##### Table of Contents



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 1934For the fiscal year ended
    December 31, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition 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(Address of principal
    executive offices)

94080(Zip Code)   (650) 266-3000
 (Registrants telephone
    number, including area code)
      Securities registered pursuant
    to Section 12 (b) of the Act:
  Title of each class

Name of exchange on which registeredCommon Stock, $.001 Par Value

The NASDAQ Stock Market LLCPreferred Shares Purchase Rights   Securities registered pursuant to Section 12(g) of
    the Act:
      o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K. Form 10-K.




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##### 



TABLE OF
    CONTENTS
  PagePART IItem 1.

Business


1Item 1A.

Risk
    Factors


14Item 1B.

Unresolved Staff
    Comments


28Item 2.

Properties


28Item 3.

Legal
    Proceedings


28Item 4.

Submission of
    Matters to a Vote of Security Holders


28PART IIItem 5.

Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


29Item 6.

Selected Financial
    Data


30Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operation


31Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


40Item 8.

Financial
    Statements and Supplementary Data


41Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


66Item 9A.

Controls and
    Procedures


66Item 9B.

Other
    Information


66PART IIIItem 10.

Directors,
    Executive Officers and Corporate Governance


67Item 11.

Executive
    Compensation


67Item 12.

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


67Item 13.

Certain
    Relationships and Related Transactions, and Director
    Independence


67Item 14.

Principal
    Accountant Fees and Services


67PART IVItem 15.

Exhibits and
    Financial Statement Schedules


68SIGNATURES


72EXHIBIT 12.1EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1   i




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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, 2006 and other documents
    filed by us from time to time with the Securities and Exchange
    Commission.
  ITEM 1.
    BUSINESS  Overview
  off-the-shelf
      ® (650) 266-3000. http://www.cellgenesys.com; Form 10-K, Form 10-Q, Form 8-K,
   1




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Note 14, Subsequent Events Form 10-K
      Our
    Clinical Pipeline
  Product Candidates

Targeted Indication

Status

Commercialization RightsGVAX Cancer
    Immunotherapies:Prostate Cancer

Prostate cancer (hormone-
    refractory metastatic disease)

Phase 3

Cell GenesysPancreatic Cancer

Resectable pancreatic cancer

Phase 2

Cell GenesysLeukemia

Acute myelogenous leukemia

Phase 2

Cell GenesysChronic myelogenous leukemia

Phase 2

Cell GenesysOncolytic Virus
    Therapy:CG0070

Recurrent bladder cancer

Phase 1

Cell Genesys/Novartis  2




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Our
    GVAXtmCancer Immunotherapy Program
  GM-CSF, GM-CSF
  off-the-shelf
  GVAX
    Immunotherapy for Prostate Cancer
  off-the-shelf
    ®
   3




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follow-up. follow-up
  (MDX-010), CTLA-4
  (VITAL-1) VITAL-1
      GVAX
    Immunotherapy for Pancreatic Cancer
   4




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The
    Journal of Experimental Medicine
  GVAX
    Cancer Immunotherapy for Leukemia
  ®
    ® follow-up
  Our
    Oncolytic Virus Therapies Program
   5




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CG0070
    Oncolytic Virus Therapy for Recurrent Bladder Cancer
  follow-up
  CG5757
    Oncolytic Virus Therapy for Multiple Types of Cancer
    Government
    Regulations
  FDA
    and Other Foreign Regulation
     6




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VITAL-1 VITAL-2
    and/or
 7




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direct-to-consumer
  Other
    Government Regulations
      Manufacturing
    Corporate
    Collaborations
  Novartis
    AG
   8




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Medarex,
    Inc.
    Amgen,
    Inc.
  ®
  Other
    Collaborations
    Patents
    and Trade Secrets
   9




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and/or
      Competition
   10




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Human
    Resources
      Executive
    Officers
    Name

Age

PositionStephen A. Sherwin, M.D.


58


Chairman of the Board and Chief
    Executive OfficerSharon E. Tetlow


47


Senior Vice President and Chief
    Financial OfficerRobert J. Dow, MBChB


56


Senior Vice President, Medical
    Affairs and Chief Medical OfficerCarol C. Grundfest


52


Senior Vice President, Regulatory
    Affairs and Portfolio ManagementChristine B. McKinley


53


Senior Vice President, Human
    ResourcesMichael W. Ramsay


50


Senior Vice President, OperationsRobert H. Tidwell


63


Senior Vice President, Corporate
    DevelopmentPeter K. Working, Ph.D.


58


Senior Vice President, Research
    and DevelopmentMarc L. Belsky


51


Vice President, Finance and Chief
    Accounting OfficerKristen M. Hege, M.D.


43


Vice President, Clinical Research      11




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12




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Medical
    Advisory Board
    Name

Scientific PositionBruce Chabner, M.D.

Clinical Director
    Massachusetts General Hospital Cancer Center
    Professor of Medicine
    Harvard Medical SchoolJordan U.
    Gutterman, M.D.

Department of Molecular
    Therapeutics
    Professor of Medicine
    University of Texas
    M.D. Anderson Cancer CenterCraig Henderson, M.D.

Adjunct Professor of
    Hematology/Oncology
    University of California, San FranciscoRonald Levy, M.D.

Professor of Medicine
    Chief of the Division of Oncology
    Stanford University School of MedicineWilliam
    Nelson, M.D., Ph.D.

