GERON CORPORATION - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO .

COMMISSION FILE NUMBER: 0-20859

GERON CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 75-2287752
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

230 CONSTITUTION DRIVE, MENLO PARK, CA 94025
(Address, including zip code, of principal executive offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (650) 473-7700

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK $0.001 PAR VALUE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

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. [ ]

As of February 25, 2002, there were 24,491,771 shares of Common Stock
outstanding. The aggregate market value of voting stock held by non-affiliates
of the registrant was approximately $182,737,000 based upon the closing price of
the Common Stock on February 25, 2002 on The Nasdaq National Market. Shares of
Common Stock held by each officer, director and holder of five percent or more
of the outstanding Common Stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

Except for the historical information contained herein, the matters
discussed in this report are forward-looking statements that involve certain
risks and uncertainties that could cause actual results to differ materially
from those in the forward-looking statements. Potential risks and uncertainties
include, without limitation, those mentioned in this report and in particular,
the factors described below in Part II, Item 7, under the heading "Additional
Factors That May Affect Future Results."

DOCUMENTS INCORPORATED BY REFERENCE:

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PART I

ITEM 1. BUSINESS

OVERVIEW

We are a biopharmaceutical company focused on developing and
commercializing therapeutic and diagnostic products for applications in oncology
and regenerative medicine, and research tools for drug discovery. Our product
development programs are based upon three patented core technologies:
telomerase, human embryonic stem cells and nuclear transfer. Telomeres are the
ends of chromosomes that protect chromosomes from degradation and act as a
molecular "clock" for cellular aging. Telomerase is an enzyme that restores
telomere length and rewinds the molecular "clock," thereby extending the cell's
ability to multiply or replicate. By activating telomerase, we seek to increase
the lifespan of normal cells which have prematurely aged in the body to treat
certain chronic degenerative diseases. Conversely, by inhibiting or targeting
telomerase we hope to kill cancer cells in which telomerase is abnormally turned
on and to diagnose cancer by measuring telomerase activity. Human embryonic stem
cells can develop and differentiate into all cells and tissues in the body. As
such, they are a potential source for the manufacture of replacement cells and
tissues for organ repair applications in regenerative medicine. Nuclear transfer
is a method for generating whole animals from genetic material derived solely
from the nucleus of a single cell obtained from a single animal. We are actively
licensing this technology to others for applications in agriculture and
production of biologicals.

We were incorporated in 1990 under the laws of Delaware. Our principal
executive offices are located at 230 Constitution Drive, Menlo Park, California,
94025. Our telephone number is (650) 473-7700.

TECHNOLOGY PLATFORMS

TELOMERES AND TELOMERASE: THEIR ROLE IN CELLULAR AGING AND CANCER

Cells are the building blocks for all tissues in the human body and cell
division plays a critical role in the normal growth, maintenance and repair of
human tissue. However, in the human body, cell division is a limited process.
Depending on the tissue type, cells generally divide only 60 to 100 times during
the course of their normal lifespan.

We and our collaborators have shown that telomeres, located at the ends of
chromosomes, are key genetic elements involved in regulation of the cellular
aging process. Our work has shown that each time a normal cell divides,
telomeres shorten. Once telomeres reach a certain short length, cell division
halts and the cell enters a state known as senescence or aging. Our
collaborators have used mouse models to show that this type of cellular aging
can cause numerous age-related degenerative changes in mammals. We believe that
this cellular aging process, which occurs in numerous tissues throughout the
human body, causes or contributes to chronic degenerative diseases and
conditions including anemia, AIDS, macular degeneration (a chronic disease of
the eyes often leading to vision loss), atherosclerosis (narrowing of arteries
which reduces blood flow to internal organs) and impaired wound healing.
Cellular aging is also believed to contribute to the initiation of cancer.

We and our collaborators have demonstrated that telomeres serve as a
molecular "clock" for cellular aging and that the enzyme telomerase, when
introduced into normal cells, is capable of restoring telomere length or
resetting the "clock," thereby increasing the lifespan of cells without altering
their normal function or causing them to become cancerous. Human telomerase, a
complex enzyme, is composed of a ribonucleic acid (RNA) component, known as hTR,
and a protein component, known as hTERT. In 1994, in collaboration with Dr.
Carol Greider, we cloned the gene for hTR, and in 1997, in collaboration with
Dr. Thomas Cech, we cloned the gene for hTERT.

Our work and that of others has shown that telomerase is not present in
most normal cells and tissues, but that during tumor progression, telomerase is
abnormally reactivated in all major cancer types. We have shown that while
telomerase does not cause cancer (which is caused by mutations in cells), the
presence of telomerase enables cancer cells to maintain telomere length,
providing them with indefinite replicative

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capacity. We and others have shown in various tumor models that inhibiting
telomerase activity results in telomere shortening and therefore causes aging or
death of the cancer cell.

We are working to develop anti-cancer therapies based on telomerase
inhibitors, oncolytic (cancer-killing) viruses and telomerase vaccines. We also
intend to continue to develop and commercialize products using telomerase as a
marker for cancer diagnosis, prognosis, patient monitoring and screening.

HUMAN EMBRYONIC STEM CELLS: A POTENTIAL SOURCE FOR THE MANUFACTURING OF
REPLACEMENT CELLS AND TISSUES

Stem cells generally are self-renewing primitive cells that can develop
into functional, differentiated cells. Human embryonic stem cells are unique
because they are pluripotent, that is they can develop into all cells and
tissues in the body. There are two types of human pluripotent stem cells: human
embryonic stem cells (hESCs) which were first derived by our collaborators from
donated in vitro fertilized blastocysts or very early-stage embryos; and human
embryonic germ cells (hEG cells) which were derived from donated fetal material.

In addition to their pluripotent characteristics, hESCs express telomerase
and can therefore multiply or replicate indefinitely. The ability of hESCs to
divide indefinitely in the undifferentiated state without losing pluripotency is
a unique characteristic that distinguishes them from all other stem cells
discovered to date in humans. Other stem cells such as blood or gut stem cells
express telomerase at very low levels or only periodically; they therefore age,
limiting their use in research or therapeutic applications. Human embryonic stem
cells also maintain a structurally normal set of chromosomes even after
prolonged growth in culture. They do not, for example, have any abnormal
additions, deletions or rearrangements in their chromosomal structure as is
characteristic of cell lines derived from tumors or immortalized by viruses.
Although not as well characterized as hESCs, we believe that hEG cells will
share most of the characteristics of hESCs.

We intend to use human embryonic stem cell technology to:

- enable the development of transplantation therapies by providing standard
starting material for the manufacture of cells and tissues;

- facilitate pharmaceutical research and development practices by providing
cells for disease models and screening, and for assigning function to
newly discovered genes; and

- accelerate research in human developmental biology by identifying the
genes that control human growth and development.

NUCLEAR TRANSFER: A MECHANISM FOR COPYING ADULT ANIMALS

Nuclear transfer is a method for generating whole animals whose nuclear
genetic material is derived solely from a donor cell from a single animal. In
this process, the nucleus containing all of the chromosomal DNA is removed, or
enucleated, from the egg cell and replaced with the nucleus containing all of
the chromosomal DNA from a donor somatic (non-reproductive) cell. Fusion between
the resulting egg cell and the donor somatic nucleus results in a new cell which
gains a complete set of chromosomes derived entirely from the donor nucleus.
Mitochondrial DNA, providing some of the genes for energy production, resides
outside the nucleus and is provided by the egg. After a brief culture period,
the resulting embryo is implanted into the uterus of a female animal, where it
can develop and produce the live birth of a cloned offspring. The offspring is
essentially a genetic clone of the animal from which the donor nucleus was
obtained.

In early 1997, Dr. Ian Wilmut and his colleagues at the Roslin Institute
demonstrated with the birth of Dolly, the sheep, that the nucleus of an adult
cell can be transferred to an enucleated egg to create cloned offspring. The
birth of Dolly was significant because it demonstrated the ability of egg cell
cytoplasm, the portion of the cell outside of the nucleus, to reprogram an adult
nucleus. Reprogramming enables the adult differentiated cell nucleus to express
all the genes required for full embryonic development of the adult animal. In
addition to sheep, the technique has been used to clone mice, goats, cattle and
pigs from donor cells and enucleated eggs from the respective animals.

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In order to complement and strengthen our technology platforms, in 1999, we
acquired Roslin Bio-Med Ltd., a commercial subsidiary of the Roslin Institute
which pioneered the use of nuclear transfer technology for the creation of
cloned animals. We also entered into a research collaboration with the Roslin
Institute to focus on understanding the molecular mechanisms used by animal egg
cell cytoplasm to reprogram adult animal cell nuclei.

Today, we are using the Roslin Institute's expertise in developmental
biology to derive new stem cell lines and genetically engineer them to avoid
immune rejection through gene targeting methods. In this way, we will learn the
biology of gene expression during differentiation. With this knowledge, we
intend to produce cells for use in repairing organs damaged by degenerative
disease that will not be rejected by the transplant recipient.

We continue to license nuclear transfer technology to others for
applications in agriculture and production of biologicals. As of December 31,
2001, we had granted six non-exclusive licenses or license options to various
companies for applications in chickens, cows, pigs and goats, and one
non-exclusive license to a company to produce materials based on spider silk.

COMMERCIAL OPPORTUNITIES FOR OUR TECHNOLOGY PLATFORMS

ONCOLOGY

Cancer is a group of diseases characterized by the uncontrolled growth and
spread of abnormal cells. The American Cancer Society estimates that
approximately 1.3 million cancer cases were diagnosed in the year 2001. Overall
annual costs associated with cancer in 2001 were $157 billion in the United
States alone. Because telomerase is detectable in more than 30 human cancer
types and in over 80 percent of cancer samples studied, we believe that
telomerase-based drugs could overcome the limitations of current cancer
therapies and potentially be broadly applicable and highly specific drug
treatments for cancer.

We are working to discover and develop anti-cancer therapies based on
telomerase inhibitors, oncolytic (cancer-killing) viruses and telomerase
vaccines. We also intend to continue to develop and commercialize products using
telomerase as a marker for cancer diagnosis, prognosis, patient monitoring and
screening. We believe that we have achieved a dominant position in telomerase
research and in telomerase intellectual property which gives us a significant
advantage in the discovery and development of oncology products based on
telomerase.

Telomerase Inhibition. Telomerase activation is necessary for most cancer
cells to replicate indefinitely and thereby enable tumor growth and metastasis.
One of our strategies for the development of anti-cancer therapies is to inhibit
telomerase activity in cancer cells. Inhibiting telomerase activity should
result in telomere shortening and therefore cause the aging and eventual death
of cancer cells. Because telomerase is expressed at very low levels, if at all,
in most normal cells, the telomerase inhibition therapies described below are
not expected to be cytotoxic to normal cells. To produce a telomerase inhibitor
for the treatment of cancer, we have focused our efforts on two approaches:
template antagonists and small molecules. Both approaches have produced
compounds which are in animal testing. We and our collaborator have established
research programs focused on our telomerase-inhibiting compounds with the goal
of advancing an inhibitor to clinical development.

Template Antagonists. We have designed and synthesized a special
class of short-chain nucleic acid-like molecules, known as
oligonucleotides, to target the template region, or active site, of
telomerase. These oligonucleotides have demonstrated highly potent
telomerase inhibitory activity at sub-nanomolar, or very low,
concentrations in both biochemical assays and various cellular systems.
Published research by others has shown that these template antagonists
inhibit the growth of malignant human glioma (brain cancer) cells in
animals.

In 2001, our development partner in Asia, Kyowa Hakko, selected our
compound, GRN163, for development as a telomerase inhibitor for the
treatment of cancer. GRN163 is a true enzyme inhibitor and can therefore be
much smaller (lower molecular weight) than other oligonucleotide drug
candidates. Also, it does not inhibit other critical nucleic acid-modifying
enzymes, nor is it toxic to normal cells at concentrations needed to
inhibit telomerase in tumor cells.

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Small Molecules. Through high-throughput screening of highly diverse
chemical compound libraries, we have identified classes of small molecule
compounds that are telomerase inhibitors which are being further evaluated.
We continue to work toward improving the specificity and potency of these
small molecule compounds by modifying them chemically and testing them in
cancer cells in cell culture and in animal models.

Oncolytic Virus. Our second anti-cancer therapeutic strategy is based on
viruses which have been manipulated or engineered to have oncolytic, or
cancer-killing, properties which would selectively target and destroy cancer
cells. We are developing customized adenoviruses (common cold viruses) that will
infect and kill cancer cells which express telomerase and not infect and kill
normal cells which do not express telomerase. To pursue this goal, we have
cloned the region of the hTERT gene, called the promoter sequence, that is
responsible for turning on or off the activity of telomerase in a cell. We have
demonstrated that this promoter is turned on in telomerase-positive cancer
cells, and is turned off in most normal cells.

We are using the hTERT promoter to turn on the genes which are required for
the customized adenovirus to replicate within the cancer cell. Our data indicate
that when tumor cells are infected with the adenovirus which contains the hTERT
promoter, the virus multiplies or replicates within the cancer cells and causes
the rupture and death, or lysis, of the tumor cells. When these same
adenoviruses containing the hTERT promoter infect normal somatic cells, there is
no similar effect on the cells. We believe that these oncolytic viruses could be
used to treat many types of primary and metastatic cancers. We have granted a
non-exclusive license to Genetic Therapy Inc. (GTI), a subsidiary of Novartis
AG, to use our telomerase promoter technology in oncolytic virus products.

Telomerase Vaccine. Our third approach to anti-cancer therapy is a
telomerase vaccine, exploiting the fact that telomerase is present in all major
cancer types but is expressed at very low levels, if at all, in most normal
cells. In this approach, we deliver telomerase to special immune cells called
dendritic cells which instruct the immune system to detect cells that express
telomerase and kill them.

We are conducting research to confirm the safety and efficacy of dendritic
cell telomerase vaccine therapies. In collaboration with scientists at Duke
University, we published studies in the September 2000 issue of Nature Medicine,
which demonstrate that cancer patients' immune cells can be activated with a
telomerase vaccine in the laboratory to kill their own cancer cells. This
technique was also effective in reducing tumors in animals. A Phase 1 study in
prostate cancer patients at Duke University Medical Center is currently under
way using this approach. We are also developing procedures to directly immunize
patients using telomerase. This direct method of vaccination would eliminate the
need for manipulation of dendritic cells in culture and could potentially allow
simple vaccination procedures to be available for all cancer patients.

Cancer Diagnostics. Telomerase is a broadly applicable and highly specific
marker for cancer because it has been detected in more than 30 human cancer
types and in over 80 percent of cancer samples studied. We believe that the
detection of telomerase may have significant clinical utility for cancer
diagnosis, prognosis, monitoring and screening. Current cancer diagnostics apply
only to a single or limited number of cancer types because they rely on
molecules expressed only by particular cancer types. However, telomerase-based
diagnostics could potentially address a broad range of cancers.

We have developed several proprietary assays for the detection of
telomerase which are based on its activity or the presence of its RNA or protein
components. The first-generation assay is the Telomeric Repeat Amplification
Protocol (TRAP) assay which can be used to detect telomerase activity in human
tissue or cells in culture. The second generation assays detect the presence of
hTR and hTERT in human tissues and body fluids. We own issued patents for the
detection of telomerase activity and the components of telomerase including
patents for the TRAP assay and diagnostic methods based on telomerase detection.
To date, our licensees have commercialized 13 research-use-only kits that
incorporate our technology.

We are working with Roche Diagnostics to develop the clinical potential of
our telomerase detection technology. Research data shows that an assay for
telomerase is a more sensitive and specific test for screening bladder cancer
than other commercially available tests. We believe that these and other data
support the

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clinical application of telomerase assays in diagnosis, staging, monitoring and
screening for bladder, cervical, prostate and other cancers.

RESEARCH & DEVELOPMENT TECHNOLOGIES

Genomics and Human Developmental Biology. The first phase of the private
and publicly funded programs to complete the sequencing of the human genome is
now accomplished. Despite this catalogue of human gene sequences, little is
known about the structure of most genes, when and in what cells they are
expressed or how they function. The next major hurdle is to determine the
function of these genes and to use this information to develop new diagnostic
and therapeutic approaches to treat many diseases.

Embryonic stem cells are especially suitable for the functional analysis of
genes involved in cell proliferation, differentiation and metabolism. The
effects of adding or knocking out specific genes in hESCs can be monitored,
providing evidence for the function of the gene on a particular proliferation or
differentiation process. In collaboration with Celera Genomics, we are
generating gene libraries from hESCs and sequencing them to identify genes
important for human development. We are simultaneously developing procedures
using hESCs to identify the function of multiple developmental genes.
Identification of the function of developmental genes will facilitate the
selection of genes that would be good targets for drug discovery.

Immortalized Cells for Research. Scientists study specific cells from
targeted tissues in order to understand their biological function. For these
studies, cells are usually isolated from tissue and maintained in culture. The
progressive changes in biological activity, morphology and proliferation as a
result of normal cell aging in tissue culture potentially limit the utility of
these cells in serial experiments and long-term research. Because of these
limitations, most research laboratories utilize transformed cell lines for their
studies. Cells can be transformed by using viruses which ultimately cause the
cells to grow indefinitely in culture. However, such immortalized cell lines
have abnormal characteristics compared to non-transformed cells. For this
reason, they are not good models of normal tissue in the human body.

The telomerase-immortalized cells may be ideal for use in biological
research because these cells proliferate indefinitely and function in culture in
the same manner as the normal, mortal cells from which they were derived.
Moreover, telomerase-immortalized cells can function in the body to form normal
tissue and their capacity to differentiate into mature tissue is maintained. The
ability of these cells to maintain normal physical and biological
characteristics while retaining proliferative capacity allows them to be a
constant source of cells for repeat and long-term studies on the function of
cells both in culture and in the body. Telomerase-immortalized cells can be used
to study any of the normal biological pathways in cells and can be used to
screen for factors which influence the appropriate function of those cells.
Moreover, cells taken from diseased tissues which are then
telomerase-immortalized in culture can be used to explore the mechanism of the
disease process and to develop interventions to prevent or treat that disease.

We distribute the human telomerase gene under material transfer agreements
to academic laboratories worldwide in order to generate new applications of our
technology and to preserve our commercialization rights in these applications.
To date, we have material transfer agreements with over 500 academic
laboratories worldwide.

To distribute our telomerase-immortalized cell lines commercially, we
established an alliance with Clontech Laboratories, Inc., to distribute
telomerase-immortalized cell lines to the not-for-profit research market for
basic research applications. Under the alliance, we execute licenses with, and
receive license fees from, commercial entities that are supplied by Clontech.

Drug Screens and Toxicology. Three of the major hurdles of pharmaceutical
drug development are (i) identifying compounds with activity in diseased tissue;
(ii) understanding the metabolism and biodistribution of the compound; and (iii)
determining the potential toxic side effects of the compound. Undesirable
activity of a compound being evaluated as a candidate drug in any one of these
areas can impact the development and commercialization of the drug. The earlier
in development that a compound is found to have undesirable characteristics, the
faster these characteristics can be potentially corrected. This potentially

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translates into reduced costs and time in drug development, and less harmful
exposure to patients in clinical trials.

Many prospective new drugs fail in clinical trials because of toxicity to
the liver or because of poor uptake, distribution or elimination of the active
compound in the human body. Much of the efficacy and safety of a drug will
depend on how that drug is metabolized into an active or inactive form, and on
the toxic metabolites that might be generated in the process. Hepatocytes, the
major cells of the liver, metabolize most compounds and thereby can be used to
predict many pharmacological characteristics of a drug.

There are no completely effective systems available today to accurately
predict the metabolism or toxicity of a compound in human livers. Rat and mouse
metabolism models only approximate human metabolism. The development of several
drugs has been terminated late in human clinical trials because rodent systems
utilized early in the development process failed to predict that the drug would
be toxic to humans. Human hepatocyte cell lines available today do not have the
same attributes as their normal counterparts in the body and must be transformed
in order to maintain their proliferative capacity in culture. Access to fresh
primary human liver tissue for use in toxicity studies is very limited and
substantial variability can be observed depending on the individual donor, the
time and process of collection and the culture conditions for the experiments.

We believe that we have the technologies to provide a consistent source of
normal human liver tissue which would more closely predict the impact of a new
drug on human livers in the body. We believe that an unlimited supply of
hepatocytes which retain normal drug metabolism enzymes would revolutionize
toxicity testing, address the largest bottleneck in new drug research and
accelerate the drug development process. To potentially meet this need, we are
working to create hepatocytes using two methods. First, we will apply our
telomerase technology to immortalize primary human hepatocytes. In every cell
system tested, telomerase-immortalized cells have been shown to function
comparably to their normal non-immortalized counterparts. Therefore, we believe
telomerase-immortalized hepatocytes should also function comparably to
hepatocytes of a whole human liver in the body. Second, we are developing
procedures to differentiate hESCs into hepatocyte precursors and eventually into
mature hepatocytes. Functional hepatocytes, developed by either immortalization
by telomerase or derivation from hESCs, would provide a consistent and reliable
source of material for extensive and reproducible compound testing.

We intend to commercialize such cells as a means to more accurately
determine the potential toxicity and metabolism of a new candidate drug. In
addition, the availability of a panel of hepatocytes from numerous individuals
would allow a more thorough understanding of the effects of a drug candidate on
a specific individual, allowing full development of the field of
pharmacogenomics whereby a compound's activity will be correlated with an
individual's genetic make-up.

NUCLEAR TRANSFER: AGRICULTURE/XENOTRANSPLANTATION/BIOLOGICS

Agriculture. Our nuclear transfer and gene targeting technologies can be
used for applications in agriculture that improve livestock by producing
unlimited numbers of genetically identical animals with superior commercial
qualities. Such applications can be extended to major agricultural sectors, such
as beef, dairy, pig and chicken, to provide large numbers of animals with
superior characteristics of disease resistance, longevity, growth rate or
product quality.

We continue to license our nuclear transfer technology to others for
applications in agriculture and production of biologicals. As of December 31,
2001, we had granted six non-exclusive licenses or license options to various
companies for applications in chicken, cows, pigs, goats or other animals.

Transgenic Animals. Our nuclear transfer technology can be applied to
clone animals that have been genetically engineered to produce proteins for
human therapeutic or industrial use. For example, herds which carry the genes to
make human antibodies could be cloned, thereby allowing for the large-scale
production of therapeutic antibodies or vaccines. In 2001, we granted a
non-exclusive license to Nexia Biotechnologies Inc. for the production of
natural and synthetic silk proteins in goats for industrial and medical
applications.

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Xenotransplantation. Our nuclear transfer technologies can be used for
applications in xenotransplantation to create animals whose cells, tissues or
organs could be used in humans. This approach could be used either as a bridge
to human organ transplantation or as a long-term therapy.

REGENERATIVE MEDICINE

The preceding product opportunities are examples of how we plan to
separately use each of our three technology platforms. Additional opportunities
arise from their combination. We are developing two basic approaches to restore
organ function lost to chronic diseases: small molecule and cell-based
therapies.

We believe that the controlled activation of telomerase in the body can
have therapeutic applications for the treatment of blood, skin and immune
disorders, conditions in which deficiencies in cell proliferation have been
implicated. We are developing a drug-like strategy with our small molecule-based
therapy which would reactivate the existing telomerase gene already present in
the cell to restore normal function to the cell. We are currently developing
methods to activate telomerase in skin cells to address impaired wound healing.

