******]. The GTC Team shall assist the ACT Team by providing all
necessary [******] jointly deemed necessary by the parties for use in the hSA
Program, including, without limitation, the [*****] and/or other suitable
selectable markers.

          (c) IDENTIFICATION OF TRANSGENIC LINES AND ANIMALS. GTC shall provide
all materials and resources necessary for the identification and evaluation of
[*****]. Such materials shall include, without limitation, DNA probes and
polymerase chain reaction ("PCR") primers.

          (d) OTHER EXPERTISE. The GTC Team shall provide additional expertise,
as reasonably necessary, during the course of the hSA Program, including,
without limitation, lactation induction and pharmaceutical protein purification,
characterization and regulatory advice.

          (e) CHARACTERIZATION OF hSA COWS. Following the birth of cows
generated during the hSA Program, GTC shall characterize individual animals
derived from specific recombinant cell lines and elect whether to expand the hSA
Cows from select cell lines. Characterization shall be comprised of genotyping,
animal health and measurement of the levels of hSA in the induced and/or natural
lactation of such hSA Cows.

7.   TERM AND TERMINATION.

     7.1  GENERAL. The licenses granted by ACT to GTC under Section 3.1(a) will
commence on the Effective Date and, unless sooner terminated as provided herein,
continue until the expiration of all ACT Patent Rights, whereupon the license
hereunder to GTC shall become paid-up and royalty free. The licenses granted by
GTC to ACT under Section 3.2(a) will commence on the Effective Date and, unless
sooner terminated as provided herein, continue until the expiration of all GTC
Patent Rights, whereupon the license hereunder to ACT shall become paid-up and
royalty free. This Agreement will commence on the Effective Date and, unless
sooner terminated as provided herein, continue until the expiration of all ACT
Patent Rights and GTC Patent Rights.

     7.2  TERMINATION FOR CAUSE. This Agreement may be terminated by either
party for breach by the other party of any material obligation arising
hereunder, by giving thirty (30) days

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                                      -12-


prior written notice to the other party specifying the cause of the termination;
provided, however, that if the breach is cured within the thirty (30) day
period, the notice shall be withdrawn and shall be of no effect.

     7.3  SURVIVAL OF OBLIGATIONS; RETURN OF CONFIDENTIAL INFORMATION.
Notwithstanding any termination of this Agreement, the obligations of the
parties under Section 10, as well as under any other provisions which by their
nature are intended to survive any such termination, shall survive and continue
in force. Upon any termination of this Agreement, each party shall promptly
return to the other party all written Confidential Information, and all copies
thereof, to the other party.

     7.4  SUBLICENSES.

          (a) GTC's SUBLICENSES. Upon termination of this Agreement, the
relevant provisions of any existing sublicenses of GTC shall be automatically
assigned to ACT, and ACT shall be bound by the terms of such sublicenses,
provided that the sublicensees continue to perform in accordance with their
respective sublicense agreements. Notwithstanding the foregoing, ACT's
obligations to any such sublicensee shall not be interpreted to extend beyond
any of its obligations to GTC hereunder with respect to the subject matter of
the sublicense.

          (b) ACT's SUBLICENSES. Upon termination of this Agreement, the
relevant provisions of any existing sublicenses of ACT shall be automatically
assigned to GTC, and GTC shall be bound by the terms of such sublicenses,
provided that the sublicensees continue to perform in accordance with their
respective sublicense agreements. Notwithstanding the foregoing, GTC's
obligations to any such sublicensee shall not be interpreted to extend beyond
any of its obligations to ACT hereunder with respect to the subject matter of
the sublicense.

8.   PAYMENTS.

     8.1  INITIAL PAYMENT. On the Effective Date, GTC will pay ACT the sum of
$1,000,000, $750,000 of which shall be in consideration of the license
granted to GTC from ACT in Section 3.1(a) of this Agreement, and $250,000 of
which shall be an advance payment which shall be fully creditable against ACT
services for which the parties have separately contracted, milestone payments
(including those listed in Section 8.3 below), royalties, sublicense revenues
or other payments payable or to become payable to ACT from GTC under this
Agreement or under any other agreement between the parties.

     8.2  SHARES OF GTC.

          (a) AUTHORIZATION OF ISSUANCE OF THE SHARES. As additional
consideration for the license granted to GTC from ACT in Section 3.1(a) of this
Agreement, GTC will issue to (x) ACT that number of shares of the Common Stock
of GTC, par value $0.01 per share ("ACT's Shares"), equal to the quotient
obtained by dividing (i) $[*****] by (ii) the average of the closing price of
the Common Stock of GTC on the NASDAQ National Market (or on a principal
national securities exchange on which the Common Stock is listed or admitted to
trading) for the five (5) trading days ending on the day prior to the Effective
Date of this Agreement and (y) the University that number of shares of the
Common Stock of GTC, par value $0.01 per share (the "University's Shares," and
together with ACT's Shares, the "Shares"), equal

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                                      -13-


to the quotient obtained by dividing (i) $[*****] by (ii) the average of the
closing price of the Common Stock of GTC on the NASDAQ National Market (or on a
principal national securities exchange on which the Common Stock is listed or
admitted to trading) for the five (5) trading days ending on the day prior to
the Effective Date of this Agreement.

          (b) ISSUANCE OF THE SHARES AND DELIVERY OF CERTIFICATES. Within five
(5) days after the Effective Date, GTC shall (i) issue the Shares in
consideration of the agreements of ACT and the University contained herein and
for no further consideration, (ii) deliver to ACT one or more stock certificates
representing ACT's Shares, such stock certificates to be registered in the name
of ACT or in such nominee name(s) as designated by ACT, and (iii) deliver to the
University one or more stock certificates representing the University's Shares,
such stock certificates to be registered in the name of the University or in
such nominee name(s) as designated by the University.

          (c) INVESTMENT REPRESENTATIONS. ACT and the University represent and
warrant to, and covenant with, GTC that:

              i.   ACT and the University are knowledgeable, sophisticated and
experienced in making, and are qualified to make, decisions with respect to
investments in shares presenting an investment decision like that involved in
the acquisition of the Shares, including investments in securities issued by
companies comparable to GTC, and have requested, received, reviewed and
considered all information they deem relevant in making an informed decision to
acquire the applicable Shares.

              ii.  ACT and the University are acquiring the applicable Shares in
the ordinary course of their businesses and for their own account for investment
only and with no present intention of distributing any of such Shares or any
arrangement or understanding with any other persons regarding the distribution
of such Shares.

              iii. ACT and the University understand that the Shares are
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from GTC in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances. In this connection, ACT and the University represent that they
are familiar with SEC Rule 144, as presently in effect, and understand the
resale limitations imposed thereby and by the Securities Act.

              iv.  ACT and the University will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of the Shares except
in compliance with the Securities Act, and the rules and regulations promulgated
thereunder.

              v.   ACT and the University each qualifies as an "accredited
investor" within the meaning of Rule 501(a)(3) of Regulation D promulgated under
the Securities Act and is a resident of the United States of America.

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                                      -14-


              vi.  It is understood that the certificates evidencing the Shares
shall bear the following legend unless and until the resale of the Shares
pursuant to an effective Registration Statement or until the Shares may be sold
under Rule 144 without restrictions:

     THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
     THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
     ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
     SECURITIES UNDER SUCH ACT OR, IF REQUESTED BY GTC, AN OPINION OF COUNSEL
     REASONABLY SATISFACTORY TO GTC AND ITS COUNSEL, THAT SUCH REGISTRATION IS
     NOT REQUIRED UNDER SUCH ACT.

          (d) RESTRICTION ON SALE OF SHARES. The Shares shall be "restricted
securities" and not eligible for resale under Rule 144 or otherwise until twelve
(12) months from the date of issuance, provided that thereafter one-twelfth
(1/12) of the Shares shall become saleable each month, and further provided that
ACT and the University agree to sell no more than 5,000 Shares in the aggregate
in any day.

     8.3  hSA MILESTONE PAYMENTS. GTC will pay to ACT the sum of [*****]. The
payments made under this Section 8.3 will represent full compensation for
activities conducted by ACT on the hSA Program through the date of completion of
the milestone.

     8.4  ROYALTIES, REPORTS AND RECORDS.

          (a) GTC ROYALTY OBLIGATIONS.

              i.   NET SALES OF hSA. GTC agrees to pay ACT, [*****] royalty of
[*****] percent ([*****]%) of Net Sales by GTC of ACT Products consisting of hSA
produced in the milk of hSA Cows, PROVIDED, HOWEVER, that in the event Net Sales
of ACT Products consisting of hSA produced in the milk of hSA Cows exceed
[*****], the royalty will thereafter be [*****]% of such Net Sales.

              ii.  NET SALES OF OTHER PRODUCTS. GTC agrees to pay ACT, on a
[*****], a royalty of [*****] percent ([*****]%) of the Net Sales by GTC of ACT
Products consisting of proteins (other than hSA) produced in the milk of
transgenic animals and ACT Services relating to such ACT Products, PROVIDED,
HOWEVER, that in the event Net Sales of ACT Products consisting of proteins
(other than hSA) produced in the milk of transgenic animals and ACT Services
relating to such Products exceed[*****], the royalty will thereafter be [*****]%
of such Net Sales.

          (b) ACT ROYALTY OBLIGATIONS. ACT will pay to GTC a royalty in the
amount of [*****] percent ([*****]%) of Net Sales by ACT of any GTC Products or
Services, PROVIDED,

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                                      -15-


HOWEVER, that in the event Net Sales of any GTC Products or Services exceed
[*****], the royalty will thereafter be [*****}% of such Net Sales.

     8.5  SUBLICENSE REVENUES.

          (a) GTC agrees to pay ACT [*****] ([*****]%) of any and all license
fees and up-front fees (whether paid in cash, equity of the sublicensee or other
consideration), royalties, milestone payments based on the sublicensee's
performance, and premiums over market value paid to GTC for equity investments
in GTC by the sublicensee, received in consideration of the grant of sublicenses
of the ACT Patent Rights or ACT Technology, however such sublicenses may be
characterized, but excluding payments for services of GTC, milestone payments
based on performance by GTC, or equity investments in GTC at market value ("GTC
Sublicense Revenues"). For the avoidance of doubt, no GTC Sublicense Revenues
shall be deemed received by GTC in connection with the sublicensing of the ACT
Patent Rights or ACT Technology to a third party in exchange for a license under
such third party's technology which is necessary for the manufacture or sale of
ACT Products or ACT Services, provided that no additional consideration (other
than the license under such third party's technology) is paid by such third
party for such sublicense.

