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

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FORM 10-K

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(Mark One)


[X]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
For the transition period from ________to _________
Commission file number 0-19986



CELL GENESYS, INC.



|Delaware                                                       | 94-3061375                          
|-------------------------------------------------------------- | ------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification Number)

342 Lakeside Drive, Foster City, California   94404

(650) 425-4400

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.    [   ]

As of March 15, 2002, the approximate market value of voting stock held by
non-affiliates of the Registrant was $565,505,832.  3,341,807 shares of Common
Stock held by each officer, director and holder of 5 percent or more of the
outstanding Common Stock have been excluded in that such persons may be deemed to
be affiliates.   This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

As of March 15, 2002, the number of outstanding shares of the Registrant's Common
Stock was 35,637,971.


DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for the 2002 Annual Meeting of
Stockholders are incorporated by reference into Part III of this Annual Report on
Form 10-K.  Such Proxy Statement will be filed within 120 days of the end of the
fiscal year covered by this Annual Report on Form 10-K.









CELL GENESYS, INC.
                                   FORM 10-K

                     FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                               TABLE OF CONTENTS



|Part I.   |                                                                                       | Page
|--------- | ------------------------------------------------------------------------------------- | ----
|Item 1.   | Business                                                                              | 3   
|Item 2.   | Properties                                                                            | 15  
|Item 3.   | Legal Proceedings                                                                     | 15  
|Item 4.   | Submission of Matters to a Vote of Security Holders                                   | 15  
|Part II.  |                                                                                       |     
|Item 5.   | Market for Registrant's Common Stock and Related Stockholder Matters                  | 16  
|Item 6.   | Selected Consolidated Financial Data                                                  | 17  
|Item 7.   | Management's Discussion and Analysis of Financial Condition and Results of Operations | 20  
|Item 7a.  | Quantitative and Qualitative Disclosures About Market Risk                            | 32  
|Item 8.   | Consolidated Financial Statements and Supplementary Data                              | 33  
|Item 9.   | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  | 54  
|Part III. |                                                                                       |     
|Item 10.  | Directors and Executive Officers of the Registrant                                    | 55  
|Item 11.  | Executive Compensation                                                                | 55  
|Item 12.  | Security Ownership of Certain Beneficial Owners and Management                        | 55  
|Item 13.  | Certain Relationships and Related Transactions                                        | 55  
|Part IV.  |                                                                                       |     
|Item 14.  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                       | 55  



|SIGNATURES        |  | 58
|----------------- |  | --
|POWER OF ATTORNEY |  | 59

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PART I

Statements made in this document other than
statements of historical fact, including statements about the Company's and its
subsidiaries' progress and results of preclinical studies, clinical trials,
marketability of potential products and nature of product pipelines, corporate
partnerships, licenses and intellectual property 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 and 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, results achieved in future preclinical studies and
clinical trials, the ability to manufacture the Company's products, the
regulatory approval process, competitive technologies and products, the scope
and validity of patents, proprietary technology and corporate partnerships.
Reference is made to discussions about risks associated with product development
programs, intellectual property and other risks which may affect the Company
under "Risk Factors" below. The Company does not undertake any obligation to
update forward-looking statements.



Item 1. BUSINESS

Overview



Since its inception in April 1988, Cell Genesys, Inc.
("Cell Genesys" or "the Company") has focused its research and product
development efforts on human disease therapies which are based on innovative
gene modification technologies. The Company's strategic objective is to develop
and commercialize cancer vaccines, oncolytic virus therapies and gene therapies
to treat cancer and other major, life-threatening diseases. Cell Genesys'
current clinical programs include GVAX® cancer vaccines and
oncolytic virus therapies. GVAX® cancer vaccines are in Phase II
studies for lung cancer, prostate cancer, pancreatic cancer and leukemia and in
Phase I/II studies for multiple myeloma. The Company expects to initiate a Phase
III trial for GVAX® lung cancer vaccine in late 2002 and a Phase
III trial for GVAX® prostate cancer vaccine during 2003. Ongoing
clinical programs evaluating the Company's oncolytic virus therapies include a
Phase II study of CG7060, an intratumorally administered product for early stage
prostate cancer and a Phase I/II study of CG7870, an intravenously administered
therapy for late stage prostate cancer. In addition, Cell Genesys has
preclinical oncolytic virus programs evaluating potential therapies for liver
cancer, colon cancer and bladder cancer as well as preclinical gene therapy
programs evaluating potential therapies for multiple types of cancer and
hemophilia. Additionally, Cell Genesys has a majority-owned subsidiary,
Ceregene, Inc., which is focused on gene therapies for central nervous system
disorders and Cell Genesys continues to hold approximately nine million shares
of common stock of its former subsidiary, Abgenix, Inc. (Nasdaq: ABGX), which is
focused on the development and commercialization of antibody therapies.

During 2001, Cell Genesys continued to build its gene
therapy business through the acquisition of new product platforms, through
progress in both clinical and preclinical programs, by further validating its
technology through multiple scientific papers and patent issuances, and by
establishing licensing agreements for its gene therapy technologies.
Additionally, the Company continued to invest in its manufacturing
infrastructure in preparation for Phase III clinical trials.

Cell Genesys believes that gene therapies are likely to
be developed on a continuum, progressing from ex vivo (modification of
cells outside the patient's body for injection as therapy) to in vivo
(modification of cells within the patient's body to provide therapy). The
Company's goal is to emphasize "off-the-shelf" products that enable gene therapy
to be provided in out-patient settings. These potentially include both non
patient-specific therapies, which could be vialed for direct administration and
patient-specific gene therapy products, which could be manufactured as non
patient-specific products at Cell Genesys and combined with patients' cells
prior to treatment.

Ex vivo gene therapies are currently being
evaluated by Cell Genesys in human clinical studies. These include studies of
GVAX® cancer vaccines which are designed to impart new disease-fighting
capabilities to the patient's immune system in order to enhance an
immune response against malignant cells, as well as studies of oncolytic virus
therapies which employ genetically modified adenoviruses designed to selectively
target, replicate in and kill tumor cells. During 2001, encouraging data were
obtained from clinical trials of GVAX® lung cancer vaccine,
GVAX® prostate cancer vaccine and GVAX® pancreatic
cancer vaccine. Additionally, in 2001, encouraging data were obtained from
clinical trials of the Company's oncolytic virus therapy including CG7870 for
the treatment of advanced stage prostate cancer and positive preclinical studies
were reported with CG8900 for the treatment of liver cancer, respectively.

In vivo gene therapies are at the preclinical
stage of development at Cell Genesys. Treatment strategies may target cells that
typically cannot be removed from the body for external processing and therefore
are modified within the body. With in vivo gene therapy, the treatment
goals include stimulating targeted cells to produce a protein or other substance
needed to normalize key biological processes, or otherwise inhibiting specific
disease processes. In 2001, the Company continued preclinical studies in a
number of therapeutic areas and further developed its gene therapy technologies.
While the Company's preclinical gene therapy research primarily focuses on
studies of gene therapy in animal models for cancer, the Company is also
conducting hemophilia gene therapy research. The Company's preclinical gene
therapy program in Parkinson's disease will be pursued in the future by Cell
Genesys' majority-owned subsidiary, Ceregene, Inc., which was launched in
January 2001.

Cell Genesys ended 2001 with approximately $259 million
in cash, cash equivalents and short-term investments. The Company has maintained
its financial position through strategic management of its resources including
the Company's holdings in Abgenix (of which Cell Genesys continues to hold
approximately nine million shares of common stock) and by relying on funding
from various corporate collaborations and licensing agreements. Additionally, in
late 2001, Cell Genesys secured a $60 million asset-backed financing in
connection with the construction of the Company's manufacturing facility in
Hayward, California.

The Company may finance certain of its operations through
corporate collaborations with established pharmaceutical and biotechnology
companies in order to develop its technologies as broadly as possible, to fund
product development and to accelerate the commercialization of certain product
opportunities. Such alliances are intended to provide financial resources,
research, development and manufacturing capabilities and marketing
infrastructure to aid in the commercialization of potential disease therapies.
Cell Genesys also evaluates, on an ongoing basis, opportunities to in-license or
acquire products and/or technologies that complement its portfolio. There can be
no assurance that Cell Genesys will be able to enter into additional
collaborative relationships or obtain new products and/or technologies on
acceptable terms, if at all, or that if such actions occur, they will be
successful. Failure to enter new corporate relationships or expand Cell Genesys'
product and technological base may limit Cell Genesys' success.

A major portion of our operating expenses to date are
related to the research and development ("R&D") of products either on our
own behalf or under contracts. During 2001, 2000, and 1999, our R&D expenses
were $50.8 million, $30.4 million, and $24.5 million, respectively. We intend to
maintain our strong commitment to R&D as an essential component of our
product development effort. Licensed technology developed by outside parties is
an additional source of potential products.

Background

For many years the pharmaceutical industry has
focused on developing chemical compounds as pharmaceutical drugs and disease
therapies. These traditional pharmaceutical products are most often synthesized
in the laboratory or derived from substances found in nature and include
antibiotics, antineoplastics, analgesics and a variety of other compounds. The
therapeutic value of such agents generally depends on their ability to stimulate
or inhibit physiological processes related to disease, to interfere directly
with infection or cancer, or to correct various chemical imbalances. In certain
cases, traditional pharmaceutical products may not be able to achieve these
objectives, due to a variety of reasons including unwanted side effects,
delivery of insufficient amounts of drug to the disease site, or treatment of
symptoms rather than the underlying cause of illness. Although the biotechnology
industry has made significant advances with respect to the development of
therapeutic products based on proteins or monoclonal antibodies, such products
are not always successful in treating certain complex diseases. Examples include
types of cancer, AIDS, cardiovascular diseases, neurologic conditions and a
variety of genetic diseases and disorders. Cell Genesys believes that an
important approach to the treatment of these and other diseases could involve
the genetic modification of cells, ex vivo or in vivo, to
potentially provide new, enhanced or expanded functions in the form of "gene
therapy."

Gene Therapy

A critical component of gene therapy is genes, or
segments of DNA, which typically are contained in the nucleus of cells. Genes
provide the chemical instructions that direct cells to produce proteins. The
latter process is known as gene "expression," and the resulting proteins
determine the nature and function of cells and tissues in all living organisms.

A worldwide effort has been under way for several years
to discover and study genes and their functions. Findings by academic
institutions, government organizations and various corporations are providing an
increased understanding of the relationship between specific genes and human
disease. It is now well known that genes are implicated in the cause of many
diseases, including not only inherited conditions involving a defective or
missing gene, but also a wide range of diseases arising from inappropriate
biological activity, such as the over- or under-expression of a normal gene
product as a result of environmental factors. Certain genes also may provide
therapeutic benefits by stimulating the production of proteins that can overcome
various disease processes.

The field known as gene therapy is based on the principle
that naturally occurring or modified genes can be introduced into target cells
to bring about a therapeutic effect. Depending upon the choice of genetic
material delivered, gene therapy may be used to enhance normal cell activities
or enable cells to perform new roles. In addition, certain forms of gene therapy
may involve "gene correction," which introduces normal genes into relevant cells
of patients with genetically inherited diseases, or may involve "vaccination,"
which uses genetic material or modified cells to stimulate the patient's immune
response. GVAX® cancer vaccines, one of Cell Genesys' programs
currently undergoing human clinical testing, are designed to expand the
capabilities of immune cells to target and more effectively fight cancer.
Another of Cell Genesys' clinical stage programs, oncolytic virus therapies, which
are also currently undergoing human clinical testing, are engineered to
selectively replicate in and kill targeted cancer cells, leaving healthy normal
cells largely unharmed.

Another key component of gene therapy is the methodology
used to introduce therapeutic genes into cells. Whether ex vivo or in
vivo, the insertion of genes into cells is typically accomplished using
reagents known as vectors. The role of vectors is to deliver the gene to the
target cell in order to allow the production of a specific protein. Depending
upon the type of gene and its delivery site in the cell, the expressed protein
may remain within the cell for intracellular effect, travel to the cell membrane
to exert a cell-surface effect, or be secreted into the bloodstream to provide a
systemic effect.

Different types of vectors are needed for multiple gene
therapy products and the appropriateness of a specific vector is based on the
disease indication, safety considerations, production efficiencies, disease site
and other factors. Certain viruses, because of their natural ability to insert
genes into cells, have proven to be particularly efficient vectors and can be
genetically modified to substantially eliminate inherent disease-causing
properties. Engineered viruses may potentially have selective capabilities for
targeting the delivery of genes into specific cell types and specific regions
within the cells. Cell Genesys is focusing its gene delivery efforts on the
development and use of viral vector systems, including adeno-associated viral
("AAV"), lentiviral, adenoviral and retroviral vectors.

Product Development

Cell Genesys' strategic objective is to develop and
commercialize ex vivo and in vivo gene therapies to treat cancer
and other life-threatening diseases. In its cancer programs, Cell Genesys is
genetically modifying selected cell types and viruses to impart disease-fighting
capabilities that are not possible with conventional therapeutic agents.

Clinical Programs

Overview of GVAX® Cancer Vaccines
Program. GVAX® cancer vaccines are treatment vaccines,
not preventative vaccines, designed to stimulate the patient's immune system to
effectively fight cancer. This program was added to the product portfolio of
Cell Genesys through its acquisition of Somatix Therapy Corporation in 1997.
GVAX® cancer vaccines are comprised of tumor cells which are
genetically modified to secrete an immune-stimulating hormone, granulocyte-macrophage
colony stimulating factor ("GM-CSF"), and then are lethally
irradiated for safety. The goal of GVAX® cancer vaccines is to
stimulate an anti-tumor immune response that targets and destroys tumor cells
which persist or recur following surgery, radiation therapy and other forms of
cancer treatment. Cell Genesys is currently testing non patient-specific and
patient-specific configurations of GVAX® cancer vaccines in human
clinical studies. Cell Genesys currently has clinical trials under way for
GVAX® cancer vaccines in lung cancer, prostate cancer, pancreatic
cancer, leukemia and myeloma. GVAX® cancer vaccines are
administered by intradermal (under the skin) injection on an outpatient basis.
They have been administered to over 350 patients in multiple human trials to
date and have been safe and well tolerated. The most consistent treatment-related side
effects appear to be inflammation at the injection site and
occasional low grade fever. Cell Genesys expects to manufacture
GVAX® cancer vaccines in its GMP ("Good Manufacturing Practices")
facilities located in Hayward, California and Memphis, Tennessee.

GVAX® Lung Cancer
Vaccine.Based on encouraging data from Cell Genesys' initial
GVAX® lung cancer vaccine trial, the Company initiated two
multicenter clinical trials, each evaluating a different patient-specific form
of GVAX® cancer vaccine. One form of the vaccine is made directly
from each treated patient's tumor cells. After surgical removal of a patient's
tumor, the GVAX® cancer vaccine is prepared genetically modifying
the patient's tumor cells to secrete GM-CSF. The cells are then irradiated for
safety prior to vaccinating the patient. The alternate form of patient-specific
GVAX® lung cancer vaccine involves the mixing of the patient's
tumor cells that have been irradiated for safety with a non patient-specific
GVAX® product manufactured at Cell Genesys. The first of these
trials, a Phase II trial for patients with advanced and early stage non small-cell lung
cancer, evaluated the GVAX® vaccine prepared completely
from the patient's own tumor cells. In December 2001, updated data from this
trial were presented at the International Conference on Gene Therapy of Cancer.
Of the 26 evaluable advanced stage patients who had failed prior chemotherapy
and/or radiation therapy, three patients (12 percent) experienced complete
responses (complete disappearance of tumor) -- two were ongoing at 11 and 16
months without further cancer treatment and one, maintained for nine months,
developed a local recurrence that was successfully surgically removed leaving no
evidence of tumor. Seven of eight early stage patients remain disease free
following surgical removal of their tumors and administration of
GVAX® lung cancer vaccine. In June 2001, the Company initiated
the second trial, a Phase I/II multicenter trial for patients with advanced
stage lung cancer. This trial is designed to evaluate the safety and efficacy of
the alternate form of GVAX® lung cancer vaccine, a non patient-specific
GVAX® product that is mixed with the patient's
irradiated tumor cells and is expected to enroll approximately 40 patients. Cell
Genesys expects to report data from this ongoing trial in mid-2002. The Company
will evaluate data from these two trials and is expecting to initiate a Phase
III clinical trial in late 2002 utilizing one of the two product configurations.

GVAX®Prostate Cancer
Vaccine. GVAX®prostate cancer vaccine is an "allogeneic"
(non patient-specific) vaccine comprised of prostate cancer cells that have been
genetically modified to secrete GM-CSF and then irradiated for safety. The
Company's plan is to develop and manufacture this potential product as an "off-the-shelf"
pharmaceutical for use after surgery, hormone, or radiation therapy
for advanced stage prostate cancer. Data from the initial Phase II clinical
trial of GVAX® prostate cancer vaccine in 34 patients with
hormone refractory metastatic prostate cancer demonstrated that following
treatment with the higher of two doses of GVAX® prostate cancer
vaccine, there was a trend toward prolonged progression-free survival as
measured by bone scan as compared to those treated with the lower dose (median
time to progression of 140 days versus 85 days). Additionally, earlier studies
showed a high degree of correlation between antitumor activity as measured by
PSA (Prostate Specific Antigen) and antitumor immunity as measured by formation
of new antibodies against prostate cancer cells. Based on these encouraging
data, in April 2001, Cell Genesys launched a series of Phase I/II clinical
trials in hormone refractory prostate cancer patients to evaluate the safety and
efficacy of a second-generation higher potency form of GVAX®
prostate cancer vaccine. This second-generation product is approximately five to
ten times more potent than the vaccine used in the previous trial. The Company
expects to initiate a Phase III clinical trial of GVAX® prostate
cancer vaccine in hormone refractory patients in 2003.

GVAX® Pancreatic Cancer
Vaccine. GVAX® pancreatic cancer vaccine is comprised of
"allogeneic" (non patient-specific) pancreatic cancer cells that have been
genetically modified to secrete GM-CSF and then irradiated for safety. In
October 2001, the Company reported updated results from a Phase I trial
evaluating a non patient-specific form of GVAX® pancreatic cancer
vaccine which was conducted at Johns Hopkins Oncology Center. Prolongation of
disease-free survival was demonstrated in three of eight patients who received
the two highest vaccine doses following surgery and adjuvant radiation and
chemotherapy. The updated data revealed that these three responding patients
remained disease-free at 48, 45 and 43 months after their respective diagnoses.
These data prompted the initiation of a Phase II clinical trial of
GVAX® pancreatic cancer vaccine in up to approximately 60
patients with resectable pancreatic cancer, which is evaluating
GVAX® cancer vaccine in combination with surgery and adjuvant
radiation and chemotherapy. An additional trial of GVAX®
pancreatic cancer vaccine in patients with unresectable pancreatic cancer is
expected to be initiated during 2002.

GVAX® Vaccines for Hematologic
Malignancies. Cell Genesys is also currently conducting clinical trials
utilizing a patient-specific form of GVAX® cancer vaccine
in combination with bone marrow transplantation for the treatment of hematologic
malignancies, including multiple myeloma and acute myelogenous leukemia. Prior
to being treated with chemotherapy, the patient's tumor cells are collected and
mixed with a non patient-specific GVAX® cancer vaccine product
manufactured at Cell Genesys. In February 2001, Cell Genesys initiated a
multicenter Phase I/II clinical trial evaluating GVAX® cancer
vaccine in patients with multiple myeloma. In this trial, patients are being
treated with chemotherapy to induce remission and are then vaccinated before and
after autologous bone marrow stem cell transplantation. The goal of
GVAX® vaccine therapy in this setting is to stimulate an immune
response directed against the patient's tumor cells and prolong the remission
induced by standard chemotherapy and transplantation. In November 2001, the
Company initiated a similar multicenter Phase II trial in patients with acute
myelogenous leukemia. This trial, which is expected to enroll up to
approximately 50 patients, was prompted by encouraging results published in the
May 2000 issue of the journal, Blood, demonstrating that in animal
studies of GVAX® vaccine for acute leukemia, GVAX®
vaccine administered following bone marrow transplantation significantly
prevented tumor relapse and increased the therapeutic benefit of
transplantation. Autologous (patient-specific) bone marrow transplantation is
currently being used to treat hematologic cancers in order to reduce the bone
marrow toxicity of high dose chemotherapy and to enhance antitumor immunity.

Overview of Oncolytic Virus Therapies
Program.Cell Genesys added the oncolytic virus technology
platform to its portfolio in September 2001 through its acquisition of Calydon,
Inc., a private Sunnyvale, California-based biotechnology company. As part of
this transaction, Calydon shareholders received approximately 935,000 shares of
Cell Genesys stock, then valued at approximately $17.4 million, and the
transaction also included the assumption of up to approximately $2.6 million in
Calydon liabilities by Cell Genesys. The proprietary oncolytic virus therapy
program utilizes adenovirus, one of the viruses responsible for the common cold,
to create cancer cell-killing viruses. The virus is engineered to selectively
replicate in and kill targeted cancer cells, leaving healthy normal cells
largely unharmed. The engineered viruses are delivered either by direct
injection into tumors or by intravenous administration and then replicate in
cancer cells until the cancer cell can no longer contain the virus and bursts.
The tumor cell is destroyed and the newly created viruses spread to neighboring
cancer cells to continue the cycle. Following treatment, excess virus is cleared
by the patient's immune system. Cell Genesys expects to manufacture oncolytic
virus therapies and other viral-based products in its GMP facility located in
San Diego, California.

