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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

FOR THE QUARTERLY PERIOD ENDED March 31, 2011

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: 0-31265





TELIK, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 93-0987903                          
|(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) |  | (I.R.S. EMPLOYER IDENTIFICATION NO.)

700 Hansen Way, Palo Alto, CA
94304

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)

(650) 845-7700

(REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE)





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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

The number of shares of common stock outstanding as of April 30, 2011 was 53,957,177.









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TELIK, INC.

INDEX



|           |  |                                                                                       |    |      |    | 
|---------- |  | ------------------------------------------------------------------------------------- | -- | ---- | -- | 
|           |  |                                                                                       |    | Page |   
|           |  |                                                                                      
|PART I.    |  | FINANCIAL INFORMATION                                                                 |    |      |    | 
|           |  |                                                                                      
|Item 1:    |  | Financial Statements (Unaudited)                                                      |    |      |    | 
|           |  |                                                                                      
|           |  | Condensed Balance Sheets at March 31, 2011 and December 31, 2010                      |    |      | 3  | 
|           |  |                                                                                      
|           |  | Condensed Statements of Operations for the three ended March 31, 2011 and 2010        |    |      | 4  | 
|           |  |                                                                                      
|           |  | Condensed Statements of Cash Flows for the three months ended March 31, 2011 and 2010 |    |      | 5  | 
|           |  |                                                                                      
|           |  | Notes to Condensed Financial Statements                                               |    |      | 6  | 
|           |  |                                                                                      
|Item 2:    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |    |      | 13 | 
|           |  |                                                                                      
|Item 3:    |  | Quantitative and Qualitative Disclosures About Market Risk                            |    |      | 20 | 
|           |  |                                                                                      
|Item 4:    |  | Controls and Procedures                                                               |    |      | 21 | 
|           |  |                                                                                      
|PART II.   |  | OTHER INFORMATION                                                                     |    |      |    | 
|           |  |                                                                                      
|Item 1A:   |  | Risk Factors                                                                          |    |      | 22 | 
|           |  |                                                                                      
|Item 6:    |  | Exhibits                                                                              |    |      | 33 | 
|           | 
|SIGNATURES |  |                                                                                       | 34 |     



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PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements (Unaudited)
|------- | --------------------------------

TELIK, INC.

CONDENSED BALANCE SHEETS

(In thousands)



|                                              |  |             |          |   |              |   |          |  
|--------------------------------------------- |  | ----------- | -------- | - | ------------ | - | -------- | -
|                                              |  | March 31,   |          |   | December 31, |  
|                                              |  | 2011        |          |   | 2010         |  
|                                              |  | (Unaudited) |          |   | (Note 1)     |  
|Assets                                        | 
|Current assets:                               |  |             |          |   |              |   |          |  
|Cash and cash equivalents                     |  | $           | 4,972    |   |              | $ | 7,768    |  
|Short-term investments                        |  |             | 14,988   |   |              |   | 15,847   |  
|Interest and other receivables                |  |             | 156      |   |              |   | 214      |  
|Prepaids and other current assets             |  |             | 687      |   |              |   | 643      |  
|                                              |  |             |          |   |              |   |          |  
|Total current assets                          |  |             | 20,803   |   |              |   | 24,472   |  
|Property and equipment, net                   |  |             | 4        |   |              |   | 11       |  
|Restricted investments                        |  |             | 250      |   |              |   | 449      |  
|Other assets                                  |  |             | 97       |   |              |   | 97       |  
|                                              |  |             |          |   |              |   |          |  
|Total assets                                  |  | $           | 21,154   |   |              | $ | 25,029   |  
|                                              |  |             |          |   |              |   |          |  
|Liabilities and Stockholders Equity          | 
|Current liabilities:                          |  |             |          |   |              |   |          |  
|Accounts payable                              |  | $           | 461      |   |              | $ | 932      |  
|Accrued clinical trial costs                  |  |             | 235      |   |              |   | 226      |  
|Accrued compensation                          |  |             | 473      |   |              |   | 661      |  
|Accrued liabilities                           |  |             | 736      |   |              |   | 478      |  
|Current portion of facility exit costs        |  |             | 1,443    |   |              |   | 1,439    |  
|                                              |  |             |          |   |              |   |          |  
|Total current liabilities                     |  |             | 3,348    |   |              |   | 3,736    |  
|Noncurrent portion of facility exit costs     |  |             | 2,558    |   |              |   | 2,923    |  
|Long-term deferred rent                       |  |             | 3        |   |              |   | 1        |  
|Commitments and contingencies                 |  |             |          |   |              |   |          |  
|Stockholders equity:                         |  |             |          |   |              |   |          |  
|Common stock                                  |  |             | 539      |   |              |   | 536      |  
|Additional paid-in capital                    |  |             | 546,686  |   |              |   | 546,141  |  
|Accumulated other comprehensive income (loss) |  |             | 1        |   |              |   | (1       | )
|Accumulated deficit                           |  |             | (531,981 | ) |              |   | (528,307 | )
|                                              |  |             |          |   |              |   |          |  
|Total stockholders equity                    |  |             | 15,245   |   |              |   | 18,369   |  
|                                              |  |             |          |   |              |   |          |  
|Total liabilities and stockholders equity    |  | $           | 21,154   |   |              | $ | 25,029   |  
|                                              |  |             |          |   |              |   |          |  

See accompanying Notes to Condensed Financial Statements.



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TELIK, INC.

CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)



|                                                              |  |                             |        |   |      |   |        |  
|------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                              |  | Three Months EndedMarch 31, |       
|                                                              |  | 2011                        |        |   | 2010 |  
|Operating costs and expenses:                                 |  |                             |        |   |      |   |        |  
|Research and development                                      |  | $                           | 1,694  |   |      | $ | 2,825  |  
|General and administrative                                    |  |                             | 1,994  |   |      |   | 2,558  |  
|                                                              |  |                             |        |   |      |   |        |  
|Total operating costs and expenses                            |  |                             | 3,688  |   |      |   | 5,383  |  
|                                                              |  |                             |        |   |      |   |        |  
|Loss from operations                                          |  |                             | (3,688 | ) |      |   | (5,383 | )
|Interest and other income, net                                |  |                             | 14     |   |      |   | 62     |  
|Interest expense                                              |  |                             |       |   |      |   | (6     | )
|                                                              |  |                             |        |   |      |   |        |  
|Net loss                                                      |  | $                           | (3,674 | ) |      | $ | (5,327 | )
|                                                              |  |                             |        |   |      |   |        |  
|Basic and diluted net loss per share                          |  | $                           | (0.07  | ) |      | $ | (0.10  | )
|                                                              |  |                             |        |   |      |   |        |  
|Shares used to calculate basic and diluted net loss per share |  |                             | 53,690 |   |      |   | 53,465 |  
|                                                              |  |                             |        |   |      |   |        |  

See accompanying Notes to Condensed Financial Statements.



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TELIK, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                            |  |                             |        |   |      |   |         |  
|--------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------- | -
|                                                                            |  | Three Months EndedMarch 31, |       
|                                                                            |  | 2011                        |        |   | 2010 |  
|Cash flows from operating activities:                                       |  |                             |        |   |      |   |         |  
|Net loss                                                                    |  | $                           | (3,674 | ) |      | $ | (5,327  | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                             |        |   |      |   |         |  
|Depreciation and amortization                                               |  |                             | 7      |   |      |   | 93      |  
|Stock-based compensation expense                                            |  |                             | 321    |   |      |   | 714     |  
|Change in fair value of marketable securities                               |  |                             |       |   |      |   | 61      |  
|Change in fair value of rights to sell ARS to UBS                           |  |                             |       |   |      |   | (61     | )
|Changes in assets and liabilities:                                          |  |                             |        |   |      |   |         |  
|Other receivables                                                           |  |                             | 58     |   |      |   | 134     |  
|Prepaids and other current assets                                           |  |                             | (44    | ) |      |   | (15     | )
|Accounts payable                                                            |  |                             | (471   | ) |      |   | 94      |  
|Accrued liabilities                                                         |  |                             | 81     |   |      |   | (148    | )
|Accrued facility exit costs                                                 |  |                             | (361   | ) |      |   |        |  
|                                                                            |  |                             |        |   |      |   |         |  
|Net cash used in operating activities                                       |  |                             | (4,083 | ) |      |   | (4,455  | )
|                                                                            |  |                             |        |   |      |   |         |  
|                                                                            |  |                            
|Cash flows from investing activities:                                       |  |                             |        |   |      |   |         |  
|Purchases of investments                                                    |  |                             | (5,469 | ) |      |   | (11,842 | )
|Sales of investments                                                        |  |                             | 199    |   |      |   | 4,224   |  
|Maturities of investments                                                   |  |                             | 6,330  |   |      |   | 8,000   |  
|                                                                            |  |                             |        |   |      |   |         |  
|Net cash provided by investing activities                                   |  |                             | 1,060  |   |      |   | 382     |  
|                                                                            |  |                             |        |   |      |   |         |  
|                                                                            |  |                            
|Cash flows from financing activities:                                       |  |                             |        |   |      |   |         |  
|Payments under financing arrangement                                        |  |                             |       |   |      |   | (3,100  | )
|Proceeds from issuance of common stock                                      |  |                             | 227    |   |      |   | 33      |  
|                                                                            |  |                             |        |   |      |   |         |  
|Net cash provided by (used in) financing activities                         |  |                             | 227    |   |      |   | (3,067  | )
|                                                                            |  |                             |        |   |      |   |         |  
|Net decrease in cash and cash equivalents                                   |  |                             | (2,796 | ) |      |   | (7,140  | )
|Cash and cash equivalents at beginning of period                            |  |                             | 7,768  |   |      |   | 12,251  |  
|                                                                            |  |                             |        |   |      |   |         |  
|Cash and cash equivalents at end of period                                  |  | $                           | 4,972  |   |      | $ | 5,111   |  
|                                                                            |  |                             |        |   |      |   |         |  
|Supplementary information:                                                  |  |                             |        |   |      |   |         |  
|Interest paid                                                               |  | $                           |       |   |      | $ | 6       |  

See accompanying Notes
to Condensed Financial Statements.



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TELIK, INC.

Notes to Condensed Financial Statements

(Unaudited)



|1. | Basis of Presentation and Summary of Significant Accounting Policies
|-- | --------------------------------------------------------------------

We have prepared the accompanying condensed financial statements in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934, or the Exchange Act. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. We believe all
adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included herein. Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2011 or any other future period. The condensed balance sheet at December 31, 2010 has been derived from the audited financial statements at that date. You should read these condensed
financial statements and notes in conjunction with our audited financial statements for the year ended December 31, 2010, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 2,
2011.

Need for Additional Capital

We have incurred net losses since inception and we expect to incur substantial losses for at least the next several years as we continue our research and development activities. To date, we have funded
operations primarily through the sale of equity securities, non-equity payments from collaborators and interest income. Future revenue, if any, for at least the next few years is expected to consist primarily of payments under corporate
collaborations and government grants. The process of developing our products will require significant additional research and development, preclinical testing and clinical trials, as well as regulatory approval. We expect these activities, together
with general and administrative expenses, to result in substantial operating losses for the foreseeable future. We will not receive product revenue unless we, or our collaborative partners, complete clinical trials, obtain regulatory approval and
successfully commercialize one or more of our products.

We expect continuing losses over the next several years. We plan to
seek capital through public or private equity or debt financing, capital lease financing and collaborative arrangements with corporate partners. We may have to seek other sources of capital or re-evaluate our operating plans if we are unable to
consummate some or all of the capital financing arrangements noted above. We believe our existing cash resources will be sufficient to satisfy our current operating plan until the third quarter of 2012. However, changes in our research and
development plans or other changes affecting our operating expenses may affect actual future consumption of existing cash resources.

Use of Estimates

In preparing our financial statements to conform
with GAAP, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Actual results may differ from these estimates.

Cash and Cash Equivalents, Short-Term and Long-Term Investments

We currently invest our excess cash in money market funds, cash deposits, U.S. treasury and U.S. government agency securities. Prior to
July 2010, we held taxable municipal notes, some of which had an auction reset feature (auction rate securities, or ARS), and corporate notes. All investments with stated maturities of three months or less from date of purchase are classified as
cash equivalents. Debt securities with original maturities greater than three months and remaining maturities less than one year are classified as short-term investments. Debt securities with remaining maturities greater than one year and which we
intend to hold until maturity are classified as long-term investments. We classify all cash equivalents and non-ARS investments as available-for-sale. Available-for-sale securities are carried at estimated fair value, with unrealized gains and
losses reported as a component of accumulated other comprehensive income (loss).



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Realized gains or losses on the sale of investments are determined on a specific
identification method, and such gains and losses are reflected as a component of interest income.

