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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, 2010

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.)

3165 PORTER DRIVE, 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

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.



|                                    |  |                                                 
|----------------------------------- |  | ------------------------------------------------
|Class: Common Stock $0.01 par value |  | Outstanding at April 30, 2010: 53,522,329 shares









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TELIK, INC.

INDEX



|           |  |                                                                                       |  |     
|---------- |  | ------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                       |  | Page
|PART I.    |  | FINANCIAL INFORMATION                                                                 |  |     
|           |  |                                                                                      
|Item 1:    |  | Financial Statements (Unaudited)                                                      |  |     
|           |  |                                                                                      
|           |  | Condensed Balance Sheets at March 31, 2010 and December 31, 2009                      |  | 3   
|           |  |                                                                                      
|           |  | Condensed Statements of Operations for the three months ended March 31, 2010 and 2009 |  | 4   
|           |  |                                                                                      
|           |  | Condensed Statements of Cash Flows for the three months ended March 31, 2010 and 2009 |  | 5   
|           |  |                                                                                      
|           |  | Notes to Condensed Financial Statements                                               |  | 6   
|           |  |                                                                                      
|Item 2:    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 15  
|           |  |                                                                                      
|Item 3:    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 23  
|           |  |                                                                                      
|Item 4:    |  | Controls and Procedures                                                               |  | 24  
|           |  |                                                                                      
|PART II.   |  | OTHER INFORMATION                                                                     |  |     
|           |  |                                                                                      
|Item 1A:   |  | Risk Factors                                                                          |  | 25  
|           |  |                                                                                      
|Item 6:    |  | Exhibits                                                                              |  | 37  
|           | 
|SIGNATURES |  | 38                                                                                   



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PART I. FINANCIAL INFORMATION



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

TELIK, INC.

CONDENSED BALANCE SHEETS

(In thousands)



|                                           |  |               |          |   |                  |   |          |  
|------------------------------------------ |  | ------------- | -------- | - | ---------------- | - | -------- | -
|                                           |  | March 31,2010 |          |   | December 31,2009 |  
|                                           |  | (Unaudited)   |          |   | (Note 1)         |  
|Assets                                     |  |               |          |   |                  |   |          |  
|Current assets:                            |  |               |          |   |                  |   |          |  
|Cash and cash equivalents                  |  | $             | 5,111    |   |                  | $ | 12,251   |  
|Short-term investments                     |  |               | 29,654   |   |                  |   | 27,475   |  
|Interest and other receivables             |  |               | 82       |   |                  |   | 216      |  
|Prepaids and other current assets          |  |               | 1,798    |   |                  |   | 4,122    |  
|                                           |  |               |          |   |                  |   |          |  
|Total current assets                       |  |               | 36,645   |   |                  |   | 44,064   |  
|Property and equipment, net                |  |               | 1,322    |   |                  |   | 1,415    |  
|Restricted investments                     |  |               | 449      |   |                  |   | 674      |  
|                                           |  |               |          |   |                  |   |          |  
|Total assets                               |  | $             | 38,416   |   |                  | $ | 46,153   |  
|                                           |  |               |          |   |                  |   |          |  
|Liabilities and Stockholders Equity       |  |               |          |   |                  |   |          |  
|Current liabilities:                       |  |               |          |   |                  |   |          |  
|Accounts payable                           |  | $             | 284      |   |                  | $ | 190      |  
|Accrued clinical trial costs               |  |               | 409      |   |                  |   | 505      |  
|Accrued compensation                       |  |               | 623      |   |                  |   | 528      |  
|Accrued liabilities                        |  |               | 383      |   |                  |   | 519      |  
|Notes payable                              |  |               |         |   |                  |   | 3,101    |  
|                                           |  |               |          |   |                  |   |          |  
|Total current liabilities                  |  |               | 1,699    |   |                  |   | 4,843    |  
|Long-term deferred rent                    |  |               | 365      |   |                  |   | 376      |  
|Commitments and contingencies              |  |               |          |   |                  |   |          |  
|Stockholders equity:                      |  |               |          |   |                  |   |          |  
|Common stock                               |  |               | 535      |   |                  |   | 534      |  
|Additional paid-in capital                 |  |               | 544,733  |   |                  |   | 543,987  |  
|Accumulated other comprehensive gain       |  |               | (4       | ) |                  |   | (2       | )
|Accumulated deficit                        |  |               | (508,912 | ) |                  |   | (503,585 | )
|                                           |  |               |          |   |                  |   |          |  
|Total stockholders equity                 |  |               | 36,352   |   |                  |   | 40,934   |  
|                                           |  |               |          |   |                  |   |          |  
|Total liabilities and stockholders equity |  | $             | 38,416   |   |                  | $ | 46,153   |  
|                                           |  |               |          |   |                  |   |          |  