          (b) ACT agrees to pay GTC [*****] percent ([*****]%) of any and all
license fees or up-front fees (whether paid in cash, equity of the sublicensee
or other consideration), milestone payments based on the sublicensee's
performance, royalties or premiums over market value paid to ACT for equity
investments in ACT by the sublicensee, received in consideration of the grant of
sublicenses of GTC Patent Rights or GTC Technology, however such sublicenses may
be characterized, but excluding payments for services of ACT, milestone payments
based on performance by ACT, or equity investments in ACT at market value ("ACT
Sublicense Revenues"). For the avoidance of doubt, no ACT Sublicense Revenues
shall be deemed received by ACT in connection with the sublicensing of the GTC
Patent Rights or GTC Technology to a third party in exchange for a license under
such third party's technology which is necessary for the manufacture or sale of
GTC Products or GTC Services, provided that no additional consideration (other
than the license under such third party's technology) is paid by such third
party for such sublicense.

     8.6  MINIMUM ANNUAL PAYMENTS.

          (a) Effective January 5, 2000, GTC shall pay to ACT an annual fee of
$[*****] to maintain exclusivity of the license granted under Section 3.1(a)
(the "Exclusivity Fee"). Except as provided below, the Exclusivity Fee shall be
payable in advance on January 5th of each year.

          (b) If, by June 30, 2001, GTC enters into agreements with
third-party(s) to develop two (2) products covered by the ACT Patent Rights
and/or using the ACT Technology

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                                      -16-


intended for use as therapeutics, the Exclusivity Fee shall remain at $[*****]
per year; otherwise the Exclusivity Fee shall increase to $[*****] per year
thereafter. In the event of unanticipated technical difficulties, which
technical difficulties are confirmed by ACT, the parties may extend the above
deadline of June 30, 2001 to a date mutually agreed on.

          (c) Provided that the Exclusivity Fee was not already raised to
$[*****] pursuant to Section 8.6(b), then if, by June 30th of every second year
following June 30, 2001 (i.e., June 30, 2003; June 30, 2005; etc.), GTC enters
into agreements with third party(s) to develop two (2) additional products
covered by the ACT Patent Rights and/or using the ACT Technology intended for
use as therapeutics, the Exclusivity Fee shall remain at $[*****] per year;
otherwise the Exclusivity Fee shall increase to $[*****] per year thereafter.

          (d) If the Exclusivity Fee increases to $[*****] in any year pursuant
to Section 8.6(b) or (c) above, such increase shall be applied PRO RATA only for
the remainder of such year (i.e., the Exclusivity Fee due for the remainder of
such year shall be [*****] payable on or about July 1st of such year, and
thereafter the Exclusivity Fee shall be $ [*****] per year, payable on or about
January 5th of each subsequent year).

          (e) The above fees will be creditable by GTC against amounts due or to
become due to ACT thereafter under this Agreement or under any other agreement
between the parties including, but not limited to, fees for ACT services,
sublicense revenue, and royalties.

          (f) GTC may elect to allow the license granted under Section 3.1(a) to
become non-exclusive at any time by electing not to pay the applicable
Exclusivity Fee.

          (g) If at any time the license granted under Section 3.1(a) to GTC
hereunder becomes non-exclusive, (i) the royalties and other fees payable by GTC
to ACT hereunder shall be automatically reduced to the most favorable rates
charged by ACT to its other licensees of such rights, and (ii) the license
granted by GTC to ACT with respect to the GTC Licensed Property under Section
3.2(a) shall be restricted such that ACT shall not be permitted to use or
sublicense the use of the GTC Licensed Property in programs with GTC's
competitors, as determined in GTC's reasonable discretion.

     8.7  PAYMENTS IN U.S. DOLLARS. All payments due under this Agreement shall
be payable in United States dollars. Conversion of foreign currency to U.S.
dollars shall be made at the conversion rate reported in The Wall Street Journal
on the last working day of the calendar quarter to which the payment relates.
Such payments shall be without deduction of exchange, collection, or other
charges.

     8.8  BLOCKED PAYMENTS. If by law, regulation, or fiscal policy of a
particular country, conversion into United States dollars or transfer of funds
of a convertible currency to the United States is restricted or forbidden, the
party having the payment obligation (the "Payor") shall give

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                                      -17-


the other party (the "Payee") prompt notice in writing and shall pay the royalty
and other amounts due through such means or methods as are lawful in such
country as Payee may reasonably designate. Failing the designation by Payee of
such lawful means or methods within thirty (30) days after such notice is given
to Payee, Payor shall deposit such royalty payment in local currency to the
credit of Payee in a recognized banking institution selected by Payor and
identified in a written notice to Payee by Payor, and such deposit shall fulfill
all obligations of Payor to Payee with respect to such royalties.

     8.9  AUDIT RIGHTS

          (a) Each party shall submit a report to the other party quarterly
within 45 days after the end of each calendar quarter during the term of this
Agreement stating in each such report the aggregate sales and payments with
respect to ACT Products and Services, or GTC Products and Services, as
applicable, during the preceding calendar quarter and the royalty and sublicense
revenue as provided herein. Such reports shall also include a statement of any
credits claimed (including without limitation any credits under Sections 3.1(e),
8.1, 8.4(a)(ii) and 8.6(e) hereunder) during the preceding calendar quarter. The
payment of royalty and sublicense revenue amounts shall be made concurrently
with such reports.

          (b) Each party shall keep full, complete, true and accurate books of
account containing all particulars relating to the manufacture and sales with
respect to ACT Products and Services, or GTC Products and Services, as
applicable, and any allowed credits, which may be necessary to ascertain and
verify the royalties and sublicense revenue payable to the other party. Said
books and accounts shall be kept at the respective party's principal place of
business.

          (c) At the request of a party or the University, but not more than
once in each calendar year, the other party shall permit an independent
certified public accountant selected by the requesting party (or the
University's internal accountants) to have access, during regular business
hours of the audited party, to such records to determine, for any calendar
quarter commencing not more than three years prior to the date of such
request, the completeness and accuracy of such books and records, and the
accuracy of reports submitted to the other party and/or payments made to the
other party. If any such inspection discloses an error in any royalty or
sublicense revenue payment, the audited party shall pay to the other party,
within thirty (30) days of the discovery of the error, (a) all deficiencies
in royalty or sublicense revenue payments, (b) interest on such deficiencies
from the date such royalty or sublicense revenue payment was due until the
date paid at the rate equal to [*****] percent ([*****]%) per month, and (c)
if such error is in excess of [*****] percent ([*****]%) of any royalty or
sublicense revenue payment, the cost of the audit. In all other cases, the
costs of the audit shall be paid for by the party conducting the audit. All
information disclosed pursuant to an audit shall be deemed Confidential
Information subject to the provisions of Section 10 hereof.

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                                      -18-


9.   PROPRIETARY RIGHTS.

     9.1  OWNERSHIP.

          (a) GTC. GTC shall own all hSA Cows, GTC Patent Rights, GTC
Technology, GTC Developments, all proprietary [*****], and [*****] generated
with GTC's [*****]

          (b) ACT. ACT or its licensor(s) shall own the ACT Patent Rights, ACT
Technology, and ACT Developments.

          (c) JOINT DEVELOPMENTS. The parties shall jointly own all Joint
Developments.


     9.2  ACT PATENT RIGHTS.

          (a) RESPONSIBILITY; COSTS. ACT will retain primary responsibility for
filing, prosecution and maintenance of the ACT Patent Rights in all countries
and for all ACT Technology where GTC requests patent protection, using patent
counsel approved by GTC, which approval shall not be unreasonably withheld or
delayed. The costs of such filing, prosecution and maintenance shall be borne by
ACT, except that GTC will reimburse ACT for such costs for any countries where
GTC requests patent protection, but where ACT did not otherwise intend to seek
protection. Except as provided above, ACT and GTC will pay the fees and expenses
of their respective outside patent counsel for the activities described in this
Section 9.2.

          (b) CONSULTATION; ABANDONMENT. GTC's patent counsel shall be given a
reasonable opportunity to comment on all proposed patent filings ("Filings") and
responses ("Responses") to patent office actions or other patent office
communications (collectively, "Office Communications") with respect to ACT
Patent Rights. In the case of Filings, and in the case of Office Communications
to which ACT must respond in a period of time equal to or exceeding sixty (60)
days (including extensions), ACT shall deliver its proposed Filing or Response
to GTC for comment not later than sixty (60) days prior to the final patent
office deadline for such Filing or Response, and ACT will not unreasonably
refuse to accept any suggestions of GTC's patent counsel regarding such Filing
or Response, provided that GTC's patent counsel provides such comments to ACT's
patent counsel not less than thirty (30) days prior to the final patent office
deadline for such Filing or Response. In the case of Office Communications to
which ACT must respond in less than sixty (60) days, which deadline may not be
extended, ACT shall deliver its proposed Response to GTC for comment not later
than ten (10) days after ACT's receipt of such Office Communication, and ACT
will not unreasonably refuse to accept any suggestions of GTC's patent counsel
regarding such Response, provided that GTC's patent counsel provides such
comments to ACT's patent counsel not less than ten (10) days prior to the final
patent office deadline for such Response. To the extent that any such

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                                      -19-


patent matter relates solely to the GTC Field and not to the ACT Field, GTC's
patent counsel will have the final right to determine the resolution of the
matter, subject to the right of the University to consultation as provided in
the UMASS License. ACT will not allow any patent or patent application within
the ACT Patent Rights to become expired or abandoned without giving GTC the
right to assume responsibility for such patent or patent application, and if GTC
so elects, ACT will assign such patent or patent application to GTC, and GTC
will thereafter assume control thereof and all expenses related thereto. With
respect to the UMASS Patent Rights, GTC's rights under this subsection 9.2(b)
shall be subject to the rights of the University under Section 6 of the UMASS
License.