In cell-based therapies, differentiated cells derived from human embryonic
stem cells (hESCs) would be transplanted or injected into the patient where they
would integrate into the target tissue and thereby restore organ function or
prevent or slow further deterioration. This approach is particularly applicable
for the regeneration of tissues that do not normally divide in the body or which
fail to proliferate in the disease state. Such cells include neural cells,
cardiomyocytes (heart muscle cells), pancreatic islet (beta) cells, osteoblasts,
chondrocytes and hematopoietic cells. We are currently developing these cell
types for therapeutic applications in Parkinson's disease, spinal cord injury,
heart disease, diabetes, osteoporosis, osteoarthritis and blood disease.

Parkinson's Disease, Stroke and Spinal Cord Injury. The major neural cells
of the nervous system typically do not regenerate after injury. If a nerve cell
is damaged due to disease or injury, there is no treatment at present to restore
lost function. Millions of patients worldwide suffer from injury to the nervous
system or disorders associated with its degeneration. Strokes are caused by
blood clots or local bleeding in the brain and result in the death or
degeneration of critical brain cells. Over 600,000 Americans suffer strokes each
year. Stroke patients are often permanently compromised by loss of cognitive
motor and sensory functions for which there are no treatments available today
except costly long-term rehabilitation programs which have limited utility in
restoring function. Over one million Americans suffer from Parkinson's disease,
a neurological disorder caused by the progressive degeneration of specific cells
within the brain that control certain motor functions. In the case of spinal
cord injuries, patients are often left partly or wholly paralyzed because nerve
and supporting cells in the spinal cord have been damaged and cannot regenerate.
Such patients are permanently disabled, often institutionalized, and may require
life support.

Embryonic stem cell-derived neural cells have been used by researchers to
treat nervous system disorders in animal models. Mouse embryonic stem cells were
stimulated to differentiate into neural cells which, when transplanted into mice
with neurological disorders, helped to restore normal function. In the case of
spinal cord injuries, neural cells derived from animal embryonic stem cells and
injected into the spinal cord injury site produced partial recovery of the
animal's ability to move and bear weight.

We have derived the major types of neural cells from hESCs in culture,
including human neurons, astrocytes and oligodendrocytes, and are characterizing
their functional properties. We have devoted a significant portion of our
research activities to developing procedures that could enable us to produce
these neural cells for transplantation therapy in humans. We are now testing
these cells in appropriate animal models to determine whether they can restore
normal neural function. If these tests are successful, we intend to repair the
damaged portions of patients' nervous systems by transplanting
hESC-differentiated neurons into the damaged area.

Heart Disease. Heart muscle cells (cardiomyocytes) do not regenerate
during adult life. When heart muscle is damaged by injury or decreased blood
flow, functional contracting heart muscle is replaced with nonfunctional scar
tissue. Congestive heart failure, a common consequence of heart muscle or valve
damage,

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affects more than four million people in the United States. This year, it is
estimated that about 1.1 million people will have a heart attack, which is the
primary cause of heart muscle damage.

We intend to use cardiomyocytes derived from hESCs to treat heart disease.
Researchers have demonstrated proof of concept of our approach in mice. Mouse
embryonic stem cells have been used to derive mouse cardiomyocytes. When
injected into the hearts of recipient adult mice, the cardiomyocytes repopulated
the heart tissue and stably integrated into the muscle tissue of the adult mouse
heart. These results suggest that hESC-derived cardiomyocytes could be developed
for cellular transplantation therapy in humans suffering from congestive heart
failure and the damage caused by heart attacks. We have derived human
cardiomyocytes from hESCs and observed their normal contractile function and
response to cardiac drugs. We plan to test these cardiomyocytes in animal models
to establish the safety and efficacy of this cell-based therapy.

Diabetes. It is estimated that there are as many as one million Americans
suffering from the type of diabetes known as Type 1 Diabetes (Insulin Dependent
Diabetes Mellitus). Normally, certain cells in the pancreas, called the islet
(beta) cells, produce insulin which promotes the uptake of the sugar glucose by
cells in the human body. Degeneration of pancreatic islet (beta) cells results
in a lack of insulin in the bloodstream which results in diabetes. Although
diabetics can be treated with daily injections of insulin, these injections
enable only intermittent glucose control. As a result, patients with diabetes
suffer chronic degeneration of many organs, including the eye, kidney, nerves
and blood vessels. In some cases, patients with diabetes have been treated with
islet (beta) cell transplantation. However, poor availability of suitable
sources for islet (beta) cell transplantation and the complications of the
required co-administration of immunosuppressive drugs make this approach
impractical as a treatment for the growing numbers of individuals suffering from
diabetes.

We are currently developing methods to derive insulin producing islet
(beta) cells from hESCs. Future work includes improving the yield of islet
cells, characterizing their secretion of insulin in response to glucose and
transplanting the islets to animal models of diabetes. If these tests are
successful, we plan to infuse those cells into the liver of patients with
severe, brittle Type 1 (insulin-requiring) diabetes.

Osteoporosis and Non-Union Bone Fractures. Osteoporosis, or loss of bone
density, is a common condition associated with aging and hormonal changes in
post menopausal women. In addition to skeletal deformities, back pain and loss
of height, the disease causes over 1.2 million fractures per year in the United
States alone. These fractures often occur after minimal trauma and if severe, as
in hip fracture, carry mortality rates between 12% and 20%, resulting in
long-term nursing home care for nearly half of those who survive. Total health
care costs for osteoporosis and its complications are estimated at $7-10 billion
per year in the United States.

The primary cause of the disease is metabolic bone loss (mediated by
osteoclasts -- cells which resorb bone) that is incompletely compensated by new
bone formation (mediated by osteoblasts -- cells which form new bone).
Osteoblast activity declines over human lifespan and fails to keep pace with the
increasing activity of osteoclasts, resulting in progressive loss of bone
density leading to fracture, pain and deformity.

We have recently derived from hESCs cells that are positive for
osteocalcin. Current work focuses on confirming their characteristics as
osteoblasts, improving cell yields, testing function in vitro and then testing
the cells in animals. We intend to infuse osteoblasts derived from hESCs to
treat osteoporosis. The clinical approach will first test the cells in non-union
fractures (fractures of the long bones of the leg or arm that do not heal). If
these trials are successful, we plan to proceed to test the cells in patients
with severe refractory osteoporosis.

Osteoarthritis. Osteoarthritis, or Degenerative Joint Disease, is an
extremely common condition characterized by degradation of cartilage in joints,
often accompanied by bone remodeling and bone overgrowth at the affected joints.
Depending on the criteria for diagnosis, it can be argued that the majority of
the population over 50 is afflicted by the disease. Osteoarthritis is the
leading cause of joint pain and joint disability in middle-aged and elderly
patients.

The disease has many causes, but the end result is a structural degradation
of joint cartilage and a failure of chondrocytes (cartilage-forming cells) to
repair the degraded cartilage collagen matrix. We plan to derive
8

chondrocytes from hESCs and after successful in vitro and animal testing, treat
patients with osteoarthritis by injecting these chondrocytes directly into their
affected joints.

Hematologic Diseases. The hematologic system (the circulating cells of
blood) is one of the rare tissues of the human body that can replenish itself
throughout life. Nevertheless, the critical importance of the blood cells and
the many diseases that can affect those cells have caused the emergence of an
entire subspecialty in medicine: hematology -- the study of blood and its
diseases.

One of the most complex and impactful areas of hematology is bone marrow
transplantation, now used to treat patients with bone marrow failure, leukemia,
lymphoma, myeloma and solid tumors such as breast cancer. The most common
indications for the procedure are: 1) failure of bone marrow stem cells to
produce a particular blood cell type(s), such as aplastic anemia (a deficiency
of mature circulating blood cells), 2) infiltration of bone marrow by tumor
cells which displace the marrow and cause deficiencies of mature circulating
blood cells, or 3) side effects of chemotherapy or radiotherapy used for cancer
treatment which is toxic to bone marrow stem cells. Although complex and
expensive, the use of bone marrow transplantation is increasing worldwide. A
major unresolved problem in the procedure is the lack of availability of
suitably matched marrow donors, which severely limits the numbers of patients
who can undergo the transplant.

We have recently derived hematopoietic stem cells from hESCs with our
collaborator and have begun testing them in animal models of bone marrow
transplantation. If these animal tests and other in vitro tests are positive, we
intend to produce hematopoietic stem cells from hESCs and test them in human
bone marrow transplant settings in which a suitably matched donor is
unavailable.

Skin. The skin is a major organ of the body whose deterioration with age
impacts not just human physical health but also appearance and self-esteem. The
thinning and increased wrinkling of older skin is symptomatic of impaired wound
healing and results in increased frequency of chronic ulcers. Skin cancers are
more prevalent than any other form of cancer and are believed to be caused in
part by aging of skin cells.

We have a skin program based upon the activation of telomerase in skin
cells. Our scientists and other researchers have established that skin cells age
in tissue culture and in the body with loss of telomeric DNA. The restoration of
telomerase activity in skin cells in culture dramatically extends the healthy
lifespan of these cells. Animal models of telomere loss also correlate cellular
aging with thinning of skin, graying of hair, chronic ulcerative lesions at
areas of stress and reduced ability to repair wounds. Our approach to the
therapeutic use of telomerase activation in skin includes both small molecule
drug discovery and biological methods of restoring telomerase in various skin
cells.

COMMERCIALIZATION

We believe that our broad scientific platforms will generate significant
opportunities for a variety of strategic collaborations. We have established and
intend to continue to establish selective collaborations with leading
pharmaceutical, diagnostic and technology companies to enhance our research,
development and commercialization capabilities and to participate in
commercialization opportunities. In each of these strategic collaborations and
in future collaborations, we retain and intend to retain co-promotion rights to
participate in the commercial success of our products.

KYOWA HAKKO COLLABORATION

In April 1995, we entered into a license and research collaboration
agreement with Kyowa Hakko Kogyo Co., Ltd. Under the agreement, Kyowa Hakko
agreed to provide $16.0 million of research funding over four years to support
our program to discover and develop in several Asian countries a telomerase
inhibitor for the treatment of cancer. All of this research funding had been
received as of December 31, 2000. In addition, we are entitled to receive future
payments upon the achievement of certain contractual milestones relating to drug
development and regulatory progress, as well as royalty payments on product
sales. Kyowa Hakko also purchased $2.5 million of our common stock in connection
with our initial public offering. Under the Kyowa Hakko agreement, we exercised
significant influence during the research phase and Kyowa Hakko exercises
significant influence during the development and commercialization phases. In
February 2000, we amended

9

our agreement with Kyowa Hakko to extend the research period and the compound
selection period for one additional year each, to March 2001 and March 2002,
respectively. We received additional research funding of $2.0 million each in
2000 and 2001 as part of this extension, subject to the terms of the agreement.

In 2001, Kyowa Hakko selected GRN163 as a compound for development as a
telomerase inhibitor for the treatment of cancer.

RIBOZYME PHARMACEUTICALS INC. (RPI) COLLABORATION

In December 2001, we entered into a collaboration with RPI to accelerate
process development for our lead telomerase inhibitor, GRN163, and to explore
the potential for a ribozyme-based telomerase inhibitor. Under the terms of the
collaboration, RPI will assist us in the scale-up and optimization of the
manufacturing process for GRN163. In addition, we will explore with RPI a
ribozyme approach for telomerase inhibition therapy in cancer. We have retained
the first right to commercialize technology that results from this
collaboration.

TELOMERASE CANCER VACCINE CLINICAL DEVELOPMENT AT DUKE UNIVERSITY

In August 2000, we initiated a collaboration with Merix Bioscience, Inc. to
develop telomerase-based cancer vaccines for clinical and commercial
applications using Merix's proprietary ex vivo RNA-modified dendritic cell
technology platform. Under the terms of the collaboration, we sponsored
preclinical studies at Duke University to confirm the safety and efficacy of
hTERT-modified dendritic cells to mediate immune responses against tumors.
Studies were performed in parallel by Merix.

In October 2001, we announced that researchers at Duke University Medical
Center had initiated a Phase 1 clinical trial of telomerase as an antigen for
cancer immunotherapy. The trial is designed to assess the safety of using
telomerase immunotherapy to treat metastatic prostate cancer, and is being
conducted under an IND (Investigational New Drug application) submitted by
Johannes Vieweg, M.D., Associate Professor of Urology and Assistant Professor of
Immunology.

DENDREON CORPORATION LICENSE AGREEMENT

In October 2001, we entered into a non-exclusive license agreement with
Dendreon Corporation to develop ex vivo cancer immunotherapies for clinical and
commercial applications. Under the terms of the license, we have granted
Dendreon non-exclusive rights to our telomerase technology. Dendreon plans to
combine telomerase with its proprietary dendritic cell-based technology using
telomerase as an antigen in a vaccine intended to induce a specific immune
response against malignant cancers. We will receive a license fee, milestone
payments and royalties on future sales of these products.

GENETIC THERAPY, INC. (GTI) LICENSE AGREEMENT

In December 2001, we entered into a non-exclusive license agreement with
GTI, a subsidiary of Novartis AG, granting GTI non-exclusive rights to our human
telomerase (hTERT) promoter for the development of oncolytic virus products.
Under the terms of the agreement, GTI has the right to commercialize products
using the hTERT promoter in cancer therapeutics. We will receive a license fee,
milestone payments and royalties on future sales of these products.

DIAGNOSTIC COLLABORATIONS

Research-Use-Only Kits. Roche Diagnostics (formerly Boehringer Mannheim)
has licensed all telomerase and telomere length assay technologies, including
TRAP, hTR, hTERT, and telomere length, for research-use-only kits for cancer. In
late 1996, Boehringer Mannheim commenced commercial sale of the TRAP research
kit. In 1999, Roche Diagnostics launched three additional research kits,
including quantitative TRAP, telomere length measurement and hTERT
quantification assays. In 2000, Roche Diagnostics launched an hTR quantification
kit. Roche Diagnostics is currently marketing a total of five kits.

10

Examples of other companies marketing research-use-only kits under license
include the following:

- In 1999, Roche Diagnostics entered into a sublicense agreement with Dako
under which Dako received non-exclusive rights to develop antibody
mediated telomerase detection assays and telomere length measurement
assays for research and clinical diagnostic applications in oncology. We
receive royalties from products commercialized under this sublicense. In
1999, Dako marketed two kits for measuring telomere length by
fluorescence microscopy. In 2000, Dako launched a telomere length
measurement kit for flow cytometry. Dako is currently marketing a total
of three kits.

- We licensed the TRAP assay for research-use-only to Oncor Inc. and the
license has been subsequently transferred to the Intergen Company
following the acquisition of Oncor's research reagent division by
Intergen. Intergen is currently marketing three TRAP research kits.

- Kyowa Medex Co. has licensed our TRAP assay technology on a non-exclusive
basis for the research-use-only market in Japan and commenced commercial
sale of Intergen's TRAP kit in late 1996.

- PharMingen has licensed our TRAP assay and telomere length measurement
technology on a non-exclusive basis for sale to the research-use-only
market and presently has two research kits on the market.

Although we do not expect royalties from the sale of these 13 research kits
to be significant, the use of these kits has stimulated additional studies of
telomerase activity by academic laboratories and standardized the methodology
used to evaluate the role of telomerase in cancer.

In Vitro Diagnostics. In addition to the rights described above related to
research-use-only kits, our December 1997 license, product development and
marketing agreement with Roche Diagnostics (formally Boehringer Mannheim) also
grants Roche rights to develop and commercialize certain clinical in vitro
diagnostic products for cancer on an exclusive, worldwide basis. Under the
agreement, Roche provided reimbursement in the amount of $500,000 for research
previously conducted and is responsible for all clinical, regulatory,
manufacturing, marketing and sales efforts and expenses. We are entitled to
receive future payments upon achievement of certain contractual milestones
relating to levels of product sales, as well as royalties on product sales.
Further, we have an option at our sole discretion to exercise co-promotion
rights with respect to in vitro diagnostic products sold by Roche in the United
States.

CLONTECH MARKETING AGREEMENT

In March 1999, we entered into a development and license agreement with
Clontech Laboratories, Inc. to market the Infinity(TM) product family of primary
human cell lines immortalized with telomerase. Under the terms of the agreement,
Clontech manufactures and markets products resulting from the use of our
telomerase technology to the not-for-profit research market. Clontech also
supplies products to the biotechnology and pharmaceutical industries under
licenses to be executed between the individual commercial companies and us.
Under the Clontech agreement, Clontech paid us an up-front fee of $50,000 for
development activities. We will equally share operating profits with Clontech
from the sales of the Infinity(TM) Cell Lines, while we will retain all
licensing revenues.

Clontech is presently selling three telomerase-immortalized cell lines: the
hTERT-HME1 human mammary epithelial cell line, the hTERT-BJ1 human foreskin
fibroblast cell line, and the hTERT-RPE1 human retinal pigment epithelial cell
line.

CELERA GENOMICS COLLABORATION

In May 2000, we entered into a collaborative research and license agreement
with Celera Genomics to combine our expertise in human embryonic stem cell
biology with Celera's DNA sequencing and gene discovery capabilities. In
September 2001, we completed the identification of genes expressed in
undifferentiated and differentiated human embryonic stem cells. The large body
of DNA sequence data derived from this collaboration is now being analyzed.
Celera and we are filing patents for all newly discovered DNA information. We
expect to use the new DNA information to develop and potentially commercialize a
number

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of small molecule drugs, protein therapeutics, cell or gene therapy products,
and prenatal diagnostics. Celera and we may also license this technology to
others for applications outside of the scope of our collaboration.

ROSLIN INSTITUTE COLLABORATION

In May 1999, we completed the acquisition of Roslin Bio-Med Ltd., a company
formed by the Roslin Institute in Midlothian, Scotland, in order to complement
and strengthen our technology platforms. Under the terms of the agreement, we
purchased all outstanding shares of Roslin Bio-Med in exchange for 2.1 million
shares of our common stock and Roslin Bio-Med became a wholly-owned United
Kingdom subsidiary known as Geron Bio-Med Ltd. In addition, the Roslin Institute
transferred to us the exclusive rights to the patent applications covering
nuclear transfer technology for all animal and human-based biomedical
applications, excluding (i) human reproductive cloning, (ii) the production of
therapeutic proteins in the milk of ruminants and rabbits and (iii) the
modification of milk composition for nutraceutical use.

In connection with this acquisition, we also formed a research
collaboration with the Roslin Institute and have agreed to provide approximately
$20.0 million in applied research funding over six years, of which $11.1 million
remains payable at December 31, 2001. Under this collaboration, we retain
exclusive license rights to commercialize the results of the research. We are
using the Roslin Institute's expertise in developmental biology to derive new
stem cell lines and genetically engineer them to avoid immune rejection through
gene targeting methods. In this way, we will learn the biology of gene
expression during differentiation. With this knowledge, we intend to produce
cells for use in repairing organs damaged by degenerative disease that will not
be rejected by the transplant recipient.

We are non-exclusively licensing our nuclear transfer technology for
commercial applications in agriculture, xenotransplantation and production of
biologicals. To date, we have signed seven licenses or license options to
various companies for applications in chicken, cows, pigs, goats or other
animals. These companies include AviGenics, Inc., Origen Therapeutics, Inc.,
Viragen, Inc., Clone International, AgResearch Pty Ltd, ProLinia, Inc., and
Nexia Biotechnologies Inc.

RESEARCH COLLABORATIONS

We selectively enter into, and intend to continue to enter into,
collaborative research agreements with leading academic and research
institutions. We design these collaborative agreements to significantly enhance
our research and development capabilities while enabling us to obtain commercial
rights to intellectual property developed through the research collaboration.
Under these agreements, we generally provide funding or other resources for
scientific research in return for commercial rights to materials and discoveries
arising out of this research. We seek to retain rights to commercially develop
and market discoveries made under these research programs by obtaining rights to
exclusively license technology developed under them, including patents and
patent applications filed in connection with these research programs.

As of December 31, 2001, we have collaborative research agreements in
support of our telomerase programs in oncology and regenerative medicine with a
number of institutions, including Duke University, Lawrence Berkeley National
Laboratory, the National Cancer Institute, Stanford University, the University
of Texas Southwestern Medical School at Dallas, the University of California at
San Francisco, the Memorial Sloan-Kettering Cancer Center, Texas A&M University
and Hong Kong University of Science and Technology. We have collaborative
research agreements in support of our research on telomerase-immortalized cells
with numerous institutions, including Duke University and the University of
Texas. We are continuing collaborative research agreements in support of our
human embryonic stem cell research in regenerative medicine programs with The
Johns Hopkins University, the University of California at Irvine, the Roslin
Institute, the University of Wisconsin-Madison and the University of Utah.

PATENTS, PROPRIETARY TECHNOLOGY AND TRADE SECRETS

Our three core technology platforms are supported by a broad intellectual
property portfolio of issued patents and pending patent applications. We
currently own or have licensed over 81 issued or allowed United

12

States patents, 48 granted or accepted foreign patents and over 335 patent
applications that are pending around the world.

Our policy is to seek appropriate patent protection for inventions in our
core technology platforms as well as ancillary technologies that support these
platforms or otherwise provide a competitive advantage to us. We achieve this by
filing patent applications for discoveries made by Geron scientists, as well as
those that we make in conjunction with our scientific collaborators and
strategic partners. Typically, although not always, we file patent applications
in the United States and internationally through the Patent Cooperation Treaty.
In addition, where appropriate we try to obtain licenses from other
organizations to patent filings that may be useful in advancing our scientific
and product development programs.

Patent rights to embryonic stem cells and telomerase underpin both our
regenerative medicine program and our development of products for drug screening
and toxicology. Currently, we own or have licensed rights to five issued United
States patents relating to human embryonic stem cells and human embryonic germ
cells. Our licenses to certain of these patent rights arise from the work that
we funded at the University of Wisconsin-Madison and The Johns Hopkins
University. We have also filed patent applications to protect technologies
developed by Geron scientists in our ongoing efforts to develop products based
on embryonic stem cells. By way of example, these patent applications cover
technologies that we believe will facilitate the commercial-scale production of
embryonic stem cells, such as methods for growing the cells without the need for
cell feeder layers. Patent applications that we own or have licensed also cover
cell types that can be made from hESCs, including hepatocytes (liver cells),
cardiomyocytes (heart muscle cells), neural cells (nerve cells, including
dopaminergic neurons), chondrocytes (cartilage cells), pancreatic islet cells,
osteoblasts (bone cells) and hematopoietic cells (blood-forming cells). We
currently have over 63 patent applications pending around the world covering
various aspects of our stem cell technology.

Our telomerase platform is protected by over 56 issued or allowed United
States patents, 44 granted foreign patents and over 182 patent applications
pending around the world. Our issued United States patents include patents
covering the cloned genes that encode the RNA component (hTR) and the catalytic
protein component (hTERT) of human telomerase, as well as cells that are
immortalized by expression of recombinant hTERT. Aspects of our oncology product
development program covered by issued and pending patent applications include
cancer diagnostics based on detecting the expression of telomerase in cancer
cells, the use of telomerase as a cancer vaccine, the use of the hTERT promoter
to power cancer-killing genes and viruses, and telomerase inhibitors for use as
cancer therapeutics. In the area of telomerase inhibitors, we also own issued
United States patents and/or pending patent applications directed to both small
molecule and oligonucleotide template antagonist telomerase inhibitors, as well
as particular nucleic acid chemistry developed at Geron.