Due to the unprecedented
events in the ARS market and our November 2008 ARS Rights Agreement, or the Rights Agreement, with UBS AG and with its affiliates, or UBS, we elected a one-time transfer of our ARS investments from the classification of available-for-sale to trading
securities under ASC 320, Investments-Debt and Equity Securities,during the fourth quarter of fiscal 2008. Trading securities are carried at estimated fair value, with gains and losses resulting from changes in fair value
reported in earnings.

Marketable security investments are evaluated periodically for impairment. We take into account general
market conditions, changes in economic environment as well as specific investment attributes, such as credit downgrade or illiquidity for each investment, the expected cash flows from the security, our intent to sell the security and whether or not
we will be required to sell the security before the recovery of its amortized cost, to estimate the fair value of our investments and to determine whether impairment is other than temporary. If it is determined that a decline in fair value of any
investment is other than temporary, then the unrealized loss related to credit risk would be included in interest and other income (expense), net.

Fair Value of Financial Instruments

We used the provisions of ASC
820, Fair Value Measurements and Disclosure, to determine the fair values of our financial and nonfinancial assets and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosure about fair value measurements. The objective of fair value measurement is to determine the price that would be received to sell the asset or paid to transfer the liability (an exit price) in an orderly
transaction between market participants at the measurement date. The statement emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and that market participant assumptions include assumptions about risk and
effect of a restriction on the sale or use of an asset. To increase consistency and comparability in fair value measurement and related disclosures, this statement establishes a fair value hierarchy that prioritize the inputs to valuation techniques
used to measure fair value into three broad levels: (1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
(2) Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly through corroboration with observable market data; and (3) Level 3 inputs are
unobservable inputs for asset or liability that reflect the reporting entitys own assumptions about risk and the assumptions market participants would use in pricing the asset or liability developed based on the best information available in
the circumstances.

We recorded the fair values of our treasury bills, treasury notes and government agency securities based
on a monthly report provided by our investment provider. Since these government securities generally have market prices from multiple sources and it can be difficult to select the best individual price directly from the quoted prices in the active
markets, our investment provider uses Level 2 inputs for the valuation of these securities. Using the Level 2 inputs, a consensus price or a weighted average price for each of these securities can be derived from a
distribution-curve-based algorithm which includes market prices obtained from a variety of industrial standard data providers (e.g. Bloomberg), security master files from large financial institutions, and other third-party sources.

For our ARS and put option held prior to July 2010, we used Level 3 inputs to determine their fair values since they did not have a
readily determinable market value. The assumptions used in valuing the ARS and the put option included, basing on data as of the reporting period then ended, interest rates, tax status, credit quality, expected holding periods of the ARS, insurance
wraps, the portfolio composition of Federal Family Education Loan Program, or FFELP, and private loans, likelihood of redemption, loan rates per the UBS Rights offering and bearer risk associated with UBSs financial ability to repurchase the
ARS beginning June 30, 2010. These assumptions were volatile and subject to change, and therefore could have resulted in significant changes to the fair values of these financial instruments.



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Recent Accounting Pronouncements

With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements
during the three months ended March 31, 2011, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, that are of significance, or potential significance
to us.

In January 2010, the FASB issued Accounting Standard Update No. 2010-06, Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, ASU 2010-06, to improve disclosures related to fair value measurements. This guidance requires new disclosures as well as clarifies certain existing
disclosure requirements. Under ASU 2010-06, companies are required to provide separate information about significant transfers in and out of Level 1 and Level 2 of the fair value hierarchy as well as the reasons for such transfers, and a
reconciliation of purchases, sales, issuances, and settlements activities valued using Level 3 inputs on a gross basis. ASU 2010-06 also clarifies the requirement to determine the level of disaggregation for fair value measurement disclosures and
the requirement to disclose valuation techniques and inputs used for both recurring and nonrecurring fair value measurements in either Level 2 or Level 3. ASU 2010-06 was effective for interim and annual reporting periods beginning after
December 15, 2009, except for the disclosure about purchases, sales, issuances, and settlements in the rollforward of activity for Level 3 fair value measurement which was effective for fiscal years beginning after December 15, 2010, and
for interim periods within those fiscal years. We have adopted ASU 2010-06 for Level 1 and 2 disclosure requirements since the quarter ended March 31, 2010 and adopted ASU 2010-06 for Level 3 requirement on January 1, 2011. The adoption of
this guidance increases the level of disclosures in our financial statements related to fair value measurements.



|2. | Employee Stock-Based Compensation
|-- | ---------------------------------

Stock-based Compensation

Total estimated stock-based compensation
expense, related to all of our share-based payment awards recognized under ASC 718, CompensationStock Compensationcomprised of the following:



|                                              |  |                             |     |  |      |   |     | 
|--------------------------------------------- |  | --------------------------- | --- |  | ---- | - | --- | 
|                                              |  | Three Months EndedMarch 31, |    
|                                              |  | 2011                        |     |  | 2010 |  
|                                              |  | (in thousands)              |    
|Research and development                      |  | $                           | 157 |  |      | $ | 257 | 
|General and administrative                    |  |                             | 164 |  |      |   | 457 | 
|                                              |  |                             |     |  |      |   |     | 
|Stock-based compensation expense before taxes |  |                             | 321 |  |      |   | 714 | 
|                                              |  |                             |     |  |      |   |     | 
|Effect on net loss                            |  | $                           | 321 |  |      | $ | 714 | 
|                                              |  |                             |     |  |      |   |     | 

Because we had a net operating loss carryforward as of March 31, 2011, no tax benefits for the tax
deductions related to stock-based compensation expense were recognized in our condensed statements of operations. Additionally, no incremental tax benefits were recognized from stock options exercised in the three months ended
March 31, 2011 and 2010, which would have resulted in a reclassification to reduce net cash provided by operating activities with an offsetting increase in net cash provided by financing activities. As of March 31, 2011, $851,000
of total unrecognized compensation costs, net of forfeitures, related to non-vested service based awards is expected to be recognized over a weighted average period of 0.82 year.



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Valuation Assumptions

We used a Black-Scholes-Merton option valuation model, or the Black-Scholes model, to determine the stock-based expense recognized under
ASC 718. For the three months ended March 31, 2011, we began a new two-year purchase offering under our Employee Stock Purchase Plan, or ESPP, but did not grant any stock options during this period as our option plans had expired in March 2010.
There were no new purchase offerings under our ESPP or stock options granted for the same period in 2010. Our expected stock-price volatility assumption for the new ESPP offering was based solely on the weighted average of the historical volatility
as there was insufficient traded option activity for us to use implied volatility. The expected term of stock awards under the ESPP was based on the weighted average purchase periods of each offering. The risk-free interest rate was based on the
U.S. Treasury yield for a period consistent with the expected term of the stock award in effect at the time of the grant. Assumptions used in the Black-Scholes model for our new 2011 ESPP offering were as follows:



|                                          |  |  |      |  
|----------------------------------------- |  |  | ---- | -
|Weighted average expected volatility      |  |  | 72.2 | %
|Weighted average risk-free interest rate  |  |  | 0.38 | %
|Weighted average expected life (in years) |  |  | 1.25 |  
|Weighted average dividend yield           |  |  |     |  



|3. | Comprehensive Loss
|-- | ------------------

Comprehensive loss consists of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes changes in
unrealized gains (losses) on investments. The activity in comprehensive loss was as follows:



|                                                      |  |                             |        |   |      |   |        |  
|----------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                      |  | Three Months EndedMarch 31, |       
|                                                      |  | 2011                        |        |   | 2010 |  
|                                                      |  | (in thousands)              |       
|Net loss                                              |  | $                           | (3,674 | ) |      | $ | (5,327 | )
|Changes in net unrealized gains (loss) on investments |  |                             | 2      |   |      |   | (2     | )
|                                                      |  |                             |        |   |      |   |        |  
|Comprehensive loss                                    |  | $                           | (3,672 | ) |      | $ | (5,329 | )
|                                                      |  |                             |        |   |      |   |        |  



|4. | Basic and Diluted Net Loss per Share
|-- | ------------------------------------

Basic and diluted net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period.

Weighted average outstanding options to purchase 11,375,293 and 12,559,324 shares of our common stock before application of the treasury
method for the three months ended March 31, 2011 and 2010 were excluded from the diluted net loss per common share calculations because inclusion of such options would be anti-dilutive.



|5. | Fair Value Measurements on a Recurring Basis
|-- | --------------------------------------------

We measure certain financial assets at fair value on a recurring basis, including cash equivalents and available-for-sale securities. The fair value of these financial assets was determined based on a
three-tier fair value hierarchy as described in Note 1, which prioritizes the inputs used in measuring fair value.



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The following table presents information about our financial assets that are measured at
fair value on a recurring basis as of March 31, 2011 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value:



|                               |  |                |        |  |                                                             |   |       |                                             |  |   |                                         |  |  |   |   | 
|------------------------------ |  | -------------- | ------ |  | ----------------------------------------------------------- | - | ----- | ------------------------------------------- |  | - | --------------------------------------- |  |  | - | - | 
|                               |  |                |        |  | Fair Value Measurement at March 31, 2011 Using              |  
|                               |  | March 31,2011  |        |  | Quoted Prices inActive Marketsfor IdenticalAssets (Level 1) |   |       | Significant OtherObservableInputs (Level 2) |  |   | SignificantUnobservableInputs (Level 3) | 
|                               |  | (in thousands) |       
|Available-for-sale securities: |  |                |        | 
|Money market funds             |  | $              | 2,823  |  |                                                             | $ | 2,823 |                                             |  | $ |                                        |  |  | $ |  | 
|US government agencies         |  |                | 16,592 |  |                                                             |   |      |                                             |  |   | 16,592                                  |  |  |   |  | 
|                               |  |                |        |  |                                                             |   |       |                                             |  |   |                                         |  |  |   |   | 
|Total                          |  | $              | 19,415 |  |                                                             | $ | 2,823 |                                             |  | $ | 16,592                                  |  |  | $ |  | 
|                               |  |                |        |  |                                                             |   |       |                                             |  |   |                                         |  |  |   |   | 

The following table presents information about our financial assets that are measured at fair value on a
recurring basis as of December 31, 2010, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.



|                               |  |                  |        |  |                                                             |   |    |                                             |  |   |                                          |  |  |   |   | 
|------------------------------ |  | ---------------- | ------ |  | ----------------------------------------------------------- | - | -- | ------------------------------------------- |  | - | ---------------------------------------- |  |  | - | - | 
|                               |  |                  |        |  | Fair Value Measurement at December 31, 2010 Using           |  
|                               |  | December31, 2010 |        |  | Quoted Prices inActive Marketsfor IdenticalAssets (Level 1) |   |    | Significant OtherObservableInputs (Level 2) |  |   | SignificantUnobservableInputs 
(Level 3) | 
|                               |  | (in thousands)   |       
|Available-for-sale securities: |  |                  |        | 
|Money market funds             |  | $                | 53     |  |                                                             | $ | 53 |                                             |  | $ |                                         |  |  | $ |  | 
|US government agencies         |  |                  | 20,734 |  |                                                             |   |   |                                             |  |   | 20,734                                   |  |  |   |  | 
|                               |  |                  |        |  |                                                             |   |    |                                             |  |   |                                          |  |  |   |   | 
|Total                          |  | $                | 20,787 |  |                                                             | $ | 53 |                                             |  | $ | 20,734                                   |  |  | $ |  | 
|                               |  |                  |        |  |                                                             |   |    |                                             |  |   |                                          |  |  |   |   | 

There were no transfers between Level 1 and Level 2 measurements in the three months ended March 31,
2011 and in the year ended December 31, 2010.



|6. | Cash, Cash Equivalents, Investments and Restricted Investments
|-- | --------------------------------------------------------------

The following is a summary of estimated fair value of cash and cash equivalents, investments and restricted investments:



|                                   |  |                |        |  |              |   |        | 
|---------------------------------- |  | -------------- | ------ |  | ------------ | - | ------ | 
|                                   |  | March 31,      |        |  | December 31, |  
|                                   |  | 2011           |        |  | 2010         |  
|                                   |  | (in thousands) |       
|Certificate of deposits            |  | $              | 250    |  |              | $ | 449    | 
|US government agencies enterprises |  |                | 16,592 |  |              |   | 20,734 | 
|Cash and money market funds        |  |                | 3,368  |  |              |   | 2,881  | 
|                                   |  |                |        |  |              |   |        | 
|Total                              |  | $              | 20,210 |  |              | $ | 24,064 | 
|                                   |  |                |        |  |              |   |        | 
|Reported as:                       |  |                |        |  |              |   |        | 
|Cash and cash equivalents          |  | $              | 4,972  |  |              | $ | 7,768  | 
|Short-term investments             |  |                | 14,988 |  |              |   | 15,847 | 
|Restricted investments             |  |                | 250    |  |              |   | 449    | 
|                                   |  |                |        |  |              |   |        | 
|Total                              |  | $              | 20,210 |  |              | $ | 24,064 | 
|                                   |  |                |        |  |              |   |        | 