          (c) DEFENSE OF ACT PATENT RIGHTS. ACT and GTC will consult with one
another in the event of a third party claim that a patent within the ACT
Patent Rights in the GTC Field is invalid, unenforceable, or non-infringing.
ACT will have the first right to control the defense of such claim at its
expense, but GTC will have the right to share in the control of the defense
by sharing 50% of the costs thereof, but ACT shall have the final decision in
the event of a disagreement regarding the conduct of the defense. If ACT
elects not to defend, GTC may do so at its expense and under its control, but
shall have the right to offset such expenses against royalties otherwise due
to ACT (other than royalties attributable to the UMASS Patent Rights) until
such time as the ACT Patent Rights have been upheld, provided that such
offset shall not exceed [*****]% of such royalties. Notwithstanding the
foregoing, neither party will enter into a settlement that admits the
invalidity, unenforceability, or non-infringement of any ACT Patent Rights
without consent of the other party. With respect to the UMASS Patent Rights,
GTC's rights under this subsection 9.2(c) shall be subject to the rights of
the University under Section 6 of the UMASS License.

          (d) PROSECUTION OF INFRINGERS OF ACT PATENT RIGHTS. GTC shall have the
first right to prosecute infringers of the ACT Patent Rights in the GTC Field at
its expense, and shall retain all recoveries arising out of such prosecutions by
GTC. ACT shall have the right to prosecute such infringers if GTC elects not to
do so, at its expense, and shall retain all recoveries arising out of such
prosecutions by ACT. Neither party will enter into a settlement that admits the
invalidity, unenforceability, or non-infringement of any ACT Patent Rights
without consent of the other party. With respect to the UMASS Patent Rights,
GTC's rights under this subsection 9.2(d) shall be subject to the rights of the
University under Section 6 of the UMASS License.

     9.3  GTC PATENT RIGHTS.

          (a) RESPONSIBILITY; COSTS. GTC will retain primary responsibility for
filing, prosecution and maintenance of the GTC Patent Rights in all countries
and for all GTC Technology where ACT requests patent protection, using patent
counsel approved by ACT, which approval shall not be unreasonably withheld or
delayed. The costs of such filing, prosecution and maintenance shall be borne by
GTC, except that ACT will reimburse GTC for such costs for any countries where
ACT requests patent protection, but where GTC did not otherwise intend to seek
protection. Except as provided above, GTC and ACT will pay the fees and expenses
of their respective outside patent counsel for the activities described in this
Section 9.3.

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                                      -20-


          (b) CONSULTATION; ABANDONMENT. ACT's patent counsel shall be given a
reasonable opportunity to comment on all proposed patent filings ("Filings") and
responses ("Responses") to patent office actions or other patent office
communications (collectively, "Office Communications") with respect to GTC
Patent Rights. In the case of Filings, and in the case of Office Communications
to which GTC must respond in a period of time equal to or exceeding sixty (60)
days (including extensions), GTC shall deliver its proposed Filing or Response
to ACT for comment not later than sixty (60) days prior to the final patent
office deadline for such Filing or Response, and GTC will not unreasonably
refuse to accept any suggestions of ACT's patent counsel regarding such Filing
or Response, provided that ACT's patent counsel provides such comments to GTC's
patent counsel not less than thirty (30) days prior to the final patent office
deadline for such Filing or Response. In the case of Office Communications to
which GTC must respond in less than sixty (60) days, which deadline may not be
extended, GTC shall deliver its proposed Response to ACT for comment not later
than ten (10) days after GTC's receipt of such Office Communication, and GTC
will not unreasonably refuse to accept any suggestions of ACT's patent counsel
regarding such Response, provided that ACT's patent counsel provides such
comments to GTC's patent counsel not less than ten (10) days prior to the final
patent office deadline for such Response. To the extent that any such patent
matter relates solely to the ACT Field and not to the GTC Field, ACT's patent
counsel will have the final right to determine the resolution of the matter. GTC
will not allow any patent or patent application within the GTC Patent Rights to
become expired or abandoned without giving ACT the right to assume
responsibility for such patent or patent application, and if ACT so elects, GTC
will assign such patent or patent application to ACT, and ACT will thereafter
assume control thereof and all expenses related thereto.

          (c) DEFENSE OF GTC PATENT RIGHTS. GTC and ACT will consult with one
another in the event of a third party claim that a patent within the GTC
Patent Rights in the ACT Field is invalid, unenforceable, or non-infringing.
GTC will have the first right to control the defense of such claim at its
expense, but ACT will have the right to share in the control of the defense
by sharing 50% of the costs thereof, but GTC shall have the final decision in
the event of a disagreement regarding the conduct of the defense. If GTC
elects not to defend, ACT may do so at its expense and under its control, but
shall have the right to offset such expenses against royalties otherwise due
to GTC until such time as the GTC Patent Rights have been upheld, provided
that such offset shall not exceed [*****]% of such royalties. Notwithstanding
the foregoing, neither party will enter into a settlement that admits the
invalidity, unenforceability, or non-infringement of any GTC Patent Rights
without consent of the other party.

          (d) PROSECUTION OF INFRINGERS OF GTC PATENT RIGHTS. ACT shall have the
first right to prosecute infringers of the GTC Patent Rights in the ACT Field at
its expense, and shall retain all recoveries arising out of such prosecutions by
ACT. GTC shall have the right to prosecute such infringers if ACT elects not to
do so, at its expense, and shall retain all recoveries arising out of such
prosecutions by GTC. Neither party will enter into a settlement that admits the
invalidity, unenforceability, or non-infringement of any GTC Patent Rights
without consent of the other party.

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                                      -21-


     9.4  JOINT PATENT RIGHTS.

          (a) RESPONSIBILITY; COSTS. GTC will retain primary responsibility for
filing, prosecution and maintenance of the Joint Patent Rights in all countries,
using patent counsel approved by ACT, which approval shall not be unreasonably
withheld or delayed. The costs of such filing, prosecution and maintenance shall
be borne equally by GTC and ACT, except that ACT will bear all of such costs in
any countries where ACT requests patent protection, but where GTC did not
otherwise intend to seek protection. If either party fails to pay its share of
such costs with respect to any Joint Patent Rights, its exclusive license from
the other party under Article 3 with respect to such Joint Patent Rights shall
be automatically revoked, but the exclusive license from such party to the other
party with respect to such Joint Patent Rights shall remain effective.

          (b) CONSULTATION; ABANDONMENT. ACT's patent counsel shall be given a
reasonable opportunity to comment on all proposed patent filings ("Filings") and
responses ("Responses") to patent office actions or other patent office
communications (collectively, "Office Communications") with respect to Joint
Patent Rights. In the case of Filings, and in the case of Office Communications
to which GTC must respond in a period of time equal to or exceeding sixty (60)
days (including extensions), GTC shall deliver its proposed Filing or Response
to ACT for comment not later than sixty (60) days prior to the final patent
office deadline for such Filing or Response, and GTC will not unreasonably
refuse to accept any suggestions of ACT's patent counsel regarding such Filing
or Response, provided that ACT's patent counsel provides such comments to GTC's
patent counsel not less than thirty (30) days prior to the final patent office
deadline for such Filing or Response. In the case of Office Communications to
which GTC must respond in less than sixty (60) days, which deadline may not be
extended, GTC shall deliver its proposed Response to ACT for comment not later
than ten (10) days after GTC's receipt of such Office Communication, and GTC
will not unreasonably refuse to accept any suggestions of ACT's patent counsel
regarding such Response, provided that ACT's patent counsel provides such
comments to GTC's patent counsel not less than ten (10) days prior to the final
patent office deadline for such Response. To the extent that any such patent
matter relates solely to the ACT Field and not to the GTC Field, ACT's patent
counsel will have the final right to determine the resolution of the matter. GTC
will not allow any patent or patent application within the Joint Patent Rights
to become expired or abandoned without giving ACT the right to assume
responsibility for such patent or patent application, and if ACT so elects, GTC
will assign such patent or patent application to ACT, and ACT will thereafter
assume control thereof and all expenses related thereto.

          (c) DEFENSE OF JOINT PATENT RIGHTS. GTC and ACT will consult with one
another in the event of a third party claim that a patent within the Joint
Patent Rights is invalid, unenforceable, or non-infringing. GTC will have the
first right to control the defense of such claim at its expense, but ACT will
have the right to share in the control of the defense by sharing 50% of the
costs thereof, but GTC shall have the final decision in the event of a
disagreement regarding the conduct of the defense. If GTC elects not to defend,
ACT may do so at its expense and under its control, but shall have the right to
offset such expenses against royalties otherwise due to GTC. Notwithstanding the
foregoing, neither party will enter into a settlement that admits the
invalidity, unenforceability, or non-infringement of any Joint Patent Rights
without consent of the other party.

                                      -22-


          (d) PROSECUTION OF INFRINGERS OF JOINT PATENT RIGHTS. ACT shall have
the first right to prosecute infringers of the Joint Patent Rights in the ACT
Field at its expense, and shall retain all recoveries arising out of such
prosecutions by ACT. GTC shall have the right to prosecute such infringers if
ACT elects not to do so, at its expense, and shall retain all recoveries arising
out of such prosecutions by GTC. GTC shall have the first right to prosecute
infringers of the Joint Patent Rights in the GTC Field at its expense, and shall
retain all recoveries arising out of such prosecutions by GTC. ACT shall have
the right to prosecute such infringers if GTC elects not to do so, at its
expense, and shall retain all recoveries arising out of such prosecutions by
ACT. Neither party will enter into a settlement that admits the invalidity,
unenforceability, or non-infringement of any Joint Patent Rights without consent
of the other party.

     9.5  COOPERATION. GTC and ACT shall cooperate fully in the preparation,
filing, prosecution, and maintenance of all ACT Patent Rights, GTC Patent
Rights, and Joint Patent Rights. Such cooperation includes, without limitation,
(i) promptly executing all papers and instruments or requiring employees of GTC
or ACT to execute such papers and instruments as reasonable and appropriate so
as to enable GTC or ACT to file, prosecute, and maintain such Patent Rights in
any country; and (ii) promptly informing the other party of matters that may
affect the preparation, filing, prosecution, or maintenance of any such Patent
Rights (such as becoming aware of an additional inventor who is not listed as an
inventor in a patent application).