Associate Professor of Oncology,
    Pathology,
    Pharmacology and Medicine, and Urology
    Sidney Kimmel Comprehensive Cancer Center
    The Johns Hopkins UniversityJohn 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    13




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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.
       14




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and/or
  We
    have not been profitable absent the gains on sales of stock in
    Abgenix, our former subsidiary, and certain up-front 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.
        
    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; 15




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
    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.    Our
    substantial indebtedness could adversely affect our financial
    condition.
    
    make it more difficult for us to satisfy our obligations with
    respect to the convertible notes;
    increase our vulnerability to general adverse economic and
    industry conditions;
    limit our ability to raise additional funds to fund future
    working capital, capital expenditures, research and development
    and other general corporate requirements;
    require us to dedicate a substantial portion of our cash flow
    from operations to service payments on our debt;
    limit our flexibility to react to changes in our business and
    the industry in which we operate;
    place us at a competitive disadvantage to any of our competitors
    that have less debt; or
    limit our ability to borrow additional funds.  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.
  and/or
   16




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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 corporate
    collaborations. 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.
  and/or
  
    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;
    ongoing compliance with cGMP regulations and other expectations
    from FDA and other regulatory bodies;
    equipment shortage or malfunction; and
    inability to validate new equipment or processes in a timely
    manner.     17




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We
    depend on clinical trial arrangements with public and private
    medical institutions and clinical research organizations 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.
   18




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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.
   19




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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.
      and/or
  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.
     20




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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.
   21




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Insurance
    coverage is increasingly more difficult and costly to obtain or
    maintain.
    Our
    business, financial condition and results of operations could
    suffer as a result of future strategic acquisitions and
    investments.
      
    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.
   22




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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.
  and/or and/or and/or and/or and/or
    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; 23




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
    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, disapproval, delays or
    suspensions 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;
    material developments related to our minority interest in
    Ceregene, Inc.;
    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.
   24




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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.
    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.
    The
    Committed Equity Financing Facility (CEFF) that we
    entered into with Kingsbridge may not be available to us if we
    elect to make a draw down, may require us to make additional
    blackout or other payments to Kingsbridge, and may
    result in dilution to our stockholders.
     25




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Recent
    accounting pronouncements impacted our results of
    operations.
    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.
   26




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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.
    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.   27




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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.
     ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS     ITEM 2.
    PROPERTIES       ITEM 3.
    LEGAL
    PROCEEDINGS     ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS  Form 8-K Form 8-K
 28




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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, 2006:

High


LowFirst Quarter

$
7.98


$
5.36Second Quarter


7.79



4.92Third Quarter


5.24



4.32Fourth Quarter


4.69



3.39   Year Ended December 31, 2005:

High


LowFirst Quarter

$
7.76


$
4.53Second Quarter


6.48



4.50Third Quarter


6.53



5.36Fourth Quarter


6.52



4.48       STOCKHOLDER
    RETURN COMPARISON
    Performance
    Measurement Comparison
   
  Form 10-K.
 29




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ITEM 6.
    SELECTED
    FINANCIAL DATA  Item 7, Managements Discussion and
    Analysis of Financial Condition and Results of Operations Form 10-K
  Year Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share amounts)Consolidated Statement of
    Operations Data:Revenue

$
1,364


$
4,584


$
11,458


$
18,128


$
39,141Total operating expenses


114,387
*


111,097



110,061



111,276



95,649Gain on sale of Abgenix, Inc.
    common stock


62,677



55,123



12,160



12,638



2,246Net loss


(82,929
)*


(64,939
)


(97,411
)


(56,406
)


(26,599
)Net loss attributed to common
    stockholders


(82,929
)*


(64,943
)


(97,511
)


(56,636
)


(27,301
)Basic and diluted net loss per
    common share


(1.67
)*


(1.43
)


(2.23
)


(1.48
)


(0.76
)   December 31,2006


2005


2004


2003


2002(In thousands)Consolidated Balance Sheet
    Data:Cash, cash equivalents and
    short-term investments, including restricted cash and investments

$
154,074


$
129,139


$
174,227


$
158,917


$
165,670Total assets


291,167



366,975



435,139



460,502



419,197Total current liabilities


51,314



69,385



77,923



94,296



76,353Long-term obligations, excluding
    current portion


51,326



52,093



51,013



146,634



104,064Convertible senior notes


145,000



145,000



145,000







Redeemable convertible preferred
    stock










1,897



2,706



7,632Accumulated deficit


(391,841
)


(308,912
)


(243,973
)


(146,562
)


(90,156
)Stockholders equity


43,527



100,497



159,306



216,866



231,148     *
    As discussed in Note 1, Organization and Summary
    of Significant Accounting Policiesto the consolidated
    financial statements included under Item 8 of this Annual
    Report on
    Form 10-K,
    effective January 1, 2006, we changed our method of
    accounting for stock-based compensation to conform to Statement
    of Financial Accounting Standards No. 123(R),
    Share-Based Payment (FAS 123(R)). 30




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ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATION  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, 2006 and other documents
    filed by us from time to time with the Securities and Exchange
    Commission.
  Overview
  tm
  Critical
    Accounting Policies and the Use of Estimates
    Revenue
    recognition
   31




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Up-front payments:
  Milestones:
  License fees:
  Income
    taxes
         32




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Stock-based
    compensation
      Note 1, Organization and Summary of
    Significant Accounting Policiesand Note 9,
    Stockholders Equity and Stock-Based
    Compensation of Notes to Consolidated Financial Statements Form 10-K
  Recently
    issued accounting standards
     33




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Results
    of Operations
  Revenue
    2006


2005


2004Novartis AG

$



$
2,031


$
5,846sanofi-aventis Group


1,000



2,000



3,173Transkaryotic Therapies, Inc.










