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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K





|           |  |                                                                                            
|---------- |  | -------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                            
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   
|          
|           |  | For the fiscal year ended December 31, 2005                                                
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the period
    from           to                                                       

Commission File Number: 0-19986





Cell Genesys, Inc.


(Exact name of registrant as specified in its charter)


|                                                                                                         |  |                                                                       
|-------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------
|Delaware                                                                                                 |  | 94-3061375                                                            
|(State or other jurisdiction of
    incorporation or organization)                                       |  | (I.R.S. employer identification number)                               
|500 Forbes Blvd.,
    South San Francisco, CA 94080(Address of principal executive offices and zip code) |  | (650) 266-3000(Registrants telephone number, including area
    code)




Securities registered pursuant to Section 12 (b) of
the Act: None


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


Common Stock, $.001 Par Value


Preferred Shares Purchase Rights





o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2


o þ o


12b-2 o þ






10-K. 10-K.










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TABLE OF CONTENTS


|              |  |                                                                                                                         |    |      |    | 
|------------- |  | ----------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|              |  |                                                                                                                         |    | Page |   
|              |  |                                                                                                                         |    |      |   
|PART I       
|Item 1.       |  | Business                                                                                                                |    |      | 2  | 
|Item 1A.      |  | Risk Factors                                                                                                            |    |      | 15 | 
|Item 1B.      |  | Unresolved Staff Comments                                                                                               |    |      | 29 | 
|Item 2.       |  | Properties                                                                                                              |    |      | 29 | 
|Item 3.       |  | Legal Proceedings                                                                                                       |    |      | 29 | 
|Item 4.       |  | Submission of Matters to a Vote of Security
    Holders                                                                 |    |      | 29 | 
|PART II      
|Item 5.       |  | Market for Registrants Common Equity
    and Related Stockholder Matters and Issuer Purchases of Equity
    Securities |    |      | 30 | 
|Item 6.       |  | Selected Consolidated Financial Data                                                                                    |    |      | 31 | 
|Item 7.       |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                               |    |      | 32 | 
|Item 7A.      |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                          |    |      | 41 | 
|Item 8.       |  | Consolidated Financial Statements and
    Supplementary Data                                                            |    |      | 42 | 
|Item 9.       |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                                |    |      | 66 | 
|Item 9A.      |  | Controls and Procedures                                                                                                 |    |      | 66 | 
|Item 9B.      |  | Other Information                                                                                                       |    |      | 67 | 
|PART III     
|Item 10.      |  | Directors and Executive Officers of the
    Registrant                                                                  |    |      | 67 | 
|Item 11.      |  | Executive Compensation                                                                                                  |    |      | 67 | 
|Item 12.      |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                      |    |      | 67 | 
|Item 13.      |  | Certain Relationships and Related
    Transactions                                                                      |    |      | 67 | 
|Item 14.      |  | Principal Accountant Fees and Services                                                                                  |    |      | 67 | 
|PART IV      
|Item 15.      |  | Exhibits and Financial Statement
    Schedules                                                                          |    |      | 68 | 
|SIGNATURES    |  |                                                                                                                         | 71 |     
|EXHIBIT 3.2  
|EXHIBIT 10.12
|EXHIBIT 12.1 
|EXHIBIT 21.1 
|EXHIBIT 23.1 
|EXHIBIT 31.1 
|EXHIBIT 32.1 





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PART I


Statements made in this document other than statements of
historical fact, including statements about us and our
subsidiaries and the future of our respective clinical trials,
research programs, product pipelines, current and potential
corporate partnerships, licenses and intellectual property, the
adequacy of capital reserves and anticipated operating results
and cash expenditures, are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. As
such, they are subject to a number of uncertainties that could
cause actual results to differ materially from the statements
made, including risks associated with the success of research
and product development programs, the issuance and validity of
patents, the development and protection of proprietary
technologies, the ability to raise capital, operating expense
levels and the ability to establish and retain corporate
partnerships. Reference is made to discussions about risks
associated with product development programs, intellectual
property and other risks which may affect us under below. We do not
undertake any obligation to update forward-looking statements.
The following should be read in conjunction with our
consolidated financial statements located elsewhere in this
Annual Report on
Form 10-K for the
year ended December 31, 2005 and other documents filed by
us from time to time with the Securities and Exchange
Commission.







|        |         
|------- | --------
|ITEM 1. | BUSINESS

Overview


off-the


®




http://www.cellgenesys.com; 10-K, 10-Q, 8-K,






2



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| |                      
| | ---------------------
| | Our Clinical Pipeline

|                             |  |                                                         |  |         |  |                          |                       | 
|---------------------------- |  | ------------------------------------------------------- |  | ------- |  | ------------------------ | --------------------- | 
|Product Candidates           |  | Targeted Indication                                     |  | Status  |  | Commercialization Rights |                      
|                             |  |                                                         |  |         |  |                          |                      
|GVAX Cancer Immunotherapies: |  |                                                         |  |         |  |                          |                       | 
|Prostate Cancer              |  | Prostate cancer (hormone-refractory metastatic disease) |  | Phase 3 |  |                          | Cell Genesys          | 
|Pancreatic Cancer            |  | Resectable pancreatic cancer                            |  | Phase 2 |  |                          | Cell Genesys          | 
|                             |  | Acute myelogenous leukemia                              |  | Phase 2 |  |                          | Cell Genesys          | 
|Leukemia:                    |  | Chronic myelogenous leukemia                            |  | Phase 2 |  |                          | Cell Genesys          | 
|Oncolytic Virus Therapy:     |  |                                                         |  |         |  |                          |                       | 
|CG0070                       |  | Recurrent bladder cancer                                |  | Phase 1 |  |                          | Cell Genesys/Novartis | 



| |                                      
| | -------------------------------------
| | Our GVAX Cancer Immunotherapy Program



3



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off-the




| |                                       
| | --------------------------------------
| | GVAX Immunotherapy for Prostate Cancer

off-the




®


follow-up




4



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| |                                         
| | ----------------------------------------
| | GVAX Immunotherapy for Pancreatic Cancer

follow-up Journal of
Clinical Oncology


The
Journal of Experimental Medicine




| |                                       
| | --------------------------------------
| | GVAX Cancer Immunotherapy for Leukemia

®


5



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®




| |                                      
| | -------------------------------------
| | Our Oncolytic Virus Therapies Program







| |                                                                
| | ---------------------------------------------------------------
| | CG0070 Oncolytic Virus Therapy for Recurrent Bladder
    Cancer



6



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| |                                                                
| | ---------------------------------------------------------------
| | CG5757 Oncolytic Virus Therapy for Multiple Types of
    Cancer



Government Regulations




| |                                 
| | --------------------------------
| | FDA and Other Foreign Regulation









7



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direct-to


8



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| |                             
| | ----------------------------
| | Other Government Regulations





Manufacturing




Corporate Collaborations




| |            
| | -----------
| | Novartis AG








| |              
| | -------------
| | Medarex, Inc.



9



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| |              
| | -------------
| | Abgenix, Inc.

®




| |                     
| | --------------------
| | Other Collaborations



Patents and Trade Secrets










10



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Competition




Human Resources






11



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Executive Officers




|                         |  |     |    |  |          |                                                                        
|------------------------ |  | --- | -- |  | -------- | -----------------------------------------------------------------------
|Name                     |  | Age |    |  | Position
|                         |  |     |    |  |         
|Stephen A. Sherwin, M.D. |  |     | 57 |  |          | Chairman of the Board and Chief Executive Officer                      
|Joseph J. Vallner, Ph.D. |  |     | 59 |  |          | President and Chief Operating Officer                                  
|Sharon E. Tetlow         |  |     | 46 |  |          | Senior Vice President and Chief Financial Officer                      
|Robert J. Dow, MBChB     |  |     | 55 |  |          | Senior Vice President  Medical Affairs                                
|Carol C. Grundfest       |  |     | 51 |  |          | Senior Vice President  Regulatory Affairs and
    Portfolio Management
|Christine B. McKinley    |  |     | 52 |  |          | Senior Vice President  Human Resources                                
|Michael W. Ramsay        |  |     | 49 |  |          | Senior Vice President  Operations                                     
|Robert H. Tidwell        |  |     | 62 |  |          | Senior Vice President  Corporate Development                          
|Peter K. Working, Ph.D.  |  |     | 57 |  |          | Senior Vice President  Research and Development                       
|Kristen M. Hege, M.D.    |  |     | 42 |  |          | Vice President  Clinical Research                                     



®






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Medical Advisory Board




|                            |  |                                                     
|--------------------------- |  | ----------------------------------------------------
|Name                        |  | Scientific Position                                 
|                            |  |                                                     
|Bruce Chabner, M.D.         |  | Clinical Director                                   
|                            |  | Massachusetts General Hospital Cancer Center        
|                            |  | Professor of Medicine                               
|                            |  | Harvard Medical School                              
|Jordan U. Gutterman, M.D.   |  | Department of Molecular Therapeutics                
|                            |  | Professor of Medicine                               
|                            |  | University of Texas                                 
|                            |  | M.D. Anderson Cancer Center                         
|Craig Henderson, M.D.       |  | Adjunct Professor of Hematology/Oncology            
|                            |  | University of California, San Francisco             
|Ronald Levy, M.D.           |  | Robert K. Summy and Helen K. Summy                  
|                            |  | Professor of Medicine                               
|                            |  | Chief of the Division of Oncology                   
|                            |  | Stanford University School of Medicine              
|William Nelson, M.D., Ph.D. |  | Associate Professor of Oncology, Pathology,         
|                            |  | Pharmacology and Medicine, and Urology              
|                            |  | Sidney Kimmel Comprehensive Cancer Center           
|                            |  | The Johns Hopkins University                        
|John T. Potts, Jr., M.D.    |  | Physician-in-Chief and Director of Research Emeritus
|                            |  | Massachusetts General Hospital                      
|                            |  | Jackson Distinguished Professor of Clinical Medicine
|                            |  | Harvard Medical School                              



14



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ITEM 1A. RISK FACTORS


Investors should carefully consider the risks described below
before making an investment decision. The risks described below
are not the only ones facing our company. Additional risks not
currently known to us or that we currently believe are
immaterial may also impair our business operations. Our business
could be harmed by any of these risks. The trading price of our
common stock could decline, and our ability to repay our
convertible notes could be impaired, due to any of these risks,
and investors may lose all or part of their investment. In
assessing these risks, investors should also refer to the other
information contained or incorporated by reference in this
Annual Report on
Form 10-K,
including our consolidated financial statements and related
notes.


Risks Related to Our Company




| |                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our products are in developmental stage, are not approved
    for commercial sale and might not ever receive regulatory
    approval or become commercially viable.





| |                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our cancer immunotherapies and oncolytic virus therapies
    must undergo exhaustive clinical testing and may not prove to be
    safe or effective. If any of our proposed products are delayed
    or fail, we may have to curtail our operations.







15



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| |                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have not been profitable absent the gains on sales of
    Abgenix common stock and certain upfront or non-recurring
    license fees. We expect to continue to incur substantial losses
    and negative cash flow from operations and may not become
    profitable in the future.





| |                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | We will need substantial additional funds to continue
    operations, and our ability to generate funds depends on many
    factors beyond our control.





16



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| |   |                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the progress and scope of our internally funded research,
    development, clinical, manufacturing and commercialization
    activities;                                         
|
| |  | our ability to establish new collaborations and the terms of
    those collaborations;                                                                                           
|
| |  | our ability to reach a favorable resolution with the IRS with
    respect to their audit of our fiscal 2000 federal tax return, or
    to other potential tax assessments;       
|
| |  | competing technological and market developments;                                                                                                                                 
|
| |  | the time and cost of regulatory approvals;                                                                                                                                       
|
| |  | the extent to which we choose to commercialize our future
    products through our own sales and marketing capabilities;                                                         
|
| |  | the costs we incur in obtaining, defending and enforcing patent
    and other proprietary rights or gaining the freedom to operate
    under the patents of others;              
|
| |  | our success in acquiring and integrating complementary products,
    technologies or businesses; and                                                                             
|
| |  | the extent to which we choose to expand and develop our
    manufacturing capacities, including manufacturing capacities
    necessary to meet potential commercial requirements.





| |                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We plan to raise additional funds through collaborative
    business relationships, additional equity or debt financings, or
    otherwise, but we may not be able to do any of the foregoing on
    favorable terms, or at all.





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| |                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We plan to use potential future operating losses and our
    federal and state net operating loss carryforwards to offset
    taxable income from revenue generated from operations or from
    the sale of Abgenix common stock. However, our ability to use
    net operating loss carryforwards could be limited as a result of
    potential future issuances of equity securities.





| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | Our ability to manufacture our products is uncertain,
    which may delay or impair our ability to develop, test and
    commercialize our products.





| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | achieving consistent and acceptable production yield and costs;                                          
|
| |  | meeting product release specifications;                                                                  
|
| |  | shortages of qualified personnel;                                                                        
|
| |  | shortages of raw materials;                                                                              
|
| |  | shortages of key contractors or contract manufacturers; and                                              
|
| |  | ongoing compliance with cGMP regulations and other expectations
    from FDA and other regulatory bodies.







18



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| |                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on clinical trial arrangements with public and
    private medical institutions to advance our technology, and the
    loss of these arrangements could impair the development of our
    products.





| |                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Failure to comply with foreign regulatory requirements
    governing human clinical trials and marketing approval for drugs
    and devices could prevent us from conducting our clinical trials
    or selling our products in foreign markets, which may adversely
    affect our operating results and financial condition.



19



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| |                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If our proposed products are not effectively protected by
    issued patents or if we are not otherwise able to protect our
    proprietary information, we will be more vulnerable to
    competitors, and our business could be adversely
    affected.





| |                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our intellectual property and freedom to operate may be
    challenged by others, which, if such a challenge were
    successful, could have a material adverse effect on our
    business, results of operations, financial condition and cash
    flow.





| |                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may have to engage in litigation, which could result in
    substantial cost, to enforce our patents or to determine the
    scope and validity of other parties proprietary
    rights.





20



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| |                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our competitive position may be adversely affected by our
    limited ability to protect and control unpatented trade secrets,
    know-how and other technological innovation.







| |                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our competitors may develop therapies for the diseases
    that we are targeting that are more advanced or more effective
    than ours, which could adversely affect our competitive
    position, or they may commercialize products more rapidly than
    we do, which may adversely affect our competitive
    position.







21



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| |   |                                                
| | - | -----------------------------------------------
| |  | product efficacy;                              
|
| |  | price;                                         
|
| |  | safety;                                        
|
| |  | reliability;                                   
|
| |  | availability;                                  
|
| |  | reimbursement;                                 
|
| |  | patent protection; and                         
|
| |  | sales, marketing and distribution capabilities.





| |                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | To the extent we depend on strategic partners to sell,
    market or distribute our products, we will have reduced control
    over the success of the sales, marketing and distribution of our
    future products.





| |   |                                                                                
| | - | -------------------------------------------------------------------------------
| |  | market size and concentration;                                                 
|
| |  | size and expertise of the partners sales force in a
    particular market; and
|
| |  | our overall strategic objectives.                                              





| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may in the future be exposed to product liability
    claims, which could adversely affect our business, results of
    operations, financial condition and cash flow.





| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | Our business, financial condition and results of
    operations could suffer as a result of future strategic
    acquisitions and investments.