10.  CONFIDENTIAL INFORMATION.

     10.1 NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During the term of this
Agreement and for five (5) years thereafter, neither party nor the University
will disclose or make available to any person outside its organization the
disclosing party's Confidential Information, except that each party will have
the right to disclose such of the other party's Confidential Information
consisting of ACT Technology or GTC Technology, as applicable, to third parties
to which sublicensing is permitted under Section 3.1(b) or 3.2(b), provided that
such third parties are bound to protect the confidentiality of such Confidential
Information. Each party may disclose the other party's Confidential Information
to persons within its organization and that of its Affiliates to the extent
necessary to further the purposes of this Agreement, provided that all such
persons are bound to protect the confidentiality of such Confidential
Information. Each party may disclose the other party's Confidential Information
if required by law or governmental authority, provided that prior notice of any
such disclosure is given to the other party and that the disclosing party
cooperates with the other party in seeking protective orders or other
restrictions on disclosure.

     10.2 USE OF CONFIDENTIAL INFORMATION. Each party will use the Confidential
Information of the other party only for the purposes contemplated by this
Agreement.

                                      -23-


11.  REPRESENTATIONS AND WARRANTIES.

     11.1 REPRESENTATIONS AND WARRANTIES BY ACT. ACT represents and warrants to
GTC that:

          (a) ACT owns or has a licensable interest in the ACT Licensed Property
and has the right to grant to GTC the licenses set forth above. As of the
Effective Date, GTC is in receipt of proposed claims to an ACT patent concerning
[*****] which ACT represents it believes will issue in the U.S. in the near
term.

          (b) ACT has provided GTC with a copy of the UMASS License, as amended,
with certain terms redacted, and ACT represents and warrants that the said copy
is a true and complete (except as redacted) copy of the UMASS License as of the
Effective Date.

          (c) ACT shall have the unrestricted right to transfer good and
marketable title to the Milk Products and the hSA Cows to GTC pursuant to this
Agreement, free and clear of any lien, charge or encumbrance created or
permitted by ACT;

          (d) the Milk Products and hSA Cows will conform to the applicable
specifications set forth in SCHEDULE B. The parties agree that any hSA Cows that
do not conform to the specifications set forth in SCHEDULE B shall be destroyed.

          (e) the Milk Products shall not be (i) adulterated or misbranded
within the meaning of the Federal Food, Drug and Cosmetic Act, as amended, or
within the meaning of any applicable state or municipal law in which the
definitions of adulteration and misbranding are substantially the same as those
contained in the Federal Food, Drug and Cosmetic Act, as such Act and laws are
constituted and effective at the time of delivery of the Milk Products, or (ii)
an article which may not be introduced into interstate commerce under the
provisions of Sections 404, 505 or 512 of such Act, as amended;

          (f) as of the date of delivery of each hSA Cow, each hSA Cow and the
Milk Products of such hSA Cow have been manufactured in accordance with all
current material applicable federal, state and local laws and regulations
relating to ACT's activities under this Agreement, including without limitation
applicable GMPs and GAPs;

          (g) with respect to the ACT Patent Rights and ACT Technology only, to
the knowledge of ACT, the commercialization of the Milk Products will not
infringe the patent or other intellectual property rights of any third party;
and

          (h) the execution of this Agreement and performance of the
transactions contemplated by such agreements have been approved by the ACT Board
Of Directors and will

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                                      -24-


not conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, any agreement to which ACT is a
party or by which ACT is bound.

     11.2 REPRESENTATION AND WARRANTY BY GTC. GTC represents and warrants to ACT
that:

          (a) it owns the GTC Licensed Property and has the right to grant to
ACT the licenses set forth above;

          (b) it shall have the unrestricted right to transfer good and
marketable title to all [*****] and/or other suitable selectable markers used in
the hSA Program and all materials and resources necessary for the identification
and evaluation of [*****] including, without limitation, DNA probes and
polymerase chain reaction ("PCR") primers;

          (c) the execution of this Agreement and performance of the
transactions contemplated by such agreements have been approved by all necessary
corporate action and will not conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute a default under, any
agreement to which GTC is a party or by which GTC is bound; and

          (d) to the knowledge of GTC, the transgenic activities described in
SCHEDULE B performed or to be performed by ACT will not infringe the patent or
other intellectual property rights of any third party.

     11.3 DISCLAIMER. Except as expressly set forth in Section 11.1(g) and
11.2(d), neither party makes any representation or warranty as to the validity
or scope of the ACT Licensed Property or the GTC Licensed Property, nor does
either party make any representation or warranty that the exercise of the rights
granted to either party with respect to the ACT Licensed Property or the GTC
Licensed Property will not infringe the patent or other intellectual property
rights of any third party.

12.  INDEMNIFICATION.

     12.1 INDEMNIFICATION BY ACT. ACT agrees to defend, indemnify and hold
harmless GTC, the University, and their Affiliates, agents, directors, officers
and employees, at ACT's cost and expense, from and against any and all losses,
costs, liabilities, damages, fees and expenses, including reasonable attorneys'
fees and expenses with respect to claims by third parties:

          (a) arising out of any breach by ACT of any representation or warranty
contained in Section 11.1; and

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                                      -25-


          (b) in the nature of product liability or otherwise attributable to
the making, using, development, testing, registration, distribution and/or sale
by or through ACT of any GTC Products or GTC Services under this Agreement.

     12.2 INDEMNIFICATION BY GTC. GTC agrees to defend, indemnify and hold
harmless ACT, the University, and their Affiliates, agents, directors, officers
and employees, at GTC's cost and expense, from and against any and all losses,
costs, liabilities, damages, fees and expenses, including reasonable attorneys'
fees and expenses with respect to claims by third parties:

          (a) arising out of any breach by GTC of any representation or warranty
contained in Section 11.2; and

          (b) in the nature of product liability or otherwise attributable to
the making, using, development, testing, registration, distribution and/or sale
by or through GTC of any ACT Products or ACT Services under this Agreement; and

          (c) that the transgenic activities of ACT under the hSA Program
described in SCHEDULE B infringe the patent or other intellectual property
rights of such third parties.

     12.3 INDEMNIFICATION CLAIMS. Each party shall give the other party prompt
notice of any claim for which indemnification under this Section 12 is or may be
applicable and will cooperate with the indemnifying party in the defense or
settlement of such claim at the indemnifying party's expense. The indemnifying
party shall be required to provide and be entitled to control the defense of any
claim covered hereunder (including the right to settle it at the sole discretion
of the indemnifying party) with counsel reasonably satisfactory to the other
party which may, at its own expense, participate in the defense of any claim
after the indemnifying party assumes control of the defense thereof. The
indemnification obligations in this Section 12 shall not apply to amounts paid
in settlement of such claim if such settlement is effected without the consent
of the indemnifying party, which consent shall not be unreasonably withheld or
delayed. The failure of the indemnified party to deliver notice to the
indemnifying party promptly after the commencement of any such action, if
prejudicial to the indemnifying party's ability to defend such action, shall
relieve the indemnifying party of any liability to the indemnified party under
this Section 12, but the failure to promptly deliver notice to the indemnifying
party will not relieve it of any liability that it may have to the indemnified
party other than under this Section 12.

13.  LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY (OR ITS AFFILIATES,
SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, OR AGENTS) BE LIABLE FOR ANY
SPECIAL, INDIRECT, RELIANCE, INCIDENTAL, EXEMPLARY, COVER, OR CONSEQUENTIAL
DAMAGES, INCLUDING LOSS OF PROFITS AND GOODWILL, EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, REGARDLESS OF THE THEORY OF
LIABILITY.

14.  INSURANCE. Prior to the commencement of the first Phase I clinical trial of
any proteins/products produced in hSA Cows developed by ACT under this
Agreement, each party shall obtain and maintain, at all times during the term of
this Agreement, general liability

                                      -26-


insurance with appropriate bodily injury, death and property damage limits. Upon
request, a party shall furnish a certificate of insurance signed by an
authorized representative of its insurance underwriter evidencing such coverage
and providing for at least thirty (30) days' prior written notice of any
cancellation, termination or reduction of coverage.

15.  MISCELLANEOUS.

     15.1 ASSIGNMENT. This Agreement, and the rights and obligations thereunder,
may not be assigned or transferred, in whole or in part, by either party without
the prior written consent of the other party, except that (a) either party may
assign this Agreement to an Affiliate, provided that such party remains
primarily liable and/or responsible for the performance of such obligations, and
provided further that such Affiliate agrees to be bound to the terms and
conditions of this Agreement, and (b) either party may assign this agreement in
connection with the merger, consolidation or sale of all or substantially all of
the assets of such party which pertain to the subject matter of this Agreement.

     15.2 NOTICES. Notices shall be in writing and delivered by hand or sent by
nationally recognized overnight delivery service, prepaid registered or
certified air mail, or by facsimile confirmed by prepaid first class, registered
or certified mail letter, and shall be deemed to have been properly served to
the addressee upon receipt of such written communication.

          Addresses: In the case of GTC, the proper address for communications
          shall be:

                Genzyme Transgenics Corporation
                Five Mountain Road
                Framingham, Massachusetts 01701-9322
                Attn: President
                Fax: (508) 370-3797

          with a copy to:       Palmer & Dodge
                                One Beacon Street
                                Boston, MA 02108
                                Fax: (617) 227-4420

          and in the case of ACT, the proper address for communications and all
          payments shall be:

                Advanced Cell Technology, Inc.
                One Innovation Drive
                Worcester, Massachusetts 01605
                Attn: President
                Fax: (508) 756-0931

          with a copy to:       Pierce Atwood
                                One Monument Square
                                Portland, ME
                                Fax: (207) 791-1350

                                      -27-


     15.3 CHOICE OF LAW. This Agreement is subject to and governed by the laws
of the Commonwealth of Massachusetts, without regard to principles of conflicts
of law thereof.

