Back to GetFilings.com

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)

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

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

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

1

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.

2

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

3

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:

•

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.



•

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.



•

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.



•

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:

•

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.



•

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

4

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

•

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.

5

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.

6

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

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

7

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

8

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.

9

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

12

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:

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.

13

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.

14

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.

15

SELECTED FINANCIAL DATA

(Dollars in thousands except per share data)

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

16

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

18

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.

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.

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:

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)

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)

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

28

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