The following is a summary of amortized cost, unrealized gains and losses, and estimated fair value of cash
and cash equivalents and market securities held as available-for-sale.



|                            |  |                |        |  |                      |   |   |                       |  |   |                     |   |  |   |        | 
|--------------------------- |  | -------------- | ------ |  | -------------------- | - | - | --------------------- |  | - | ------------------- | - |  | - | ------ | 
|                            |  | March 31, 2011 |       
|                            |  | AmortizedCost  |        |  | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |  |   | EstimatedFair Value |  
|                            |  | (in thousands) |       
|Certificate of deposits     |  | $              | 250    |  |                      | $ |  |                       |  | $ |                    |   |  | $ | 250    | 
|US government agencies      |  |                | 16,591 |  |                      |   | 3 |                       |  |   | (2                  | ) |  |   | 16,592 | 
|Cash and money market funds |  |                | 3,368  |  |                      |   |  |                       |  |   |                    |   |  |   | 3,368  | 
|                            |  |                |        |  |                      |   |   |                       |  |   |                     |   |  |   |        | 
|Total                       |  | $              | 20,209 |  |                      | $ | 3 |                       |  | $ | (2                  | ) |  | $ | 20,210 | 
|                            |  |                |        |  |                      |   |   |                       |  |   |                     |   |  |   |        | 



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|                            |  |                   |        |  |                      |   |   |                       |  |   |                     |   |  |   |        | 
|--------------------------- |  | ----------------- | ------ |  | -------------------- | - | - | --------------------- |  | - | ------------------- | - |  | - | ------ | 
|                            |  | December 31, 2010 |       
|                            |  | AmortizedCost     |        |  | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |  |   | EstimatedFair Value |  
|                            |  | (in thousands)    |       
|Certificate of deposits     |  | $                 | 449    |  |                      | $ |  |                       |  | $ |                    |   |  | $ | 449    | 
|US government agencies      |  |                   | 20,735 |  |                      |   | 2 |                       |  |   | (3                  | ) |  |   | 20,734 | 
|Cash and money market funds |  |                   | 2,881  |  |                      |   |  |                       |  |   |                    |   |  |   | 2,881  | 
|                            |  |                   |        |  |                      |   |   |                       |  |   |                     |   |  |   |        | 
|Total                       |  | $                 | 24,065 |  |                      | $ | 2 |                       |  | $ | (3                  | ) |  | $ | 24,064 | 
|                            |  |                   |        |  |                      |   |   |                       |  |   |                     |   |  |   |        | 

There were no realized gains or losses on sales of available-for-sale securities for the three months ended
March 31, 2011 and 2010. Realized gains and losses were calculated based on the specific identification method.

Investments which were in unrealized loss positions for which other-than-temporary impairments were not recognized are summarized below:



|                       |  |                     |       |  |                      |   |    |           |  |   |                  |  |  |           |   |  |                  |   |       |  |  |   |    |  
|---------------------- |  | ------------------- | ----- |  | -------------------- | - | -- | --------- |  | - | ---------------- |  |  | --------- | - |  | ---------------- | - | ----- |  |  | - | -- | -
|At March 31, 2011      |  | Less Than 12 Months |       |  | 12 Months or Greater |   |    | Total     | 
|                       |  | FairValue           |       |  | UnrealizedLosses     |   |    | FairValue |  |   | UnrealizedLosses |  |  | FairValue |   |  | UnrealizedLosses |  
|                       |  | (in thousands)      |      
|US government agencies |  | $                   | 4,571 |  |                      | $ | (2 | )         |  | $ |                 |  |  | $         |  |  |                  | $ | 4,571 |  |  | $ | (2 | )
|                       |  |                     |       |  |                      |   |    |           |  |   |                  |  |  |           |   |  |                  |   |       |  |  |   |    |  
|Total                  |  | $                   | 4,571 |  |                      | $ | (2 | )         |  | $ |                 |  |  | $         |  |  |                  | $ | 4,571 |  |  | $ | (2 | )
|                       |  |                     |       |  |                      |   |    |           |  |   |                  |  |  |           |   |  |                  |   |       |  |  |   |    |  



|                       |  |                     |       |  |                      |   |    |           |  |   |                  |  |  |           |   |  |                  |   |       |  |  |   |    |  
|---------------------- |  | ------------------- | ----- |  | -------------------- | - | -- | --------- |  | - | ---------------- |  |  | --------- | - |  | ---------------- | - | ----- |  |  | - | -- | -
|At December 31, 2010   |  | Less Than 12 Months |       |  | 12 Months or Greater |   |    | Total     | 
|                       |  | FairValue           |       |  | UnrealizedLosses     |   |    | FairValue |  |   | UnrealizedLosses |  |  | FairValue |   |  | UnrealizedLosses |  
|                       |  | (in thousands)      |      
|US government agencies |  | $                   | 8,482 |  |                      | $ | (3 | )         |  | $ |                 |  |  | $         |  |  |                  | $ | 8,482 |  |  | $ | (3 | )
|                       |  |                     |       |  |                      |   |    |           |  |   |                  |  |  |           |   |  |                  |   |       |  |  |   |    |  
|Total                  |  | $                   | 8,482 |  |                      | $ | (3 | )         |  | $ |                 |  |  | $         |  |  |                  | $ | 8,482 |  |  | $ | (3 | )
|                       |  |                     |       |  |                      |   |    |           |  |   |                  |  |  |           |   |  |                  |   |       |  |  |   |    |  

The following is a summary of the cost and estimated fair value of marketable debt securities, held as
available-for-sale at March 31, 2011 and December 31, 2010, classified by stated maturity date of the security:



|                             |  |                |        |  |                   |   |        |               |  |   |           |  |  |   |        | 
|---------------------------- |  | -------------- | ------ |  | ----------------- | - | ------ | ------------- |  | - | --------- |  |  | - | ------ | 
|                             |  | March 31, 2011 |        |  | December 31, 2010 |  
|                             |  | AmortizedCost  |        |  | FairValue         |   |        | AmortizedCost |  |   | FairValue | 
|                             |  | (in thousands) |       
|Mature in less than one year |  | $              | 16,591 |  |                   | $ | 16,592 |               |  | $ | 20,735    |  |  | $ | 20,734 | 
|                             |  |                |        |  |                   |   |        |               |  |   |           |  |  |   |        | 



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|7. | Facility Exit Costs
|-- | -------------------

In
November 2010, we ceased the use of our facility at 3165 Porter Drive in Palo Alto, California and subleased the facility to a tenant for the remaining contractual term of our master lease, which is through May 2014. As a result, we accrued $4.7
million facility exit costs liabilities to reflect the estimated fair value of future lease-related payments less estimated net income from sublease rental in November 2010. Future lease-related payments and rental income are scheduled to be made
and received monthly until the lease and sublease expire in May 2014.

The following table summarizes the activities related
to accrued facility exit costs for the three months ended March 31, 2011 (in thousands):



|                                   |  |   |       |  
|---------------------------------- |  | - | ----- | -
|Balance as of December 31, 2010    |  | $ | 4,362 |  
|Amounts paid during the period     |  |   | (953  | )
|Amounts received during the period |  |   | 591   |  
|Non-cash accretion                 |  |   | 1     |  
|                                   |  |   |       |  
|Balance as March 31, 2011          |  | $ | 4,001 |  
|                                   |  |   |       |  
|Reported as current portion        |  | $ | 1,443 |  
|Reported as noncurrent portion     |  | $ | 2,558 |  



|8. | Restructuring Plans
|-- | -------------------

We
implemented a restructuring plan in November 2010, ultimately reducing our workforce by ten positions and accrued a restructuring charge of approximately $425,000, including employee severance costs, health benefits and personnel related costs. In
connection with the restructuring plan, we paid $232,000 in December 2010 and $140,000 in the quarter ended March 31, 2011. The remaining balance of $53,000 is expected to be paid in the second and third quarters of 2011.



|9. | Commitments
|-- | -----------

Operating Leases

In November 2010, we entered into a 28-month lease agreement for 8,620 square feet of office space at 700 Hansen Way in Palo Alto, California and relocated our corporate offices to this facility.

We also lease approximately 92,000 square feet located at 3165 Porter Drive in Palo Alto, California, which we have subleased
to a tenant effective November 2010 through May 2014 when our master lease expires. Pursuant to the terms of the master lease, we are required to maintain a security deposit, in the form of a letter of credit equal to approximately $250,000. This
letter of credit must be secured by either a deposit account or a securities account and at March 31, 2011, the security deposit is in the form of securities that are classified in the balance sheet as restricted investments. This collateral
account is managed in accordance with our investment policy, and is restricted as to withdrawal.

Future minimum rental
payments under our non-cancelable operating leases as of March 31, 2011 are as follows:



|                                                                    |  |                  |        |  
|------------------------------------------------------------------- |  | ---------------- | ------ | -
|                                                                    |  | Operating Leases |       
|                                                                    |  | (in thousands)   |       
|Years ending December 31,                                           |  |                  |        |  
|2011                                                                |  |                  | 3,184  |  
|2012                                                                |  |                  | 4,370  |  
|2013                                                                |  |                  | 3,685  |  
|2014                                                                |  |                  | 1,537  |  
|2015                                                                |  |                  |       |  
|                                                                    |  |                  |        |  
|Total future minimum rental payments                                |  |                  | 12,776 |  
|Less aggregate future minimum rentals to be received from subleases |  |                  | (7,830 | )
|                                                                    |  |                  |        |  
|Total                                                               |  | $                | 4,946  |  
|                                                                    |  |                  |        |  



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Special Note Regarding Statements of Expected Future Performance

This Quarterly Report on Form 10-Q contains statements indicating expectations about future performance and other forward-looking
statements that involve risks and uncertainties. We usually use words such as may, will, should, expect, plan, anticipate, believe, estimate,
predict, future, intend, potential, or continue or the negative of these terms or similar expressions to identify forward-looking statements. These statements appear throughout this
Quarterly Report on Form 10-Q and are statements regarding our current intent, belief or expectation, primarily with respect to our operations and related industry developments. Examples of these statements include, but are not limited to,
statements regarding the following: the implications of results of our Phase 2 clinical trials, the progress of our research programs, including clinical testing, the extent to which our issued and pending patents may protect our products and
technology, our ability to identify new product candidates using TRAP technology (our proprietary Target-Related Affinity Profiling technology), the potential of such product candidates to lead to the development of safer or more effective
therapies, our ability to develop the technology derived from our collaborations, our anticipated timing for filing additional Investigational New Drug applications, or INDs, with the FDA, or for the initiation or completion of Phase 1, Phase 2 or
Phase 3 clinical trials for any of our product candidates, our future operating expenses, our future losses, our future expenditures for research and development, the sufficiency of our cash resources and ability to raise adequate funds in the
future. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q. Our actual results could differ materially from those anticipated in these forward-looking
statements for many reasons, including the risks faced by us and described in Part II, Item 1A of this Quarterly Report on Form 10-Q.

The following discussion and analysis should be read in conjunction with the unaudited condensed financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form
10-Q and with the financial statements and notes thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2010 filed with
the Securities and Exchange Commission on March 2, 2011.

TELIK, the Telik logo, TRAP, TELCYTA and TELINTRA are
trademarks of Telik, Inc. All other brand names or trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

Overview

Telik is engaged in the discovery and development of small
molecule drugs. Our business strategy is to advance our product candidates through Phase 2 clinical studies, and to enter into a partnership with a pharmaceutical or biotechnology company to assist in further development and commercialization,
license product candidates outside our therapeutic focus, and identify and develop additional drug product candidates.

We
have incurred net losses since inception and expect to incur losses for the next several years as we continue our research and development activities. During the three months ended March 31, 2011, loss from operations was $3.7 million and net
loss was $3.7 million. Net cash used in operations for the three months ended March 31, 2011 was $4.1 million and net cash, cash equivalents, investments and restricted investments at March 31, 2011 were $20.2 million. As of March 31,
2011, we had an accumulated deficit of $532.0 million.

Our expenses consist primarily of those incurred for research and
development and general and administrative costs associated with our operations. The process of carrying out the development of our product candidates to later stages of development and our research programs would require significant additional
research and development expenditures, including for preclinical testing and clinical trials, as well as for manufacturing development efforts and obtaining regulatory approval. We outsource our clinical trials and our manufacturing development
activities to third parties to maximize efficiency and minimize our internal overhead. To date, we have funded our operations primarily through the sale of equity securities, non-equity payments from collaborative partners and interest income.



