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

FOR THE PERIOD ENDED JUNE 30, 2002

OR

FOR THE TRANSITION PERIOD FROM _________ TO __________.

COMMISSION FILE NUMBER: 0-20859

GERON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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
(TITLE OF CLASS)

     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 the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class: Common Stock $0.001 par value		Outstanding at July 30, 2002:
		24,737,341 shares

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GERON CORPORATION

INDEX

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GERON CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

See accompanying notes.

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GERON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)

				THREE MONTHS ENDED								SIX MONTHS ENDED
				JUNE 30,								JUNE 30,
				2002				2001				2002				2001
Revenues from collaborative agreements				$	15			$	500			$	530			$	2,250
License fees and royalties					96				85				207				132
		Total revenues			111				585				737				2,382
Operating expenses:
	Research and development				8,146				6,644				18,310				13,356
	General and administrative				1,453				1,362				3,049				5,277
		Total operating expenses			9,599				8,006				21,359				18,633
Loss from operations					(9,488	)			(7,421	)			(20,622	)			(16,251	)
Interest and other income					665				1,584				1,536				3,250
Interest and other expense					(185	)			(244	)			(397	)			(516	)
Net loss				$	(9,008	)		$	(6,081	)		$	(19,483	)		$	(13,517	)
Basic and diluted net loss per share				$	(0.37	)		$	(0.28	)		$	(0.79	)		$	(0.62	)
Weighted average shares used in computing basic and diluted net loss per share					24,674,456				21,809,085				24,582,423				21,795,600

See accompanying notes.

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GERON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
CHANGE IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
(UNAUDITED)

				SIX MONTHS ENDED
				JUNE 30,
				2002				2001
Cash flows from operating activities:
	Net loss			$	(19,483	)		$	(13,517	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization			747				713
		Accretion and amortization on investments			517				(45	)
		Interest for convertible debentures			10				63
		Issuance of redeemable common stock in exchange for acquired research technology			1,585				—
		Stock-based compensation			—				2,576
		Accretion of interest on research funding obligation			245				245
		Deferred compensation			120				120
		Loss on equity investments in licensees			94				14
	Changes in assets and liabilities:
		Other current and noncurrent assets			1,760				341
		Other current and noncurrent liabilities			(969	)			1,633
		Translation adjustment			(70	)			(174	)
Net cash used in operating activities					(15,444	)			(8,031	)
Cash flows from investing activities:
	Capital expenditures				(274	)			(784	)
	Purchases of securities available-for-sale				(4,112	)			(27,333	)
	Proceeds from sales/calls of securities available-for-sale				—				14,589
	Proceeds from maturities of securities available-for-sale				30,276				16,540
	Accrued research funding payments				(1,216	)			(1,544	)
Net cash provided by investing activities					24,674				1,468
Cash flows from financing activities:
	Proceeds from equipment loans				498				—
	Payments of obligations under equipment loans				(437	)			(480	)
	Proceeds from issuance of common stock, net				181				132
Net cash provided by (used in) financing activities					242				(348	)
Net increase (decrease) in cash and cash equivalents					9,472				(6,911	)
Cash and cash equivalents at the beginning of the period					18,773				29,985
Cash and cash equivalents at the end of the period				$	28,245			$	23,074

See accompanying notes.

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GERON CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

     The accompanying condensed consolidated unaudited balance sheet as of June 30, 2002 and condensed consolidated statements of operations for the three and six month period ended June 30, 2002 and 2001 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the management of Geron Corporation, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month period ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002 or any other period. These financial statements and notes should be read in conjunction with the financial statements for the year ended December 31, 2001, included in the Company’s Annual Report on Form 10-K. The accompanying condensed consolidated balance sheet as of December 31, 2001 has been derived from audited financial statements at that date.

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 calculated using the weighted average number of common shares outstanding. Because the Company is in a net loss position, diluted earnings per share is also calculated using the weighted average number of common shares outstanding and excludes the effects of options, warrants and convertible securities which are antidilutive. 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 504,014 and 1,775,839 shares for 2002 and 2001, respectively, related to outstanding options, warrants and convertible securities not included above (as determined using the treasury stock method at the estimated average market value).

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 1 day to 9 months.

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     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.