250Ceregene, Inc. (since
    August 4, 2004)


83



69



998Other


281



484



1,191$
1,364


$
4,584


$
11,458     Research
    and development expenses
  VITAL-2
   34




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VITAL-1 VITAL-2
  EstimatedClinical Phase

Completion PeriodPhase 1


1-3 yearsPhase 2


1-3 yearsPhase 3


2-5 years   follow-up
  follow-up
  EstimatedPhase of


CompletionTreatment

Development


of PhaseGVAX Cancer
    Immunotherapies:Prostate Cancer


Phase 3



2009-2010Pancreatic Cancer


Phase 2



2008-2009Leukemia


Phase 2



2008-2009Oncolytic Virus
    Therapy:CG0070 (Recurrent Bladder Cancer)


Phase 1



2007-2008   General
    and administrative expenses
   35




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Restructuring
    charges
    Gain
    on sale of Abgenix common stock
    Interest
    and other income
    Interest
    expense
    Income
    taxes
    Liquidity
    and Capital Resources
   36




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Note 4, Investments of
    Notes to Consolidated Financial Statements Form 10-K.
        Note 14,
    Subsequent Events of Notes to Consolidated Financial
    Statements Form 10-K
   37




---



##### Table of Contents



38




---



##### Table of Contents



Payment Due2012 andTotal


2007


2008 and 2009


2010 and 2011


thereafterConvertible senior notes and
    related interest

$
167,655


$
4,531


$
9,062


$
154,062


$
South San Francisco capital
    lease obligation


86,763



5,994



13,766



14,714



52,289Operating leases


27,806



1,894



3,863



4,743



17,306$
282,224


$
12,419


$
26,691


$
173,519


$
69,595     Item 1A.
    Risk Factors
  and/or
  Off-Balance
    Sheet Arrangements
  Regulation S-K
 39




---



##### Table of Contents



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 Value2011





December 31,As of December 31, 2006

2007


2008


2009


2010


Thereafter


Total


2006(Dollars in thousands)Total Investment Securities
    Excluding Asset Backed

$
123,968


$
603


$



$



$



$
124,571


$
124,608Average Interest Rate


5.35
%


4.63
%














5.35
%


Asset Backed Securities(i)





















$
23,836


$
23,837Average Interest Rate






















3.25
%


Fixed Interest Rate Convertible
    Senior Notes

$
4,531


$
4,531


$
4,531


$
4,531


$
149,531


$
167,655


$
110,449Average Interest Rate


3.125
%


3.125
%


3.125
%


3.125
%


3.125
%


3.125
%


   Fair Value2010





December 31,As of December 31, 2005

2006


2007


2008


2009


Thereafter


Total


2005(Dollars in thousands)Total Investment Securities
    Excluding Asset Backed

$
78,724


$
9,591


$



$



$



$
88,315


$
88,200Average Interest Rate


3.27
%


4.23
%














3.38
%


Asset Backed Securities(ii)





















$
25,688


$
25,623Average Interest Rate






















4.08
%


Fixed Interest Rate Convertible
    Senior Notes

$
4,531


$
4,531


$
4,531


$
4,531


$
154,063


$
172,187


$
121,500Average 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 2007 to 2010. The expected maturity dates for these
    securities range from 2007 to 2008 and differ from the
    contractual maturity dates because the issuers of these
    securities have, in some circumstances, the right to prepay the
    obligations.(ii)
    
    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. 40




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Report of
    Independent Registered Public Accounting Firm on
    Internal Control Over Financial Reporting
                 
    41




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
               
    42




---



##### Table of Contents



CELL
    GENESYS, INC.
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2006


2005(In thousands, except par value and share data)ASSETSCurrent assets:Cash and cash equivalents

$
23,692


$
54,138Short-term investments


127,492



72,107Investment in Abgenix, Inc. common
    stock






63,824Prepaid expenses and other current
    assets


3,481



2,563Total current assets


154,665



192,632Restricted cash and investments


2,890



2,894Property and equipment, net


129,643



142,225Deferred income tax assets






24,430Unamortized debt issuance costs
    and other assets


3,969



4,794$
291,167


$
366,975LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
2,360


$
1,902Accrued compensation and benefits


5,820



4,399Other accrued liabilities


6,378



4,947Accrued income taxes


35,410



32,612Deferred income tax liabilities






24,430Current portion of capital lease
    obligation


1,346



1,095Total current liabilities


51,314



69,385Other liabilities


2,851



2,174Non-current portion of capital
    lease obligation


48,475



49,919Convertible senior notes


145,000



145,000Commitments and contingenciesStockholders equity:Preferred stock, $.001 par
    value: 5,000,000 shares authorized; none issued and
    outstanding in 2006 and 2005, respectively






Common stock, $.001 par
    value: 150,000,000 shares authorized; 57,853,953 and
    45,559,495 shares issued and outstanding in 2006 and 2005,
    respectively; 396,107 subscribed in 2006