Our third technology platform, nuclear transfer, is protected in part by
the patent rights that we acquired in 1999 with the acquisition of Roslin
Bio-Med, now Geron Bio-Med. Two United States patents have now issued for this
technology, and 19 foreign patents have been granted or accepted. In addition,
we have more than 62 pending patent applications worldwide relating to nuclear
transfer, arising both from the acquired patent rights and subsequent research
that we funded at the Roslin Institute. Intellectual property rights to nuclear
transfer technology are the primary asset of our licensing program through which
we are granting licenses for cloning animals for use in agriculture,
xenotransplantation and production of biologicals.

We endeavor to monitor worldwide patent filings by third parties that are
relevant to our business. Based on this monitoring, we may determine that an
action is appropriate to protect our business interests. As an example of this,
in 2001 we filed a request with the U.S. Patent and Trademark Office (USPTO) for
the declaration of an interference between U.S. patent application 09/650,194
(licensed to Geron from the Roslin Institute) and U.S. Patent No. 5,945,577 (the
'577 patent) which is assigned to the University of Massachusetts. On January
30, 2002, the USPTO granted Geron's request and a patent interference proceeding
is now underway. The '577 patent covers certain aspects of nuclear transfer
technology that we believe were first invented at the Roslin Institute. Through
the interference proceeding, the USPTO will reconsider its decision to issue the
'577 patent and determine whether the rights in that patent should be awarded to
Roslin/Geron.

13

GOVERNMENT REGULATION

Regulation by governmental authorities in the United States and other
countries is a significant factor in the development, manufacture and marketing
of our proposed products and in our ongoing research and product development
activities. The nature and extent to which such regulation applies to us will
vary depending on the nature of any products which may be developed by us. We
anticipate that many, if not all, of our products will require regulatory
approval by governmental agencies prior to commercialization. In particular,
human therapeutic products are subject to rigorous preclinical and clinical
testing and other approval procedures of the Food and Drug Administration (FDA),
and similar regulatory authorities in European and other countries. Various
governmental statutes and regulations also govern or influence testing,
manufacturing, safety, labeling, storage and recordkeeping related to such
products and their marketing. The process of obtaining these approvals and the
subsequent compliance with appropriate statutes and regulations require the
expenditure of substantial time and money. Any failure by us or our
collaborators to obtain, or any delay in obtaining these approvals may affect
the marketing of any products developed by us, will prevent us from generating
product revenues and obtaining adequate cash to continue present and planned
operations.

FDA APPROVAL PROCESS

Prior to commencement of clinical studies involving humans, preclinical
testing of new pharmaceutical products is generally conducted on animals in the
laboratory to evaluate the potential efficacy and the safety of the product. The
results of these studies are submitted to the FDA as a part of an
Investigational New Drug application, which must become effective before
clinical testing in humans can begin. Typically, human clinical evaluation
involves a time consuming and costly three-phase process. In Phase 1, clinical
trials are conducted with a small number of people to assess safety and to
evaluate the pattern of drug distribution and metabolism within the body. In
Phase 2, clinical trials are conducted with groups of patients afflicted with a
specific disease in order to determine preliminary efficacy, optimal dosages and
expanded evidence of safety. In Phase 3, large-scale, multi-center, comparative
trials are conducted with patients afflicted with a target disease in order to
provide enough data to demonstrate the efficacy and safety required by the FDA.
The FDA closely monitors the progress of each of the three phases of clinical
testing and may, at its discretion, re-evaluate, alter, suspend, or terminate
the testing based upon the data which have been accumulated to that point and
its assessment of the risk/benefit ratio to the patient. Monitoring of all
aspects of the study to minimize risks is a continuing process. Reports of all
adverse events must be made to the FDA.

The results of the preclinical and clinical testing on a non-biologic drug
and certain diagnostic drugs are submitted to the FDA in the form of a New Drug
Application, or NDA, for approval prior to commencement of commercial sales. In
the case of vaccines or gene and cell therapies, the results of clinical trials
are submitted as a Biologics License Application or BLA. In responding to a NDA
or BLA, the FDA may grant marketing approval, request additional information or
deny the application if the FDA determines that the application does not satisfy
its regulatory approval criteria. There can be no assurance that approvals will
be granted on a timely basis, if at all, for any of our products.

EUROPEAN AND OTHER REGULATORY APPROVAL

Whether or not FDA approval has been obtained, approval of a product by
comparable regulatory authorities in Europe and other countries will likely be
necessary prior to commencement of marketing the product in such countries. The
regulatory authorities in each country may impose their own requirements and may
refuse to grant, or may require additional data before granting an approval,
even though the relevant product has been approved by the FDA or another
authority. As with the FDA, the regulatory authorities in the European Union, or
EU, and other developed countries have lengthy approval processes for
pharmaceutical products. The process for gaining approval in particular
countries varies, but generally follows a similar sequence to that described for
FDA approval. In Europe, the European Committee for Proprietary Medicinal
Products provides a mechanism for EU-member states to exchange information on
all aspects of product licensing. The EU has established a European agency for
the evaluation of medical products, with both a centralized community procedure
and a decentralized procedure, the latter being based on the principle of
licensing within one member country followed by mutual recognition by the other
member countries.
14

OTHER REGULATIONS

We are also subject to various United States, federal, state, local and
international laws, regulations and recommendations relating to safe working
conditions, laboratory and manufacturing practices and the use and disposal of
hazardous or potentially hazardous substances, including radioactive compounds
and infectious disease agents, used in connection with our research work. We
cannot accurately predict the extent of government regulation which might result
from future legislation or administrative action.

SCIENTIFIC ADVISORS AND CONSULTANTS

We have consulting agreements with a number of leading academic scientists
and clinicians. These individuals serve as members of our Scientific Advisory
Board or as key consultants with respect to our product development programs and
strategies. They are distinguished scientists and clinicians with expertise in
numerous scientific fields, including the genetics of aging, embryonic stem
cells, nuclear transfer, cell senescence and telomere and telomerase biology, as
well as developmental biology, cellular biology and molecular biology.

We established the advisory board to provide us with expert advice and
consultation on our scientific programs and strategies. Members of the advisory
board also serve as important contacts for us throughout the broader scientific
community. The advisory board meets at least once annually as a whole or in
smaller groups to focus on general strategy and certain specific scientific
issues. We also contact individual members of the advisory board to provide
advice and consultation on an ad hoc basis, as appropriate.

We retain each member of the advisory board according to the terms of a
consulting agreement between the advisory board member and us. Under such
consulting agreements, some advisory board members hold options to purchase our
common stock, subject to the vesting requirements contained in the consulting
agreements. In addition, we pay advisory board members a consulting fee and
reimburse them for out-of-pocket expenses incurred in attending each advisory
board meeting. Most members of the advisory board are employed by institutions
other than ours, and therefore may have commitments to, or consulting or
advisory agreements with, other entities or academic institutions that may limit
their availability to us.

As of December 31, 2001, our advisory board members and key consultants
included the following individuals:

STEPHEN BENKOVIC, PH.D., is Professor of Chemistry at the Pennsylvania
State University. Dr. Benkovic is a member of the Chemical Society and the
recipient of the 1998 Chemical Pioneer Award given by the American Institute of
Chemists. He is an internationally recognized expert in protein chemistry,
including the enzymology of DNA polymerases.

JUDITH CAMPISI, PH.D., is a Senior Scientist and Acting Chair, Department
of Cancer Biology, Lawrence Berkeley National Laboratory. She has been an
Established Investigator of the American Heart Association and currently has a
MERIT Award from the NIA, and serves on its Board of Scientific Counselors. Her
major interests are the cellular and molecular biology of senescence and
tumorigenesis.

JOHN CLARK, OBE, FRSE, PH.D., is Head of the Division of Molecular Biology
at the Roslin Institute and is the leader of Geron Bio-Med's cellular
reprogramming team. Dr. Clark was a scientific founder of PPL Therapeutics, plc
and is also a Professor in the Division of Biology at Edinburgh University. He
received the Order of the British Empire from the Queen of England in 1997 for
his contribution to biotechnology and particularly his pioneering work on the
modification of milk composition by genetic engineering of livestock. He was
elected to the Royal Society of Edinburgh in 1999. Current research areas
include use of genetically modified animals for biomedical and agricultural
applications and fundamental studies of the control of gene expression.

DOUGLAS HANAHAN, PH.D., is a Professor of Biochemistry in the Department of
Biochemistry and Biophysics and Associate Director of the Hormone Research
Institute, University of California at San Francisco and is a member of our
Scientific Advisory Board. His major research interests are the cellular and
genetic mechanisms of tumor development and autoimmunity. Prior to joining the
University of California at

15

San Francisco in 1988, Dr. Hanahan was with the Cold Spring Harbor Laboratory
for nine years, where he developed technologies for recombinant DNA and
molecular cloning and established transgenic mouse models to study cancer and
autoimmune diseases.

RUDOLF JAENISCH, PH.D., is a Professor of Biology at the Massachusetts
Institute of Technology, a member of the Whitehead Institute for Biomedical
Research and a member of our Scientific Advisory Board. Dr. Jaenisch is
internationally known for his research on the control of gene expression in
mammalian development and genetic disease. He has recently turned his attention
to the use of mammalian cloning technology to distinguish epigenetic and genetic
alterations in the genome and their role in growth and development.

MALCOLM MOORE, PH.D., is a Professor of Biology at the Sloan-Kettering
Division, Cornell Graduate School of Medical Sciences and is internationally
known for his pioneering work in hematopoiesis, growth factors and cytokines. He
is also currently incumbent of the Enid A. Haupt Chair of Cell Biology, Memorial
Sloan-Kettering Cancer Center. Dr. Moore received the William B. Coley Award For
Distinguished Research in Immunology by the Cancer Research Institute in June
1995.

ROGER A. PEDERSEN, PH.D., is a Professor in the Department of Surgery at
the University of Cambridge in England where he teaches human developmental
biology and conducts research on human embryonic stem cells. Previously, Dr.
Pedersen was a Professor of Obstetrics, Gynecology and Reproductive Sciences at
the University of California at San Francisco. Since 1991 he has served as
Series Editor of Current Topics in Developmental Biology. He has written
numerous original publications and reviews on early mouse development, and
co-produced two instructional videotapes on the use of mice in transgenic and
gene targeting research.

JERRY W. SHAY, PH.D., is a Professor of Cell Biology and Neuroscience at
the University of Texas Southwestern Medical Center at Dallas and is a member of
our Scientific Advisory Board. Dr. Shay's research focuses on molecular
mechanisms of tumorigenesis and immortalization with a particular emphasis on
cancer of the breast. Dr. Shay has numerous publications, honors and patents. He
is also on the editorial board for the Journal of Clinical Pathology.

IAN WILMUT, OBE, B.SC., PH.D., D.SC., F.MED.SCI., is Professor of the
Division of Biological Science of the University of Edinburgh and is the head of
the Geron Bio-Med nuclear transfer team. Professor Wilmut has received numerous
prizes, including the Sir John Hammond Prize by the British Society of Animal
Production, the Golden Plate Award by the American Academy of Achievement of
Science and Technology, the Lord Lloyd of Kilgerran Prize by the Foundation of
Science and Technology, and the Order of the British Empire from the Queen of
England in 1999. He is the leader of the team that cloned Dolly, the first
animal to develop after nuclear transfer from an adult cell, and is an
internationally recognized expert in the field of nuclear transfer. Current
research areas include early mammalian development, embryo manipulation, nuclear
transfer and gene targeting in mice, cattle, sheep and pigs.

WOODRING E. WRIGHT, M.D., PH.D., is a Professor of Cell Biology and
Neuroscience at the University of Texas Southwestern Medical Center at Dallas
and is a member of our Scientific Advisory Board. He is widely recognized as a
leading molecular biologist working in the field of cellular senescence and the
molecular basis of muscle development.

GERON ETHICS ADVISORY BOARD

In July 1998, we created an Ethics Advisory Board whose members represent a
variety of philosophical and theological traditions with broad knowledge in
health care ethics. The advisory board functions as an independent entity,
consulting and giving advice to us on the ethical aspects of our work. Members
of the advisory board have no financial interest in Geron.

As of December 31, 2001, the Ethics Advisory Board consisted of the
following individuals:

KAREN LEBACQZ, PH.D., is the Robert Gordon Sproul Professor of Theological
Ethics at the Pacific School of Religion in the Graduate Theological Union,
Berkeley, California. She has published extensively on ethics

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and genetics as well as research ethics and served on the National Commission
for the Protection of Human Subjects of Biomedical and Behavioral Research.

ALBERT JONSEN, PH.D., is Professor Emeritus of Ethics in Medicine and
former chairperson of the Department of Medical History and Ethics, School of
Medicine, University of Washington. He has contributed chapters to more than 70
books on medicine and health care and his articles have appeared in numerous
publications.

TED PETERS, PH.D., is Professor of Systematic Theology at Pacific Lutheran
Theological Seminary. He conducts research at the Center for Theology and the
National Sciences where he is principal investigator for a research project on
"Theological and Ethical Implications of the Human Genome Initiative." He is
also editor of Genetics: Issues of Social Justice.

ERNLE W. D. YOUNG, PH.D., is Clinical Professor of Ethics in the Department
of Medicine and Pediatrics at Stanford University School of Medicine, a
Co-Director of Stanford University's Center for Biomedical Ethics, the Clinical
Ethics Consultant to Stanford University Hospital and to Veterans' Affairs
hospitals in Palo Alto and Fresno, California. He has published extensively on
issues in bioethics.

LAURIE ZOLOTH-DORFMAN, PH.D., is Associate Professor of Social Ethics and
Director of the Program in Jewish Studies at San Francisco State University and
a Co-Founder of The Ethics Practice, a group which provides education services
and consultation on bioethics to health care providers and health care systems.
She has published on bioethics, religion, and health care.

EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth certain information with respect to the
executive officers of Geron Corporation:

THOMAS B. OKARMA, PH.D., M.D., has served as our President, Chief Executive
Officer and director since July 1999. He is also a director of Geron Bio-Med
Limited, a United Kingdom company. From May 1998 until July 1999, Dr. Okarma was
the Vice President of Research and Development. From December 1997 until May
1998, Dr. Okarma was Vice President of Cell Therapies. From 1985 until joining
us, Dr. Okarma, the scientific founder of Applied Immune Sciences, Inc., served
initially as Vice President of Research and Development and then as its
chairman, chief executive officer and a director, until 1995 when it was
acquired by Rhone-Poulenc Rorer. Dr. Okarma was a Senior Vice President at
Rhone-Poulenc Rorer from the time of the acquisition of Applied Immune Sciences,
Inc. until December 1996. From 1980 to 1985, Dr. Okarma was a member of the
faculty of the Department of Medicine at Stanford University School of Medicine.
Dr. Okarma holds a A.B. from Dartmouth College and a M.D. and Ph.D. from
Stanford University.

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DAVID L. GREENWOOD has served as our Chief Financial Officer and Treasurer
since August 1995, Vice President of Corporate Development since April 1997 and
Senior Vice President of Corporate Development since August 1999. He is a
director of Geron Bio-Med Limited, a United Kingdom company and Clone
International Pty Ltd., an Australian company. From 1979 until joining us, Mr.
Greenwood held various positions with J.P. Morgan & Co. Incorporated, an
international banking firm, and its subsidiaries, J.P. Morgan Securities Inc.
and Morgan Guaranty Trust Company of New York. Mr. Greenwood holds a B.A. from
Pacific Lutheran University and an M.B.A. from Harvard Business School.

ELIZABETH R. ADEN, PH.D., has served as our Senior Vice President and
General Manager of Regenerative Medicine since September 2001. Previously, Dr.
Aden was senior vice president and international business director of Pharma
Business Strategy at F. Hoffmann-La Roche. From 1995 to 1999, she held several
research management positions at Roche Bioscience. She developed product
strategy at Syntex Laboratories from 1992 to 1995 and was responsible for
business and market development at Genelabs from 1987 to 1992. Dr. Aden holds a
B.A. degree from the University of California at Berkeley and an M.A. degree
from the University of Cincinnati. Her Ph.D. is from the University of
Pennsylvania, where she studied under Baruch S. Blumberg, who received the Nobel
Prize for the discovery of the hepatitis B virus.

DAVID J. EARP, J.D., PH.D., joined us in June 1999 and has served as our
Vice President of Intellectual Property since October 1999. From 1992 until
joining us, Dr. Earp was with the intellectual property law firm of Klarquist
Sparkman Campbell Leigh and Whinston, LLP where his practice focused on
biotechnology patent law. Dr. Earp holds a B.S. in microbiology from the
University of Leeds, England, a Ph.D. in biochemistry and molecular biology from
The University of Cambridge, England, and conducted postdoctoral research at the
University of California at Berkeley. He received his J.D., magna cum laude from
the Northwestern School of Law of Lewis and Clark College in Portland, Oregon.

CALVIN B. HARLEY, PH.D., has served as our Chief Scientific Officer since
July 1996. From May 1994 until July 1996, Dr. Harley was Vice President of
Research and from April 1993 to May 1994, Dr. Harley was Director, Cell Biology.
Dr. Harley was an Associate Professor from 1989 until joining us, and from 1982
to 1989, an Assistant Professor of Biochemistry at McMaster University. Dr.
Harley also was also an executive of the Canadian Association on Gerontology,
Division of Biological Sciences from 1987 to 1991. Dr. Harley holds a B.S. from
the University of Waterloo and a Ph.D. from McMaster University, and conducted
postdoctoral work at the University of Sussex and the University of California
at San Francisco.

JANE S. LEBKOWSKI, PH.D., has served as our Vice President of Research and
Development, Regenerative Medicine since August 1999. Since joining us in April
1998 and until August 1999, Dr. Lebkowski served as Senior Director, Cell and
Gene Therapies. Formerly, Dr. Lebkowski was employed at Applied Immune Sciences
from 1986 to 1995 where she served as Vice President, Research and Development.
In 1995, Applied Immune Sciences was acquired by Rhone-Poulenc Rorer, at which
time Dr. Lebkowski was appointed Vice President, Discovery & Product
Development. Dr. Lebkowski graduated Phi Beta Kappa with a B.S. in Chemistry and
Biology from Syracuse University and received her Ph.D. from Princeton
University.

JEANNINE M. NIACARIS joined us in November 1999 and has served as our Vice
President of Human Resources and Administrative Services since June 2000.
Previously, she held senior human resources positions at several biotech
companies including Matrix Pharmaceuticals, Sequus Pharmaceuticals and Affymax
Research Institute. She holds a B.A. in Education from Western Washington
University and a M.A. in Human Resources from Redlands University.

BRUCE L. SCOTT has served as our Vice President of Corporate Development
since September 2001. Prior to joining us, he co-founded and was vice president
of business development, operations, finance and marketing at NovoDynamics
Incorporated, a discovery systems company. From 1999 to 2000, he was director
and vice president of business development at Catalytica, Inc. He was vice
president of operations and finance at AIM International, Inc. from 1997 to
1998. From 1978 to 1996, he held numerous positions in general management,
acquisition/strategic planning, marketing and finance with The BF Goodrich Co.
in Akron, Ohio. Mr. Scott holds a B.B.A. in public accounting from Gonzaga
University and an M.B.A. in management and finance from the Krannert School at
Purdue University.

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WILLIAM D. STEMPEL, J.D., has served as our Vice President and General
Counsel since January 2001 and Secretary since May 2001. From 1998 until joining
us, Mr. Stempel was the General Counsel at UCSF Stanford Health Care in San
Francisco. From 1987 to 1998, Mr. Stempel was Deputy General Counsel at Yale
University where he worked in a wide range of areas including intellectual
property, medical affairs and research administration. Mr. Stempel holds B.A.
and J.D. degrees from Yale University. He is a member of the bars of the States
of California, Connecticut and New York, and the United States District Courts
for the District of Connecticut, Southern District of New York and Eastern
District of New York.

RICHARD L. TOLMAN, PH.D., has served as our Vice President of Drug
Discovery since August 1999. From December 1998 until August 1999, Dr. Tolman
served as Senior Director, Medicinal Chemistry, overseeing the program to
discover and develop a small molecule telomerase inhibitor. From 1973 until
joining us, Dr. Tolman was employed at the Merck Research Laboratories where he
served as Senior Director, Medicinal Chemistry. He received a B.A. in Chemistry
with Honors from Brigham Young University and earned a Ph.D. with distinction
from the University of Utah.

EMPLOYEES

As of December 31, 2001, we had 142 full-time employees of whom 47 hold
Ph.D. degrees and 26 hold other advanced degrees. Of the total workforce, 108
are engaged in, or directly support, our research and development activities and
34 are engaged in business development, finance and administration. We also
retain outside consultants. None of our employees is covered by a collective
bargaining agreement, nor have we experienced work stoppages. We consider
relations with our employees to be good.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

Our business is subject to various risks, including those described below.
You should carefully consider these risk factors, together with all of the other
information included in this Form 10-K. Any of these risks could materially
adversely affect our business, operating results and financial condition.

OUR BUSINESS IS AT AN EARLY STAGE OF DEVELOPMENT.

The study of the mechanisms of cellular aging and cellular immortality,
including telomere biology and telomerase, human embryonic stem cells, and the
process of nuclear transfer are relatively new areas of research. Our business
is at an early stage of development. Our ability to produce products that
progress to and through clinical trials is subject to our ability to, among
other things:

- continue to have success with our research and development efforts;

- select therapeutic compounds for development;

- obtain the required regulatory approvals; and

- manufacture and market resulting products.

When potential lead drug compounds or product candidates are identified
through our research programs, they will require significant preclinical and
clinical testing prior to regulatory approval in the United States and
elsewhere. In addition, we will also need to determine whether any of these
potential products can be manufactured in commercial quantities at an acceptable
cost. Our efforts may not result in a product that can be marketed. Because of
the significant scientific, regulatory and commercial milestones that must be
reached for any of our research programs to be successful, any program may be
abandoned, even after significant resources have been expended.

WE HAVE A HISTORY OF OPERATING LOSSES AND ANTICIPATE FUTURE LOSSES; CONTINUED
LOSSES COULD IMPAIR OUR ABILITY TO SUSTAIN OPERATIONS.

We have incurred net operating losses every year since our operations began
in 1990. As of December 31, 2001, our accumulated deficit was approximately
$191.9 million. Losses have resulted principally from costs incurred in
connection with our research and development activities and from general and
administrative costs
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associated with our operations. We expect to incur additional operating losses
over the next several years as our research and development efforts and
preclinical testing activities are expanded. Substantially all of our revenues
to date have been research support payments under the collaboration agreements
with Kyowa Hakko and Pharmacia. In 2001, we regained our right to telomerase
inhibitors from Pharmacia and we will not receive future payments from
Pharmacia. Kyowa Hakko provided additional research funding in 2001 and is not
contractually obligated to provide any further research funding. We may be
unsuccessful in entering into any new corporate collaboration that results in
revenues. Even if we are able to obtain new collaboration arrangements with
third parties the revenues generated from these arrangements will be
insufficient to continue or expand our research activities and otherwise sustain
our operations.

We are unable to estimate at this time the level of revenue to be received
from the sale of diagnostic products and telomerase-immortalized cell lines, and
do not currently expect to receive significant revenues from the sale of these
products. Our ability to continue or expand our research activities and
otherwise sustain our operations is dependent on our ability, alone or with
others to, among other things, manufacture and market therapeutic products.

We may never receive material revenues from product sales or if we do
receive revenues, such revenues may not be sufficient to continue or expand our
research activities and otherwise sustain our operations.

