When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that characterize our business. In particular, we encourage you to review the risks and uncertainties described under the heading "Risk Factors" below. These risks and uncertainties could cause actual results to differ materially from those forecasted in forward-looking statements or implied by past results and trends. Forward-looking statements are statements that attempt to project or anticipate future developments in our business; we encourage you to review the examples of forward-looking statements under "Note Regarding Forward-Looking Statements" at the beginning of this report. These statements, like all statements in this report, speak only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments.

INTRODUCTION

We are a global biotechnology company dedicated to making a major impact on the lives of people with serious diseases. Our broad product and service portfolio is focused on rare disorders, renal diseases, orthopaedics, organ transplant, diagnostic and predictive testing, and cancer. We are organized into six financial reporting units, which we also consider to be our reporting segments:

º •
º Renal, which develops, manufactures and distributes products that treat patients suffering from renal diseases, including chronic renal failure. The unit derives substantially all of its revenue from sales of Renagel/Renvela (including sales of bulk sevelamer) and Hectorol;

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º Therapeutics, which develops, manufactures and distributes therapeutic products, with an expanding focus on products to treat patients suffering from genetic diseases and other chronic debilitating diseases, including a family of diseases known as LSDs, and other specialty therapeutics, such as Thyrogen. The unit derives substantially all of its revenue from sales of Cerezyme, Fabrazyme, Myozyme, Aldurazyme and Thyrogen;

º •
º Transplant, which develops, manufactures and distributes therapeutic products that address pre-transplantation, prevention and treatment of graft rejection in organ transplantation as well as other hematologic and auto-immune disorders. The unit derives substantially all of its revenue from sales of Thymoglobulin;

º •
º Biosurgery, which develops, manufactures and distributes biotherapeutics and biomaterial-based products, with an emphasis on products that meet medical needs in the orthopaedics and broader surgical areas. The unit derives substantially all of its revenue from sales of Synvisc, the Sepra line of products, Carticel and MACI;

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º Genetics, which provides testing services for the oncology, prenatal and reproductive markets; and

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º Oncology, which develops, manufactures and distributes products for the treatment of cancer, with a focus on antibody- and small molecule-based therapies. The unit derives substantially all of its revenue from sales and royalties received on sales of Campath and clofarabine and from the reimbursement of Campath development expenses. Clofarabine is marketed under the name Clolar in North and South America and as Evoltra elsewhere in the world

We report the activities of our diagnostic products, bulk pharmaceuticals and cardiovascular business units under the caption "Other." We report our corporate, general and administrative operations and corporate science activities under the caption "Corporate."

As a result of our acquisition of Bioenvision in October 2007, our Oncology business unit, which was formerly reported combined with "Other," now meets the criteria for disclosure as a separate reporting segment. We have revised our 2007 segment disclosures to conform to our 2008 presentation.

MERGERS AND ACQUISITIONS

The following acquisitions were accounted for as business combinations and, accordingly, we have included their results of operations in our consolidated statements of operations from the date of acquisition.

Diagnostic Assets of Diagnostic Chemicals Limited

On December 3, 2007, we acquired certain diagnostic assets from Diagnostic Chemicals Limited, or DCL, a privately-held diagnostics and biopharmaceutical company, including DCL's line of over 50 formulated clinical chemistry reagents and their diagnostics operations in Prince Edward Island, Canada and Connecticut. We paid consideration of $53.8 million in cash.

Bioenvision

Effective October 23, 2007, we completed our acquisition of Bioenvision through the culmination of a two-step process consisting of a tender offer completed in July 2007, and a merger approved in October 2007. We paid gross consideration of $349.9 million in cash, including $345.4 million for the outstanding shares of Bioenvision common and preferred stock and options to purchase shares of Bioenvision common stock, and approximately $5 million for acquisition costs. Net consideration was $304.7 million as we acquired Bioenvision's cash and cash equivalents totaling $45.2 million.