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, |       
|                                                              |  | 2010                        |        |   | 2009 |  
|Operating costs and expenses:                                 |  |                             |        |   |      |   |        |  
|Research and development                                      |  |                             | 2,825  |   |      |   | 3,990  |  
|General and administrative                                    |  |                             | 2,558  |   |      |   | 2,887  |  
|Restructuring costs                                           |  |                             |       |   |      |   | 868    |  
|                                                              |  |                             |        |   |      |   |        |  
|Total operating costs and expenses                            |  |                             | 5,383  |   |      |   | 7,745  |  
|                                                              |  |                             |        |   |      |   |        |  
|Loss from operations                                          |  |                             | (5,383 | ) |      |   | (7,745 | )
|Interest and other income, net                                |  |                             | 62     |   |      |   | 70     |  
|Interest expense                                              |  |                             | (6     | ) |      |   | (30    | )
|                                                              |  |                             |        |   |      |   |        |  
|Net loss                                                      |  | $                           | (5,327 | ) |      | $ | (7,705 | )
|                                                              |  |                             |        |   |      |   |        |  
|Basic and diluted net loss per share                          |  | $                           | (0.10  | ) |      | $ | (0.14  | )
|                                                              |  |                             |        |   |      |   |        |  
|Shares used to calculate basic and diluted net loss per share |  |                             | 53,465 |   |      |   | 53,314 |  
|                                                              |  |                             |        |   |      |   |        |  

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, |        
|                                                                            |  | 2010                        |         |   | 2009 |  
|Cash flows from operating activities:                                       |  |                             |         |   |      |   |         |  
|Net loss                                                                    |  | $                           | (5,327  | ) |      | $ | (7,705  | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                             |         |   |      |   |         |  
|Depreciation and amortization                                               |  |                             | 93      |   |      |   | 188     |  
|Stock-based compensation expense                                            |  |                             | 714     |   |      |   | 766     |  
|Change in fair value of marketable securities                               |  |                             | 61      |   |      |   | (1,159  | )
|Change in fair value of rights to sell ARS to UBS                           |  |                             | (61     | ) |      |   | 1,283   |  
|Changes in assets and liabilities:                                          |  |                             |         |   |      |   |         |  
|Other receivables                                                           |  |                             | 134     |   |      |   | (135    | )
|Prepaids and other current assets                                           |  |                             | (15     | ) |      |   | (11     | )
|Accounts payable                                                            |  |                             | 94      |   |      |   | (244    | )
|Accrued liabilities                                                         |  |                             | (148    | ) |      |   | (283    | )
|                                                                            |  |                             |         |   |      |   |         |  
|Net cash used in operating activities                                       |  |                             | (4,455  | ) |      |   | (7,300  | )
|                                                                            |  |                             |         |   |      |   |         |  
|Cash flows from investing activities:                                       |  |                             |         |   |      |   |         |  
|Purchases of investments                                                    |  |                             | (11,842 | ) |      |   | (10,103 | )
|Sales of investments                                                        |  |                             | 4,224   |   |      |   | 224     |  
|Maturities of investments                                                   |  |                             | 8,000   |   |      |   |        |  
|                                                                            |  |                             |         |   |      |   |         |  
|Net cash provided by (used in) investing activities                         |  |                             | 382     |   |      |   | (9,879  | )
|                                                                            |  |                             |         |   |      |   |         |  
|Cash flows from financing activities:                                       |  |                             |         |   |      |   |         |  
|Payments under financing arrangement                                        |  |                             | (3,100  | ) |      |   |        |  
|Proceeds from issuance of common stock                                      |  |                             | 33      |   |      |   | 23      |  
|                                                                            |  |                             |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                         |  |                             | (3,067  | ) |      |   | 23      |  
|                                                                            |  |                             |         |   |      |   |         |  
|Net decrease in cash and cash equivalents                                   |  |                             | (7,140  | ) |      |   | (17,156 | )
|Cash and cash equivalents at beginning of period                            |  |                             | 12,251  |   |      |   | 50,562  |  
|                                                                            |  |                             |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                  |  | $                           | 5,111   |   |      | $ | 33,406  |  
|                                                                            |  |                             |         |   |      |   |         |  
|Supplementary information:                                                  |  |                             |         |   |      |   |         |  
|Interest paid                                                               |  | $                           | 6       |   |      | $ | 30      |  