22



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| |   |                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the loss of key personnel and business relationships;                                                                                                                                                      
|
| |  | difficulties associated with assimilating and integrating the
    new personnel and operations of the acquired companies;                                                                                  
|
| |  | the potential disruption of our ongoing business;                                                                                                                                                          
|
| |  | the expense associated with maintenance of diverse standards,
    controls, procedures, employees and clients;                                                                                             
|
| |  | the diversion of resources from the development of our own
    proprietary technology; and                                                                                                                 
|
| |  | our inability to generate revenue from acquired technology
    sufficient to meet our objectives in undertaking the acquisition
    or even to offset the associated acquisition and maintenance
    costs.



| |                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our operations are vulnerable to interruption by fire,
    earthquake, power loss, telecommunications failure, terrorist
    activity and other events beyond our control, which could result
    in a material adverse effect on our business.





| |                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on our key technical and management personnel to
    advance our technology, and the loss of these personnel could
    impair the development of our products.





| |                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Various materials that we use are purchased from single
    qualified suppliers, which could result in our inability to
    secure sufficient materials to conduct our business.



23



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| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Inventions or processes discovered by our outside
    scientific collaborators may not become our property, which may
    affect our competitive position.





| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | The prices of our common stock and convertible senior
    notes are likely to continue to be volatile in the
    future.





| |   |                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | announcements of data from, or material developments in, our
    clinical trials or those of our competitors, including delays in
    the commencement, progress or completion of a clinical trial;                                                                                          
|
| |  | fluctuations in our financial results;                                                                                                                                                                                                                                                       
|
| |  | the potential of an unfavorable future resolution with the IRS
    with respect to their audit of our fiscal 2000 federal tax
    return, or to other potential tax assessments;                                                                                                             
|
| |  | announcements of technological innovations or new therapeutic
    products by us or our competitors, including innovations or
    products by our competitors that may require us to redesign, and
    therefore delay, our clinical trials to account for those
    innovations or products;
|
| |  | announcements of changes in governmental regulation affecting us
    or our competitors;                                                                                                                                                                                                     
|
| |  | announcements of regulatory approval or disapproval of our or
    our competitors products;                                                                                                                                                                                                 
|
| |  | announcements of new collaborative relationships by us or our
    competitors;                                                                                                                                                                                                               
|
| |  | developments in patent or other proprietary rights affecting us
    or our competitors;                                                                                                                                                                                                      
|
| |  | public concern as to the safety of products developed by us or
    other biotechnology and pharmaceutical companies;                                                                                                                                                                         
|
| |  | general market conditions;                                                                                                                                                                                                                                                                   
|
| |  | material developments related to our minority interest in
    Ceregene, Inc.;                                                                                                                                                                                                                

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| |   |                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | fluctuations in price and volume in the stock market in general,
    or in the trading of the stock of biopharmaceutical and
    biotechnology companies in particular, that are unrelated to our
    operating performance;
|
| |  | issuances of securities in equity, debt or other financings or
    issuances of common stock upon conversion of our convertible
    senior notes;                                                                           
|
| |  | unforeseen litigation;                                                                                                                                                                                                      
|
| |  | sales of common stock by existing stockholders; and                                                                                                                                                                         
|
| |  | the perception that such issuances or sales could occur.                                                                                                                                                                    



| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | Our stockholders may be diluted by the conversion of
    outstanding convertible senior notes.





| |                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our stockholders may be diluted, or our common stock price
    may be adversely affected, by the exercise of outstanding stock
    options or other issuances of our common stock.





| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have adopted anti-takeover defenses that could make it
    difficult for another company to acquire control of us or could
    limit the price investors might be willing to pay for our
    stock.



25



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| |                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Due to the potential value of our strategic investments,
    we could be determined to be an investment company, and if such
    a determination were made, we would become subject to
    significant regulation that would adversely affect our
    business.





| |                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we fail to maintain an effective system of internal
    controls, we may not be able to accurately report our financial
    results, maintain investor confidence or prevent fraud.





| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Recent accounting pronouncements will impact our future
    results of operations.

Note 1 of Notes to
Consolidated Financial Statements 10-K.


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Risks Related to Our Industry




| |                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In order for our products to be offered to the public,
    they must undergo extensive clinical testing and receive
    approval from the FDA and other regulatory agencies, which could
    delay or prevent the commercialization of our products.







| |                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Even if our products are approved by regulatory
    authorities, if we fail to comply with ongoing regulatory
    requirements, or if we experience unanticipated problems with
    our products, these products could be subject to restrictions or
    withdrawal from the market.



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| |                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to federal, state, local and foreign laws
    and regulations, and complying with these may cause us to incur
    significant costs.





| |   |                                                                                       
| | - | --------------------------------------------------------------------------------------
| |  | the Occupational Safety and Health Act;                                               
|
| |  | the Environmental Protection Act;                                                     
|
| |  | the Toxic Substances Control Act;                                                     
|
| |  | the Food, Drug and Cosmetic Act;                                                      
|
| |  | the Resource Conservation and Recovery Act; and                                       
|
| |  | other current and potential federal, state, local or foreign
    laws and regulations.





| |                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------
| | Reimbursement from third-party payers may become more
    restricted in the future, which may reduce demand for our
    products.





| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | government agencies;                                                                                       
|
| |  | private health care insurers and other health care payers such
    as health maintenance organizations; and
|
| |  | self-insured employee plans.                                                                               





| |                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The continuing efforts of governmental and third-party
    payers to contain or reduce the costs of healthcare may impair
    our future revenues and profitability.



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|         |                          
|-------- | -------------------------
|ITEM 1B. | UNRESOLVED STAFF COMMENTS








|        |           
|------- | ----------
|ITEM 2. | PROPERTIES










|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS








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



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PART II







|        |                                                                                                                        
|------- | -----------------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED
    STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES



|                              |  |      |      |  |     |   |      | 
|----------------------------- |  | ---- | ---- |  | --- | - | ---- | 
|Year Ended December 31, 2005: |  | High |      |  | Low |  
|                              |  |      |      |  |     |  
|First Quarter                 |  | $    | 7.76 |  |     | $ | 4.53 | 
|Second Quarter                |  |      | 6.48 |  |     |   | 4.50 | 
|Third Quarter                 |  |      | 6.53 |  |     |   | 5.36 | 
|Fourth Quarter                |  |      | 6.52 |  |     |   | 4.48 | 

|                              |  |      |       |  |     |   |       | 
|----------------------------- |  | ---- | ----- |  | --- | - | ----- | 
|Year Ended December 31, 2004: |  | High |       |  | Low |  
|                              |  |      |       |  |     |  
|First Quarter                 |  | $    | 15.93 |  |     | $ | 11.03 | 
|Second Quarter                |  |      | 12.98 |  |     |   | 9.45  | 
|Third Quarter                 |  |      | 10.40 |  |     |   | 6.61  | 
|Fourth Quarter                |  |      | 9.34  |  |     |   | 6.38  | 





10-K.


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|        |                                     
|------- | ------------------------------------
|ITEM 6. | SELECTED CONSOLIDATED FINANCIAL DATA

Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations 10-K


|                                            |  |                                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|------------------------------------------- |  | ---------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                            |  | Year Ended December 31,                  |        
|                                            |  |                                          |        
|                                            |  | 2005                                     |         |   | 2004 |   |         | 2003 |  |   | 2002    |   |  | 2001 |        
|                                            |  |                                          |         |   |      |   |         |      |  |   |         |   |  |      |        
|                                            |  | (In thousands, except per share amounts) |        
|Consolidated Statement of Operations Data:  |  |                                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Revenue                                     |  | $                                        | 4,584   |   |      | $ | 11,458  |      |  | $ | 18,128  |   |  | $    | 39,141  |   |  | $ | 28,317  |  
|Total operating expenses                    |  |                                          | 111,097 |   |      |   | 110,061 |      |  |   | 111,276 |   |  |      | 95,649  |   |  |   | 80,644  |  
|Gain on sale of Abgenix, Inc. common stock  |  |                                          | 55,123  |   |      |   | 12,160  |      |  |   | 12,638  |   |  |      | 2,246   |   |  |   |        |  
|Net loss                                    |  |                                          | (64,939 | ) |      |   | (97,411 | )    |  |   | (56,406 | ) |  |      | (26,599 | ) |  |   | (28,673 | )
|Net loss attributed to common stockholders  |  |                                          | (64,943 | ) |      |   | (97,511 | )    |  |   | (56,636 | ) |  |      | (27,301 | ) |  |   | (29,458 | )
|Basic and diluted net loss per common share |  |                                          | (1.43   | ) |      |   | (2.23   | )    |  |   | (1.48   | ) |  |      | (0.76   | ) |  |   | (0.85   | )

|                                                                                                 |  |                |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|------------------------------------------------------------------------------------------------ |  | -------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                                                 |  | December 31,   |         
|                                                                                                 |  |                |         
|                                                                                                 |  | 2005           |          |   | 2004 |   |          | 2003 |  |   | 2002     |   |  | 2001 |        
|                                                                                                 |  |                |          |   |      |   |          |      |  |   |          |   |  |      |        
|                                                                                                 |  | (In thousands) |         
|Consolidated Balance Sheet Data:                                                                 |  |                |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|Cash, cash equivalents and short-term investments, including
    restricted cash and investments |  | $              | 129,598  |   |      | $ | 174,971  |      |  | $ | 160,288  |   |  | $    | 166,905 |   |  | $ | 258,649 |  
|Total assets                                                                                     |  |                | 366,975  |   |      |   | 435,139  |      |  |   | 460,502  |   |  |      | 419,197 |   |  |   | 615,310 |  
|Total current liabilities                                                                        |  |                | 69,385   |   |      |   | 77,923   |      |  |   | 94,296   |   |  |      | 76,353  |   |  |   | 149,690 |  
|Long-term obligations, excluding current portion                                                 |  |                | 52,093   |   |      |   | 51,013   |      |  |   | 146,634  |   |  |      | 104,064 |   |  |   | 60,000  |  
|Convertible senior notes                                                                         |  |                | 145,000  |   |      |   | 145,000  |      |  |   |         |   |  |      |        |   |  |   |        |  
|Redeemable convertible preferred stock                                                           |  |                |         |   |      |   | 1,897    |      |  |   | 2,706    |   |  |      | 7,632   |   |  |   | 17,970  |  
|Accumulated deficit                                                                              |  |                | (308,912 | ) |      |   | (243,973 | )    |  |   | (146,562 | ) |  |      | (90,156 | ) |  |   | (63,557 | )
|Stockholders equity                                                                             |  |                | 100,497  |   |      |   | 159,306  |      |  |   | 216,866  |   |  |      | 231,148 |   |  |   | 387,554 |  

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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS

Statements made in this Item other than statements of
historical fact, including statements about us and our
subsidiaries and our respective clinical trials, research
programs, product pipelines, current and potential corporate
partnerships, licenses and intellectual property, the adequacy
of capital reserves and anticipated operating results and cash
expenditures, are forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. As
such, they are subject to a number of uncertainties that could
cause actual results to differ materially from the statements
made, including risks associated with the success of research
and product development programs, the issuance and validity of
patents, the development and protection of proprietary
technologies, the ability to raise capital, operating expense
levels and the ability to establish and retain corporate
partnerships. Reference is made to discussions about risks
associated with product development programs, intellectual
property and other risks which may affect us under above. We do not
undertake any obligation to update forward-looking statements.
The following should be read in conjunction with our
consolidated financial statements located elsewhere in this
Annual Report on
Form 10-K for the
year ended December 31, 2005 and other documents filed by
us from time to time with the Securities and Exchange
Commission.


Overview




Critical Accounting Policies






| |                    
| | -------------------
| | Revenue recognition



Up-front payments:


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Milestones:


License fees:




| |             
| | ------------
| | Income taxes









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| |                         
| | ------------------------
| | Stock-based compensation







| |                                               
| | ----------------------------------------------
| | Recently issued financial accounting standards

Note 1 of Notes to
Consolidated Financial Statements 10-K.


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Results of Operations




| |        
| | -------
| | Revenue



|                                      |  |      |       |  |      |   |        |      |  |   |        | 
|------------------------------------- |  | ---- | ----- |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                      |  | 2005 |       |  | 2004 |   |        | 2003 | 
|                                      |  |      |       |  |      |   |        |      | 
|Novartis AG                           |  | $    | 2,031 |  |      | $ | 5,846  |      |  | $ | 2,104  | 
|Japan Tobacco Inc.                    |  |      |      |  |      |   |       |      |  |   | 14,145 | 
|sanofi-aventis Group                  |  |      | 2,000 |  |      |   | 3,173  |      |  |   | 1,000  | 
|Transkaryotic Therapies, Inc.         |  |      |      |  |      |   | 250    |      |  |   |       | 
|Ceregene, Inc. (since August 4, 2004) |  |      | 69    |  |      |   | 998    |      |  |   |       | 
|Other                                 |  |      | 484   |  |      |   | 1,191  |      |  |   | 879    | 
|                                      |  |      |       |  |      |   |        |      | 
|                                      |  | $    | 4,584 |  |      | $ | 11,458 |      |  | $ | 18,128 | 
|                                      |  |      |       |  |      |   |        |      | 







| |                                  
| | ---------------------------------
| | Research and development expenses





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VITAL-1 VITAL-2


|               |  |                   |           | 
|-------------- |  | ----------------- | --------- | 
|               |  | Estimated         |          
|Clinical Phase |  | Completion Period |          
|               |  |                   |          
|Phase 1        |  |                   | 1-3 years | 
|Phase 2        |  |                   | 1-3 years | 
|Phase 3        |  |                   | 2-5 years | 

follow-up


follow-up


|                                  |                                      |             |         |           |            |  |           |           | 
|--------------------------------- | ------------------------------------ | ----------- | ------- | --------- | ---------- |  | --------- | --------- | 
|                                  |                                      |             |         | Estimated |           
|                                  |                                      | Phase of    |         |           | Completion | 
|Treatment                         |                                      | Development |         |           | of Phase   | 
|                                  |                                      |             |         |           |            | 
|GVAX Cancer Immunotherapies:      |                                      |             |         |           |            |  |           |          
|                                  | Prostate Cancer                      |             |         | Phase 3   |            |  |           | 2008-2009 | 
|                                  | Pancreatic Cancer                    |             |         | Phase 2   |            |  |           | 2006-2007 | 
|                                  | Leukemia  Acute Myelogenous (AML)   |             |         | Phase 2   |            |  |           | 2008-2009 | 
|                                  | Leukemia  Chronic Myelogenous (CML) |             |         | Phase 2   |            |  |           | 2008-2009 | 
|Oncolytic Virus Therapy:          |                                      |             |         |           |            |  |           |          
|CG0070 (Recurrent Bladder Cancer) |                                      |             | Phase 1 |           |            |  | 2006-2007 |          

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| |                                    
| | -----------------------------------
| | General and administrative expenses

start-up




| |                      
| | ---------------------
| | Restructuring charges





| |                                     
| | ------------------------------------
| | Gain on sale of Abgenix common stock







| |                          
| | -------------------------
| | Interest and other income





| |                 
| | ----------------
| | Interest expense



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| |             
| | ------------
| | Income taxes



Liquidity and Capital Resources


Note 4 of Notes to Consolidated
Financial Statements 10-K.