CG7060 Oncolytic Virus Therapy for Early Stage
Prostate Cancer.Cell Genesys' CG7060, an oncolytic virus therapy
for early stage prostate cancer, has demonstrated encouraging results in an
initial Phase I/II clinical trial. CG7060 is administered via direct injection
into the prostate, similar to radiation seed therapy. Results from an initial
Phase I/II trial of CG7060 conducted in 21 patients with recurrent, organ-confined
prostate cancer, demonstrated that CG7060 was safe and well tolerated.
The trial also demonstrated evidence of antitumor activity as measured by PSA
levels in patients treated at the two higher dose levels (11 patients). Nine of
the 11 patients demonstrated greater than 35 percent reductions in PSA levels
below baseline and in four cases, there were greater than 50 percent reductions,
qualifying as partial responses, with a median time to progression of 11 months.
Cell Genesys expects to initiate a follow-on Phase II trial during 2002
evaluating CG7060 in combination with external beam radiation therapy. This
trial will be conducted in preparation for a potential Phase III trial targeted
for 2003 in which treatment with CG7060 plus radiation therapy will be compared
to treatment with radiation alone for preventing clinical relapse in newly-diagnosed,
intermediate to high risk prostate cancer patients.

CG7870 Oncolytic Virus Therapy for Advanced
Stage Prostate Cancer.Cell Genesys' CG7870, an intravenously
administered oncolytic virus therapy for the treatment of advanced stage
prostate cancer, has demonstrated encouraging results in an initial Phase I/II
clinical trial. Preliminary data, in 23 patients with recurrent prostate cancer
have demonstrated antitumor activity as measured by PSA level in six of the
treated patients after just a single intravenous injection of CG7870.
Additionally, preclinical studies of CG7870 in combination with chemotherapy,
the current standard of care for patients with advanced stage prostate cancer,
demonstrated significant synergistic antitumor activity in mouse tumor models of
prostate cancer including complete elimination of tumors within four weeks of
treatment without dose-limiting toxicity. Based on these findings, Cell Genesys
may initiate a Phase I/II trial evaluating CG7870 in combination with
chemotherapy.

Cell Genesys' GVAX® cancer vaccines and
oncolytic virus therapies are novel therapies which must undergo rigorous human
testing regulated by the Food and Drug Administration ("FDA"). There is no
assurance that GVAX® cancer vaccines or oncolytic virus therapies
will be proven safe or efficacious, or if approved, that the vaccines can be
successfully commercialized. Although preliminary results reported to date from
Cell Genesys' clinical testing of GVAX® vaccines for prostate
cancer, lung cancer, pancreatic cancer, and leukemia as well as clinical testing
of oncolytic virus therapies CG7060 and CG7870 are encouraging and the therapies
appear to be both safe and well tolerated by patients, there can be no assurance
that the therapies will be tolerated over an extended period of time or that the
clinical efficacy of the vaccines will be demonstrated in later stage testing.
There also can be no assurance that Phase I/II studies of GVAX®
vaccines for the treatment of hematologic malignancies, nor Phase I/II studies
of CG7870 will demonstrate clinical efficacy. Any conclusion as to whether the
Company's GVAX® cancer vaccines and oncolytic virus therapies can
potentially play a role in the treatment of multiple types of cancer will be
based on both the results of ongoing clinical trials as well as future Phase II
and Phase III studies.



Preclinical Programs

Cell Genesys' preclinical programs are focused on
oncolytic virus therapies and gene therapies for multiple types of cancer,
although encouraging results have been obtained in other preclinical gene
therapy programs such as hemophilia. Moreover, with the Company's increasing
focus on cancer, Cell Genesys continues to execute its plan to pursue its
Parkinson's disease gene therapy program through its majority-owned subsidiary,
Ceregene, Inc., and expects to seek partners to complete the development and
commercialization of its hemophilia gene therapy program in the future.

Cancer Gene Therapy. Cell Genesys is exploring
a variety of gene therapy strategies to block tumor growth with an emphasis on
antiangiogenesis therapies that inhibit blood vessel growth to tumors, thereby
starving the tumor of its blood supply. Cell Genesys is collaborating with
EntreMed, Inc. to evaluate two genes with antiangiogenic properties-
Angiostatin and Endostatin -using
the Company's adenoviral and AAV vectors. In June 2001, Cell Genesys reported
encouraging preclinical data at the American Society for Gene Therapy Meeting
demonstrating the feasibility of gene therapy with Angiostatin
and Endostatin
as a strategy to inhibit tumor
growth by delivering genes that block the growth of tumor blood vessels. Cell
Genesys also has an agreement with Rigel Pharmaceuticals, Inc. ("Rigel") in
which Rigel is using their high throughput functional genomics screening to
identify novel genes which have antiangiogenic capabilities. Cell Genesys will
be granted exclusive worldwide rights to these targets in the field of gene
therapy. In light of the Company's growing pipeline of potential cancer
therapeutic products, a separate collaboration with GPC Biotech focusing on the
use of cell cycle inhibitor genes for the treatment of cancer and cardiovascular
disorders was terminated in early 2002.

Oncolytic Virus Therapies. Beyond prostate
cancer, Cell Genesys' oncolytic virus technology is demonstrating encouraging
results in preclinical studies of liver cancer (CG8900), bladder cancer (CG8840)
and colon cancer (CG7980) when used alone as well as in combination with
chemotherapy or radiation. For example, it was published in the September 2001
issue of the journal, Cancer Research, that in studies evaluating CG8900
for liver cancer, human liver tumors in mice could be completely eliminated
following a single intravenous injection of CG8900 combined with doxorubicin, a
chemotherapeutic agent commonly used in the treatment of liver cancer. By late
2002, the Company plans to select one preclinical cancer product candidate to
bring into clinical trials.

Hemophilia Gene Therapy. Cell Genesys'
scientists and academic collaborators have evaluated gene therapy using an AAV
vector to deliver the factor IX gene (which produces the factor IX protein, the
protein deficient in hemophilia B patients) into the livers of both small and
large animals with hemophilia. In a canine hemophilia model, scientists observed
an 85 percent reduction in bleeding episodes following a single administration
of factor IX gene therapy. Additionally, three years after the single injection,
the treated animals continued to produce the factor IX protein that was
deficient in these animals prior to treatment. In Cell Genesys' preclinical
program for hemophilia B, an AAV vector system is employed since the factor IX
gene is small enough to fit in this vector. For hemophilia A, the company has
the option of employing an AAV vector system if a truncated form of the factor
VIII gene (which produces the factor VIII protein, the protein deficient in
hemophilia A patients) can be successfully applied, or its proprietary
lentiviral vector system if the full length gene is required for optimal
production of the deficient clotting factor protein. This program has been
targeted for outlicensing and therefore, the Company's focus in its hemophilia
program is on partnering.



Proprietary Gene Therapy Technologies

Successful gene therapy -- ex vivo or in
vivo -- depends on an effective combination of therapeutic genes and
vectors, the gene delivery technologies used to transfer genes into cells. Cell
Genesys' proprietary gene delivery technologies include AAV, lentiviral,
adenoviral and retroviral vectors. This broad portfolio of vectors enhances the
number of gene therapy applications that the Company and its collaborators can
pursue.

The selection of a specific vector is based on the
disease indication, safety considerations, production efficiencies, disease site
and other factors. Adenoviral vectors deliver larger genes into dividing or
nondividing cells and they are currently being used ex vivo in human
clinical studies of GVAX® cancer vaccines. AAV vectors deliver
smaller genes to certain nondividing cells, including muscle, liver, nerve and
blood vessel cells. Effective in vivo gene delivery using the AAV vector
has been achieved in the Company's preclinical cancer gene therapy and
hemophilia programs and previously in the Company's Parkinson's disease research
now being conducted by Ceregene, Inc. (see Cell Genesys' Assets Outside of its
Core Business in Gene Therapy). Lentiviral vectors deliver larger genes to
dividing and nondividing cells, including nerve, liver, muscle and bone marrow
stem cells. Company scientists have described improved third-generation
lentiviral vectors that employ a new safety mechanism that can prevent the
vector from functioning should it recombine with an infectious virus already
present in the individual receiving the gene therapy treatment. The Company
believes that these third generation lentiviral vectors could potentially be
employed in human clinical studies. Finally, retroviral vectors are suitable for
delivering genes ex vivo to dividing cells.

Cell Genesys believes that its broad portfolio of
vectors, positions the Company as an attractive partner for biotechnology and
pharmaceutical companies as well as academic institutions which have proprietary
genes with potential in gene therapy. Cell Genesys has signed agreements
relating to its vector technologies with several companies. These collaborations
include transactions in which Cell Genesys is reimbursed for providing gene
delivery technologies to other companies with gene therapy product opportunities
within their portfolio, as well as transactions in which Cell Genesys acquired
commercial rights to therapeutic genes owned or discovered by other companies.
Examples of the former type of transaction include agreements with EntreMed,
Inc. in cancer gene therapy, Pharmacia in animal health, Invitrogen Corporation
for the research market and Clontech Laboratories, Inc., a division of Becton
Dickinson, in genomic research kits. An example of the latter type of
transaction is Cell Genesys' collaboration with Rigel Pharmaceuticals, Inc., a
genomics company, which is providing access to genes for cancer. Cell Genesys
anticipates that additional agreements of these types will be signed in the
future.

Government Regulations

FDA Regulation. The activities required
before a pharmaceutical agent may be marketed in the United States begin with
preclinical testing. Preclinical tests include laboratory evaluation of
potential products and animal studies to assess the potential safety and
efficacy of the product and its formulations. The results of these studies and
other information must be submitted to the Food and Drug Administration ("FDA")
as part of an investigational new drug application, which must be reviewed and
approved by the FDA before proposed clinical testing can begin. Clinical trials
involve the administration of the investigational new drug to healthy volunteers
or to patients under the supervision of a qualified principal investigator.
Clinical trials are conducted in accordance with Good Clinical Practices under
protocols that detail the objectives of the study, the parameters to be used to
monitor safety and the efficacy criteria to be evaluated. Each protocol must be
submitted to the FDA as part of the investigational new drug application.
Further, each clinical study must be conducted under the auspices of an
independent institutional review board at the institution at which the study
will be conducted. The institutional review board will consider, among other
things, ethical factors and the safety of human subjects. In addition, certain
protocols involving the use of genetically modified human cells must also be
reviewed by the Recombinant Advisory Committee of the National Institutes of
Health.

Typically, clinical testing involves a three-phase
process. In Phase I, clinical trials are conducted with a small number of
subjects to determine the early safety profile and pharmacology of the new
therapy. In Phase II, clinical trials are conducted with groups of patients
afflicted with a specific disease in order to determine preliminary efficacy,
optimal dosages and expanded evidence of safety. In Phase III, large scale,
multicenter, comparative clinical trials are conducted with patients afflicted
with a target disease in order to provide enough data for the statistical proof
of efficacy and safety required by the FDA and others. In the case of products
for life-threatening diseases, the initial human testing is generally done with
diseased patients rather than with healthy volunteers. Since these patients are
already afflicted with the target disease, it is possible that such studies may
provide some results traditionally obtained in Phase II trials. These trials are
frequently referred to as Phase I/II trials. Although the preliminary Phase I/II
and Phase II clinical trials of Cell Genesys' GVAX® cancer
vaccine and oncolytic virus therapies have shown a favorable safety profile to
date, there can be no assurance that such therapies or products will be
tolerated at higher doses or that the clinical efficacy of such therapy or
product will be demonstrated in later stage testing.

The results of the preclinical and clinical testing,
together with chemistry and manufacturing information, are submitted to the FDA
in the form of a new drug application for a pharmaceutical product, and in the
form of a product license application for a biological product, for approval to
commence commercial sales. In responding to a new drug application or a product
license application, the FDA may grant marketing approvals, request additional
information or further research, or deny the application if it determines that
the application does not satisfy its regulatory approval criteria. Approvals may
not be granted on a timely basis, if at all, or if granted may not cover all the
clinical indications for which Cell Genesys is seeking approval or may contain
significant limitations in the form of warnings, precautions or
contraindications with respect to conditions of use.

Other Government Regulations. In addition
to laws and regulations enforced by the FDA, Cell Genesys is also subject to
regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other present and potential future federal, state or local laws
and regulations as Cell Genesys research and development involves the controlled
use of hazardous materials, chemicals, viruses and various radioactive
compounds.

Manufacture of clinical quantities of Cell Genesys'
products does not require an FDA license, although the FDA may at any time
inspect the Company's manufacturing facilities. The Company's initial
manufacturing facility at the Company's headquarters in Foster City, California,
is approximately 5,000 square feet and is currently being used to manufacture
clinical product for the Company's GVAX® cancer vaccine clinical
trials. Cell Genesys has three additional GMP manufacturing facilities including
a 41,000 square-foot leased facility under construction in Hayward, California,
which it expects will begin operating in late 2002, a staffed and operating
48,000 square-foot leased facility in San Diego, California and a 35,000 square-foot
facility under construction in Memphis, Tennessee, which is expected to be
available in late 2002. Cell Genesys believes that its three manufacturing
facilities will have the capacity to manufacture products for Phase III trials
and market launch. The Company expects to manufacture patient-specific
GVAX® lung cancer vaccines, viral based products and non-patient
specific GVAX®

Cell Genesys' Assets Outside of its Core Business in Gene
Therapy

Minority-Owned Abgenix, Inc. ("Abgenix")
Subsidiary. Abgenix is developing antibody therapies for inflammation,
cancer, transplant disorders, cardiovascular disease and infectious disease.
Abgenix's core technology includes strains of transgenic mice capable of
generating fully human antibodies. Cell Genesys formed Abgenix as a separate
business subsidiary in June 1996, contributing $14.0 million in cash, research,
development and manufacturing technology as well as patents and other
intellectual property specific to the antibody therapy programs. Abgenix
completed its initial public offering (Nasdaq-ABGX) in July 1998. Following the
initial public offering, Cell Genesys' ownership of Abgenix dropped below 50
percent. Additional Abgenix financings, including secondary offerings in 2000
further decreased Cell Genesys' holdings. The Company continues to hold
8,954,136 shares of Abgenix stock, or approximately 10.31 percent of outstanding
shares as of December 31, 2001. The Company expects to sell additional shares of
Abgenix common stock over time to provide additional funding for Cell Genesys'
cancer vaccine, oncolytic virus and gene therapy programs.

Ceregene, Inc., A Majority-Owned Subsidiary of Cell
Genesys. In January 2001, Cell Genesys launched a new majority-owned
subsidiary, Ceregene, Inc., located in San Diego, California, which is focused
on gene therapies for central nervous system (CNS) disorders such as Alzheimer's
disease and Parkinson's disease. Ceregene was formed through the acquisition of
Neurologic Gene Therapeutics, a private San Diego-based start-up company. Cell
Genesys contributed $10 million to Ceregene together with access to technology
and patents in the CNS gene therapy area, in exchange for approximately 60
percent ownership of the new company. Cell Genesys has majority representation
on Ceregene's board and Stephen A. Sherwin, M.D., chairman and chief executive
officer of Cell Genesys, also serves as chairman of Ceregene. In 2001,
Ceregene's operations were significantly expanded and included the appointment
of Dr. Jeffrey M. Ostrove as president and chief operating officer. Also in
2001, the first-ever study of Alzheimer's disease gene therapy was initiated at
the University of California, San Diego (UCSD) School of Medicine based on
technology exclusively licensed to Ceregene.

Gene Activation Technology. Cell Genesys
has developed a novel and proprietary method for protein production referred to
as "gene activation." Gene activation involves the insertion of genetic
regulatory elements at specific sites in cell chromosomes in proximity to a
human gene responsible for the production ("expression") of a therapeutic
protein. Subsequently, the gene-activated protein could be produced in a cell-based
production system. Gene activation may be applied to therapeutic proteins
such as erythropoietin (EPO) and potentially other proteins and may offer
certain advantages. Gene activation licensing agreements have provided more than
$25 million in revenues to Cell Genesys to date. Since February 1997, Cell
Genesys has had a license agreement with Hoechst Marion Roussel, now Aventis
Pharmaceuticals, Inc. ("Aventis"), for gene-activated EPO. To date, Cell Genesys
has received over $17 million under this license agreement, which includes
certain milestone payments relating to the development of gene-activated EPO
which Aventis is developing in collaboration with Transkaryotic Therapies, Inc.
The agreement also provides for royalties on future sales of gene-activated EPO
anywhere in the world.

Corporate Collaborations

Pharmaceutical Division of Japan
Tobacco. In November 2001, Cell Genesys and the pharmaceutical division
of Japan Tobacco Inc. ("JT") modified an agreement originally signed in December
1998 involving the Company's GVAX® prostate cancer and lung
cancer vaccine programs. Under the terms of the new agreement, the two parties
established a royalty arrangement on sales of GVAX® lung cancer
vaccines and on sales in other cancer indications that may be derived from a
certain form of that vaccine. JT will pay Cell Genesys an undisclosed royalty on
GVAX® lung cancer vaccine sales in Japan, Taiwan and Korea, and
Cell Genesys will pay JT the same royalty on such sales in North America and the
rest of the world. The two parties will continue to share equally in the product
development costs of GVAX® lung cancer vaccine and JT will
continue to pay Cell Genesys milestone payments. In addition, full commercial
rights to GVAX® prostate cancer vaccine have been returned to
Cell Genesys. As of February 2002,Cell Genesys has received over $68.4
million in milestone and other payments and reimbursement for research and
development costs. The agreement provides for future loans of up to $30 million
to Cell Genesys for Phase III development costs, if JT continues in the
collaboration into Phase III trials. The parties have also agreed to support an
ongoing clinical trial of GVAX® for kidney cancer in Japan, which
is the first clinical trial of cancer gene therapy in Japan. If the parties
agree to proceed with the development of this GVAX® product for
kidney cancer, Cell Genesys will be eligible to receive additional funding in
the form of research and development reimbursements and other payments to be
agreed upon at a later date. None of the payments involve an additional equity
investment in Cell Genesys by JT, which currently owns approximately three
percent of the Company. This is the second collaboration agreement between Cell
Genesys and JT. The first collaboration, signed in 1991, funded the successful
development of the fully human monoclonal antibody technology transferred to
Abgenix.

Gene Therapy Rights Agreement with Abgenix.
In November 1997, Cell Genesys entered into a gene therapy rights agreement (the
"GTRA") with Abgenix. The GTRA provides Cell Genesys with certain rights to
utilize Abgenix's XenoMouse

Other Collaborations. Cell Genesys has
licensing agreements with five companies relating to its four proprietary viral
vector technologies.  These collaborations enable Cell Genesys to either
acquire commercial rights to therapeutic genes owned or discovered by other
companies or to receive monetary reimbursement for providing viral vector
technologies to companies researching and developing their own gene therapy
products in disease areas that Cell Genesys is not pursuing.  Cell Genesys'
agreement with Rigel Pharmaceuticals, Inc. is an example of an agreement that
enables Cell Genesys to acquire commercial rights to therapeutic genes. Under
the agreement, Rigel is attempting to discover novel genes for use in Cell
Genesys' cancer gene therapy programs with a primary focus on genes for
antiangiogenesis in exchange for certain rights to Cell Genesys' retroviral
vector technology.   Examples of licensing agreements which provide
Cell Genesys with monetary reimbursement for providing vector technologies to
other companies include agreements with the Clonetech division of Becton
Dickinson and Invitrogen for use in the research market and an agreement with
Pharmacia in the field of animal health. Additionally, Cell Genesys has a
research collaboration with EntreMed, Inc. in which EntreMed's
Angiostatin and
Endostatin genes
are being combined with Cell Genesys' proprietary adenoviral and AAV gene
delivery systems in preclinical antiangiogenesis studies designed to assess
whether this gene therapy strategy can treat tumors by inhibiting their blood
supply.

Gene Therapy Patents and Trade Secrets

The patent positions of pharmaceutical and
biotechnology firms, including Cell Genesys, are generally uncertain and involve
complex legal and factual questions. Cell Genesys currently has approximately
315 issued or granted patents and more than 400 pending applications. While Cell
Genesys is currently prosecuting its patent applications, it cannot be certain
whether any given application will result in the issuance of a patent or, if any
patent is issued, whether it will provide significant proprietary protection or
will not be invalidated. Because patent applications in the United States are
confidential until patents are issued and publication of discoveries in the
scientific or patent literature tends to lag behind actual discoveries by
several months, Cell Genesys cannot be certain that it was the first creator of
inventions covered by pending patent applications or that it was the first to
file patent applications for such inventions.