58



46Additional paid-in capital


436,888



375,700Stock subscription receivable


(1,200
)


Accumulated other comprehensive
    income (loss)


(378
)


33,663Accumulated deficit


(391,841
)


(308,912
)Total stockholders equity


43,527



100,497$
291,167


$
366,975    43




---



##### Table of Contents



CELL
    GENESYS, INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2006


2005


2004(In thousands, except per share data)Revenue

$
1,364


$
4,584


$
11,458Operating expenses:Research and development


96,346



92,405



92,133General and administrative


18,123



16,342



17,928Restructuring charges


(82
)


2,350



Total operating expenses


114,387



111,097



110,061Loss from operations


(113,023
)


(106,513
)


(98,603
)Other income (expense):Gain on sale of Abgenix, Inc.
    common stock


62,677



55,123



12,160Interest and other income


7,495



3,058



2,662Interest expense


(10,465
)


(10,679
)


(9,885
)Loss before income taxes


(53,316
)


(59,011
)


(93,666
)Income tax provision


(29,613
)


(5,928
)


(3,745
)Net loss


(82,929
)


(64,939
)


(97,411
)Dividend in kind to preferred
    stockholders






(4
)


(100
)Net loss attributed to common
    stockholders

$
(82,929
)

$
(64,943
)

$
(97,511
)Basic and diluted net loss per
    common share

$
(1.67
)

$
(1.43
)

$
(2.23
)Weighted average shares of common
    stock outstanding-basic and diluted


49,728



45,434



43,682    44




---



##### Table of Contents



CELL
    GENESYS, INC.
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
  Accumulated





CommonAdditional


Other





Stock


TotalCommon Stock


Paid-In


Comprehensive


Accumulated


Subscription


StockholdersShares


Amounts


Capital


Income (Loss)


Deficit


Receivable


Equity(In thousands, except price per share amounts)Balances at December 31,
    2003


39,672


$
40


$
312,017


$
51,371


$
(146,562
)

$



$
216,866Comprehensive 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















1,897Issuance of common stock in
    follow-on public offering, net of issuance costs of
    $3.9 million


4,887



5



57,186















57,191Non-employee stock-based
    compensation










105















105Conversion of 74 preferred shares
    into common shares


135







909















909Dividend to preferred stockholders










(100
)














(100
)Balances at December 31,
    2004


44,978



45



372,014



31,220



(243,973
)






159,306Comprehensive loss:Net loss


















(64,939
)






(64,939
)Change in net unrealized gain on
    available-for-sale
    securities, net of taxes














2,443











2,443Total 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















1,596Non-employee stock-based
    compensation










195















195Conversion of 152 preferred shares
    into common shares


276







1,900















1,900Dividend to preferred stockholders










(4
)














(4
)Balances at December 31,
    2005


45,559



46



375,700



33,663



(308,912
)






100,497Comprehensive loss:Net loss


















(82,929
)






(82,929
)Change in net unrealized gain on
    available-for-sale
    securities, net of taxes














(34,041
)










(34,041
)Total comprehensive loss


























(116,970
)Issuance of common stock upon
    exercise of stock options and pursuant to the Employee Stock
    Purchase Plan


256







1,196















1,196Issuance of common stock upon draw
    down of committed equity financing facility at
    $3.07-$6.00 per share, net of issuance costs of
    $0.1 million


6,289



6



27,845















27,851Issuance of warrant in connection
    with committed equity financing facility










1,324















1,324Financing costs of warrant issued
    in connection with committed equity financing facility










(1,324
)














(1,324
)Issuance of common stock related to
    public offering, net of issuance costs of $0.3 million


5,750



6



25,017















25,023Stock-based compensation










5,930















5,930Common stock subscription receivable










1,200











(1,200
)


Balances at December 31,
    2006


57,854


$
58


$
436,888


$
(378
)

$
(391,841
)

$
(1,200
)

$
43,527    45




---



##### Table of Contents



CELL
    GENESYS, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2006


2005


2004(In thousands)Cash flows from operating
    activities:Net loss

$
(82,929
)

$
(64,939
)

$
(97,411
)Adjustments to reconcile net loss
    to net cash used in operating activities:Depreciation and amortization


14,521



16,204



16,773Loss (gain) on disposal of property
    and equipment


2



(27
)


(19
)Gain on sale of Abgenix, Inc.
    common stock


(62,677
)


(55,123
)


(12,160
)Stock-based compensation


5,930



137



105Deferred income tax provision


26,815



3,270



3,745Impairment of long-lived assets


193



280



Changes in operating assets and
    liabilities:Prepaid expenses and other assets


(178
)


185



1,415Accounts payable


458



(986
)


411Accrued compensation and benefits


1,421



(672
)


1,134Deferred revenue






(2,031
)


(5,846
)Accrued facility exit costs






(6,092
)


(3,367
)Other accrued liabilities


1,967



1,197



2,064Accrued income taxes


2,798



2,658



Net cash used in operating
    activities


(91,679
)


(105,939
)


(93,156
)Cash flows from investing
    activities:Purchases of short-term investments


(183,511
)


(109,730
)


(228,278
)Maturities of short-term investments


103,825



51,066



8,543Sales of short-term investments


24,521



99,629



251,661Conversion of restricted cash and
    investments


4



406



Capital expenditures


(2,046
)