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|                                             |  |       |         |             |      |          |       |               |  |   |               |  |  |            |        |  |  |   |         | 
|-------------------------------------------- |  | ----- | ------- | ----------- | ---- | -------- | ----- | ------------- |  | - | ------------- |  |  | ---------- | ------ |  |  | - | ------- | 
|                                             |  |       |         | Payment Due |     
|                                             |  |       |         |             |     
|                                             |  |       |         |             |      | 2011 and |      
|                                             |  | Total |         |             | 2006 |          |       | 2007 and 2008 |  |   | 2009 and 2010 |  |  | thereafter |       
|                                             |  |       |         |             |      |          |       |               |  |   |               |  |  |            |       
|Convertible senior notes                     |  | $     | 145,000 |             |      | $        |      |               |  | $ |              |  |  | $          |       |  |  | $ | 145,000 | 
|South San Francisco capital lease obligation |  |       | 93,588  |             |      |          | 6,300 |               |  |   | 13,268        |  |  |            | 14,249 |  |  |   | 59,771  | 
|Operating leases                             |  |       | 29,750  |             |      |          | 1,944 |               |  |   | 3,860         |  |  |            | 3,919  |  |  |   | 20,027  | 
|                                             |  |       |         |             |      |          |       |               |  |   |               |  |  |            |       
|                                             |  | $     | 268,338 |             |      | $        | 8,244 |               |  | $ | 17,128        |  |  | $          | 18,168 |  |  | $ | 224,798 | 
|                                             |  |       |         |             |      |          |       |               |  |   |               |  |  |            |       



Item 1A, Risk Factors




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|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK



| |                   
| | ------------------
| | Interest Rate Risk



Interest Rate Sensitivity


Principal Amount by Expected Maturity and Average Interest
Rate


|                            |                        |                        |       |        |      |   |       |       |   |      |       |       |   |            |              |       |       |   |         |       |   |   |         |        |   |   |         |        | 
|--------------------------- | ---------------------- | ---------------------- | ----- | ------ | ---- | - | ----- | ----- | - | ---- | ----- | ----- | - | ---------- | ------------ | ----- | ----- | - | ------- | ----- | - | - | ------- | ------ | - | - | ------- | ------ | 
|                            |                        |                        |       |        |      |   |       |       |   |      |       |       |   | Fair Value |             
|                            |                        |                        |       |        |      |   |       |       |   | 2010 |       |       |   |            | December 31, |      
|As of December 31, 2005     |                        | 2006                   |       |        | 2007 |   |       | 2008  |   |      | 2009  |       |   | Thereafter |              |       | Total |   |         | 2005  |  
|                            |                        |                        |       |        |      |   |       |       |   |      |       |       |   |            |              |       |       |   |         |       |  
|                            |                        | (Dollars in thousands) |      
|Total Investment Securities |                        |                        |       |        |      |   |       |       |   |      |       |       |   |            |              |       |       |   |         |       |   |   |         |        |   |   |         |       
|                            | Excluding Asset Backed |                        | $     | 79,040 |      |   | $     | 9,661 |   |      | $     |      |   |            | $            |      |       |   | $       |      |   |   | $       | 88,701 |   |   | $       | 88,586 | 
|                            | Average Interest Rate  |                        |       | 3.27   | %    |   |       | 4.23  | % |      |       |      |   |            |              |      |       |   |         |      |   |   |         | 3.38   | % |   |         |       | 
|Asset Backed Securities(i)  |                        |                        |       |        |      |   |       |       |   |      |       |       |   |            |              |       |       |   |         |       |   | $ | 25,761  |        |   | $ | 25,696  |       
|                            | Average Interest Rate  |                        |       |        |      |   |       |       |   |      |       |       |   |            |              |       |       |   |         |       |   |   |         | 4.08   | % |   |         |       | 
|Fixed Interest Rate         |                        |                        |       |        |      |   |       |       |   |      |       |       |   |            |              |       |       |   |         |       |   |   |         |        |   |   |         |       
|Convertible Senior Notes    |                        | $                      | 4,531 |        |      | $ | 4,531 |       |   | $    | 4,531 |       |   | $          | 4,531        |       |       | $ | 153,307 |       |   | $ | 171,431 |        |   | $ | 121,500 |       
|                            | Average Interest Rate  |                        |       | 3.125  | %    |   |       | 3.125 | % |      |       | 3.125 | % |            |              | 3.125 | %     |   |         | 3.125 | % |   |         | 3.125  | % |   |         |       | 






|    |                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) | Asset backed securities have various contractual maturity dates
    ranging from 2006 to 2035. The expected maturity dates for these
    securities range from 2006 to 2007 and differ from the
    contractual maturity dates because the issuers of these
    securities have, in some circumstances, the right to prepay the
    obligations.

|                            |                       |                        |         |       |      |   |        |       |   |      |        |       |   |            |              |       |       |   |         |       |   |   |         |       |   |   |         |   | 
|--------------------------- | --------------------- | ---------------------- | ------- | ----- | ---- | - | ------ | ----- | - | ---- | ------ | ----- | - | ---------- | ------------ | ----- | ----- | - | ------- | ----- | - | - | ------- | ----- | - | - | ------- | - | 
|                            |                       |                        |         |       |      |   |        |       |   |      |        |       |   | Fair Value |             
|                            |                       |                        |         |       |      |   |        |       |   | 2009 |        |       |   |            | December 31, |      
|As of December 31, 2004     |                       | 2005                   |         |       | 2006 |   |        | 2007  |   |      | 2008   |       |   | Thereafter |              |       | Total |   |         | 2004  |  
|                            |                       |                        |         |       |      |   |        |       |   |      |        |       |   |            |              |       |       |   |         |       |  
|                            |                       | (Dollars in thousands) |        
|Total Investment Securities |                       | $                      | 115,112 |       |      | $ | 37,340 |       |   | $    | 10,976 |       |   | $          |             |       |       | $ |        |       |   | $ | 163,428 |       |   | $ | 162,779 |  
|                            | Average Interest Rate |                        |         | 2.39  | %    |   |        | 2.27  | % |      |        | 2.46  | % |            |              |      |       |   |         |      |   |   |         | 2.37  | % |   |         |  | 
|Fixed Interest Rate         |                       |                        |         |       |      |   |        |       |   |      |        |       |   |            |              |       |       |   |         |       |   |   |         |       |   |   |         |  
|Convertible Senior Notes    |                       | $                      | 4,531   |       |      | $ | 4,531  |       |   | $    | 4,531  |       |   | $          | 4,531        |       |       | $ | 157,838 |       |   | $ | 175,962 |       |   | $ | 170,900 |  
|                            | Average Interest Rate |                        |         | 3.125 | %    |   |        | 3.125 | % |      |        | 3.125 | % |            |              | 3.125 | %     |   |         | 3.125 | % |   |         | 3.125 | % |   |         |  | 

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|        |                                                             
|------- | ------------------------------------------------------------
|ITEM 8. | CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
    DATA

Report of Independent Registered Public Accounting Firm on
Internal Control Over Financial Reporting




















| |                       
| | ----------------------
| | /s/  Ernst & Young LLP





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Report of Independent Registered Public Accounting Firm on
Consolidated Financial Statements
















| |                       
| | ----------------------
| | /s/  Ernst & Young LLP





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CELL GENESYS, INC.


CONSOLIDATED BALANCE SHEETS


|                                                                                                                                                                                                       |                                             |                                                                                                                                                              |                            |          |      |         |         |          |    |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | -------- | ---- | ------- | ------- | -------- | -- | ------- | 
|                                                                                                                                                                                                       |                                             | December 31,                                                                                                                                                 |                           
|                                                                                                                                                                                                       |                                             |                                                                                                                                                              |                           
|                                                                                                                                                                                                       |                                             | 2005                                                                                                                                                         |                            |          | 2004 |        
|                                                                                                                                                                                                       |                                             |                                                                                                                                                              |                            |          |      |        
|                                                                                                                                                                                                       |                                             | (In thousands, except par                                                                                                                                    |                           
|                                                                                                                                                                                                       |                                             | value and share data)                                                                                                                                        |                           
|ASSETS                                                                                                                                                                                                
|Current assets:                                                                                                                                                                                        |                                             |                                                                                                                                                              |                            |          |      |         |         |         
|                                                                                                                                                                                                       | Cash and cash equivalents                   |                                                                                                                                                              | $                          | 54,221   |      |         | $       | 58,324   |   
|                                                                                                                                                                                                       | Short-term investments                      |                                                                                                                                                              |                            | 72,483   |      |         |         | 113,347  |   
|                                                                                                                                                                                                       | Investment in Abgenix, Inc. common stock    |                                                                                                                                                              |                            | 63,824   |      |         |         | 68,503   |   
|                                                                                                                                                                                                       | Prepaid expenses and other current assets   |                                                                                                                                                              |                            | 2,104    |      |         |         | 1,184    |   
|                                                                                                                                                                                                       |                                             |                                                                                                                                                              |                            |          |      |        
|                                                                                                                                                                                                       |                                             |                                                                                                                                                              | Total current assets       |          |      | 192,632 |         |          |    | 241,358 | 
|Restricted cash and investments                                                                                                                                                                        |                                             |                                                                                                                                                              | 2,894                      |          |      |         | 3,300   |         
|Property and equipment, net                                                                                                                                                                            |                                             |                                                                                                                                                              | 142,225                    |          |      |         | 159,663 |         
|Deferred income tax assets                                                                                                                                                                             |                                             |                                                                                                                                                              | 24,430                     |          |      |         | 25,177  |         
|Unamortized debt issuance costs and other assets                                                                                                                                                       |                                             |                                                                                                                                                              | 4,794                      |          |      |         | 5,641   |         
|                                                                                                                                                                                                       |                                             |                                                                                                                                                              |                            |          |      |        
|                                                                                                                                                                                                       |                                             | $                                                                                                                                                            | 366,975                    |          |      | $       | 435,139 |         
|                                                                                                                                                                                                       |                                             |                                                                                                                                                              |                            |          |      |        
|                                                                                                                                                                                                      
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                  
|Current liabilities:                                                                                                                                                                                   |                                             |                                                                                                                                                              |                            |          |      |         |         |         
|                                                                                                                                                                                                       | Accounts payable                            |                                                                                                                                                              | $                          | 1,902    |      |         | $       | 2,888    |   
|                                                                                                                                                                                                       | Accrued compensation and benefits           |                                                                                                                                                              |                            | 4,399    |      |         |         | 5,071    |   
|                                                                                                                                                                                                       | Deferred revenue                            |                                                                                                                                                              |                            |         |      |         |         | 2,031    |   
|                                                                                                                                                                                                       | Accrued facility exit costs                 |                                                                                                                                                              |                            |         |      |         |         | 6,092    |   
|                                                                                                                                                                                                       | Other accrued liabilities                   |                                                                                                                                                              |                            | 4,947    |      |         |         | 5,924    |   
|                                                                                                                                                                                                       | Accrued income taxes                        |                                                                                                                                                              |                            | 32,612   |      |         |         | 29,954   |   
|                                                                                                                                                                                                       | Deferred income tax liabilities             |                                                                                                                                                              |                            | 24,430   |      |         |         | 25,177   |   
|                                                                                                                                                                                                       | Current portion of capital lease obligation |                                                                                                                                                              |                            | 1,095    |      |         |         | 786      |   
|                                                                                                                                                                                                       |                                             |                                                                                                                                                              |                            |          |      |        
|                                                                                                                                                                                                       |                                             |                                                                                                                                                              | Total current liabilities  |          |      | 69,385  |         |          |    | 77,923  | 
|Other liabilities                                                                                                                                                                                      |                                             |                                                                                                                                                              | 2,174                      |          |      |         |        |         
|Capital lease obligation, less current portion                                                                                                                                                         |                                             |                                                                                                                                                              | 49,919                     |          |      |         | 51,013  |         
|Convertible senior notes                                                                                                                                                                               |                                             |                                                                                                                                                              | 145,000                    |          |      |         | 145,000 |         
|Redeemable Series B convertible preferred stock,
    $.001 par value: 4,000 shares authorized; designated
    by series; none and 152 shares issued and outstanding in
    2005 and 2004, respectively |                                             |                                                                                                                                                              |                           |          |      |         | 1,897   |         
|Commitments and contingencies                                                                                                                                                                          |                                             |                                                                                                                                                              |                            |          |      |         |         |         
|Stockholders equity:                                                                                                                                                                                  |                                             |                                                                                                                                                              |                            |          |      |         |         |         
|                                                                                                                                                                                                       |                                             | Preferred stock, $.001 par value: 4,996,000 shares
    authorized; designated by series; none issued and outstanding in
    2005 and 2004, respectively      |                            |          |     |         |         |          |   |        
|                                                                                                                                                                                                       |                                             | Common stock, $.001 par value: 150,000,000 shares
    authorized; 45,559,495 and 44,978,226 shares issued and
    outstanding in 2005 and 2004, respectively |                            |          | 46   |         |         |          | 45 |        
|                                                                                                                                                                                                       | Additional paid-in capital                  |                                                                                                                                                              |                            | 375,700  |      |         |         | 372,014  |   
|                                                                                                                                                                                                       | Accumulated other comprehensive income      |                                                                                                                                                              |                            | 33,663   |      |         |         | 31,220   |   
|                                                                                                                                                                                                       | Accumulated deficit                         |                                                                                                                                                              |                            | (308,912 | )    |         |         | (243,973 | ) 
|                                                                                                                                                                                                       |                                             |                                                                                                                                                              |                            |          |      |        
|                                                                                                                                                                                                       |                                             |                                                                                                                                                              | Total stockholders equity |          |      | 100,497 |         |          |    | 159,306 | 
|                                                                                                                                                                                                       |                                             |                                                                                                                                                              |                            |          |      |        
|                                                                                                                                                                                                       |                                             | $                                                                                                                                                            | 366,975                    |          |      | $       | 435,139 |         
|                                                                                                                                                                                                       |                                             |                                                                                                                                                              |                            |          |      |        



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CELL GENESYS, INC.