Bioenvision was focused on the acquisition, development and marketing of compounds and technologies for the treatment of cancer, autoimmune disease and infection. The acquisition of Bioenvision provided us with the rights to clofarabine outside North America. Clofarabine, which is approved for the treatment of relapsed and refractory pediatric ALL, is marketed under the name Clolar in North and South America and as Evoltra elsewhere in the world. We are developing clofarabine for diseases with significantly larger patient populations, including use as a first-line therapy for the treatment of acute myelogenous leukemia, or AML, in adults. Clofarabine has been granted orphan drug status for the treatment of ALL and AML in both the United States and the European Union.

STRATEGIC TRANSACTIONS

We classify nonrefundable fees paid outside of a business combination for the acquisition or licensing of products that have not received regulatory approval and have no future alternative use as research and development expense.

Strategic Alliance with Osiris

In October 2008, we entered into a strategic alliance with Osiris, whereby we obtained an exclusive license to develop and commercialize Prochymal and Chondrogen, mesenchymal stem cell products, outside of the United States and Canada. Osiris will commercialize Prochymal and Chondrogen in the United States and Canada. We will pay Osiris a nonrefundable upfront payment of $75.0 million by November 21, 2008 and an additional $55.0 million nonrefundable upfront license fee on July 1, 2009,

both of which will be charged to research and development expense in our consolidated statements of operations during the fourth quarter of 2008.

Osiris will be responsible for completing, at its own expense, all clinical trials of Prochymal for the treatment of GvHD and Crohn's disease, both of which are in phase 3 trials, and clinical trials of Prochymal and Chondrogen through phase 2 for all other indications. Osiris will be responsible for 60% and we will be responsible for 40% of the clinical trial costs for phase 3 and 4 clinical trials of Prochymal (other than for the treatment of GvHD and Crohn's disease) and Chondrogen. Osiris is eligible to receive:

º •
º up to $500.0 million in development and regulatory milestone payments for all indications of Prochymal and up to $100.0 million for Chondrogen, unless we elect to opt out of further development of Chondrogen; and

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º up to $250.0 million in sales milestones for all indications of Prochymal and up to $400.0 million for all indications of Chondrogen for the prevention and treatment of conditions of articulating joints.

Osiris is also eligible to receive tiered, double-digit royalties from sales of Prochymal and Chondrogen outside of the United States and Canada.

Collaboration with PTC

On July 15, 2008, we entered into a collaboration agreement with PTC to develop and commercialize PTC124, PTC's novel oral therapy in late-stage development for the treatment of nonsense-mutation-mediated DMD and nonsense-mutation-mediated CF. Under the terms of the agreement, PTC will commercialize PTC124 in the United States and Canada, and we will commercialize the treatment in all other countries. In connection with the collaboration agreement, we paid PTC a nonrefundable upfront payment of $100.0 million, which we recorded as a charge to research and development expense for our Therapeutics segment in our consolidated statements of operations in July 2008. PTC will conduct and be responsible for the phase 2b trial of PTC124 in DMD, the phase 2b trial of PTC124 in CF and two proof-of-concept studies in other indications to be determined. Once these four studies have been completed, we and PTC will share research and development costs for PTC124 equally. We and PTC will each bear the sales and marketing and other costs associated with the commercialization of PTC124 in our respective territories. PTC is eligible to receive up to $337.0 million in milestone payments as follows:

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º up to $165.0 million in development and approval milestones, the majority of which would be paid upon the receipt of approvals obtained outside of the United States and Canada; and

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º up to $172.0 million in sales milestones, commencing if and when annual net sales for PTC124 outside of the United States and Canada reach $300.0 million and increasing in increments through revenues of $2.4 billion.

PTC is also eligible to receive tiered, double-digit royalties from sales of PTC124 outside of the United States and Canada.