WE WILL NEED ADDITIONAL CAPITAL TO CONDUCT OUR OPERATIONS AND DEVELOP OUR
PRODUCTS, AND OUR ABILITY TO OBTAIN THE NECESSARY FUNDING IS UNCERTAIN.

We will require substantial capital resources in order to conduct our
operations and develop our products. While we estimate that our existing capital
resources, interest income and equipment financing arrangements will be
sufficient to fund our current level of operations through June 30, 2003, we
cannot guarantee that this will be the case. The timing and degree of any future
capital requirements will depend on many factors, including:

- the accuracy of the assumptions underlying our estimates for our capital
needs in 2002 and beyond;

- continued scientific progress in our research and development programs;

- the magnitude and scope of our research and development programs;

- our ability to maintain and establish strategic arrangements for
research, development, clinical testing, manufacturing and marketing;

- our progress with preclinical and clinical trials;

- the time and costs involved in obtaining regulatory approvals;

- the costs involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims; and

- the potential for new technologies and products.

We intend to acquire additional funding through strategic collaborations,
public or private equity financings, capital lease transactions or other
financing sources that may be available. Additional financing may not be
available on acceptable terms, or at all. Additional equity financings could
result in significant dilution to stockholders. Further, in the event that
additional funds are obtained through arrangements with collaborative partners,
these arrangements may require us to relinquish rights to some of our
technologies, product candidates or products that we would otherwise seek to
develop and commercialize ourselves. If sufficient capital is not available, we
may be required to delay, reduce the scope of or eliminate one or more of our
research or development programs, each of which could have a material adverse
effect on our business.

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WE MAY BE UNABLE TO IDENTIFY A SAFE AND EFFECTIVE INHIBITOR OF TELOMERASE
WHICH MAY PREVENT US FROM DEVELOPING A VIABLE CANCER TREATMENT PRODUCT, WHICH
WOULD ADVERSELY IMPACT OUR FUTURE BUSINESS PROSPECTS.

As a result of our drug discovery efforts to date, we have identified
compounds in laboratory studies that demonstrate potential for inhibiting
telomerase in humans. Kyowa Hakko has selected one of these compounds, GRN163,
as a lead compound for preclinical development as a telomerase inhibitor for
cancer. Further research is required to determine if this compound can be fully
developed as an efficacious, safe and commercially viable treatment for cancer.

This compound, and other compounds we have identified, may prove to have
undesirable and unintended side effects or other characteristics adversely
affecting its safety or efficacy that would likely prevent or limit its
commercial use. Accordingly, it may not be appropriate for us to proceed with
clinical development, to obtain regulatory approval or to market a telomerase
inhibitor for the treatment of cancer. If we abandon our research for cancer
treatment for any of these reasons or for other reasons, our business prospects
would be materially and adversely affected.

IF OUR ACCESS TO NECESSARY TISSUE SAMPLES, INFORMATION OR LICENSED
TECHNOLOGIES IS RESTRICTED, WE WILL NOT BE ABLE TO DEVELOP OUR BUSINESS.

To continue the research and development of our therapeutic and diagnostic
products, we need access to normal and diseased human and other tissue samples,
other biological materials and related clinical and other information. We
compete with many other companies for these materials and information. We may
not be able to obtain or maintain access to these materials and information on
acceptable terms, if at all. In addition, government regulation in the United
States and foreign countries could result in restricted access to, or
prohibiting the use of, human and other tissue samples. If we lose access to
sufficient numbers or sources of tissue samples, or if tighter restrictions are
imposed on our use of the information generated from tissue samples, our
business will be materially harmed.

SOME OF OUR COMPETITORS MAY DEVELOP TECHNOLOGIES THAT ARE SUPERIOR TO OR MORE
COST-EFFECTIVE THAN OURS, WHICH MAY IMPACT THE COMMERCIAL VIABILITY OF OUR
TECHNOLOGIES AND WHICH MAY SIGNIFICANTLY DAMAGE OUR ABILITY TO SUSTAIN
OPERATIONS.

The pharmaceutical and biotechnology industries are intensely competitive.
We believe that other pharmaceutical and biotechnology companies and research
organizations currently engage in or have in the past engaged in efforts related
to the biological mechanisms of cell aging and cell immortality and potential
applications in regenerative medicine, including the study of telomeres,
telomerase, human embryonic stem cells, and nuclear transfer. In addition, other
products and therapies that could compete directly with the products that we are
seeking to develop and market currently exist or are being developed by
pharmaceutical and biopharmaceutical companies and by academic and other
research organizations.

Many companies are also developing alternative therapies to treat cancer
and, in this regard, are competitors of ours. Many of the pharmaceutical
companies developing and marketing these competing products have significantly
greater financial resources and expertise than we do in:

- research and development;

- manufacturing;

- preclinical and clinical testing;

- obtaining regulatory approvals; and

- marketing.

Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and established
companies. Academic institutions, government agencies and other public and
private research organizations may also conduct research, seek patent protection
and establish

21

collaborative arrangements for research, clinical development and marketing of
products similar to ours. These companies and institutions compete with us in
recruiting and retaining qualified scientific and management personnel as well
as in acquiring technologies complementary to our programs. There is also
competition for access to libraries of compounds to use for screening. Should we
fail to secure and maintain access to sufficiently broad libraries of compounds
for screening potential targets, our business would be materially harmed.

In addition to the above factors, we expect to face competition in the
following areas:

- product efficacy and safety;

- the timing and scope of regulatory consents;

- availability of resources;

- reimbursement coverage;

- price; and

- patent position, including potentially dominant patent positions of
others.

As a result of the foregoing, our competitors may develop more effective or
more affordable products, or achieve earlier patent protection or product
commercialization than we do. Most significantly, competitive products may
render the products that we develop obsolete.

THE ETHICAL, LEGAL AND SOCIAL IMPLICATIONS OF OUR RESEARCH USING EMBRYONIC
STEM CELLS AND NUCLEAR TRANSFER COULD PREVENT US FROM DEVELOPING OR GAINING
ACCEPTANCE FOR COMMERCIALLY VIABLE PRODUCTS IN THIS AREA.

Our programs in regenerative medicine may involve the use of human
pluripotent stem cells that would be derived from human embryonic or fetal
tissue. The use of human embryonic stem cells gives rise to ethical, legal and
social issues regarding the appropriate use of these cells. In the event that
our research related to human embryonic stem cells becomes the subject of
adverse commentary or publicity, the market price for our common stock could be
significantly harmed.

Some groups have voiced opposition to our technology and practices. The
concepts of cell regeneration, cell immortality, and genetic cloning have
stimulated significant debate in social and political arenas. We use human
pluripotent stem cells derived through a process that uses either donated
embryos that are no longer necessary following a successful in vitro
fertilization procedure or donated fetal material as the starting material.
Further, many research institutions, including some of our scientific
collaborators, have adopted policies regarding the ethical use of human
embryonic and fetal tissue. These policies may have the effect of limiting the
scope of research conducted using human embryonic stem cells, resulting in
reduced scientific progress. In addition, the United States government and its
agencies have in recent years refused to fund research which involves the use of
human embryonic tissue. President Bush, however, announced on August 9, 2001
that he would permit federal funding of research on human embryonic stem cells
using the limited number of embryonic stem cell lines that had already been
created. A newly created president's council will monitor stem cell research,
and the guidelines and regulations it recommends may include restrictions on the
scope of research using human embryonic or fetal tissue. Our inability to
conduct research using human embryonic stem cells due to such factors as
government regulation or otherwise could have a material adverse effect on us.
Finally, we acquired Roslin Bio-Med to gain the rights to nuclear transfer
technology. The Roslin Institute produced Dolly the sheep in 1997 -- the first
mammal cloned from an adult cell. Geron acquired exclusive rights to this
technology for all areas except human reproductive cloning and certain other
limited applications. Although we will not be pursuing human reproductive
cloning, we continue to develop techniques for use in agricultural cloning.
Government imposed restrictions with respect to any or all of these practices
could:

- harm our ability to establish critical partnerships and collaborations;

- prompt government regulation of our technologies;

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- cause delays in our research and development; and

- cause a decrease in the price of our stock.

If human therapeutic cloning is restricted or banned (as it would be under
bill H.R. 2505 recently passed by the U.S. House of Representatives), our
ability to commercialize those applications could be significantly harmed. Also,
if regulatory bodies were to ban nuclear transfer processes, our research using
nuclear transfer technology could be cancelled and our business could be
significantly harmed.

PUBLIC ATTITUDES TOWARDS GENE THERAPY MAY NEGATIVELY AFFECT REGULATORY
APPROVAL OR PUBLIC PERCEPTION OF OUR PRODUCTS.

The commercial success of our product candidates will depend in part on
public acceptance of the use of gene therapies for the prevention or treatment
of human diseases. Public attitudes may be influenced by claims that gene
therapy is unsafe, and gene therapy may not gain the acceptance of the public or
the medical community. Adverse events in the field of gene therapy that have
occurred or may occur in the future also may result in greater governmental
regulation of our product candidates and potential regulatory delays relating to
the testing or approval of our product candidates.

Negative public reaction to gene therapy in the development of certain of
our therapies could result in greater government regulation, stricter clinical
trial oversight, commercial product labeling requirements of gene therapies and
could cause a decrease in the demand for any products that we may develop. The
subject of genetically modified organisms has received negative publicity in
Europe, which has aroused public debate. The adverse publicity in Europe could
lead to greater regulation and trade restrictions on imports of genetically
altered products. If similar adverse public reaction occurs in the United
States, genetic research and resultant products could be subject to greater
domestic regulation and could cause a decrease in the demand for our potential
products.

ENTRY INTO CLINICAL TRIALS WITH ONE OR MORE PRODUCTS MAY NOT RESULT IN ANY
COMMERCIALLY VIABLE PRODUCTS.

We do not expect to generate any significant revenues from product sales
for a period of several years. We may never generate revenues from product sales
or become profitable because of a variety of risks inherent in our business,
including risks that:

- clinical trials may not demonstrate the safety and efficacy of our
products;

- completion of clinical trials may be delayed, or costs of clinical trials
may exceed anticipated amounts;

- we may not be able to obtain regulatory approval of our products, or may
experience delays in obtaining such approvals;

- we may not be able to manufacture our drugs economically on a commercial
scale;

- we and our licensees may not be able to successfully market our products;

- physicians may not prescribe our products, or patients may not accept
such products;

- others may have proprietary rights which prevent us from marketing our
products; and

- competitors may sell similar, superior or lower-cost products.

IMPAIRMENT OF OUR INTELLECTUAL PROPERTY RIGHTS MAY LIMIT OUR ABILITY TO PURSUE
THE DEVELOPMENT OF OUR INTENDED TECHNOLOGIES AND PRODUCTS.

Protection of our proprietary technology is critically important to our
business. Our success will depend in part on our ability to obtain and enforce
our patents and maintain trade secrets, both in the United States and in other
countries. The patent positions of pharmaceutical and biopharmaceutical
companies, including ours, are highly uncertain and involve complex legal and
technical questions. In particular, legal principles for biotechnology patents
in the United States and in other countries are evolving, and the extent to
which we will be able to obtain patent coverage to protect our technology, or
enforce issued patents, is uncertain. Further,
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our patents may be challenged, invalidated or circumvented, and our patent
rights may not provide proprietary protection or competitive advantages to us.
In the event that we are unsuccessful in obtaining and enforcing patents, our
business would be negatively impacted.

Publication of discoveries in the scientific or patent literature tends to
lag behind actual discoveries by at least several months and sometimes several
years. Therefore, the persons or entities that we or our licensors name as
inventors in our patents and patent applications may not have been the first to
invent the inventions disclosed in the patent applications or patents, or file
patent applications for these inventions. As a result, we may not be able to
obtain patents from discoveries that we otherwise would consider patentable and
that we consider to be extremely significant to our future success.

Where several parties seek patent protection for the same technology, the
U.S. Patent Office may declare an interference proceeding in order to ascertain
the party to which the patent should be issued. Patent interferences are
typically complex, highly contested legal proceedings, subject to appeal. They
are usually expensive and prolonged, and can cause significant delay in the
issuance of patents. Moreover, parties that receive an adverse decision in an
interference can lose important patent rights. In our Form 10-K filings for 1999
and 2000, we reported that the U.S. Patent Office had suspended examination of
two of our patent applications relating to telomerase pending a possible
declaration of interference. The U.S. Patent Office has now lifted those
suspensions and, in 2001, issued to us a U.S. patent with claims covering cloned
human telomerase. While this was a positive development, it does not mean that
the risk of an interference has been eliminated.

The interference process can also be used to challenge a patent that has
been issued to another party. As noted previously, the U.S. Patent Office has
granted a request from Geron for the declaration of an interference between one
of our pending applications and an issued patent in the area of nuclear
transfer. We requested this interference in order to clarify our patent rights
in the nuclear transfer area, and, based on a review of publicly available
information, believe that the technology at issue was invented first at the
Roslin Institute and is encompassed within our nuclear transfer license.
However, we do not have access to the other party's invention records, and, as
in any legal proceeding, the outcome is uncertain.

If interferences or other challenges to our patent rights are not resolved
promptly in our favor, our existing business relationships may be jeopardized
and we could be delayed or prevented from entering into new collaborations or
from commercializing certain products, which could materially harm our business.

Patent litigation may also be necessary to enforce patents issued or
licensed to us or to determine the scope and validity of our proprietary rights
or the proprietary rights of another. We may not be successful in any patent
litigation. Patent litigation can be extremely expensive and time-consuming,
even if the outcome is favorable to us. An adverse outcome in a patent
litigation or any other proceeding in a court or patent office could subject our
business to significant liabilities to other parties, require disputed rights to
be licensed from other parties or require us to cease using the disputed
technology.

IF WE FAIL TO MEET OUR OBLIGATIONS UNDER LICENSE AGREEMENTS, WE MAY FACE LOSS
OF OUR RIGHTS TO KEY TECHNOLOGIES ON WHICH OUR BUSINESS DEPENDS.

Our business depends on our three core technology platforms, each of which
is based in part on patents licensed from third parties. Those third-party
license agreements impose obligations on us, such as payment obligations and
obligations to diligently pursue development of commercial products under the
licensed patents. If a licensor believes that we have failed to meet our
obligations under a license agreement, the licensor could seek to limit or
terminate our license rights, which would most likely lead to costly and time-
consuming litigation. During the period of any such litigation our ability to
carry out the development and commercialization of potential products could be
significantly and negatively affected. If our license rights were ultimately
lost, our ability to carry on our business based on the affected technology
platform would be severely affected.

24

WE MAY BE SUBJECT TO LITIGATION THAT WILL BE COSTLY TO DEFEND OR PURSUE AND
UNCERTAIN IN ITS OUTCOME.

Our business may bring us into conflict with our licensees, licensors, or
others with whom we have contractual or other business relationships, or with
our competitors or others whose interests differ from ours. If we are unable to
resolve those conflicts on terms that are satisfactory to all parties, we may
become involved in litigation brought by or against us. That litigation is
likely to be expensive and may require a significant amount of management's time
and attention, at the expense of other aspects of our business. The outcome of
litigation is always uncertain, and in some cases could include judgments
against us that require us to pay damages, enjoin us from certain activities, or
otherwise affect our legal or contractual rights, which could have a significant
effect on our business.

WE MAY BE SUBJECT TO INFRINGEMENT CLAIMS THAT ARE COSTLY TO DEFEND, AND WHICH
MAY LIMIT OUR ABILITY TO USE DISPUTED TECHNOLOGIES AND PREVENT US FROM
PURSUING RESEARCH AND DEVELOPMENT OR COMMERCIALIZATION OF POTENTIAL PRODUCTS.

Our commercial success depends significantly on our ability to operate
without infringing patents and proprietary rights of others. Our technologies
may infringe the patents or proprietary rights of others. In addition, we may
become aware of discoveries and technology controlled by third parties that are
advantageous to our research programs. In the event our technologies do infringe
on the rights of others or we require the use of discoveries and technology
controlled by third parties, we may be prevented from pursuing research,
development or commercialization of potential products or may be required to
obtain licenses to those patents or other proprietary rights or develop or
obtain alternative technologies. We may not be able to obtain alternative
technologies or any required license on commercially favorable terms, if at all.
If we do not obtain the necessary licenses or alternative technologies, we may
be delayed or prevented from pursuing the development of some potential
products. Our failure to obtain alternative technologies or a license to any
technology that we may require to develop or commercialize our products will
significantly and negatively affect our business.

Patent law relating to the scope and enforceability of claims in the
technology fields in which we operate is still evolving, and the degree of
future protection for any of our proprietary rights is highly uncertain. In this
regard, patents may not issue from any of our patent applications or our
existing patents may be found to be invalid by a court. In addition, our success
may become dependent on our ability to obtain licenses for using the patented
discoveries of others. We are aware of patent applications and patents that have
been filed by others with respect to our technologies and we may have to obtain
licenses to use these technologies. Moreover, other patent applications may be
granted priority over patent applications that we or any of our licensors have
filed. Furthermore, others may independently develop similar or alternative
technologies, duplicate our technologies or design around the patented
technologies we have developed. In the event that we are unable to acquire
licenses to critical technologies that we cannot patent ourselves, we may be
required to expend significant time and resources to develop alternative
technology, and we may not be successful in this regard. If we cannot acquire or
develop the necessary technology, we may be prevented from pursuing some of our
business objectives. Moreover, one or more of our competitors could acquire or
license the necessary technology. Any of these events could materially harm our
business.

MUCH OF THE INFORMATION AND KNOW-HOW THAT IS CRITICAL TO OUR BUSINESS IS NOT
PATENTABLE AND WE MAY NOT BE ABLE TO PREVENT OTHERS FROM OBTAINING THIS
INFORMATION AND ESTABLISHING COMPETITIVE ENTERPRISES.

We sometimes rely on trade secrets to protect our proprietary technology,
especially in circumstances in which patent protection is not believed to be
appropriate or obtainable. We attempt to protect our proprietary technology in
part by confidentiality agreements with our employees, consultants,
collaborators and contractors. We cannot assure you that these agreements will
not be breached, that we would have adequate remedies for any breach, or that
our trade secrets will not otherwise become known or be independently discovered
by competitors, any of which would harm our business significantly.

25

WE DEPEND ON OUR COLLABORATORS TO HELP US COMPLETE THE PROCESS OF DEVELOPING
AND TESTING OUR PRODUCTS AND OUR ABILITY TO DEVELOP AND COMMERCIALIZE PRODUCTS
MAY BE IMPAIRED OR DELAYED IF OUR COLLABORATIVE PARTNERSHIPS ARE UNSUCCESSFUL.

Our strategy for the development, clinical testing and commercialization of
our products requires entering into collaborations with corporate partners,
licensors, licensees and others. We are dependent upon the subsequent success of
these other parties in performing their respective responsibilities and the
continued cooperation of our partners. Our collaborators may not cooperate with
us or perform their obligations under our agreements with them. We cannot
control the amount and timing of our collaborators' resources that will be
devoted to our research activities related to our collaborative agreements with
them. Our collaborators may choose to pursue existing or alternative
technologies in preference to those being developed in collaboration with us.

Our ability to successfully develop and commercialize a telomerase
inhibitor in Asia depends on our corporate alliance with Kyowa Hakko. Our
ability to successfully develop and commercialize telomerase diagnostic products
depends on our corporate alliance with Roche Diagnostics. Under our
collaborative agreements with these collaborators, we rely significantly on
them, among other activities, to:

- design and conduct advanced clinical trials in the event that we reach
clinical trials;

- fund research and development activities with us;

- pay us fees upon the achievement of milestones; and

- market with us any commercial products that result from our
collaborations.

The development and commercialization of products from these collaborations
will be delayed if Kyowa Hakko or Roche Diagnostics fail to conduct these
collaborative activities in a timely manner or at all. In addition, Kyowa Hakko
or Roche Diagnostics could terminate their agreements with us and we may not
receive any development or milestone payments. If we do not achieve milestones
set forth in the agreements, or if Kyowa Hakko or Roche Diagnostics or any of
our future collaborators breach or terminate collaborative agreements with us,
our business may be materially harmed.

OUR RELIANCE ON THE RESEARCH ACTIVITIES OF OUR NON-EMPLOYEE SCIENTIFIC
ADVISORS AND OTHER RESEARCH INSTITUTIONS, WHOSE ACTIVITIES ARE NOT WHOLLY
WITHIN OUR CONTROL, MAY LEAD TO DELAYS IN TECHNOLOGICAL DEVELOPMENTS.

We rely extensively and have relationships with scientific advisors at
academic and other institutions, some of whom conduct research at our request.
These scientific advisors are not our employees and may have commitments to, or
consulting or advisory contracts with, other entities that may limit their
availability to us. We have limited control over the activities of these
advisors and, except as otherwise required by our collaboration and consulting
agreements, can expect only limited amounts of their time to be dedicated to our
activities. If our scientific advisors are unable or refuse to contribute to the
development of any of our potential discoveries, our ability to generate
significant advances in our technologies will be significantly harmed.

In addition, we have formed research collaborations with many academic and
other research institutions throughout the world, including the Roslin
Institute. These research facilities may have commitments to other commercial
and non-commercial entities. We have limited control over the operations of
these laboratories and can expect only limited amounts of time to be dedicated
to our research goals.

THE LOSS OF KEY PERSONNEL COULD SLOW OUR ABILITY TO CONDUCT RESEARCH AND
DEVELOP PRODUCTS.

Our future success depends to a significant extent on the skills,
experience and efforts of our executive officers and key members of our
scientific staff. Competition for personnel is intense and we may be unable to
retain our current personnel or attract or assimilate other highly qualified
management and scientific personnel in the future. The loss of any or all of
these individuals could harm our business and might significantly delay or
prevent the achievement of research, development or business objectives.

26

We also rely on consultants and advisors, including the members of our
Scientific Advisory Board, who assist us in formulating our research and
development strategy. We face intense competition for qualified individuals from
numerous pharmaceutical, biopharmaceutical and biotechnology companies, as well
as academic and other research institutions. We may not be able to attract and
retain these individuals on acceptable terms. Failure to do so would materially
harm our business.

WE MAY NOT BE ABLE TO OBTAIN OR MAINTAIN SUFFICIENT INSURANCE ON COMMERCIALLY
REASONABLE TERMS OR WITH ADEQUATE COVERAGE AGAINST POTENTIAL LIABILITIES IN
ORDER TO PROTECT OURSELVES AGAINST PRODUCT LIABILITY CLAIMS.

Our business exposes us to potential product liability risks that are
inherent in the testing, manufacturing and marketing of human therapeutic and
diagnostic products. We may become subject to product liability claims if the
use of our products is alleged to have injured subjects or patients. This risk
exists for products tested in human clinical trials as well as products that are
sold commercially. We currently have no clinical trial liability insurance and
we may not be able to obtain and maintain this type of insurance for any of our
clinical trials. In addition, product liability insurance is becoming
increasingly expensive. As a result, we may not be able to obtain or maintain
product liability insurance in the future on acceptable terms or with adequate
coverage against potential liabilities which could have a material adverse
effect on us.

BECAUSE WE OR OUR COLLABORATORS MUST OBTAIN REGULATORY APPROVAL TO MARKET OUR
PRODUCTS IN THE UNITED STATES AND FOREIGN JURISDICTIONS, WE CANNOT PREDICT
WHETHER OR WHEN WE WILL BE PERMITTED TO COMMERCIALIZE OUR PRODUCTS.