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, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010 or any other future period. The condensed
balance sheet at December 31, 2009 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, 2009, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 2, 2010.

Need for Additional Capital

We have incurred net losses since inception and we expect to incur substantial and increasing 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 interest income. 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 obtain 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 mid-2011.

Use of Estimates

In preparing our financial statements to conform with U.S. generally accepted accounting principles, 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 invest our excess cash in money market funds, cash deposits, U.S. treasury and U.S. government agency securities, taxable municipal
notes, some of which may have an auction reset feature (auction rate securities, or ARS), and corporate notes. All highly liquid 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 and all our ARS including perpetual rate securities are classified as short-term investments based on our intention to sell these
securities in less than one year. 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). 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.



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TELIK, INC.

Notes to Condensed Financial Statements(Continued)

(Unaudited)



Due to the unprecedented events in the ARS market and our November 2008 ARS 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 assets and liabilities using the fair value hierarchy. 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 agencies 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.

With the current financial market conditions, the assessment of fair values of certain financial instruments can be difficult and
subjective. For our ARS and put option, we use Level 3 inputs to determine their fair values since they do 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 are volatile and subject to change, and therefore could result in significant
changes to the fair values of these financial instruments. See Notes 5 and 7 to Condensed Financial Statements for additional information.



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TELIK, INC.

Notes to Condensed Financial Statements(Continued)

(Unaudited)



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, 2010, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, 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 is 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 will be effective for fiscal years beginning after December 15, 2010,
and for interim periods within those fiscal years. We adopted ASU 2010-06 for Level 1 and 2 disclosure requirements in the quarter ended March 31, 2010. The adoption of this guidance increases the level of disclosures in our financial
statements related to fair value measurements.

On February 24, 2010, the FASB issued ASU No. 2010-09, Subsequent
Events (Topic 855)Amendments to Certain Recognition and Disclosure Requirements, ASU 2010-09. ASU 2010-09 removes the requirement that SEC filers disclose the date through which subsequent events have been evaluated.
This amendment alleviates potential conflicts between Subtopic 855-10 and the SECs requirements. We have adopted this guidance since its issuance.

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,
|                                              |  | 2010                        |     | 2009
|                                              |  | (in thousands)             
|Research and development                      |  | $                           | 257 |      | $ | 202
|General and administrative                    |  |                             | 457 |      |   | 564
|                                              |  |                             |     |      |   |    
|Stock-based compensation expense before taxes |  |                             | 714 |      |   | 766
|                                              |  |                             |     |      |   |    
|Effect on net loss                            |  | $                           | 714 |      | $ | 766
|                                              |  |                             |     |      |   |    

Because we had a net operating loss carryforward as of
March 31, 2010, 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, 2010 and 2009, 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, 2010, $2.5 million 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 1.68 years.



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TELIK, INC.

Notes to Condensed Financial Statements(Continued)

(Unaudited)



3. Comprehensive Loss

Comprehensive loss is comprised 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, |       
|                                               |  | 2010                        |        |   | 2009 |  
|                                               |  | (In thousands)              |       
|Net loss                                       |  | $                           | (5,327 | ) |      | $ | (7,705 | )
|Changes in net unrealized gains on investments |  |                             | (2     | ) |      |   | (8     | )
|                                               |  |                             |        |   |      |   |        |  
|Comprehensive loss                             |  | $                           | (5,329 | ) |      | $ | (7,713 | )
|                                               |  |                             |        |   |      |   |        |  

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.

Outstanding options to purchase 12,559,324 and 9,847,098 shares of our common stock for the three months ended
March 31, 2010 and 2009 were excluded from the diluted net loss per common share calculations because inclusion of such options was 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, available-for-sale securities, trading
securities and put options. 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.