(2,189
)


(5,087
)Proceeds from disposal of property
    and equipment


138



3,255



67Proceeds from sale of Abgenix, Inc.
    common stock


65,425



58,506



12,918Cash effect related to the
    deconsolidation of Ceregene










(521
)Net cash provided by investing
    activities


8,356



100,943



39,303Cash flows from financing
    activities:Proceeds from Employee Stock
    Purchase Plan and exercise of stock options


1,196



1,596



1,897Net proceeds from convertible
    senior note financing










139,912Payments under Ceregene financing










(482
)Payments under capital lease
    obligation


(1,193
)


(786
)


(515
)Payments under debt financings










(95,693
)Net proceeds from committed equity
    financing facility


27,851







Net proceeds from issuance of
    public offering


25,023







57,191Net cash provided by financing
    activities


52,877



810



102,310Net increase (decrease) in cash and
    cash equivalents


(30,446
)


(4,186
)


48,457Cash and cash equivalents,
    beginning of the year


54,138



58,324



9,867Cash and cash equivalents, end of
    the year

$
23,692


$
54,138


$
58,324Supplemental cash flow information:Cash paid for interest

$
10,158


$
9,997


$
9,155    46




---



##### Table of Contents



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:
  Milestones:
 47




---



##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    License fees:
  Property
    and equipment
    Long-lived
    assets
    Unamortized
    debt issuance costs
    Cash,
    cash equivalents and short-term investments
  available-for-sale.
  available-for-sale available-for-sale available-for-sale re-evaluate
 48




---



##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   other-than-temporary other-than-temporary,
    Fair
    value of financial instruments
    Research
    and development costs
    Net
    loss per share
  anti-dilutive
  Year Ended December 31,2006


2005Convertible senior notes


15,934



15,934Outstanding stock options


8,368



8,087Warrants to purchase common stock


375



   Comprehensive
    loss
   49




---



##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  available-for-sale
  Year Ended December 31,2006


2005


2004Net loss

$
(82,929
)

$
(64,939
)

$
(97,411
)Other comprehensive income (loss):Increase (decrease) in unrealized
    gain on investments, net of tax provision of $0.6 million,
    $21.7 million, $9.6 million in 2006, 2005 and 2004,
    respectively


1,063



32,297



(12,779
)Less: reclassification adjustment
    for gains recognized in net loss, net of related tax of
    $27.5 million, $25.0 million and $4.9 million, in
    2006, 2005 and 2004, respectively


(35,104
)


(29,854
)


(7,372
)Comprehensive loss

$
(116,970
)

$
(62,496
)

$
(117,562
)   Income
    taxes
    Segment
    reporting
    Stock-based
    compensation
    No. 123R-3, paid-in-capital
 50




---



##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Reclassifications
    Recent
    accounting pronouncements
      2.
    Restructuring
    Charges     51




---



##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Collaborative
    and License Agreements    Year Ended December 31,2006


2005


2004Novartis AG

$



$
2,031


$
5,846sanofi-aventis Group


1,000



2,000



3,173Transkaryotic Therapies, Inc.










250Ceregene, Inc. (since
    August 4, 2004)


83



69



998Other


281



484



1,191$
1,364


$
4,584


$
11,458   Global
    alliance with Novartis AG
    Gene
    activation technology licenses
     52




---



##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Gene
    therapy rights agreement with Amgen, Inc.
  ®
  Other
    collaborations
    4.
    Investments  available-for-sale
  Gross


GrossUnrealized


Unrealized


EstimatedDecember 31, 2006

Amortized Cost


Gains


Losses


Fair ValueMoney market funds

$
20,953


$



$



$
20,953Corporate notes


100,416



44



(3
)


100,457Asset backed securities


23,836



4



(3
)


23,837U.S. government agencies


3,202







(4
)


3,198$
148,407


$
48


$
(10
)

$
148,445Classified as:Cash equivalents













$
20,953Short-term investments














127,492$
148,445   53




---



##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Gross


GrossUnrealized


Unrealized


EstimatedDecember 31, 2005

Amortized Cost


Gains


Losses


Fair ValueMoney market funds

$
41,053


$
2


$



$
41,055Corporate notes


12,167



15



(5
)


12,177Asset backed securities


25,688



6



(71
)


25,623U.S. government agencies


35,095







(127
)


34,968Abgenix common stock


2,749



61,075







63,824$
116,752


$
61,098


$
(203
)

$
177,647Classified as:Cash equivalents













$
41,716Short-term investments














72,107Abgenix common stock














63,824$
177,647     available-for-sale
  December 31, 2006

Amortized Cost


Estimated Fair ValueDebt securities maturing:In one year or less

$
123,968


$
124,007In one to two years


603



601Asset backed securities*


23,836



23,837$
148,407


$
148,445     *
    
    Asset backed securities have various contractual maturity dates
    ranging from 2007 to 2010. The expected maturity dates for these
    securities range from 2007 to 2008 and differ from the
    contractual maturity dates because the issuers of these
    securities have, in some circumstances, the right to prepay the
    obligations. 54




---



##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    Property
    and Equipment    December 31,2006


2005Machinery, furniture and equipment

$
29,609


$
29,878Leasehold improvements


103,461



102,815Property and equipment under
    capital lease obligation


52,361



52,361Construction in process


1,343



1,461186,774



186,515Accumulated depreciation and
    amortization


(57,131
)