Federal, state and local governments in the United States and governments
in other countries have significant regulations in place that govern many of our
activities. The preclinical testing and clinical trials of the products that we
develop ourselves or that our collaborators develop are subject to extensive
government regulation and may prevent us from creating commercially viable
products from our discoveries. In addition, the sale by us or our collaborators
of any commercially viable product will be subject to government regulation from
several standpoints, including the processes of:

- manufacturing;

- advertising and promoting;

- selling and marketing;

- labeling; and

- distributing.

We may not obtain regulatory approval for the products we develop and our
collaborators may not obtain regulatory approval for the products they develop.
Regulatory approval may also entail limitations on the indicated uses of a
proposed product. Because certain of our product candidates involve the
application of new technologies and may be based upon a new therapeutic
approach, such products may be subject to substantial additional review by
various government regulatory authorities, and, as a result, we may obtain
regulatory approvals for such products more slowly than for products based upon
more conventional technologies. If, and to the extent that, we are unable to
comply with these regulations, our ability to earn revenues will be materially
and negatively impacted.

The regulatory process, particularly for biopharmaceutical products like
ours, is uncertain, can take many years and requires the expenditure of
substantial resources. Any product that we or our collaborative partners develop
must receive all relevant regulatory agency approvals or clearances, if any,
before it may be marketed in the United States or other countries. Generally,
biological drugs and non-biological drugs are regulated more rigorously than
medical devices. In particular, human pharmaceutical therapeutic products are
subject to rigorous preclinical and clinical testing and other requirements by
the Food and Drug Administration in the United States and similar health
authorities in foreign countries. The regulatory process, which includes

27

extensive preclinical testing and clinical trials of each product in order to
establish its safety and efficacy, is uncertain, can take many years and
requires the expenditure of substantial resources.

Data obtained from preclinical and clinical activities is susceptible to
varying interpretations that could delay, limit or prevent regulatory agency
approvals or clearances. In addition, delays or rejections may be encountered as
a result of changes in regulatory agency policy during the period of product
development and/or the period of review of any application for regulatory agency
approval or clearance for a product. Delays in obtaining regulatory agency
approvals or clearances could:

- significantly harm the marketing of any products that we or our
collaborators develop;

- impose costly procedures upon our activities or the activities of our
collaborators;

- diminish any competitive advantages that we or our collaborative partners
may attain; or

- adversely affect our ability to receive royalties and generate revenues
and profits.

Even if we commit the necessary time and resources, economic and otherwise,
the required regulatory agency approvals or clearances may not be obtained for
any products developed by or in collaboration with us. If regulatory agency
approval or clearance for a new product is obtained, this approval or clearance
may entail limitations on the indicated uses for which it may be marketed that
could limit the potential commercial use of the product. Furthermore, approved
products and their manufacturers are subject to continual review, and discovery
of previously unknown problems with a product or its manufacturer may result in
restrictions on the product or manufacturer, including withdrawal of the product
from the market. Failure to comply with regulatory requirements can result in
severe civil and criminal penalties, including but not limited to:

- recall or seizure of products;

- injunction against manufacture, distribution, sales and marketing; and

- criminal prosecution.

The imposition of any of these penalties could significantly impair our
business, financial condition and results of operations.

TO BE SUCCESSFUL, OUR PRODUCTS MUST BE ACCEPTED BY THE HEALTH CARE COMMUNITY,
WHICH CAN BE VERY SLOW TO ADOPT OR UNRECEPTIVE TO NEW TECHNOLOGIES AND
PRODUCTS.

Our products and those developed by our collaborative partners, if approved
for marketing, may not achieve market acceptance since physicians, patients or
the medical community in general may decide to not accept and utilize these
products. The products that we are attempting to develop may represent
substantial departures from established treatment methods and will compete with
a number of traditional drugs and therapies manufactured and marketed by major
pharmaceutical companies. The degree of market acceptance of any of our
developed products will depend on a number of factors, including:

- our establishment and demonstration to the medical community of the
clinical efficacy and safety of our product candidates;

- our ability to create products that are superior to alternatives
currently on the market;

- our ability to establish in the medical community the potential advantage
of our treatments over alternative treatment methods; and

- reimbursement policies of government and third-party payors.

If the health care community does not accept our products for any of the
foregoing reasons, or for any other reason, our business would be materially
harmed.

28

THE REIMBURSEMENT STATUS OF NEWLY-APPROVED HEALTH CARE PRODUCTS IS UNCERTAIN
AND FAILURE TO OBTAIN REIMBURSEMENT APPROVAL COULD SEVERELY LIMIT THE USE OF
OUR PRODUCTS.

Significant uncertainty exists as to the reimbursement status of newly
approved health care products, including pharmaceuticals. If we fail to generate
adequate third party reimbursement for the users of our potential products and
treatments, then we may be unable to maintain price levels sufficient to realize
an appropriate return on our investment in product development.

In both domestic and foreign markets, sales of our products, if any, will
depend in part on the availability of reimbursement from third-party payors,
examples of which include:

- government health administration authorities;

- private health insurers;

- health maintenance organizations; and

- pharmacy benefit management companies.

Both federal and state governments in the United States and foreign
governments continue to propose and pass legislation designed to contain or
reduce the cost of health care through various means. Legislation and
regulations affecting the pricing of pharmaceuticals and other medical products
may change or be adopted before any of our potential products are approved for
marketing. Cost control initiatives could decrease the price that we receive for
any product we may develop in the future. In addition, third-party payors are
increasingly challenging the price and cost-effectiveness of medical products
and services and any of our potential products and treatments may ultimately not
be considered cost effective by these third parties. Any of these initiatives or
developments could materially harm our business.

OUR ACTIVITIES INVOLVE HAZARDOUS MATERIALS AND IMPROPER HANDLING OF THESE
MATERIALS BY OUR EMPLOYEES OR AGENTS COULD EXPOSE US TO SIGNIFICANT LEGAL AND
FINANCIAL PENALTIES.

Our research and development activities involve the controlled use of
hazardous materials, chemicals and various radioactive compounds. As a
consequence, we are subject to numerous environmental and safety laws and
regulations, including those governing laboratory procedures, exposure to
blood-borne pathogens and the handling of biohazardous materials. We may be
required to incur significant costs to comply with current or future
environmental laws and regulations and may be adversely affected by the cost of
compliance with these laws and regulations.

Although we believe that our safety procedures for using, handling, storing
and disposing of hazardous materials comply with the standards prescribed by
state and federal regulations, the risk of accidental contamination or injury
from these materials cannot be eliminated. In the event of such an accident,
state or federal authorities could curtail our use of these materials and we
could be liable for any civil damages that result, the cost of which could be
substantial. Further, any failure by us to control the use, disposal, removal or
storage of, or to adequately restrict the discharge of, or assist in the cleanup
of, hazardous chemicals or hazardous, infectious or toxic substances could
subject us to significant liabilities, including joint and several liability
under certain statutes, and any liability could exceed our resources and could
have a material adverse effect on our business, financial condition and results
of operations. Additionally, an accident could damage our research and
manufacturing facilities and operations.

Additional federal, state and local laws and regulations affecting us may
be adopted in the future. We may incur substantial costs to comply with and
substantial fines or penalties if we violate any of these laws or regulations.

OUR STOCK PRICE HAS HISTORICALLY BEEN VERY VOLATILE.

Stock prices and trading volumes for many biopharmaceutical companies
fluctuate widely for a number of reasons, including some reasons which may be
unrelated to their businesses or results of operations such as media coverage,
legislation and regulatory measures and the activities of various interest
groups or organiza-

29

tions. This market volatility, as well as general domestic or international
economic, market and political conditions, could materially and adversely affect
the market price of our common stock and the return on your investment.

Historically, our stock price has been extremely volatile. Between January
1998 and December 31, 2001, our stock has traded as high as $75.88 per share and
as low as $3.50 per share. The significant market price fluctuations of our
common stock are due to a variety of factors, including:

- depth of the market for the common stock;

- the experimental nature of our prospective products;

- fluctuations in our operating results;

- market conditions relating to the biopharmaceutical and pharmaceutical
industries;

- any announcements of technological innovations, new commercial products
or clinical progress or lack thereof by us, our collaborative partners or
our competitors; or

- announcements concerning regulatory developments, developments with
respect to proprietary rights and our collaborations.

In addition, the stock market is subject to other factors outside our
control that can cause extreme price and volume fluctuations. Securities class
action litigation has often been brought against companies, including many
biotechnology companies, which then experience volatility in the market price of
their securities. Litigation brought against us could result in substantial
costs and a diversion of management's attention and resources, which could
adversely affect our business.

THE SALE OF A SUBSTANTIAL NUMBER OF SHARES, INCLUDING SHARES THAT WILL BECOME
ELIGIBLE FOR SALE IN THE NEAR FUTURE, MAY ADVERSELY AFFECT THE MARKET PRICE
FOR OUR COMMON STOCK.

Sales of substantial number of shares of our common stock in the public
market could significantly and negatively affect the market price for our common
stock. As of December 31, 2001, we had 24,481,774 shares of common stock
outstanding. Of these shares, approximately 10,534,534 shares were issued
(including shares issuable upon conversion or exercise of convertible notes or
warrants) since December 1998 pursuant to private placements. Of these shares,
approximately 9,623,463 shares have been registered pursuant to shelf
registration statements and therefore may be resold (if not sold prior to the
date hereof) in the public market and approximately 911,071 of the remaining
shares may be resold pursuant to Rule 144 into the public markets as early as
March 9, 2002 upon the expiration of a lockup agreement with us.

OUR UNDESIGNATED PREFERRED STOCK MAY INHIBIT POTENTIAL ACQUISITION BIDS; THIS
MAY ADVERSELY AFFECT THE MARKET PRICE FOR OUR COMMON STOCK AND THE VOTING
RIGHTS OF THE HOLDERS OF COMMON STOCK.

Our certificate of incorporation provides our Board of Directors with the
authority to issue up to 3,000,000 shares of undesignated preferred stock and to
determine the rights, preferences, privileges and restrictions of these shares
without further vote or action by the stockholders. As of the date of this Form
10-K, the Board of Directors still has authority to designate and issue up to
2,950,000 shares of preferred stock. The rights of the holders of common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. The issuance of shares
of preferred stock may delay or prevent a change in control transaction without
further action by our stockholders. As a result, the market price of our common
stock may be adversely affected. The issuance of preferred stock may also result
in the loss of voting control by others.

30

PROVISIONS IN OUR SHARE PURCHASE RIGHTS PLAN, CHARTER AND BYLAWS, AND
PROVISIONS OF DELAWARE LAW, MAY INHIBIT POTENTIAL ACQUISITION BIDS FOR US,
WHICH MAY PREVENT HOLDERS OF OUR COMMON STOCK FROM BENEFITING FROM WHAT THEY
BELIEVE MAY BE THE POSITIVE ASPECTS OF ACQUISITIONS AND TAKEOVERS.

Our Board of Directors has adopted a share purchase rights plan, commonly
referred to as a "poison pill". This plan entitles existing stockholders to
rights, including the right to purchase shares of common stock, in the event of
an acquisition of 15% or more of our outstanding common stock. Our share
purchase rights plan could prevent stockholders from profiting from an increase
in the market value of their shares as a result of a change of control of Geron
by delaying or preventing a change of control. In addition, our Board of
Directors has the authority, without further action by our stockholders, to
issue additional shares of common stock, to fix the rights and preferences of,
and to issue authorized but undesignated shares of preferred stock.

In addition to our share purchase rights plan and the undesignated
preferred stock, provisions of our charter documents and bylaws may make it
substantially more difficult for a third party to acquire control of us and may
prevent changes in our management, including provisions that:

- prevent stockholders from taking actions by written consent;

- divide the Board of Directors into separate classes with terms of office
that are structured to prevent all of the directors from being elected in
any one year; and

- set forth procedures for nominating directors and submitting proposals
for consideration at stockholders' meetings.

Provisions of Delaware law may also inhibit potential acquisition bids for
us or prevent us from engaging in business combinations. Either collectively or
individually, these provisions may prevent holders of our common stock from
benefiting from what they may believe are the positive aspects of acquisitions
and takeovers, including the potential realization of a higher rate of return on
their investment from these types of transactions.

ITEM 2. PROPERTIES

We currently lease approximately 65,000 square feet of office space at 200,
230 and 255 Constitution Drive, Menlo Park, California. The lease for 200 and
230 Constitution Drive expires in July 2004, with an option to renew the lease
for an additional period of two and one-half years. The sublease for 255
Constitution Drive has an option to extend the term to coincide with the end
date of the extension period for 200 and 230 Constitution Drive. We intend to
use this space for general office and biomedical research and development
purposes. We also currently lease 900 square feet of office space at Roslin
Biotechnology Centre, Roslin, Midlothian, United Kingdom. The lease for the
office space expires in May 2005. We believe that the existing facilities are
adequate to meet our requirements for the near term.

ITEM 3. LEGAL PROCEEDINGS

As stated in our Form 10-Q for the fiscal period ended September 30, 2001,
the Wisconsin Alumni Research Foundation ("WARF") filed suit on August 13, 2001
against Geron seeking a declaratory judgment concerning our rights and WARF's
obligations under the 1999 license agreement between WARF and Geron. WARF's
lawsuit addressed our option to obtain an exclusive license to cell types in
addition to the six cell types already licensed to us and the scope of our
exclusive license to commercialize research products based on those six cell
types. WARF had also stated its dissatisfaction with the development plans for
the six cell types we submitted to WARF and with our progress in commercializing
therapeutic products based on the WARF patents, although WARF did not file any
claim in the lawsuit with respect to the development plans in the lawsuit. On
January 8, 2002, as stated in our Form 8-K filed on January 9, 2002, we entered
into a settlement agreement with WARF that resolved all disputes between us and
WARF, and also entered into a new license agreement that supersedes the 1999
license agreement. Under the new license agreement, we have the exclusive
license to commercialize therapeutic and diagnostic products based on three cell
types, the non-exclusive license to commercialize therapeutic and diagnostic
products based on three other cell types, and the non-exclusive license to
commercialize research products based on six cell types. We have also agreed to
grant
31

licenses on reasonable commercial terms under certain of our intellectual
property to certain non-exclusive licensees of WARF's patents. WARF's potential
remedies for our alleged failure to meet development milestones or otherwise
fulfill our development plans are strictly defined and limited in the new
license agreement.

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

None.

PART II

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

MARKET INFORMATION

Our common stock trades on the Nasdaq Stock Market(R) under the symbol
GERN. The high and low closing sales prices (excluding retail markup, markdowns
and commissions) of our stock for the years ending December 31, 2001 and 2000
are as follows:

As of December 31, 2001, there were approximately 868 stockholders of
record. We are engaged in a highly dynamic industry, which often results in
significant volatility of our common stock price.

DIVIDEND POLICY

We have never paid cash dividends on our capital stock and do not
anticipate paying cash dividends in the foreseeable future, but intend to retain
our capital resources for reinvestment in our business. Any future determination
to pay cash dividends will be at the discretion of the Board of Directors and
will be dependent upon our financial condition, results of operations, capital
requirements and other factors as the Board of Directors deems relevant.

32

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

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

(1) In May 1999, we recognized $23.4 million as acquired in-process research
technology expense for the value of the nuclear transfer technology license
obtained through the acquisition of Roslin Bio-Med.

(2) In November 2001, we amended the terms of the series D convertible
debentures and warrants and converted a portion of the outstanding series D
convertible debentures. We recognized $11.9 million as conversion expense
related to this amendment and conversion.

(3) In November 2000, we adopted a new accounting principle which retroactively
affected the calculation of the beneficial conversion features associated
with the series C convertible debentures issued in September 1999 and the
series D convertible debentures issued in June 2000. We recognized an
additional $13.3 million in imputed non-cash interest expense to reflect the
change in accounting principle.

33

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

OVERVIEW

This Form 10-K contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipate", "believe", "plan", "expect",
"future", "intend" and similar expressions to identify forward-looking
statements. These statements appear throughout the Form 10-K and are statements
regarding our intent, belief, or current expectations, primarily with respect to
our operations and related industry developments. You should not place undue
reliance on these forward-looking statements, which apply only as of the date of
this Form 10-K. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by us and described in the section of Item 1 titled "Additional
Factors That May Affect Future Results," and elsewhere in this Form 10-K.

The following discussion should be read in conjunction with the audited
consolidated financial statements and notes thereto included in Part I, Item 8
of this Form 10-K.

We are a biopharmaceutical company focused on developing and
commercializing therapeutic and diagnostic products for applications in oncology
and regenerative medicine and research tools for drug discovery. Our product
development programs are based upon three patented core technologies:
telomerase, human embryonic stem cells and nuclear transfer.

In January 2001, we and Pharmacia agreed to terminate our license and
research collaboration agreement. All product rights for telomerase inhibition
reverted to us. We continue our development work on compounds that inhibit
telomerase for the treatment of cancer.

In August 2001, Kyowa Hakko selected our compound, GRN163, for development
as an anti-cancer drug. We and Kyowa Hakko are now focused on preparing and
testing GRN163 prior to initiation of human clinical trials. The Geron and Kyowa
Hakko collaboration includes the development and marketing of telomerase
inhibitors for the Asian market. We retain all rights in North America, Europe
and the rest of the world outside Asia.

Our nuclear transfer technology continues to be in demand by various
companies working in the agriculture sector as well as in the production of
biologicals. In 2001, we signed license or license option agreements with
ProLinia, Inc., Clone International Pty Ltd. and AgResearch Pty Ltd. for
improved cattle production and agreements with AviGenics, Inc. and Viragen, Inc.
for improved poultry and production of biologicals. We also signed a license
with Nexia Biotechnologies Inc. for the production of synthetic silk proteins
for medical and industrial uses. With each agreement, we received license or
option fees payable in cash or equity as well as share future revenues from
products that use our nuclear transfer technology.

In November 2001, an institutional investor converted all of the remaining
$6.25 million of series C convertible debentures plus accrued interest into
635,516 shares of our common stock. As a result, no series C convertible
debentures remain outstanding. Also in November 2001, this institutional
investor converted $10.0 million of series D convertible debentures into
1,011,122 shares of our common stock. We amended the terms of the remaining
$15.0 million of series D convertible debentures held by this investor to carry
a 2.5% coupon, have a fixed conversion price of $20.00 per share and have the
maturity date extended to June 2005. We also amended the related outstanding
Series D warrants to include new exercise prices and to extend the exercise
periods.

In December 2001, we sold $7.3 million of our common stock under an equity
line financing facility.

In January 2002, we resolved a federal lawsuit with the Wisconsin Alumni
Research Foundation and entered into a new license for the commercialization of
human embryonic stem cell technology. The new agreement supersedes the earlier
license, and resolves all issues related to the lawsuit filed by WARF against us
in August 2001. We do not expect an adverse accounting impact on our financial
condition or results of operations related to this new license agreement.

34

CRITICAL ACCOUNTING POLICIES

We consider certain accounting policies related to revenue recognition,
consolidation and use of estimates to be critical policies.

REVENUE RECOGNITION

Since Geron's inception, a substantial portion of our revenues has been
generated from license and research agreements with collaborators. We recognize
cost reimbursement revenue under these collaborative agreements as the related
research and development costs are incurred. We recognize milestone fees upon
completion of specified milestones according to contract terms. Deferred revenue
represents the portion of research payments received which has not been earned.

We also have several license, option and marketing agreements with various
diagnostic, research tools, agriculture and biologics production companies. With
each of these agreements, we may receive nonrefundable license payments in cash
or equity securities, option payments in cash or equity securities, royalties on
future sales of products, or any combination of these items. We recognize
nonrefundable signing or license fees that are not dependent on future
performance under these agreements as revenue when received and over the term of
the arrangement if we have continuing performance obligations. We recognize
option payments as revenue over the period of the option agreement. We generally
recognize royalties as revenue upon receipt.

CONSOLIDATION

Our consolidated financial statements include the results of Geron in the
United States and our wholly owned subsidiary, Geron Bio-Med Ltd., a United
Kingdom company. Transactions and accounts between us and Geron Bio-Med have
been eliminated. We translate the assets and liabilities of Geron Bio-Med from
British pounds sterling into United States dollars using foreign exchange rates
as of the balance sheet date. We translate the revenues and expenses of Geron
Bio-Med using average monthly foreign exchange rates. Translation adjustments
are included in the balance sheet under accumulated other comprehensive income
(loss), a separate component of stockholders' equity.

USE OF ESTIMATES

In preparing our consolidated financial statements to conform with
accounting principles generally accepted in the United States, we make estimates
and assumptions that affect the amounts reported in our financial statements and
accompanying notes. These estimates include useful lives for fixed assets for
depreciation calculations, estimated lives for license agreements related to
deferred revenue and assumptions for valuing options and warrants. Actual
results could differ from these estimates.

RESULTS OF OPERATIONS

Our results of operations have fluctuated from period to period and may
continue to fluctuate in the future based upon the timing and composition of
funding under our various collaborative agreements, as well as the progress of
our research and development efforts and variations in the level of expenses
related to developmental efforts during any given period. Results of operations
for any period may be unrelated to results of operations for any other period.
In addition, historical results should not be viewed as indicative of future
operating results. We are subject to risks common to companies in our industry
and at our stage of development, including risks inherent in our research and
development efforts, reliance upon our collaborative partners, enforcement of
our patent and proprietary rights, need for future capital, potential
competition and uncertainty of regulatory approvals or clearances. In order for
a product to be commercialized based on our research, we and our collaborators
must conduct preclinical tests and clinical trials, demonstrate the efficacy and
safety of our product candidates, obtain regulatory approvals or clearances and
enter into manufacturing, distribution and marketing arrangements, as well as
obtain market acceptance. We do not expect to receive revenues or royalties
based on therapeutic products for a period of years, if at all.

35

REVENUES

We recognized revenues from collaborative agreements of $3.3 million in
fiscal 2001 compared to $6.5 million in fiscal 2000 and $5.2 million in fiscal
1999. Revenues in 2001, 2000 and 1999 represented research support payments from
our collaborative agreements with Kyowa Hakko and Pharmacia. The decrease in
revenues in 2001 was a result of terminating our agreement with Pharmacia in
January 2001. The increase in revenues in 2000 was a result of the extension of
our three-way agreement with Kyowa Hakko and Pharmacia. We recognize revenue
under collaborative agreements as we incur the related research and development
costs. We received $2.0 million, $2.0 million and none in funding payments under
the Kyowa Hakko agreement in 2001, 2000 and 1999, respectively. We recognized
$1.3 million in fiscal 2001 and $5.0 million each in fiscal 2000 and 1999 in
revenue for funding payments received under the Pharmacia agreement. We expect
revenues under collaborative agreements to decrease in the future as a result of
contractually agreed reduced research funding from Kyowa Hakko.