Revenue Recognition

     Since the Company’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, biologics production and cancer immunotherapy 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 the Company has continuing performance obligations. Option payments are recognized as revenue over the period of the option agreement. Royalties are generally recognized upon receipt.

Restricted Cash

     As of June 30, 2002 and 2001, 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 for the three and six months ended June 30, 2002 and 2001.

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 (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes certain changes in equity that are excluded from net income (loss). Specifically, net unrealized losses on our available-for-sale securities and equity investments in licensees of ($370,000), which are included in stockholders’ equity, and cumulative translation adjustment of ($97,000) are included in accumulated other comprehensive income (loss).

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Reclassifications

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

2. CONVERTIBLE DEBENTURES

     In November 2001, the Company 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 debentures 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 $1,300,000 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, $177,000 for the six months ended June 30, 2002. The Company is also accruing 2.5% interest on the amended series D convertible debentures as interest expense over the life of the debentures, $187,000 for the six months ended June 30, 2002. 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 June 30, 2002, $15,000,000 in aggregate principal amount of series D convertible debentures and series D warrants to purchase 834,836 shares of Geron common stock remained outstanding.

3. RESTRUCTURING CHARGE

     In June 2002, Geron restructured its organization to focus internal resources on its most advanced and promising product development programs. In the process, Geron reduced its research staff by 33 employees and its support staff by 10 employees, a reduction of approximately 30% of Geron’s work force in Menlo Park, California and Edinburgh, Scotland. Geron recorded a restructuring charge of $706,000, of which $625,000 related to research and development expense and $81,000 related to general and administrative expense, none of which were paid as of June 30, 2002.

4. SEGMENT INFORMATION

     Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“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 development of therapeutic and diagnostic products for applications in oncology, drug discovery and regenerative medicine. As a result, the financial information disclosed herein materially represents all of the financial information related to the Company’s principal operating segment.

5. CONSOLIDATED STATEMENT OF CASH FLOWS DATA

		SIX MONTHS				SIX MONTHS
		ENDED				ENDED
(IN THOUSANDS)		JUNE 30, 2002				JUNE 30, 2001
		(Unaudited)				(Unaudited)
Supplementary Investing and Financing Activities:
Common stock issued under purchase plan		$	128			$	233
Net unrealized gain (loss) on equity investment		$	(150	)		$	908
Net unrealized gain (loss) on available-for-sale securities		$	(341	)		$	353

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

     This Form 10-Q 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-Q 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-Q. 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 under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001, in the section of this Item 2 titled “Additional Factors That May Affect Future Results,” and elsewhere in this Form 10-Q.

     The following discussion should be read in conjunction with the unaudited financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.

     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.

     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.

CRITICAL ACCOUNTING POLICIES

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

Revenue Recognition

     Since our 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, biologics production and cancer immunotherapy 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

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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

Revenues

     We recognized revenues from collaborative agreements of $15,000 and $530,000 for the three and six months ended June 30, 2002, compared to $500,000 and $2,250,000 for the comparable periods in 2001. Revenues recognized in 2002 reflected the final research support payment from our collaborative agreement with Kyowa Hakko and a consulting payment from Modex Therapeutiques. Revenues recognized in 2001 reflected the final research support payments from our collaborative agreements with Pharmacia and Kyowa Hakko. Our agreement with Pharmacia terminated in January 2001. Kyowa Hakko selected GRN163, a telomerase inhibitor compound, for development in August 2001, which moved the project from the research phase to the development phase. Kyowa Hakko is not obligated to provide any further research funding in the future. We recognize revenue under collaborative agreements as we incur the related research and development costs.

     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, royalties on future sales, or any combination. We recognized license and option fee revenues of $61,000 and $122,000 for the three and six months ended June 30, 2002 as compared to $43,000 and $48,000 for the same periods in 2001 related to our various agreements. Also, we received royalties of $35,000 and $85,000 for the three and six months ended June 30, 2002, compared to $42,000 and $84,000 for the comparable periods in 2001, 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 $277,000 in 2002, $238,000 in 2003, $120,000 in 2004, $127,000 in 2005 and $547,000 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 $8.1 million and $18.3 million for the three and six months ended June 30, 2002, compared to $6.6 million and $13.4 million for the comparable periods in 2001. The increase in research and development expenses for the six month period compared to the comparable period in 2001 was primarily the result of increased scientific personnel expenses of $1.2 million, $1.2 million in increased scientific supplies and the acquisition of research technology from Lynx Therapeutics, Inc. in the

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amount of $2.5 million. The increase in scientific personnel expenses includes $625,000 of payroll-related costs as a result of restructuring the organization in June 2002.