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We are subject to risks common to biopharmaceutical companies, including risks inherent in
our research, development and commercialization efforts, preclinical testing, clinical trials, uncertainty of regulatory and marketing approvals, enforcement of patent and proprietary rights, the need for capital, potential competition and retention
of key employees. In order for a product to be commercialized, it will be necessary for us to conduct preclinical tests and clinical trials, demonstrate efficacy and safety of our product candidates to the satisfaction of regulatory authorities,
obtain marketing approval, enter into manufacturing, distribution and marketing arrangements, obtain market acceptance and, in many cases, obtain adequate reimbursement from government and private insurers. We cannot provide assurance that we will
generate revenues or achieve and sustain profitability in the future.

We have carried out four workforce reductions since
2007, the most recent of which was completed in November 2010. As a result of our restructuring plans, we believe our existing cash resources will be sufficient to satisfy our current operating plan until the third quarter of 2012. However, changes
in our research and development plans or other changes affecting our operating expenses may affect actual future consumption of existing cash resources. In any event, we will require substantial additional financing to fund our operations in the
future.

We expect that our quarterly and annual results of operations will fluctuate for the foreseeable future due to
several factors, including the timing and extent of our research and development efforts and the outcome of our clinical trial activities. The successful development of our product candidates is uncertain. As such, an accurate prediction of future
operating results is difficult or impossible.

Clinical Product Development

TELINTRA, our lead drug product candidate in clinical development, is a small molecule glutathione analog inhibitor of the enzyme
glutathione S-transferase P1-1, or GST P1-1. We are developing TELINTRA for the treatment of blood disorders associated with low blood cell levels, such as neutropenia or anemia. In 2008, we initiated a Phase 2 clinical trial of TELINTRA tablets,
for the treatment of patients with Myelodysplastic Syndrome, or MDS. The trial for MDS completed enrollment of 86 patients and we presented the results at the annual meeting of the American Society of Hematology, or ASH, in December 2010. In the
second quarter of 2009, we initiated a Phase 2 randomized study in Severe Chronic Neutropenia, or SCN, to determine the effect of TELINTRA tablets on absolute neutrophil count in patients with this disease. The on-going trial for SCN is intended to
enroll a total of 20 patients. In the fourth quarter of 2009, we initiated a Phase 1 dose-ranging study of TELINTRA tablets in combination with Lenalidomide in patients with MDS. We expect to complete this 30-patient study by the end of 2011.

TELCYTA, our other product candidate, is a small molecule cancer drug product candidate designed to be activated in cancer
cells. TELCYTA has been evaluated in multiple Phase 2 and Phase 3 clinical trials, including trials using TELCYTA as monotherapy and in combination regimens in ovarian, non-small cell lung, breast and colorectal cancer. Results from these clinical
trials indicate that TELCYTA monotherapy was generally well-tolerated, with mostly mild to moderate side effects, particularly when compared to the side effects and toxicities of standard chemotherapeutic drugs. When TELCYTA was evaluated in
combination with standard chemotherapeutic drugs, the tolerability of the combinations was similar to that expected of each drug alone. Clinical activity including objective tumor responses and/or disease stabilization was reported in the TELCYTA
Phase 2 trials; however, TELCYTA did not meet its primary endpoints in the Phase 3 studies. In May 2010, we initiated an investigator led study at a single site of TELCYTA in patients with refractory or relapsed mantle cell lymphoma, diffuse large B
cell lymphoma, and multiple myeloma. Enrollment for this study is expected to range between 18 to 48 patients based on the number of responses observed. We are currently seeking a partnership with a pharmaceutical or biotechnology company to further
advance the development and commercialization of TELCYTA.



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Preclinical Drug Product Development

TLK60404Aurora Kinase/VEGFR Inhibitors

We have a small molecule
compound inhibiting both Aurora kinase and VEGFR kinase. Aurora kinase is a signaling enzyme whose function is required for cancer cell division, while VEGF plays a key role in tumor blood vessel formation, ensuring an adequate supply of nutrients
to support tumor growth. The lead compounds of our first dual inhibitor program met a development milestone in August 2008 by demonstrating anticancer activity in preclinical models of human colon cancer and human leukemia. These lead compounds
prevented tumor growth in preclinical models of human colon cancer and human leukemia by inhibiting both Aurora kinase and VEGFR kinase. Our data support the concept that dual inhibition of Aurora kinase and VEGFR kinase represents a promising
approach for anticancer therapy. A development drug product candidate, TLK60404, has been selected. We are conducting the required preclinical safety studies that if successful may support the potential filing of an IND application with the FDA.

TLK60357Antimitotic Agent

Using our TRAP technology, we have discovered TLK60357, a novel, potent small molecule inhibitor of cell division. TLK60357 inhibits the formation of microtubules that are necessary for cancer cell growth
leading to persistent cancer cell block and subsequent cell death at the G2/M cell cycle. This compound demonstrates potent broad-spectrum anticancer activity against a number of human cancer cells. This compound also displays oral efficacy in
multiple, standard preclinical models of cancer. TLK60357 is currently being evaluated in preclinical safety studies.

TLK60596 
VEGFR Inhibitor

TLK60596 is a small-molecule dual inhibitor of VEGFR1 and VEGFR2 kinase. VEGFR1/2 kinases are known to
mediate the formation of new blood vessels in human cancers allowing them to grow. In standard animal models of human colon cancer, oral administration of TLK60596 significantly reduced tumor growth. TLK60596 is undergoing further preclinical
assessment.

Other

We discovered all of our drug product candidates using our proprietary technology, TRAP, which we believe enables the rapid and efficient discovery of small molecule drug product candidates. We expect to
enter into collaborative arrangements with third parties, such as contract research organizations for clinical trials, development, manufacturing, regulatory approvals or commercialization of some of our products, particularly outside North America,
or in disease areas requiring larger and longer clinical trials than cancer.

Nasdaq Stock Listing Compliance

On September 19, 2008, we received notification from Nasdaq informing us that the bid price for our common stock had closed below the
minimum $1.00 per share requirement for continued inclusion on the Nasdaq Global Market under Nasdaq Marketplace Rule 5550(a)(2). Effective January 7, 2010, we transferred the listing of our common stock from the Nasdaq Global Market to the
Nasdaq Capital Market. On April 22, 2010, we received notification from Nasdaq that we have regained compliance with the minimum bid price requirement. Since May 20, 2010, the bid price for our common stock had again fluctuated below the
levels required by Nasdaq rules for continued listing. On July 21, 2010, we received notice from Nasdaq that the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq
Capital Market. On February 10, 2011, we received a notification from Nasdaq that we regained compliance with the minimum bid price requirement. On April 21, 2011, we received notice from Nasdaq that the bid price of our common stock had
closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Capital Market and that we have 180 calendar days, or until October 18, 2011 to regain compliance.

Critical Accounting Policies and Significant Judgments and Estimates

Our managements discussion and analysis of our financial condition and results of operations are based on our financial statements,
which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenues and expenses during the reporting periods. On an on-going basis, we evaluate our estimates and judgments
related to revenue recognition and clinical development costs. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ significantly from these estimates under different assumptions or conditions.



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There has been no material change in our critical accounting policies and significant
judgments and estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2010.

Use of Estimates

In preparing our financial statements to conform with GAAP, we make estimates and assumptions that affect the amounts
reported in our financial statements and accompanying notes. Actual results may differ from these estimates.

Results of Operations

Revenues

We did not record any revenues for the three months ended March 31, 2011 or in 2010. Future non-product revenues, if any, will depend upon the extent to which we enter into new collaborative research
agreements and the amounts of payments relating to such agreements.

Research and Development Expenses

Research and development expenses for the three months ended March 31, 2011 and 2010 were $1.7 million and $2.8 million. Our research
and development activities consist primarily of drug development, clinical supply manufacturing, clinical activities, discovery research, screening and identification of product candidates and preclinical studies. We group these activities into two
major categories: research and preclinical and clinical development.

The approximate costs associated
with research and preclinical and clinical development activities were as follows:



|                               |  |                                    |       |  |      |   |       |        |  |  |     |   
|------------------------------ |  | ---------------------------------- | ----- |  | ---- | - | ----- | ------ |  |  | --- | --
|                               |  | Three Months EndedMarch 
31,       |       |  | %    |  
|                               |  | 2011                               |       |  | 2010 |   |       | Change | 
|                               |  | (in thousands, except percentages) |      
|Research and preclinical       |  | $                                  | 481   |  |      | $ | 733   |        |  |  | (34 | )%
|Clinical development           |  |                                    | 1,213 |  |      |   | 2,092 |        |  |  | (42 | )%
|                               |  |                                    |       |  |      |   |       |        |  |  |     |   
|Total research and development |  | $                                  | 1,694 |  |      | $ | 2,825 |        |  |  | (40 | )%
|                               |  |                                    |       |  |      |   |       |        |  |  |     |   

The decrease of 40%, or $1.1 million, in research and development expenses for the three months ended
March 31, 2011 compared to the same period in 2010 was primarily due to the following:



| |  |  | decreased clinical trial expenses of approximately $155,000 related to the completion of our Phase 2 TELINTRA tablets for MDS; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | decreased costs of approximately $1.1 million associated with workforce reduction as a result of our November 2010 restructuring plan and reduced
facility costs as we relocated our corporate offices to a smaller facility in November 2010;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | offset by increased clinical development expenses of approximately $219,000 for our ongoing Phase 1 dose-ranging study of TELINTRA tablets in
combination with Lenalidomide in patients with MDS, Phase 2 TELINTRA tablets randomized study in SCN and TELCYTA in patients with Refractory or Relapsed Mantle Cell lymphoma, Diffuse Large B Cell Lymphoma, and Multiple Myeloma clinical studies.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We expect total research and development expenditures to continue to decrease in 2011 as we focus our
resources mainly on advancing the clinical development of TELINTRA in MDS.

The following table summarizes our principal drug
product candidate development initiatives:



|                                        |  |                                                   |       |  |      |   |       | 
|--------------------------------------- |  | ------------------------------------------------- | ----- |  | ---- | - | ----- | 
|                                        |  | Related R&D ExpensesThree 
Months ended March 31, |      
|Product                                 |  | 2011                                              |       |  | 2010 |  
|                                        |  | (in thousands)                                    |      
|TELCYTA                                 |  | $                                                 | 406   |  |      | $ | 605   | 
|TELINTRA                                |  |                                                   | 1,275 |  |      |   | 1,698 | 
|TLK58747                                |  |                                                   |      |  |      |   | 60    | 
|TLK60404                                |  |                                                   | 13    |  |      |   | 158   | 
|Other (1)                               |  |                                                   |      |  |      |   | 304   | 
|                                        |  |                                                   |       |  |      |   |       | 
|Total research and development expenses |  | $                                                 | 1,694 |  |      | $ | 2,825 | 
|                                        |  |                                                   |       |  |      |   |       | 



|(1) | Other constitutes research and development activities that cannot be allocated to any individual project.
|--- | -----------------------------------------------------------------------------------------------------------

The largest component of our total operating expenses is our on-going investment in our research and development activities and, in
particular, the clinical development of our product candidate pipeline. The process of conducting the clinical research necessary to obtain FDA approval is costly and time consuming. Current FDA requirements for a new human drug to be marketed in
the United States include:



| |  |  | the successful conclusion of preclinical laboratory and animal tests, if appropriate, to gain preliminary information on the products safety;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | filing with the FDA of an IND, to conduct initial human clinical trials for drug candidates;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | the successful completion of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product candidate; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | filing by company and acceptance and approval by the FDA of a New Drug Application, or NDA, for a product candidate to allow commercial distribution of
the drug.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

In view of the factors mentioned above, we consider the active management and development of our
clinical pipeline to be crucial to our long-term success. The actual probability of success for each candidate and clinical program may be impacted by a variety of factors, including, among others, the quality of the candidate, the validity of the
target and disease indication, early clinical data, investment in the program, competition, manufacturing capability and commercial viability. Due to these and other factors, it is difficult to give accurate guidance on the anticipated proportion of
our research and development investments or the future cash inflows from these programs.

General and Administrative Expenses



|                           |  |                                    |       |  |      |   |       |        |  |  |     |   
|-------------------------- |  | ---------------------------------- | ----- |  | ---- | - | ----- | ------ |  |  | --- | --
|                           |  | Three Months EndedMarch 
31,       |       |  | %    |  
|                           |  | 2011                               |       |  | 2010 |   |       | Change | 
|                           |  | (in thousands, except percentages) |      
|General and administrative |  | $                                  | 1,994 |  |      | $ | 2,558 |        |  |  | (22 | )%



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The decrease in general and administrative expenses of 22%, or $564,000, for the three
months ended March 31, 2011 compared to the same period in 2010 was primarily due to a decrease of $465,000 in workforce and corporate administrative expenses as a result of the restructuring plan implemented in November 2010 and decreased
facility costs of $444,000 primarily due to the relocation of our corporate offices to a smaller facility in November 2010. The decrease was partially offset by an increase of $345,000 in legal and professional service expenses primarily due to new
patent applications filed during the period.