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                          |                            |                                            |                          |        |         |         |         |        |        |         |         |        |        |         | 
|------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ------------------------ | ------ | ------- | ------- | ------- | ------ | ------ | ------- | ------- | ------ | ------ | ------- | 
|                                                                          |                            | Year Ended December 31,                    |                         
|                                                                          |                            |                                            |                         
|                                                                          |                            | 2005                                       |                          |        | 2004    |         |         | 2003   |       
|                                                                          |                            |                                            |                          |        |         |         |         |        |       
|                                                                          |                            | (In thousands, except per share data)      |                         
|Revenue                                                                   |                            | $                                          | 4,584                    |        |         | $       | 11,458  |        |        | $       | 18,128  |       
|                                                                          |                            |                                            |                          |        |         |         |         |        |       
|Operating expenses:                                                       |                            |                                            |                          |        |         |         |         |        |        |         |         |       
|                                                                          | Research and development   |                                            |                          | 92,405 |         |         |         | 92,133 |        |         |         | 85,296 |       
|                                                                          | General and administrative |                                            |                          | 16,342 |         |         |         | 17,928 |        |         |         | 25,980 |       
|                                                                          | Restructuring charges      |                                            |                          | 2,350  |         |         |         |       |        |         |         |       |       
|                                                                          |                            |                                            |                          |        |         |         |         |        |       
|                                                                          |                            |                                            | Total operating expenses |        |         | 111,097 |         |        |        | 110,061 |         |        |        | 111,276 | 
|                                                                          |                            |                                            |                          |        |         |         |         |        |       
|Loss from operations                                                      |                            |                                            | (106,513                 | )      |         |         | (98,603 | )      |        |         | (93,148 | )     
|Other income (expense):                                                   |                            |                                            |                          |        |         |         |         |        |        |         |         |       
|                                                                          |                            | Gain on sale of Abgenix, Inc. common stock |                          |        | 55,123  |         |         |        | 12,160 |         |         |        | 12,638 |        
|                                                                          |                            | Interest and other income                  |                          |        | 3,058   |         |         |        | 2,662  |         |         |        | 4,832  |        
|                                                                          |                            | Interest expense                           |                          |        | (10,679 | )       |         |        | (9,885 | )       |         |        | (5,360 | )      
|                                                                          |                            |                                            |                          |        |         |         |         |        |       
|Loss before income taxes                                                  |                            |                                            | (59,011                  | )      |         |         | (93,666 | )      |        |         | (81,038 | )     
|Income tax benefit (provision)                                            |                            |                                            | (5,928                   | )      |         |         | (3,745  | )      |        |         | 24,632  |       
|                                                                          |                            |                                            |                          |        |         |         |         |        |       
|Net loss                                                                  |                            |                                            | (64,939                  | )      |         |         | (97,411 | )      |        |         | (56,406 | )     
|Dividend in kind to preferred stockholders                                |                            |                                            | 4                        |        |         |         | 100     |        |        |         | 230     |       
|                                                                          |                            |                                            |                          |        |         |         |         |        |       
|Net loss attributed to common stockholders                                |                            | $                                          | (64,943                  | )      |         | $       | (97,511 | )      |        | $       | (56,636 | )     
|                                                                          |                            |                                            |                          |        |         |         |         |        |       
|Basic and diluted net loss per common share                               |                            | $                                          | (1.43                    | )      |         | $       | (2.23   | )      |        | $       | (1.48   | )     
|                                                                          |                            |                                            |                          |        |         |         |         |        |       
|Weighted average shares of common stock outstanding-basic and
    diluted |                            |                                            | 45,434                   |        |         |         | 43,682  |        |        |         | 38,177  |       
|                                                                          |                            |                                            |                          |        |         |         |         |        |       



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CELL GENESYS, INC.


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                                                                                             |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |   |          |         |   |   |          |         |  
|------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------- | -------------- | ------ | - | ---------- | ----- | -- | ------------- |  | - | ----------- | - | ----- | ------------- | ------ | ------- | ------ | - | -------- | ------- | - | - | -------- | ------- | -
|                                                                                                             |                                                                                  |                |        |   |            |       |    | Accumulated   |  |   |             |   |      
|                                                                                                             |                                                                                  |                |        |   |            | Other |    |               |  |   |            
|                                                                                                             |                                                                                  | Common Stock   |        |   | Additional |       |    | Comprehensive |  |   |             |   | Total |              
|                                                                                                             |                                                                                  |                |        |   | Paid-In    |       |    | Income        |  |   | Accumulated |   |       | Stockholders |       
|                                                                                                             |                                                                                  | Shares         |        |   | Amounts    |       |    | Capital       |  |   | (Loss)      |   |       | Deficit       |        |         | Equity |  
|                                                                                                             |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |  
|                                                                                                             |                                                                                  | (In thousands) |       
|Balances at December 31, 2002                                                                                |                                                                                  |                | 36,882 |   |            | $     | 37 |               |  | $ | 286,548     |   |       | $             | 34,719 |         |        | $ | (90,156  | )       |   | $ | 231,148  |        
|Comprehensive loss:                                                                                          |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |   |          |         |   |   |          |        
|                                                                                                             | Net loss                                                                         |                |        |  |            |       |    |              |  |   |             |  |       |               |        |        |        |   |          | (56,406 | ) |   |          | (56,406 | )
|                                                                                                             | Change in net unrealized gain on available-for-sale securities,
    net of taxes |                |        |  |            |       |    |              |  |   |             |  |       |               |        | 16,652  |        |   |          |        |   |   |          | 16,652  |  
|                                                                                                             |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |  
|Total comprehensive loss                                                                                     |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |   |          |         |   |   | (39,754  | )      
|Issuance of common stock upon exercise of stock options and
    pursuant to the Employee Stock Purchase Plan |                                                                                  |                | 223    |   |            |       |   |               |  |   | 1,730       |   |       |               |       |         |        |   |         |         |   |   | 1,730    |        
|Income tax benefit from stock option deductions                                                              |                                                                                  |                |       |   |            |       |   |               |  |   | 216         |   |       |               |       |         |        |   |         |         |   |   | 216      |        
|Non-employee stock-based compensation                                                                        |                                                                                  |                |       |   |            |       |   |               |  |   | 81          |   |       |               |       |         |        |   |         |         |   |   | 81       |        
|Conversion of 439 preferred shares into common shares                                                        |                                                                                  |                | 567    |   |            |       | 1  |               |  |   | 5,155       |   |       |               |       |         |        |   |         |         |   |   | 5,156    |        
|Issuance of common stock to Novartis/ GTI                                                                    |                                                                                  |                | 2,000  |   |            |       | 2  |               |  |   | 18,517      |   |       |               |       |         |        |   |         |         |   |   | 18,519   |        
|Dividend to preferred stockholders                                                                           |                                                                                  |                |       |   |            |       |   |               |  |   | (230        | ) |       |               |       |         |        |   |         |         |   |   | (230     | )      
|                                                                                                             |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |  
|Balances at December 31, 2003                                                                                |                                                                                  |                | 39,672 |   |            |       | 40 |               |  |   | 312,017     |   |       |               | 51,371 |         |        |   | (146,562 | )       |   |   | 216,866  |        
|Comprehensive loss:                                                                                          |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |   |          |         |   |   |          |        
|                                                                                                             | Net loss                                                                         |                |        |  |            |       |    |              |  |   |             |  |       |               |        |        |        |   |          | (97,411 | ) |   |          | (97,411 | )
|                                                                                                             | Change in net unrealized loss on available-for-sale securities,
    net of taxes |                |        |  |            |       |    |              |  |   |             |  |       |               |        | (20,151 | )      |   |          |        |   |   |          | (20,151 | )
|                                                                                                             |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |  
|Total comprehensive loss                                                                                     |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |   |          |         |   |   | (117,562 | )      
|Issuance of common stock upon exercise of stock options and
    pursuant to the Employee Stock Purchase Plan |                                                                                  |                | 284    |   |            |       |   |               |  |   | 1,897       |   |       |               |       |         |        |   |         |         |   |   | 1,897    |        
|Issuance of common stock in follow-on public offering, net of
    issuance costs of $3.9 million             |                                                                                  |                | 4,887  |   |            |       | 5  |               |  |   | 57,186      |   |       |               |       |         |        |   |         |         |   |   | 57,191   |        
|Non-employee stock-based compensation                                                                        |                                                                                  |                |       |   |            |       |   |               |  |   | 105         |   |       |               |       |         |        |   |         |         |   |   | 105      |        
|Conversion of 74 preferred shares into common shares                                                         |                                                                                  |                | 135    |   |            |       |   |               |  |   | 909         |   |       |               |       |         |        |   |         |         |   |   | 909      |        
|Dividend to preferred stockholders                                                                           |                                                                                  |                |       |   |            |       |   |               |  |   | (100        | ) |       |               |       |         |        |   |         |         |   |   | (100     | )      
|                                                                                                             |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |  
|Balances at December 31, 2004                                                                                |                                                                                  |                | 44,978 |   |            |       | 45 |               |  |   | 372,014     |   |       |               | 31,220 |         |        |   | (243,973 | )       |   |   | 159,306  |        
|Comprehensive loss:                                                                                          |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |   |          |         |   |   |          |        
|                                                                                                             | Net loss                                                                         |                |        |  |            |       |    |              |  |   |             |  |       |               |        |        |        |   |          | (64,939 | ) |   |          | (64,939 | )
|                                                                                                             | Change in net unrealized gain on available-for-sale securities,
    net of taxes |                |        |  |            |       |    |              |  |   |             |  |       |               |        | 2,443   |        |   |          |        |   |   |          | 2,443   |  
|                                                                                                             |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |  
|Total comprehensive loss                                                                                     |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |   |          |         |   |   | (62,496  | )      
|Issuance of common stock upon exercise of stock options and
    pursuant to the Employee Stock Purchase Plan |                                                                                  |                | 305    |   |            |       | 1  |               |  |   | 1,595       |   |       |               |       |         |        |   |         |         |   |   | 1,596    |        
|Non-employee stock-based compensation                                                                        |                                                                                  |                |       |   |            |       |   |               |  |   | 195         |   |       |               |       |         |        |   |         |         |   |   | 195      |        
|Conversion of 152 preferred shares into common shares                                                        |                                                                                  |                | 276    |   |            |       |   |               |  |   | 1,900       |   |       |               |       |         |        |   |         |         |   |   | 1,900    |        
|Dividend to preferred stockholders                                                                           |                                                                                  |                |       |   |            |       |   |               |  |   | (4          | ) |       |               |       |         |        |   |         |         |   |   | (4       | )      
|                                                                                                             |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |  
|Balances at December 31, 2005                                                                                |                                                                                  |                | 45,559 |   |            | $     | 46 |               |  | $ | 375,700     |   |       | $             | 33,663 |         |        | $ | (308,912 | )       |   | $ | 100,497  |        
|                                                                                                             |                                                                                  |                |        |   |            |       |    |               |  |   |             |   |       |               |        |         |        |  



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CELL GENESYS, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                     |                                                                                 |                                                   |                                                     |          |         |          |        |          |         |         |         |          |         |         |  
|---------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------------- | --------------------------------------------------- | -------- | ------- | -------- | ------ | -------- | ------- | ------- | ------- | -------- | ------- | ------- | -
|                                                     |                                                                                 | Year Ended December 31,                           |                                                    
|                                                     |                                                                                 |                                                   |                                                    
|                                                     |                                                                                 | 2005                                              |                                                     |          | 2004    |          |        | 2003     |        
|                                                     |                                                                                 |                                                   |                                                     |          |         |          |        |          |        
|                                                     |                                                                                 | (In thousands)                                    |                                                    
|Cash flows from operating activities:                |                                                                                 |                                                   |                                                     |          |         |          |        |          |         |         |         |         
|                                                     | Net loss                                                                        |                                                   | $                                                   | (64,939  | )       |          | $      | (97,411  | )       |         | $       | (56,406  | )      
|                                                     | Adjustments to reconcile net loss to net cash used in operating
    activities: |                                                   |                                                     |          |         |          |        |          |         |         |         |          |        
|                                                     |                                                                                 | Depreciation and amortization                     |                                                     |          | 16,204  |          |        |          | 16,773  |         |         |          | 12,159  |        
|                                                     |                                                                                 | Loss (gain) on disposal of property and equipment |                                                     |          | (27     | )        |        |          | (19     | )       |         |          | 634     |        
|                                                     |                                                                                 | Asset impairment                                  |                                                     |          | 280     |          |        |          |        |         |         |          |        |        
|                                                     |                                                                                 | Gain on sale of Abgenix, Inc. common stock        |                                                     |          | (55,123 | )        |        |          | (12,160 | )       |         |          | (12,638 | )      
|                                                     |                                                                                 | Non-employee stock based compensation             |                                                     |          | 137     |          |        |          | 105     |         |         |          | 81      |        
|                                                     |                                                                                 | Deferred income tax provision (benefit)           |                                                     |          | 3,271   |          |        |          | 3,745   |         |         |          | (20,682 | )      
|                                                     | Changes in operating assets and liabilities:                                    |                                                   |                                                     |          |         |          |        |          |         |         |         |          |        
|                                                     |                                                                                 | Prepaid expenses and other assets                 |                                                     |          | (100    | )        |        |          | 788     |         |         |          | 636     |        
|                                                     |                                                                                 | Receivable from Transkaryotic Therapies, Inc.     |                                                     |          |        |          |        |          |        |         |         |          | 15,000  |        
|                                                     |                                                                                 | Accounts payable                                  |                                                     |          | (986    | )        |        |          | 411     |         |         |          | (1,413  | )      
|                                                     |                                                                                 | Accrued compensation and benefits                 |                                                     |          | (672    | )        |        |          | 1,134   |         |         |          | 495     |        
|                                                     |                                                                                 | Deferred revenue                                  |                                                     |          | (2,031  | )        |        |          | (5,846  | )       |         |          | 2,006   |        
|                                                     |                                                                                 | Accrued facility exit costs                       |                                                     |          | (6,092  | )        |        |          | (3,367  | )       |         |          | 3,281   |        
|                                                     |                                                                                 | Other accrued liabilities                         |                                                     |          | 1,197   |          |        |          | 2,064   |         |         |          | (2,260  | )      
|                                                     |                                                                                 | Accrued income taxes                              |                                                     |          | 2,658   |          |        |          |        |         |         |          | 12,386  |        
|                                                     |                                                                                 |                                                   |                                                     |          |         |          |        |          |        
|                                                     |                                                                                 |                                                   | Net cash used in operating activities               |          |         | (106,223 | )      |          |         | (93,783 | )       |          |         | (46,721 | )
|                                                     |                                                                                 |                                                   |                                                     |          |         |          |        |          |        
|Cash flows from investing activities:                |                                                                                 |                                                   |                                                     |          |         |          |        |          |         |         |         |         
|                                                     | Purchases of short-term investments                                             |                                                   |                                                     | (109,363 | )       |          |        | (227,651 | )       |         |         | (265,905 | )      
|                                                     | Maturities of short-term investments                                            |                                                   |                                                     | 51,066   |         |          |        | 8,543    |         |         |         | 15,520   |        
|                                                     | Sales of short-term investments                                                 |                                                   |                                                     | 99,629   |         |          |        | 251,661  |         |         |         | 226,468  |        
|                                                     | Conversion of restricted cash and investments                                   |                                                   |                                                     | 406      |         |          |        |         |         |         |         |         |        
|                                                     | Capital expenditures                                                            |                                                   |                                                     | (2,189   | )       |          |        | (5,087   | )       |         |         | (27,658  | )      
|                                                     | Proceeds from disposal of property and equipment                                |                                                   |                                                     | 3,255    |         |          |        | 67       |         |         |         | 65       |        
|                                                     | Proceeds from sale of Abgenix, Inc. common stock                                |                                                   |                                                     | 58,506   |         |          |        | 12,918   |         |         |         | 13,859   |        
|                                                     | Cash effect related to the deconsolidation of Ceregene                          |                                                   |                                                     |         |         |          |        | (521     | )       |         |         |         |        
|                                                     |                                                                                 |                                                   |                                                     |          |         |          |        |          |        
|                                                     |                                                                                 |                                                   | Net cash provided by (used in) investing activities |          |         | 101,310  |        |          |         | 39,930  |         |          |         | (37,651 | )
|                                                     |                                                                                 |                                                   |                                                     |          |         |          |        |          |        
|Cash flows from financing activities:                |                                                                                 |                                                   |                                                     |          |         |          |        |          |         |         |         |         
|                                                     | Proceeds from issuances of common stock                                         |                                                   |                                                     | 1,596    |         |          |        | 59,088   |         |         |         | 20,249   |        
|                                                     | Net proceeds from convertible senior note-financing                             |                                                   |                                                     |         |         |          |        | 139,912  |         |         |         |         |        
|                                                     | Proceeds from term loan financings                                              |                                                   |                                                     |         |         |          |        |         |         |         |         | 35,237   |        
|                                                     | Payments under Ceregene financing                                               |                                                   |                                                     |         |         |          |        | (482     | )       |         |         | (272     | )      
|                                                     | Payments under capital lease obligation                                         |                                                   |                                                     | (786     | )       |          |        | (515     | )       |         |         | (47      | )      
|                                                     | Payments under debt financings                                                  |                                                   |                                                     |         |         |          |        | (95,693  | )       |         |         |         |        
|                                                     |                                                                                 |                                                   |                                                     |          |         |          |        |          |        
|                                                     |                                                                                 |                                                   | Net cash provided by financing activities           |          |         | 810      |        |          |         | 102,310 |         |          |         | 55,167  |  
|                                                     |                                                                                 |                                                   |                                                     |          |         |          |        |          |        
|Net increase (decrease) in cash and cash equivalents |                                                                                 |                                                   | (4,103                                              | )        |         |          | 48,457 |          |         |         | (29,205 | )       
|Cash and cash equivalents, beginning of the year     |                                                                                 |                                                   | 58,324                                              |          |         |          | 9,867  |          |         |         | 39,072  |         
|                                                     |                                                                                 |                                                   |                                                     |          |         |          |        |          |        
|Cash and cash equivalents, end of the year           |                                                                                 | $                                                 | 54,221                                              |          |         | $        | 58,324 |          |         | $       | 9,867   |         
|                                                     |                                                                                 |                                                   |                                                     |          |         |          |        |          |        