We have entered into license and option agreements with companies involved
with diagnostics, research tools, agriculture, biologics production and cancer
immunotherapy. In each of these agreements, we have granted certain rights to
our technologies. In connection with the agreements, we are entitled to receive
license fees, option fees, milestone payments and royalties on future sales, or
any combination. We recognized license and option fee revenues of $200,000 and
$75,000 in 2001 and 1999, respectively related to our various agreements. No
license or option fees were recognized in 2000. Also, we received royalties of
$140,000, $109,000 and $94,000 in 2001, 2000 and 1999, respectively on product
sales of telomerase diagnostic kits to the research-use-only market and
cell-based research products. License and royalty revenues are dependent upon
additional agreements being signed and future product sales. We expect to
recognize revenue of $767,000 in 2002, $202,000 in 2003, $158,000 in 2004,
$127,000 in 2005 and $610,000 thereafter related to our existing deferred
revenue. Current revenues may not be predictive of future results.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses were $29.0 million, $23.5 million and
$20.6 million for the years ended December 31, 2001, 2000 and 1999,
respectively. The increase in 2001 from 2000 was primarily the result of
increased scientific personnel expenses of $3.2 million, increased sponsored
research of $424,000 and increased scientific supplies of $1.1 million. The
increase in 2000 from 1999 was primarily the result of increased contract
research expenses of $1.4 million, increased license fees for research
technology of $880,000 and higher scientific supplies of $640,000. We expect
research and development expenses to increase significantly in the future as a
result of the continued development of our therapeutic and diagnostic programs.

The scope and magnitude of future research and development expenses are
difficult to predict at this time given the number of studies that will need to
be conducted for any of the our potential products. In general,
biopharmaceutical development involves a series of steps -- beginning with
identification of a potential target and including, among others, proof of
concept in animals and Phase 1, 2, and 3 clinical studies in humans -- each of
which is typically more expensive than the previous step. Success in development
therefore results in increasing expenditures. Our research and development
expenses currently include costs for scientific personnel, supplies, equipment,
consultants, patent filings and sponsored research at academic and research
institutions. Future research and development expenses would also include costs
related to clinical trials.

Currently, our lead oncology development product, GRN163, is in animal
studies. Upon conclusive results from those animal studies, we expect to enter
Phase 1 clinical studies with this product in 2003. We are currently sponsoring
a Phase 1 clinical study at Duke University Medical Center for a telomerase
immunotherapy for patients with prostate cancer. The results of this study will
be evaluated in 2002 and 2003. Future clinical progress of this product will
depend on the study results. We plan to begin testing several cell types
differentiated from human embryonic stem cells in animal models of disease in
2002, including neurons for the treatment of Parkinson's disease and
cardiomyocytes for the treatment of heart disease. If these tests are
successful, we will continue clinical development of these products in
accordance with FDA guidelines.

For a more complete discussion of the risks and uncertainties associated
with completing development of potential products, see the section titled
"Because we or our collaborators must obtain regulatory approval to
36

market our products in the United States and foreign jurisdictions, we cannot
predict whether or when we will be permitted to commercialize our products" in
the section of Item 1 entitled "Additional Factors That May Affect Future
Results," and elsewhere in this Form 10-K.

ACQUIRED IN-PROCESS RESEARCH TECHNOLOGY EXPENSES

Acquired in-process research technology expenses were the result of the
acquisition of Roslin Bio-Med in May 1999. We used the purchase method of
accounting. We allocated the purchase price between the acquired basic research
in the form of a license to the nuclear transfer technology, the research
agreement with the Roslin Institute and the net tangible assets of Roslin
Bio-Med. We expensed the value of the nuclear transfer technology of $23.4
million as acquired research in-process technology expense and capitalized the
value of the research agreement of $17.2 million as an intangible asset. The
total purchase price of $44.4 million also included acquisition costs of $2.9
million.

The license to the nuclear transfer technology was the only significant
asset of Roslin Bio-Med. We intend to enhance the research and development of
the nuclear transfer technology by combining it with our other technology
platforms. Future products, if any, may take several years to develop and
commercialize and will require substantial additional funds. We may never be
able to create a commercial product from the nuclear transfer technology. We
concluded that this technology had no alternative future use, and accordingly,
expensed the value of the acquired research in-process technology at the time of
the acquisition.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses were $9.6 million, $9.3 million and
$5.6 million for the years ended December 31, 2001, 2000 and 1999, respectively.
The increase in 2001 from 2000 was the result of a net increase in personnel
related costs of $741,000 and legal expenses of $793,000 offset by reduced
business consulting expenses of $1.5 million. The increase in 2000 from 1999 was
primarily the result of increased business consulting expenses of $3.0 million.
We do not expect general and administrative expenses to increase significantly
in the near future.

INTEREST AND OTHER INCOME

Interest income was $5.0 million, $5.4 million and $2.3 million for the
years ended December 31, 2001, 2000 and 1999, respectively. The decrease in 2001
as compared to 2000 was primarily due to lower interest rates and decreasing
cash and investment balances. The increase in 2000 and 1999 was due to higher
average cash and investment balances as a result of investing proceeds from the
sale of debt and equity securities in 2000 and 1999. Interest earned in the
future will depend on any future funding cycles and prevailing interest rates.
We also received $794,000, $400,000 and $1.0 million in research payments under
government grants for the years ended December 31, 2001, 2000 and 1999,
respectively. We expect income from government grants to decrease in the future.

INTEREST AND OTHER EXPENSE

Interest and other expense was $1.0 million, $12.3 million and $5.5 million
for the years ended December 31, 2001, 2000 and 1999, respectively. The decrease
in interest and other expense for 2001 was primarily the result of lower
expenses related to convertible debentures. The increase in interest and other
expense in 2000 over 1999 was primarily the result of the various convertible
debenture financings during 2000. In connection with the issuance of series D
convertible debentures in June 2000, we recorded approximately $616,000 in
interest expense for the difference between the fair value of our common stock
on the date of signing and the conversion price of the debentures. In addition,
we recorded the $10.5 million value of the warrant issued with the series D
convertible debentures as a charge to interest expense and an increase to
additional-paid-in capital.

At the end of 2000, we adopted a new accounting principle as required by
the Financial Accounting Standards Board. This new principle required us to
modify the way we calculated the interest expense recognized for the difference
between the fair value of our common stock on the closing date of the
convertible
37

debenture financing and the conversion price of the debentures. We were required
to apply this new accounting principle retroactively to the September 1999
series C convertible debenture issuance. As a result of adopting this new
accounting principle, we recognized $13.3 million in imputed non-cash interest
expense and have recorded this charge as a cumulative effect of a change in
accounting principle.

In connection with the issuance of series C convertible debentures in
September 1999, we recorded approximately $305,000 in interest expense for the
difference between the fair value of our common stock on the date of signing and
the conversion price of the debentures. In addition, we recognized $625,000 in
interest expense related to a potential penalty on redemption up through the
date our stockholders authorized the additional shares to be issued for the full
conversion of the series C convertible debentures and the exercise of the series
C warrants. We determined the value of the series C warrants to be $2.7 million.
We recorded this value as an increase to additional paid-in-capital with a
related charge to interest expense.

CONVERSION EXPENSE

In connection with the restructuring agreement for our series D convertible
debentures in November 2001, we modified the terms of $10.0 million of our
outstanding series D convertible debentures by reducing the conversion price to
92% of the closing bid price on the date of conversion by the investor and, as a
result, we recorded $7.2 million as conversion expense. The conversion expense
was calculated as the difference between the fair market value of the common
stock issued on the date of conversion and the fair market value of common stock
that would have been issued under the original agreement.

We also modified the terms of the remaining $15.0 million of our series D
convertible debentures to extend the maturity date to June 30, 2005, increase
the yield on the debenture to 2.5%, and fix the conversion price at $20.00 per
share. In addition, we modified the terms of the related warrants that were
originally issued with our series D convertible debentures to reset the exercise
price of 40% of the warrants to $15.625 per share and extend the exercise period
to June 30, 2003 (series D-1 warrants) and 60% of the warrants to $25.00 per
share and extend the exercise period to December 31, 2006 (series D-2 warrants).
The difference between the current fair values of the original series D warrants
and the amended series D-1 and D-2 warrants was recorded as conversion expense
of $3.4 million. We also recorded the remaining $15.0 million of the amended
series D convertible debentures at a fair value of $16.3 million with the
offsetting difference of $1.3 million being recorded as conversion expense. The
excess of the fair value over the face value of the debentures is being
amortized over the life of the debentures as a reduction of interest expense
($59,000 in 2001). We are also accruing 2.5% interest on the amended debentures
as interest expense over the life of the debentures ($54,000 in 2001). The fair
values used in calculating the conversion expense associated with the series D-1
and D-2 warrants and the amended series D convertible debentures were based on
values determined through an independent valuation.

NET LOSS

Losses before cumulative effect of a change in accounting principle were
$42.1 million, $32.6 million and $46.4 million for the years ended December 31,
2001, 2000 and 1999, respectively. Net losses after cumulative effect of a
change in accounting principle were $42.1 million, $45.8 million and $46.4
million for the years ended December 31, 2001, 2000 and 1999, respectively. The
decrease in net loss in 2001 compared to 2000 was the net result of higher
operating expenses, conversion expense related to amending series D convertible
debentures and warrants, decreased revenues from collaborative agreements and
reduced interest expense and cumulative effect of a change in accounting
principle. The net loss for 2000 was the net result of increased operating
expenses, interest expense and cumulative effect of a change in accounting
principle which was offset by the decrease in acquisition costs from 1999 which
included the charge for acquired in-process research technology in connection
with the acquisition of Roslin Bio-Med and the amortization of the research
funding obligation to the Roslin Institute.

38

LIQUIDITY AND CAPITAL RESOURCES

Cash, restricted cash, cash equivalents and investments at December 31,
2001 were $79.6 million compared to $95.8 million at December 31, 2000 and $42.9
million at December 31, 1999. We have an investment policy to invest these funds
in liquid, investment grade securities, such as interest-bearing money market
funds, corporate notes, commercial paper and municipal securities. The decrease
in cash, cash equivalents and investments in 2001 was the result of cash used in
operations. The increase in cash, cash equivalents and investments in 2000 was
primarily the result of the exercise of warrants, the sale of equity to a
private investor and the sale of convertible debentures.

Net cash used in operations was $22.4 million in 2001 and $13.9 million in
2000. The increase in net cash used in operations in 2001 was primarily the
result of increased research and development expenses. Cash used in operations
in 2000 was primarily the result of the net loss for the year of $45.8 million
offset partially by non-cash charges including $24.4 million of interest arising
from the beneficial conversion feature of convertible debentures and the value
of warrants issued with convertible debentures. We expect that our net cash used
in operations will increase in 2002 as a result of increased research and
development expenses.

Through December 31, 2001, we have invested approximately $12.0 million in
property and equipment, of which approximately $7.8 million was financed through
an equipment financing arrangement. Minimum annual payments due under the
equipment financing facility are expected to total $825,000, $241,000, $38,000
and $20,000 in 2002, 2003, 2004 and 2005, respectively. As of December 31, 2001,
we had approximately $1.4 million available for borrowing under our equipment
financing facility. The drawdown period under the equipment financing facility
expires on August 31, 2002. We intend to renew the commitment for a new
equipment financing facility in 2002 to further fund equipment purchases. If we
are unable to renew the commitment, then we will need to spend our own resources
for equipment purchases.

In January 2001, we and Pharmacia agreed to terminate our license and
research collaboration agreement. All product rights for telomerase inhibition
reverted to us. We will seek further funding through other strategic
collaborations, public or private equity financing, or other financing sources.
In 2001, we received $2.0 million from Kyowa Hakko as a result of the extension
signed in 2000. Kyowa Hakko is not contractually obligated to provide any
further research funding.

In September 1999, we sold $12.5 million in series C convertible
two-percent coupon debentures and warrants to purchase 1,100,000 shares of
common stock to an institutional investor. The series C convertible debentures
were convertible at any time by the holder at a fixed conversion price of $10.25
per share. In March 2000, $6.3 million of principal of series C convertible
debentures converted into approximately 615,000 shares of our common stock. In
addition, we received proceeds of $13.8 million from the exercise of all of the
series C warrants. In November 2001, all of the remaining $6.3 million of series
C convertible debentures plus accrued interest were converted by the holder into
approximately 636,000 shares of our common stock. As of December 31, 2001, no
series C convertible debentures and no series C warrants were outstanding.

In June 2000, we sold $25.0 million in series D zero coupon convertible
debentures and warrants to purchase 834,836 shares of our common stock to an
institutional investor. The debentures were convertible at any time by the
holder at a fixed conversion price of $29.95 per share. If unconverted, the
debentures had a maturity date of June 29, 2003. The warrants to purchase
834,836 shares of common stock were exercisable at $37.43 per share at the
option of the holder through December 2001. In November 2001, $10.0 million of
series D convertible debentures were converted by the holder into approximately
1,011,000 shares of our common stock at a conversion price of $9.89 per share,
reflecting a modification of the terms of these debentures. We amended the terms
of the remaining $15.0 million of series D convertible debentures to carry a
2.5% coupon, have a fixed conversion price of $20.00 per share and have the
maturity date extended to June 2005. We also amended the outstanding series D
warrants. The amended series D-1 warrant to purchase 333,935 shares of our
common stock is exercisable at $15.625 per share through June 30, 2003. The
amended series D-2 warrant to purchase 500,901 shares of our common stock is
exercisable at $25.00 per share through December 31, 2006. As of December 31,
2001, $15.0 million of series D convertible debentures and series D-1 and D-2
warrants to purchase 834,836 shares of our common stock remained outstanding.

39

In September 2000, we entered into an agreement with an institutional
investor for an equity financing facility covering the sale of up to $50.0
million of our common stock over 24 months. The shares will be sold at our
discretion at a discount to the then current market price of our common stock on
the day of sale. We control the amount and timing of each sale of stock.

In October 2000, we sold $2.5 million of our common stock under the equity
line financing facility and issued approximately 88,000 shares. In December
2001, we sold $7.3 million of our common stock under our equity line financing
facility and issued approximately 758,000 shares. As of December 31, 2001, $40.2
million remains available under the equity line. This line expires in September
2002.

Our contractual obligations for the next five years, and thereafter are as
follows:

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

(1) This table does not include any milestone payments under research
collaborations or license agreements as the timing and likelihood of such
payments are not known.

(2) Our convertible debentures may be converted to common stock prior to their
maturity date, therefore may not require use of our capital resources.

We estimate that our existing capital resources, interest income and
equipment financing facilities will be sufficient to fund our current level of
operations through at least June 30, 2003. Changes in our research and
development plans or other changes affecting our operating expenses may result
in the expenditure of available resources before such time, and in any event, we
will need to raise substantial additional capital to fund our operations in the
future. We intend to seek additional funding through strategic collaborations,
public or private equity financings, capital lease transactions or other
financing sources that may be available.

40

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about Geron's market risk disclosures contains
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements. We are exposed to market risk
related to changes in interest rates and foreign currency exchange rates. We do
not use derivative financial instruments for speculative or trading purposes.

Interest Rate Sensitivity. The fair value of our available-for-sale
securities at December 31, 2001 was $78.7 million. These investments include
$18.3 million of cash and cash equivalents which are due in less than 90 days,
$50.2 million of short-term investments which are due in less than one year and
$10.2 million in long-term investments which are due in one to two years. Our
investment policy is to manage our marketable securities portfolio to preserve
principal and liquidity while maximizing the return on the investment portfolio
through the full investment of available funds. We diversify the marketable
securities portfolio by investing in multiple types of investment grade
securities. We primarily invest our marketable securities portfolio in short-
term securities with at least an investment grade rating to minimize interest
rate and credit risk as well as to provide for an immediate source of funds.
Although changes in interest rates may affect the fair value of the marketable
securities portfolio and cause unrealized gains or losses, such gains or losses
would not be realized unless the investments are sold. Due to the nature of our
investments, which are primarily corporate and municipal notes and money market
funds, we have concluded that there is no material market risk exposure.

Foreign Currency Exchange Risk. Because we translate foreign currencies
into United States dollars for reporting purposes, currency fluctuations can
have an impact, though generally immaterial, on our results. We believe that our
exposure to currency exchange fluctuation risk is insignificant primarily
because our international subsidiary satisfies its financial obligations almost
exclusively in its local currency. For the fiscal 2001 year end, there was an
immaterial currency exchange impact from our intercompany transactions. However,
the financial obligations of Geron to the Roslin Institute are stated in British
pounds sterling over the next four years. This obligation may become more
expensive for us if the United States dollar becomes weaker against the British
pounds sterling. As of December 31, 2001, we did not engage in foreign currency
hedging activities.

41

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Geron Corporation

We have audited the accompanying consolidated balance sheets of Geron
Corporation at December 31, 2001 and 2000, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 2001. 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 in accordance with auditing standards generally
accepted in the United States. Those standards 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. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Geron Corporation at December 31, 2001 and 2000 and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.

As discussed in Note 7 to the consolidated financial statements, in 2000
the Company changed its method of accounting for convertible debentures in
accordance with Emerging Issues Task Force ("EITF") 00-27, "Application of EITF
Issue 98-5, Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios, to Certain Convertible
Instruments."

/s/ ERNST & YOUNG LLP

Palo Alto, California
February 8, 2002

42

GERON CORPORATION

CONSOLIDATED BALANCE SHEETS

See accompanying notes.
43

GERON CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes.
44

GERON CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

See accompanying notes.
45

GERON CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes.
46

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Geron Corporation ("Geron" or the "Company") was incorporated in the State
of Delaware on November 29, 1990. Geron is a biopharmaceutical company focused
on developing and commercializing therapeutic and diagnostic products for
applications in oncology and regenerative medicine, and research tools for drug
discovery. Geron's product development programs are based upon three patented
core technologies: telomerase, human embryonic stem cells and nuclear transfer.
Principal activities to date have included obtaining financing, recruiting
management and technical personnel, securing operating facilities and conducting
research and development. The Company has no therapeutic products currently
available for sale and does not expect to have any therapeutic products
commercially available for sale for a period of years, if at all. These factors
indicate that the Company's ability to continue its research and development
activities is dependent upon the ability of management to obtain additional
financing as required.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Geron
Corporation and its wholly owned subsidiary, Geron Bio-Med Ltd., a United
Kingdom company. Intercompany accounts and transactions have been eliminated.
The financial statements of the Company's subsidiary outside the United States
are measured using the local currency as the functional currency. Assets and
liabilities of this subsidiary are translated at the rates of exchange at the
balance sheet date. The resultant translation adjustments are included in
accumulated other comprehensive income (loss), a separate component of
stockholders' equity. Income and expense items are translated at average monthly
rates of exchange.

NET LOSS PER SHARE

Basic earnings (loss) per share is based on weighted average shares
outstanding and excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings (loss) per share includes any dilutive
effect of options, warrants and convertible securities.

47

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of shares used in calculation of basic and diluted net
loss per share follows:

Had the Company been in a net income position, diluted earnings per share
would have included the shares used in the computation of basic net loss per
share as well as an additional 1,454,846, 2,069,229 and 1,392,833 shares related
to outstanding options and warrants not included above (as determined using the
treasury stock method at the estimated average market value) for 2001, 2000 and
1999, respectively. In addition, had the Company been in a net income position,
diluted earnings per share would also have included 752,671, 1,479,760, and
235,305 shares in 2001, 2000 and 1999, respectively, related to convertible
debentures.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

CASH EQUIVALENTS AND MARKETABLE DEBT SECURITIES AVAILABLE-FOR-SALE

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The Company is
subject to credit risk related to its cash equivalents and securities
available-for-sale. The Company places its cash and cash equivalents in money
market funds, municipal notes and commercial paper. The Company's investments
include corporate notes in United States corporations and municipal securities
with original maturities ranging from five to 20 months.

The Company classifies its marketable debt securities as
available-for-sale. Available-for-sale securities are recorded at fair value
with unrealized gains and losses reported in accumulated other comprehensive
income (loss) in stockholders' equity. Fair values for investment securities are
based on quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments. Realized gains and losses are included in interest and other income
and are derived using the specific identification method for determining the
cost of securities sold and have been immaterial to date. Declines in market
value judged other-than-temporary result in a charge to interest income.
Dividend and interest income are recognized when earned.

48

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

Since Geron's inception, a substantial portion of its revenues has been
generated from license and research agreements with collaborators. The Company
recognizes revenue under these collaborative agreements as the related research
and development costs are incurred. Milestone fees are recognized upon
completion of specified milestones according to contract terms. Deferred revenue
represents the portion of research payments received which have not been earned.

The Company also has several license, option and marketing agreements with
various diagnostic, research tools, agriculture and biologics production
companies. With each of these agreements, the Company receives nonrefundable
license payments in cash or equity securities, option payments in cash or equity
securities, royalties on future sales of products, or any combination of these
items. Nonrefundable signing or license fees that are not dependent on future
performance under these agreements are recognized as revenue when received and
over the term of the arrangement if we have continuing performance obligations.
Option payments are recognized as revenue over the period of the option
agreement. Royalties are generally recognized upon receipt.

The majority of the Company's revenues was earned in the United States. Two
customers accounted for 35% and 55% of the Company's 2001 revenues, 76% and 22%
of the Company's 2000 revenues, and 92% and 5% of the Company's 1999 revenues.
In January 2001, the Company and its largest customer, accounting for 76% of
2000 revenues, agreed to terminate its agreement.

RESTRICTED CASH

As of December 31, 2001 and 2000, the Company held $530,000 in a
Certificate of Deposit as collateral on an unused line of credit.

MARKETABLE AND NON-MARKETABLE EQUITY INVESTMENTS IN LICENSEES

Equity in nonpublic companies is carried at the lower of cost or net
realizable value. Equity in public companies is carried at the market value as
of the balance sheet date. Unrealized gains and losses are included as a
separate component of stockholders' equity. Realized gains or losses are
included in interest and other income and are derived using the specific
identification method. Statement of Financial Accounting Standards No. 115 (SFAS
115), "Accounting for Certain Investments in Debt and Equity Securities",
requires companies to determine whether a decline in fair value below the
amortized cost basis is other than temporary. If a decline in fair value is
determined to be other than temporary, SFAS 115 requires the carrying value of
the debt or equity security to be written down to its fair value. No such
writedowns were recorded in the years ended December 31, 2001, 2000 and 1999.

DEPRECIATION AND AMORTIZATION

The Company records property and equipment at cost and calculates
depreciation using the straight-line method over the estimated useful lives of
the assets, generally four years. Leasehold improvements are amortized over the
remaining term of the lease.

COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) is comprised of net income and other
comprehensive income (loss). Other comprehensive income (loss) includes certain
changes in equity that are excluded from net income. Specifically, unrealized
holding gains and losses on our available-for-sale securities and equity
investments in licensees, which were reported separately in stockholders'
equity, and the cumulative translation adjustment are included in accumulated
other comprehensive income (loss). Comprehensive income (loss) of $32,000,

49

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$161,000 and $(82,000) for the years ended December 31, 2001, 2000 and 1999,
respectively, have been reflected in the consolidated statement of stockholders'
equity.

OTHER RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS
141, "Business Combinations." SFAS 141 supersedes APB 16, "Business
Combinations," and SFAS 38, "Accounting for Preacquisition Contingencies of
Purchased Enterprises." SFAS 141 requires the purchase method of accounting for
all business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The Company does not expect the adoption of SFAS
141 to have a material effect on its financial condition or results of
operations.

In July 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible
Assets." SFAS 142 supersedes APB 17, "Intangible Assets," and requires the
discontinuance of goodwill amortization. In addition, SFAS 142 includes
provisions regarding the reclassification of certain existing recognized
intangibles as goodwill, reassessment of the useful lives of existing recognized
intangibles, reclassification of certain intangibles out of previously reported
goodwill and the testing for impairment of existing goodwill and other
intangibles. SFAS 142 is required to be applied for fiscal years beginning after
December 15, 2001, with certain early adoption permitted. The Company does not
expect the adoption of SFAS 142 to have a material effect on its financial
condition or results of operations.