The commercial success of the Company will also depend in
part on not infringing the patents or proprietary rights of others and not
breaching licenses granted to the Company. The Company is aware of competing
intellectual property relating to both its programs in cancer vaccines and
oncolytic viruses.  While the Company currently believes it has freedom to operate
in these areas, there can be no assurance that its position will not be challenged
by others in the future. The Company may be required  to obtain licenses to
certain third-party technologies or genes necessary in order to market our
products. Any failure to license any technologies or genes required to
commercialize our technologies or products at reasonable cost may have a material
adverse effect on the our business, results of operations or financial condition.

Litigation, which could result in substantial cost to the
Company, may also be necessary to enforce any patents issued to the Company or
to determine the scope and validity of other parties' proprietary rights. To
determine the priority of inventions, interference proceedings are frequently
declared by the U.S. Patent and Trademark Office, which could result in
substantial costs to the Company and may result in an adverse decision as to the
priority of the Company's inventions. Cell Genesys is currently involved in
multiple interference and/or opposition proceedings with regard to: (i) gene
activation technology, (ii) certain ex vivo gene therapies, (iii)
chimeric receptor technology and (iv) certain vector technologies. The outcomes
of these proceedings cannot be predicted, but are not expected to have a
material adverse effect on the Company's intellectual property position or its
business. The Company may be involved in other interference and/or opposition
proceedings in the future. The Company believes there will continue to be
significant litigation in the industry regarding patent and other intellectual
property rights.

The Company also relies on unpatented trade secrets and
improvements, unpatented know-how and continuing technological innovation to
develop and maintain its competitive position. No assurance can be given that
others will not independently develop substantially equivalent proprietary
information and techniques, or otherwise gain access to the Company's trade
secrets or disclose such technology, or that the Company can meaningfully
protect its rights to its unpatented trade secrets.

Cell Genesys requires its employees and consultants to
execute confidentiality agreements upon the commencement of employment and
consulting relationships with the Company. These agreements provide that all
confidential information developed by or made known to an individual during the
course of the employment or consulting relationship generally must be kept
confidential. In the case of employees, the agreements provide that all
inventions conceived by the individual, while employed by the Company, relating
to the Company's business are the Company's exclusive property. These agreements
may not provide meaningful protection for the Company's trade secrets in the
event of unauthorized use or disclosure of such information.

Competition

The Company faces substantial competition in the
development of products for cancer and other diseases. This competition, from
other manufacturers of the same products and from manufacturers of different
products designed for the same uses, is expected to continue in both U.S. and
ex-U.S. markets. Cancer vaccines, oncolytic viruses and gene therapies, the
three primary focus areas of the Company, are rapidly evolving areas of the
biotechnology industry and are expected to undergo many changes in the coming
years as a result of technological advances. Cell Genesys is aware of a number
of groups that are developing cancer vaccines, oncolytic viruses and gene
therapies including early-stage and established biotechnology companies,
pharmaceutical companies, academic institutions, government agencies and
research institutions. The Company faces competition from these groups in areas
such as recruiting employees, acquiring technologies that might enhance the
Company's ability to market products, establishing relationships with certain
research or academic institutions, enrolling patients in clinical trials and in
partnering certain of its programs with larger pharmaceutical companies. It is
possible that the Company's competitors could achieve earlier market
commercialization, could have superior patent protection, or could have safer,
more effective or more cost-effective products. These factors could render the
Company's potential products less competitive, which could have a material
adverse effect on its business.

Human Resources

As of December 31, 2001, Cell Genesys employed 262
persons, of whom 36 hold Ph.D. degrees and seven hold M.D. degrees. Approximately
202 employees are engaged in research and development, and 60 support business
development, intellectual property, finance and other administrative functions.
Many of Cell Genesys' management have had prior product development experience
in the biotechnology and pharmaceutical industries.

Cell Genesys' success will depend in large part upon its
ability to attract and retain employees. Cell Genesys faces competition in this
regard from other companies, research and academic institutions, government
entities and other organizations. Cell Genesys believes that it maintains good
relations with its employees.

Executive Officers

The executive officers of Cell Genesys and their ages
as of March 31, 2002 are as follows:

|Name                     |  | Age |  | Position With Cell Genesys                       
|------------------------ |  | --- |  | -------------------------------------------------
|Stephen A. Sherwin, M.D. |  | 53  |  | Chairman of the Board and Chief Executive Officer
|Joseph J. Vallner, Ph.D. |  | 55  |  | President and Chief Operating Officer            
|Matthew J. Pfeffer       |  | 44  |  | Vice President and Chief Financial Officer       
|Dale G. Ando, M.D.       |  | 48  |  | Vice President-Clinical Research                 
|Malcolm J. McKay, Ph.D.  |  | 46  |  | Vice President-Quality and Regulatory Affairs    
|Christine McKinley       |  | 48  |  | Vice President-Human Resources                   
|Michael W. Ramsay        |  | 45  |  | Vice President-Manufacturing Operations          
|Robert H. Tidwell        |  | 58  |  | Vice President-Corporate Development             
|Peter K. Working, Ph.D.  |  | 54  |  | Vice President-Research and Development          

Dr. Sherwin has served as chief executive
officer and a director of Cell Genesys since March 1990. Dr. Sherwin also served
as president until July, 2001 at which time Joseph J. Vallner, Ph.D. was
appointed president. In March 1994, he was elected to the additional position of
chairman of the board. From 1983 to 1990, Dr. Sherwin held various positions at
Genentech, Inc., a biotechnology company, most recently as vice president of
clinical research. Prior to 1983, Dr. Sherwin was on the staff of the National
Cancer Institute. Dr. Sherwin currently serves as the chairman of the board of
Ceregene, Inc., a majority-owned subsidiary of Cell Genesys. He is also a
director of Abgenix, Inc., Neurocrine Biosciences, Inc., Rigel Pharmaceuticals,
Inc. and privately owned Calyx Therapeutics, Inc. Dr. Sherwin holds a B.A. in
biology from Yale University and an M.D. from Harvard Medical School and is
board-certified in internal medicine and medical oncology.

Dr. Vallner joined Cell Genesys in October 1999 as
executive vice president and chief operating officer. Effective July 2001, Dr.
Vallner became president of the Company. He currently manages the research,
development, clinical, regulatory, manufacturing and operations departments at
Cell Genesys. Prior to joining Cell Genesys, Dr. Vallner was with SEQUUS
Pharmaceuticals for seven years where he was instrumental in the product launch
of two products including Doxil®, a liposome-based cancer
therapeutic. In addition, Dr. Vallner helped transition SEQUUS through its
merger with ALZA Corporation. Prior to that, he held various positions with
Syntex Corporation and G.D. Searle and Company, and was an associate professor
of pharmaceutics at the University of Georgia. Dr. Vallner received his Ph.D. in
pharmaceutics, his M.S. in physical chemistry and his B.S. in pharmacy from the
University of Wisconsin, Madison.

Mr. Pfeffer joined Cell Genesys in June 1996 as director
of finance and was appointed chief financial officer in September 1998 and vice
president in April 1999. From 1989 to 1996, Mr. Pfeffer held a variety of
positions at Diasonics Ultrasound, Inc., most recently as corporate controller.
From 1987 to 1989, he was in the finance department at ComputerLand Corporation.
From 1981 to 1987, Mr. Pfeffer was in the audit and consulting groups at Price
Waterhouse, where he obtained his CPA certificate. Mr. Pfeffer graduated with a
B.S. degree in business administration from the University of California,
Berkeley.

Dr. Ando, vice president, clinical research, joined Cell
Genesys in July 1997. Dr. Ando brings over nine years of clinical development
and research experience to Cell Genesys, including three years at Cetus
Corporation and six years at Chiron Corporation. Most recently he has served as
director of clinical gene therapy for Chiron Technologies at Chiron. His
experience includes clinical development of biological therapeutics and gene
therapy for both cancer and HIV infection. Dr. Ando began his career as a
faculty member at the UCLA School of Medicine in the division of rheumatology.
He received his M.D. and Internal Medicine training at the University of
Michigan and a B.S. in Chemistry from Stanford University.

Dr. McKay joined Cell Genesys in November 2000 as vice
president, quality and regulatory affairs. Prior to joining Cell Genesys, from
1996-2000, Dr. McKay was vice president of regulatory affairs at Celtrix
Pharmaceuticals. For over nine years, Dr. McKay also held various management
positions in the regulatory affairs and quality assurance areas with other
biotechnology companies including COR Therapeutics, Berlex Biosciences and
Triton Biosciences. Dr. McKay holds a Ph.D. in biochemistry from the University
of London and a B.S. in biology from the University of Portsmouth in Hampshire,
UK.

Ms. McKinley, vice president, human resources, joined
Cell Genesys in l994. From 1986 to 1994, she was responsible for human resources
at Nellcor Puritan Bennett, Inc.. Previously, Ms. McKinley also worked at
Genentech, Inc. for seven years in various human resource positions. She
received a B.A. in psychology from the University of California, Santa
Barbara.



Mr. Ramsay joined Cell Genesys in January 2002 and serves
as vice president of manufacturing operations. Prior to joining Cell Genesys,
Mr. Ramsay served three years as a vice president of manufacturing at ALZA
Corporation. Mr. Ramsay also held various positions during seven years with
SEQUUS Pharmaceuticals, including vice president of manufacturing operations, as
well as various positions at Syntex Corporation focusing on manufacturing,
product development and regulatory affairs. Mr. Ramsay holds a Bachelor of
Pharmacy degree from the University of Nottingham in the United Kingdom.

Mr. Tidwell joined Cell Genesys in August 2000 as vice
president, corporate development. Prior to joining Cell Genesys, from 1998-2000,
Mr. Tidwell was vice president of business development at Calydon, Inc. Mr.
Tidwell has also held various management positions with such companies as Boston
Life Sciences where he served as chief operating officer for one year, Genetics
Institute where he was vice president of marketing and business development for
five years, and Eli Lilly and Company where he held various positions including
director of worldwide pharmaceutical licensing. Mr. Tidwell holds an M.B.A from
The Ohio State Graduate School of Business and a Bachelor of Pharmacy from The
Ohio State School of Pharmacy.

Dr. Working joined Cell Genesys in September 2001 as vice
president, research and development. Prior to joining Cell Genesys, from 1999 - 2000, Dr.
Working served as vice president of analytical and non-clinical
sciences and principal scientist at ALZA Corporation. Dr. Working has also held
various positions with SEQUUS Pharmaceuticals, where from 1997-1999 he served as
vice president of research and development, as well as Genentech, Inc. where he
served four years as a senior toxicologist and head of the Experimental
Toxicology Group in the Department of Safety Evaluation. Dr. Working holds
Ph.D., M.S. and B.S. degrees from the University of California, Davis and an
M.A. degree from the University of California, San Francisco.

Scientific Advisory Board

Cell Genesys has established a prominent scientific advisory board that
includes several leaders in the fields of cancer immunotherapy and gene therapy.
As of March 31, 2002, the board consists of the following
individuals:



|NAME                          | SCIENTIFIC POSITION                                                                                                                                        
|----------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|Fred H. Gage, Ph.D            | Professor of Neuroscience The Salk
Institute                                                                                                               
|Ronald N. Germain, M.D., Ph.D | Deputy Chief of Laboratory of Immunology 
National Institutes of Health National Institute of Allergy and Infectious
Diseases                              
|Jordan U. Gutterman, M.D      | Chairman, Clinical Immunology and Biological
Therapy M. D. Anderson Cancer Center                                                                          
|Raju S. Kucherlapati, Ph.D.   | Scientific Director Harvard-Partners Center for
Genetics and Genomics Paul C. Cabot Professor of Genetics Professor of Medicine 
Harvard Medical School    
|John T. Potts, Jr., M.D       | Director of Research Massachusetts General
Hospital Physician-in-Chief Emeritus Jackson Distinguished Professor of Clinical
Medicine Harvard Medical School
|Thomas E. Shenk, Ph.D         | Elkins Professor Chairman of the Department of
Molecular Biology Professor, Princeton University                                                           
|Inder M. Verma, Ph.D          | Professor of Molecular Biology and Virology The
Salk Institute                                                                                             

Item 2. Properties

Cell Genesys occupies administrative offices and
research laboratories covering approximately 106,477 square feet of space in a
research and development office park located in Foster City, California. In
February 2001, the Company extended the lease agreement in the Foster City
location to January 31, 2006. Cell Genesys' laboratories are equipped for
biochemical and tissue culture research and development. In March 2001, the
Company signed a build-to-suit lease with purchase option for a new building to
be constructed in South San Francisco, California. The proposed building is
expected to contain approximately 154,000 square feet of research and
development and administrative space, and is planned to serve as the Company's
future corporate headquarters. Construction is under way, and the new
headquarters office is expected to be ready for occupancy in mid 2003. After
moving to its South San Francisco facility, the Company expects to sublease its
facilities in Foster City.

On January 8, 2001, the Company announced that it had
acquired the principal operating assets of Chiron Corporation's gene therapy
business, including a fully equipped and staffed manufacturing facility, at a
cost of approximately $4.8 million. The San Diego-based leased facility is
approximately 48,000 square feet and includes a validated Good Manufacturing Practices ("GMP")
manufacturing facility equipped to handle large-scale production of gene therapy products for
Phase I to Phase III clinical trials and potential product launch. This facility
is expected to manufacture viral-based products such as the Company's oncolytic
virus therapies and gene therapies.

A 41,000 square feet leased facility in Hayward,
California is being constructed to become a manufacturing facility for the
clinical production requirements for Phase III studies and potential product
launch of non patient-specific GVAX

On February 12, 2002, the Company announced that it had
leased a 35,000 square foot manufacturing facility in Memphis, Tennessee. Cell
Genesys plans to use the Memphis facility to manufacture the Company's patient-
specific GVAX® lung cancer vaccines for both Phase III clinical
trials and potential market launch. The Company is beginning facility
modifications in order to have validated GMP manufacturing capabilities in place
prior to the initiation of these Phase III trials, expected to begin in late
2002. The facility sets the stage for Cell Genesys' product development strategy
for GVAX® lung cancer vaccines, which includes establishing a
centrally located GMP facility to receive and process frozen tumor cells
obtained from patient biopsies, manufacture the patient-specific vaccine
products and carry out quality control testing and ship the frozen vaccine
products back to the patient treatment centers.

Cell Genesys has previously leased certain other
facilities, including facilities in Sunnyvale, California and Alameda,
California that were acquired in connection with its acquisitions of Calydon,
Inc. in 2001 and Somatix Therapy Corporation in 1997, respectively. Cell Genesys
had been subleasing these facilities to other companies under sub-leasing
arrangements. The remaining lease in Sunnyvale will expire in January 2004, and
the Alameda lease will expire in April 2005.

Ceregene, Inc., a 60% owned subsidiary of Cell Genesys,
is curently subleasing approximately 7,000 square feet in the Company's San
Diego Facility. In November 2001, Ceregene signed a sublease agreement for
20,000 square feet from Triad Therapeutics for its headquarters and research
laboratory space in San Diego. The lease commences in 2002 and has a 5 year
duration.

Item 3. Legal proceedings

Not applicable.

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

Not applicable.



PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Cell Genesys Common Stock is traded in the
over-the-counter market and is quoted on The Nasdaq National Market under the symbol
"CEGE." The following table sets forth, for the periods indicated, the high and
low closing prices per share of Cell Genesys Common Stock as reported by The
Nasdaq National Market. Cell Genesys did not pay any cash dividends with respect
to the Cell Genesys Common Stock during any of the periods indicated below.



|                   | High    | Low     
|------------------ | ------- | --------
|Calendar Year 2000 |         |         
|First Quarter      | $	52.00 | $ 	11.81
|Second Quarter     | $	28.50 | $ 	14.75
|Third Quarter      | $	33.56 | $ 	21.31
|Fourth Quarter     | $	28.48 | $	 19.63
|                   |         |         
|Calendar Year 2001 |         |         
|First Quarter      | $	22.44 | $ 	12.50
|Second Quarter     | $	20.50 | $ 	12.61
|Third Quarter      | $	20.97 | $ 	13.79
|Fourth Quarter     | $	24.80 | $	 15.60



The Company has 1,569 shares of Series B preferred stock
outstanding, held by eleven holders of record. The Series B preferred stock is
convertible into shares of common stock at the option of the holder. No
established public trading market exists for the Series B preferred stock
itself. For a description of the terms of the Series B preferred stock, see Note
9 of Notes to Consolidated Financial Statements included under Item 8 of this
annual report on Form 10-K.



Item 6.

`Year Ended December 31,
                                             ------------------------------------------------------
                                               2001       2000       1999        1998       1997
                                             ---------  ---------  ---------  ----------  ---------
                                                         (in thousands, except per share data)
Consolidated Statement of Operations Data:
Total Revenue.............................. $  28,317     24,209  $  33,607  $   24,146  $  23,806
Operating expenses:
  Research and development.................    50,752     30,474     24,538      37,932     36,830
  General and administrative...............    11,850      6,984      4,833       8,204     10,659
  Charge for purchased in-process
   technology..............................    18,042        --         --          --      72,270
  Restructuring charge related to
   acquisition.............................       --         --         --          --       6,576
  Charge for cross-license and settlement
   (includes $11,250 equity in losses of
   Xenotech joint venture associated with
   cross-license and settlement)...........       --         --         --          --      22,500
  Merger termination costs.................       --         --      15,382         --         --
                                             ---------  ---------  ---------  ----------  ---------
          Total operating expenses.........    80,644     37,458     44,753      46,136    148,835
                                             ---------  ---------  ---------  ----------  ---------
Operating loss.............................   (52,327)   (13,249)   (11,146)    (21,990)  (125,029)
Equity in loss of Abgenix..................       --         --      (3,083)     (2,917)       --
Gain on sale of stock of Abgenix...........       --     239,660        --        7,020        --
Interest income, net.......................    17,878     13,172      2,235       1,567      1,500
                                             ---------  ---------  ---------  ----------  ---------
Income (loss) before minority interest,
  income tax and cumulative effect of
  change in accounting.....................   (34,449)   239,583    (11,994)    (16,320)  (123,529)
Loss attributed to minority interest.......       264        --         --        4,192        --
                                             ---------  ---------  ---------  ----------  ---------
Income (loss) before income tax and
  cumulative effect of change in
  accounting...............................   (34,185)   239,583    (11,994)    (12,128)  (123,529)
Benefit (provision) for income tax.........     5,512    (64,203)       --          --         --
                                             ---------  ---------  ---------  ----------  ---------
Income (loss) before effect of
  cumulative change in accounting..........   (28,673)   175,380    (11,994)    (12,128)  (123,529)
Cumulative effect of change in
  accounting principle, net of tax(1)......       --      (6,460)       --          --         --
                                             ---------  ---------  ---------  ----------  ---------
Net income (loss)..........................   (28,673)   168,920    (11,994)    (12,128)  (123,529)
Deemed dividend to preferred stockholders..       785        756        392       1,088        --
                                             ---------  ---------  ---------  ----------  ---------
Net income (loss) attributed to
  common stockholders...................... $ (29,458)   168,164  $ (12,386) $  (13,216) $(123,529)
                                             =========  =========  =========  ==========  =========

Basic income (loss) per common share....... $   (0.85) $    4.99  $   (0.39) $    (0.46) $   (5.33)
                                             =========  =========  =========  ==========  =========

Diluted income (loss) per common share..... $   (0.85) $    4.55  $   (0.39) $    (0.46) $   (5.33)
                                             =========  =========  =========  ==========  =========

Weighted average shares of common
  stock outstanding - basic................    34,746     33,716     31,682      28,607     23,172
                                             =========  =========  =========  ==========  =========

Weighted average shares of common
  stock outstanding - diluted..............    34,746     36,952     31,682      28,607     23,172
                                             =========  =========  =========  ==========  =========`

(1) Reflects the impact of the adoption of SAB 101 on revenue recognition
effective January 1, 2000.  Pro forma amounts of net income (loss) and related
diluted per share amounts, excluding the effects of deemed dividends to preferred
stockholders and assuming retroactive application of the change in accounting
principle for the years ended 2000, 1999, 1998, and 1997 (previous amounts were
not material), are as follows (in thousands, except per share amounts):

2000       1999        1998       1997
                                                        ---------  ---------  ----------  ---------
Pro forma:
  Net income (loss)........................            $ 175,380  $ (10,257) $  (22,277) $(122,729)
  Earnings (loss) per share-diluted........            $    4.75  $   (0.32) $    (0.78) $   (5.30)


                                                                   December 31,
                                             ------------------------------------------------------
                                               2001       2000       1999        1998       1997
                                             ---------  ---------  ---------  ----------  ---------
                                                                  (in thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term
  investments.............................. $ 258,649    259,647  $  50,287  $   53,243  $  88,816
Working capital............................   420,779    549,985    334,646      44,080     51,804
Total assets...............................   615,310    793,716    489,683      65,799    106,887
Total current liabilities..................   149,690    239,002    150,430       9,964     39,955
Long-term obligations......................    60,000      1,350      3,198       4,860     11,082
Redeemable convertible preferred stock.....    17,970     17,185      7,679      12,083     19,817
Accumulated deficit........................   (63,557)   (34,883)  (203,803)   (191,809)  (179,563)
Stockholders' equity.......................   387,554    536,179    328,376      38,892     18,6412001
                                           ---------------------------------------------------------------------
                                             March 31       June 30     September 30  December 31      Total
                                           ------------   ------------  ------------  ------------  ------------
                                                           (in thousands, except per share amounts)
Quarterly Results Of Operations (1)
               (Unaudited)
Revenue.................................. $      5,973   $      4,036  $      4,635  $     13,673  $     28,317
Research and development.................       10,726         11,010        12,362        16,654        50,752
General and administrative...............        2,700          2,839         2,786         3,525        11,850
Charge for purchased in-process
  technology.............................          --             --         18,042           --         18,042
Net income (loss)........................ $       (203)  $     (4,678) $    (22,384) $     (1,408) $    (28,673)
Basic income (loss) per common share..... $      (0.01)  $      (0.14) $      (0.64) $      (0.06) $      (0.85)
Diluted income (loss) per common share... $      (0.01)  $      (0.14) $      (0.64) $      (0.06) $      (0.85)