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CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                                                
|-- | ---------------------------------------------------------------
|1. | Organization and Summary of Significant Accounting
    Policies



| |                  
| | -----------------
| | Business activity





| |                            
| | ---------------------------
| | Principles of consolidation





| |                 
| | ----------------
| | Use of estimates





| |                       
| | ----------------------
| | Concentrations of risk





| |                    
| | -------------------
| | Revenue recognition



Up-front payments:


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CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Milestones:


License fees:




| |                       
| | ----------------------
| | Property and equipment





| |                  
| | -----------------
| | Long-lived assets





| |                                
| | -------------------------------
| | Unamortized debt issuance costs





| |                                                  
| | -------------------------------------------------
| | Cash, cash equivalents and short-term investments





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CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                                    
| | -----------------------------------
| | Fair value of financial instruments





| |                               
| | ------------------------------
| | Research and development costs





| |               
| | --------------
| | Loss per share





|                                       |  |              |        |  |      |  |        | 
|-------------------------------------- |  | ------------ | ------ |  | ---- |  | ------ | 
|                                       |  | Year Ended   |       
|                                       |  | December 31, |       
|                                       |  |              |       
|                                       |  | 2005         |        |  | 2004 | 
|                                       |  |              |        |  |      | 
|Convertible senior notes               |  |              | 15,934 |  |      |  | 15,934 | 
|                                       |  |              |        |  |      | 
|Redeemable convertible preferred stock |  |              |       |  |      |  | 253    | 
|                                       |  |              |        |  |      | 
|Outstanding stock options              |  |              | 8,087  |  |      |  | 7,822  | 
|                                       |  |              |        |  |      | 

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CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                            
| | ---------------------------
| | Comprehensive income (loss)



|                                   |                                                                                                                                                                                             |                         |         |         |      |   |          |         |   |   |         |        |  
|---------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------- | ------- | ------- | ---- | - | -------- | ------- | - | - | ------- | ------ | -
|                                   |                                                                                                                                                                                             | Year Ended December 31, |        
|                                   |                                                                                                                                                                                             |                         |        
|                                   |                                                                                                                                                                                             | 2005                    |         |         | 2004 |   |          | 2003    |  
|                                   |                                                                                                                                                                                             |                         |         |         |      |   |          |         |  
|Net loss                           |                                                                                                                                                                                             | $                       | (64,939 | )       |      | $ | (97,411  | )       |   | $ | (56,406 | )     
|Other comprehensive income (loss): |                                                                                                                                                                                             |                         |         |         |      |   |          |         |   |   |         |       
|                                   | Increase (decrease) in unrealized gain on investments, net of
    tax benefit/(provision) of ($21.7) million,
    $(9.6) million and $11.1 million in 2005, 2004 and
    2003, respectively |                         |         | 32,297  |      |   |          | (12,779 | ) |   |         | 25,411 |  
|                                   | Less: reclassification adjustment for gains recognized in net
    loss, net of related tax of $25.0 million,
    $4.9 million, and $5.8 million in 2005, 2004, and
    2003, respectively   |                         |         | (29,854 | )    |   |          | (7,372  | ) |   |         | (8,759 | )
|                                   |                                                                                                                                                                                             |                         |         |         |      |   |          |         |  
|Comprehensive loss                 |                                                                                                                                                                                             | $                       | (62,496 | )       |      | $ | (117,562 | )       |   | $ | (39,754 | )     
|                                   |                                                                                                                                                                                             |                         |         |         |      |   |          |         |  



| |             
| | ------------
| | Income taxes





| |                  
| | -----------------
| | Segment reporting





| |                  
| | -----------------
| | Reclassifications





| |                                 
| | --------------------------------
| | Recent accounting pronouncements



51



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CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                         
| | ------------------------
| | Stock-based compensation





|                                                        |                                                                                                                             |                                      |         |        |      |   |          |         |   |   |         |         |  
|------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ------- | ------ | ---- | - | -------- | ------- | - | - | ------- | ------- | -
|                                                        |                                                                                                                             | Year Ended December 31,              |        
|                                                        |                                                                                                                             |                                      |        
|                                                        |                                                                                                                             | 2005                                 |         |        | 2004 |   |          | 2003    |  
|                                                        |                                                                                                                             |                                      |         |        |      |   |          |         |  
|                                                        |                                                                                                                             | (In thousands except per share data) |        
|Net loss attributed to common stockholders, as reported |                                                                                                                             | $                                    | (64,943 | )      |      | $ | (97,511  | )       |   | $ | (56,636 | )      
|Deduct:                                                 |                                                                                                                             |                                      |         |        |      |   |          |         |   |   |         |        
|                                                        | Stock-based employee compensation expense determined under fair
    value method for all awards, net of related tax effects |                                      |         | (9,369 | )    |   |          | (13,516 | ) |   |         | (12,700 | )
|                                                        |                                                                                                                             |                                      |         |        |      |   |          |         |  
|Pro forma net loss                                      |                                                                                                                             | $                                    | (74,312 | )      |      | $ | (111,027 | )       |   | $ | (69,336 | )      
|                                                        |                                                                                                                             |                                      |         |        |      |   |          |         |  
|Loss per share:                                         |                                                                                                                             |                                      |         |        |      |   |          |         |   |   |         |        
|                                                        | Basic and diluted loss per common share, as reported                                                                        |                                      | $       | (1.43  | )    |   | $        | (2.23   | ) |   | $       | (1.48   | )
|                                                        | Basic and diluted pro forma loss per common share                                                                           |                                      | $       | (1.64  | )    |   | $        | (2.54   | ) |   | $       | (1.82   | )



|                                |  |              |      |   |      |  |      |      |  |  |      |  
|------------------------------- |  | ------------ | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                |  | Year Ended   |     
|                                |  | December 31, |     
|                                |  |              |     
|                                |  | 2005         |      |   | 2004 |  |      | 2003 | 
|                                |  |              |      |   |      |  |      |      | 
|Dividend yield                  |  |              | 0.00 | % |      |  | 0.00 | %    |  |  | 0.00 | %
|Annual risk free rate of return |  |              | 3.82 | % |      |  | 2.67 | %    |  |  | 1.53 | %
|Expected volatility             |  |              | 0.60 |   |      |  | 0.68 |      |  |  | 0.76 |  
|Expected term (years)           |  |              | 4.0  |   |      |  | 3.9  |      |  |  | 3.9  |  



|   |                      
|-- | ---------------------
|2. | Restructuring charges



52



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CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|   |                                     
|-- | ------------------------------------
|3. | Collaborative and License Agreements



|                                      |  |                         |       |  |      |   |        |      |  |   |        | 
|------------------------------------- |  | ----------------------- | ----- |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                      |  | Year Ended December 31, |      
|                                      |  |                         |      
|                                      |  | 2005                    |       |  | 2004 |   |        | 2003 | 
|                                      |  |                         |       |  |      |   |        |      | 
|Novartis AG                           |  | $                       | 2,031 |  |      | $ | 5,846  |      |  | $ | 2,104  | 
|Japan Tobacco Inc.                    |  |                         |      |  |      |   |       |      |  |   | 14,145 | 
|sanofi-aventis Group                  |  |                         | 2,000 |  |      |   | 3,173  |      |  |   | 1,000  | 
|Transkaryotic Therapies, Inc.         |  |                         |      |  |      |   | 250    |      |  |   |       | 
|Ceregene, Inc. (since August 4, 2004) |  |                         | 69    |  |      |   | 998    |      |  |   |       | 
|Other                                 |  |                         | 484   |  |      |   | 1,191  |      |  |   | 879    | 
|                                      |  |                         |       |  |      |   |        |      | 
|                                      |  | $                       | 4,584 |  |      | $ | 11,458 |      |  | $ | 18,128 | 
|                                      |  |                         |       |  |      |   |        |      | 



| |                                 
| | --------------------------------
| | Global alliance with Novartis AG





| |                                                
| | -----------------------------------------------
| | Collaborative agreement with Japan Tobacco Inc.



53



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CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                    
| | -----------------------------------
| | Gene activation technology licenses







| |                                           
| | ------------------------------------------
| | Gene therapy rights agreement with Abgenix

®




| |                     
| | --------------------
| | Other collaborations



54



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CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |            
|-- | -----------
|4. | Investments



|                                 |  |                |         |            |       |   |            |        |  |           |            |   |  |   |         | 
|-------------------------------- |  | -------------- | ------- | ---------- | ----- | - | ---------- | ------ |  | --------- | ---------- | - |  | - | ------- | 
|                                 |  |                |         | Gross      |       |   | Gross      |        |  |          
|                                 |  |                |         | Unrealized |       |   | Unrealized |        |  | Estimated |           
|December 31, 2005                |  | Amortized Cost |         |            | Gains |   |            | Losses |  |           | Fair Value |  
|                                 |  |                |         |            |       |   |            |        |  |           |            |  
|Money market funds               |  | $              | 41,135  |            |       | $ | 2          |        |  | $         |           |   |  | $ | 41,137  | 
|Corporate notes                  |  |                | 12,270  |            |       |   | 15         |        |  |           | (5         | ) |  |   | 12,280  | 
|Asset backed securities          |  |                | 25,761  |            |       |   | 6          |        |  |           | (71        | ) |  |   | 25,696  | 
|U.S. government and its agencies |  |                | 35,296  |            |       |   |           |        |  |           | (127       | ) |  |   | 35,169  | 
|Abgenix common stock             |  |                | 2,749   |            |       |   | 61,075     |        |  |           |           |   |  |   | 63,824  | 
|                                 |  |                |         |            |       |   |            |        |  |           |            |  
|                                 |  | $              | 117,211 |            |       | $ | 61,098     |        |  | $         | (203       | ) |  | $ | 178,106 | 
|                                 |  |                |         |            |       |   |            |        |  |           |            |  
|Classified as:                   |  |                |         |            |       |   |            |        |  |           |            |   |  |   |         | 
|Cash equivalents                 |  |                |         |            |       |   |            |        |  |           |            |   |  | $ | 41,799  | 
|Short-term investments           |  |                |         |            |       |   |            |        |  |           |            |   |  |   | 72,483  | 
|Abgenix common stock             |  |                |         |            |       |   |            |        |  |           |            |   |  |   | 63,824  | 
|                                 |  |                |         |            |       |   |            |        |  |           |            |  
|                                 |  |                |         |            |       |   |            |        |  |           |            |   |  | $ | 178,106 | 
|                                 |  |                |         |            |       |   |            |        |  |           |            |  

|                                 |  |                |         |            |       |   |            |        |  |           |            |   |  |   |         | 
|-------------------------------- |  | -------------- | ------- | ---------- | ----- | - | ---------- | ------ |  | --------- | ---------- | - |  | - | ------- | 
|                                 |  |                |         | Gross      |       |   | Gross      |        |  |          
|                                 |  |                |         | Unrealized |       |   | Unrealized |        |  | Estimated |           
|December 31, 2004                |  | Amortized Cost |         |            | Gains |   |            | Losses |  |           | Fair Value |  
|                                 |  |                |         |            |       |   |            |        |  |           |            |  
|Money market funds               |  | $              | 2,744   |            |       | $ |           |        |  | $         |           |   |  | $ | 2,744   | 
|Corporate notes                  |  |                | 11,743  |            |       |   |           |        |  |           | (3         | ) |  |   | 11,740  | 
|U.S. government and its agencies |  |                | 148,941 |            |       |   | 6          |        |  |           | (652       | ) |  |   | 148,295 | 
|Abgenix common stock             |  |                | 6,131   |            |       |   | 62,372     |        |  |           |           |   |  |   | 68,503  | 
|                                 |  |                |         |            |       |   |            |        |  |           |            |  
|                                 |  | $              | 169,559 |            |       | $ | 62,378     |        |  | $         | (655       | ) |  | $ | 231,282 | 
|                                 |  |                |         |            |       |   |            |        |  |           |            |  
|Classified as:                   |  |                |         |            |       |   |            |        |  |           |            |   |  |   |         | 
|Cash equivalents                 |  |                |         |            |       |   |            |        |  |           |            |   |  | $ | 49,432  | 
|Short-term investments           |  |                |         |            |       |   |            |        |  |           |            |   |  |   | 113,347 | 
|Abgenix common stock             |  |                |         |            |       |   |            |        |  |           |            |   |  |   | 68,503  | 
|                                 |  |                |         |            |       |   |            |        |  |           |            |  
|                                 |  |                |         |            |       |   |            |        |  |           |            |   |  | $ | 231,282 | 
|                                 |  |                |         |            |       |   |            |        |  |           |            |  



55



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CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                          |                     |                |         |        |                      |   |         |        | 
|------------------------- | ------------------- | -------------- | ------- | ------ | -------------------- | - | ------- | ------ | 
|December 31, 2005         |                     | Amortized Cost |         |        | Estimated Fair Value |  
|                          |                     |                |         |        |                      |  
|Debt securities maturing: |                     |                |         |        |                      |   |         |       
|                          | In one year or less |                | $       | 79,040 |                      |   | $       | 78,917 | 
|                          | In one to two years |                |         | 9,661  |                      |   |         | 9,669  | 
|Asset backed securities   |                     |                | 25,761  |        |                      |   | 25,696  |       
|                          |                     |                |         |        |                      |  
|                          |                     | $              | 114,462 |        |                      | $ | 114,282 |       
|                          |                     |                |         |        |                      |  







|   |                       
|-- | ----------------------
|5. | Property and Equipment



|                                                      |  |              |         |   |      |   |         |  
|----------------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                                      |  | December 31, |        
|                                                      |  |              |        
|                                                      |  | 2005         |         |   | 2004 |  
|                                                      |  |              |         |   |      |  
|Machinery, furniture and equipment                    |  | $            | 29,878  |   |      | $ | 34,792  |  
|Leasehold improvements                                |  |              | 102,815 |   |      |   | 112,130 |  
|Property and equipment under capital lease obligation |  |              | 52,361  |   |      |   | 52,361  |  
|Construction in process                               |  |              | 1,461   |   |      |   | 3,864   |  
|                                                      |  |              |         |   |      |  
|                                                      |  |              | 186,515 |   |      |   | 203,147 |  
|Accumulated depreciation and amortization             |  |              | (44,290 | ) |      |   | (43,484 | )
|                                                      |  |              |         |   |      |  
|                                                      |  | $            | 142,225 |   |      | $ | 159,663 |  
|                                                      |  |              |         |   |      |  





|   |                                                   
|-- | --------------------------------------------------
|6. | Convertible Senior Notes and Other Debt Financings