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



|                               |  |                |        |                                                             |   |                                             |  |                                         |        |  |   |      
|------------------------------ |  | -------------- | ------ | ----------------------------------------------------------- | - | ------------------------------------------- |  | --------------------------------------- | ------ |  | - | -----
|                               |  |                |        | Fair Value Measurement at March 31, 2010 Using             
|                               |  | March 31,2010  |        | Quoted Prices inActive Marketsfor IdenticalAssets (Level 1) |   | Significant OtherObservableInputs (Level 2) |  | SignificantUnobservableInputs (Level 3)
|                               |  | (in thousands)
|Available-for-sale securities: |  |                |       
|Money market funds             |  | $              | 1,166  |                                                             | $ | 1,166                                       |  | $                                       |       |  | $ |     
|US treasuries                  |  |                | 13,081 |                                                             |   |                                            |  |                                         | 13,081 |  |   |     
|US government agencies         |  |                | 9,954  |                                                             |   |                                            |  |                                         | 9,954  |  |   |     
|Trading securities:            |  |                |        |                                                             |   |                                             |  |                                         |        |  |   |      
|Auction rate certificates      |  |                | 8,719  |                                                             |   |                                            |  |                                         |       |  |   | 8,719
|Other current assets:          |  |                |        |                                                             |   |                                             |  |                                         |        |  |   |      
|Put option                     |  |                | 1,081  |                                                             |   |                                            |  |                                         |       |  |   | 1,081
|                               |  |                |        |                                                             |   |                                             |  |                                         |        |  |   |      
|Total                          |  | $              | 34,001 |                                                             | $ | 1,166                                       |  | $                                       | 23,035 |  | $ | 9,800
|                               |  |                |        |                                                             |   |                                             |  |                                         |        |  |   |      



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##### Table of Contents

TELIK, INC.

Notes to Condensed Financial Statements(Continued)

(Unaudited)



The following table presents information about our financial assets that are measured at
fair value on a recurring basis as of December 31, 2009, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value.



|                               |  |                  |        |                                                             |   |                                             |  |                                         |        |  |   |       
|------------------------------ |  | ---------------- | ------ | ----------------------------------------------------------- | - | ------------------------------------------- |  | --------------------------------------- | ------ |  | - | ------
|                               |  |                  |        | Fair Value Measurement at December 31, 2009 Using          
|                               |  | December 31,2009 |        | Quoted Prices inActive Marketsfor IdenticalAssets (Level 1) |   | Significant OtherObservableInputs (Level 2) |  | SignificantUnobservableInputs (Level 3)
|                               |  | (in thousands)  
|Available-for-sale securities: |  |                  |       
|Money market funds             |  | $                | 11,583 |                                                             | $ | 11,583                                      |  | $                                       |       |  | $ |      
|US treasuries                  |  |                  | 17,095 |                                                             |   |                                            |  |                                         | 17,095 |  |   |      
|Trading securities:            |  |                  |        |                                                             |   |                                             |  |                                         |        |  |   |       
|Auction preferred stock        |  |                  | 1,600  |                                                             |   |                                            |  |                                         |       |  |   | 1,600 
|Auction rate certificates      |  |                  | 8,780  |                                                             |   |                                            |  |                                         |       |  |   | 8,780 
|Other current assets:          |  |                  |        |                                                             |   |                                             |  |                                         |        |  |   |       
|Put option                     |  |                  | 3,420  |                                                             |   |                                            |  |                                         |       |  |   | 3,420 
|                               |  |                  |        |                                                             |   |                                             |  |                                         |        |  |   |       
|Total                          |  | $                | 42,478 |                                                             | $ | 11,583                                      |  | $                                       | 17,095 |  | $ | 13,800
|                               |  |                  |        |                                                             |   |                                             |  |                                         |        |  |   |       