General and Administrative Expenses

     General and administrative expenses were $1.5 million and $3.0 million for the three and six months ended June 30, 2002, compared to $1.4 million and $5.3 million for the comparable periods in 2001. The increase in general and administrative expenses for the three month period ending June 30, 2002, reflects $81,000 of payroll-related costs as a result of restructuring the organization in June 2002. In 2001, $2.4 million of stock-based compensation expense was recorded as a result of extending the exercise period of certain options to purchase common stock. In the three and six months ended June 30, 2002, no such stock-based compensation expense was recorded.

Interest and Other Income

     Interest income was $466,000 and $1.2 million for the three and six months ended June 30, 2002, compared to $1.3 million and $2.9 million for the comparable periods in 2001. The decrease in interest income for 2002 compared to 2001 was primarily due to lower interest rates and decreasing cash and investment balances. Interest earned in the future will depend on any future funding cycles and prevailing interest rates. We also received $199,000 and $358,000 in research payments under government grants for the three and six months ended June 30, 2002, compared to $244,000 and $323,000 for the comparable periods in 2001. We expect income from government grants to decrease in the future.

Interest and Other Expense

     Interest and other expense was $185,000 and $397,000 for the three and six months ended June 30, 2002, compared to $244,000 and $516,000 for the comparable periods in 2001. The decrease in interest and other expense for 2002 compared to 2001 was primarily the result of lower interest expenses related to convertible debentures in 2002.

Net Loss

     Net loss was $9.0 million and $19.5 million for the three and six months ended June 30, 2002, compared to $6.1 million and $13.5 million for the comparable periods in 2001. The increase in net loss for 2002 compared to 2001 was primarily the result of higher research and development expenses, decreased revenues from collaborative agreements and decreased interest income.

LIQUIDITY AND CAPITAL RESOURCES

     Cash, restricted cash, cash equivalents and investments at June 30, 2002 totaled $62.1 million compared to $79.6 million at December 31, 2001. The decrease in cash, cash equivalents and investments in 2002 was the result of cash used for operations. We have an investment policy to invest these funds in liquid, investment-grade securities, such as interest-bearing money market funds, commercial paper and municipal securities.

     Net cash used in operations was $15.4 million for the six months ended June 30, 2002 compared to $8.0 million for the comparable period in 2001. The increase was primarily a result of increased research and development expenses and decreased revenues from collaborative partners for the six months ending June 30, 2002.

     Through June 30, 2002, we have invested approximately $12.4 million in property and equipment, of which approximately $8.3 million was financed through equipment financing. As of June 30, 2002, we had approximately $900,000 available for borrowing under our equipment financing arrangements. The drawdown period under the equipment financing arrangements 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.

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     As of December 31, 2001, our contractual obligations for the next five years and thereafter are as follows:

			Principal Payments Due by Period
Contractual Obligations(1)			Less Than 1 Year				1-3 Years				4-5 Years				After 5 Years				Total
									(Amounts in thousands)
Convertible debentures (2)				—				—			$	15,000				—			$	15,000
Equipment loans			$	825			$	279				20				—				1,124
Operating leases				994				2,032				—				—				3,026
Research funding				3,085				6,682				2,260			$	281				12,308
	Total contractual cash obligations		$	4,904			$	8,993			$	17,280			$	281			$	31,458

     We estimate that our existing capital resources, interest income and equipment financing will be sufficient to fund our current and planned operations through June 30, 2004. 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.

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-Q. 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 science and technology of telomere biology and telomerase, human embryonic stem cells, and nuclear transfer are relatively new. 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.

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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 June 30, 2002, our accumulated deficit was approximately $211.4 million. Losses have resulted principally from costs incurred in connection with our research and development activities and from general and administrative costs 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 or development 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 or development 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 and planned operations through June 30, 2004, 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

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of our research or development programs, each of which could have a material adverse effect on our business.

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. We and Kyowa Hakko have selected one of these compounds, GRN163, as a lead compound for 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. Other pharmaceutical and biotechnology companies and research organizations currently engage in or have in the past engaged in efforts related to the biological mechanisms that are the focus of our programs in oncology and 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.