We expect 2011 general and administrative expenses to be lower than the 2010
spending level as we undertake efforts to control expenses.

Stock-Based Compensation Expense

Employee stock-based compensation expense related to our share-based payment awards was as follows:



|                                              |  |                              |     |  |      |   |     | 
|--------------------------------------------- |  | ---------------------------- | --- |  | ---- | - | --- | 
|                                              |  | Three Months EndedMarch 
31, |    
|                                              |  | 2011                         |     |  | 2010 |  
|                                              |  | (in thousands)               |    
|Research and development                      |  | $                            | 157 |  |      | $ | 257 | 
|General and administrative                    |  |                              | 164 |  |      |   | 457 | 
|                                              |  |                              |     |  |      |   |     | 
|Stock-based compensation expense before taxes |  |                              | 321 |  |      |   | 714 | 
|Related income tax benefits                   |  |                              |    |  |      |   |    | 
|                                              |  |                              |     |  |      |   |     | 
|Effect on net loss                            |  | $                            | 321 |  |      | $ | 714 | 
|                                              |  |                              |     |  |      |   |     | 

The decreases in employee stock-based compensation expense for research and development, and general and
administrative for the three months ended March 31, 2011 compared with the same period in 2010 were primarily due to options shares with higher fair values which vested in 2010.

Interest Income and Interest Expense



|                                         |  |                                    |    |  |      |   |    |        |  |  |      |   
|---------------------------------------- |  | ---------------------------------- | -- |  | ---- | - | -- | ------ |  |  | ---- | --
|                                         |  | Three Months EndedMarch 
31,       |    |  | %    |  
|                                         |  | 2011                               |    |  | 2010 |   |    | Change | 
|                                         |  | (in thousands, except percentages) |   
|Interest and other income (expense), net |  | $                                  | 14 |  |      | $ | 62 |        |  |  | (77  | )%
|Interest expense                         |  |                                    |   |  |      |   | (6 | )      |  |  | (100 | )%

The decrease in interest
and other income (expense), net of approximately $48,000 for the three months ended March 31, 2011 compared to the same period in 2010 was due primarily to a decrease in investment income resulting from lower investment cash balances and lower
interest rates.

Interest expense for the three months ended March 31, 2010 was solely for interest payments on our UBS
loan. There was no interest expense for the three months ended March 31, 2011

Liquidity and Capital Resources



|                                                               |  |                              |         |  |                  |   |         | 
|-------------------------------------------------------------- |  | ---------------------------- | ------- |  | ---------------- | - | ------- | 
|                                                               |  | March 31,2011                |         |  | December 31,2010 |  
|                                                               |  | (in millions, except ratios) |        
|Cash, cash equivalents, investments and restricted investments |  | $                            | 20.2    |  |                  | $ | 24.1    | 
|Working capital                                                |  | $                            | 17.5    |  |                  | $ | 20.7    | 
|Current ratio                                                  |  |                              | 6.2 : 1 |  |                  |   | 6.6 : 1 | 



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##### Table of Contents

|                              |  |                             |      |   |      |   |      |  
|----------------------------- |  | --------------------------- | ---- | - | ---- | - | ---- | -
|                              |  | Three Months EndedMarch 31, |     
|                              |  | 2011                        |      |   | 2010 |  
|                              |  | (in millions)               |     
|Cash (used in) / provided by: |  |                             |      |   |      |   |      |  
|Operating activities          |  | $                           | (4.1 | ) |      | $ | (4.5 | )
|Investing activities          |  | $                           | 1.1  |   |      | $ |     |  
|Financing activities          |  | $                           | 0.2  |   |      | $ | (3.1 | )

Sources and Uses of
Cash. Due to significant research and development expenditures and the lack of any approved products to generate revenue, we have not been profitable and have generated operating losses since we incorporated in 1988. As such, we have funded our
research and development operations through the sale of equity securities, non-equity payments from corporate partners, interest earned on investments, government grants and equipment lease and loan financings. At March 31, 2011, we had
available cash, cash equivalents, investments and restricted investments of $20.2 million. Our cash and investment balances are held in a variety of interest-bearing instruments including obligations of U.S. government agencies and money market
accounts. Cash in excess of immediate requirements is invested with regard to liquidity and capital preservation. Wherever possible, we seek to minimize the potential effects of concentration and degrees of risk.

Cash Flows from Operating Activities. Cash used in operations for the three months ended March 31, 2011 was $4.1 million
compared with $4.5 million for the same period in 2010. Net loss of $3.7 million in the three months ended March 31, 2011 included non-cash charges of $321,000 for stock-based compensation, $7,000 for depreciation and amortization. Cash used in
operations was further impacted by a $471,000 reduction in accounts payable primarily due to payments made during the three months ended March 31, 2011 related to our office relocation at the end of 2010 and a $361,000 reduction in accrued
facility exit costs due to payments made on our Porter Drive facility partially offset by sublease payments received. Operating cash outflows for the same period in 2010 resulted primarily from a net loss of $5.3 million which included non-cash
charges of $714,000 for stock-based compensation, $93,000 for depreciation and amortization and $61,000 for the decrease in the fair value of marketable securities and was partially offset by a $61,000 reduction in value of the put option associated
with the UBS ARS Rights. Cash used in 2010 was further impacted by a $148,000 reduction in accrued liabilities related primarily to payments made during the three months ended March 31, 2010 for 2009 audit and tax services and was partially
offset by a decrease of $134,000 in other receivables and an approximately $94,000 increase in accounts payable.

Cash
Flows from Investing Activities. Cash provided by investing activities for the three months ended March 31, 2011 was $1.1 million compared with $382,000 for the same period in 2010. Cash provided in the three months ended March 31,
2011 was primarily from $6.3 million in investment maturities and $199,000 in investment sales partially offset by the purchase of available-for-sale investments of $5.5 million. We had no capital expenditures for the three months ended
March 31, 2011. Cash provided by investing activities for the same period in 2010 was primarily from $8.0 million in investment maturities and $4.2 million in investment sales which included a $4.0 million sale of our ARS to UBS on
February 12, 2010 and was partially offset by the purchase of available-for-sale investments of $11.8 million.

Cash Flows from Financing Activities. Cash provided by financing activities for the three months ended March 31, 2011 was
approximately $227,000 compared with cash used in financing activities of $3.1 million for the same period in 2010. Cash provided by financing activities for the three months ended March 31, 2011 was primarily due to proceeds from stock
purchases under our employee stock purchase plan and stock option exercises. Financing activities for the same period in 2010 comprised a $3.1 million payment on our remaining UBS loan balance and was offset by $33,000 in proceeds from stock
purchases under our employee stock purchase plan.

Working Capital. Working capital decreased to $17.5 million at
March 31, 2011 from $20.7 million at December 31, 2010. The decrease in working capital was primarily due to our use of cash for our clinical studies and operating expenses.



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As a result of our relocation to a smaller facility and restructuring plan implemented in
November 2010, we believe our existing cash resources will be sufficient to satisfy our current operating plan until the third quarter of 2012. Changes in our research and development plans or other changes affecting our operating expenses may
affect actual future consumption of existing cash resources as well. In any event, we will require substantial additional financing to fund our operations in the future. We may seek to raise any necessary additional funds through equity or debt
financings, collaborative arrangements with corporate partners or other sources. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience dilution. Debt financing may subject us to restrictive
covenants that may adversely affect our operations. To the extent that we raise additional capital through licensing arrangements or arrangements with collaborative partners, we may be required to relinquish, on terms that are not favorable to us,
rights to some of our technologies or product candidates that we would otherwise seek to develop or commercialize ourselves. Our future capital uses and requirements depend on numerous factors, including the following:



| |  |  | the progress and success of preclinical studies and clinical trials of our product candidates;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | the progress and number of research programs in development;
| | - |  | ------------------------------------------------------------



| |  |  | the costs associated with conducting Phase 2 clinical trials;
| | - |  | -------------------------------------------------------------



| |  |  | the costs and timing of obtaining regulatory approvals;
| | - |  | -------------------------------------------------------



| |  |  | our ability to establish, and the scope of, any new collaborations;
| | - |  | -------------------------------------------------------------------



| |  |  | our ability to meet the milestones identified in our collaborative agreements that trigger payments;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | the costs and timing of obtaining, enforcing and defending our patent and intellectual property rights; and
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | competing technological and market developments.
| | - |  | ------------------------------------------------

We currently have no commitments for any additional financings. If we need to raise additional money to fund our operations, funding may not be available to us on acceptable terms, or at all. If we are
unable to raise additional funds when needed, we may not be able to market our products as planned or continue development of our products, or we could be required to delay, scale back or eliminate some or all of our research and development
programs.

Our future contractual obligations net of rental income from sublease at March 31, 2011 were as follows:



|                 |  |                |       |  |      |   |       |           |  |   |           |  |  |           |     |  |  |   |   | 
|---------------- |  | -------------- | ----- |  | ---- | - | ----- | --------- |  | - | --------- |  |  | --------- | --- |  |  | - | - | 
|                 |  | Total          |       |  | 2011 |   |       | 2012-2013 |  |   | 2014-2015 |  |  | After2015 |    
|                 |  | (in thousands) |      
|Operating leases |  | $              | 4,946 |  |      | $ | 1,399 |           |  | $ | 3,086     |  |  | $         | 461 |  |  | $ |  | 

We also have a
contractual obligation under the terms of our manufacturing supply agreement with AMRI wherein we are obligated to purchase a majority of our United States requirements for the active ingredient in TELCYTA for a number of years. However, we
currently do not have any requirements for the active ingredient. We have agreed on a pricing schedule for such supply, which will be subject to future renegotiation after a defined time period.

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements as defined in Regulation S-K 303(a)(4)(ii).



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk.
|------- | -----------------------------------------------------------

The following discussion about our market risk exposure involves forward-looking statements. We do not use or hold derivative financial instruments; however we are exposed to market risk related to
changes in interest rates and market conditions.



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Our investment policy is to manage our marketable securities portfolio to preserve principal
and liquidity while maximizing the return on the investment portfolio. To minimize the exposure due to adverse shifts in interest rates we maintain investments of shorter maturities. Our marketable securities portfolio is primarily invested in U.S.
treasury and U.S. government agency securities with an average maturity of less than one year and a minimum investment grade rating of A or A-1 or better to minimize credit risk. Although changes in interest rates may affect the fair value of the
marketable securities portfolio and cause unrealized gains or losses, such gains or losses would not be realized unless the investments were sold prior to maturity. Through our money managers, we maintain risk management control systems to monitor
interest rate risk. The risk management control systems use analytical techniques, including sensitivity analysis. We have operated primarily in the United States and all funding activities with our collaborators to date have been made in U.S.
dollars. Accordingly, we do not have any exposure to foreign currency rate fluctuations.

The table below presents the
principal amounts and weighted-average interest rates by year of stated maturity for our investment portfolio:



|                              |  |      |        |   |                                    |  |      |       |  |   |                            |   |  |   |        | 
|----------------------------- |  | ---- | ------ | - | ---------------------------------- |  | ---- | ----- |  | - | -------------------------- | - |  | - | ------ | 
|                              |  | 2011 |        |   | 2012andBeyond                      |  |      | Total |  |   | Fair Value atMarch 31,2011 |  
|                              |  |      |        |   | (in thousands, except percentages) |  |      |       | 
|Available-for-sale securities |  | $    | 16,591 |   |                                    |  |     |       |  | $ | 16,591                     |   |  | $ | 16,592 | 
|Average interest rate         |  |      | 0.26   | % |                                    |  | 0.00 | %     |  |   | 0.26                       | % |  |   |        | 



|Item 4. | Controls and Procedures.
|------- | ------------------------

Evaluation of disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and Vice
President, Finance and Controller, evaluated the effectivness of our disclosure controls and procedures as of March 31, 2011. Based on such evaluation, our Chief Executive Officer and Vice President, Finance and Controller concluded that,
subject to limitations described below, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), were effective as of March 31, 2011.

Changes in internal control over financial reporting. There were no changes in our internal controls over financial reporting
during the quarter ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Limitations on the effectiveness of controls. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly, our disclosure controls and
procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, our Chief Executive Officer and Vice President, Finance and Controller have concluded, based
on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures were sufficiently effective to provide reasonable assurance that the objectives of our disclosure control system were met.