Strategic Alliance with Isis

On January 7, 2008, we entered into a strategic alliance with Isis, whereby we obtained an exclusive, worldwide license to develop and commercialize mipomersen, a lipid-lowering drug targeting apolipoprotein B-100, which is currently being developed for the treatment of FH, an inherited disorder that causes exceptionally high levels of LDL-cholesterol. In February 2008, we made a nonrefundable payment to Isis of $150.0 million, of which $80.1 million was recorded as an investment in equity securities in our consolidated balance sheets based on the fair value of the five million shares

of Isis common stock we acquired in connection with the transaction and the remaining $69.9 million was allocated to the mipomersen license, which had not reached technological feasibility and did not have alternative future use. We recorded the $69.9 million license fee as a charge to research and development expense in our consolidated statements of operations in the first quarter of 2008.

In June 2008, we finalized the terms of our license and collaboration agreement with Isis and paid Isis an additional $175.0 million upfront nonrefundable license fee, which we recorded as a charge to research and development expense in our consolidated statements of operations in June 2008. Under the terms of the agreement, Isis will contribute up to the first $125.0 million in funding for the development of mipomersen and, thereafter, we and Isis will share development costs for mipomersen equally. The initial funding commitment by Isis and shared development funding would end when the mipomersen program is profitable. In the event the research and development of mipomersen is terminated prior to Isis completing their funding obligation, we are not entitled to any refund of our $175.0 million upfront payment. Accordingly, the $175.0 million was recorded as research and development expense in June 2008. Isis is eligible to receive up to $750.0 million in commercial milestone payments and up to $825.0 million in development and regulatory milestone payments.

We will be responsible for funding sales and marketing expenses until mipomersen revenues are sufficient to cover such costs. Profits on mipomersen initially will be allocated 70% to us and 30% to Isis. The profit ratio would be adjusted on a sliding scale if and as annual revenues for mipomersen ramp up to $2.0 billion, at which point we would share profits equally with Isis. The results of our mipomersen program will be included in the results of our cardiovascular business unit, which are reported under the caption "Other" in our segment disclosures.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

Our critical accounting policies and significant judgments and estimates are set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Significant Judgments and Estimates" in Exhibit 13 to our 2007 Form 10-K. There have been no significant changes to our critical accounting policies or significant judgments and estimates since December 31, 2007.

During the third quarter of 2008, we completed the required annual impairment tests for our $1.4 billion of net goodwill and determined that no impairment charge was required.

Additional information regarding our provisions and estimates for our product sales allowances, sales allowance reserves and accruals, and distributor fees, and the key assumptions we use to determine the fair value assigned to IPR&D are included below.

Revenue Recognition

Product Sales Allowances

Sales of many biotechnology products in the United States are subject to increased pricing pressure from managed care groups, institutions, government agencies, and other groups seeking discounts. We and other biotechnology companies in the U.S. market are also required to provide statutorily defined rebates and discounts to various U.S. government agencies in order to participate in the Medicaid program and other government-funded programs. In most international markets, we operate in an environment where governments may, and in some cases have, mandated cost-containment programs, placed restrictions on physician prescription levels and patient reimbursements, emphasized greater use of generic drugs and enacted across-the-board price cuts as methods to control costs. The sensitivity of our estimates can vary by program, type of customer and geographic location. Estimates associated with Medicaid and other government allowances may become subject to adjustment in a subsequent period.

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º Contractual adjustments-We offer chargebacks and contractual discounts and rebates, which we collectively refer to as contractual adjustments, to certain private institutions and various government agencies in both the United States and international markets. We record chargebacks and contractual discounts as allowances against accounts receivable in our consolidated balance sheets. We account for rebates by establishing an accrual for the amounts payable by us to these agencies and institutions, which is included in accrued liabilities in our consolidated balance sheets. We estimate the allowances and accruals for our contractual adjustments based on historical experience and current contract prices, using both internal data as well as information obtained from external sources, such as independent market research agencies and data from wholesalers. We continually monitor the adequacy of these estimates and adjust the allowances and accruals periodically throughout each quarter to reflect our actual experience. In evaluating these allowances and accruals, we consider several factors, including significant changes in the sales performance of our products subject to contractual adjustments, inventory in the distribution channel, changes in U.S. and foreign healthcare legislation impacting rebate or allowance rates, changes in contractual discount rates and the estimated lag time between a sale and payment of the corresponding rebate;