(44,290
)$
129,643


$
142,225     6.
    Convertible
    Senior Notes and Other Debt Financings  30-day
    7.
    Leases  Operating
    leases
   55




---



##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Capital
    lease obligation
      Capital LeaseOperating Leases


ObligationYears ending December 31:2007

$
1,894


$
5,9942008


1,966



6,7482009


1,897



7,0182010


2,022



7,2322011


2,721



7,4822012 and beyond


17,306



52,289Total minimum payments

$
27,806



86,763Less: Amount representing interest






(36,942
)Present value of future debt
    payments






49,821Less: Current portion of future
    payments






(1,346
)Noncurrent portion of future
    payments





$
48,475   8.
    Redeemable
    Convertible Preferred Stock     56




---



##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   9.
    Stockholders
    Equity and Stock-Based Compensation  Common
    stock
    Committed
    Equity Financing Facility
          Stock
    option plans
   57




---



##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2005 Equity Incentive Plan:
    Adoption
    of FAS 123R
      Year EndedDecember 31,2006Research and development

$
4,640General and administrative


1,290Total stock-based compensation
    expense

$
5,930Increase in net loss per
    share-basic and diluted

$
(0.12
)    58




---



##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Pro
    Forma Information for Period Prior to Adoption of
    FAS 123R
    Year Ended December 31,2005


2004Net loss attributed to common
    stockholders, as reported

$
(64,943
)

$
(97,511
)Deduct:Stock-based employee compensation
    expense determined under fair value method for all awards, net
    of related tax effects


(9,369
)


(13,516
)Pro forma net loss

$
(74,312
)

$
(111,027
)Loss per share:Basic and diluted loss per common
    share, as reported

$
(1.43
)

$
(2.23
)Basic and diluted pro forma loss
    per common share

$
(1.64
)

$
(2.54
)   Employee
    Stock-Based Compensation Valuation Assumptions
    Options


Employee Stock Purchase PlanYear Ended December 31,


Year Ended December 31,2006


2005


2004


2006


2005


2004Dividend yield


0.00
%


0.00
%


0.00
%


0.00
%


0.00
%


0.00
%Annual risk free rate of return


4.82
%


3.82
%


2.67
%


4.37
%


2.51
%


1.72
%Expected volatility


0.57



0.60



0.68



0.48



0.60



0.75Expected term (years)


5.1



4.0



3.9



1.0



0.5



0.5    59




---



##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Stock
    option activity
    Year ended December 31,2006


2005


2004Weighted





Weighted





WeightedAverage





Average





AverageExercise





Exercise





ExerciseShares


Price


Shares


Price


Shares


Price(In thousands)





(In thousands)





(In thousands)Outstanding, beginning of year


8,087


$
11.18



7,822


$
12.23



6,635


$
12.62Granted


1,640


$
5.83



1,758


$
6.27



2,131


$
11.50Exercised


(74
)

$
4.83



(106
)

$
4.44



(123
)

$
6.33Forfeited or expired


(1,285
)

$
11.87



(1,387
)

$
11.39



(821
)

$
14.44Outstanding, end of year


8,368


$
10.08



8,087


$
11.18



7,822


$
12.23Exercisable, end of year


6,040


$
11.33



5,772


$
12.26



4,951


$
12.68Weighted average grant date
    fair value





$
3.15






$
3.07






$
6.24       Options Outstanding


Options ExercisableWeighted-AverageRemaining


Weighted-





Weighted-Contractual


Average





AverageRange of

Number


Life


Exercise


Number


ExerciseExercise Price

Outstanding


(in years)


Price


Exercisable


Price(In thousands)








(In thousands)$3.39-$5.75


1,239



5.3


$
4.76



866


$
4.86$5.80-$6.07


1,458



8.1


$
6.01



498


$
5.96$6.19-$6.99


1,090



7.8


$
6.63



497


$
6.67$7.00-$9.50


1,458



4.0


$
8.52



1,318


$
8.61$9.95-$14.04


1,455



6.4


$
12.67



1,216


$
12.59$14.07-$19.63


1,302



3.8


$
17.15



1,279


$
17.20$19.88-$42.63


366



4.2


$
25.29



366


$
25.298,368



5.8


$
10.08



6,040


$
11.33   Employee
    stock purchase plan
   60




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##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Non-employee
    stock-based compensation
    Stockholder
    rights plan
    Common
    shares reserved for future issuance
    10.
    Income
    Taxes    Year Ended December 31,2006


2005


2004Current:Federal

$
(2,798
)

$
(2,658
)

$
State










(2,798
)


(2,658
)


Deferred:Federal


(26,815
)


(3,270
)


(3,745
)State










(26,815
)


(3,270
)


(3,745
)Provision for income taxes

$
(29,613
)

$
(5,928
)

$
(3,745
)    61




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##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Year Ended December 31,2006


2005


2004Tax benefit at U.S. statutory
    rate

$
18,661


$
20,654


$
32,783Change in valuation allowance


(20,969
)


(23,357
)


(43,998
)Research and development tax
    credits


2,865



2,739



2,389Tax effect of realized and
    unrealized (gains) losses on
    available-for-sale-securities
    recorded in other comprehensive income


(26,815
)


(3,270
)


5,094Interest on tax contingencies


(2,798
)


(2,658
)


Other


(557
)


(36
)


(13
)Provision for income taxes

$
(29,613
)

$
(5,928
)

$
(3,745
)    62




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##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     December 31,2006


2005Deferred tax assets:Net operating loss carryforwards

$
125,366


$
108,372Research credit carryforwards


29,262



24,573Capitalized research and
    development, net of amortization


13,366



11,347Other accruals and reserves


3,771



1,654Net deferred tax assets


171,765



145,946Valuation allowance


(171,765
)


(118,961
)



26,985Deferred tax liabilities:Depreciation






(2,555
)Unrealized gain on investments,
    including Abgenix, Inc.