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PART II. OTHER INFORMATION



|Item 1A. | Risk Factors.
|-------- | -------------

Included below is a description of risk factors related to our business to enable readers to assess, and be appropriately apprised of,
many of the risks and uncertainties applicable to the forward-looking statements made in this Quarterly Report on Form 10-Q. The risks and uncertainties set forth below are not all of the risks and uncertainties facing our business, but we do
believe that they reflect the more important ones. You should carefully consider these risk factors as each of these risks could adversely affect our business, operating results and financial condition. Given these risks and uncertainties, you are
cautioned not to place undue reliance on forward-looking statements.

The risk factors described in Part I,
Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on March 2, 2011, are set forth below. These risk factors have not substantively changed, except for those identified by asterisk
and restated below.

If we are unable to raise adequate funds in the future, we will not be able to continue to fund our operations,
research programs, preclinical testing and clinical trials to develop and manufacture our drug product candidates.*

The
process of carrying out the development of our own unpartnered product candidates to later stages of development and developing other research programs to the stage that they may be partnered to a pharmaceutical or biotechnology company will require
significant additional expenditures, including the expenses associated with preclinical testing, clinical trials and obtaining regulatory approval. We believe that our existing cash and investment securities will be sufficient to support our current
operating plan until the third quarter of 2012. However, unanticipated changes in our research and development plans or other changes affecting our operating expenses may affect actual consumption of existing cash resources. In any event, we will
require substantial additional financing to fund our operations in the future. We do not know whether additional financing will be available when needed or that, if available, we will be able to obtain financing on terms favorable to our
stockholders. In addition, the tight credit markets and concerns regarding the availability of credit, particularly in the United States, may also negatively impact our ability to raise additional capital to fund our business. As of March 31,
2011, our accumulated deficit was $532.0 million, and we expect to incur capital outlays and operating expenditures for the next several years as we continue our clinical, research and development activities. The extent of any actual increase in
operating or capital spending will depend in part on the clinical success of our product candidates. If we fail to raise adequate funds on terms acceptable to us, if at all, we will not be able to continue to fund our operations, research programs,
preclinical testing, clinical trials and manufacturing efforts.

We have a history of net losses, which we expect to continue for the next
several years. We will never be profitable unless we develop, and obtain regulatory approval and market acceptance of, our product candidates.*

To date, we have not obtained regulatory approval for the commercial sale of any products, and we have not received any revenue from the commercial sale of products. Due to the significant research and
development expenditures required to develop our TRAP technology and identify new product candidates, and the lack of any products to generate revenue, we have not been profitable and have incurred operating losses since we were incorporated in
1988. As of March 31, 2011, we had an accumulated deficit of $532.0 million. We expect to incur losses for the next several years as we continue our research and development activities and incur significant clinical testing and drug supply
manufacturing costs. We do not anticipate that we will generate product revenue for at least several years. Our losses, among other things, have caused and will cause our stockholders equity and working capital to decrease. We expect that this
trend will continue until we develop, and obtain regulatory approval and market acceptance of, our product candidates, if at all. We may never generate product revenue sufficient to become profitable.



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Both of our most advanced drug product candidates, TELINTRA and TELCYTA, are in clinical development. If
clinical trials of our product candidates are delayed or unsuccessful, or if we are unable to complete the preclinical development of our other preclinical product candidates, our business may suffer.

Preclinical testing and clinical trials are long, expensive and uncertain processes. It may take us or our collaborators several years to
complete this testing, and failure can occur at any stage of the process. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and interim results of clinical trials do not
necessarily predict final results. A number of companies in the pharmaceutical industry, including biotechnology companies, have suffered significant setbacks in advanced clinical trials, even after promising results in earlier clinical trials. To
obtain regulatory approvals, we must, among other requirements, complete carefully controlled and well-designed clinical trials demonstrating that a particular drug is safe and effective for the applicable disease.

In 2007, we completed a Phase 1-2a clinical trial of a tablet formulation of TELINTRA in MDS, a form of pre-leukemia, to evaluate safety,
pharmacokinetics, pharmacodynamics and efficacy. In May 2008, we initiated a Phase 2 clinical trial of TELINTRA tablets for the treatment of patients with MDS and announced final data at the ASH meeting in December 2010. In April 2009, we initiated
a randomized Phase 2 clinical trial in SCN and in November 2009, we initiated a Phase 1 Dose-Ranging Study of TELINTRA tablets in combination with lenalidomide in patients with MDS. Our success depends in part on our ability to continue clinical
development of TELINTRA.

TELCYTA has been evaluated in multiple Phase 1, 2 and 3 clinical trials. Our Phase 3 trials did not
achieve their primary endpoints and consequently the FDA required that we conduct additional studies of TELCYTA to complete clinical development. In May 2010, we initiated an investigator led study at a single site of TELCYTA in patients with
refractory or relapsed mantle cell lymphoma, diffuse large B cell lymphoma, and multiple myeloma.

Our success depends in
large part on our ability to continue clinical development of TELINTRA and TELCYTA. If we do not have sufficient capital required to conduct additional studies or if the data on future clinical trials are not positive, we may not be able to continue
clinical development on TELINTRA or TELCYTA and our business will suffer.

We rely on third-party clinical investigators to
conduct our clinical trials and, as a result, we may face additional delays outside our control. We have in the past engaged contract research organizations, or CROs, to facilitate the administration of our Phase 3 clinical trials of TELCYTA.
Dependence on a CRO subjects us to a number of risks. We may not be able to control the amount and timing of resources the CRO may devote to our clinical trials. Should the CRO fail to administer our Phase 3 clinical trials properly and on a timely
basis, regulatory approval, development and commercialization of our product candidates will be delayed.

We do not know
whether we will begin planned clinical trials on time or whether we will complete any of our on-going clinical trials on schedule, if at all. Clinical trials can be delayed for a variety of other reasons, including delays in clinical testing,
obtaining regulatory approval to commence a study, delays in reaching agreement on acceptable clinical study agreement terms with prospective clinical sites, delays in obtaining institutional review board approval to conduct a study at a prospective
clinical site and delays in recruiting subjects to participate in a study. Even if we are able to complete such clinical trials, we do not know whether any such trials will result in marketable products. Typically, there is a high rate of failure
for product candidates in preclinical and clinical trials. We do not anticipate that any of our product candidates will reach the market for at least the next several years.

Delays in clinical testing can also materially impact our product candidates development costs. If we experience delays in clinical testing or approvals, our product candidates development
costs will increase. For example, we may need to make additional payments to third-party investigators and organizations to retain their services or we may need to pay additional recruitment incentives. If the delays are significant, our financial
results and the commercial prospects for our product candidates will be harmed, and our ability to become profitable will be significantly impaired or delayed.



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If we do not find collaborators for our product candidates, we may have to reduce or delay our rate of
product development and/or increase our expenditures.

Our strategy to develop, manufacture and commercialize our products
includes entering into relationships with pharmaceutical companies to advance certain programs and reduce our expenditures with respect to such programs. Our product candidates will target highly competitive therapeutic markets in which we have
limited experience and expertise. If we are unable to develop this expertise ourselves, we will need to enter into agreements with one or more biotechnology or pharmaceutical companies to provide us with the necessary resources and experience for
the development and commercialization of products in these markets. In particular, we are seeking a partnership with a pharmaceutical or biotechnology company to further advance the development and commercialization of TELINTRA and TELCYTA. There
are a limited number of companies with the resources necessary to develop our future products commercially, and we may be unable to attract any of these firms. The current credit and financial market conditions could also impact our ability to find
a collaborator for our development programs. A company that has entered into a collaboration agreement with one of our competitors may choose not to enter into a collaboration agreement with us. We may not be able to negotiate a collaboration
agreement on acceptable terms or at all. If we are not able to establish collaborative arrangements, we may have to reduce or delay further development of some of our programs and/or increase our expenditures and undertake the development activities
at our own expense. If we elect to increase our expenditures to fund our development programs, we will need to obtain additional capital, which may not be available on acceptable terms or at all.

In addition, there have been a significant number of recent business combinations among biotechnology and pharmaceutical companies that
have reduced the number of potential future collaborators that would be willing to enter into a collaboration agreement with us. If business combinations involving potential collaborators continue to occur, our ability to find a collaborative
partner could be diminished, which could result in the termination or delay in one or more of our product candidate development programs.

We will depend on collaborative arrangements to complete the development and commercialization of some of our product candidates. These collaborative
arrangements may place the development of our product candidates outside of our control, may require us to relinquish important rights or may otherwise not be on terms favorable to us.

We expect to enter into collaborative arrangements with third parties for clinical trials, development, manufacturing, regulatory
approvals or commercialization of some of our product candidates. Dependence on collaborative arrangements will subject us to a number of risks. We may not be able to control the amount and timing of resources our collaborative partners may devote
to the product candidates. Our collaborative partners may experience financial difficulties. Should a collaborative partner fail to develop or commercialize a compound or product candidate to which it has rights from us, we may not receive any
future milestone payments and will not receive any royalties for that compound or product candidate. Business combinations or significant changes in a collaborative partners business strategy may also adversely affect a partners
willingness or ability to complete its obligations under an arrangement. If we fail to enter into additional collaborative agreements on favorable terms, our business, financial condition and results of operations could be materially adversely
affected.

Some of our collaborations are for early stage programs and allow partners significant discretion in electing
whether to pursue any of the planned activities. We do not anticipate significant revenues to result from these relationships until the collaborator has advanced product candidates into clinical trials, which will not occur for several years, if at
all. These arrangements are subject to numerous risks, including the right of the collaboration partner to control the timing of the research and development efforts, the advancement of lead product candidates to clinical trials and the
commercialization of product candidates. In addition, a collaborative partner could independently move forward with a competing lead candidate developed either independently or in collaboration with others, including our competitors.



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Our ability to publicly or privately sell equity securities and the liquidity of our common stock could
be adversely affected if we are delisted from Nasdaq or if we are unable to transfer our listing to another stock market. *

On September 19, 2008, we received a letter from the Nasdaq Listing Qualifications Department indicating that, for 30 consecutive
business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Global Market under Nasdaq Marketplace Rule 5550(a)(2). The letter also stated that we were given 180
calendar days to regain compliance with this listing requirement, which may be accomplished if the bid price of our common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days. Subsequently, Nasdaq implemented
temporary suspensions of the minimum bid price requirement. Effective January 7, 2010, we transferred the listing of our common stock from the Nasdaq Global Market to the Nasdaq Capital Market, and we were provided an additional 180-day period
to regain compliance. On April 22, 2010, we received notice from Nasdaq that we had regained compliance with the minimum bid price requirement. Subsequently, the bid price for our common stock fluctuated below the levels required by Nasdaq
rules for continued listing. On July 21, 2010, we received notice from Nasdaq that the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Capital Market and that we had
180 calendar days to regain compliance. On January 19, 2011, we received a notice from Nasdaq indicating that, while we had not regained compliance with the $1.00 per share requirement, Nasdaq determined that Telik was eligible to receive an
additional 180-day period to regain compliance. On February 10, 2011, we received a notice from Nasdaq indicating that for the preceding, ten consecutive business days, the closing bid price of our common stock was $1.00 per share or greater
and we had regained compliance with the $1.00 per share minimum bid price requirement. On April 21, 2011, we received notice from Nasdaq that the bid price of our common stock had closed below the minimum $1.00 per share requirement for
continued inclusion on the Nasdaq Capital Market and that we have 180 calendar days, or until October 18, 2011 to regain compliance. We cannot assure you that we will be able to regain the minimum bid price, and even if so, maintain it or other
Nasdaq listing requirements.

Delisting from Nasdaq could adversely affect our ability to raise additional financing through
the public or private sale of equity securities, would significantly affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our common stock. Delisting could also have other negative results,
including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities.

Raising additional capital by issuing securities or through collaboration and licensing arrangements may cause dilution to existing stockholders or require us to relinquish rights to our technologies
or product candidates.

We may seek to raise additional funds through equity or debt financings, collaborative
arrangements with corporate partners or other sources. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience dilution. To the extent that we raise additional capital through licensing
arrangements or arrangements with collaborative partners, we may be required to relinquish, on terms that are not favorable to us, rights to some of our technologies or product candidates that we would otherwise seek to develop or commercialize
ourselves.

It may be difficult for us to retain our current employees and identify, hire and retain future employees.

Our future success depends in part upon our ability to attract and retain highly skilled personnel. Several factors could make it
difficult for us to achieve this. Competition among numerous companies, academic and other research institutions for skilled personnel and experienced scientists may be intense and turnover rates high. The cost of living in the San Francisco Bay
Area is high compared to other parts of the country, which could adversely affect our ability to compete for qualified personnel and increase our costs. Because of this competitive environment, we have encountered and may continue to encounter
increasing difficulty attracting qualified personnel, particularly if our operations expand and the demand for these professionals increases.

In addition, we may have difficulty attracting and retaining personnel as a result of having carried out four workforce reductions since 2007, the most recent of which was completed in November 2010. We
cannot assure you that future reductions or adjustments of our workforce will not be made or that issues, such as voluntary departures by some employees, associated with such reductions will not recur. These circumstances could significantly impede
the achievement of our business objectives.