                                                                            2000
                                           ---------------------------------------------------------------------
                                             March 31       June 30     September 30  December 31      Total
                                           ------------   ------------  ------------  ------------  ------------
                                                           (in thousands, except per share amounts)
Quarterly Results Of Operations
               (Unaudited)
Revenue.................................. $      4,600   $      4,985  $      5,112  $      9,512  $     24,209
Research and development.................        6,400          7,747         7,448         8,879        30,474
General and administrative...............        1,659          1,574         1,860         1,891         6,984
Cumulative effect of change in
  accounting                                     6,460            --            --            --          6,460
Net income (loss)........................ $    130,307 * $       (434) $       (308) $     39,355  $    168,920
Basic income (loss) per common share..... $       3.92   $      (0.01) $      (0.01) $       1.14  $       4.99
Diluted income (loss) per common share... $       3.56   $      (0.01) $      (0.01) $       1.05  $       4.55* - Includes gain on sale of Abgenix, Inc.
common stock.Statements made in this Item other than statements of
historical fact, including statements about the Company's and its subsidiaries'
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 the Company under "Other Factors Affecting Future
Operations" below. The Company does not undertake any obligation to update
forward-looking statements. The following should be read in conjunction with the
Company's financial statements for the year ended December 31, 2001 located
elsewhere in this Annual Report on Form 10-K.Item
7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS



Overview

Since its inception in April 1988, Cell Genesys, Inc.
("Cell Genesys" or "the Company") has focused its research and product
development efforts on human disease therapies that are based on innovative gene
modification technologies. The Company's strategic objective is to develop and
commercialize cancer vaccines, oncolytic virus therapies and gene therapies to
treat cancer and other major, life-threatening diseases. Cell Genesys' current
clinical programs include GVAX® cancer vaccines and oncolytic
virus therapies. GVAX® cancer vaccines are in Phase II studies
for lung cancer, prostate cancer, pancreatic cancer, and leukemia and in Phase
I/II studies for multiple myeloma. The Company expects to initiate a Phase III
trial for GVAX® lung cancer vaccine in late 2002 and a Phase III
trial for GVAX® prostate cancer vaccine during 2003. Clinical
programs evaluating the Company's oncolytic virus therapies include a Phase II
study of CG7060, an intratumorally administered product for early stage prostate
cancer, and a Phase I/II study of CG7870, an intravenously administered therapy
for late stage prostate cancer. In addition, Cell Genesys has preclinical
oncolytic virus programs evaluating potential therapies for liver cancer, colon
cancer and bladder cancer as well as preclinical gene therapy programs
evaluating potential therapies for multiple types of cancer and hemophilia.
Additionally, Cell Genesys has a majority-owned subsidiary, Ceregene Inc., which
is focused on gene therapies for central nervous system disorders, and also
continues to hold approximately nine million shares of common stock of its
former subsidiary, Abgenix (Nasdaq: ABGX), which is focused on the development
and commercialization of antibody therapies.

Critical Accounting Policies

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

Revenue recognition

Since the Company's inception, a substantial portion
of our revenues has been generated from research and licensing agreements with
collaborators. Revenue from non-refundable upfront license fees and other
payments where we continue involvement through development is recognized ratably
over the development period. We recognize cost reimbursement revenue under these
collaborative agreements as the related research and development costs are
incurred. Incentive milestone payments under collaborative arrangements are
recognized as revenue upon achievement of the incentive milestone events, which
represent the culmination of the earnings process because the Company has no
future performance obligations related to the payment. Incentive milestone
payments are triggered either by the results of our research efforts or by
events external to Cell Genesys, such as regulatory approval to market a product
or the achievement of specified sales levels by a marketing partner. Deferred
revenue represents the portion of research payments received that has not been
earned.

Use of estimates

The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates. Estimates in the financial statements include, but are not
limited to accrued but unbilled expenses in clinical trails, outside experts and
consultants (including legal and accounting fees), useful lives of property and
equipment, and other items.

Results of Operations

Revenue

Revenue increased to $28.3 million in 2001 from $24.2
million in 2000 and decreased from $33.6 million in 1999. Revenues for 2001 were
derived primarily from the Company's GVAX® collaboration. During
2001, the Company recognized $7 million in milestone payments related to
clinical progress in the GVAX® lung program. Also during 2001,
the Company restructured its GVAX® collaboration to regain full
rights to its GVAX® prostate cancer vaccine program and converted its
GVAX® lung program to a reciprocal royalty arrangement. This
restructuring will result in lower collaboration reimbursements relating to the
GVAX® prostate program, but reimbursements relating to the
GVAX® lung program are not affected by the restructuring and are
likely to increase as associated costs increase. Revenues for 2000 were impacted
by the adoption of SAB 101 and the resulting change in the Company's revenue
recognition policy. As a result of the adoption of SAB 101 a cumulative effect
of a change in accounting of $6.5 million, net of taxes, was recorded in 2000
(see the revenue recognition note in the notes to the consolidated financial
statements for further information on our adoption of SAB 101). Revenues for
1999 included a non-recurring payment of $8 million received in connection with
the termination of the Company's AIDS gene therapy collaboration agreement with
Aventis Pharmaceuticals (formerly Hoechst Marion Roussel) in September 1999. The
Company's gene activation technology agreement with Aventis for gene activated
erythropoietin (EPO) provides for milestone payments and annual maintenance
fees, in addition to royalties on future sales of potential gene-activated
protein products. The Company recognized revenue of $3 million, $2 million and
$4 million in 2001, 2000 and 1999, respectively, pursuant to the Aventis
agreement.

Research and development

Research and development expenses increased to $50.8
million during 2001, from $30.5 million in 2000 and $24.5 million in 1999. The
increase can be attributed primarily to the Company's expanding clinical trials
for both its GVAX® cancer vaccines and the addition of oncolytic
virus therapy programs. During 2001, the Company advanced its research and
development through clinical trial programs-including trials of
GVAX® vaccines in multiple cancers as well as in the oncolytic
virus therapies-as well as preclinical programs including cancer and hemophilia.
The relatively low amount spent in 1999 was primarily the result of a corporate
restructuring plan implemented in the fourth quarter of 1998 as well as the
discontinuance of the AIDS gene therapy program. The Company expects that its
research and development expenditures will continue to increase in future years
to support expanded, more advanced and more numerous clinical trials and
additional product development activities. The rate of increase depends on a
number of factors including progress in research and development and clinical
trials.

Biopharmaceutical products such as those that we develop
generally take 10 to 15 years to research, develop and bring to market in the
United States. Drug development in the U.S. is a process that includes several
steps regulated by the FDA. The process begins with the filing of an
Investigational Drug Application which, if successful, allows opportunity for
clinical study of the potential new medicine. Clinical development typically
involves three phases of study: Phase I, II, and III. Costs for each phase are
generally larger than the preceding phase, as the size of the clinical trial
(number of patients) grows. The most significant costs associated with clinical
development are the Phase III trials as they tend to be the longest and largest
studies conducted during the drug development process. We currently have three
products in development that have been targeted for Phase III studies. However,
the successful development of our products is highly uncertain. Estimates of
product completion dates and completion costs can vary significantly for each
product and are difficult to predict. Various statutes and regulations also
govern or influence the manufacturing, safety, labeling, storage, record keeping
and marketing of each product. The lengthy process of seeking these approvals,
and the subsequent compliance with applicable statutes and regulations, require
the expenditure of substantial resources. Any failure by us to obtain, or any
delay in obtaining, regulatory approvals could materially adversely affect our
business. In responding to a Biologic License Application, the FDA may grant
marketing approval, request additional information or deny the application if it
determines that the application does not provide an adequate basis for approval.
There can be no assurance that any approval required by the FDA or other
regulatory body will be obtained on a timely basis, if at all. For additional
discussion of the risks and uncertainties associated with completing development
of potential products, see "Other Factors Affecting Future Operations"
below.

Included below is a summary of products and the related stage
of development for each product in clinical development. The information in the column
labeled "Estimated Completion of Phase" contains forward-looking statements regarding
timing of completion of product development phases. Timing of completion of these
trials is based on typical times to completion for trials at such phases of
development.   The actual timing of completion of these phases of clinical trials could
differ materially from the estimates provided in the table due to the number of
patients enrolled in the trial, the number of clinical trial sites involved, the time
needed to fully enroll the trial, the time required for patient follow-up and other
factors.  In addition, it is possible that any of these ongoing clinical trials may
never be completed due to the occurrence of unacceptable treatment-related side
effects, lack of clinical efficacy, insufficient supply of product for these clinical
trials and other factors.  For a discussion of the risks and uncertainties associated
with the timing of completing a product development phase, see "Other Factors Affecting
Future Operations" below.

|Product                | Indication                 | Phase of Development | Estimated Completion of
Phase
|---------------------- | -------------------------- | -------------------- | -----------------------------
|GVAX®Lung              | Non small-cell lung cancer | Phase II             | 2002 - 2003                  
|GVAX®Prostate          | Prostate cancer            | Phase II             | 2002 - 2003                  
|GVAX®Panceatic         | Pancreatic cancer          | Phase II             | 2003 - 2004                  
|GVAX®Leukemia          | Acute leukemia             | Phase II             | 2003 - 2004                  
|GVAX®Myeloma           | Multiple Myeloma           | Phase I/II           | 2002 - 2003                  
|CV7060
Oncolytic Virus | Prostate cancer            | Phase II             | 2003 - 2004                  
|CV7870
Oncolytic Virus | Prostate cancer            | Phase I              | 2002 - 2003                  



General and administrative expenses were $11.9 million during
2001, compared to $6.9 million and $4.8 million in 2000 and 1999, respectively.
The increase resulted from additional headcount and facility infrastructure to
support expanding preclinical and clinical programs including facilities added
during 2001. Future spending for general and administrative costs is expected to
continue to increase in future years to support the growing infrastructure needs
of the Company, particularly in the area of facilities.

Operating expenses were $80.6 million during 2001, compared
to $37.5 million and $44.8 million in 2000 and 1999, respectively. The increase
in 2001 included the non-recurring charge for purchased in-process research and
development of $18 million resulted from the acquisition of Calydon.

In January 2001, the Company created a new subsidiary,
Ceregene, Inc., which is focused on gene therapies for neurologic disorders such
as Alzheimer's disease and Parkinson's disease. The Company contributed $10
million cash and access to technology and patents in the Central Nervous System
("CNS") gene therapy area, in exchange for approximately 60 percent ownership of
the new company. Ceregene's financial statements are currently consolidated into
the operations of the Company, but this may change should the Company's
ownership position be decreased as a result of outside financing by
Ceregene.

Abgenix, Inc., a former subsidiary of the Company, was
fully consolidated in the Company's financial statements prior to July 1, 1998.
As a result of Abgenix's IPO on July 2, 1998, the Company's ownership percentage
was reduced to less than 50 percent, and Abgenix was accounted for under the
equity method of accounting from that date to November 1999. In 1998, the sale
of Abgenix stock resulted in $7 million realized gain. In November 1999, Abgenix
completed a public offering of 3 million shares and a private placement of 1.8
million shares of its common stock, further reducing Cell Genesys' ownership to
approximately 19 percent. Consequently, from November 1999 forward, the Company
has accounted for its investment in Abgenix as equity securities which are
considered "available for sale" in accordance with SFAS 115 "Accounting for
Certain Investments in Debt and Equity Securities."

Interest and other income was $18.4 million in 2001
compared to $13.6 million and $3.1 million in 2000 and 1999, respectively. The
higher income in 2001 compared to 2000 is a result of higher average cash
balances, plus $8 million realized gains earned from converting a portion of the
investment portfolio from tax-free securities to taxable securities during the
first quarter of 2001, partially offset by lower market interest rates in 2001
compared with prior years. In 2000, the Company realized gains on sales of
Abgenix stock of $239.7 million. The Company did not sell any Abgenix common
stock during 2001. Interest expense increased to $0.5 million in 2001 from $0.4
million in 2000 and decreased from $0.8 million in 1999. The slight increase
from 2000 is a result of additional capital leases resulting from the
acquisition of Calydon in the third quarter of 2001. The decrease from 1999
reflects expired capital leases and repayment of a $1.6 million tenant
improvement loan in March 2000. Interest expense is expected to increase in
future years as a result of a $60 million liquid collateral debt financing
completed in December 2001 in connection with the construction of the Company's
manufacturing facility in Hayward, California.



Cell Genesys' net loss was $29.5 million in 2001,
compared to net income of $168.2 million in 2000 and net loss of $12.4 million
in 1999. The loss for 2001 was due to the $18 million charge for purchased
in-process research and development from the Calydon acquisition and increased
research and development expenses in advancing clinical and preclinical
programs. The net income for 2000 was primarily due to a $180 million gain
realized on sales of Abgenix common stock, net of tax, partially offset by a
$6.5 million, net of tax, revenue adjustment under the cumulative effect of
accounting change following the adoption of SEC Staff Accounting Bulletin No.
101 ("SAB 101") during the first quarter of 2000. The loss in 1999 was primarily
due to a one-time merger termination charge of $15.4 million in December 1999.
Losses, excluding non-recurring charges and gains from sales of Abgenix stock,
are expected to continue and may increase in future years as operating expenses
rise, particularly as the Company incurs expenses related to manufacturing and
late stage human testing of its potential products.

The Company recorded a tax benefit for 2001 of $5.5 million,
which represents the estimated refund available from the carryback of 2001's
losses to offset taxable income in 2000. At December 31, 2001, Cell Genesys had
federal net operating loss carryforwards of approximately $42 million. The net
operating loss will expire in the years 2011 through 2021, if not utilized. The
large capital gains associated with the sale of a portion of the Company's
investment in Abgenix during February and November 2000 were substantially
offset by utilizing a large portion of the company's previously available net
operating loss carryovers and tax credits.

In-Process Research and Development

On September 5, 2001 the Company announced that it
had completed the acquisition of Calydon, Inc., a private biotechnology company
focused on the treatment of cancer using genetically engineered oncolytic
viruses, for approximately $17.4 million in Cell Genesys stock and other
consideration and assumption of approximately $2.6 million in liabilities, for a
total purchase price of approximately $20.0 million. The acquisition provided
Cell Genesys with a third product platform in addition to cancer vaccines and
cancer gene therapies as well as a product, CG7060, for early stage prostate
cancer that is a potential candidate for Phase III clinical trials. The company
engaged the services of an outside consulting firm to estimate the value of the
acquired assets. Approximately $18.0 million of the total purchase price
represented the value of in-process research and development that had not yet
reached technological feasibility, had no alternative future uses and was
charged to our operations in the third quarter ended September 30, 2001. The
acquisition was accounted for under the purchase method of accounting.
Accordingly, the results of operations of Calydon are included in the condensed
consolidated financial statements from September 5, 2001.

The $18.0 million in-process research and development
charge represents the value using a
discounted cash flow methodology, attributable to the in-process research and
development of Calydon based on a valuation analysis of such research and
development. In-process technology was expensed upon acquisition as
technological feasibility had not been established and no alternative future
uses existed. The charge relates to specific on-going research and development.
Management believes that the allocation of the purchase price to in-process
research and development is appropriate given the future potential of this
research and development to contribute to our operations. Assuming this research
continues through all stages of clinical development, we project substantial
future research and development expenditures related to this technology.

Liquidity and Capital Resources

Cell Genesys ended 2001 with approximately $259
million in cash, cash equivalents and short-term investments, of which $66
million is classified as restricted cash. Information regarding the
classification of these assets is included in Notes to Financial Statements 6,
"Fair Value of Financial Instruments." The Company has maintained its financial
position through strategic management of its resources including the Company's
holdings in Abgenix of which Cell Genesys continues to hold approximately 9
million shares of common stock and by relying on funding from various corporate
collaborations and licensing agreements. Additionally, in late 2001, Cell
Genesys secured a $60 million asset-backed financing in connection with the
construction of the Company's manufacturing facility in Hayward, California.

Cell Genesys has financed its operations primarily
through the sale of equity securities, funding under collaborative arrangements,
sale of Abgenix common stock and secured financing. In February and November
2000, the Company received an aggregate of $244 million in net proceeds for the
sale of shares of Abgenix common stock. From inception through February 28,
2002, the Company received $181.6 million in net proceeds from Cell Genesys
equity financings, $188.0 million under collaborative agreements and $88.2
million from property and secured financings.

In connection with the gain on sale of Abgenix common
stock in 2000, the Company paid $41.5 million in federal and state income tax.
The Company recorded a tax benefit for 2001 of $5.5 million, which represents
the estimated refund available from the carryback of 2001's losses to offset
taxable income in 2000. The Company has additional unutilized NOL carryforwards,
although the future utilization of these NOL carryforwards is limited by IRS
regulation Section 382, which imposes an annual limitation on taxable income
that can be offset by NOLs following a change in control. The Company, for IRS
purposes, experienced a change in control during its acquisition of Somatix in
1997. It is the Company's current intention to minimize future tax liabilities
on sales of Abgenix stock by offsetting gains against current operating losses
and the NOL carryfowards allowed under Section 382. In addition, the Company has
certain research and development tax credits which it may utilize to offset such
gains. However, under some circumstances the Company may sell more Abgenix stock
and consequently recognize more gain than it may be able to shelter from tax
using these methods.

Future minimum payments under non-cancelable operating leases
and an asset-backed debt financing at December 31, 2001, were (in
thousands):

`Operating      Debt
                                                  Leases     Financing
                                                ----------  ----------- 
Years ending December 31:
  2002........................................ $    8,810  $     1,759
  2003........................................     13,548       13,610
  2004........................................     16,116       13,262
  2005........................................     16,406       12,913
  2006 and beyond.............................    120,197       24,783
                                                ----------  -----------
  Total minimum lease payment................. $  175,077       66,327
                                                ==========
Less: Amount representing interest........................      (6,327)
                                                            -----------
Present value of future lease payments.................... $    60,000
                                                            ===========`

Cell Genesys currently has three facilities
under construction and at various stages of completion. The Company's
manufacturing facility for cell-based vaccines located in Hayward, California,
is expected to be completed in late 2002. Expenditures associated with the
completion and validation of this facility during 2002 are expected to total
approximately $35 to 40 million. In addition, the Company recently announced the
opening of a new manufacturing facility in Memphis, Tennessee that will be
devoted to the manufacture of patient-specific cancer vaccines for non
small-cell lung cancer, in support of Phase III trials expected to commence late in
2002. Total costs for equipment and improvements for this facility are expected
to approximate $1 million in 2002. Finally, in 2001 the Company announced that
it had signed a lease with a purchase option for a new facility in South San
Francisco, intended to serve as the Company's new corporate headquarters and
research and development facility. Construction of this new facility began in
2002, and total payments for build-out of tenant improvements during 2002 are
expected to be approximately $20 to $22 million.

Cell Genesys anticipates that fiscal year 2002 cash usage
will not exceed approximately $40 million. Operating cash usage does not include
any potential offset from sales of Abgenix stock or usage for capital
expenditures or any potential acquisitions. The Company's capital requirements
depend on numerous factors, including: the progress of the Company's research
and development programs; preclinical and clinical trials; clinical and
commercial scale manufacturing requirements; the attraction of collaborative
partners; the acquisition of new products or technologies; the cost of
litigation; and patent interference proceedings or other legal proceedings or
their resolution. Nonetheless, the Company's ongoing development programs and
any increase in the number of programs will reduce the current cash resources
and potentially create the need to raise further capital. Therefore, the Company
may continue to consider financing alternatives, including the potential sale of
additional shares of Abgenix stock and debt financings.

A substantial portion of the Company's working capital
consists of shares maintained in its former subsidiary, Abgenix. These shares
are carried at market value and have been subject to extreme fluctuation in
recent quarters due to the highly volatile nature of the market price of Abgenix
stock. To the extent that we continue to hold a substantial amount of these
shares, our working capital position can be expected to continue to fluctuate in
future periods.

While the Company believes that its current liquidity
position will be sufficient to meet its cash needs for at least the next year
and beyond, it anticipates entertaining the possibility of raising additional
capital in advance of actual capital expenditures to preserve its liquidity.
Therefore, liquidity and volatility of capital markets play a significant role
in the decision to raise capital. The types of financing available to the
Company include the sale of Abgenix securities, asset-backed debt financing and
private or public placement of Cell Genesys equity securities. The Company's
evaluation processes regularly consider the liquidity of capital markets,
dilution, shareholder value and tax consequences of each type of financing on
stockholders. Certain of the financing options available to the Company have
some type of negative consequence to stockholders such as dilution. Given the
volatile nature of the capital markets, decisions to raise capital may require
actions that would impose a slightly negative future consequence in order to
reduce or minimize a more significant negative consequence to stockholders.