(24,430
)Net deferred tax

$



$
         11.  401(k)
    Plan
   63




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##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     12.
    Related
    Party    Ceregene:
      Caliper Life Sciences:
  13.
    Selected
    Quarterly Financial Information (Unaudited)  Quarter EndedMarch 31,


June 30,


September 30,


December 31,Quarterly Results of Operations

2006


2006


2006


2006(Unaudited)(In thousands, except per share amounts)Revenue

$
176


$
1,046


$
52


$
90Research and development expenses


25,314



23,203



23,196



24,633General and administrative expenses


5,045



4,308



4,335



4,435Restructuring charges


(17
)


(40
)






(25
)Gain on sale of Abgenix, Inc.
    common stock


62,677











Net income (loss)


4,014



(27,892
)


(28,801
)


(30,250
)Basic net income (loss) per share


0.09



(0.60
)


(0.57
)


(0.54
)Diluted net income (loss) per share


0.08



(0.60
)


(0.57
)


(0.54
)   64




---



##### Table of Contents



CELL
    GENESYS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Quarter EndedMarch 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


$
85Research and development expenses


24,843



23,199



23,333



21,030General and administrative expenses


3,763



3,945



3,648



4,986Restructuring charges






853



744



753Gain on sale of Abgenix, Inc.
    common stock










6,293



48,830Net income (loss)


(29,311
)


(27,416
)


(27,268
)


19,056Basic net income (loss) per common
    share


(0.65
)


(0.60
)


(0.60
)


0.42Diluted net income (loss) per
    common share


(0.65
)


(0.60
)


(0.60
)


0.33     14.
    Subsequent
    Events       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
  Rule 13a-15(e)
  Managements
    Annual Report on Internal Control Over Financial
    Reporting
    Form 10-K.
  ITEM 9B.
    OTHER
    INFORMATION   66




---



##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    Executive Officers Form 10-K
  http://www.cellgenesys.com/investing-business-conduct.shtml
  Form 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, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   67




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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  PageConsolidated Balance Sheets at
    December 31, 2006 and 2005


43Consolidated Statements of
    Operations for the years ended December 31, 2006, 2005 and
    2004


44Consolidated Statements of
    Stockholders Equity for the years ended December 31,
    2006, 2005 and 2004


45Consolidated Statements of Cash
    Flows for the years ended December 31, 2006, 2005 and 2004


46Notes to Consolidated Financial
    Statements


47   2.
    Financial
    Statement Schedules    3.
    Exhibits  Number

Note

Description2
.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.3
.1


(2)


Restated Certificate of
    Incorporation.3
.2


(3)


Certificate of Amendment to
    Restated Certificate of Incorporation.3
.3


(2)


Certificate of Designation of
    Rights, Preferences and Privileges of Series A
    Participating Preferred Stock.3
.4


(2)


Certificate of Amendment to
    Certificate of Designation of Rights, Preferences and Privileges
    of Series A Participating Preferred Stock.3
.5


(2)


Certificate of Designations,
    Preferences and Rights of Series B Convertible Preferred
    Stock.3
.6


(4)


Bylaws.4
.1


(5)


Amended and Restated Preferred
    Shares Rights Agreement, dated as of July 26, 2000 between
    Cell Genesys and Fleet National Bank.4
.2


(6)


Indenture dated as of
    October 20, 2004 by and between Cell Genesys and
    U.S. Bank National Association.10
.1


(7)


Form of Indemnification Agreement
    for Directors and Officers.10
.6


(7)


License Agreement dated
    August 13, 1990 between Cell Genesys and the University of
    North Carolina at Chapel Hill.10
.9


(7)


License Agreement dated
    June 28, 1991 between Cell Genesys and the University of
    Utah Research Foundation.10
.10


(8)


Amended Employment Agreement with
    Stephen A. Sherwin, M.D.10
.11


(9)


Research and Development Leases
    between Cell Genesys and Drawbridge/Forbes LLC, dated
    March 3, 2001.10
.12


(3)


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


(10)


2001 Nonstatutory Stock Option
    Plan. 68




---



##### Table of Contents



Number

Note

Description10
.14


(11)


2002 Employee Stock Purchase Plan.10
.15


(12)


Form of Change of Control
    Severance Agreement.10
.16


(13)


Amended and Restated 1998
    Incentive Stock Plan.10
.19


(14)


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*


(15)


License Agreement dated
    June 7, 2002 between Transkaryotic Therapies, Inc. and Cell
    Genesys, Inc.10
.22*


(16)


Patent Assignment and License
    Agreement dated July 23, 2003 between Cell Genesys,
    Novartis AG and Genetic Therapy Inc.10
.23*