     15.4 DISPUTE RESOLUTION. Any dispute arising under this Agreement which is
not promptly settled by the parties shall be referred to the Chief Executive
Officers of the parties. The Chief Executive Officers will meet for negotiations
within fifteen (15) days of such referral. If the dispute has not been resolved
within thirty (30) days (which period may be extended by mutual agreement),
subject to any rights to injunctive relief and unless otherwise specifically
provided for herein, any dispute will be submitted to binding arbitration. The
arbitration shall be conducted before a single arbitrator in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (AAA),
which shall administer the arbitration and act as appointing authority. The
arbitration shall take place in Boston, Massachusetts, and shall be the
exclusive forum for resolving such dispute, controversy or claim. The decision
of the arbitrator shall be final and binding upon the parties. Notwithstanding
anything contained above to the contrary, each party shall have the right to
institute judicial proceedings against the other party in order to enforce the
instituting party's rights hereunder through specific performance, injunction or
similar equitable relief.

     15.5 COMPLIANCE WITH LAW BY GTC. GTC shall comply with, and shall ensure
that its sublicensees comply with, all local, state, federal and international
laws and regulations relating to the development, manufacture, use, and sale of
ACT Products and ACT Services. GTC shall, and shall cause its sublicensees to,
comply with the following:

          (a) GTC and its sublicensees shall obtain all necessary approvals from
the FDA and any similar governmental authorities of any foreign jurisdiction in
which GTC or a permitted sublicensee intends to make, use, or sell ACT Products
or to perform ACT Services.

          (b) GTC and its sublicensees shall comply with all United States laws
and regulations controlling the export of certain commodities and technical
data, including without limitation all Export Administration Regulations of the
United States Department of Commerce. Among other things, these laws and
regulations prohibit, or require a license for, the export of certain types of
commodities and technical data to specified countries. GTC hereby gives written
assurance that it will comply with, and will cause its sublicensees to comply
with, all United States export control laws and regulations, that it bears sole
responsibility for any violation of such laws and regulations by itself or its
sublicensees, and that it will indemnify, defend, and hold ACT harmless (in
accordance with Section 12.1) for the consequences of any such violation.

          (c) To the extent that any invention claimed in the ACT Licensed
Property has been partially funded by the United States government, and only to
the extent required by applicable laws and regulations, GTC agrees that any ACT
Products used or sold in the United States will be manufactured substantially in
the United States or its territories. Current law provides that if domestic
manufacture is not commercially feasible under the circumstances, ACT and/or the
University may seek a waiver of this requirement from the relevant federal
agency on behalf of GTC and, upon GTC's request, shall cooperate with GTC in
seeking such a waiver.

                                      -28-


     15.6 COMPLIANCE WITH LAW BY ACT. ACT shall comply with, and shall ensure
that its sublicensees comply with, all local, state, federal and international
laws and regulations relating to the development, manufacture, use, and sale of
GTC Products and GTC Services. ACT shall, and shall cause its sublicensees to,
comply with the following:

          (a) ACT and its sublicensees shall obtain all necessary approvals from
the FDA and any similar governmental authorities of any foreign jurisdiction in
which ACT or a permitted sublicensee intends to make, use, or sell GTC Products
or to perform GTC Services.

          (b) ACT and its sublicensees shall comply with all United States laws
and regulations controlling the export of certain commodities and technical
data, including without limitation all Export Administration Regulations of the
United States Department of Commerce. Among other things, these laws and
regulations prohibit, or require a license for, the export of certain types of
commodities and technical data to specified countries. ACT hereby gives written
assurance that it will comply with, and will cause its sublicensees to comply
with, all United States export control laws and regulations, that it bears sole
responsibility for any violation of such laws and regulations by itself or its
sublicensees, and that it will indemnify, defend, and hold GTC harmless (in
accordance with Section 12.1) for the consequences of any such violation.

     15.7 NO ENCUMBRANCES. GTC will not create or incur or cause to be incurred
or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or
other security interest of any kind upon the ACT Licensed Property without the
prior written consent of the University and ACT. ACT will not create or incur or
cause to be incurred or to exist any lien, encumbrance, mortgage, pledge,
charge, restriction or other security interest of any kind upon the GTC Licensed
Property without the prior written consent of GTC.

     15.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

     15.9 HEADINGS. All headings contained in this Agreement are for convenience
of reference only and shall not be considered in construing this Agreement.

     15.10 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective permitted successors and assigns.
The parties acknowledge that the University is a third party beneficiary of the
applicable provisions of Sections 3.1, 4.3(a), 5.1, 8.2, 8.9(c), 9.2, 12.1,
12.2, 15.5(c), 15.7, 15.10, and 15.14 hereof, with the right to enforce such
provisions against the applicable party.

     15.11 AMENDMENT AND WAIVER. This Agreement may be amended, supplemented, or
otherwise modified only by means of a written instrument signed by both parties.
Any waiver of any rights or failure to act in a specific instance shall relate
only to such instance and shall not be construed as an agreement to waive any
rights or fail to act in any other instance, whether or not similar.

     15.12 SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect,

                                      -29-


such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, and all other provisions shall remain in full force
and effect. If any of the provisions of this Agreement is held to be excessively
broad or invalid, illegal or unenforceable in any jurisdiction, it shall be
reformed and construed by limiting and reducing it so as to be enforceable to
the maximum extent permitted by law in conformance with its original intent.

     15.13 ENTIRE AGREEMENT. This Agreement, together with the UMASS License,
constitute the entire agreement of the parties with regard to its subject
matter, and supersedes all previous written or oral representations, agreements
and understandings between the parties. The parties acknowledge and agree that
there are no representations, warranties, arrangements, promises or agreements
outstanding between them, whether oral or in writing, other than those contained
or referred to in this Agreement or the UMASS License.

     15.14 PUBLICITY. Neither party, nor any of its Affiliates, shall originate
any publicity, news release or other public announcement ("Announcements"),
written or oral, relating to this Agreement or the existence of an arrangement
between the parties, without the prior written approval of the other party,
which approval shall not be unreasonably withheld, except as otherwise required
by law. Any references to the University in such Announcements shall be subject
to the approval of the University. The foregoing notwithstanding, ACT and GTC
shall have the right to make such Announcements without the consent of the other
party or the University, as applicable, in any prospectus, offering memorandum,
or other document or filing required by applicable securities laws or other
applicable law or regulation, provided that such party shall have given the
other party or the University, as applicable, at least ten (10) days' prior
written notice of the proposed text for the purpose of giving the other party or
the University, as applicable, the opportunity to comment on such text.

     15.15 NO IMPLIED LICENSES. No implied licenses are granted pursuant to the
terms of this Agreement. No license rights shall be created by implication or
estoppel.

     15.16 NO AGENCY. Nothing herein shall be deemed to constitute either party
as the agent or representative of the other party, or both parties as joint
venturers or partners for any purpose. Each party shall be an independent
contractor, not an employee or partner of the other party, and the manner in
which each party renders its services under this Agreement shall be within its
sole discretion. Neither party shall be responsible for the acts or omissions of
the other party, and neither party will have authority to speak for, represent
or obligate the other party in any way without prior written authority from the
other party.

     15.17 NON-SOLICITATION. During the term of the hSA Program and for a period
of one (1) year thereafter, neither party may solicit any person who is employed
by or a consultant to the other party or any Affiliate of such party and who has
worked on the hSA Program under this Agreement to terminate such person's
employment by or consultancy to such party or such Affiliate. As used herein,
the term "solicit" shall include, without limitation, requesting, encouraging,
assisting or causing, directly or indirectly, any such employee or consultant to
terminate such person's employment with or consultancy to such party or
Affiliate.

     15.18 PRODUCT MARKING. To the extent commercially feasible, and consistent
with prevailing business practices, all products manufactured or sold by either
party under this

                                      -30-


Agreement will be marked with the number of each issued patent of the other
party that applies to such product.

                                      -31-


     IN WITNESS WHEREOF, the parties hereto and the University have caused this
Exclusive Development and License Agreement to be executed the day and year
first written above. The persons signing below warrant their authority to sign
the Agreement.

GENZYME TRANSGENICS CORPORATION                 ADVANCED CELL TECHNOLOGY, INC.


By:  /s/ John B. Green                          By: /s/ Michael West
     ------------------------------                 ----------------------------
     SIGNATURE                                      SIGNATURE

     John B. Green                                  Michael West
     ------------------------------                 ----------------------------
     PRINTED NAME                                   PRINTED NAME

     Vice President and Chief Financial Officer     President and CEO
     ------------------------------------------     ----------------------------
     TITLE                                          TITLE

                              CONSENT AND AGREEMENT

     For value received, the University hereby (a) consents to the sublicense by
ACT to GTC of the UMASS Patent Rights under this Agreement, (b) agrees to be
bound by the applicable provisions of Sections 3.1, 4.3(a), 5.1, 8.9(c), 10.1,
and 15.5 hereof, and (c) affirms its representations, warranties, and covenants
set forth in Section 8.2(c) hereof.

THE UNIVERSITY OF MASSACHUSETTS


By:  /s/ Joseph F.X. McGuirl
     ------------------------------
     SIGNATURE

     Joseph F.X. McGuirl
     ------------------------------
     PRINTED NAME

     Executive Director Commercial Ventures and Intellectual Property
     ----------------------------------------------------------------
     TITLE

                                      -32-


                                                                    SCHEDULE A-1
                                ACT PATENT RIGHTS



- --------------------------------------------------------------------------------------------------------------------------
                                                                           Serial No./                 Filing Date/
                  Title                        1st Inventor                Patent No.                   Grant Date
- --------------------------------------------------------------------------------------------------------------------------
                                                                                       

- --------------------------------------------------------------------------------------------------------------------------
Cultured inner cell mass cell lines        Stice, Steven          US 08/626,054                 April 1, 1996
derived from ungulate embryos

                                                                  PCT/US97/04736                March 24, 1997
- --------------------------------------------------------------------------------------------------------------------------

Embryonic or stem-like cell lines          Robl, James            US 08/699,040                 August 19, 1996
produced by cross species nuclear
transplantation

                                                                  PCT/US97/12919                July 28, 1997
- --------------------------------------------------------------------------------------------------------------------------
[*****]
- --------------------------------------------------------------------------------------------------------------------------
[*****]
- --------------------------------------------------------------------------------------------------------------------------


- ----------
***** Confidential Treatment has been requested for the marked portion.