Recent Accounting Pronouncements

Business combinations

In July 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS 141
requires that all business combinations be accounted for by the purchase method
of accounting and changes the criteria for recognition of intangible assets
acquired in a business combination. The provisions of SFAS 141 apply to all
business combinations initiated after June 30, 2001, including the Company's
acquisition of Calydon, Inc. in September 2001. SFAS 142 requires that goodwill
and intangible assets with indefinite useful lives no longer be amortized;
however, these assets must be reviewed at least annually for impairment.
Intangible assets with finite useful lives will continue to be amortized over
their respective useful lives. The standard also establishes specific guidance
for testing for impairment of goodwill and intangible assets with indefinite
useful lives. The provisions of SFAS 142 will be effective for fiscal year 2002.
The Company is currently in the process of evaluating the potential impact that
the adoption of SFAS 142 will have on its consolidated financial position and
results of operations.

Asset retirement obligations

In August 2001, the FASB issued SFAS No. 143,
"Accounting for Asset Retirement Obligation." SFAS 143 addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated retirement costs. The Company is
in the process of assessing the effect of adopting SFAS 143, which will be
effective for the Company's fiscal year ending December 31, 2002.

Asset impairments

In October 2001, the FASB issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144
addresses financial accounting and reporting for the impairment of long-lived
assets and for long-lived assets to be disposed of. The provisions of SFAS 144
will be effective for fiscal year 2002 and will be applied prospectively. The
Company is currently in the process of evaluating the potential impact that the
adoption of SFAS 144 will have on its consolidated financial position and
results of operations.



Other Factors Affecting Future Operations

Investors should carefully consider the risks
described below before making an investment decision. In addition, these risks
are not the only ones facing our Company. Additional risks we are not presently
aware of 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 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.

Our products are in developmental stage, are not approved
for commercial sale and might not receive regulatory approval or become
commercially viable. All of our potential cancer vaccines, oncolytic
virus therapies and gene therapy products are in research and development. We
have not generated any revenues from the sale of products. We do not expect to
generate any revenues from product sales for at least the next several years.
Our products currently under development will require significant additional
research and development efforts, including extensive preclinical and clinical
testing and regulatory approval, prior to commercial use. There can be no
assurance that our research and development efforts will be successful or that
any of our future products will ultimately be commercially successful. Even if
developed, our products may not receive regulatory approval or be successfully
introduced and marketed at prices that would permit us to operate
profitably.

Our cancer vaccine and gene therapy programs depend on
new and unproven technologies. Gene therapy is a new technology.
Existing preclinical and clinical data on the safety and efficacy of gene
therapy are limited. Data relating to our specific gene therapy approaches are
also limited. Our GVAX® cancer vaccines and oncolytic virus
therapies are currently being tested in Phase I/II and Phase II human clinical
trials to determine their safety and efficacy. None of our other products or
therapies under development are in human clinical trials. The results of
preclinical studies do not predict safety or efficacy in humans. Possible side
effects of gene therapy may be serious and potentially life-threatening.
Unacceptable side effects may be discovered during preclinical and clinical
testing of our potential products or thereafter. There are many reasons that
potential products that appear promising at an early stage of research or
development do not result in commercially successful products. Although we are
testing proposed products or therapies in human clinical trials, we cannot
guarantee that we will be permitted to undertake human clinical trials for any
of our other products. Also, the results of this testing might not demonstrate
the safety or efficacy of these products. Even if clinical trials are
successful, we might not obtain regulatory approval for any indication. Finally,
even if our products proceed successfully through clinical trials and receive
regulatory approval, there is no guarantee that an approved product can be
manufactured in commercial quantities at reasonable cost or that such a product
will be successfully marketed.

We have not been profitable in our operations (absent
the gains on sales of Abgenix stock) and may not become profitable in the
future. We have incurred an accumulated deficit since our inception. At
December 31, 2001, our accumulated deficit was approximately $63.6 million,
compared with $34.9 million at December 31, 2000. For the year ended December
31, 2001, we recorded a net loss of $29.5 million including a charge for
purchased in-process technology for $18.0 million as a result of the Calydon
acquisition. We expect to incur substantial operating losses for at least the
next several years due primarily to the expansion of research and development
programs, including preclinical studies, clinical trials, manufacturing and to a
lesser extent, from general and administrative expenses. We expect that losses
will fluctuate from quarter to quarter and that these fluctuations may be
substantial. We cannot guarantee that we will successfully develop,
commercialize, manufacture or market any products. We cannot guarantee that we
will ever achieve or sustain product revenues or profitability.

We may have a need for substantial additional
funds. We will need substantial funds for existing and planned
preclinical and clinical trials, to continue research and development
activities, and to establish manufacturing and marketing capabilities for any
products we may develop. At some point in the future, we may need to raise
additional capital to fund our operations.

Our future capital requirements will depend on, and could
increase as a result of, many factors, such as:

- continued scientific progress of research and development
programs
- magnitude of such programs' expenses
- progress of preclinical and clinical testing
- time and costs involved in obtaining regulatory
approvals
- costs involved in preparing, filing, prosecuting,
maintaining, enforcing and defending patent claims
- competing technological and market developments
- changes in collaborative relationships with Japan Tobacco
and others
- terms of any additional collaborative arrangements into
which we may enter
- our ability to establish research, development and
commercialization arrangements pertaining to products other than those covered
by existing collaborative arrangements
- cost of establishing manufacturing facilities
- cost of commercialization activities
- demand for our products, if and when approved
- potential redemption obligations in connection with
conversion of the Series B preferred stock
- our ability to realize the carrying value of the Abgenix
stock due to its volatility

We expect to
be able to raise additional funds through collaborative relationships, sales of
some portion or all of our investment in Abgenix, additional equity or debt
financings, or otherwise. Because of our long-term capital requirements, we may
seek to access the public or private equity markets whenever conditions are
favorable, even if we do not have an immediate need for additional capital at
that time. There can be no assurance that any such additional funding will be
available to us, or, if available, that it will be on acceptable terms. If we
raise additional funds by issuing equity securities, stockholders will incur
immediate dilution. There can be no assurance that opportunities for
in-licensing technologies or for third-party collaborations will continue to be
available to us on acceptable terms. If adequate funds are not available, we may
be required to delay, reduce the scope of, or eliminate one or more of our
research, development and clinical activities. Alternatively, we may need to
seek funds through arrangements with collaborative partners or others that
require us to relinquish rights to certain of our technologies or product
candidates that we would otherwise seek to develop or commercialize ourselves.
Either of these events could have a material adverse effect on our business,
results of operations, financial condition or cash flow.

We rely heavily on the development
and protection of our intellectual property portfolio.

Our commercial success will also depend in part on not infringing
the patents or proprietary rights of others and not breaching licenses granted to us.
The Company is aware of competing intellectual property relating to both its programs
in cancer vaccines and oncolytic viruses.  While the Company currently believes it has
freedom to operate in these areas, there can be no assurance that its position will not
be  challenged by others in the future.  We may be required to obtain licenses to
certain third party technologies or genes necessary in order to market our products.
Any failure to license any technologies or genes required to commercialize our
technologies or products at reasonable cost may have a material adverse effect on our
business, results of operations or financial condition.

We may also have to engage in litigation, which could result
in substantial cost to us, to enforce our patents, or to determine the scope and
validity of other parties' proprietary rights. To determine the priority of
inventions, the United States Patent and Trademark Office frequently declares
interference proceedings. In Europe, other patents can be revoked through
opposition proceedings. Such proceedings could result in an adverse decision as
to the priority of our inventions.

We are currently involved in multiple interference and/or
opposition proceedings with regard to:

- gene activation technology
- certain ex vivo gene therapies
- certain vector technologies
- chimeric receptor technology

We cannot predict the outcome of these proceedings. An
adverse result could have a material adverse effect on our intellectual property
position in these areas and on our business as a whole. We may be involved in
other interference and/or opposition proceedings in the future. We believe that
there will continue to be significant litigation in the industry regarding
patent and other intellectual property rights.

We also rely on unpatented trade secrets, know-how and
continuing technological innovation to develop and to maintain our competitive
position. Our competitors may independently develop similar or better
proprietary information and techniques and disclose them publicly. Also, there
can be no assurance that others will not gain access to our trade secrets, or
that we can meaningfully protect our rights to our unpatented trade secrets.

We require our employees and consultants to execute
confidentiality agreements upon the commencement of employment or consulting
relationships with us. These agreements provide that all confidential
information developed by or made known to an individual during the course of the
employment or consulting relationship generally must be kept confidential. In
the case of employees, the agreements provide that all inventions conceived by
the employee while employed by us relating to our business are our exclusive
property. These agreements may not provide meaningful protection for our trade
secrets in the event of unauthorized use or disclosure of such information.

The fields of cancer vaccines, oncolytic virus and gene
therapy are highly competitive. Competition in the field from other
biotechnology and pharmaceutical companies and from research and academic
institutions is intense and expected to increase. In many instances, we compete
with other commercial entities in acquiring products or technology from
universities. There are numerous competitors working on products to treat each
of the diseases for which we are seeking to develop therapeutic products. Some
competitors are pursuing a product development strategy competitive with ours,
particularly with respect to our cancer vaccine and oncolytic virus therapy programs. Certain of these
competitive products are in more advanced stages of product development and
clinical trials. Our competitors may develop technologies and products that are
more effective than ours, or that would render our technology and products less
competitive or obsolete.

Many of our competitors have greater financial resources and
larger research and development staffs than we do. Some of these competitors
have significantly greater experience than we do in developing products, in
undertaking preclinical testing and human clinical trials of new pharmaceutical
products, in obtaining United States Food and Drug Administration ("FDA") and
other regulatory approvals of products, and in manufacturing and marketing such
products. Accordingly, our competitors may obtain patent protection or FDA
approval and commercialize products more rapidly than we do. There can be no
assurance that we will be able to obtain certain biological materials necessary
to support our research, development or manufacturing of any of our planned
therapies. If we are permitted to commence commercial sales of products, we will
also be competing with respect to marketing capabilities and manufacturing
efficiency, areas in which we have limited or no experience.

We expect that competition among products approved for sale
will be based, among other things, on:

- product efficacy
- price
- safety
- reliability
- availability
- patent protection
- sales, marketing and distribution
capabilities

Our competitive positions also depend upon our ability to
attract and retain qualified personnel, obtain patent protection or otherwise
develop proprietary products or processes and secure sufficient funding for the
often lengthy period between product conception and commercial sales.

Our stock price has fluctuated in the past and is
likely to continue to be volatile in the future. The stock prices of
biopharmaceutical and biotechnology companies (including Cell Genesys) have
historically been highly volatile. The market has from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. The following factors may affect our stock
price:

- fluctuations in our financial results
- announcements of technological innovations or new
therapeutic products by us or our competitors
- announcements of changes in governmental regulation
affecting us or our competitors
- announcements of regulatory approval or disapproval of
our or our competitors' products
- 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
- fluctuations in the price of Abgenix stock
- severe fluctuations in price and volume in the stock
market in general which are unrelated to our operating performance
- issuance of common stock upon conversion of the Series B
preferred stock
- future sales of such common stock or other shares of
common stock by existing stockholders
- the perception that such issuances or sales could
occur

Our business is subject to extensive regulation and any
failure to obtain required regulatory approvals could prevent or delay the
commercialization of our products. Regulation by governmental
authorities in the United States and foreign countries is important in the
manufacture and marketing of our proposed products and our research and
development activities. All of our products will require regulatory approval by
governmental agencies prior to commercialization. In particular, human
therapeutic products must undergo rigorous preclinical and clinical testing and
other premarket approval procedures by the FDA and similar authorities in
foreign countries. Since our potential products involve the application of new
technologies, regulatory approvals may take longer than for products produced
using more conventional methods with which these regulatory agencies are more
familiar and comfortable. Various federal and, in some cases, state laws also
govern or influence the manufacturing, safety, labeling, storage, record keeping
and marketing of these products. The lengthy process of seeking these approvals,
and the subsequent compliance with applicable federal laws, requires significant
expenditures. Any delay or failure by us or our collaborators or licensees to
obtain regulatory approvals could hinder the marketing of our products and our
ability to receive product or royalty revenue.

In responding to a new drug application, or a product license
application, the FDA may grant marketing approvals, request additional
information or further research, or deny the application if it determines that
the application does not satisfy its regulatory approval criteria. Approvals may
not be granted on a timely basis, if at all, or if granted may not cover all the
clinical indications for which we are seeking approval. Also, an approval might
contain significant limitations in the form of warnings, precautions or
contraindications with respect to conditions of use.

In addition to laws and regulations enforced by the FDA, we
are also subject to regulation under:

- Occupational Safety and Health Act
- Environmental Protection Act
- Toxic Substances Control Act
- Resource Conservation and Recovery Act
- Other present and potential future federal, state or
local laws and regulations

Our manufacturing facilities are subject to licensing
requirements of the California Department of Health Services. While not subject
to license by the FDA, these facilities are subject to inspection by the FDA as
well as by the California Department of Health Services. A separate license from
the FDA is required for commercial manufacture of any product. Failure to
maintain these licenses or to meet the inspection criteria of the FDA and the
California Department of Health Services would disrupt our manufacturing
processes and have a material adverse effect on our business, results of
operations, financial condition and cash flow.

For marketing outside the United States, we are subject to
foreign regulatory requirements governing human clinical trials and marketing
approval for drugs and devices. The requirements governing the conduct of
clinical trials, product licensing, pricing and reimbursement vary greatly from
country to country. Failure to comply with these regulatory requirements or
obtain required approvals could impair our ability to develop these markets and
have a material adverse effect on our results of operations and financial
condition.

Our product development activities involve the use of
hazardous materials and we may incur significant costs as a result of the need
to comply with environmental laws. Our research and development
activities involve the controlled use of hazardous materials, chemicals, viruses
and radioactive compounds. We are subject to federal, state and local laws and
regulations governing the use, manufacture, storage, handling and disposal of
these materials and waste products. Although we believe that our safety
procedures for handling and disposing of these materials comply with the
standards prescribed by applicable laws and regulations, we cannot completely
eliminate the risk of contamination or injury, by accident or as the results of
intentional acts of terrorists, from these materials. In the event of an
accident, we could be held liable for any damages that result and any resulting
liability could exceed our resources. We may also be required to incur
significant costs to comply with environmental laws and regulations in the
future.

We may depend on our strategic partners for the sales,
marketing and distribution of our future products. We have no experience
in sales, marketing or distribution of biopharmaceutical products. We may need
to rely on sales and marketing expertise of potential corporate partners for our
initial products. The decision to market future products directly or through
corporate partners will be based on a number of factors, including:

- market size and concentration
- size and expertise of the partner's sales force in a
particular market
- our overall strategic objectives

We may in the future be exposed to product liability
claims and may be unable to obtain sufficient insurance coverage.
Clinical trials or marketing of any of our potential products may expose us
to liability claims resulting from the use of our products. These claims might
be made by consumers, health care providers or by others selling our products.
We currently maintain product liability insurance with respect to each of our
clinical trials. There can be no assurance that we will be able to maintain
insurance or that sufficient coverage can be acquired at a reasonable cost. An
inability to maintain insurance at an acceptable cost, or at all, could prevent
or inhibit the clinical testing or commercialization of our products or
otherwise affect our financial condition. A product liability claim or recall
could have a material adverse effect on our business, results of operations,
financial condition and cash flow.

Sales of our future products will be influenced by the
willingness of third-party payers to provide reimbursement. In both
domestic and foreign markets, sales of our potential products will depend in
part upon coverage and reimbursement from third-party payers, including:

- government agencies
- private health care insurers and other health care payers
such as health maintenance organizations
- self-insured employee plans
- Blue Cross/Blue Shield and similar plans

There is considerable pressure to reduce the cost of
biotechnology and pharmaceutical products. In particular, reimbursement from
government agencies, insurers and large health organizations may become more
restricted in the future. Our potential products represent a new mode of therapy
and, while the cost-benefit ratio of the products may be favorable, we expect
that the costs associated with our products will be substantial. There can be no
assurance that our proposed products, if successfully developed, will be
considered cost-effective by third-party payers. Insurance coverage might not be
provided by third-party payers at all or without substantial delay. Even if such
coverage is provided, the approved reimbursement might not provide sufficient
funds to enable us to become profitable.

The pricing of our future products may be influenced in
part by government controls. The continuing efforts of governmental and
third-party payors to contain or reduce the costs of healthcare may impair
future revenues and profitability of biotechnology companies. For example, in
certain foreign markets, pricing or profitability of prescription
pharmaceuticals is subject to government control. In the United States, there
have been, and we expect that there will continue to be, a number of federal and
state proposals to implement similar government control. While we cannot predict
whether the government will adopt any such legislative or regulatory proposals,
the announcement or adoption of these proposals could have a material adverse
effect on our business, results of operations, financial condition and cash
flow.

We depend on our key technical and management personnel
and collaborative partners to advance our technology, and the loss of these
personnel or partners could impair the development of our products. We
rely and will continue to rely on our key management and scientific staff. The
loss of key personnel or the failure to recruit necessary additional qualified
personnel could have a material adverse effect on our business and results of
operations. There is intense competition from other companies, research and
academic institutions and other organizations for qualified personnel. There is
no assurance that we will be able to continue to attract and retain the
qualified personnel necessary for the development of our business. We will need
to continue to recruit experts in the areas of clinical testing, manufacturing,
marketing and distribution and develop additional expertise in our existing
personnel. If we do not succeed in recruiting such personnel or developing such
expertise, our business could suffer significantly.

We have clinical trial agreements with a number of public and
private medical institutions relating to the conduct of human clinical trials
for our GVAX

We rely on the continued availability of outside scientific
collaborators performing research. These relationships generally may be
terminated at any time by the collaborator, typically by giving 30 days notice.
These scientific collaborators are not our employees. As a result, we have
limited control over their activities and can expect that only limited amounts
of their time will be dedicated to our activities. Our agreements with these
collaborators, as well as those with our scientific consultants, provide that
any rights we obtain as a result of their research efforts will be subject to
the rights of the research institutions in such work. In addition, some of these
collaborators have consulting or other advisory arrangements with other entities
that may potentially conflict with their obligations to us. For these reasons,
there can be no assurance that inventions or processes discovered by our
scientific collaborators or consultants will become our property.

Cell Genesys stockholders may be diluted by the
exercise of outstanding stock options, the conversion of outstanding Series B
redeemable convertible preferred stock, or other issuances of our common
stock. Substantially all the outstanding shares of Cell Genesys common
stock are eligible for sale in the public market. Conversion of the Series B
preferred stock or exercise of outstanding stock options would result in
issuance of additional shares of common stock, diluting existing investors. The
number of shares of common stock issued, and therefore the dilution of existing
investors, would increase as a result of either (i) an event triggering the
antidilution rights of any outstanding shares of Series B preferred stock, or
(ii) a decline in the market price of the Company's common stock immediately
prior to conversion of the Series B preferred stock.

The holders of the Series B preferred stock may choose at any
time to convert their shares into common stock. In that event, the number of
shares of common stock issued would be based on the lower of:

- a fixed conversion price of $11.02 per share for the 694
remaining shares from the original issue of $20 million face value preferred
stock and $14.53 per share for the 875 shares issued January 2000 from call
options or
- the average of certain trading prices during the 10
trading days preceding such date of conversion.

As of December 31, 2001, the market price of Cell Genesys
common stock traded above the two fixed conversion price of $11.02 and $14.53.
Consequently, the conversion rate for the shares is based on the fixed
conversion price. As of December 31, 2001, the 694 outstanding shares of Series
B preferred stock issued in November 1997 were convertible into an aggregate of
approximately 760,000 shares of common stock, while the 875 outstanding shares
issued in January 2000 were convertible into an aggregate of approximately
660,000 shares of common stock. As the market price declines below the fixed
conversion rate, the greater the decline in the market price, the greater the
number of shares issuable upon conversion of the Series B preferred stock.

Following the issuance of the new preferred shares in 2000,
no further call options remain outstanding.

Our operations are vulnerable to interruption of
fire, earthquake, power loss, telecommunications failure, terrorist activity and
other events beyond our control.Our facilities in California have, in
the past, been subject to electrical blackouts as a result of a shortage of
available electrical power. In the event that these or other of our facilities
are subject to future blackouts, they could disrupt the operations of the
affected facilities. In addition, we do not carry sufficient business
interruption insurance to compensate us for losses that may occur and any losses
or damages incurred by us could have a material adverse effect on our business.

Our stock price is greatly influenced by the market
price of Abgenix stock, which has been highly volatile. Our retained
ownership of approximately 9 million Abgenix shares represents a material
portion of the total assets on our balance sheet. Abgenix stock prices have
proven to be highly volatile. The value of our 9 million shares of Abgenix stock
was approximately $301 million at December 31, 2001 versus approximately $529
million at December 31, 2000. Movements in the price of Abgenix stock, up or
down, exert corresponding influences on the market price of our stock.