30-day


56



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##### Table of Contents



CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |       
|-- | ------
|7. | Leases



| |                 
| | ----------------
| | Operating leases







| |                         
| | ------------------------
| | Capital lease obligation



57



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##### Table of Contents



CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                         |                 |           |        |        |               |   |         |        | 
|---------------------------------------- | --------------- | --------- | ------ | ------ | ------------- | - | ------- | ------ | 
|                                         |                 | Operating |        |        | Capital Lease |  
|                                         |                 | Leases    |        |        | Obligation    |  
|                                         |                 |           |        |        |               |  
|Years ending December 31:                |                 |           |        |        |               |   |         |       
|                                         | 2006            |           | $      | 1,944  |               |   | $       | 6,300  | 
|                                         | 2007            |           |        | 1,894  |               |   |         | 6,520  | 
|                                         | 2008            |           |        | 1,966  |               |   |         | 6,748  | 
|                                         | 2009            |           |        | 1,897  |               |   |         | 7,017  | 
|                                         | 2010            |           |        | 2,022  |               |   |         | 7,232  | 
|                                         | 2011 and beyond |           |        | 20,027 |               |   |         | 59,771 | 
|                                         |                 |           |        |        |               |  
|Total minimum payments                   |                 | $         | 29,750 |        |               |   | 93,588  |       
|                                         |                 |           |        |        |               |  
|Less: Amount representing interest       |                 |           |        |        |               |   | (42,574 | )     
|                                         |                 |           |        |        |               |  
|Present value of future debt payments    |                 |           |        |        |               |   | 51,014  |       
|Less: Current portion of future payments |                 |           |        |        |               |   | (1,095  | )     
|                                         |                 |           |        |        |               |  
|Noncurrent portion of future payments    |                 |           |        |        |               | $ | 49,919  |       
|                                         |                 |           |        |        |               |  



|   |                                       
|-- | --------------------------------------
|8. | Redeemable Convertible Preferred Stock







|   |                     
|-- | --------------------
|9. | Stockholders Equity



| |             
| | ------------
| | Common stock





| |                   
| | ------------------
| | Stock option plans



58



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##### Table of Contents



CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




2005 Equity Incentive Plan:




59



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CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                            |            |           |       |                           |           |  |       |                  |   |   |       |       | 
|----------------------------------------------------------- | ---------- | --------- | ----- | ------------------------- | --------- |  | ----- | ---------------- | - | - | ----- | ----- | 
|                                                            |            |           |       | Outstanding Stock Options |          
|                                                            |            |           |       |                           |          
|                                                            |            | Shares    |       |                           | Number of |  |       | Weighted Average |  
|                                                            |            | Available |       |                           | Shares    |  |       | Exercise Price   |  
|                                                            |            |           |       |                           |           |  |       |                  |  
|Balances, December 31, 2002                                 |            |           | 3,496 |                           |           |  | 5,762 |                  |   | $ | 13.82 |      
|                                                            | Authorized |           |       | 500                       |           |  |       |                 |   |   |       |      | 
|                                                            | Granted    |           |       | (1,674                    | )         |  |       | 1,674            |   |   | $     | 9.85  | 
|                                                            | Exercised  |           |       |                          |           |  |       | (97              | ) |   | $     | 7.41  | 
|                                                            | Expired    |           |       | (31                       | )         |  |       |                 |   |   |       |      | 
|                                                            | Forfeited  |           |       | 704                       |           |  |       | (704             | ) |   | $     | 16.70 | 
|                                                            |            |           |       |                           |           |  |       |                  |  
|Balances, December 31, 2003                                 |            |           | 2,995 |                           |           |  | 6,635 |                  |   | $ | 12.62 |      
|                                                            | Authorized |           |       | 500                       |           |  |       |                 |   |   |       |      | 
|                                                            | Granted    |           |       | (2,131                    | )         |  |       | 2,131            |   |   | $     | 11.50 | 
|                                                            | Exercised  |           |       |                          |           |  |       | (123             | ) |   | $     | 6.33  | 
|                                                            | Expired    |           |       | (31                       | )         |  |       |                 |   |   |       |      | 
|                                                            | Forfeited  |           |       | 821                       |           |  |       | (821             | ) |   | $     | 14.44 | 
|                                                            |            |           |       |                           |           |  |       |                  |  
|Balances, December 31, 2004                                 |            |           | 2,154 |                           |           |  | 7,822 |                  |   | $ | 12.23 |      
|                                                            | Authorized |           |       | 1,000                     |           |  |       |                 |   |   |       |      | 
|                                                            | Granted    |           |       | (1,758                    | )         |  |       | 1,758            |   |   | $     | 6.27  | 
|                                                            | Exercised  |           |       |                          |           |  |       | (106             | ) |   | $     | 4.44  | 
|                                                            | Expired    |           |       | (28                       | )         |  |       |                 |   |   |       |      | 
|                                                            | Forfeited  |           |       | 1,387                     |           |  |       | (1,387           | ) |   | $     | 11.39 | 
|                                                            |            |           |       |                           |           |  |       |                  |  
|Balances, December 31, 2005                                 |            |           | 2,755 |                           |           |  | 8,087 |                  |   | $ | 11.18 |      
|                                                            |            |           |       |                           |           |  |       |                  |  
|Exercisable at December 31, 2005                            |            |           |       |                           |           |  | 5,772 |                  |   | $ | 12.26 |      
|                                                            |            |           |       |                           |           |  |       |                  |  
|Exercisable at December 31, 2004                            |            |           |       |                           |           |  | 4,951 |                  |   | $ | 12.68 |      
|                                                            |            |           |       |                           |           |  |       |                  |  
|Exercisable at December 31, 2003                            |            |           |       |                           |           |  | 4,056 |                  |   | $ | 12.22 |      
|                                                            |            |           |       |                           |           |  |       |                  |  
|Weighted average fair value of options granted during 2005* |            |           |       |                           |           |  |       |                  |   | $ | 3.07  |      
|Weighted average fair value of options granted during 2004* |            |           |       |                           |           |  |       |                  |   | $ | 6.24  |      
|Weighted average fair value of options granted during 2003* |            |           |       |                           |           |  |       |                  |   | $ | 5.66  |      






|  |                                                                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Fair value of the stock options was based on the Black-Scholes
    model. See Note 1 above for more information regarding the
    assumptions applied to the model in each of the years presented
    above.

60



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CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|               |  |                     |       |           |             |  |           |          |                     |   |                |           |  |          |       |  |  |   |       | 
|-------------- |  | ------------------- | ----- | --------- | ----------- |  | --------- | -------- | ------------------- | - | -------------- | --------- |  | -------- | ----- |  |  | - | ----- | 
|               |  | Options Outstanding |       |           |             |  |          
|               |  |                     |       |           |            
|               |  |                     |       | Weighted- |             |  |           |          | Options Exercisable |  
|               |  |                     |       | Average   |             |  |           |          |                     |  
|               |  |                     |       | Remaining |             |  | Weighted- |          |                     |   |                | Weighted- | 
|               |  | Number              |       |           | Contractual |  |           | Average  |                     |   | Number         |           |  | Average  |      
|Range of       |  | Outstanding         |       |           | Life        |  |           | Exercise |                     |   | Exercisable    |           |  | Exercise |      
|Exercise Price |  | (in thousands)      |       |           | (in years)  |  |           | Price    |                     |   | (in thousands) |           |  | Price    |      
|               |  |                     |       |           |             |  |           |          |                     |   |                |           |  |          |      
|$3.50-$7.21    |  |                     | 2,835 |           |             |  | 7.0       |          |                     | $ | 5.91           |           |  |          | 1,382 |  |  | $ | 5.52  | 
|$7.34-$9.50    |  |                     | 1,429 |           |             |  | 5.4       |          |                     | $ | 8.75           |           |  |          | 1,229 |  |  | $ | 8.72  | 
|$9.95-$14.04   |  |                     | 1,746 |           |             |  | 7.6       |          |                     | $ | 12.72          |           |  |          | 1,135 |  |  | $ | 12.57 | 
|$14.07-$19.63  |  |                     | 1,595 |           |             |  | 5.7       |          |                     | $ | 17.03          |           |  |          | 1,544 |  |  | $ | 17.12 | 
|$19.88-$42.63  |  |                     | 482   |           |             |  | 5.2       |          |                     | $ | 24.36          |           |  |          | 482   |  |  | $ | 24.36 | 
|               |  |                     |       |           |             |  |           |          |                     |   |                |           |  |          |      
|               |  |                     | 8,087 |           |             |  |           |          |                     |   |                |           |  |          | 5,772 |  |  |   |       | 
|               |  |                     |       |           |             |  |           |          |                     |   |                |           |  |          |      



| |                              
| | -----------------------------
| | Employee stock purchase plans





| |                        
| | -----------------------
| | Stockholder rights plan





| |                                      
| | -------------------------------------
| | Non-employee stock-based compensation



61



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CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                           
| | ------------------------------------------
| | Common shares reserved for future issuance





|    |             
|--- | ------------
|10. | Income Taxes



|                                     |         |                         |        |        |      |   |        |        |   |   |        |        | 
|------------------------------------ | ------- | ----------------------- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | 
|                                     |         | Year Ended December 31, |       
|                                     |         |                         |       
|                                     |         | 2005                    |        |        | 2004 |   |        | 2003   |  
|                                     |         |                         |        |        |      |   |        |        |  
|Current:                             |         |                         |        |        |      |   |        |        |   |   |        |       
|                                     | Federal |                         | $      | (2,658 | )    |   | $      |       |   |   | $      | 3,726  | 
|                                     | State   |                         |        |       |      |   |        |       |   |   |        |       | 
|                                     |         |                         |        |        |      |   |        |        |  
|                                     |         |                         | (2,658 | )      |      |   |       |        |   |   | 3,726  |       
|                                     |         |                         |        |        |      |   |        |        |  
|Deferred:                            |         |                         |        |        |      |   |        |        |   |   |        |       
|                                     | Federal |                         |        | (3,270 | )    |   |        | (3,745 | ) |   |        | 20,906 | 
|                                     | State   |                         |        |       |      |   |        |       |   |   |        |       | 
|                                     |         |                         |        |        |      |   |        |        |  
|                                     |         |                         | (3,270 | )      |      |   | (3,745 | )      |   |   | 20,906 |       
|                                     |         |                         |        |        |      |   |        |        |  
|Benefit (provision) for income taxes |         | $                       | (5,928 | )      |      | $ | (3,745 | )      |   | $ | 24,632 |       
|                                     |         |                         |        |        |      |   |        |        |  





|                                                                                                                                     |  |                         |         |   |      |   |         |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                                                                                     |  | Year Ended December 31, |        
|                                                                                                                                     |  |                         |        
|                                                                                                                                     |  | 2005                    |         |   | 2004 |   |         | 2003 | 
|                                                                                                                                     |  |                         |         |   |      |   |         |      | 
|Tax benefit at U.S. statutory rate                                                                                                   |  | $                       | 20,654  |   |      | $ | 32,783  |      |  | $ | 28,363 |  
|Change in valuation allowance                                                                                                        |  |                         | (23,357 | ) |      |   | (43,998 | )    |  |   | (9,941 | )
|Research and development tax credits                                                                                                 |  |                         | 2,739   |   |      |   | 2,389   |      |  |   | 2,511  |  
|Tax effect of realized and unrealized (gains) losses on
    available-for-sale-securities recorded in other comprehensive
    income |  |                         | (3,270  | ) |      |   | 5,094   |      |  |   |       |  
|Interest on tax contingencies                                                                                                        |  |                         | (2,658  | ) |      |   |        |      |  |   |       |  
|Prior year items                                                                                                                     |  |                         |        |   |      |   |        |      |  |   | 3,726  |  
|Other                                                                                                                                |  |                         | (36     | ) |      |   | (13     | )    |  |   | (27    | )
|                                                                                                                                     |  |                         |         |   |      |   |         |      | 
|Benefit (provision) for income taxes                                                                                                 |  | $                       | (5,928  | ) |      | $ | (3,745  | )    |  | $ | 24,632 |  
|                                                                                                                                     |  |                         |         |   |      |   |         |      | 



62



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##### Table of Contents



CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                          |                                                           |              |        |          |      |   |        |         |  
|------------------------- | --------------------------------------------------------- | ------------ | ------ | -------- | ---- | - | ------ | ------- | -
|                          |                                                           | December 31, |       
|                          |                                                           |              |       
|                          |                                                           | 2005         |        |          | 2004 |  
|                          |                                                           |              |        |          |      |  
|Deferred tax assets:      |                                                           |              |        |          |      |   |        |        
|                          | Net operating loss carryforwards                          |              | $      | 108,372  |      |   | $      | 90,073  |  
|                          | Research credit carryforwards                             |              |        | 24,573   |      |   |        | 20,701  |  
|                          | Capitalized research and development, net of amortization |              |        | 11,347   |      |   |        | 8,405   |  
|                          | Other accruals and reserves                               |              |        | 1,654    |      |   |        | 6,164   |  
|                          |                                                           |              |        |          |      |  
|                          | Net deferred tax assets                                   |              |        | 145,946  |      |   |        | 125,343 |  
|                          | Valuation allowance                                       |              |        | (118,961 | )    |   |        | (93,550 | )
|                          |                                                           |              |        |          |      |  
|                          |                                                           |              | 26,985 |          |      |   | 31,793 |        
|Deferred tax liabilities: |                                                           |              |        |          |      |   |        |        
|                          | Depreciation                                              |              |        | (2,555   | )    |   |        | (6,616  | )
|                          | Unrealized gain on investments, including Abgenix, Inc.   |              |        | (24,430  | )    |   |        | (25,177 | )
|                          |                                                           |              |        |          |      |  
|Net deferred tax          |                                                           | $            |       |          |      | $ |       |        
|                          |                                                           |              |        |          |      |  





63



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##### Table of Contents



CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |            
|--- | -----------
|11. | 401(k) Plan







|    |                        
|--- | -----------------------
|12. | Statement of Cash Flows



|                               |  |                         |       |  |      |   |       |      |  |   |         |  
|------------------------------ |  | ----------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ------- | -
|                               |  | Year Ended December 31, |      
|                               |  |                         |      
|                               |  | 2005                    |       |  | 2004 |   |       | 2003 | 
|                               |  |                         |       |  |      |   |       |      | 
|Cash paid for interest         |  | $                       | 9,997 |  |      | $ | 9,155 |      |  | $ | 5,887   |  
|Cash refunded for income taxes |  | $                       |      |  |      | $ |      |      |  | $ | (16,532 | )





|    |              
|--- | -------------
|13. | Related Party



Ceregene:




64



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##### Table of Contents



CELL GENESYS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Xenogen:




|    |                                                     
|--- | ----------------------------------------------------
|14. | Selected Quarterly Financial Information (Unaudited)

|                                           |  |                                          |         |   |          |   |         |               |  |   |              |   |  |   |        | 
|------------------------------------------ |  | ---------------------------------------- | ------- | - | -------- | - | ------- | ------------- |  | - | ------------ | - |  | - | ------ | 
|                                           |  | Quarter Ended                            |        
|                                           |  |                                          |        
|                                           |  | March 31,                                |         |   | June 30, |   |         | September 30, |  |   | December 31, |  
|Quarterly Results of Operations            |  | 2005                                     |         |   | 2005     |   |         | 2005          |  |   | 2005         |  
|                                           |  |                                          |         |   |          |   |         |               |  |   |              |  
|(Unaudited)                                |  |                                         
|                                           |  | (In thousands, except per share amounts) |        
|Revenue                                    |  | $                                        | 1,646   |   |          | $ | 2,782   |               |  | $ | 71           |   |  | $ | 85     | 
|Research and development                   |  |                                          | 24,843  |   |          |   | 23,199  |               |  |   | 23,333       |   |  |   | 21,030 | 
|General and administrative                 |  |                                          | 3,763   |   |          |   | 3,945   |               |  |   | 3,648        |   |  |   | 4,986  | 
|Restructuring charges                      |  |                                          |        |   |          |   | 853     |               |  |   | 744          |   |  |   | 753    | 
|Gain on sale of Abgenix, Inc. common stock |  |                                          |        |   |          |   |        |               |  |   | 6,293        |   |  |   | 48,830 | 
|Net income (loss)                          |  |                                          | (29,311 | ) |          |   | (27,416 | )             |  |   | (27,268      | ) |  |   | 19,056 | 
|Basic net income (loss) per common share   |  |                                          | (0.65   | ) |          |   | (0.60   | )             |  |   | (0.60        | ) |  |   | 0.42   | 
|Diluted net income (loss) per common share |  |                                          | (0.65   | ) |          |   | (0.60   | )             |  |   | (0.60        | ) |  |   | 0.33   | 

|                                           |  |                                          |         |   |          |   |         |               |  |   |              |   |  |   |         |  
|------------------------------------------ |  | ---------------------------------------- | ------- | - | -------- | - | ------- | ------------- |  | - | ------------ | - |  | - | ------- | -
|                                           |  | Quarter Ended                            |        
|                                           |  |                                          |        
|                                           |  | March 31,                                |         |   | June 30, |   |         | September 30, |  |   | December 31, |  
|Quarterly Results of Operations            |  | 2004                                     |         |   | 2004     |   |         | 2004          |  |   | 2004         |  
|                                           |  |                                          |         |   |          |   |         |               |  |   |              |  
|(Unaudited)                                |  |                                         
|                                           |  | (In thousands, except per share amounts) |        
|Revenue                                    |  | $                                        | 2,584   |   |          | $ | 2,462   |               |  | $ | 3,228        |   |  | $ | 3,184   |  
|Research and development                   |  |                                          | 22,644  |   |          |   | 24,097  |               |  |   | 21,686       |   |  |   | 23,706  |  
|General and administrative(1)              |  |                                          | 5,549   |   |          |   | 5,115   |               |  |   | 3,772        |   |  |   | 3,492   |  
|Gain on sale of Abgenix, Inc. common stock |  |                                          | 5,506   |   |          |   | 6,474   |               |  |   | 180          |   |  |   |        |  
|Net loss                                   |  |                                          | (20,919 | ) |          |   | (26,019 | )             |  |   | (24,049      | ) |  |   | (26,424 | )
|Basic and diluted loss per common share    |  |                                          | (0.52   | ) |          |   | (0.58   | )             |  |   | (0.54        | ) |  |   | (0.59   | )






|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(1) | The quarters ended March 31 and June 30, 2004 include
    facility exit costs of $1.0 million and $0.8 million,
    respectively.



65



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##### Table of Contents








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








|         |                        
|-------- | -----------------------
|ITEM 9A. | CONTROLS AND PROCEDURES



| |                                                 
| | ------------------------------------------------
| | Evaluation of Disclosure Controls and Procedures

10-K.




| |                                                                            
| | ---------------------------------------------------------------------------
| | Managements Annual Report on Internal Control Over
    Financial Reporting







| |   |                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of the assets of the company;                                                                                                                                                                                        
|
| |  | provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the Company are being made
    only in accordance with authorizations of management and
    directors of the Company; and
|
| |  | provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    Companys assets that could have a material effect on the
    financial statements.                                                                                                                                       



Internal Control-Integrated Framework.


10-K 10-K.


66



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##### Table of Contents





| |                                                         
| | --------------------------------------------------------
| | Changes in Internal Control Over Financial
    Reporting






ITEM 9B.     OTHER INFORMATION







PART III







|         |                                                   
|-------- | --------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



Executive Officers 10-K


http://www.cellgenesys.com/investing-business-conduct.shtml


8-K







|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT AND RELATED STOCKHOLDER MATTERS








|         |                                               
|-------- | ----------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS








|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES



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##### Table of Contents






PART IV







|         |                                           
|-------- | ------------------------------------------
|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are included as part of this
Annual Report on
Form 10-K.




|   |                              
|-- | -----------------------------
|1. | Index to Financial Statements

|                                                                                                             |  |      |    | 
|------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|                                                                                                             |  | Page |   
|                                                                                                             |  |      |   
|Consolidated Balance Sheets at
    December 31, 2005 and 2004                                                |  |      | 44 | 
|Consolidated Statements of Operations for
    the years ended December 31, 2005, 2004 and 2003               |  |      | 45 | 
|Consolidated Statements of
    Stockholders Equity for the years ended December 31,
    2005, 2004 and 2003 |  |      | 46 | 
|Consolidated Statements of Cash Flows for
    the years ended December 31, 2005, 2004 and 2003               |  |      | 47 | 
|Notes to Consolidated Financial
    Statements                                                               |  |      | 48 | 



|   |                              
|-- | -----------------------------
|2. | Financial Statement Schedules





|   |         
|-- | --------
|3. | Exhibits

|       |    |      |  |             |  |                                                                                                                                                                                                                                                                                                                           
|------ | -- | ---- |  | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |    | Note |  | Description
|       |    |      |  |            
|       | 2  | .1   |  | (1)         |  | Agreement and plan of merger and reorganization, dated as of
    January 12, 1997, among Cell Genesys, S Merger Corp. and
    Somatix Therapy Corporation.                                                                                                                                                                
|       | 2  | .3   |  | (3)         |  | Series A Preferred Stock Purchase Agreement dated
    January 10, 2001, pursuant to which Cell Genesys purchased
    shares of Series A Preferred Stock of Ceregene, Inc.                                                                                                                                                 
|       | 2  | .4   |  | (4)         |  | Agreement and Plan of Reorganization dated as of August 1,
    2001 by and among Cell Genesys, Satellite Acquisition
    Corporation, Calydon, Inc., Kenneth Socha as shareholder
    representative (with respect to Articles VII and IX only)
    and Chase Manhattan Bank and Trust Company, N.A., as escrow
    agent.
|       | 3  | .1   |  | (5)         |  | Restated Certificate of Incorporation.                                                                                                                                                                                                                                                                                    
|       | 3  | .2   |  | (25)        |  | Certificate of Amendment to Restated Certificate of
    Incorporation.                                                                                                                                                                                                                                                    
|       | 3  | .3   |  | (5)         |  | Certificate of Designation of Rights, Preferences and Privileges
    of Series A Participating Preferred Stock.                                                                                                                                                                                                           
|       | 3  | .4   |  | (5)         |  | Certificate of Amendment to Certificate of Designation of
    Rights, Preferences and Privileges of Series A
    Participating Preferred Stock.                                                                                                                                                                           
|       | 3  | .5   |  | (5)         |  | Certificate of Designations, Preferences and Rights of
    Series B Convertible Preferred Stock.                                                                                                                                                                                                                          
|       | 3  | .6   |  | (6)         |  | Bylaws.                                                                                                                                                                                                                                                                                                                   
|       | 4  | .1   |  | (7)         |  | Amended and Restated Preferred Shares Rights Agreement, dated as
    of July 26, 2000 between Cell Genesys and Fleet National
    Bank.                                                                                                                                                                                   
|       | 4  | .2   |  | (8)         |  | Indenture dated as of October 20, 2004 by and between Cell
    Genesys and U.S. Bank National Association.                                                                                                                                                                                                                
|       | 10 | .1  |  | (9)         |  | Form of Indemnification Agreement for Directors and Officers.                                                                                                                                                                                                                                                             
|       | 10 | .6   |  | (9)         |  | License Agreement dated August 13, 1990 between Cell
    Genesys and the University of North Carolina at Chapel Hill.                                                                                                                                                                                                     
|       | 10 | .9   |  | (9)         |  | License Agreement dated June 28, 1991 between Cell Genesys
    and the University of Utah Research Foundation.                                                                                                                                                                                                            
|       | 10 | .10 |  | (10)        |  | Amended Employment Agreement with Stephen A. Sherwin, M.D.                                                                                                                                                                                                                                                                

68



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|       |    |      |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                        
|------ | -- | ---- |  | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |    | Note |  | Description
|       |    |      |  |            
|       | 10 | .11  |  | (11)        |  | Research and Development Leases between Cell Genesys and
    Drawbridge/ Forbes LLC, dated March 3, 2001.                                                                                                                                                                                                                                                                              
|       | 10 | .12  |  | (25)        |  | Lease Agreement dated June 29, 2000 between Lincoln-RECP
    Industrial OPCO, LLC and Cell Genesys, First Amendment to Lease
    Agreement dated January 2, 2001 between F & S
    Hayward, LLC and Cell Genesys and Lease Agreement dated
    January 7, 2002 between F & S Hayward II, LLC
    and Cell Genesys for premises located at 24570 Clawiter Road,
    Hayward, California.
|       | 10 | .13 |  | (12)        |  | 2001 Nonstatutory Stock Option Plan.                                                                                                                                                                                                                                                                                                                                                   
|       | 10 | .14 |  | (13)        |  | 2002 Employee Stock Purchase Plan.                                                                                                                                                                                                                                                                                                                                                     
|       | 10 | .15 |  | (14)        |  | Form of Change of Control Severance Agreement.                                                                                                                                                                                                                                                                                                                                         
|       | 10 | .16 |  | (15)        |  | Amended and Restated 1998 Incentive Stock Plan.                                                                                                                                                                                                                                                                                                                                        
|       | 10 | .17* |  | (16)        |  | Amended and Restated GVAX Agreement by and between Japan Tobacco
    Inc. and Cell Genesys dated November 26, 2001.                                                                                                                                                                                                                                                                    
|       | 10 | .19  |  | (16)        |  | Industrial Lease Agreement dated February 1, 2002, between
    Shelby Drive Corporation, and Cell Genesys for property located
    at 4600 Shelby Drive, Suite 108, Memphis, Tennessee.                                                                                                                                                                                                
|       | 10 | .21* |  | (17)        |  | License Agreement dated June 7, 2002 between Transkaryotic
    Therapies, Inc. and Cell Genesys, Inc.                                                                                                                                                                                                                                                                                  
|       | 10 | .22* |  | (18)        |  | Patent Assignment and License Agreement dated July 23, 2003
    between Cell Genesys, Novartis AG and Genetic Therapy Inc.                                                                                                                                                                                                                                                             
|       | 10 | .23* |  | (19)        |  | Product Development and Option Agreement dated July 23,
    2003 between Cell Genesys and Novartis Pharma AG.                                                                                                                                                                                                                                                                          
|       | 10 | .24  |  | (20)        |  | Standstill and Registration Rights Agreement dated July 23,
    2003 between Cell Genesys, Novartis AG and Genetic Therapy, Inc.                                                                                                                                                                                                                                                       
|       | 10 | .25  |  | (21)        |  | Resale Registration Rights Agreement dated as of
    October 20, 2004 among Cell Genesys and J.P. Morgan
    Securities Inc. and Lehman Brothers Inc., as representatives of
    the initial purchaser.                                                                                                                                                                                
|       | 10 | .26 |  | (22)        |  | Contract of Employment dated February 25, 2005 between
    Robert J. Dow and Cell Genesys.                                                                                                                                                                                                                                                                                             
|       | 10 | .27 |  | (23)        |  | Change of Control Severance Agreement dated May 2, 2005
    between Robert J. Dow and Cell Genesys.                                                                                                                                                                                                                                                                                    
|       | 10 | .28 |  | (24)        |  | 2005 Equity Incentive Plan.                                                                                                                                                                                                                                                                                                                                                            
|       | 12 | .1   |  | (25)        |  | Computation of Ratio of Earnings to Fixed Charges and Ratio of
    Earnings to Combined Fixed Charges and Preferred Stock Dividend
    Requirements.                                                                                                                                                                                                                                   
|       | 21 | .1   |  | (25)        |  | Subsidiaries of Cell Genesys, Inc.                                                                                                                                                                                                                                                                                                                                                     
|       | 23 | .1   |  | (25)        |  | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                                                                                              
|       | 31 | .1   |  | (25)        |  | Certification of Chief Executive Officer and Chief Financial
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.                                                                                                                                                                                                                                                
|       | 32 | .1   |  | (26)        |  | Certification of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                 






| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| | * | Confidential treatment has been granted with respect to specific
    portions of this exhibit.



| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | Management compensatory plan or arrangement required to be filed
    as an exhibit pursuant to Item 15(c) of
    Form 10-K.



| |     |                                                                                                                                                       
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated by reference to Exhibit 2.1 filed with the
    Companys
    Form 8-K dated
    January 12, 1997.                                        
|
| | (3) | Incorporated by reference to Exhibit 10.4 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended March 31, 2001.    
|
| | (4) | Incorporated by reference to Exhibit 10.1 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended September 30, 2001.