                                                                    SCHEDULE A-2

                                GTC PATENT RIGHTS

                            To be completed at future date.



                                                                    SCHEDULE A-3

                               JOINT PATENT RIGHTS

                            To be completed at future date.



                                                                      SCHEDULE B

                               hSA PROGRAM SUMMARY

[*****]

- ----------
***** Confidential Treatment has been requested for the marked portion.

EX-10.28-5

                                                                 Exhibit 10.28.5

                      SECOND AMENDMENT TO CREDIT AGREEMENT

     Reference is hereby made to that certain Credit Agreement dated as of
December 28, 1998, as amended, by and between Genzyme Transgenics Corporation
(the "Borrower"), and Fleet National Bank ("Lender") (as may be further amended
from time to time, the "Credit Agreement"). Capitalized terms not defined herein
shall have the meanings ascribed thereto in the Credit Agreement.

     WHEREAS, the Borrower and Guarantor have requested that the Lender agree to
modify the definition of Termination Date to extend the maturity of the Loans
evidenced by the Credit Agreement and other Loan Documents from December 28,
2001 to January 11, 2002, and the Lender has agreed to such change, subject to
the terms and conditions of this Second Amendment To Credit Agreement (the
"Second Amendment").

     NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties do hereby agree as follows:

1.   TERMINATION DATE.  Schedule 1 to the Credit Agreement is hereby amended to
delete the defined term "Termination Date" and to replace such defined term with
the following:

          "`TERMINATION DATE'" - the earlier of (a) January 11, 2002, and (b)
          the date the Lender's commitment to make Loans is terminated pursuant
          to Section 8.2 of Article 8."

2.   REPRESENTATIONS AND WARRANTIES. In order to induce the Lender to enter into
this Second Amendment, the Borrower makes the following representations and
warranties, all of which shall survive the execution and delivery of this Second
Amendment:

     (a) The Borrower has all requisite corporate, partnership or other power
and authority to execute, deliver and perform its obligations under this Second
Amendment and under the Credit Agreement, as amended hereby. This Second
Amendment has been duly authorized, executed and delivered by the Borrower, and
does not conflict with, violate or result in a breach of or require any consent
under any applicable law, rule or regulation or any of the terms of the charter
or by-laws (or equivalent constitutional documents) of the Borrower, any
agreement or instrument to which the Borrower or any of its Subsidiaries is a
party or to which any of them or their property is bound or to which any of them
is subject. This Second Amendment and the Credit Agreement, as amended hereby,
constitute the legal, valid and binding obligation of the Borrower enforceable
against it in accordance with its terms.

     (b) On the date hereof each of the representations and warranties in the
Credit Agreement are true, accurate and complete in all material respects except
as to changes that have been consented to or approved by Lender in writing,
PROVIDED THAT, if any representation or warranty is expressly required in the
Credit Agreement to be made only as of a specific date, such representation or
warranty shall be true, accurate and complete as of such date in all material
respects.



     (c) Upon the execution and delivery of this Second Amendment, and the
satisfaction of each of the conditions precedent set forth in Section 4 of this
Second Amendment, no Default or Event of Default shall exist and be continuing.

3.   CONDITIONS PRECEDENT. The agreements contained herein and the amendments
contemplated hereby shall become effective on the date (the "Effective Date")
when the Borrower and the Lender shall have executed this Second Amendment and
when each of the following conditions shall have been fulfilled:

     (a) EXECUTION OF DOCUMENTS, ETC. This Second Amendment and any other
agreements, documents and instruments to be executed and/or delivered in
connection herewith (collectively the "Second Amendment Documents") shall have
been duly and properly authorized and executed by the Borrower and the Lender
and shall be in full force and effect on and as of the Effective Date of this
Second Amendment and all representations and warranties of the Borrower
hereunder shall continue to be true, accurate and complete.

     (b) PROCEEDINGS; RECEIPT OF DOCUMENTS. All requisite corporate action and
proceedings of the Borrower in connection with the execution and delivery of
this Second Amendment and the other Second Amendment Documents shall be
satisfactory in form and substance to the Lender and its counsel, and the Lender
and its counsel shall have received all information and copies of all documents,
including without limitation, records of requisite corporate action and
proceedings which the Lender or its counsel may have requested in connection
therewith, such documents where requested by the Lender or its counsel to be
certified by appropriate persons or governmental authorities.

     (c) MATERIAL LITIGATION. There shall be no pending or, to the best
knowledge of the Borrower, threatened litigation with respect to the Borrower or
the Guarantor before any court, arbitrator or governmental or administrative
body or agency which challenges or relates to (i) the transactions contemplated
hereby or (ii) the Loan Documents.

     (d) GUARANTOR CONSENT. The Lender shall have received a copy of a letter
from the Guarantor in which the Guarantor shall have consented to this Second
Amendment, which letter shall be in form and substance satisfactory to Lender.

4.   REAFFIRMATION AND RATIFICATION OF EXISTING AGREEMENTS, ETC.  The Borrower:
(i) reaffirms and ratifies all the Obligations to the Lender, in respect of the
Credit Agreement, as hereby amended, and the other Loan Documents, (ii)
certifies that there are no defenses, offsets or counterclaims to such
Obligations as of the date hereof, (iii) expressly acknowledges its continuing
liability pursuant thereto, and (iv) agrees that each of the Credit Agreement,
as amended hereby, and the other Loan Documents shall remain in full force and
effect, enforceable against the Borrower in accordance with its terms.



5.   MISCELLANEOUS.

     (a) This Second Amendment may be executed on separate counterparts by the
parties hereto, each of which when so executed and delivered shall be an
original, but all of which shall constitute one and the same agreement.

     (b) This Second Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and be governed by the laws of
the Commonwealth of Massachusetts (without giving effect to the conflict of law
principles thereof).

     (c) The headings of the several sections of this Second Amendment are
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Second Amendment.

     (d) This Second Amendment, together with the other Second Amendment
Documents, embodies the entire agreement and understanding among the parties
relating to the subject matter hereof and supersedes all prior proposals,
negotiation, agreements and understandings relating to such subject matter.

     (e) This Second Amendment, together with the other Second Amendment
Documents, shall be deemed to be Loan Documents under the Credit Agreement.

     (f) EACH OF THE BORROWER AND THE LENDER HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SECOND AMENDMENT, OR
THE TRANSACTIONS CONTEMPLATED HEREBY.

     (g) The Borrower shall pay on demand the reasonable costs and expenses,
including, without limitation, reasonable attorneys' fees and expenses incurred,
or which may be incurred by the Lender in connection with the negotiation,
documentation, administration and enforcement of this Second Amendment.



     IN WITNESS WHEREOF, this Second Amendment has been duly executed and
delivered as a sealed instrument at Boston, Massachusetts as of this 27th day of
December, 2001.

                                                THE BORROWER:

                                                GENZYME TRANSGENICS CORPORATION


                                                By: /s/ John B. Green
                                                    ----------------------------
                                                    Title: Vice President


                                                THE LENDER:

                                                FLEET NATIONAL BANK


                                                By: /s/ Kimberly Martone
                                                    ----------------------------
                                                    Title: Managing Director

EX-10.28-6

                                                                 Exhibit 10.28.6

                       THIRD AMENDMENT TO CREDIT AGREEMENT
              AND AMENDMENT TO REVOLVING CREDIT NOTE AND TERM NOTE

     Reference is hereby made to that certain Credit Agreement dated as of
December 28, 1998, as amended, by and between Genzyme Transgenics Corporation
(the "Borrower"), and Fleet National Bank ("Lender") (as may be further amended
from time to time, the "Credit Agreement"), together with that certain Revolving
Credit Note and Term Note of even date therewith. Capitalized terms not defined
herein shall have the meanings ascribed thereto in the Credit Agreement.

     WHEREAS, the Borrower and Guarantor have requested that the Lender agree to
modify the definition of Termination Date to extend the maturity of the Loans
evidenced by the Credit Agreement and other Loan Documents from January 11, 2002
to March 28, 2002, and the Lender has agreed to such change, subject to the
terms and conditions of this Third Amendment To Credit Agreement And Amendment
To Revolving Credit Note And Term Note (the "Third Amendment").

     NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties do hereby agree as follows:

1.   AMENDMENTS.

     1.1. Schedule 1 to the Credit Agreement is hereby amended to delete the
defined term "Termination Date" and to replace such defined term with the
following:

          "`TERMINATION DATE'" - the earlier of (a) March 28, 2002, and (b) the
          date the Lender's commitment to make Loans is terminated pursuant to
          Section 8.2 of Article 8."

     1.2. The "Maturity Date", as defined in the Revolving Credit Note and the
Term Note, is extended to March 28, 2002.

     1.3. Section 4.2 of the Term Note shall be deleted and replaced with the
following:

          "4.2 PRINCIPAL. The principal amount of the Term Loan outstanding on
               January 11, 2002 (which principal amount equals $5,734,795.20)
               shall be repaid in two installments, as follows: (a) on January
               31, 2002, in the amount of $177,500 of and (b) on March 28, 2002,
               in the amount of the then outstanding principal."

2.   REPRESENTATIONS AND WARRANTIES.  In order to induce the Lender to enter
into this Third Amendment, the Borrower makes the following representations and
warranties, all of which shall survive the execution and delivery of this Third
Amendment:



     (a)  The Borrower has all requisite corporate, partnership or other power
and authority to execute, deliver and perform its obligations under this Third
Amendment and under the Notes and the Credit Agreement, as amended hereby. This
Third Amendment has been duly authorized, executed and delivered by the
Borrower, and does not conflict with, violate or result in a breach of or
require any consent under any applicable law, rule or regulation or any of the
terms of the charter or by-laws (or equivalent constitutional documents) of the
Borrower, any agreement or instrument to which the Borrower or any of its
Subsidiaries is a party or to which any of them or their property is bound or to
which any of them is subject. This Third Amendment, the Notes, and the Credit
Agreement, as amended hereby, constitute the legal, valid and binding obligation
of the Borrower enforceable against it in accordance with its terms.