Our
business could suffer as a result of our strategic acquisitions and investments.















There can be no assurance that we will be successful in overcoming these
risks or any other problems encountered in connection with our acquisitions.

We may
engage in future acquisitions or investments that could dilute our existing
stockholders, or cause us to incur contingent liabilities, debt or significant
expense.

Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK

In the normal course of business, the
financial position of the Company is subject to a variety of risks, including
market risk associated with interest rate movements. The Company regularly
assesses these risks and has established policies and business practices to
protect against these and other exposures. As a result, the Company does not
anticipate material potential losses in these areas. However, as mentioned under
"Liquidity and Capital Resources" and the "Other Factors Affecting Future
Operations" sections of the Company's Management Discussion and Analysis of
Financial Condition and Results of Operations above, the Company is subject to
risk associated with its retained ownership in Abgenix shares.

The Company has not entered into any financial instruments
that would give rise to foreign currency exchange risk, commodity pricing risk
or equity pricing risk.

The following table provides information about the Company's
financial instruments that are sensitive to changes in interest rates. For
investment securities and debt obligations, the table presents principal cash
flows and related weighted-average interest rates by expected maturity dates.
Additionally, the Company has assumed its available for sale securities,
comprised of corporate notes and commercial paper, are similar enough to
aggregate those securities for presentation purposes. The average interest rate
was calculated using the weighted average fixed rates under all contracts with
Wells Fargo Bank, Sterling Capital Management, JP Morgan Chase H & Q and
Fleet National Bank.

The Company does not currently hold any derivative financial
instruments nor has it entered into hedging transactions or activities.

`Fair
                                                                                                    Value
                                                                             There-               Dec. 31,
 (in thousands)                   2002       2003       2004       2005       after      Total      2001
                                ---------  ---------  ---------  ---------  ---------  ---------  ---------
Total Investments
  Securities.................. $  66,766  $  52,082  $  43,326  $  12,883  $   2,586  $ 177,643  $ 179,287
  Average Interest Rate.......      2.00%      3.89%       --         --         --        3.10%
Long-term Debt, including
  Current Portion............. $     --   $  12,000  $  12,000  $  12,000  $  24,000  $  60,000  $  60,000
  Average Interest Rate.......       --         --         --         --         --         --         2.9%`

>ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

---

Report of Ernst & Young LLP, Independent
Auditors



The Board of Directors and Stockholders of
  Cell Genesys, Inc.

We have audited the accompanying consolidated balance sheets
of Cell Genesys, Inc. as of December 31, 2001 and 2000, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

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

As discussed in the revenue recognition note to the consolidated financial
statements, in 2000 the Company changed its method of revenue recognition.



ERNST & YOUNG LLP



Palo Alto, California
   January 17, 2002

---

CELL GENESYS, INC.
                          Consolidated Balance Sheets(In thousands, except share and per share data)
December 31,
                                                           ---------------------
                                                             2001        2000
                                                           ---------  ----------
                           ASSETS
Current assets:
  Cash and cash equivalents including restricted cash
    of $66,382 and $349 for 2001 and 2000, respectively . $ 143,055  $   21,747
  Short-term investments.................................   115,594     237,900
  Investment in Abgenix common stock, at fair value......   301,217     528,858
  Prepaid expenses and other current assets..............    10,603         482
                                                           ---------  ----------
          Total current assets...........................   570,469     788,987
Property and equipment, net..............................    43,217       4,439
Deposits and other assets................................     1,624         290
                                                           ---------  ----------
                                                          $ 615,310  $  793,716
                                                           =========  ==========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable....................................... $   1,978  $      520
  Accrued compensation and benefits......................     2,637       1,323
  Deferred revenue from related parties..................     3,756       5,503
  Accrued legal expenses.................................       549         492
  Accrued acquisition and related costs..................     1,535         --
  Accrued clinical trial costs...........................       928         418
  Other accrued liabilities..............................     7,405         599
  Income tax payable.....................................    13,094      24,820
  Deferred tax liability.................................   117,808     204,300
  Current portion of property and equipment financing....       --        1,027
                                                           ---------  ----------
          Total current liabilities......................   149,690     239,002

Noncurrent portion of property and equipment financing...    60,000       1,350

Commitments and contingencies

Minority interest in equity of subsidiary................        96         --

Redeemable convertible preferred stock, $.001 par value:
  5,000,000 shares authorized; 1,569 shares issued
  and outstanding in 2001 and 2000, respectively.........    17,970      17,185

Stockholders' equity:
  Common stock, $.001 par value:  84,859,199 shares
     authorized; 35,596,446 and 34,123,771 shares
     issued and outstanding in 2001 and 2000,
     respectively........................................        36          34
  Additional paid-in capital.............................   274,365     256,007
  Accumulated comprehensive income, principally
    unrealized gains on investment in Abgenix, net
    of taxes.............................................   176,710     315,021
  Accumulated deficit....................................   (63,557)    (34,883)
                                                           ---------  ----------
          Total stockholders' equity.....................   387,554     536,179
                                                           ---------  ----------
                                                          $ 615,310  $  793,716
                                                           =========  ==========See accompanying notes.




CELL GENESYS, INC.
                     Consolidated Statements of Operations(In thousands, except per share data)
Year Ended December 31,
                                                  -------------------------------
                                                    2001       2000       1999
                                                  ---------  ---------  ---------

Revenue under collaborative agreements.......... $  28,317     24,209  $  33,607
Operating expenses:
  Research and development......................    50,752     30,474     24,538
  General and administrative....................    11,850      6,984      4,833
  Charge for purchased in-process technology        18,042        --         --
  Merger termination costs......................       --         --      15,382
                                                  ---------  ---------  ---------
         Total operating expenses...............    80,644     37,458     44,753
                                                  ---------  ---------  ---------
Operating loss..................................   (52,327)   (13,249)   (11,146)

Equity in loss of Abgenix.......................       --         --      (3,083)
Gain on sale of stock of Abgenix................       --     239,660        --
Interes and other income........................    18,378     13,558      3,059
Interest expense................................      (500)      (386)      (824)
                                                  ---------  ---------  ---------
Income (loss) before minority interest, income
   tax and cumulative effect of change in
   accounting...................................   (34,449)   239,583    (11,994)
Loss attributed to minority interest............       264        --         --
                                                  ---------  ---------  ---------
Income (loss) before income tax and cumulative
   effect of accounting change..................   (34,185)   239,583    (11,994)
Benefit (provision) for income tax..............     5,512    (64,203)       --
                                                  ---------  ---------  ---------
Income (loss) before cumulative effect of
   change in accounting.........................   (28,673)   175,380    (11,994)
Cumulative effect of change in accounting
   principle, net of tax........................       --      (6,460)       --
                                                  ---------  ---------  ---------
Net income (loss)...............................   (28,673)   168,920    (11,994)
Deemed dividend to preferred stockholders.......       785        756        392
                                                  ---------  ---------  ---------
Net income (loss) attributed to
   common shareholders.......................... $ (29,458)   168,164  $ (12,386)
                                                  =========  =========  =========

Basic income (loss) per common share............ $   (0.85)      4.99  $   (0.39)
                                                  =========  =========  =========

Diluted income (loss) per common share.......... $   (0.85)      4.55  $   (0.39)
                                                  =========  =========  =========

Weighted average shares of common stock
   outstanding -- basic.........................    34,746     33,716     31,682
                                                  =========  =========  =========
Weighted average shares of common stock
   outstanding -- diluted.......................    34,746     36,952     31,682
                                                  =========  =========  =========

Pro forma amounts assuming the new revenue
    recognition policy was applied
    retroactively (unaudited)
Net Income (loss)............................... $     --   $ 175,380  $ (10,257)See accompanying notes.




CELL GENESYS, INC.
                 Consolidated Statement of Stockholders' Equity(In thousands, except share data)
Accumulated
                                                                Comprehensive
                                                                Income(loss),
                                                                 Principally                    Total
                                                    Additional  Unrealized Gain                Stock-
                                           Common    Paid-in    on Investment  Accumulated    holders'
                                           Stock     Capital     of Abgenix      Deficit       Equity
                                          --------  ----------  -------------  ------------  -----------
Balances at December 31, 1998........... $     31  $  230,557  $         113  $   (191,809) $    38,892

  Net loss..............................      --          --             --        (11,994)     (11,994)
  Change in net unrealized
    holding loss on available
    for sale securities.................      --          --            (713)          --          (713)
  Unrealized gain on investment
    in Abgenix, net of taxes of
    $137,000 (restated).................      --          --         284,491           --       284,491
                                                                                             -----------
  Comprehensive income (loss)...........      --          --             --            --       271,784
                                                                                             -----------
  Adjustment to carrying
    amount of Abgenix
    investment resulted
    from March 4, 1999 Abgenix
    common stock offering...............      --        9,835            --            --         9,835
  Issuance of 516,970
   shares of common stock
   upon exercise of stock
   options and pursuant to
   the 1992 Employee Stock
   Purchase Plan........................        1       3,332            --            --         3,333
  Issuance of 34,780 shares
   of common stock upon
   exercise of warrants.................      --          127            --            --           127
  Conversion of 462 shares
   of Series B redeemable
   preferred into 1,149,081
   shares of common stock ..............        1       4,796            --            --         4,797
  Deemed dividend to
   preferred stockholders  .............      --         (392)           --            --          (392)
                                          --------  ----------  -------------  ------------  -----------
Balances at December 31, 1999...........       33     248,255        283,891      (203,803)     328,376
  Net income............................      --          --             --        168,920      168,920
  Change in net unrealized
    holding loss on available
    for sale securities.................      --          --           3,118           --         3,118
  Unrealized gain on investment
    in Abgenix, net of taxes of
    $208,000 ...........................      --          --          28,012           --        28,012
                                                                                             -----------
  Comprehensive income..................      --          --             --            --       200,050
                                                                                             -----------
  Issuance of 1,537,515
   shares of common stock
   upon exercise of stock
   options and pursuant to
   the 1992 Employee Stock
   Purchase Plan........................        1       8,508            --            --         8,509
  Deemed dividend to
   preferred stockholders ..............      --         (756)           --            --          (756)
                                          --------  ----------  -------------  ------------  -----------
Balances at December 31, 2000...........       34     256,007        315,021       (34,883)     536,179
  Net loss..............................      --          --             --        (28,673)     (28,673)
  Change in net unrealized
    holding loss on available
    for sale securities.................      --          --            (865)          --          (865)
  Unrealized gain on investment
    in Abgenix, net of taxes of
    $117,808 ...........................      --          --        (137,446)          --      (137,446)
                                                                                             -----------
  Comprehensive loss....................      --          --             --            --      (166,984)
                                                                                             -----------
  Issuance of 909,199
   shares of common stock
   upon acquisition of Calydon..........        1      16,421            --            --        16,421
  Issuance of 563,476
   shares of common stock
   upon exercise of stock
   options and pursuant to
   the 1992 Employee Stock
   Purchase Plan........................        1       2,722            --            --         2,723
  Deemed dividend to
   preferred stockholders ..............      --         (785)           --            --          (785)
                                          --------  ----------  -------------  ------------  -----------
Balances at December 31, 2001........... $     36  $  274,365  $     176,710  $    (63,557) $   387,554
                                          ========  ==========  =============  ============  ===========See accompanying notes.




CELL GENESYS, INC.
                     Consolidated Statement of Cash Flows(In thousands)
Year Ended December 31,
                                                    --------------------------------
                                                      2001        2000       1999
                                                    ---------  ----------  ---------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss........................................ $ (28,673) $  168,920  $ (11,994)
  Adjustments to reconcile net income (loss)
     to net cash used by operating activities:
     Depreciation and amortization................     3,410       2,211      2,986
     Gain on disposal of property and equipment...       --          --         (34)
     Equity in losses of Abgenix..................       --          --       3,083
     Gain on sale of shares of Abgenix............       --     (239,660)       --
     Purchased in-process technology..............    18,042         --         --
  Changes to:
     Prepaid expenses and other assets............   (10,546)        991       (645)
     Accounts payable.............................     1,458        (574)        21
     Accrued compensation and benefits............       796        (733)       768
     Deferred revenue.............................    (1,747)      1,308      3,492
     Accrued legal expenses.......................      (335)       (220)        61
     Accrued acquisition and related costs........     1,535      (1,068)       136
     Other accrued liabilities....................    10,067        (612)      (123)
     Accrued tax provision........................   (11,726)     21,120        --
                                                    ---------  ----------  ---------
          Net cash used in operating activities...   (17,719)    (48,317)    (2,249)
                                                    ---------  ----------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of short-term investments.............  (333,640)   (347,396)   (55,628)
  Maturities of short-term investments............    20,433      30,844     48,716
  Sales of short-term investments.................   434,652     126,759        --
  Capital expenditures............................   (42,188)     (2,373)       (13)
  Proceeds from disposal of property and equipment       --           31         82
  Exercise of Abgenix warrants....................       --         (730)       --
  Net proceeds from sale of Abgenix shares........       --      243,860        --
  Minority interest in equity of subsidiary.......        96         --         --
                                                    ---------  ----------  ---------
          Net cash provided by (used in)
            investing activities..................    79,353      50,995     (6,843)
                                                    ---------  ----------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of convertible
    preferred stock...............................       --        8,750        --
  Proceeds from issuances of common stock.........     2,772       8,517      3,461
  Proceeds from long-term debt financing..........    60,000         --         --
  Payments under equipment financing obligations..    (3,098)     (3,498)    (3,524)
                                                    ---------  ----------  ---------
          Net cash provided by (used in)
            financing activities..................    59,674      13,769        (63)
                                                    ---------  ----------  ---------
Net increase (decrease) in cash and cash
  equivalents.....................................   121,308      16,447     (9,155)
Cash and cash equivalents at beginning of year....    21,747       5,300     14,455
                                                    ---------  ----------  ---------
Cash and cash equivalents at end of year.......... $ 143,055  $   21,747  $   5,300
                                                    =========  ==========  =========**See accompanying notes**



CELL GENESYS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Organization and Summary of Significant
Accounting Policies
Organization and basis of presentation
Cell Genesys, Inc. ("Cell Genesys" or "the Company") has
focused its research and product development efforts on human disease therapies
that are based on innovative gene modification technologies. The Company's
objective is to develop and commercialize cancer vaccines, oncolytic virus
therapies and gene therapies to treat cancer and other major, life-threatening
diseases. Cell Genesys' current clinical programs include GVAX®
cancer vaccines and oncolytic virus therapies.
The consolidated financial statements include the accounts of
Cell Genesys and its wholly owned and majority owned subsidiaries (see footnote
#3). All significant inter-company balances and transactions have been
eliminated. Investments in entities in which the Company does not have control,
but has the ability to exercise significant influence over operating and
financial policies, are accounted for by the equity method.
Concentration of risk
Cash and cash equivalents, short-term investments and
accounts receivables are financial instruments, which potentially subject the
company to concentrations of credit risk. The Company maintains and invests
excess cash in money market funds and repurchase agreements which bear minimal
risk. The Company has not experienced any significant credit losses and does not
generally require collateral on receivables.
Revenue recognition
Research payments under collaborative arrangements
and grants are recognized as revenue based on research expenses incurred as
provided for under the terms of the arrangements.
The Company previously recognized non-refundable license
fees as revenue when received and when all significant contractual obligations
of the Company relating to the fees had been met. Effective January 1, 2000, the
Company changed its method of accounting for non-refundable license fees to
recognize such fees over the research and development period of the applicable
agreement. The Company believes the change in accounting principle is preferable
based on guidance provided in SEC Staff Accounting Bulletin No. 101 - Revenue
Recognition in Financial Statements.The $6.5 million, net of taxes,
cumulative effect of the change in accounting principle, calculated as of
January 1, 2000, was reported as a charge in the year ended December 31, 2000.
The cumulative effect was initially recorded as deferred revenue and is being
recognized as revenue over the estimated research and development periods of the
agreements. The impact of the accounting change in 2001 and 2000 was to increase
net income by $5.4 million each year, or $0.16 per share, which represents the
cumulative effect amount recognized in 2000 and 1999 based on the new accounting
method. The pro forma amounts presented below were calculated assuming the
accounting change was made retroactive to prior periods.
Pro forma amounts of net income (loss) and related per
share amounts, assuming retroactive application of the accounting change for all
periods (in thousands, except per share amounts):

Year Ended December 31,
                                          ----------------------
                                             2000        1999
                                          ----------  ----------
As reported:
  Net income (loss)..................... $  168,164  $   11,994
  Net income (loss) per share- diluted.. $     4.57  $    (0.38)

Pro forma amounts with change in
  accounting related to revenue
  recognition applied retroactively
  (unaudited):
  Net income (loss)..................... $  175,380  $  (10,257)
  Net income (loss) per share- diluted.. $     4.75  $    (0.32)Incentive milestone payments under collaborative
arrangements are recognized as revenue upon achievement of the incentive
milestone events, which represent the culmination of the earnings process
because the Company has no future performance obligations related to the
payment. Incentive milestone payments are triggered either by the results of our
research efforts or by events external to Cell Genesys, such as regulatory
approval to market a product or the achievement of specified sales levels by a
marketing partner.
Amounts received in advance are recorded as deferred
revenue until the related revenue is recognized.
Research and development
R&D expenses include related salaries, contractor
fees, building costs, utilities, administrative expenses and allocations of
corporate costs. R&D expenses consist of independent R&D costs and costs
associated with collaborative R&D and in-licensing arrangements. All such
costs are charged to R&D expense as incurred.
Depreciation and amortization
Cell Genesys records property and equipment at cost and
depreciates it using the straight-line method over the estimated useful lives of
the assets, generally five years. Computer equipment is depreciated over a life
of three years. Furniture and equipment leased under capital leases is amortized
over the shorter of the useful lives or the lease term. Amortization of leased
assets is included in depreciation and amortization expense and is combined with
accumulated depreciation and amortization of the Company's owned assets.
Intangible assets are amortized using the straight-line method over the
estimated useful lives of the assets, generally three years, 10 years in the
case of intellectual property intangible assets.
Cash, cash equivalents and short-term investments
Cell Genesys places its cash, cash equivalents and
short-term investments with high credit quality U.S. and foreign financial
institutions, government and corporate issuers and limits the amount of credit
exposure to any one issuer. The Company considers all highly liquid investments
with insignificant interest rate risk with a maturity of less than three months
when purchased to be cash equivalents. Cash and cash equivalents include $66.4
million and $349,000 of restricted cash at December 31, 2001 and 2000,
respectively. The increase in restricted cash during 2001 includes a $60 million
liquid collateral asset-backed debt financing and an approximate $6 million
balance securing a letter of credit in connection with facility leases. All
investments are denominated in U.S. dollars. Short-term investments include
equity securities classified as available-for-sale. The Company records its
investments at fair market value.
The Company's debt securities are classified as
available-for-sale and carried at fair value. The cost of securities sold is based on the
specific identification method. Realized gains and losses and declines in value,
judged to be other than temporary, on available-for-sale securities are included
in interest income. Unrealized holding gains and losses on securities classified
as available-for-sale are recorded in accumulated deficit. The Company
determines the appropriate classification of debt securities at the time of
purchase and re-evaluates such designation as of each balance sheet date.
Reclassifications
Certain prior year balances have been reclassified to
conform with the current year presentation.

Stock-based compensation
In accordance with the provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), the Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25") and related interpretations and to adopt the "disclosure only"
alternative described in SFAS 123. Under APB 25, if the exercise price of the
Company's employee stock options equals or exceeds the fair market value on the
date of the grant or the fair value of the underlying stock on the date of the
grant as determined by the Company's Board of Directors, no compensation expense
is recognized.

Net income (loss) per share
Basic earnings (loss) per common share is calculated
using the weighted average number of shares of common stock outstanding during
the period, less shares subject to repurchase. Diluted earnings per share
includes the impact of potentially dilutive securities. As the Company's
potentially dilutive securities (stock options, warrants, and convertible
preferred stock) were anti-dilutive for the years ended December 31, 2001 and
1999, they have been excluded from the computation of shares used in computing
diluted net loss per common share for those years.
The following table presents the calculation of basic and diluted income
(loss) per share (in thousands, except per share data):

Year ended December 31,
                                                  -------------------------------
                                                    2001       2000       1999
                                                  ---------  ---------  ---------
Net income (loss) attributable to
   common stockholders ......................... $ (29,458) $ 168,164  $ (12,386)
                                                  =========  =========  =========

Weighted-average shares outstanding:
   Denominator for basic earnings (loss)
      per common share..........................    34,746     33,716     31,682
   Potential common shares:
       - stock options..........................       --       2,000        --
       - convertible preferred stock............       --       1,236        --
                                                  ---------  ---------  ---------
   Denominator for diluted earnings
      (loss) per share..........................    34,746     36,952     31,682
                                                  =========  =========  =========
Net income (loss) per common share:
   Basic........................................ $   (0.85) $    4.99  $   (0.39)
                                                  =========  =========  =========

   Diluted...................................... $   (0.85) $    4.55  $   (0.39)
                                                  =========  =========  =========Use of estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
Comprehensive income (loss)
Comprehensive income (loss) is comprised of net income
(loss) and other comprehensive income (loss). Other comprehensive income (loss)
includes certain changes to stockholders' equity of the Company that are
excluded from net income (loss). Specifically, unrealized gains or losses on the
Company's available-for-sale securities are included in other comprehensive
income (loss) and deemed dividends to preferred stockholders are charged to
additional paid in capital.