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If our competitors develop and market products that are more effective than our product candidates or any
products that we may develop, or obtain marketing approval before we do, our commercial opportunity will be reduced or eliminated.

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. Some of the drugs that we are attempting to develop will have to
compete with existing therapies. In addition, a large number of companies are pursuing the development of pharmaceuticals that target the same diseases and conditions that we are targeting. We face competition from pharmaceutical and biotechnology
companies in the United States and abroad. Our competitors may develop new screening technologies and may utilize discovery techniques or partner with collaborators in order to develop products more rapidly or successfully than we or our
collaborators are able to do.

Many of our competitors, particularly large pharmaceutical companies, have substantially
greater financial, technical and human resources than we do. These organizations also compete with us to attract qualified personnel and parties for acquisitions, joint ventures, licensing arrangements or other collaborations. In addition, academic
institutions, government agencies and other public and private organizations conducting research may seek patent protection with respect to potentially competing products or technologies and may establish exclusive collaborative or licensing
relationships with our competitors.

Our competitors may succeed in developing technologies and drugs that are more effective,
better tolerated or less costly than any which are being developed by us or which would render our technology and potential drugs obsolete and noncompetitive. In addition, our competitors may succeed in obtaining FDA or other regulatory approvals
for product candidates more rapidly than us or our collaborators. Any drugs resulting from our research and development efforts, or from our joint efforts with our existing or future collaborative partners, may not be able to compete successfully
with our competitors existing products or product candidates under development or may not obtain regulatory approval in the United States or elsewhere.

If we do not obtain regulatory approval to market products in the United States and foreign countries, we or our collaborators will not be permitted to commercialize our product candidates.

Even if we are able to achieve success in our preclinical testing, we, or our collaborators, must provide the FDA and
foreign regulatory authorities with clinical data that demonstrate the safety and efficacy of our product candidates in humans before they can be approved for commercial sale. Failure to obtain regulatory approval will prevent commercialization of
our product candidates.

The pharmaceutical industry is subject to stringent regulation by a wide range of regulatory
authorities. We cannot predict whether regulatory clearance will be obtained for any product candidate that we are developing or hope to develop. A pharmaceutical product cannot be marketed in the United States until it has completed rigorous
preclinical testing and clinical trials and an extensive regulatory clearance process implemented by the FDA. Satisfaction of regulatory requirements typically takes many years and depends on the type, complexity and novelty of the product candidate
and requires the expenditure of substantial resources. Of particular significance are the requirements covering research and development, testing, manufacturing, quality control, labeling and promotion of drugs for human use.

Before commencing clinical trials in humans, we, or our collaborators, must submit and receive approval from the FDA of an IND
application. We must comply with FDA Good Laboratory Practices regulations in our preclinical studies. Clinical trials are subject to oversight by Institutional Review Boards, or IRBs, of participating clinical sites and the FDA and:



| |  |  | must be conducted in conformance with the FDA regulations;
| | - |  | ----------------------------------------------------------



| |  |  | must meet requirements for IRB approval;
| | - |  | ----------------------------------------



| |  |  | must meet requirements for informed consent;
| | - |  | --------------------------------------------



| |  |  | must meet requirements for Good Clinical Practices;
| | - |  | ---------------------------------------------------



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| |  |  | may require large numbers of participants; and
| | - |  | ----------------------------------------------



| |  |  | may be suspended by us, our collaborators or the FDA at any time if it is believed that the subjects participating in these trials are being exposed to
unacceptable health risks or if the FDA finds deficiencies in the IND application or the conduct of these trials. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the
IRBs requirements, or may impose other conditions.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Before receiving FDA clearance to market a product
candidate, we, or our collaborators must demonstrate that the product candidate is safe and effective in the patient population that will be treated. Negative or inconclusive results or adverse medical events during a clinical trial could cause a
clinical trial to be repeated, a program to be terminated and could delay approval. We typically rely on third-party clinical investigators to conduct our clinical trials and other third-party organizations to perform data collection and analysis.
As a result, we may face additional delaying factors outside our control. In addition, we may encounter delays or rejections based upon additional government regulation from future legislation or administrative action or changes in FDA policy or
interpretation during the period of product development, clinical trials and FDA regulatory review. Failure to comply with applicable FDA or other applicable regulatory requirements may result in criminal prosecution, civil penalties, recall or
seizure of products, total or partial suspension of production or injunction, as well as other regulatory action. We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approval.

If regulatory clearance of a product candidate is granted, this clearance will be limited to those disease states and conditions for
which the product candidate is demonstrated through clinical trials to be safe and efficacious, which could limit our market opportunity. Furthermore, product approvals, once granted, may be withdrawn if problems occur after initial marketing. We
cannot ensure that any product candidate developed by us, alone or with others, will prove to be safe and efficacious in clinical trials and will meet all of the applicable regulatory requirements needed to receive marketing clearance. Regulatory
clearance may also contain requirements for costly post-marketing testing and surveillance to monitor the safety and efficacy of the product candidate. If problems occur after initial marketing, such as the discovery of previously unknown problems
with our product candidates, including unanticipated adverse events or adverse events of unanticipated severity or frequency, or manufacturer or manufacturing issues, marketing approval can be withdrawn.

Outside the United States, the ability to market a product depends on receiving a marketing authorization from the appropriate regulatory
authorities. Most foreign regulatory approval processes include all of the risks associated with FDA clearance described above and some may include additional risks.

As our product programs advance, we may need to hire additional scientific and management personnel. Our research and development efforts will be seriously jeopardized if we are unable to attract and
retain key personnel.

Our success depends in part on the continued contributions of our principal management and
scientific personnel and on our ability to develop and maintain important relationships with leading academic institutions, scientists and companies in the face of intense competition for such personnel. As we plan for additional advanced clinical
trials, including Phase 2 and Phase 3, we may also need to expand our clinical development personnel. If we lose the services of Dr. Wick or any of our other key personnel, our research and development efforts could be seriously and adversely
affected. We have generally entered into consulting or other agreements with our scientific and clinical collaborators and advisors. We do not carry key person insurance that covers Dr. Wick or any of our other key employees.

If we or our licensees cannot obtain and defend our respective intellectual property rights, or if our product candidates, technologies or any
products that we may develop are found to infringe patents of third parties, we could become involved in lengthy and costly legal proceedings that could adversely affect our business.



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Our success will depend in a large part on our own and our licensees ability to obtain
and defend patents for each partys respective technologies and the compounds and other products, if any, resulting from the application of these technologies. The patent positions of pharmaceutical and biotechnology companies can be highly
uncertain and involve complex legal and factual questions. As a result, the degree of future protection for our proprietary rights is uncertain, and we cannot assure you that:



| |  |  | we were the first to make the inventions covered by each of our pending patent applications;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | we were the first to file patent applications for these inventions;
| | - |  | -------------------------------------------------------------------



| |  |  | others will not independently develop similar or alternative technologies or duplicate any of our technologies;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | any of our pending patent applications will result in issued patents;
| | - |  | ---------------------------------------------------------------------



| |  |  | any patents issued to us or our collaborators will provide a basis for commercially viable products, will provide us with any competitive advantages or
will not be challenged by third parties;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any of our issued patents will be valid or enforceable; or
| | - |  | ----------------------------------------------------------



| |  |  | we will develop additional proprietary technologies that are patentable.
| | - |  | ------------------------------------------------------------------------

Accordingly, we cannot predict the breadth of claims allowed in our or other companies patents.

For TELINTRA, we hold compound patents in the United States and internationally that will expire in 2014. For TELCYTA, we hold compound
patents in the United States and internationally that will expire in 2013 and 2014. We can generally apply for patent term extensions on the patents for TELINTRA and TELCYTA when and if marketing approvals for these compounds are obtained in the
relevant countries. In foreign countries, these extensions are available only if approval is obtained before the patent expires, but in the United States, extensions are available even if approval is obtained after the patent would expire normally
through a system of interim extensions until approval.

Our success will also depend, in part, on our ability to operate
without infringing the intellectual property rights of others. We cannot assure you that our activities will not infringe patents owned by others. To date, we have not received any communications with the owners of related patents alleging that our
activities infringe their patents. However, if our product candidates, technologies or any products that we may develop are found to infringe patents issued to third parties, the manufacture, use and sale of any products that we may develop could be
enjoined, and we could be required to pay substantial damages. In addition, we may be required to obtain licenses to patents or other proprietary rights of third parties. We cannot assure you that any licenses required under any such patents or
proprietary rights would be made available on terms acceptable to us, if at all. Failure to obtain such licenses could negatively affect our business.

Others may have filed and in the future may file patent applications covering small molecules or therapeutic products that are similar to ours. We cannot assure you that our patent applications will have
priority over patent applications filed by others. Any legal action against us or our collaborators claiming damages and seeking to enjoin commercial activities relating to the affected products and processes could, in addition to subjecting us to
potential liability for damages, require us or our collaborators to obtain a license to continue to manufacture or market the affected products and processes. We cannot predict whether we, or our collaborators, would prevail in any of these actions
or that any license required under any of these patents would be made available on commercially acceptable terms, if at all. We believe that there may be significant litigation in the industry regarding patent and other intellectual property rights.
If we become involved in litigation, it could consume a substantial portion of our managerial and financial resources, and we may not be successful in any such litigation.

In addition, we could incur substantial costs and use of our key employees time and efforts in litigation if we are required to defend against patent suits brought by third parties or if we initiate
these suits, and we cannot predict whether we would be able to prevail in any of these suits.

Furthermore, some of our
patents and intellectual property rights are owned jointly by us and our collaborators. While there are legal and contractual restraints on the rights of these joint owners, they may use these patents and other intellectual property in ways that may
harm our business. We may not be able to prevent this type of use.



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We also rely on trade secrets to protect technology, including aspects of our TRAP
technology, where we believe patent protection is not appropriate or obtainable. However, trade secrets are difficult to protect. While we require employees, academic collaborators and consultants to enter into confidentiality agreements, we may not
be able to adequately protect our trade secrets or other proprietary information in the event of any unauthorized use or disclosure or the lawful development by others of such information. If the identity of specific proteins or other elements of
our TRAP technology become known, our competitive advantage in drug discovery could be reduced.

Many of our collaborators and
scientific advisors have publication and other rights to certain information and data gained from their collaborations and research with us. Any publication or other use could limit our ability to secure intellectual property rights or impair any
competitive advantage that we may possess or realize by maintaining the confidentiality of that information or data.

If we are unable to
enter into or maintain existing contracts with third parties to manufacture our product candidates or any products that we may develop in sufficient quantities and at an acceptable cost, clinical development of product candidates could be delayed
and we may be unable to meet demand for any products that we may develop and lose potential revenue.

We do not currently
operate manufacturing facilities for clinical or commercial production of our product candidates. We expect to continue to rely on third parties for the manufacture of our product candidates and any products that we may develop. We currently lack
the resources and capability to manufacture any of our product candidates on a clinical scale or any products that we may develop on a commercial scale. As a result, we will be dependent on corporate partners, licensees or other third parties for
the manufacturing of clinical and commercial scale quantities of our product candidates and any products that we may develop. Our product candidates and any products that we may develop may be in competition with other product candidates and
products for access to these manufacturing facilities. For this and other reasons, our collaborators or third parties may not be able to manufacture our product candidates and products in a cost effective or timely manner. While we currently possess
sufficient inventory of TELINTRA and TELCYTA that are stored in multiple locations and an additional, substantial quantity of the active ingredient in TELCYTA, if these inventories are lost or damaged, the clinical development of our product
candidates or their submission for regulatory approval could be delayed, and our ability to deliver any products that we may develop on a timely basis could be impaired or precluded.

Isochem has in the past manufactured and supplied a limited number of batches of the active ingredient to be used in the production of
TELINTRA for use in clinical trials. As such, we have qualified Isochem as a potential source of supply for clinical quantities of this ingredient. In addition, Patheon has in the past performed formulation development and analytical
services, and produced for us limited batches of clinical trial material, relating to the tablet formation of TELINTRA. As such, we have qualified Patheon as a potential manufacturer of TELINTRA tablets. However, we currently do not have
in effect any manufacturing or supply agreements with either Isochem or Patheon. Although we have not qualified any other sources for the active ingredient in TELINTRA or the manufacture of TELINTRA tablets, we have evaluated, and may consider,
potential alternative sources for this material in the future.

We are currently dependent on a single source of supply of the
active ingredient in TELCYTA, AMRI. We currently depend upon two sources for the drug product manufacture of TELCYTA.