There were no transfers between Level 1 and Level 2
measurements in the three months ended March 31, 2010. The following is a reconciliation of our investments measured at fair value on a recurring basis using significant unobservable inputs (Level 3):



|                                            |  |                                                                        |        |   |                        |   |        |       |  |   |        |  
|------------------------------------------- |  | ---------------------------------------------------------------------- | ------ | - | ---------------------- | - | ------ | ----- |  | - | ------ | -
|                                            |  | Fair Value Measurements Using SignificantUnobservable Inputs (Level
3) |       
|                                            |  | Put Option                                                             |        |   | Auction RateSecurities |   |        | Total | 
|                                            |  | (in thousands)                                                         |       
|Balance at December 31, 2009                |  | $                                                                      | 3,420  |   |                        | $ | 10,380 |       |  | $ | 13,800 |  
|Impairment gain (loss) included in net loss |  |                                                                        | 61     |   |                        |   | (61    | )     |  |   |       |  
|Sales or settlement                         |  |                                                                        | (2,400 | ) |                        |   | (1,600 | )     |  |   | (4,000 | )
|                                            |  |                                                                        |        |   |                        |   |        |       |  |   |        |  
|Balance at March 31, 2010                   |  | $                                                                      | 1,081  |   |                        | $ | 8,719  |       |  | $ | 9,800  |  
|                                            |  |                                                                        |        |   |                        |   |        |       |  |   |        |  

On February 12, 2010, UBS repurchased $4.0 million of our ARS from the original balance of $13.8
million. At March 31, 2010, our ARS had an aggregate fair value of $8.7 million and par value of $9.8 million. The ARS investments, purchased through our investment account with UBS at par value, have an auction reset feature.
Historically, the fair value of ARS investments approximated par value due to the frequent resets through the auction process. Beginning in late 2007, our securities invested in ARS failed to settle in scheduled auctions due to liquidity crises. An
auction failure means that the parties wishing to sell securities could not make the sale, but does not result in the securities going into default because the issuer continues to pay interest. The interest rates may be reset to predetermined
penalty or maximum rates based on mathematical formulas in accordance with each securitys prospectus. While we continue to earn interest on our ARS investments at the contractual rate, these investments are not
currently trading and therefore do not have a readily determinable market value. Accordingly, the estimated fair value of the ARS no longer approximates par value.



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TELIK, INC.

Notes to Condensed Financial Statements(Continued)

(Unaudited)



We estimated the fair value of our ARS after consideration of several factors, including
input provided by UBS. Valuation techniques involved the use of a discounted cash flow approach. Although these securities would typically be measured using Level 2 inputs, the failure of auctions and the lack of market activity required that these
securities be measured using Level 3 inputs. The assumptions used in preparing the discounted cash flow model to determine the fair value of our auction preferred stock take into account factors such as interest rates, credit quality, likelihood of
redemption, duration and credit default swap data points for monoline insurers. The underlying assets of our auction rate certificates are primarily comprised of student loans and their fair values were measured by considering factors such as
interest rates, tax status, credit quality, duration, insurance wraps, the portfolio composition of Federal Family Education Loan Program, or FFELP, and private loans and likelihood of redemption. These assumptions are highly subjective and involve
significant judgment and are subject to change as the underlying sources of these assumptions and market conditions change. For the three months ended March 31, 2010, we recorded (i) a reduction of approximately $2.4 million and $1.6
million in fair values of our put option and ARS respectively, as a result of certain ARS repurchased by UBS in February 2010 and (ii) no gain or loss to interest and income, net due to offsetting changes in fair values of our ARS and put
option. For additional information, see Note 7 to Condensed Financial Statements.

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 31,2010  |        | December 31,2009
|                                   |  | (in thousands)
|Certificate of deposits            |  | $              | 449    |                  | $ | 674   
|Auction rate securities            |  |                | 8,719  |                  |   | 10,380
|US treasuries                      |  |                | 13,081 |                  |   | 17,095
|US government agencies enterprises |  |                | 9,954  |                  |   |      
|Cash and money market funds        |  |                | 3,011  |                  |   | 12,251
|                                   |  |                |        |                  |   |       
|Total                              |  | $              | 35,214 |                  | $ | 40,400
|                                   |  |                |        |                  |   |       
|Reported as:                       |  |                |        |                  |   |       
|Cash and cash equivalents          |  | $              | 5,111  |                  | $ | 12,251
|Short-term investments             |  |                | 29,654 |                  |   | 27,475
|Restricted investments             |  |                | 449    |                  |   | 674   
|                                   |  |                |        |                  |   |       
|Total                              |  | $              | 35,214 |                  | $ | 40,400
|                                   |  |                |        |                  |   |       

ARS securities with an aggregate estimated fair value
of $8.7 million as of March 31, 2010 and $10.4 million as of December 31, 2009 were determined as securities held for trading. Accordingly, these securities are carried at estimated fair value, with unrealized gains and losses resulting
from changes in fair value reported in earnings. All other marketable debt securities continue to be held as available-for-sale.