Income taxes
Income taxes are computed using the asset and
liability method, under which deferred income tax assets and liabilities are
determined based on the differences between the financial reporting and tax
basis of assets and liabilities, and are measured using the currently enacted
tax rates and laws. A valuation allowance is provided for the amount of deferred
tax assets that, based on available evidence, are not expected to be
realized.
Segment reporting
Our operations are treated as one operating segment as we
only report profit and loss information on an aggregate basis to our chief
operating decision-makers.
Accounting for derivative financial instruments and for
hedging activitiesIn June
1998, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 requires the Company to recognize
all derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through net income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of the
derivative are either offset against the change in fair value of assets,
liabilities, or firm commitments through earnings or recognized in the other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of the derivative's change in fair value will be immediately
recognized in earnings. SFAS 133 was adopted for the Company's year ending
December 31, 2001. The Company does not currently hold any derivatives and as
such the adoption of this pronouncement did not materially impact results of
operations.Recent accounting pronouncements
Business combinationsIn July 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS 141 requires that all business combinations be accounted for by
the purchase method of accounting and changes the criteria for recognition of
intangible assets acquired in a business combination. The provisions of SFAS 141
apply to all business combinations initiated after June 30, 2001. The Company
does not expect that the adoption of SFAS 141 will have a material effect on its
consolidated financial position or results of operations. SFAS 142 requires that
goodwill and intangible assets with indefinite useful lives no longer be
amortized; however, these assets must be reviewed at least annually for
impairment. Intangible assets with finite useful lives will continue to be
amortized over their respective useful lives. The standard also establishes
specific guidance for testing for impairment of goodwill and intangible assets
with indefinite useful lives. The provisions of SFAS 142 will be effective for
fiscal year 2002. The Company is currently in the process of evaluating the
potential impact that the adoption of SFAS 142 will have on its consolidated
financial position and results of operations.
Asset retirement obligations
In August 2001, the FASB issued SFAS No. 143,
"Accounting for Asset Retirement Obligation." SFAS 143 addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated retirement costs. The Company is
in the process of assessing the effect of adopting SFAS 143, which will be
effective for the Company's fiscal year ending December 31, 2002.

Asset impairments
In October 2001, the FASB issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144
addresses financial accounting and reporting for the impairment of long-lived
assets and for long-lived assets to be disposed of. The provisions of SFAS 144
will be effective for fiscal year 2002 and will be applied prospectively. The
Company is currently in the process of evaluating the potential impact that the
adoption of SFAS 144 will have on its consolidated financial position and
results of operations.
Statement of cash flows
Supplemental disclosure to the Consolidated Statements of Cash Flows is
as follows for the years ended December 31, (in thousands):

2001        2000       1999
                                                    ---------  ----------  ---------
Cash paid for interest............................ $     500  $      386  $     824
Cash paid for income taxes........................ $   2,500  $   40,000  $     --Supplemental disclosure regarding non-cash
investing and financing activities is as follows for the years ended December
31, (in thousands):

2001        2000       1999
                                                    ---------  ----------  ---------
Furniture and equipment acquired under
  financing....................................... $     --   $      --   $     973
Charge for purchased in-process technology........ $  18,042  $      --   $     --2. Investment in Abgenix and Minority Interest
Since 1996, the Company has maintained an investment
in Abgenix, Inc. ("Abgenix"). In December 1997 and January 1998, Abgenix
completed private placements of securities reducing Cell Genesys' percentage
ownership from approximately 100 percent to approximately 54 percent.
On July 2, 1998, Abgenix completed an initial public offering
("IPO"), reducing Cell Genesys' percentage ownership to approximately 40
percent. Prior to the IPO, Abgenix was a consolidated subsidiary and its
financial results were presented accordingly. From July 2, 1998 through November
19, 1999, the Company's investment in Abgenix was accounted for under the equity
method of accounting as a result of the reduced ownership position. On March 4,
1999, Abgenix completed the sale of an additional 3,000,000 shares of common
stock in a public offering which further reduced the Company's ownership
percentage in Abgenix to approximately 22 percent. The difference between the
cost of the investment (the carrying value of the net assets less the equity in
loss of Abgenix immediately prior to the public offering) and the amount of the
underlying equity in net assets of Abgenix immediately following each of the
public offerings was accounted for under the equity method of accounting.
Accordingly, the Company recognized $9.8 million as a contribution to
stockholders' equity upon completion of the Abgenix March 1999 public
offering.
On November 19, 1999, Abgenix completed a private
placement of 1.8 million shares of its common stock, and Cell Genesys' ownership
was further reduced to approximately 19 percent. Accordingly, the Company no
longer accounts for Abgenix's losses under the equity method of accounting. The
Company's investment in Abgenix is now treated as available-for-sale securities
and carried at fair value.

During 2000, the Company sold shares of Abgenix
common stock resulting in $243.9 million in net proceeds. During 2001, the
Company did not sell any of the Abgenix common stock and retains approximately 9
million shares, or 10.31 percent, ownership in Abgenix. Based on Abgenix common
stock's market value of $33.64 per share as of December 31, 2001, the total
carrying amount of the Company's investment in Abgenix was $301.2 million.

3. Acquisitions
In January 2001, the Company acquired the principal
operating assets of Chiron Corporation's gene therapy business located in San
Diego, California, at a cost of approximately $4.8 million. The transaction was
accounted for as a purchase. The cost of the acquisition was allocated among the
principal assets, leasehold improvements and machinery and equipment. The
allocation was based on information on construction costs of similar type
facilities for leasehold improvements and machinery and equipment. The $4.8
million purchase price was allocated entirely to tangible assets and no material
intangible assets were purchased.
In January 2001, the Company created
a new subsidiary, Ceregene, Inc ("Ceregene") through the acquisition of
Neurologic Gene Therapeutics, a private San Diego-based start-up company. The
Company contributed $10 million cash and access to technology and patents in the
Central Nervous System ("CNS") gene therapy area, in exchange for approximately
60 percent ownership of the new company. Ceregene's financial statements are
consolidated into the operations of the Company.
In September 2001, the Company announced that it had
completed the acquisition of Calydon, Inc., a private biotechnology company
focused on the treatment of cancer using genetically engineered oncolytic
viruses, for approximately $17.4 million in Cell Genesys stock and other
consideration and assumption of approximately $2.6 million in liabilities, for a
total purchase price of approximately $20.0 million. The acquisition provided
Cell Genesys with a third product platform in addition to cancer vaccines and
cancer gene therapies as well as a product, CG7060, for early stage prostate
cancer that is a potential candidate for Phase III clinical trials. The Company
engaged the services of an outside consulting firm to evaluate the value of the
acquired assets. In relation to the acquisition, the Company recognized
approximately an $18 million charge for in-process research and development and
approximately $1 million in intangible assets related to patents. The
acquisition was accounted for as a purchase business combination using the
guidance contained in Statement of Financial Accounting Standards No. 141 ("SFAS
141") issued by the Financial Accounting Standards Board ("FASB").

4. Termination of Merger Agreement between Cell Genesys
and Genzyme
In October 1999, Genzyme General and the Company
announced that they had entered into a definitive agreement under which Genzyme
General was to acquire Cell Genesys for approximately $350 million in a tax-free
stock-for-stock exchange. The agreement was then terminated by Genzyme General
on December 21, 1999 following the decision announced by Cell Genesys that its
board of directors had withdrawn its recommendation of the merger with Genzyme
and recommended that stockholders not approve the merger. Cell Genesys noted
that the value of its equity ownership of Abgenix had increased significantly in
value since the merger agreement was announced in October 1999. In accordance
with the terms of the merger agreement, the Company made a payment of $15
million on December 21, 1999 to Genzyme General, which was charged to expense in
the statement of operations for the year ended December 31, 1999.
5. Collaborative and License Agreements
Collaborative agreement with Japan Tobacco Inc.
On December 17, 1998, Cell Genesys entered into a
worldwide collaboration agreement with the pharmaceutical division of Japan
Tobacco Inc. ("JT") for the Company's GVAX® cancer vaccine
program. The Company received an initial payment under the agreement of $12.7
million in December 1998. Inception-to-date, the Company has received $32.1
million in research and development funding, $22 million for product milestone
achievements, $2.5 million anniversary payment and $1.7 million in manufacturing
facility build-out cost reimbursement. In November 2001, the
Company and JT agreed to modify their ongoing
collaborations for the GVAX®cancer vaccines. Under the amended agreement, the companies will
continue to equally share in the development costs of GVAX®lung cancer
vaccine products and JT will continue to pay Cell Genesys milestone payments.The two companies will have a royalty arrangement on sales
of GVAX® lung cancer vaccine as well as a royalty arrangement on
sales in other cancer indications that may be derived from a certain form of
that vaccine. JT will pay the Company a royalty on GVAX® lung
cancer vaccine sales in Japan, Taiwan and Korea, and Cell Genesys will pay JT
the same royalty on such sales in North America and the rest of the world. Cell
Genesys will have full commercial rights for GVAX® prostate
cancer vaccine. None of the payments involve an additional equity investment in
Cell Genesys by JT, which currently owns approximately three percent of the
Company.

Collaborative agreement with Aventis Pharmaceuticals, Inc. (formerly
Hoechst Marion Roussel, Inc.)
On September 15, 1999, the Company reacquired product
rights to its AIDS gene therapy program following the termination of a
collaboration agreement with Aventis Pharmaceuticals, Inc. ("Aventis"). Since
October 1995, the agreement provided total funding of $51.6 million for the
Company's AIDS gene therapy program including the Phase II human clinical trials
conducted to date. The total funding included a payment of $8 million during
1999 as final wind-down payment following the termination of the collaborative
agreement.
Gene activation technology licenses
Cell Genesys executed a license agreement with
Aventis in February 1997 for gene-activated erythropoietin ("EPO") and a second
undisclosed protein. In late 2000, Aventis informed the Company of its intention
to terminate this license agreement as it relates to the second undisclosed
protein. The agreement provided for up to $26 million in milestone payments and
fees, in addition to any royalties on future sales gene-activated EPO anywhere
in the world. As of December 31, 2000, Cell Genesys had received approximately
$17 million under this license agreement, which included certain milestone
payments relating to the development of gene-activated EPO which Aventis is
developing in collaboration with Transkaryotic Therapies, Inc. The Company
recognized revenue of $3.2, $2.8 and $4.0 million in 2001, 2000 and 1999,
respectively, pursuant to the agreement.
Gene therapy rights agreement with Abgenix
In November 1997, Cell Genesys entered into a gene
therapy rights agreement (the "GTRA") with Abgenix. The GTRA provides Cell
Genesys with certain rights to Abgenix's XenoMouseÔtechnology in the field of gene therapy for
two antigen targets per year. Cell Genesys is obligated to make certain payments
to Abgenix for these rights including reimbursement of license fees and
royalties on future product sales. The GTRA also prohibits Abgenix from granting
any third-party licenses for antibody products based on antigens nominated by
Abgenix for its own purposes where the primary field of use is gene therapy. In
the case of third-party licenses granted by Abgenix where gene therapy is a
secondary field, Abgenix is obligated to share with us a portion of the cash
milestone payments and royalties resulting from any products in the field of
gene therapy.
Other collaborations
Cell Genesys has signed agreements with seven
different companies relating to its gene therapy technologies. In August 1999,
Cell Genesys signed a research collaboration for cancer gene therapy with
EntreMed, Inc. Under this agreement, EntreMed's Angiostatin® and
EndostatinTM genes will be combined with Cell Genesys' proprietary
adenoviral and adeno-associated viral (AAV) gene delivery systems in preclinical
studies designed to assess whether the gene therapy can treat tumors by
inhibiting their blood supply.
In September 1999, the Company signed a research
collaboration with Pharmacia in which Cell Genesys will provide its proprietary
adenoviral and AAV gene delivery technologies to Pharmacia to evaluate certain
applications of gene therapy in animal health.
In September 1999, Cell Genesys signed a research
collaboration and license agreement with Rigel Pharmaceuticals, Inc. Under the
agreement, Rigel is employing its proprietary functional genomics technology to
identify novel therapeutic genes for the treatment of cancer-and Cell Genesys
will be granted exclusive, worldwide rights to these genes in the field of gene
therapy. In exchange, Rigel gains access to certain Cell Genesys patents and
technology pertaining to retroviral gene delivery technology for use in the
field of functional genomics. The Company's chief executive officer is a member
of the Board of Directors of Rigel and the chief executive officer of Rigel is a
member of the Company's Board of Directors.
In January 2000, Cell Genesys nonexclusively licensed
certain retroviral gene delivery technology to Clontech Laboratories, Inc., a
wholly owned subsidiary of Becton Dickinson and Company. Under the license, Cell
Genesys will receive royalties on worldwide sales of certain research kits that
are currently being marketed and any future products employing Cell Genesys'
proprietary retroviral gene delivery technology. Additionally, customers of
Clontech who intend to market products arising from research using these kits
will need to obtain an additional license to this technology from Cell Genesys
prior to product commercialization.
In August 2001, the Company entered into a license
agreement with Invitrogen Corporation for sale of the Company's lentiviral
technology to the research market.
In April 1998, Cell Genesys signed a license and research
collaboration agreement with GPC Biotech (formerly Mitotix, Inc.) for the use of
certain cell cycle inhibitor genes for the development of gene therapy products
to treat cardiovascular disease and cancer. In March 2002, as a result of
competitive factors in the cardiovascular market and portfolio management of the
Company's potential cancer products, the agreement was terminated.

6. Fair Value of Financial Instruments
The following is a summary of the Company's available-for-sale securities
at December 31, 2001 and 2000, respectively (in thousands):

Gross        Gross     Estimated
                                    Amortized   Unrealized  Unrealized     Fair
                                       Cost       Gains       Losses       Value
                                    ----------  ----------  -----------  ---------
2001
Commercial paper.................. $   70,944  $      109  $       --   $  71,053
Corporate notes...................     53,864       1,085          --      54,949
U.S. Government and its agencies..     52,836         449          --      53,285
Abgenix common stock..............      8,287     292,930          --     301,217
                                    ----------  ----------  -----------  ---------
Short-term investments............ $  185,931  $  294,573  $       --   $ 480,504
                                    ==========  ==========  ===========  =========


Classified as:
Cash equivalents.................. $   63,693  $      --   $       --   $  63,693
Short-term investments............    113,951       1,643          --     115,594
Abgenix common stock..............      8,287     292,930          --     301,217
                                    ----------  ----------  -----------  ---------
                                   $  185,931  $  294,573  $       --   $ 480,504
                                    ==========  ==========  ===========  =========
Gross        Gross     Estimated
                                    Amortized   Unrealized  Unrealized     Fair
                                       Cost       Gains       Losses       Value
                                    ----------  ----------  -----------  ---------
2000
Commercial paper.................. $   22,975  $      --   $       --   $  22,975
Corporate notes...................     24,725         224          --      24,949
Municipal bonds...................    186,288       2,164          --     188,452
U.S. Government and its agencies..     17,281          88          --      17,369
Abgenix common stock..............      8,287     520,571          --     528,858
                                    ----------  ----------  -----------  ---------
Short-term investments............ $  259,556  $  523,047  $       --   $ 782,603
                                    ==========  ==========  ===========  =========


Classified as:
Cash equivalents.................. $   15,845  $      --   $       --   $  15,845
Short-term investments............    235,424       2,476          --     237,900
Abgenix common stock..............      8,287     520,571          --     528,858
                                    ----------  ----------  -----------  ---------
                                   $  259,556  $  523,047  $       --   $ 782,603
                                    ==========  ==========  ===========  =========The net unrealized holding gains on these securities at
December 31, 2001 and 2000 are $295 million and $523 million, respectively, and
are principally unrealized gains on the investment of Abgenix common stock.
These are reflected in the consolidated statement of stockholders' equity and
are included in the Company's accumulated other comprehensive income (loss), net
of income taxes. Gross realized gains for sale of investment securities was $8
million and $239.7 million for the years ended December 31, 2001 and 2000,
respectively. The realized gain in 2000 primarily resulted from the sale of
Abgenix common stock. The Company did not sell any Abgenix common stock during
2001. The investment in Abgenix is carried at current fair market value at the
end of each reporting accounting period.
The amortized cost and estimated fair value of
available-for-sale securities at December 31, 2001, by contractual maturity, are shown
below (in thousands):

Estimated
                                                Amortized      Fair
                                                   Cost        Value
                                                ----------  -----------
Due in one year or less....................... $   66,766  $    66,766
Due in one to seven years.....................    119,164      413,738
                                                ----------  -----------
                                               $  185,930  $   480,504
                                                ==========  ===========7. Property and EquipmentProperty and equipment consists of the following at December 31, (in
thousands):

2001        2000        1999
                                                ----------  -----------  ---------
Furniture and equipment under capital
  lease....................................... $      --   $     4,872  $   8,893
Machinery and equipment.......................     23,003       12,902      7,788
Leasehold improvements under capital lease....        --         5,463      5,463
Leasehold improvements........................     12,945        3,420      2,561
Construction in progress......................     34,856          271        126
                                                ----------  -----------  ---------
                                                   70,804       26,928     24,831
Accumulated depreciation and amortization.....    (27,587)     (22,489)   (20,633)
                                                ----------  -----------  ---------
                                               $   43,217  $     4,439  $   4,198
                                                ==========  ===========  =========The Company recognized depreciation expense of $3.4, $2.2
and $2.8 million for the years ended December 31, 2001, 2000 and 1999,
respectively. The increase in the construction in progress reflects the
build-out costs in connection to the Hayward GMP facility that is expected to be fully
validated and put into service in late 2002. The cost associated with this
project is expected to increase along with the cost in validating the facility
in meeting the FDA requirements.
8. Commitments and Contingencies
Rental commitments
The Company leases certain of its facilities and
equipment under non-cancelable operating leases. The leases, including the
Hayward facility and the newly signed Memphis facility, expire at various dates
through 2016 and some contain options for renewal. Rent expense under operating
leases was $7.9 million in 2001, $2.0 million in 2000 and $1.7 million in
1999.
Property and equipment financing
In December 2001, the Company paid the outstanding
balance of $2.3 million of property and equipment financed through long-term
obligations. In December 2001, the Company completed a $60 million asset-backed
debt financing in connection with the construction of the Company's
manufacturing facility in Hayward, California, which is scheduled for completion
prior to the initiation of Phase III trials in late 2003. The financing
obligation is secured by liquid financial instruments, including cash and
marketable securities. Under the terms of the obligation the Company is required
to meet various financial covenants with which it was in compliance at December
31, 2001.
The $60 million asset-backed debt financing in connection
with the construction of the Company's manufacturing facility in Hayward,
California will have an interest rate of LIBOR (London InterBank Offering Rate)
plus one percent and a term of six years. Cell Genesys will pay interest only
for the first year, followed by quarterly payments and an approximately 30
percent balloon payment at the end of the six-year period.
Future minimum payments under non-cancelable operating and
asset-backed debt financing at December 31, 2001, were (in
thousands):

Operating      Debt
                                                  Leases     Financing
                                                ----------  -----------
Years ending December 31:
  2002........................................ $    8,810  $     1,759
  2003........................................     13,548       13,610
  2004........................................     16,116       13,262
  2005........................................     16,406       12,913
  2006 and beyond.............................    120,197       24,783
                                                ----------  -----------
  Total minimum lease payment................. $  175,077       66,327
                                                ==========
Less: Amount representing interest........................      (6,327)
                                                            -----------
Present value of future lease payments.................... $    60,000
                                                            ===========9. Redeemable Convertible Preferred Stock
On November 14, 1997, the Company completed a private
placement of 2,000 shares of Series B redeemable convertible preferred stock
("preferred stock") for aggregate proceeds of $20 million. The Company, subject
to certain conditions, may exercise a put option to sell up to an additional $10
million of preferred stock. Each of the preferred shares is convertible, at the
option of the holder, into shares of common stock of the Company based upon a
conversion price of $11.02 per share or, if lower, 100 percent of the average of
specified trading prices during the ten trading days preceding a conversion. Any
shares not converted prior to November 2002 are automatically converted into
shares of the Company's common stock. The convertible preferred stock bears a
dividend of 5 percent, payable in kind upon conversion or redemption. If the
Company enters into a "major transaction" or effects a "triggering event" as
defined in the private placement agreement, the stock may be redeemed at the
option of the holders. Examples of such transactions
or events would include a change in control of the Company or delisting
of the Company's stock. The preferred stock is non-voting.
As of December 31, 2001, 1,306 shares of the originally
issued Series B preferred stock had been converted into common stock and 694
shares of the originally issued Series B preferred stock remained outstanding.
The fixed conversion price for these shares is $11.02, and there was no
conversion activity during 2001.
Investors in Cell Genesys' preferred stock in 1997 were
initially granted a call option, triggered upon certain conditions, to purchase
up to an additional $10 million of Series B preferred stock. In January 2000,
the Company received approximately $8.8 million from the issuance of 875 new
Series B convertible preferred shares following the exercise of such call
options for these shares. The newly issued preferred shares have a fixed
conversion price of $14.53 and other terms as defined by the Series B preferred
stock agreements dated November 14, 1997. The call option right which was
available under the terms of these agreements was triggered by the rise of Cell
Genesys' stock price. Following the issuance of the new preferred shares, no
further call options remained outstanding. The total face value of Series B
preferred shares was approximately $18 million as of December 31, 2001. Any of
these 875 Series B preferred shares not converted prior to January 2005 will be
automatically converted into shares of the Company's common stock.
10. Stockholders' Equity
Accounting for stock issued to employees
The Company has elected to follow Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and
related interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123")
requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, when the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.