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     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 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 nuclear transfer have stimulated significant debate in social and political arenas. We use human pluripotent stem cells derived through a process that uses either donated embryos created for in vitro fertilization procedures but no longer needed or suitable for that use, 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 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, but relatively few federal grants have been made so far. The President’s Council on Bioethics 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. The Council issued a report in July 2002 that recommended “that the federal government undertake a thorough-going review of present and projected practices of human embryo research, with the aim of establishing appropriate institutions to advise and shape federal policy in this arena.” 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. We acquired exclusive rights to this technology for all areas except human reproductive cloning and certain other limited

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applications. Although we will not be pursuing human reproductive cloning, we continue to develop techniques for use in agricultural cloning. Human therapeutic cloning might prove to be useful in cell therapies based on embryonic stem cells derived from the cells of the patient being treated. 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;
	•		cause delays in our research and development; and
	•		cause a decrease in the price of our stock.

The U.S. House of Representatives recently passed a bill that would ban human therapeutic cloning as well as reproductive cloning, although a similar bill introduced in the U.S. Senate has so far not been passed. The July 2002 report of the President’s Council on Bioethics recommended a four-year moratorium on therapeutic cloning. If human therapeutic cloning is restricted or banned, 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;

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	•		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, 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 for 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 our request for the declaration of an interference between one of our pending applications relating to nuclear transfer and an issued patent, held by the University of Massachusetts. We requested this interference in order to clarify our patent rights in nuclear transfer technology. In March 2002, a second interference was declared involving our patent application and a patent application held by Infigen Inc. Based on a review of publicly available information, we believe that the technology at issue in both of these interferences 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.

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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.

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.

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.

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

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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 their 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.

     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.

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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 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;

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	•		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.

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:

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	•		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 organizations. 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 June 30, 2002, 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;

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	•		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 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 June 30, 2002, we had 24,737,341 shares of common stock outstanding. Of these shares, approximately 10,774,534 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 9,833,463 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.

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-Q, 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.

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;

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	•		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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. 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 June 30, 2002 was $61.2 million. These investments include $27.9 million of cash equivalents which are due in less than 90 days and $33.3 million of short-term investments which are due in less than one year. 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 three and six months ended June 30, 2002, 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 three years. This obligation may become more expensive for us if the United States dollar becomes weaker against the British pounds sterling. As of June 30, 2002, we did not engage in foreign currency hedging activities.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     None

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None

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

(a)

As listed below, all of the nominees for Class III Directors were elected at the meeting.

	(b)		The proposal to amend the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s Common Stock to 100,000,000 shares was approved. There were 18,549,455 shares of Common Stock voting in favor, 1,199,646 shares of Common Stock voting against and 148,034 shares of Common Stock abstaining.
	(c)		The proposal to adopt the 2002 Equity Incentive Plan to replace the expiring 1992 Stock Option Plan, was approved. There were 5,134,404 shares of Common Stock voting in favor, 1,496,856 shares of Common Stock voting against and 220,815 shares of Common Stock abstaining.
	(d)		The appointment of Ernst & Young LLP as the Company’s independent accountants for the fiscal year ending December 31, 2002 was ratified. There were 19,587,005 shares of Common Stock voting in favor, 160,337 shares of Common Stock voting against and 149,793 shares of Common Stock abstaining.

ITEM 5. OTHER INFORMATION

     None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

     None

(b) REPORTS ON FORM 8-K

The Registrant filed a report on Form 8-K dated June 25, 2002 announcing that it had restructured its organization to focus internal resources on its most advanced and promising product development programs, and in the process was reducing its research staff by 33 employees and its support staff by 10 employees, a reduction of approximately 30% of the Company’s work force.

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SIGNATURES

     Pursuant to the requirements 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.

GERON CORPORATION

Date: July 31, 2002

CERTIFICATION

         Each of the undersigned, in his capacity as an officer of Geron Corporation (the “Registrant”), hereby certifies that:

         1.     The quarterly report of the Registrant on Form 10Q for the quarter ended June 30, 2002 (the “Report”), which accompanies this certification, fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934.

         2.     The information contained in the Report fairly presents, in all material respects, the financial condition of the Registrant at the end of such quarter and the results of operations of the Registrant for such quarter.

Date: July 31, 2002

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