69



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##### Table of Contents





| |     |                                                                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (5) | Incorporated by reference to the same numbered exhibit filed
    with the Companys Registration Statement on
    Form S-3/ A (Reg.
    No. 333-102122)
    filed with the SEC on January 30, 2003.
|
| | (6) | Incorporated by reference to the same numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K for the
    year ended December 31, 2003.                                       
|
| | (7) | Incorporated by reference to the Companys
    Form 8-A12G/ A
    dated July 28, 2000.                                                                                                             
|
| | (8) | Incorporated by reference to Exhibit 4.1 filed with the
    Companys Registration Statement on
    Form S-3 (Reg.
    No. 333-121732)
    filed with the SEC on December 29, 2004.                
|
| | (9) | Incorporated by reference to the same numbered exhibit filed
    with the Companys Registration Statement on
    Form S-1 (Reg.
    No. 33-46452) as
    amended.                                 



|     |                                                                                                                                                                                        
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to Exhibit 10.20 filed with the
    Companys Annual Report on
    Form 10-K for the
    year ended December 31, 1992.                                       
|    
|(11) | Incorporated by reference to Exhibit 10.2 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended March 31, 2001.                                     
|    
|(12) | Incorporated by reference to Exhibit 4.2 filed with the
    Companys Registration Statement on
    Form S-8 (Reg.
    No. 333-91796)
    filed with the SEC on July 2, 2002.          
|    
|(13) | Incorporated by reference to Exhibit 4.1 filed with the
    Companys Registration Statement on
    Form S-8 (Reg.
    No. 333-91796)
    filed with the SEC on July 2, 2002.          
|    
|(14) | Incorporated by reference to Exhibit 10.26 filed with the
    Companys Annual Report on
    Form 10-K for the
    year ended December 31, 2002.                                       
|    
|(15) | Incorporated by reference to Exhibit 10.2 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended June 30, 2003.                                      
|    
|(16) | Incorporated by reference to the same numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K for the
    year ended December 31, 2001.                           
|    
|(17) | Incorporated by reference to the same numbered exhibit filed
    with the Companys Quarterly Report on
    Form 10-Q/ A for
    the quarter ended June 30, 2002 (filed July 30, 2003).
|    
|(18) | Incorporated by reference to Exhibit 10.3 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended June 30, 2003.                                      
|    
|(19) | Incorporated by reference to Exhibit 10.4 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended June 30, 2003.                                      
|    
|(20) | Incorporated by reference to Exhibit 10.5 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended June 30, 2003.                                      
|    
|(21) | Incorporated by reference to Exhibit 10.1 filed with the
    Companys Registration Statement on
    Form S-3 (Reg.
    No. 333-121732)
    filed with the SEC on December 29, 2004.   
|    
|(22) | Incorporated by reference to Exhibit 10.1 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended March 31, 2005.                                     
|    
|(23) | Incorporated by reference to Exhibit 10.2 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended March 31, 2005.                                     
|    
|(24) | Incorporated by reference to Exhibit 4.1 filed with the
    Companys Registration Statement on
    Form S-8 (Reg.
    No. 333-127158)
    filed with the SEC on August 3, 2005.       
|    
|(25) | Filed herewith.                                                                                                                                                                        
|    
|(26) | Furnished herewith.                                                                                                                                                                    

70



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SIGNATURES






| |                   
| | ------------------
| | Cell Genesys, Inc.



| |     |                     
| | --- | --------------------
| | By: | /s/ SHARON E. TETLOW

| | 
| | 
| | 



| |                                                  
| | -------------------------------------------------
| | Sharon E. Tetlow                                 
| | Senior Vice President and Chief Financial Officer
| | (Principal Financial and Accounting Officer)     



|                                                             |  |                                                                                                       |  |                |  | 
|------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                                    |  | Title                                                                                                 |  | Date          
|                                                             |  |                                                                                                       |  |               
|                                                            
|/s/ Stephen A.
    Sherwin, M.D.Stephen A. Sherwin, M.D.     |  | Chairman of the Board and
    Chief Executive Officer(Principal Executive Officer)                    |  | March 13, 2006
|                                                            
|/s/ Sharon E. TetlowSharon E. Tetlow                         |  | Senior Vice President and
    Chief Financial Officer(Principal Financial and
    Accounting Officer) |  | March 13, 2006
|                                                            
|/s/ David W. CarterDavid W. Carter                           |  | Director                                                                                              |  | March 13, 2006
|                                                            
|/s/ Nancy M. CrowellNancy M. Crowell                         |  | Director                                                                                              |  | March 13, 2006
|                                                            
|/s/ James M. GowerJames M. Gower                             |  | Director                                                                                              |  | March 13, 2006
|                                                            
|/s/ John T.
    Potts, Jr., M.D.John T.
    Potts, Jr., M.D. |  | Director                                                                                              |  | March 13, 2006
|                                                            
|/s/ Thomas E.
    Shenk, Ph.D.Thomas E. Shenk, Ph.D.         |  | Director                                                                                              |  | March 13, 2006
|                                                            
|/s/ Eugene L. StepEugene L. Step                             |  | Director                                                                                              |  | March 13, 2006
|                                                            
|/s/ Inder M.
    Verma, Ph.D.Inder M. Verma, Ph.D.           |  | Director                                                                                              |  | March 13, 2006
|                                                            
|/s/ Dennis L. WingerDennis L. Winger                         |  | Director                                                                                              |  | March 13, 2006

71



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##### Table of Contents






EXHIBIT INDEX


|       |    |      |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                        
|------ | -- | ---- |  | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |    | Note |  | Description
|       |    |      |  |            
|       | 2  | .1   |  | (1)         |  | Agreement and plan of merger and reorganization, dated as of
    January 12, 1997, among Cell Genesys, S Merger Corp. and
    Somatix Therapy Corporation.                                                                                                                                                                                                                             
|       | 2  | .3   |  | (3)         |  | Series A Preferred Stock Purchase Agreement dated
    January 10, 2001, pursuant to which Cell Genesys purchased
    shares of Series A Preferred Stock of Ceregene, Inc.                                                                                                                                                                                                              
|       | 2  | .4   |  | (4)         |  | Agreement and Plan of Reorganization dated as of August 1,
    2001 by and among Cell Genesys, Satellite Acquisition
    Corporation, Calydon, Inc., Kenneth Socha as shareholder
    representative (with respect to Articles VII and IX only)
    and Chase Manhattan Bank and Trust Company, N.A., as escrow
    agent.                                                             
|       | 3  | .1   |  | (5)         |  | Restated Certificate of Incorporation.                                                                                                                                                                                                                                                                                                                                                 
|       | 3  | .2   |  | (25)        |  | Certificate of Amendment to Restated Certificate of
    Incorporation.                                                                                                                                                                                                                                                                                                                 
|       | 3  | .3   |  | (5)         |  | Certificate of Designation of Rights, Preferences and Privileges
    of Series A Participating Preferred Stock.                                                                                                                                                                                                                                                                        
|       | 3  | .4   |  | (5)         |  | Certificate of Amendment to Certificate of Designation of
    Rights, Preferences and Privileges of Series A
    Participating Preferred Stock.                                                                                                                                                                                                                                        
|       | 3  | .5   |  | (5)         |  | Certificate of Designations, Preferences and Rights of
    Series B Convertible Preferred Stock.                                                                                                                                                                                                                                                                                       
|       | 3  | .6   |  | (6)         |  | Bylaws.                                                                                                                                                                                                                                                                                                                                                                                
|       | 4  | .1   |  | (7)         |  | Amended and Restated Preferred Shares Rights Agreement, dated as
    of July 26, 2000 between Cell Genesys and Fleet National
    Bank.                                                                                                                                                                                                                                                
|       | 4  | .2   |  | (8)         |  | Indenture dated as of October 20, 2004 by and between Cell
    Genesys and U.S. Bank National Association.                                                                                                                                                                                                                                                                             
|       | 10 | .1  |  | (9)         |  | Form of Indemnification Agreement for Directors and Officers.                                                                                                                                                                                                                                                                                                                          
|       | 10 | .6   |  | (9)         |  | License Agreement dated August 13, 1990 between Cell
    Genesys and the University of North Carolina at Chapel Hill.                                                                                                                                                                                                                                                                  
|       | 10 | .9   |  | (9)         |  | License Agreement dated June 28, 1991 between Cell Genesys
    and the University of Utah Research Foundation.                                                                                                                                                                                                                                                                         
|       | 10 | .10 |  | (10)        |  | Amended Employment Agreement with Stephen A. Sherwin, M.D.                                                                                                                                                                                                                                                                                                                             
|       | 10 | .11  |  | (11)        |  | Research and Development Leases between Cell Genesys and
    Drawbridge/ Forbes LLC, dated March 3, 2001.                                                                                                                                                                                                                                                                              
|       | 10 | .12  |  | (25)        |  | Lease Agreement dated June 29, 2000 between Lincoln-RECP
    Industrial OPCO, LLC and Cell Genesys, First Amendment to Lease
    Agreement dated January 2, 2001 between F & S
    Hayward, LLC and Cell Genesys and Lease Agreement dated
    January 7, 2002 between F & S Hayward II, LLC
    and Cell Genesys for premises located at 24570 Clawiter Road,
    Hayward, California.
|       | 10 | .13 |  | (12)        |  | 2001 Nonstatutory Stock Option Plan.                                                                                                                                                                                                                                                                                                                                                   
|       | 10 | .14 |  | (13)        |  | 2002 Employee Stock Purchase Plan.                                                                                                                                                                                                                                                                                                                                                     
|       | 10 | .15 |  | (14)        |  | Form of Change of Control Severance Agreement.                                                                                                                                                                                                                                                                                                                                         
|       | 10 | .16 |  | (15)        |  | Amended and Restated 1998 Incentive Stock Plan.                                                                                                                                                                                                                                                                                                                                        
|       | 10 | .17* |  | (16)        |  | Amended and Restated GVAX Agreement by and between Japan Tobacco
    Inc. and Cell Genesys dated November 26, 2001.                                                                                                                                                                                                                                                                    
|       | 10 | .19  |  | (16)        |  | Industrial Lease Agreement dated February 1, 2002, between
    Shelby Drive Corporation, and Cell Genesys for property located
    at 4600 Shelby Drive, Suite 108, Memphis, Tennessee.                                                                                                                                                                                                
|       | 10 | .21* |  | (17)        |  | License Agreement dated June 7, 2002 between Transkaryotic
    Therapies, Inc. and Cell Genesys, Inc.                                                                                                                                                                                                                                                                                  
|       | 10 | .22* |  | (18)        |  | Patent Assignment and License Agreement dated July 23, 2003
    between Cell Genesys, Novartis AG and Genetic Therapy Inc.                                                                                                                                                                                                                                                             
|       | 10 | .23* |  | (19)        |  | Product Development and Option Agreement dated July 23,
    2003 between Cell Genesys and Novartis Pharma AG.                                                                                                                                                                                                                                                                          
|       | 10 | .24  |  | (20)        |  | Standstill and Registration Rights Agreement dated July 23,
    2003 between Cell Genesys, Novartis AG and Genetic Therapy, Inc.                                                                                                                                                                                                                                                       



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##### Table of Contents



|       |    |      |  |             |  |                                                                                                                                                                                                        
|------ | -- | ---- |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |    | Note |  | Description
|       |    |      |  |            
|       | 10 | .25  |  | (21)        |  | Resale Registration Rights Agreement dated as of
    October 20, 2004 among Cell Genesys and J.P. Morgan
    Securities Inc. and Lehman Brothers Inc., as representatives of
    the initial purchaser.
|       | 10 | .26 |  | (22)        |  | Contract of Employment dated February 25, 2005 between
    Robert J. Dow and Cell Genesys.                                                                                                             
|       | 10 | .27 |  | (23)        |  | Change of Control Severance Agreement dated May 2, 2005
    between Robert J. Dow and Cell Genesys.                                                                                                    
|       | 10 | .28 |  | (24)        |  | 2005 Equity Incentive Plan.                                                                                                                                                                            
|       | 12 | .1   |  | (25)        |  | Computation of Ratio of Earnings to Fixed Charges and Ratio of
    Earnings to Combined Fixed Charges and Preferred Stock Dividend
    Requirements.                                                   
|       | 21 | .1   |  | (25)        |  | Subsidiaries of Cell Genesys, Inc.                                                                                                                                                                     
|       | 23 | .1   |  | (25)        |  | Consent of Independent Registered Public Accounting Firm.                                                                                                                                              
|       | 31 | .1   |  | (25)        |  | Certification of Chief Executive Officer and Chief Financial
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.                                                                
|       | 32 | .1   |  | (26)        |  | Certification of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                 






| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| | * | Confidential treatment has been granted with respect to specific
    portions of this exhibit.



| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | Management compensatory plan or arrangement required to be filed
    as an exhibit pursuant to Item 15(c) of
    Form 10-K.



| |     |                                                                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated by reference to Exhibit 2.1 filed with the
    Companys
    Form 8-K dated
    January 12, 1997.                                                                                     
|
| | (3) | Incorporated by reference to Exhibit 10.4 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended March 31, 2001.                                                 
|
| | (4) | Incorporated by reference to Exhibit 10.1 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended September 30, 2001.                                             
|
| | (5) | Incorporated by reference to the same numbered exhibit filed
    with the Companys Registration Statement on
    Form S-3/ A (Reg.
    No. 333-102122)
    filed with the SEC on January 30, 2003.
|
| | (6) | Incorporated by reference to the same numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K for the
    year ended December 31, 2003.                                       
|
| | (7) | Incorporated by reference to the Companys
    Form 8-A12G/ A
    dated July 28, 2000.                                                                                                             
|
| | (8) | Incorporated by reference to Exhibit 4.1 filed with the
    Companys Registration Statement on
    Form S-3 (Reg.
    No. 333-121732)
    filed with the SEC on December 29, 2004.                
|
| | (9) | Incorporated by reference to the same numbered exhibit filed
    with the Companys Registration Statement on
    Form S-1 (Reg.
    No. 33-46452) as
    amended.                                 



|     |                                                                                                                                                                              
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to Exhibit 10.20 filed with the
    Companys Annual Report on
    Form 10-K for the
    year ended December 31, 1992.                             
|    
|(11) | Incorporated by reference to Exhibit 10.2 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended March 31, 2001.                           
|    
|(12) | Incorporated by reference to Exhibit 4.2 filed with the
    Companys Registration Statement on
    Form S-8 (Reg.
    No. 333-91796)
    filed with the SEC on July 2, 2002.
|    
|(13) | Incorporated by reference to Exhibit 4.1 filed with the
    Companys Registration Statement on
    Form S-8 (Reg.
    No. 333-91796)
    filed with the SEC on July 2, 2002.
|    
|(14) | Incorporated by reference to Exhibit 10.26 filed with the
    Companys Annual Report on
    Form 10-K for the
    year ended December 31, 2002.                             
|    
|(15) | Incorporated by reference to Exhibit 10.2 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended June 30, 2003.                            
|    
|(16) | Incorporated by reference to the same numbered exhibit filed
    with the Companys Annual Report on
    Form 10-K for the
    year ended December 31, 2001.                 



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##### Table of Contents





|     |                                                                                                                                                                                        
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(17) | Incorporated by reference to the same numbered exhibit filed
    with the Companys Quarterly Report on
    Form 10-Q/ A for
    the quarter ended June 30, 2002 (filed July 30, 2003).
|    
|(18) | Incorporated by reference to Exhibit 10.3 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended June 30, 2003.                                      
|    
|(19) | Incorporated by reference to Exhibit 10.4 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended June 30, 2003.                                      
|    
|(20) | Incorporated by reference to Exhibit 10.5 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended June 30, 2003.                                      
|    
|(21) | Incorporated by reference to Exhibit 10.1 filed with the
    Companys Registration Statement on
    Form S-3 (Reg.
    No. 333-121732)
    filed with the SEC on December 29, 2004.   
|    
|(22) | Incorporated by reference to Exhibit 10.1 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended March 31, 2005.                                     
|    
|(23) | Incorporated by reference to Exhibit 10.2 filed with the
    Companys Quarterly Report on
    Form 10-Q for the
    quarter ended March 31, 2005.                                     
|    
|(24) | Incorporated by reference to Exhibit 4.1 filed with the
    Companys Registration Statement on
    Form S-8 (Reg.
    No. 333-127158)
    filed with the SEC on August 3, 2005.       
|    
|(25) | Filed herewith.                                                                                                                                                                        
|    
|(26) | Furnished herewith.