     (b)  On the date hereof each of the representations and warranties in the
Credit Agreement are true, accurate and complete in all material respects except
as to changes that have been consented to or approved by Lender in writing,
PROVIDED THAT, if any representation or warranty is expressly required in the
Credit Agreement to be made only as of a specific date, such representation or
warranty shall be true, accurate and complete as of such date in all material
respects.

     (c)  Upon the execution and delivery of this Third Amendment, and the
satisfaction of each of the conditions precedent set forth in Section 4 of this
Third Amendment, no Default or Event of Default shall exist and be continuing.

3.   CONDITIONS PRECEDENT. The agreements contained herein and the amendments
contemplated hereby shall become effective on the date (the "Effective Date")
when the Borrower and the Lender shall have executed this Third Amendment and
when each of the following conditions shall have been fulfilled:

     (a)  EXECUTION OF DOCUMENTS, ETC. This Third Amendment and any other
agreements, documents and instruments to be executed and/or delivered in
connection herewith (collectively the "Third Amendment Documents") shall have
been duly and properly authorized and executed by the Borrower and the Lender
and shall be in full force and effect on and as of the Effective Date of this
Third Amendment and all representations and warranties of the Borrower hereunder
shall continue to be true, accurate and complete.

     (b)  PROCEEDINGS; RECEIPT OF DOCUMENTS. All requisite corporate action and
proceedings of the Borrower in connection with the execution and delivery of
this Third Amendment and the other Third Amendment Documents shall be
satisfactory in form and substance to the Lender and its counsel, and the Lender
and its counsel shall have received all information and copies of all documents,
including without limitation, records of requisite corporate action and
proceedings which the Lender or its counsel may have requested in connection
therewith, such documents where requested by the Lender or its counsel to be
certified by appropriate persons or governmental authorities.

     (c)  MATERIAL LITIGATION. There shall be no pending or, to the best
knowledge of the Borrower, threatened litigation with respect to the Borrower or
the Guarantor before any court,



arbitrator or governmental or administrative body or agency which challenges or
relates to (i) the transactions contemplated hereby or (ii) the Loan Documents.

     (d)  GUARANTOR CONSENT. The Lender shall have received a copy of a letter
from the Guarantor in which the Guarantor shall have consented to this Third
Amendment, which letter shall be in form and substance satisfactory to Lender.

4.   REAFFIRMATION AND RATIFICATION OF EXISTING AGREEMENTS, ETC.  The Borrower:
(i) reaffirms and ratifies all the Obligations to the Lender, in respect of the
Credit Agreement and Notes, as hereby amended, and the other Loan Documents,
(ii) certifies that there are no defenses, offsets or counterclaims to such
Obligations as of the date hereof, (iii) expressly acknowledges its continuing
liability pursuant thereto, and (iv) agrees that each of the Credit Agreement
and Notes, as amended hereby, and the other Loan Documents shall remain in full
force and effect, enforceable against the Borrower in accordance with its terms.

5.   MISCELLANEOUS.

     (a)  This Third Amendment may be executed on separate counterparts by the
parties hereto, each of which when so executed and delivered shall be an
original, but all of which shall constitute one and the same agreement.

     (b)  This Third Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and be governed by the laws of
the Commonwealth of Massachusetts (without giving effect to the conflict of law
principles thereof).

     (c)  The headings of the several sections of this Third Amendment are
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Third Amendment.

     (d)  This Third Amendment, together with the other Third Amendment
Documents, embodies the entire agreement and understanding among the parties
relating to the subject matter hereof and supersedes all prior proposals,
negotiation, agreements and understandings relating to such subject matter.

     (e)  This Third Amendment, together with the other Third Amendment
Documents, shall be deemed to be Loan Documents under the Credit Agreement.

     (f)  EACH OF THE BORROWER AND THE LENDER HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS THIRD AMENDMENT, OR
THE TRANSACTIONS CONTEMPLATED HEREBY.

     (g)  The Borrower shall pay on demand the reasonable costs and expenses,
including, without limitation, reasonable attorneys' fees and expenses incurred,
or which may be incurred by the Lender in connection with the negotiation,
documentation, administration and enforcement of this Third Amendment.



     IN WITNESS WHEREOF, this Third Amendment has been duly executed and
delivered as a sealed instrument at Boston, Massachusetts as of this 11th day of
January, 2002.

                                                THE BORROWER:

                                                GENZYME TRANSGENICS CORPORATION


                                                By: /s/ John B. Green
                                                    ---------------------------
                                                    Title: Vice President

                                                THE LENDER:

                                                FLEET NATIONAL BANK


                                                By: /s/ Kimberly Martone
                                                    ---------------------------
                                                    Title: Managing Director

EX-21

                                                                      Exhibit 21

                         GENZYME TRANSGENICS CORPORATION

                           SUBSIDIARIES OF THE COMPANY

ATIII LLC, a Delaware limited liability company

Genzyme Transgenics Securities Corporation, a Massachusetts corporation

GTC Cancer Vaccines, Inc., a Delaware corporation

GTC Japan Limited, a company organized under the laws of Japan

GTC Holding, Ltd., a company organized under the laws of the Cayman Islands

TSI Corporation, a Delaware corporation

Transgenic Investments, Inc., a Delaware corporation

TSI Deutschland GmbH, a company organized under the laws of Germany

Health Sciences Research Incorporated, a Delaware corporation

EX-23

                                                                      Exhibit 23

                       CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statement on Forms S-3 (File Nos. 33-82982, 33-97024, 333-25769, 333-49497,
333-59245, 333-50874) and Forms S-8 (File Nos. 33-69516, 33-69518, 33-69520,
33-84706, 333-50874, 33-88030, 33-02970, 33-92998, 333-04535, 333-29059,
333-29977, 333-34119, 333-38490, 333-56747, 333-56749, 333-80623) of Genzyme
Transgenics Corporation of our reports dated February 14, 2002 relating to the
financial statements and financial statement schedules, which appears in this
Form 10-K. We also consent to the reference to us under the heading "Selected
Financial Data" in this Form 10-K.

PricewaterhouseCoopers LLP
Boston, Massachusetts
March 21, 2002

EX-99

                                   EXHIBIT 99

                         GENZYME TRANSGENICS CORPORATION

             Important Factors Regarding Forward-Looking Statements

                                   March 2002

In this Exhibit 99, "we," "us," "our" and "GTC" refer to Genzyme Transgenics
Corporation and its subsidiaries.

From time to time, we may make forward-looking public statements, such as
statements concerning our then expected future revenues or earnings or our
projected plans for research and development programs and collaborations, as
well as other estimates relating to future operations. Forward-looking
statements may be in reports filed under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), in press releases or informal statements made with
the approval of an authorized executive officer. In some cases, words or phrases
of expectation or uncertainty like "expect," "believe," "continue,"
"anticipate," "estimate," "may," "will," "could," "opportunity," "future,"
"project," or similar expressions identify "forward-looking statements" within
the meaning of Section 21E of the Exchange Act and Section 27A of the Securities
Act of 1933, as amended, as enacted by the Private Securities Litigation Reform
Act of 1995.

We caution you not to place undue reliance on these forward-looking statements,
which speak only as of the date on which they are made. In addition, we advise
you that the factors listed below, as well as other factors we have not
currently identified, could affect our financial or other performance and could
cause our actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods or events in any
forward-looking statement.

We will not undertake and specifically decline any obligation to publicly
release revisions to these forward-looking statements to reflect either
circumstances after the date of the statements or the occurrence of events which
may cause us to re-evaluate our forward-looking statements.

In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act, we are hereby filing cautionary statements identifying
important factors that could cause our actual results to differ materially from
those projected in forward-looking statements made by us or on our behalf.

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 December 30,
2001, we have incurred cumulative losses of approximately $96.3 million. These
losses have resulted principally from the costs of our research and development
activities [and losses from our discontinued operations]. We expect to continue
incurring significant operating losses for at least the next several years as we
incur increased costs and expenses associated with clinical trials and
submissions for regulatory approvals. We may never receive material revenues
from product sales or become profitable.



TRANSGENIC TECHNOLOGY IS IN A RELATIVELY EARLY STAGE.

Developing products based on transgenic technology is subject to significant
technological risks. Most of our transgenic protein products are in the early
development stage. 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, nor that any transgenically produced protein will
be safe or effective. In addition, it is possible that research and discoveries
by others could render our transgenic technology obsolete or noncompetitive as a
method of production for protein-based therapeutic products.

IF CLINICAL TRIALS OF ANY OF OUR TRANSGENIC PRODUCT CANDIDATES ARE UNSUCCESSFUL
OR DELAYED, WE WOULD BE UNABLE TO MEET OUR ANTICIPATED DEVELOPMENT TIMELINE,
WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE.

We and our collaborators must demonstrate through preclinical and clinical
trials that our transgenic product candidates are safe and effective for use in
humans. Clinical trials are expensive and may take several years. Several
factors could prevent or delay completion of these trials, including an
inability to enroll the required number of patients or demonstrate adequately
the safety or efficacy of the product for humans. If safety concerns develop,
regulatory authorities could stop our trials. Furthermore, the results from
early clinical trials are often not predictive of results in later clinical
trials.

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.

Before we can sell any transgenically produced products that we or our
collaborators develop, we must receive regulatory approvals by federal, state
and local governmental authorities, including the United States Food and Drug
Administration, or FDA, and similar agencies in other countries. To date, none
of our transgenically produced products have been approved for sale in the
United States or any foreign country. 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. Obtaining required regulatory approvals for our
transgenically produced products may take several years to complete and is
expensive and uncertain. We cannot give any assurance that the FDA or any other
regulatory authority will act quickly or favorably on our requests for approval
or will not require us to provide additional data that we do not currently
anticipate.

Failure to comply with extensive FDA or similar regulations may result in delay,
suspension or cancellation of a trial or a regulatory authority's refusal to
accept test results. Regulatory authorities may have varying interpretations of
our pre-clinical and clinical trial data, which could delay, limit or prevent
regulatory approval or clearance. 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 them. Any
delays or difficulties in obtaining regulatory approval or clearances for
transgenically produced products may:

                                        2


     - adversely affect the marketing of any transgenic products we or our
       collaborators develop;

     - impose significant additional costs on us or our collaborators;

     - diminish any competitive advantages that we or our collaborators may
       attain; and

     - limit our ability to receive royalties and generate revenue and profits.

