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.

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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 colla