(17)


Product Development and Option
    Agreement dated July 23, 2003 between Cell Genesys and
    Novartis Pharma AG.10
.24


(18)


Standstill and Registration Rights
    Agreement dated July 23, 2003 between Cell Genesys,
    Novartis AG and Genetic Therapy, Inc.10
.25


(19)


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


(20)


Contract of Employment dated
    February 25, 2005 between Robert J. Dow and Cell Genesys.10
.27


(21)


Change of Control Severance
    Agreement dated May 2, 2005 between Robert J. Dow and Cell
    Genesys.10
.28


(22)


2005 Equity Incentive Plan.10
.29


(23)


Employee Stock Purchase Plan, as
    amended.10
.30


(24)


Common Stock Purchase Agreement
    dated March 14, 2006 between Cell Genesys and Kingsbridge
    Capital Limited.10
.31


(25)


Registration Rights Agreement
    dated March 14, 2006 between Cell Genesys and Kingsbridge
    Capital Limited.10
.32


(26)


Warrant Issued to Kingsbridge
    Capital Limited.10
.33


(27)


Common Stock Purchase Agreement
    dated February 5, 2007 between Cell Genesys and Kingsbridge
    Capital Limited.10
.34


(28)


Registration Rights Agreement
    dated February 5, 2007 between Cell Genesys and Kingsbridge
    Capital Limited.10
.35


(29)


Warrant Issued to Kingsbridge
    Capital Limited.12
.1


(30)


Computation of Ratio of Earnings
    to Fixed Charges and Ratio of Earnings to Combined Fixed Charges
    and Preferred Stock Dividend Requirements.21
.1


(30)


Subsidiaries of Cell Genesys, Inc.23
.1


(30)


Consent of Independent Registered
    Public Accounting Firm.31
.1


(30)


Certification of Chief Executive
    Officer pursuant to
    Rules 13a-14(a)
    and
    15d-14(a)
    promulgated under Sarbanes-Oxley Act of 1934, as amended.31
.2


(30)


Certification of Chief Financial
    Officer pursuant to
    Rules 13a-14(a)
    and
    15d-14(a)
    promulgated under Sarbanes-Oxley Act of 1934, as amended.32
.1


(31)


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.(2)
    
    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.  69




---



##### Table of Contents



(3)
    
    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, 2005.(4)
    
    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.(5)
    
    Incorporated by reference to the Companys
    Form 8-A12G/A
    dated July 28, 2000.(6)
    
    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.(7)
    
    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.(8)
    
    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.(9)
    
    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.(10)
    
    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.(11)
    
    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.(12)
    
    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.(13)
    
    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.(14)
    
    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.(15)
    
    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).(16)
    
    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.(17)
    
    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.(18)
    
    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.(19)
    
    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.(20)
    
    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.(21)
    
    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.(22)
    
    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.(23)
    
    Incorporated by reference to Exhibit 10.1 filed with the
    Companys Current Report on
    Form 8-K
    dated June 21, 2006.  70




---



##### Table of Contents



(24)
    
    Incorporated by reference to Exhibit 10.1 filed with the
    Companys Current Report on
    Form 8-K
    dated March 15, 2006.(25)
    
    Incorporated by reference to Exhibit 10.2 filed with the
    Companys Current Report on
    Form 8-K
    dated March 15, 2006.(26)
    
    Incorporated by reference to Exhibit 10.3 filed with the
    Companys Current Report on
    Form 8-K
    dated March 15, 2006.(27)
    
    Incorporated by reference to Exhibit 10.1 filed with the
    Companys Current Report on
    Form 8-K
    dated February 5, 2007.(28)
    
    Incorporated by reference to Exhibit 10.2 filed with the
    Companys Current Report on
    Form 8-K
    dated February 5, 2007.(29)
    
    Incorporated by reference to Exhibit 10.3 filed with the
    Companys Current Report on
    Form 8-K
    dated February 5, 2007.(30)
    
    Filed herewith.(31)
    
    Furnished herewith. 71




---



##### Table of Contents



SIGNATURES      By:
    /s/  SHARON
    E. TETLOW      By:
    /s/  MARC
    L. BELSKY         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 1, 2007/s/  Sharon
    E. TetlowSharon
    E. Tetlow

Senior Vice President and
    Chief Financial Officer(Principal Financial Officer)

March 1, 2007/s/  Marc
    L. BelskyMarc
    L. Belsky

Vice President, Finance and
    Chief Accounting Officer(Principal Accounting Officer)

March 1, 2007/s/  David
    W. CarterDavid
    W. Carter

Director

March 1, 2007/s/  Nancy
    M. CrowellNancy
    M. Crowell

Director

March 1, 2007/s/  James
    M. GowerJames
    M. Gower

Director

March 1, 2007/s/  John
    T. Potts, Jr.,
    M.D.John
    T. Potts, Jr., M.D.

Director

March 1, 2007/s/  Thomas
    E. Shenk,
    Ph.D.Thomas
    E. Shenk, Ph.D.

Director

March 1, 2007/s/  Eugene
    L. StepEugene
    L. Step

Director

March 1, 2007/s/  Inder
    M. Verma,
    Ph.D.Inder
    M. Verma, Ph.D.

Director

March 1, 2007/s/  Dennis
    L. WingerDennis
    L. Winger

Director

March 1, 2007  72