If we do not receive regulatory approval for our transgenically produced
products in a timely manner, we will not be able to commercialize our products,
and therefore, our business and stock price will suffer.

Even if we receive regulatory approval for our transgenically produced products,
the FDA may impose limitations on the indicated uses for which our products may
be marketed. These limitations could reduce the size of the potential market for
a product. Failure to comply with applicable FDA and other regulatory
requirements can result in, among other things, warning letters, fines,
injunctions, civil penalties, recall or seizure of products, total or partial
suspension of production, refusal of the government to renew our marketing
applications and criminal prosecution.

ANY TRANSGENIC PRODUCTS FOR WHICH WE OBTAIN REGULATORY APPROVAL WILL BE SUBJECT
TO CONTINUING REVIEW AND EXTENSIVE REGULATORY REQUIREMENTS, WHICH COULD AFFECT
THEIR MANUFACTURE AND MARKETING.

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 and product approvals may be withdrawn if
problems occur after initial approval. Post-approval regulation includes
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 for any significant alterations in 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 and the occurrence of
unanticipated problems with products following approval. Any of these
withdrawals could adversely affect our operating results.

WE HAVE LIMITED MANUFACTURING EXPERIENCE AND WILL RELY ON THIRD PARTY CONTRACT
MANUFACTURERS TO PURIFY AND FORMULATE OUR TRANSGENIC PRODUCTS.

We currently rely upon third party manufacturers to purify and formulate
significant pre-clinical and clinical quantities of our transgenic product
candidates from the milk of our transgenic animals. We will depend on these
third party manufacturers to perform their obligations in a timely manner and in
accordance with applicable government regulations in order to conduct our

                                        3


clinical trials or commercialize any of our products. In addition, there are
very few third party manufacturers that have sufficient production capacity to
manufacture all of our product candidates either for our clinical trials or on a
commercial scale. Our third party manufacturers may encounter difficulties,
including problems involving:

     - inconsistent production yields;

     - poor quality control and assurance or inadequate process controls; and

     - lack of compliance with FDA and other regulations.

These contract manufacturers may not be able to manufacture our products
candidates at a cost or in quantities necessary to make them commercially
viable. If we are unable to enter into agreements with additional manufacturers
on commercially reasonable terms, or if there is poor performance on the part of
our third party manufacturers, we may not be able to complete development of, or
market, our transgenic product candidates.

WE DEPEND ON COLLABORATION AGREEMENTS FOR OUR CURRENT REVENUE.

Our revenues and business strategy depend largely on our entering into
transgenic development agreements with third parties, even in the case of
development programs for our own therapeutic compounds. We cannot guarantee that
we will continue to be able to establish these agreements on commercially
acceptable terms, if at all. The willingness of potential collaborators depends
on factors such as the perceived technological or economic advantages of
transgenic production and our ability to structure a mutually acceptable
collaboration arrangement. In the case of our own programs for development of
proteins proprietary to us, known as internal programs, the attractiveness of
the program's commercial potential or other advantages the program offers the
partner will also affect our ability to obtain collaborators. Even if we enter
into transgenic development agreements, the collaborations may ultimately by
unsuccessful, our partners could terminate the agreements or the agreements
could expire before meaningful developmental milestones are reached. The failure
of any significant number of these collaborations could have a material adverse
effect on our business.

The majority of our collaborations are, and will likely continue to be, external
programs that involve proteins proprietary to our partners. 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 in goats and other
mammals. Our partners may develop competitive production technologies or
competitive products outside of their collaborations with us, which could have a
material adverse effect on our business.

To date, the scope of our collaboration agreements have generally been limited
to transgenically producing 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 of any
transgenic product,

                                        4


including preclinical and clinical testing and regulatory approval, and
marketing and distribution of any transgenic product.

WE CANNOT ASSURE THE COMMERCIAL SUCCESS OF TRANSGENIC PRODUCTS.

Even if our transgenically produced products are successfully developed and
approved by the FDA and 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:

     - 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 or implementing a commercialization
strategy for any transgenic products.

WE FACE UNCERTAINTY IN RAISING ADDITIONAL FUNDS FOR OUR OPERATIONS.

In order to develop and bring our transgenic products to market, we and our
collaboration partners must commit substantial resources to costly and time
consuming research, preclinical testing and clinical trials. Our cash
requirements may vary materially from those now planned, depending upon the
results of research and development, competitive and technological advances, the
terms of future collaborations, regulatory requirements and other factors. If
our business does not become profitable before we exhaust existing resources, we
will need to obtain additional financing, through public or private sources,
including debt or equity financing, or through collaborative or other
arrangements with corporate partners. Depending on the state of the capital
markets, interest rates, our financial profile and other factors at that time,
we may not be able to obtain adequate funds on acceptable terms when needed. If
we raise capital through the sale of equity, or securities convertible into
equity, existing stockholders' proportionate ownership in GTC will be diluted.
If we cannot obtain financing, we could be forced to delay, scale back or
eliminate some of our research and development programs.

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 so. Many of our competitors have greater financial and human resources and
more experience in research and development than we have. We will need to
continue to devote substantial efforts and

                                        5


expense in research and development to maintain a competitive position for our
transgenic production technology and potential product offerings. It also is
possible that others will develop alternative technologies or products that will
render our proposed products or technologies obsolete. We may encounter
significant competition for our protein development and production contracts
from other companies. In addition, our potential transgenic production
capabilities may face significant competition from biological products
manufactured in cell culture or by other traditional protein production methods.
Our business will also compete against other companies whose business is
dedicated to offering transgenic production and with prospective customers or
collaborators who decide to pursue such transgenic production internally.
Pharming Group B.V. and PPL Therapeutics plc are two companies known to us that
are extensively engaged in the production of transgenic proteins in the milk of
mammals. 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.

WE MAY FACE PUBLIC CONCERNS ABOUT GENETIC ENGINEERING IN ANIMALS.

Our activities involve genetic engineering in animals. We cannot be certain to
what extent these efforts will be successful.

Restrictive legislation and regulations involving nuclear transfer and other
methodologies could be developed which could impede our ability to efficiently
conduct our business, delay preclinical studies or future clinical trials, or
prevent us or our partners from obtaining regulatory approvals or
commercializing transgenically produced products.

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

In the United States 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. Where appropriate there are
counterparts in other countries. We cannot be certain that we will receive
issued patents based on pending or future applications. Our issued patents may
not

                                        6


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.

RECOVERY FROM ANY CATASTROPHIC EVENT MAY NOT BE ADEQUATE

While we have measures in place to minimize and recover from catastrophic events
that may substantially destroy our animal herd(s), these measures may not be
adequate to recover our production processes quickly enough to support critical
timelines, collaborator needs or market demands. These catastrophic events may
include weather events such as tornadoes, earthquakes, fires or diseases that
breach our biosecurity measures. In addition, these catastrophic events may
render some or all of the products at the affected facilities unusable.

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

Sales of pharmaceutical products depend largely 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 U.S. federal government and private insurers are continually working on ways
to contain health care costs, particularly by limiting both coverage and the
level of reimbursement for new therapeutic products. We cannot be certain of the
extent to which the government or private insurers may institute future price
controls and other cost-containment measures on Medicare, a Medicaid and other
health care insurance spending. These controls and limits could affect the

                                        7


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, 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.

THE MANUFACTURE AND SALE OF OUR PRODUCTS MAY EXPOSE US TO PRODUCT LIABILITY
CLAIMS FOR WHICH WE COULD HAVE SUBSTANTIAL LIABILITY.

We face an inherent risk of product liability exposure related to testing of our
transgenic product candidates in human clinical trials and will face even
greater risks when we commercialize our products derived from these product
candidates. An individual may bring a product liability claim against us if one
of our products or product candidates causes, or is claimed to have caused, an
injury or is found to be unsuitable for consumer use. While we have obtained
product 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. Any product liability claim brought against
us, with or without merit, could result in:

     - liabilities that substantially exceed our product liability insurance,
       which we would then be required to pay from other sources, if available;

     - an increase of our product liability insurance rates or the inability to
       maintain insurance coverage in the future on acceptable terms or at all;

     - damage to our reputation and the reputation of our products, resulting in
       lower sales;

     - regulatory investigations that could require costly recalls or product
       modifications; and

     - the diversion of management's attention from managing our business.

                                        8


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.

GENZYME CORPORATION'S SIGNIFICANT OWNERSHIP INTEREST IN US COULD LEAD TO FAILURE
TO MAXIMIZE STOCK PRICE AND CONFLICTS OF INTEREST.

Genzyme is our largest single stockholder, beneficially owning 8,263,243 shares
of our outstanding common stock at December 30, 2001, assuming the exercise of
currently exercisable common stock purchase warrants. Genzyme's ownership
interest gives it significant influence over matters requiring our stockholders'
approval, including electing directors, adopting or amending provisions of our
charter or by-laws and approving or preventing some mergers or similar
transactions, such as a sale of substantially all of our assets, or transactions
that could give our stockholders the opportunity to realize a premium over the
market price of their shares. Other minority equity holders, acting alone, will
be unable to significantly influence our management or business policies. Three
of the seven 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.

WE HAVE OBLIGATIONS TO ISSUE SHARES OF COMMON STOCK IN THE FUTURE THAT 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 our common stock's
market price. As of December 30, 2001, there were 30,200,219 shares of our
common stock outstanding. As of December 30, 2001, options to purchase an
aggregate of 2,153,444 shares of common stock at varying exercise prices were
outstanding; of this total, options to purchase 1,298,463 shares were
immediately exercisable and these shares could be immediately resold into the
public market. As of December 30, 2001, Genzyme held 7,744,919 shares of our
common stock which could be sold into the public markets under Rule 144 of the
Securities Act. Genzyme is also entitled to registration rights with respect to
some of these shares. An additional 518,324 shares are 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.

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 company's operating performance. Many factors can
have a significant adverse effect on our common stock's market price, including:

                                        9


     - 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.

Anti-takeover provisions in our charter, our by-laws and Massachusetts statutes
could delay or make more difficult a merger, tender offer or proxy contest
involving us. These provisions may delay or prevent a change of control without
action by the stockholders and, therefore, could adversely affect the price of
our common stock.

                                       10