If
manufacturing is not performed in a timely manner, if our suppliers fail to perform or if our relationships with our suppliers or manufacturers should terminate, our clinical trials and commercialization of TELINTRA and TELCYTA could be delayed. We
may not be able to enter into or maintain any necessary third-party manufacturing arrangements on acceptable terms, if at all. Our current dependence upon others for the manufacture of our product candidates and our anticipated dependence upon
others for the manufacture of any products that we may develop may adversely affect our future profit margins and our ability to commercialize any products that we may develop on a timely and competitive basis.



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Working capital constraints may force us to delay our efforts to develop certain product candidates in
favor of developing others, which may prevent us from commercializing all product candidates as quickly as possible.

Because we have limited resources, and because research and development is an expensive process, we must regularly assess the most
efficient allocation of our research and development budget. As a result, we may have to prioritize development candidates and may not be able to fully realize the value of some of our product candidates in a timely manner, as they will be delayed
in reaching the market, if at all.

If product liability lawsuits are successfully brought against us, we may incur substantial liabilities
and may be required to limit commercialization of our product candidates and any products that we may develop.

The
testing and marketing of medical products entail an inherent risk of product liability. Although we are not aware of any historical or anticipated product liability claims or specific causes for concern, if we cannot successfully defend ourselves
against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates and any products that we may develop. In addition, product liability claims may also result in withdrawal of
clinical trial volunteers, injury to our reputation and decreased demand for any products that we may commercialize. We currently carry product liability insurance that covers our clinical trials up to a $10 million annual aggregate limit. We will
need to increase the amount of coverage if and when we have a product that is commercially available. If we are unable to obtain sufficient product liability insurance at an acceptable cost, potential product liability claims could prevent or
inhibit the commercialization of any products that we may develop, alone or with corporate partners.

We have implemented anti-takeover
provisions which could discourage or prevent a takeover, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.

Provisions of our amended and restated certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more
difficult for a third-party to acquire us, even if doing so would be beneficial to our stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it
more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to
replace current members of our management team. These provisions include:



| |  |  | establishing a classified board of directors requiring that members of the board be elected in different years, which lengthens the time needed to
elect a new majority of the board;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | authorizing the issuance of blank check preferred stock that could be issued by our board of directors to increase the number of
outstanding shares or change the balance of voting control and thwart a takeover attempt;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | prohibiting cumulative voting in the election of directors, which would otherwise allow for less than a majority of stockholders to elect director
candidates;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limiting the ability of stockholders to call special meetings of the stockholders;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | prohibiting stockholder action by written consent and requiring all stockholder actions to be taken at a meeting of our stockholders; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | establishing 90 to 120 day advance notice requirements for nominations for election to the board of directors and for proposing matters that can be
acted upon by stockholders at stockholder meetings.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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We adopted a stockholder rights plan that may discourage, delay or prevent a merger or acquisition that
is beneficial to our stockholders.

In November 2001, our board of directors adopted a stockholder rights plan that may
have the effect of discouraging, delaying or preventing a merger or acquisition that is beneficial to our stockholders by diluting the ability of a potential acquiror to acquire us. Under the plan, except under certain circumstances, if a person or
group acquires 20% or more of our outstanding common stock, or 10 business days after a person or group commences or announces a tender or exchange offer for 20% or more of our outstanding common stock, that person or group becomes an
Acquiring Person, and the rights (except those rights held by the Acquiring Person) would generally become exercisable for shares of our common stock at a discount. In May 2006, we amended the stockholder rights plan to exclude
Eastbourne Capital Management, L.L.C. and certain related persons and entities, collectively Eastbourne, from the definition of Acquiring Person so long as neither Eastbourne nor its affiliates or associates, either individually or in the aggregate,
becomes the beneficial owner of 25% or more of the common stock then outstanding. On December 11, 2006, the plan was further amended to increase this threshold to 30% with respect to Eastbourne. Because the potential acquirors rights
would not become exercisable for our shares of common stock at a discount, the potential acquiror would suffer substantial dilution and may lose its ability to acquire us. In addition, the existence of the plan itself may deter a potential acquiror
from acquiring us. As a result, either by operation of the plan or by its potential deterrent effect, mergers and acquisitions of us that our stockholders may consider in their best interests may not occur.

Substantial future sales of our common stock by us or by our existing stockholders could cause our stock price to fall.

Additional equity financings or other share issuances by us, including shares issued in connection with strategic alliances and corporate
partnering transactions, could adversely affect the market price of our common stock. Sales by existing stockholders of a large number of shares of our common stock in the public market or the perception that additional sales could occur could cause
the market price of our common stock to drop. Substantially all of our outstanding shares of common stock were freely tradable and, in limited cases, subject to certain volume, notice and manner of sale restrictions under Rule 144 of the Securities
Act of 1933.

If we do not progress in our programs as anticipated, our stock price could decrease.

For planning purposes, we estimate the timing of a variety of clinical, regulatory and other milestones, such as when a certain product
candidate will enter clinical development, when a clinical trial will be completed or when an application for regulatory approval will be filed. Our estimates are based on present facts and a variety of assumptions. Many of the underlying
assumptions are outside of our control. If milestones are not achieved when we estimated that they would be, investors could be disappointed, and our stock price may decrease.

Our stock price may be volatile, you may not be able to resell your shares at or above your purchase price.*

Our stock prices and the market prices for securities of biotechnology companies in general have been highly volatile, with recent significant price and volume fluctuations, and may continue to be highly
volatile in the future. For example, our stock price dropped by 71% on the day following the announcement in December 2006 that the preliminary top-line results of our first three Phase 3 trials did not meet primary end-points. During the three
months ended March 31, 2011, our common stock traded between $0.75 and $1.25, and on March 31, 2011, our common stock closed at $0.90. You may not be able to sell your shares quickly or at the market price if we are delisted from Nasdaq
Capital Market or if we are unable to transfer listing to another stock market, or if trading in our stock is not active or the volume is low. The following factors, in addition to other risk factors described in this section, may have a significant
impact on the market price of our common stock, some of which are beyond our control:



| |  |  | developments regarding, or the results of, our clinical trials;
| | - |  | ---------------------------------------------------------------



| |  |  | announcements of technological innovations or new commercial products by our competitors or us;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | developments concerning proprietary rights, including patents;
| | - |  | --------------------------------------------------------------



| |  |  | developments concerning our collaborations;
| | - |  | -------------------------------------------



| |  |  | publicity regarding actual or potential medical results relating to products under development by our competitors or us;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | regulatory developments in the United States and foreign countries;
| | - |  | -------------------------------------------------------------------



| |  |  | litigation;
| | - |  | -----------



| |  |  | economic and other external factors or other disaster or crisis; or
| | - |  | -------------------------------------------------------------------



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| |  |  | period-to-period fluctuations in our financial results.
| | - |  | -------------------------------------------------------

We have been, and in the future may be, subject to securities class action lawsuits and shareholder derivative actions. These, and potential similar or related litigation, could result in substantial
damages and may divert managements time and attention from our business.

We have been, in particular between 2007
and 2008, and may in the future be, the target of securities class actions or shareholder derivative claims. Any such actions or claims could result in substantial damages and may divert managements time and attention from our business.



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|Item 6. | Exhibits.
|------- | ---------



|     |  |                                                                                                                                                                                                                
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|3.1  |  | Amended and Restated Certificate of Incorporation. (1)                                                                                                                                                         
|     | 
|3.2  |  | Amended and Restated Bylaws. (2)                                                                                                                                                                               
|     | 
|4.1  |  | Specimen Stock Certificate. (3)                                                                                                                                                                                
|     | 
|4.2  |  | Teliks Certificate of Designation of Series A Junior Participating Preferred Stock. (4)                                                                                                                       
|     | 
|4.3  |  | Rights Agreement, between Telik and Wells Fargo Bank Minnesota, N.A., replaced by EquiServe Trust Company, N.A., as Rights Agent, dated November 2, 2001. (4)                                                  
|     | 
|4.4  |  | Amendment to Rights Agreement between Telik, Inc. and Computershare Shareholder Services, Inc. and Computershare Trust Company, N.A., dated as of May 18, 2006. (5)                                            
|     | 
|4.5  |  | Second Amendment to Rights Agreement between Telik and Computershare Shareholder Services, Inc. and Computershare Trust Company, N.A., dated December 11, 2006. (6)                                            
|     | 
|4.6  |  | Amended and Restated Standstill Agreement between Telik and Eastbourne Capital Management, L.L.C. and certain related persons and entities, dated December 11, 2006.
(6)                                       
|     | 
|4.7  |  | Agreement, by and among Telik, Eastbourne Capital Management, L.L.C., Black Bear Offshore Master Fund, L.P., Black Bear Fund I, L.P., Black Bear Fund II, L.L.C., and
Richard J. Barry, dated May 18, 2006. (7)
|     | 
|31.1 |  | Certification required by Rule 13a-14(a) or Rule 15d-14(a).                                                                                                                                                    
|     | 
|31.2 |  | Certification required by Rule 13a-14(a) or Rule 15d-14(a).                                                                                                                                                    
|     | 
|32.1 |  | Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).                                                             



|(1) | Incorporated by reference to Exhibit 3.1 to our Annual Report on Form 10-K for the year ended December 31, 2001, as filed on March 27, 2002 (File No.
000-31265).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K dated December 11, 2007, as filed on December 14, 2007 (File No. 000-31265).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-1A filed on July 3, 2000 (File No. 333-33868).
|--- | -------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to exhibits to our Current Report on Form 8-K dated November 2, 2001, as filed on November 5, 2001 (File No. 000-31265).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to Exhibit 4.5 on our Current Report on Form 8-K, dated and filed on May 18, 2006
|--- | -----------------------------------------------------------------------------------------------------------

| | (File No. 000-31265).
| | ---------------------

|(6) | Incorporated by reference to exhibits to our Current Report on Form 8-K dated December 11, 2006, as filed on December 12, 2006 (File No. 000-31265).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006, as filed on August 3, 2006 (File
No. 000-31265).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



TELIK, INC./s/    WENDY WEEWendy WeeVice President, Finance and Controller(Principal Financial and Accounting Officer)


Date:
May 16, 2011



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EXHIBIT INDEX



|     |  |                                                                                                                                                                                                                
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|3.1  |  | Amended and Restated Certificate of Incorporation. (1)                                                                                                                                                         
|     | 
|3.2  |  | Amended and Restated Bylaws. (2)                                                                                                                                                                               
|     | 
|4.1  |  | Specimen Stock Certificate. (3)                                                                                                                                                                                
|     | 
|4.2  |  | Teliks Certificate of Designation of Series A Junior Participating Preferred Stock. (4)                                                                                                                       
|     | 
|4.3  |  | Rights Agreement, between Telik and Wells Fargo Bank Minnesota, N.A., replaced by EquiServe Trust Company, N.A., as Rights Agent, dated November 2, 2001. (4)                                                  
|     | 
|4.4  |  | Amendment to Rights Agreement between Telik, Inc. and Computershare Shareholder Services, Inc. and Computershare Trust Company, N.A., dated as of May 18, 2006. (5)                                            
|     | 
|4.5  |  | Second Amendment to Rights Agreement between Telik and Computershare Shareholder Services, Inc. and Computershare Trust Company, N.A., dated December 11, 2006. (6)                                            
|     | 
|4.6  |  | Amended and Restated Standstill Agreement between Telik and Eastbourne Capital Management, L.L.C. and certain related persons and entities, dated December 11, 2006.
(6)                                       
|     | 
|4.7  |  | Agreement, by and among Telik, Eastbourne Capital Management, L.L.C., Black Bear Offshore Master Fund, L.P., Black Bear Fund I, L.P., Black Bear Fund II, L.L.C., and
Richard J. Barry, dated May 18, 2006. (7)
|     | 
|31.1 |  | Certification required by Rule 13a-14(a) or Rule 15d-14(a).                                                                                                                                                    
|     | 
|31.2 |  | Certification required by Rule 13a-14(a) or Rule 15d-14(a).                                                                                                                                                    
|     | 
|32.1 |  | Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).                                                             



|(1) | Incorporated by reference to Exhibit 3.1 to our Annual Report on Form 10-K for the year ended December 31, 2001, as filed on March 27, 2002 (File No.
000-31265).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K dated December 11, 2007, as filed on December 14, 2007 (File No. 000-31265).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-1A filed on July 3, 2000 (File No. 333-33868).
|--- | -------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to exhibits to our Current Report on Form 8-K dated November 2, 2001, as filed on November 5, 2001 (File No. 000-31265).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to Exhibit 4.5 on our Current Report on Form 8-K, dated and filed on May 18, 2006
|--- | -----------------------------------------------------------------------------------------------------------

| | (File No. 000-31265).
| | ---------------------

|(6) | Incorporated by reference to exhibits to our Current Report on Form 8-K dated December 11, 2006, as filed on December 12, 2006 (File No. 000-31265).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006, as filed on August 3, 2006 (File
No. 000-31265).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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