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º Discounts-In some countries, we offer cash discounts for certain products as an incentive for prompt payment, which are generally a stated percentage off the sales price. We account for cash discounts by reducing accounts receivable by the full amounts of the discounts. We consider payment performance and adjust the accrual to reflect actual experience; and

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º Sales returns-We record allowances for product returns at the time product sales are recorded. The product returns reserve is estimated based on the returns policies for our individual products and our experience of returns for each of our products. If the price of a product changes or if the history of product returns changes, the reserve is adjusted accordingly. We determine our estimates of the sales return accrual for new products primarily based on the historical sales returns experience of similar products, or those within the same or similar therapeutic category.

Our provisions for product sales allowances reduced gross product sales as follows (amounts in thousands):

                              Three Months Ended                        Nine Months Ended
                                 September 30,         Increase/          September 30,          Increase/
                                                      (Decrease)                                (Decrease)
                               2008         2007       % Change        2008          2007        % Change
Product sales allowances:
    Contractual
    adjustments             $   153,799   $ 106,807            44 % $   362,813   $   292,998            24 %
    Discounts                     5,655       5,296             7 %      16,663        14,489            15 %
    Sales returns                 8,434       1,826          >100 %      20,102         9,248          >100 %

        Total product
        sales allowances    $   167,888   $ 113,929            47 % $   399,578   $   316,735            26 %

Total gross product sales   $ 1,226,184   $ 981,611            25 % $ 3,535,943   $ 2,828,089            25 %

Total product sales
allowances as a percent
of total gross product
sales                                14 %        12 %                        11 %          11 %

Total product sales allowances increased $54.0 million, or 47%, for the three months ended September 30, 2008, as compared to the same period of 2007, and $82.8 million, or 26%, for the nine months ended September 30, 2008, as compared to the same period of 2007, primarily due to an increase in overall gross product sales and changes in rebate rates and product mix. The increase in sales returns allowances for the three months ended September 30, 2008, as compared to the same

period of 2007, is primarily due to increased sales returns allowances for our Renal segment due to a Renagel price increase in August 2008 and revisions to our estimates of the volume of product returns for Hectorol. The increase in sales returns allowances for the nine months ended September 30, 2008, as compared to the same period of 2007, is primarily due to price increases and increased estimates for the volume of product returns for our Renal, Transplant and Biosurgery segments.

Total estimated product sales allowance reserves and accruals in our consolidated balance sheets increased 27% to approximately $198 million as of September 30, 2008, as compared to approximately $155 million as of December 31, 2007, primarily due to increased product sales and changes in the timing of certain payments. Our actual results have not differed materially from amounts recorded. The annual variation has been less than 0.5% of total product sales for each of the last three years.

Distributor Fees

EITF Issue No. 01-9, "Accounting for Consideration given by a Vendor to a Customer (including a Reseller of a Vendor's Products)" specifies that cash consideration (including a sales incentive) given by a vendor to a customer is presumed to be a reduction of the selling prices of the vendor's products or services and, therefore, should be characterized as a reduction of revenue. We include such fees in contractual adjustments, which are recorded as a reduction to product sales. That presumption is overcome and the consideration should be characterized as a cost incurred if, and to the extent that, both of the following conditions are met:

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º the vendor receives, or will receive, an identifiable benefit (goods or services) in exchange for the consideration; and

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º the vendor can reasonably estimate the fair value of the benefit received.