Stock Option Plans
Under the Company's 1989 and the 1998 Incentive Stock
Option Plans ("the ISO Plans"), 10,478,172 shares of common stock were
authorized for issuance as of December 31, 2001. The 1989 ISO Plan was retired
in 1999 and 2,904,797 shares expired. The ISO Plans provide for the issuance of
common stock and granting of options for common stock to executive officers of
the Company. The Company grants shares of common stock for issuance under the
ISO Plans at no less than the fair market value of the stock (85 percent of fair
market value for non-qualified options). Options granted under the ISO Plans
have a maximum term of ten years and generally vest over four years at the rate
of 25 percent one year from the grant date and 1/48 monthly thereafter. As of
December 31, 2001, the number of shares reserved for future issuance was
3,995,469.
Under the Company's 2001 Non-Statutory Option Plan ("2001
Plan"), 2,000,000 shares of common stock have been authorized for issuance as of
December 31, 2001. The 2001 Plan provides for the issuance of common stock and
granting of options for common stock to employees (excluding executive officers)
and consultants of the Company. The Company grants shares of common stock for
issuance under the 2001 Plan at no less than the fair market value of the stock.
Options granted under the 2001 Plan have a maximum term of ten years and
generally vest over four years at the rate of 25 percent one year from the grant
date and 1/48 monthly thereafter. As of December 31, 2001, the number of shares
reserved for future issuance was 1,993,194.
Under the Company's 2001 Non-Employee Directors Stock
Option Plan ("the DIR Plan"), 300,000 shares of common stock have been
authorized for issuance as of December 31, 2001. The DIR Plan provides for the
issuance of common stock and granting of options for common stock to
non-employee directors of the Company. The Company grants shares of common stock for
issuance under the DIR Plan at no less than the fair market value of the stock.
Options granted under the DIR Plan have a maximum term of ten years. Each
non-employee director is automatically granted an option to purchase 30,000 shares
upon initial appointment or election to the Board and 7,500 shares annually,
thereafter. Stock options granted upon appointment or election to the Board vest
at the rate of 25 percent annually on each anniversary of its date of grant.
Subsequent grants for continued service on the Board vest 100% on date of grant.
As of December 31, 2001, the number of shares reserved for future issuance was
300,000.
The following table summarizes information about the plan
(share numbers in thousands):

Outstanding Stock Options
                                                    ------------------------
                                                                  Weighted-
                                                                   Average
                                         Shares      Number of     Exercise
                                        Available      Shares       Price
                                       -----------  ------------  ----------
Balances, December 31, 1998..........       2,358         3,275  $     4.88
     Authorized......................         --
     Granted.........................      (1,296)        1,296  $     7.65
     Exercised.......................         --           (296) $     4.08
     Expired.........................      (1,289)          --
     Canceled........................         424          (424) $     6.41
                                       -----------  ------------
Balances, December 31, 1999..........         197         3,851  $     5.69
     Authorized......................       1,500           --
     Granted.........................        (792)          792  $    23.64
     Exercised.......................         --         (1,031) $     4.28
     Expired.........................        (118)          --
     Canceled........................         395          (395) $     7.75
                                       -----------  ------------
Balances, December 31, 2000..........       1,182         3,217  $    10.33
     Authorized......................       2,300           --
     Granted.........................      (1,834)        1,834  $    18.95
     Exercised.......................         --           (385) $     5.47
     Expired.........................         (25)          --
     Canceled........................         281          (281) $    17.23
                                       -----------  ------------
Balances, December 31, 2001..........       1,904         4,385  $    13.92
                                       ===========  ============

Exercisable at December 31, 2001..................        2,136  $     9.37
                                                    ============

Exercisable at December 31, 2000..................        1,670  $     5.75
                                                    ============

Exercisable at December 31, 1999..................        1,997  $     4.77
                                                    ============

Weighted average fair value of options granted during 2001...... $    14.26
Weighted average fair value of options granted during 2000...... $    18.34
Weighted average fair value of options granted during 1999...... $     4.77The following table summarizes information about stock options
outstanding at December 31, 2001:

Options Outstanding             Options Exercisable
                   -----------------------------------  ----------------------
                                Weighted-
                                 Average     Weighted-               Weighted-
                     Number     Remaining     Average     Number      Average
      Range of     Outstanding Contractual   Exercise   Exercisable  Exercise
   Exercise Prices    (000)    Life (Years)    Price       (000)       Price
------------------ ----------- ------------  ---------  -----------  ---------
  $3.00 -    5.75         949          6.1  $    4.61          921  $    4.60
  $5.88 -    9.50       1,035          7.1  $    7.78          723  $    7.55
 $11.00 -   19.05         942          9.1  $   16.91          141  $   15.48
 $19.63 -   20.50         878          9.2  $   19.87          207  $   19.89
 $21.31 -   42.63         581          9.0  $   26.24          144  $   27.91
--------           -----------                          -----------
                        4,385                                2,136
                   ===========                          ===========Somatix 1992 Stock Option Plan
Under the terms of the merger agreement with Somatix, the
Company adopted the 1992 Stock Option Plan. Information with respect to the plan
activity is as follows:

Weighted-
                                                                 Average
                                                                 Exercise
                                                                  Price
                                                   Number of       Per
                                                     Shares       Share
                                                  ------------  ----------
                                                  (in thousand
Authorized and Outstanding at December 31, 1998..         729  $     9.01
  Granted........................................         --          --
  Exercised......................................        (221) $     7.92
  Canceled.......................................         (14) $    15.83
                                                  ------------
Authorized and Outstanding at December 31, 1999..         494  $     9.30
  Granted........................................         --          --
  Exercised......................................        (400) $     9.31
  Canceled.......................................          (3) $    15.44
                                                  ------------
Authorized and Outstanding at December 31, 2000..          91  $     9.07
  Granted........................................         --          --
  Exercised......................................         (30) $     0.73
  Canceled.......................................         --          --
                                                  ------------
Authorized and Outstanding at December 31, 2001..          61  $    13.18
                                                  ============

Exercisable at December 31, 2001.................          61  $    13.18
Exercisable at December 31, 2000.................          91  $     9.07
Exercisable at December 31, 1999.................         491  $     9.26


Weighted average remaining contractual
  life at December 31, 2001......................   2.86 years1992 Employee Stock Purchase Plan
The 1992 Employee Stock Purchase Plan ("the Purchase
Plan") allows eligible employees to participate and purchase common stock at 85
percent of its fair value at certain specified dates. Employee contributions are
limited to ten percent of compensation or $25,000, whichever is less. A total of
650,000 shares of common stock have been reserved for issuance under the
Purchase Plan. As of December 31, 2001, 554,149 shares have been issued pursuant
to the Purchase Plan and the number of shares reserved for future issuance was
95,851.
The Purchase Plan expires under its terms during 2002. It is
anticipated that a new replacement stock purchase plan with similar terms to the
previous plan will be submitted to stockholders for approval at their June 2002
meeting.
Pro forma information
Pro forma information regarding net loss and net loss per
share is required by SFAS 123, and has been determined as if the Company had
accounted for options granted under its employee stock option plans and the
Purchase Plan under
the fair value method of SFAS 123. The fair value of Cell
Genesys' options was estimated at the date of grant using a Black-Scholes option
pricing model with the following assumptions for 1999, 2000 and 2001,
respectively: risk-free interest rates of 5.5%, 6.14% and 4.08%; no dividend
yields; volatility factors of the expected market price of the Company's common
stock of 0.67, 1.0 and 1.0; and an expected life of the option of 5 years under
the stock option plan and 0.5 years for options granted under the Purchase Plan.

The Black-Scholes option valuation model was developed
for use in estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation models
require the input ofhighly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the options' vesting period.
The following table illustrates what net income (loss) would have been had the Company
accounted for its stock options under the provisions of SFAS 123.

Year Ended December 31,
                                          ----------------------------------
                                             2001        2000        1999
                                          ----------  ----------  ----------(in thousands, except per share data)
Net income (loss):
  As reported........................... $  (28,673) $  168,920  $  (11,994)
  Pro forma............................. $  (40,630) $  162,354  $  (16,274)

Net income (loss) per share- diluted:
  As reported........................... $    (0.85) $     4.55  $    (0.39)
  Pro forma............................. $    (1.17) $     4.39  $    (0.51)Stockholder Rights PlanIn July 1995, the Board of Directors approved a
stockholder rights plan under which stockholders of record on August 21, 1995
received one preferred share purchase right for each outstanding share of the
Company's common stock. In July 2000, the Company made certain technical changes
to amend the plan and extend the life of the rights plan until 2010. The rights
are exercisable only if an acquirer purchases 15 percent or more of the
Company's common stock or announces a tender offer for 15 percent or more of the
Company's common stock. Upon exercise, holders other than the acquirer may
purchase Cell Genesys stock at a discount. The board of directors may terminate
the rights plan at any time or under certain circumstances redeem the
rights.
Warrants
During January 2000, the Company announced
that it had acquired an additional 121,667 shares of stock in Abgenix in
connection with the exercise of warrants. The warrants had an exercise price of
$6.00 per share, resulting in payment of approximately $0.7 million to Abgenix.
Shares reserved
At December 31, 2001, the Company has reserved shares of
common stock for potential future issuance consisting of 2,089,136 upon
conversion of preferred stock; and 6,445,159 for exercises under the employee
stock option plans or the stock purchase plan.
In January 2001, the company adopted an employee non-
statutory stock option plan. Subject to the provisions of the plan, the maximum
aggregate number of shares which may be optioned and sold under the plan is
2,000,000 shares.

11. Income Taxes


The Company's benefit (provision) for income taxes
consists of the following (in thousands):

Year Ended December 31,
                                          ----------------------------------
                                             2001        2000        1999
                                          ----------  ----------  ----------
 Current:
    Federal............................. $    4,262  $  (52,707) $      --
    State...............................        --      (15,196)        --
                                          ----------  ----------  ----------
                                              4,262     (67,903)        --
                                          ----------  ----------  ----------
 Deferred:
    Federal.............................      1,250       3,700         --
    State...............................        --          --          --
                                          ----------  ----------  ----------
                                              1,250       3,700         --
                                          ----------  ----------  ----------
Provision for income taxes.............. $    5,512  $  (64,203) $      --
                                          ==========  ==========  ==========A reconciliation between our income tax provision and the U.S. statutory rate
follows (in thousands):

Year Ended December 31,
                                          ----------------------------------
                                             2001        2000        1999
                                          ----------  ----------  ----------
Tax at U.S. statutory rate of 35%....... $   11,965  $  (83,854) $    4,198
State taxes, net of federal benefit.....        --       (9,877)        --
Net operating losses utilized
  (not benefited).......................     (1,177)     25,585      (4,198)
Change in valuation allowance...........      1,250       3,700         --
Research and development tax credits
  utilized..............................        --        1,300         --
In process research and development.....     (6,315)        --          --
Other...................................       (211)     (1,057)        --
                                          ----------  ----------  ----------
Income tax benefit (provision) ......... $    5,512  $  (64,203) $      --
                                          ==========  ==========  ==========As of December 31, 2001, the Company had net
operating loss carryforwards for federal income tax purposes of approximately
$42 million which will expire on various dates beginning in 2011 through 2021,
if not utilized.
Utilization of the net operating losses and credits
carryforwards may be subject to substantial annual limitation due to ownership
change provisions of the Internal Revenue Code of 1986 and similar state
provisions. The annual limitation may result in the expiration of net operating
losses and credits before utilization.

Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax liabilities are
as follows (in thousands):

December 31,
                                                      ----------------------
                                                         2001        2000
                                                      ----------  ----------
Deferred Tax Assets:
Net operating loss carryforwards.................... $   15,000  $   19,400
Research credit carryforwards.......................        500         800
Capitalized research and development................      1,000       1,400
Other accruals and reserves.........................      2,450       5,400
                                                      ----------  ----------
Net deferred tax assets.............................     18,950      27,000
Valuation allowance ................................    (14,000)    (23,300)
                                                      ----------  ----------
Net deferred tax assets.............................      4,950       3,700
                                                      ----------  ----------
Deferred Tax Liabilities:

Unrealized gain on investment in Abgenix............   (122,758)   (208,000)
                                                      ----------  ----------
Net deferred tax liability.......................... $ (117,808) $ (204,300)
                                                      ==========  ==========Realization of deferred tax assets is dependent
upon future earnings, if any, the timing and amount of which are uncertain.
Accordingly, the net deferred tax assets have been fully offset by a valuation
allowance. The valuation allowance decreased by $9.3 million and $3.7million
during 2001 and 2000, respectively. Approximately $3.0 million of the valuation
allowance for deferred tax assets relates to benefits of stock option deductions
which, when recognized, will be allocated directly to contributed capital.

12. Litigation and Contingencies
The Company is party to various claims, investigations
and legal proceedings arising out of the normal course of its business. These
claims, investigations and legal proceedings relate primarily to intellectual
property of which certain are the subject of ongoing interference or opposition
proceedings with patent authorities. While there can be no assurance that an
adverse determination of any such matters could not have a material adverse
impact in any future period, management does not believe, based upon information
known to it, that the final resolution of these matters will have a material
adverse effect upon the Company's business, financial position or results of
operations.


Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
PART III


Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) The information required by this Item concerning the Company's
directors is incorporated by reference to the Company's Definitive Proxy
Statement for the 2002 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission within 120 days after the end of the
Company's 2001 fiscal year (the "2002 Proxy Statement").
(b) The information required by this Item concerning the Company's executive
officers is set forth in the section entitled "Executive Officers" at the end of
Part I of this Form 10-K.


Item 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's 2002 Proxy Statement.


Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's 2002 Proxy Statement.


Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Company's 2002 Proxy Statement.


PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. Index to Financial Statements	Page
Balance Sheets at December 31, 2001 and 2000
34Statements of Operations for the years ended December 31, 2001,
2000 and 1999
35Statement of Stockholders' Equity for the years ended December
31, 2001, 2000 and 1999
36Statements of Cash Flows for the years ended December 31, 2001,
2000 and 1999
37Notes to Financial Statements
382. Index to Financial Statement SchedulesAll financial statement schedules are omitted because they are not
applicable or not required or because the required information is included in
the financial statements or notes thereto.

(b) Reports on Form 8-K
Not applicable

(c) Exhibits

Number
Description2.1
(7)
Agreement and plan of merger and reorganization, dated as of
January 12, 1997, among Cell Genesys, S Merger Corp. and Somatix Therapy
Corporation.2.2
(10)
Asset Purchase Agreement dated January 8, 2001 between Cell
Genesys and Chiron Corporation, pursuant to which Cell Genesys purchased
operating assets of Chiron Corporation's gene therapy operations.2.3
(11)
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
(16)
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
(2)
Restated Certificate of Incorporation.3.2
(1)
Bylaws.4.1
(8)
Amended and Restated Preferred Shares Rights Agreement, dated as
of July 26, 2000 between Cell Genesys and Fleet National Bank10.1+
(1)
Form of Indemnification Agreement for Directors and
Officers.10.2+
(5)
Amended 1989 Incentive Stock Plan10.3+
(5)
Amended 1992 Employee Stock Purchase Plan.10.4
(1)
Representative Preferred Stock Purchase Agreement.10.5
(4)
Fourth Amended and Restated Stockholder Rights
Agreement.10.6
(1)
License Agreement dated August 13, 1990 between Cell Genesys and
the University of North Carolina at Chapel Hill.10.7*
(4)
Amended and Restated Exclusive License Agreement dated September
5, 1995 between Cell Genesys and the Regents of the University of
California.10.8
(2)
License Agreement dated June 28, 1991 between Cell Genesys and
the University of Utah Research Foundation.10.9+
(3)
Amended Employment Agreement with Stephen A. Sherwin,
M.D.10.10
(3)
Research and Development Leases dated November 1, 1994 between
Cell Genesys and Vintage Park Associates and Addendums thereto.10.11*
(6)
Amendment No. 1 dated June 7, 1996 to Vintage Park Research and
Development Lease.10.12
(9)
Amended 1998 Incentive Stock Plan10.13
(12)
Research and Development Leases Amendment dated February 12,
2001 between Cell Genesys and Vintage Park Associates.10.14
(13)
Research and Development Leases between Cell Genesys and
Drawbridge/Forbes LLC, dated March 3, 2001.10.15
(14)
Lease Agreement dated June 21, 2001, between Alexandria Real
Estate Equities, Inc., and Cell Genesys for property located at 11055 Roselle
Street in San Diego, California.10.16
(15)
Lease Agreement dated June 21, 2001, between Alexandria Real
Estate Equities, Inc., and Cell Genesys for property located at 11075 Roselle
Street in San Diego, California.10.17*

Amended and Restated GVAX® Agreement by and
between Japan Tobacco Inc. and Cell Genesys dated November 26, 2001.10.18

Credit Agreement between Cell Genesys and Fleet National Bank
dated as of December 27, 2001.10.19

Lease Agreement dated February 1, 2002, between Shelby Drive
Corporation, and Cell Genesys for property located at 4600 Shelby Drive, Suite
108, Memphis, Tennessee.10.20

Lease Agreement dated January 7, 2002, between F & S
Hayward, LLC, and Cell Genesys for property located at the Adjacent Park of
Bridgeview Tech Park of 24570 Clawiter Road, Hayward, California.23.1

Consent of Ernst & Young LLP, Independent Auditors.24.1

Power of Attorney, (Reference is made to page 59).*	Confidential treatment has been granted with respect to specific
portions of this exhibit.+	Indicates Compensation Plan Arrangement.(1) 	Incorporated by reference to the same numbered exhibit filed with
Cell Genesys' Registration Statement on Form S-1 (Reg. No. 33-46452) as
amended.
(2) 	Incorporated by reference to the same numbered exhibit filed with
Cell Genesys' Annual Report on Form 10-K for the year ended December 31,
1992.
(3) 	Incorporated by reference to the same numbered exhibit filed with
Cell Genesys' Annual Report on Form 10-K for the year ended December 31,
1994.
(4) 	Incorporated by reference to the same numbered exhibit filed with
Cell Genesys' Quarterly Report on Form 10-Q for the quarter ended June 30,
1995.
(5) 	Incorporated by reference to the same numbered exhibit filed with
Cell Genesys' Annual Report on Form 10-K for the year ended December 31,
1995.
(6)	Incorporated by reference to Exhibit 10.40 filed with Cell Genesys'
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.
(7) 	Incorporated by reference to Exhibit 2.1 filed with Cell Genesys'
Form 8-K dated January 12, 1997.
(8) 	Incorporated by reference to Cell Genesys' Form 8-A12G/A dated July
28, 2000.
(9) 	Incorporated by reference to Exhibit 4.1 filed with Cell Genesys'
Registration Statement Form S-8 filed July 31, 2000.
(10)	Incorporated by reference to Exhibit 10.3 filed with Cell Genesys'
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
(11)	Incorporated by reference to Exhibit 10.4 filed with Cell Genesys'
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
(12) 	Incorporated by reference to Exhibit 10.1 filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
(13)	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.
(14) 	Incorporated by reference to Exhibit 10.1 filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
(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, 2001.
(16) 	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.SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of
the Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized in
Foster City, California, on March 31, 2002:
CELL GENESYS, INC.
By:/s/ Matthew J. Pfeffer
Matthew J. Pfeffer,
Vice President and Chief Financial Officer
(Principal Accounting Officer)
Date:	March 31, 2002




POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person
whose signature appears below constitutes and appoints Stephen A. Sherwin, M.D.
and Matthew J. Pfeffer, jointly and severally, as his attorneys-in-fact, each
with the full power of substitution, for him, in any and all capacities, to sign
any amendment to this Annual Report on Form 10-K, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting to said attorneys-in-fact, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange
Act of 1934, this Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated:
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 31, 2002/s/ Matthew J. PfefferMatthew J. Pfeffer
Vice President and Chief Financial Officer (Principal
Financial and Accounting Officer)
March 31, 2002/s/ David W. CarterDavid W. Carter
Director
March 31, 2002/s/ Nancy M. CrowellNancy M. Crowell
Director
March 31, 2002/s/ James M. GowerJames M. Gower
Director
March 31, 2002/s/ John T. Potts, Jr., M.D.John T. Potts, Jr., M.D.
Director
March 31, 2002/s/ Thomas E. Shenk, Ph.D.Thomas E. Shenk, Ph.D.
Director
March 31, 2002/s/ Eugene L. StepEugene L. Step
Director
March 31, 2002/s/ Inder M. Verma, Ph.D.Inder M. Verma, Ph.D.
Director
March 31, 2002