In August 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations." SFAS 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated retirement costs. The Company is in the process of assessing the
effect of adopting SFAS 143, which will be effective for the Company's fiscal
year ending December 31, 2002.

In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," which supersedes SFAS 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." SFAS 144 addresses financial accounting and reporting for the impairment of
long-lived assets and for long-lived assets to be disposed of. However, SFAS 144
retains the fundamental provisions of SFAS 121 for: 1) recognition and
measurement of the impairment of long-lived assets to be held and used; and 2)
measurement of long-lived assets to be disposed of by sale. SFAS 144 is
effective for fiscal years beginning after December 15, 2001. The Company does
not expect the adoption of SFAS 144 to have a material effect on its financial
condition or results of operations.

RECLASSIFICATIONS

Certain reclassifications of prior year amounts have been made to conform
to current year presentation, including restricted cash and notes receivable
from stockholders.

2. ACQUISITION

In May 1999, the Company completed the acquisition of Roslin Bio-Med Ltd.,
a privately held company formed by the Roslin Institute in Midlothian, Scotland.
In connection with this acquisition, the Company formed a research collaboration
with the Roslin Institute and has committed approximately $20,000,000 in
research funding over six years which using an effective interest rate of 6% had
a net present value of $17,200,000. As of December 31, 2001 and 2000, the
present value of our remaining commitment was $11,081,000 and $13,420,000,
respectively. The Company issued 1,891,371 shares of its common stock with a
fair value of $22,200,000 in exchange for all of the outstanding shares of
Roslin Bio-Med Ltd. In addition, the Company issued fully vested options to
purchase 208,629 shares of Geron common stock with a fair value of $2,200,000 in
exchange for the outstanding fully vested stock options in Roslin Bio-Med Ltd.
The total purchase price of $44,400,000 also included acquisition costs of
$2,900,000. Under the terms of the agreement,

50

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Roslin Bio-Med Ltd. became a wholly owned United Kingdom subsidiary of Geron and
is known as Geron Bio-Med Ltd.

The license to the nuclear transfer technology was the only significant
asset of Roslin Bio-Med. Future products, if any, may take several years to
develop and commercialize and will require substantial additional funds. Geron
may never be able to create a commercial product from the technology. Geron is
using this technology for one research project. Geron has concluded that this
technology has no alternative future use, and accordingly, Geron has expensed
the value of the acquired research technology at the time of the acquisition.

The transaction was accounted for using the purchase method of accounting.
The purchase price was allocated among the acquired basic research in the form
of a license in the nuclear transfer technology, the research agreement with the
Institute and the net tangible assets of Roslin Bio-Med Ltd. The value of the
nuclear transfer technology of $23,400,000 was reflected as acquired in-process
research technology expense and the value of the research agreement of
$17,200,000 has been capitalized as an intangible asset and is being amortized
over six years. Payments totaling $2,829,000 and $2,200,000 were made to the
Roslin Institute under the research funding obligation in 2001 and 2000,
respectively. Imputed interest of $490,000 and $491,000 was accreted to the
value of the research funding obligation and was recognized as interest expense
in 2001 and 2000, respectively.

The unaudited pro forma consolidated statement of operations data for the
year ended December 31, 1999 set forth below give effect to the acquisition of
Roslin Bio-Med Ltd. as if it occurred on January 1, 1999.

The proforma results of operations for 1999 do not include the expense of
$23,400,000 recorded in 1999 by Geron for the acquired in-process research
technology. The results for 1999 include an adjustment to reflect the
amortization of the research funding obligation. The basic and diluted net loss
per share amounts are computed using the weighted average number of shares of
common stock outstanding after the issuance of Geron common stock in connection
with this acquisition.

51

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. FINANCIAL INSTRUMENTS AND CREDIT RISK

CASH EQUIVALENTS AND MARKETABLE DEBT SECURITIES AVAILABLE-FOR-SALE

The following is a summary of available-for-sale securities at December 31,
2001 and 2000:

As of December 31, 2001 and 2000, the difference between the fair value and
the amortized cost of available-for-sale securities was immaterial.

OTHER ASSETS

The Company presently holds notes receivable of $515,000 ($332,000 in 2000)
from employees of the Company related to housing costs following relocation.
These notes, which in general bear no interest, are collateralized by certain
real property assets of the employees. One of the notes receivable is to be paid
in full by August 2002, and one note is to be paid in full by December 2002. The
remaining three notes are being paid in a series of installments over three
years ending August 2003, March 2004 and June 2004.

OTHER FAIR VALUE DISCLOSURES

At December 31, 2001, the fair value of the notes receivable from employees
is $491,000. The fair value was estimated using discounted cash flow analyses,
using interest rates currently being offered for loans with similar terms of
borrowers of similar credit quality.

The fair value of the equipment loans approximates the carrying value of
$1,124,000. The fair value was estimated using discounted cash flow analyses,
based on the Company's current incremental borrowing rates for similar types of
borrowing arrangements.

The fair value of the convertible debentures approximates the carrying
value of $16,295,000. The fair value was estimated using discounted cash flow
analyses, based on the Company's current incremental borrowing rates for similar
types of borrowing arrangements and the Black-Scholes pricing model.

52

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. PROPERTY AND EQUIPMENT

Property and equipment, stated at cost, is comprised of the following:

Property and equipment at December 31, 2001 and 2000 includes assets under
capitalized leases and equipment loans of approximately $2,142,000 and
$2,626,000 respectively. Accumulated amortization related to leased assets was
approximately $1,379,000 and $1,566,000 at December 31, 2001 and 2000,
respectively.

5. EQUIPMENT LOANS

In 2001, the Company renewed its equipment financing facilities of
$1,500,000. As of December 31, 2001, the Company had approximately $1,398,000
available for borrowing under its equipment financing facilities. The drawdown
period under the equipment financing facilities expire on August 31, 2002. The
obligations under the equipment loans, which are secured by the equipment
financed, bear interest at fixed rates of approximately 11% and are due in
monthly installments through August 2005.

Future minimum principal payments on equipment loans are as follows:

6. OPERATING LEASE COMMITMENT

On March 25, 1996, the Company leased two facilities under two five-year
non-cancelable operating leases. In 2001, the Company assumed an operating lease
on a third facility and exercised the first of two options to extend the lease
period for two and one half years on its original 1996 leases. The lease on the
third facility has an option to extend the term to coincide with the end date of
the second extension option under the leases on the first two facilities. Future
minimum payments under non-cancelable operating leases are approximately
$994,000 in 2002 and $1,096,000 in 2003. Rent expense under operating leases was
approximately $710,000, $612,000 and $652,000 for the years ended December 31,
2001, 2000 and 1999, respectively.

53

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. CONVERTIBLE DEBENTURES

SERIES C DEBENTURES

On September 30, 1999, the Company sold $12,500,000 in series C convertible
two-percent coupon debentures and warrants to purchase 1,100,000 shares of
common stock to an institutional investor. The series C convertible debentures
were convertible at any time by the holder at a fixed conversion price of $10.25
per share. The series C convertible debentures were convertible at the Company's
option when the common stock has traded at a certain premium to the fixed
conversion price for ten consecutive trading days. If unconverted, the
debentures had a maturity date of September 30, 2002. The series C warrants to
purchase 1,000,000 shares of common stock were exercisable at $12.50 per share
and the series C warrants to purchase 100,000 shares of common stock were
exercisable at $12.75 per share at the option of the holder through May 2001.

In March 2000, series C convertible debentures with a face value of
$6,250,000 plus accrued interest were converted into 615,069 shares of Geron
common stock at $10.25 per share. In addition, all of the series C warrants were
exercised which resulted in proceeds of $13,750,000 and the issuance of
1,100,000 shares of Geron common stock. This debenture contains a beneficial
conversion feature equal to the difference of the market price of the Company's
common stock at the date of issue and the conversion price. In December 2000,
the Company adopted Emerging Issues Task Force Issue No. 00-27, "Application of
EITF Issue 98-5, Accounting for Convertible Securities with Beneficial
Conversion Features or Contingently Adjustable Conversion Ratios, to Certain
Convertible Instruments" ("EITF 00-27"). Accordingly, the Company recognized
$2,700,000 of additional imputed non-cash interest expense related to the
beneficial conversion feature of the series C convertible debentures as a
cumulative effect of a change in accounting principle, with an offset to
additional paid-in-capital.

In November 2001, all of the remaining $6,250,000 of series C convertible
debentures plus accrued interest were converted into 635,516 shares of Geron
common stock. As of December 31, 2001, no series C convertible debentures and no
series C warrants remained outstanding.

SERIES D DEBENTURES

On June 29, 2000, the Company sold $25,000,000 in series D zero coupon
convertible debentures and warrants to purchase 834,836 shares of Geron common
stock to an institutional investor. The debentures were convertible at any time
by the holder at a fixed conversion price of $29.95 per share. In connection
with the issuance of the series D convertible debentures, the Company recorded
approximately $616,000 in interest expense for the difference between the fair
value of the Company's common stock and the conversion price of the debentures
on the closing date of the financing. The debentures convert at the Company's
option when Geron common stock has traded at a certain premium to the fixed
conversion price for five consecutive trading days. If unconverted, the
debentures had a maturity date of June 29, 2003. The warrant to purchase 834,836
shares of Geron common stock was exercisable at $37.43 per share at the option
of the holder through December 2001. The value of the warrant of $10,527,000 was
determined using Black-Scholes and since the debentures were immediately
convertible at the option of the holder, the entire warrant value was recorded
as a charge to interest expense and a credit to additional paid-in-capital in
2000. This debenture contained a beneficial conversion feature equal to the
difference of the market price of the Company's common stock at the date of
issue and the conversion price. In December 2000, the Company adopted EITF
00-27. Accordingly, the Company recognized an additional $10,527,000 in imputed
non-cash interest expense related to the beneficial conversion feature of the
series D convertible debentures as a cumulative effect of a change in accounting
principle, with an offset to additional paid-in-capital.

In November 2001, the Company modified the terms of $10,000,000 of
outstanding series D convertible debentures by reducing the conversion price to
$9.89 per share (92% of the closing bid price on the date of

54

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

conversion by the investor and converted the debentures into 1,011,122 shares of
Geron common stock). As a result, the Company recognized $7,240,000 as
conversion expense. The conversion expense was calculated as the difference
between the fair market value of the common stock issued on the date of
conversion and the fair market value of common stock that would have been issued
under the original agreement.

The Company also modified the terms of the remaining $15,000,000 of series
D convertible debentures to extend the maturity date to June 30, 2005, increase
the yield on the debenture to 2.5%, and fix the conversion price at $20.00 per
share. In addition, the Company modified the terms of the related outstanding
warrants that were originally issued with the series D debentures to reset the
exercise price of 40% of the warrants to $15.625 per share and extend the
exercise period to June 30, 2003 (series D-1 warrants) and 60% of the warrants
to $25.00 per share and extend the exercise period to December 31, 2006 (series
D-2 warrants). The difference between the current fair values of the original
series D warrants and the amended series D-1 and D-2 warrants was recorded as
conversion expense of $3,370,000. The Company also recorded the remaining
$15,000,000 of the amended series D convertible debentures at a fair value of
$16,300,000 with the offsetting difference of $1,300,000 being recorded as
conversion expense. The excess of the fair value over the face value of the
debentures is being amortized over the life of the amended series D convertible
debentures as a reduction of interest expense, $59,000 in 2001. The Company is
also accruing 2.5% interest on the amended series D convertible debentures as
interest expense over the life of the debentures, $54,000 in 2001. The fair
values used in calculating the conversion expense associated with the series D-1
and D-2 warrants and the amended series D convertible debentures were based on
values determined through an independent valuation.

As of December 31, 2001, $15,000,000 of series D convertible debentures and
series D warrants to purchase 834,836 shares of Geron common stock remained
outstanding.

8. MARKETABLE AND NON-MARKETABLE EQUITY INVESTMENTS IN LICENSEES

In connection with its license agreement with Clone International Pty Ltd,
the Company received equity equal to 33% of the outstanding stock of Clone
International. In accordance with the equity method of accounting, the Company
increases (decreases) its carrying value of the investment by a proportionate
share of Clone International's earnings (losses). Any increases (decreases) are
included in interest and other income. As of December 31, 2001, the carrying
value of Clone International equity was zero.

In connection with its license agreement with ProLinia, Inc., the Company
received a warrant to purchase 1,500,000 shares of ProLinia common stock at an
exercise price of $0.40 per share. The warrant expires on May 17, 2008.
Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for
Derivative Instruments and Hedging Activities," requires derivative instruments
to be recorded at market value. Any resulting change in fair value is considered
a realized gain or loss and is included in interest and other income. As of
December 31, 2001, there was an immaterial difference between the original fair
value and the fair value at December 31, 2001 of ProLinia warrants.

9. STOCKHOLDERS' EQUITY

WARRANTS

In September 2001, in connection with a license agreement, the Company
issued a warrant to purchase 5,000 shares of Geron common stock at $9.07 per
share to a research institution. The warrant is exercisable through September
2011. The value of these warrants was determined to be approximately $41,000 and
was recorded as a charge to research and development expense and a credit to
additional paid-in-capital. As of December 31, 2001, the warrant to purchase
5,000 shares of common stock remained outstanding.

In August 2001, in connection with a license agreement, the Company issued
a warrant to purchase 100,000 shares of Geron common stock at $14.60 per share
to a research institution. The warrant is exercisable through August 2011. The
value of these warrants was determined to be approximately $951,000 and was

55

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

recorded as a charge to research and development expense and a credit to
additional paid-in-capital. As of December 31, 2001, the warrant to purchase
100,000 shares of common stock remained outstanding.

In August 2001, in connection with a consulting services agreement, the
Company issued a warrant to purchase 9,000 shares of common stock. The warrant
is exercisable at any time through July 2006 at $22.56 per share. The fair value
of this warrant was determined to be approximately $86,000 and was recorded as a
charge to research and development expense and a credit to additional
paid-in-capital. As of December 31, 2001, the warrant to purchase 9,000 shares
of common stock remained outstanding.

In August 2000, in connection with a milestone payment to an academic
institution, the Company issued a warrant to purchase 5,000 shares of common
stock. The warrant is exercisable at any time through August 2010 at $31.69 per
share. The fair value of this warrant was determined to be approximately
$148,000 and was recorded as a charge to research and development expense and a
credit to additional paid-in-capital. As of December 31, 2001, the warrant
issued to purchase 5,000 shares of common stock remained outstanding.

In July 2000, in connection with a milestone payment to an academic
institution, the Company issued a warrant to purchase 25,000 shares of common
stock. The warrant is exercisable at any time through June 2010 at $6.75 per
share. The fair value of this warrant was determined to be approximately
$770,000 and was recorded as a charge to research and development expense and a
credit to additional paid-in-capital. As of December 31, 2001, the warrant
issued to purchase 25,000 shares of common stock remained outstanding.

In June 2000, in connection with the sale of series D convertible
debentures to one institutional investor, the Company issued warrants to
purchase 834,836 shares of common stock at $37.43 per share. The series D
warrants were exercisable at any time through December 2001. The fair value of
these warrants in connection with the financing was determined to be
approximately $10,500,000. In November 2001, the Company amended the outstanding
Series D warrants. The amended series D-1 warrant to purchase 333,935 shares of
Geron common stock is exercisable at $15.63 per share at the option of the
holder through June 30, 2003. The amended series D-2 warrant to purchase 500,901
shares of Geron common stock is exercisable at $25.00 per share at the option of
the holder through December 31, 2006. As of December 31, 2001, all of the series
D-1 and D-2 warrants remained outstanding.

In April 2000, in connection with a consulting services agreement, the
Company issued a warrant to purchase 142,350 shares of common stock. The warrant
is exercisable at any time through April 2002 at $10.52 per share. The fair
value of this warrant was determined to be approximately $2,500,000 and was
recorded as a charge to general and administrative expense and a credit to
additional paid-in-capital. In September 2001, 71,175 of these warrants were
exercised on a non-cash basis, which resulted in the issuance of 27,341 shares
of common stock. As of December 31, 2001, warrants to purchase 71,175 shares
remained outstanding.

In March 2000, in connection with a private financing, the Company issued
warrants to purchase 100,000 shares of common stock at $12.50 per share and
warrants to purchase 200,000 shares of common stock at $67.09 per share. The
warrants are exercisable at any time through February 2010. As of December 31,
2001, all of the warrants issued with the private financing remained
outstanding.

In October 1998, in conjunction with a license agreement, the Company
issued a warrant to purchase 25,000 shares of common stock at $5.78 per share to
a research institution. The warrant is exercisable through September 2008. The
value of these warrants was determined to be immaterial. During 1999, 5,583 of
the warrants were exercised under a non-cash basis, which resulted in the
issuance of 2,586 shares of common stock. During 2000, 11,500 of these warrants
were exercised on a non-cash basis, which resulted in the issuance of 9,722
shares of common stock. As of December 31, 2001, warrants to purchase 6,500
shares of common stock remained outstanding.

56

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In August 1997, in conjunction with a license agreement, the Company issued
warrants to purchase 25,000 shares of common stock at $6.75 per share to a
research institution and its affiliates. The warrants are exercisable through
July 2007. The value of these warrants was determined to be immaterial. As of
December 31, 2001, all of the warrants issued in conjunction with the license
agreement remained outstanding.

1992 STOCK OPTION PLAN

The Company administers the 1992 Stock Option Plan (the "Plan"). The
options granted under this Plan may be either incentive stock options or
nonstatutory stock options. As of December 31, 2001, the Company had reserved
6,994,362 shares of common stock for issuance under the Plan. Options granted
under this Plan expire no later than ten years from the date of grant. For
incentive stock options and nonstatutory stock options, the option price shall
be at least 100% and 85%, respectively, of the fair market value of the
underlying common stock on the date of grant. If, at the time the Company grants
an option, the optionee directly or by attribution owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company, the option price shall be at least 110% of the fair market value of the
underlying common stock and shall not be exercisable more than five years after
the date of grant.

Options to purchase shares of common stock generally vest over a period of
four or five years from the date of the option grant, with a portion vesting
after six months and the remainder vesting ratably over the remaining period.
Options granted under the Plan prior to July 1996 (the date of the Company's
initial public offering) are generally immediately exercisable; however, any
unvested shares issued are subject to repurchase rights whereby the Company has
the option to repurchase any unvested shares upon termination of employment at
the original exercise price. In 2001 and 2000, the Company did not repurchase
any shares, in accordance with these repurchase rights. As of December 31, 2001,
no shares remained subject to repurchase.

On September 18, 1998, the Board of Directors approved a resolution to
offer all employees holding outstanding options to purchase common stock of the
Company under the Company's 1992 Stock Option Plan with exercise prices in
excess of the closing price of the Company's common stock on September 17, 1998
of $4.75, the option to exchange all such options for new incentive and/or
nonstatutory stock options. Each such new incentive and/or nonstatutory stock
option was on the same terms as the surrendered option, except that (i) the
exercise price was equal to the closing price of the Company's common stock as
reported on September 17, 1998 of $4.75, (ii) the vesting period of each
exchanged option as set forth in the applicable stock option agreement was
extended for one year beginning from the original vesting commencement date,
(iii) no exchanged option could be exercised or sold by the optionee prior to
September 18, 1999, except due to the involuntary termination of the employee by
the Company or his or her death or permanent disability, and (iv) options so
exchanged were exchanged for the maximum number of incentive stock options
permitted under applicable rules and regulations. In connection with this option
exchange program, options to purchase 1,148,224 shares of common stock were
cancelled and regranted. In addition, the Company recorded deferred compensation
of approximately $1,300,000 in 1998. The remaining deferred compensation is
being amortized over the remaining vesting term of the options. The Company
recognized compensation expense related to this option exchange of approximately
$241,000 each in 2001, 2000 and 1999, respectively.

DIRECTORS' OPTION PLAN

In July 1996, the Company adopted the 1996 Directors' Stock Option Plan and
reserved an aggregate of 250,000 shares of common stock for issuance thereunder.
In May 1999, the stockholders approved an amendment to increase the number of
authorized shares to 500,000 shares of common stock. As of December 31, 2001,
350,000 options have been granted under the Directors' Option Plan.

57

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Aggregate option activity for the 1992 Stock Option Plan and Directors'
Stock Option Plan is as follows:

Information about stock options outstanding as of December 31, 2001 is as
follows:

As of December 31, 2001 and 2000, there were 2,105,204 and 1,413,863
exercisable options outstanding at a weighted average exercise price of $9.20
and $7.15, respectively.

During the year ended December 31, 2001, the Company extended the exercise
period and accelerated the vesting schedule on 246,900 outstanding options to
two former members of the Board of Directors and recognized $2,392,000 in
compensation expense for the difference between the exercise price of the
options and the fair market value of the Company's common stock on the date of
the respective award modifications.

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and the related
Interpretations in accounting for its employee stock options and options granted
to non-employee directors because, as discussed below, the alternative fair
value accounting provided for under Financial Accounting Standards Board
Statement No. 123 ("SFAS 123"),
58

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

"Accounting for Stock Based Compensation," requires use of option pricing
valuation models that were not developed for use in valuing employee stock
options and options granted to non-employee directors. Under APB 25, the Company
generally recognizes no compensation expense with respect to such awards since
the exercise price of the stock option equals the fair market value of the
underlying common stock on the grant date.

Pro forma information regarding net loss and net loss per share is required
by SFAS 123 and has been determined as if the Company had accounted for its
employee stock options under the fair value method proscribed by the Statement.
The fair value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: risk-free interest rates ranging from 3.39% to 5.29% for 2001,
5.06% to 6.80% for 2000 and 4.78% to 6.31% for 1999 ; a dividend yield of 0.0%
for 2001, 2000 and 1999; a volatility factor of the expected market price of the
Company's common stock of 1.013 for 2001, 1.032 for 2000 and 0.958 for 1999; and
a weighted average expected life of the options of 5 years for 2001, 2000 and
1999.

The Company has recorded deferred compensation of approximately $1,300,000
for the difference between the grant price and the deemed fair value of certain
of the Company's common stock options granted in 1996. This amount is being
amortized over the vesting period of the individual options, generally a
60-month period. Deferred compensation expense recognized in 2000 and 1999
related to these options grants totaled approximately $137,000 and $289,000,
respectively. No amounts were recorded in 2001 since the deferred compensation
was fully amortized by 2000.

There were no options granted with an exercise price below fair market
value of the Company's common stock on the date of grant for 2001, 2000 and
1999. The weighted average fair value of options granted during 2001, 2000 and
1999 with an exercise price equal to the fair market value of the Company's
common stock on the date of grant was $10.08, $20.17 and $8.69, respectively.
There were no options granted with an exercise price greater than the fair
market value of the Company's common stock in 2001, 2000 and 1999.

The Company grants options to consultants from time to time in exchange for
services performed for the Company. In general, these options vest over the
contractual period of the consulting arrangement. The Company granted options to
consultants to purchase 24,234, 18,771 and 7,500 shares of the Company's common
stock in 2001, 2000 and 1999, respectively. The fair value of these options is
being amortized to expense over the vesting term of the options. In addition,
the Company will record any additional increase in the fair value of the option
grant as the options vest. The Company recorded expense of $249,000, $121,000
and $6,000 for the fair value of these options in 2001, 2000 and 1999,
respectively. As of December 31, 2001, the fair value of the remaining unvested
options to consultants is $605,000.