We record fees paid to our distributors for services as a charge to SG&A, a component of operating expenses, only if the criteria set forth above are met. The following table sets forth the distributor fees recorded as a reduction to product sales and charged to SG&A (amounts in thousands):

                                             Three Months Ended       Nine Months Ended
                                               September 30,            September 30,
                                              2008         2007        2008        2007
   Distributor fees:
     Included in contractual adjustments
     and recorded as a reduction to
     product sales                          $   3,437     $ 2,948    $   9,723   $  9,238
     Charged to SG&A                            3,519       3,210       10,039      9,644

          Total distributor fees            $   6,956     $ 6,158    $  19,762   $ 18,882

In-Process Research and Development

In-process research and development represents the fair value assigned to incomplete technologies that we acquire, which at the time of acquisition have not reached technological feasibility and have no alternative future use. The fair value of such technologies is expensed upon acquisition. A technology is considered to have an alternative future use if it is probable that the acquirer will use the asset in its current, incomplete state as it existed at the acquisition date, the asset will be used in another research and development project that has not yet commenced, and economic benefit is anticipated from that use. If a technology is determined to have an alternative future use, then the fair value of the program would be recorded as an asset on the balance sheet rather than expensed. None of the incomplete technology programs we have acquired through our business combinations have reached technological feasibility nor had an alternative future use and, therefore, the fair value of those programs was

expensed on the acquisition date. Substantial additional research and development will be required before any of our acquired programs reach technological feasibility. In addition, once research is completed, each underlying product candidate will need to complete a series of clinical trials and receive regulatory approvals prior to commercialization.

Charges for in-process research and development acquired through business combinations, which we refer to as IPR&D, are classified in our consolidated statements of operations within the line item Purchase of In-Process Research and Development. Conversely, nonrefundable fees paid outside of a business combination for the acquisition or licensing of products that have not received regulatory approval and have no future alternative use are classified in our consolidated statements of operations within the line item Research and Development.

Management assumes responsibility for determining the valuation of the acquired IPR&D programs. The fair value assigned to IPR&D for each acquisition is estimated by discounting, to present value, the future cash flows expected from the programs since the date of our acquisition. Accordingly, such cash flows reflect our estimates of revenues, costs of sales, operating expenses and income taxes from the acquired IPR&D programs based on the following factors:

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º relevant market sizes and market growth factors;

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º current and expected trends in technology and product life cycles;

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º the time and investment that will be required to develop products and technologies;

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º the ability to obtain marketing authorization and regulatory approvals;

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º the ability to manufacture and commercialize the products;

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º the extent and timing of potential new product introductions by our competitors that may be deemed more efficacious, more convenient to use, or more cost effective;

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º the amount of revenues that could be derived from the products; and

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º the appropriate discount rates to use in the analysis.

The discount rates used are commensurate with the uncertainties associated with the economic estimates described above. The resulting discounted future cash flows are then probability-adjusted to reflect the different stages of development, the time and resources needed to complete the development of the product and the risks of advancement through the product approval process. In estimating the future cash flows, we also consider the tangible and intangible assets required for successful exploitation of the technology resulting from the purchased IPR&D programs and adjust future cash flows for a charge reflecting the contribution to value of these assets. Such contributory tangible and intangible assets may include, but are not limited to, working capital, fixed assets, assembled workforce, customer relationships, patents, trademarks, and core technology.

Use of different estimates and judgments could yield materially different results in our analysis and could result in materially different asset values and IPR&D expense. There can be no assurance that we will be able to successfully develop and complete the acquired IPR&D programs and profitably commercialize the underlying product candidates before our competitors develop and commercialize products for the same indications. Moreover, if certain of the acquired IPR&D programs fail, are abandoned during development, or do not receive regulatory approval, then we may not realize the future cash flows we have estimated and recorded as IPR&D on the acquisition date, and we may also not recover the research and development investment made since the acquisition to further develop that program. If such circumstances were to occur, our future operating results could be materially adversely impacted.

RESULTS OF OPERATIONS

The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial statements.

REVENUES

    The components of our total revenues are described in the following table
(amounts in thousands):


. . .