The Company also grants common stock to consultants and research
institutions in exchange for services performed for the Company. In 2001 and
2000, the Company issued 100,876 and 121,015 shares of common stock,
respectively, in exchange for services. For these stock grants, the Company
recognized an expense equal to the fair market value of the granted shares on
the date of grant. In 2001, 2000 and 1999, the Company recognized approximately
$1,066,000, $1,889,000 and $1,526,000, respectively, of expense in connection
with stock grants to consultants and research institutions.

59

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options using the
straight-line method. The Company's pro forma information follows:

EMPLOYEE STOCK PURCHASE PLAN

In July 1996, the Company adopted the 1996 Employee Stock Purchase Plan
("Purchase Plan") and reserved an aggregate of 300,000 shares of common stock
for issuance thereunder. Under the terms of the Purchase Plan, employees can
choose to have up to 10% of their annual salary withheld to purchase the
Company's common stock. The purchase price of the stock is 85% of the lower of
the subscription date fair market value and the purchase date fair market value.
Approximately 50% of the eligible employees have participated in the Purchase
Plan. The Company does not recognize compensation cost related to employee
purchase rights under the Purchase Plan.

Approximately 155,000, 108,000 and 78,000 shares have been issued under the
Purchase Plan as of December 31, 2001, 2000 and 1999, respectively. To comply
with the pro forma reporting requirements of SFAS 123, compensation cost is
estimated for the fair value of the employees' purchase rights using the
Black-Scholes model with the following weighted average assumptions: risk-free
interest rates ranging from 1.81% to 3.65% for 2001, 5.96% to 6.06% for 2000 and
5.06% to 5.74% for 1999; a dividend yield of 0.0% for 2001, 2000 and 1999; a
volatility factor of the expected market price of the Company's common stock of
1.013 for 2001, 1.032 for 2000 and 0.958 for 1999; and an expected life of the
purchase right of 6 months for 2001, 2000 and 1999. Based upon these
assumptions, the pro forma compensation cost estimated for the fair value of the
employees' purchase rights was approximately $211,000 for 2001, $160,000 for
2000 and $100,000 for 1999 has been included in the above pro forma information.
As of December 31, 2001, 145,276 shares were available for issuance under the
1996 Employee Stock Purchase Plan.

COMMON SHARES RESERVED FOR FUTURE ISSUANCE

Common stock reserved for future issuance as of December 31, 2001 is as
follows:

Convertible debentures...................................... 752,671
Outstanding options......................................... 5,028,689
Options available for grant................................. 282,085
Employee stock purchase plan................................ 145,276
Warrants outstanding........................................ 1,381,511
---------
Total.................................................. 7,590,232
=========

SHARE PURCHASE RIGHTS PLAN

On July 20, 2001, the Company's Board of Directors adopted a share purchase
rights plan and declared a dividend distribution of one right for each
outstanding share of common stock to stockholders of record as of July 31, 2001.
Each right entitles the holder to purchase one unit consisting of one
one-thousandth of a share

60

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of Series A Junior Participating Preferred Stock for $100 per unit. Under
certain circumstances, if a person or group acquires 15% or more of Geron
outstanding common stock, holders of the rights (other than the person or group
triggering their exercise) will be able to purchase, in exchange for the $100
exercise price, shares of the Company's common stock, par value $0.001 per
share, or of any company into which the Company is merged having a value of
$200. The rights expire on July 31, 2011 unless extended by the Company's Board
of Directors. As of December 31, 2001, no rights were exercisable into any
shares of common stock.

PRIVATE FINANCING

In March 2000, the Company sold a total of 380,855 shares of common stock
and warrants to purchase 300,000 shares of Geron common stock to a single
investor for $9,000,000. Warrants to purchase 100,000 shares of common stock are
exercisable at $12.50 per share and the warrants to purchase 200,000 shares of
common stock are exercisable at $67.09 per share by the holder at any time
through February 2010. As of December 31, 2001, all of the warrants issued with
the private financing remained outstanding.

EQUITY LINE

In September 2000, the Company entered into an agreement with an
institutional investor for an equity financing facility covering the sale of up
to $50,000,000 of the Company's common stock over 24 months. The shares will be
sold at the Company's discretion at a discount to the then current market price
of the Company's common stock on the day of sale. The Company controls the
amount and timing of each sale of stock.

In October 2000, the Company sold $2,500,000 of the Company's common stock
under the equity line financing facility. In connection with the drawdown, the
Company issued 87,654 shares.

In December 2001, the Company sold $7,253,000 of the Company's common stock
under the equity line financing facility. In connection with the drawdown, the
Company issued 757,885 shares.

10. COLLABORATIVE AGREEMENTS

In April 1995, the Company entered into a License and Research
Collaboration Agreement with Kyowa Hakko (the "Kyowa Hakko Agreement") and in
February 2000, the agreement was extended. Under the Kyowa Hakko Agreement,
Kyowa Hakko provided $20,000,000 of research funding over six years to support
the Company's program to discover and develop in certain Asian countries a
telomerase inhibitor for the treatment of cancer. In addition, the Company is
entitled to receive future payments totaling $7,500,000 upon the achievement of
certain contractual milestones relating to drug development and regulatory
progress, as well as royalty payments on product sales. Kyowa Hakko also
purchased $2,500,000 of Geron common stock in connection with the Company's
initial public offering. Under the Kyowa Hakko Agreement, Geron exercises
significant influence during the research phase and Kyowa Hakko exercises
significant influence during the development and commercialization phases. Kyowa
Hakko will pay for all clinical expenses associated with product approval in the
licensed territory, which includes the countries of China, Hong Kong, India,
Indonesia, Japan, Kampuchea, Korea, Laos, Malaysia, Myan Mar, the Philippines,
Singapore, Taiwan, Thailand and Vietnam. Kyowa Hakko may terminate the agreement
only in the event of breach or bankruptcy by the Company or in the event that
both parties agree that it is no longer reasonably practical to pursue further
research and development of an inhibitor of telomerase. The compound selection
period for Kyowa Hakko expires in March 2002.

In March 1997, the Company signed a License and Research Collaboration
Agreement (the "Pharmacia Agreement") with Pharmacia Corporation to collaborate
in the discovery, development and commercialization of a new class of
anti-cancer drugs that inhibit telomerase. Under the collaboration, Pharmacia
provided $20,000,000 of research funding over four years. In addition, Pharmacia
purchased $10,000,000 of Geron

61

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

common stock at a premium over two years. In January 2001, Geron and Pharmacia
agreed to terminate the license and research collaboration agreement. Pharmacia
returned all product rights for telomerase inhibitors to the Company. The
extension agreement with Kyowa Hakko remains unchanged.

Costs associated with research and development activities attributable to
the above agreements approximate revenue recognized. Under these agreements,
revenues of approximately $3,250,000, $6,500,000 and $5,200,000, were recognized
in 2001, 2000 and 1999, respectively. No milestone payments have been received
or earned to date.

In December 1997, the Company entered into a License, Product and Marketing
Agreement with Boehringer Mannheim (the "Boehringer Mannheim Agreement") to
develop and commercialize certain research and clinical diagnostic products for
cancer on an exclusive, worldwide basis. Under the Boehringer Mannheim
Agreement, Boehringer Mannheim provided reimbursement for research previously
conducted and is responsible for all clinical, regulatory, manufacturing,
marketing and sales efforts and expenses. The Company is entitled to receive
future payments upon achievement of certain contractual milestones relating to
levels of product sales, as well as royalties on product sales. Further, the
Company has an option to exercise co-promotion rights in the United States.
After the acquisition of Boehringer Mannheim by Roche in early 1998, all
licenses and agreements pertaining to telomerase-based cancer diagnostics
entered into with Boehringer Mannheim have been transferred to Roche
Diagnostics. In accordance with the Boehringer Mannheim Agreement, the Company
received royalty payments from Roche of approximately $31,000 each in 2001 and
2000, respectively.

In March 1999, the Company entered into an exclusive License, Product and
Marketing Agreement with Clontech (the "Clontech Agreement") to develop,
manufacture and sell six cell lines. Under the terms of the Clontech Agreement,
Clontech is responsible for manufacturing and marketing of products resulting
from the use of the Company's telomerase technology. The Clontech Agreement
provides for Clontech to pay an up-front technology licensing fee of $50,000,
and for Clontech and Geron to equally share operating profits generated from the
sale of the cell lines. Specifically, the Company is entitled to receive
reimbursement funding of the greater of $25,000 or 10% of sales on December 31,
1999, December 31, 2000, and December 31, 2001. Clontech launched its first
product using the Company's telomerase technology in September 1999, but sales
did not exceed $250,000. Therefore, the Company recognized revenue of $25,000
during 1999. In addition, the Company recognized approximately $46,000 and
$29,000 in shared profits from sales of cell lines in 2001 and 2000,
respectively.

11. INCOME TAXES

As of December 31, 2001, the Company had federal and state net operating
loss carryforwards of approximately $130,000,000 which will expire at various
dates beginning 2006 through 2021, if not utilized. The Company also had federal
research and development tax credit carryforwards of approximately $3,100,000
which will expire at various dates beginning in 2012 through 2021, if not
utilized.

Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the ownership change provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.

62

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Significant components of the Company's deferred tax assets as of December
31 are as follows:

Because of the Company's history of losses, the net deferred tax asset has
been fully offset by a valuation allowance. The valuation allowance increased by
$10,200,000, $6,100,000 and $17,200,000 during the years ended December 31,
2001, 2000 and 1999, respectively.

Approximately $2,800,000 of the valuation allowance for deferred tax assets
relates to benefits of stock option deductions which, when recognized, will be
allocated directly to contributed capital.

12. SEGMENT INFORMATION

The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131") in fiscal year ended December 31, 1998. SFAS 131 establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. SFAS 131 also establishes
standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about
which separate discrete financial information is available for evaluation by the
chief operating decision maker, or decision making group, in making decisions
how to allocate resources and assess performance. The Company's chief decision
maker, as defined under SFAS 131, is the Chief Executive Officer. To date, the
Company has viewed its operations as principally one segment, the discovery and
development of therapeutic and diagnostic products for oncology and regenerative
medicine and research tools for drug discovery. As a result, the financial
information disclosed herein materially represents all of the financial
information related to the Company's principal operating segment.

63

GERON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. STATEMENT OF CASH FLOWS DATA

14. QUARTERLY RESULTS (UNAUDITED)

Basic and diluted net losses per share are computed independently for each
of the quarters presented. Therefore, the sum of the quarters may not be equal
to the full year net loss per share amounts.

15. SUBSEQUENT EVENTS

In January 2002, Geron resolved a federal lawsuit with the Wisconsin Alumni
Research Foundation and entered into a new license for the commercialization of
human embryonic stem cell technology. The new agreement supersedes the earlier
license, and resolves all issues related to the lawsuit filed by WARF against
Geron in August 2001. The Company does not expect an adverse accounting impact
on its financial condition or results of operations related to this new license
agreement.

64

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

Not Applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

IDENTIFICATION OF DIRECTORS

The information required by this Item concerning the Company's directors is
incorporated by reference from the section captioned "Proposal 1: Election of
Directors" contained in the Company's Definitive Proxy Statement related to the
Annual Meeting of Stockholders to be held May 17, 2002, to be filed by the
Company with the Securities and Exchange Commission (the "Proxy Statement").

IDENTIFICATION OF EXECUTIVE OFFICERS

The information required by this Item concerning the Company's executive
officers is set forth in Part I of this Report.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference from the
section captioned "Executive Compensation" contained in the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is incorporated by reference from the
section captioned "Security Ownership of Certain Beneficial Owners and
Management" contained in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated by reference from the
section captioned "Certain Transactions" and "Executive Compensation" contained
in the Proxy Statement.

PART IV

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

(a)(1) CONSOLIDATED FINANCIAL STATEMENTS

Included in Part II of this Report:

(2) FINANCIAL STATEMENT SCHEDULES

Financial statement schedules are omitted because they are not required or
the information is disclosed in the financial statements listed in item
14(a)(1).

65

(3) EXHIBITS.

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

+ Certain portions of this Exhibit have been omitted for which confidential
treatment has been requested and filed separately with the Securities and
Exchange Commission.

* Incorporated by reference to identically numbered exhibits filed with the
Registrant's Annual Report on Form 10-K filed on March 13, 2000.

(1) Incorporated by reference to identically numbered exhibits filed on the
Registrant's Form 8-K filed on May 18, 1999.

(2) Incorporated by reference to Exhibit 3.3 filed with the Registrant's
Registration Statement on Form S-1 which became effective on July 30, 1996.

(3) Incorporated by reference to identically numbered exhibits filed with the
Registrant's Registration Statement on Form S-1 which became effective on
July 30, 1996.

(4) Incorporated by reference to Exhibit 10.39 of the Registrant's Current
Report on Form 8-K filed on April 2, 1998.

68

(5) Incorporated by reference to Exhibit 10.41 of the Registrant's Current
Report on Form 8-K filed on December 17, 1998.

(6) Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report
on Form 8-K filed on May 18, 1999.

(7) Incorporated by reference to Exhibit 99.2 of the Registrant's Current
Report on Form 8-K filed on October 7, 1999.

(8) Incorporated by reference to Exhibit 4.2 of the Registrant's Current Report
on Form 8-K filed on December 17, 1998.

(9) Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report
on Form 8-K filed on December 17, 1998.

(10) Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report
on Form 8-K filed on July 20, 2001.

(11) Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report
on Form 8-K filed on November 9, 2001.

(12) Incorporated by reference to Exhibit 4.2 of the Registrant's Current Report
on Form 8-K filed on November 9, 2001.

(13) Incorporated by reference to Exhibit 4.3 of the Registrant's Current Report
on Form 8-K filed on November 9, 2001.

(14) Incorporated by reference to Exhibit 4.4 of the Registrant's Current Report
on Form 8-K filed on November 9, 2001.

(15) Incorporated by reference to Exhibit 99.1 of the Registrant's Registration
Statement on Form S-8 filed on December 23, 1999.

(16) Incorporated by reference to Exhibit 99.2 of the Registrant's Registration
Statement on Form S-8 filed on December 23, 1999.

(17) Incorporated by reference to Exhibit 10.1 of the Registrant's Current
Report on Form 8-K filed on January 24, 1997.

(18) Incorporated by reference to identically numbered exhibits filed with
Registrant's Quarterly Report on Form 10-Q for the period ended March 31,
1997.

(19) Incorporated by reference to identically numbered exhibits filed with
Registrant's Quarterly Report on Form 10-Q for the period ended September
30, 1997.

(20) Incorporated by reference to identically numbered exhibits filed with
Registrant's Annual Report on Form 10-K filed on March 31, 1998.

(21) Incorporated by reference to Exhibit 10.39 of the Registrant's Current
Report on Form 8-K filed on April 2, 1998.

(22) Incorporated by reference to Exhibit 10.40 of the Registrant's Current
Report on Form 8-K filed on December 17, 1998.

(23) Incorporated by reference to identically numbered exhibits filed with
Registrant's Registration Statement on Form S-3 filed on April 2, 1998.

(24) Incorporated by reference to Exhibit 99.1 of the Registrant's Current
Report on Form 8-K filed on October 5, 1999.

(25) Incorporated by reference to Exhibit 10.1 filed with Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1999.

(26) Incorporated by reference to Exhibit 10.2 filed with Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1999.

(27) Incorporated by reference to Exhibit 10.3 filed with Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1999.

69

(28) Incorporated by reference to Exhibit 10.11 of the Registrant's Annual
Report on Form 10-K filed on March 13, 2000.

(29) Incorporated by reference to Exhibit 10.12 of the Registrant's Annual
Report on Form 10-K filed on March 13, 2000.

(30) Incorporated by reference to Exhibit 10.13 of the Registrant's Annual
Report on Form 10-K filed on March 13, 2000.

(31) Incorporated by reference to Exhibit 4.7 of the Registrant's Quarterly
Report on Form 10-Q filed on May 15, 2000.

(32) Incorporated by reference to Exhibit 4.8 of the Registrant's Quarterly
Report on Form 10-Q filed on May 15, 2000.

(33) Incorporated by reference to Exhibit 4.9 of the Registrant's Quarterly
Report on Form 10-Q filed on May 15, 2000.

(34) Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report
on Form 8-K filed on July 6, 2000.

(35) Incorporated by reference to Exhibit 4.2 of the Registrant's Current Report
on Form 8-K filed on July 6, 2000.

(36) Incorporated by reference to Exhibit 4.3 of the Registrant's Current Report
on Form 8-K filed on July 6, 2000.

(37) Incorporated by reference to Exhibit 4.4 of the Registrant's Current Report
on Form 8-K filed on July 6, 2000.

(38) Incorporated by reference to Exhibit 10.1 of the Registrant's Current
Report on Form 8-K filed on September 26, 2000.

(39) Incorporated by reference to Exhibit 4.1 of the Registrant's Registration
Statement on Form S-3 filed on September 27, 2001.

(40) Incorporated by reference to Exhibit 4.2 of the Registrant's Registration
Statement on Form S-3 filed on September 27, 2001.

(41) Incorporated by reference to Exhibit 4.3 of the Registrant's Registration
Statement on Form S-3 filed on September 27, 2001.

(42) Incorporated by reference to Exhibit 10.1 of the Registrant's Current
Report on Form 8-K filed on November 9, 2001.

(b) REPORTS ON FORM 8-K.

(i) The Registrant filed a report on Form 8-K dated November 2, 2001
regarding its commitment to the development of embryonic stem cell technology.

(ii) The Registrant filed a report on Form 8-K dated November 9, 2001
regarding the restructuring of series D convertible debentures and warrants.

(c) INDEX TO EXHIBITS.

70

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Menlo
Park, State of California, on the 1st day of March, 2002.

GERON CORPORATION

By: /s/ THOMAS B. OKARMA
------------------------------------
Thomas B. Okarma
President and Chief Executive
Officer

POWER OF ATTORNEY

KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, Thomas B. Okarma
and David L. Greenwood, and each one of them, attorneys-in-fact for the
undersigned, each with the power of substitution, for the undersigned in any and
all capacities, to sign any and all amendments to this Report on Form 10-K, and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitutes, may do
or cause to be done by virtue hereof.

IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated opposite his/her name.

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

71

EXHIBIT INDEX

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

+ Certain portions of this Exhibit have been omitted for which confidential
treatment has been requested and filed separately with the Securities and
Exchange Commission.

* Incorporated by reference to identically numbered exhibits filed with the
Registrant's Annual Report on Form 10-K filed on March 13, 2000.

(1) Incorporated by reference to identically numbered exhibits filed on the
Registrant's Form 8-K filed on May 18, 1999.

(2) Incorporated by reference to Exhibit 3.3 filed with the Registrant's
Registration Statement on Form S-1 which became effective on July 30, 1996.

(3) Incorporated by reference to identically numbered exhibits filed with the
Registrant's Registration Statement on Form S-1 which became effective on
July 30, 1996.

(4) Incorporated by reference to Exhibit 10.39 of the Registrant's Current
Report on Form 8-K filed on April 2, 1998.

74

(5) Incorporated by reference to Exhibit 10.41 of the Registrant's Current
Report on Form 8-K filed on December 17, 1998.

(6) Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report
on Form 8-K filed on May 18, 1999.

(7) Incorporated by reference to Exhibit 99.2 of the Registrant's Current
Report on Form 8-K filed on October 7, 1999.

(8) Incorporated by reference to Exhibit 4.2 of the Registrant's Current Report
on Form 8-K filed on December 17, 1998.

(9) Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report
on Form 8-K filed on December 17, 1998.

(10) Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report
on Form 8-K filed on July 20, 2001.

(11) Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report
on Form 8-K filed on November 9, 2001.

(12) Incorporated by reference to Exhibit 4.2 of the Registrant's Current Report
on Form 8-K filed on November 9, 2001.

(13) Incorporated by reference to Exhibit 4.3 of the Registrant's Current Report
on Form 8-K filed on November 9, 2001.

(14) Incorporated by reference to Exhibit 4.4 of the Registrant's Current Report
on Form 8-K filed on November 9, 2001.

(15) Incorporated by reference to Exhibit 99.1 of the Registrant's Registration
Statement on Form S-8 filed on December 23, 1999.

(16) Incorporated by reference to Exhibit 99.2 of the Registrant's Registration
Statement on Form S-8 filed on December 23, 1999.

(17) Incorporated by reference to Exhibit 10.1 of the Registrant's Current
Report on Form 8-K filed on January 24, 1997.

(18) Incorporated by reference to identically numbered exhibits filed with
Registrant's Quarterly Report on Form 10-Q for the period ended March 31,
1997.

(19) Incorporated by reference to identically numbered exhibits filed with
Registrant's Quarterly Report on Form 10-Q for the period ended September
30, 1997.

(20) Incorporated by reference to identically numbered exhibits filed with
Registrant's Annual Report on Form 10-K filed on March 31, 1998.

(21) Incorporated by reference to Exhibit 10.39 of the Registrant's Current
Report on Form 8-K filed on April 2, 1998.

(22) Incorporated by reference to Exhibit 10.40 of the Registrant's Current
Report on Form 8-K filed on December 17, 1998.

(23) Incorporated by reference to identically numbered exhibits filed with
Registrant's Registration Statement on Form S-3 filed on April 2, 1998.

(24) Incorporated by reference to Exhibit 99.1 of the Registrant's Current
Report on Form 8-K filed on October 5, 1999.

(25) Incorporated by reference to Exhibit 10.1 filed with Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1999.

(26) Incorporated by reference to Exhibit 10.2 filed with Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1999.

(27) Incorporated by reference to Exhibit 10.3 filed with Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1999.

75

(28) Incorporated by reference to Exhibit 10.11 of the Registrant's Annual
Report on Form 10-K filed on March 13, 2000.

(29) Incorporated by reference to Exhibit 10.12 of the Registrant's Annual
Report on Form 10-K filed on March 13, 2000.

(30) Incorporated by reference to Exhibit 10.13 of the Registrant's Annual
Report on Form 10-K filed on March 13, 2000.

(31) Incorporated by reference to Exhibit 4.7 of the Registrant's Quarterly
Report on Form 10-Q filed on May 15, 2000.

(32) Incorporated by reference to Exhibit 4.8 of the Registrant's Quarterly
Report on Form 10-Q filed on May 15, 2000.

(33) Incorporated by reference to Exhibit 4.9 of the Registrant's Quarterly
Report on Form 10-Q filed on May 15, 2000.

(34) Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report
on Form 8-K filed on July 6, 2000.

(35) Incorporated by reference to Exhibit 4.2 of the Registrant's Current Report
on Form 8-K filed on July 6, 2000.

(36) Incorporated by reference to Exhibit 4.3 of the Registrant's Current Report
on Form 8-K filed on July 6, 2000.

(37) Incorporated by reference to Exhibit 4.4 of the Registrant's Current Report
on Form 8-K filed on July 6, 2000.

(38) Incorporated by reference to Exhibit 10.1 of the Registrant's Current
Report on Form 8-K filed on September 26, 2000.

(39) Incorporated by reference to Exhibit 4.1 of the Registrant's Registration
Statement on Form S-3 filed on September 27, 2001.

(40) Incorporated by reference to Exhibit 4.2 of the Registrant's Registration
Statement on Form S-3 filed on September 27, 2001.

(41) Incorporated by reference to Exhibit 4.3 of the Registrant's Registration
Statement on Form S-3 filed on September 27, 2001.

(42) Incorporated by reference to Exhibit 10.1 of the Registrant's Current
Report on Form 8-K filed on November 9, 2001.

76

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