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



|                                    |  |                |        |                      |   |                       |  |   |                     |   |  |   |       
|----------------------------------- |  | -------------- | ------ | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | ------
|                                    |  | March 31, 2010
|                                    |  | AmortizedCost  |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                    |  | (in thousands)
|Certificate of deposits             |  | $              | 449    |                      | $ |                      |  | $ |                    |   |  | $ | 449   
|US treasuries & government agencies |  |                | 23,039 |                      |   | 2                     |  |   | (6                  | ) |  |   | 23,035
|Cash and money market funds         |  |                | 3,011  |                      |   |                      |  |   |                    |   |  |   | 3,011 
|                                    |  |                |        |                      |   |                       |  |   |                     |   |  |   |       
|Total                               |  | $              | 26,499 |                      | $ | 2                     |  | $ | (6                  | ) |  | $ | 26,495
|                                    |  |                |        |                      |   |                       |  |   |                     |   |  |   |       



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TELIK, INC.

Notes to Condensed Financial Statements(Continued)

(Unaudited)



|                            |  |                   |        |                      |   |                       |  |   |                     |   |  |   |       
|--------------------------- |  | ----------------- | ------ | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | ------
|                            |  | December 31, 2009
|                            |  | AmortizedCost     |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                            |  | (in thousands)   
|Certificate of deposits     |  | $                 | 674    |                      | $ |                      |  | $ |                    |   |  | $ | 674   
|US treasuries               |  |                   | 17,097 |                      |   | 1                     |  |   | (3                  | ) |  |   | 17,095
|Cash and money market funds |  |                   | 12,251 |                      |   |                      |  |   |                    |   |  |   | 12,251
|                            |  |                   |        |                      |   |                       |  |   |                     |   |  |   |       
|Total                       |  | $                 | 30,022 |                      | $ | 1                     |  | $ | (3                  | ) |  | $ | 30,020
|                            |  |                   |        |                      |   |                       |  |   |                     |   |  |   |       

There were no realized gains on sales of
available-for-sale investments for the three months ended March 31, 2010 and 2009. Realized gains and losses were calculated based on the specific identification method.

Investments which were in an unrealized loss positions for which other-than-temporary impairments were not recognized at March 31,
2010 are summarized below:



|                                    |  |                     |       |                  |                      |    |           |  |                  |   |           |   |                  |  |   |       |  |   |    |  
|----------------------------------- |  | ------------------- | ----- | ---------------- | -------------------- | -- | --------- |  | ---------------- | - | --------- | - | ---------------- |  | - | ----- |  | - | -- | -
|                                    |  | Less Than 12 Months |       |                  | 12 Months or Greater |    | Total     | 
|                                    |  | FairValue           |       | UnrealizedLosses |                      |    | FairValue |  | UnrealizedLosses |   | FairValue |   | UnrealizedLosses | 
|                                    |  | (in thousands)      |      
|US treasuries & government agencies |  | $                   | 8,871 |                  | $                    | (6 | )         |  | $                |  |           | $ |                 |  | $ | 8,871 |  | $ | (6 | )
|                                    |  |                     |       |                  |                      |    |           |  |                  |   |           |   |                  |  |   |       |  |   |    |  
|Total                               |  | $                   | 8,871 |                  | $                    | (6 | )         |  | $                |  |           | $ |                 |  | $ | 8,871 |  | $ | (6 | )
|                                    |  |                     |       |                  |                      |    |           |  |                  |   |           |   |                  |  |   |       |  |   |    |  

Investments which were in an unrealized loss positions for which other-than-temporary impairments were not
recognized at December 31, 2009 are summarized below:



|              |  |                     |        |                  |                      |    |           |  |                  |   |           |   |                  |  |   |        |  |   |    |  
|------------- |  | ------------------- | ------ | ---------------- | -------------------- | -- | --------- |  | ---------------- | - | --------- | - | ---------------- |  | - | ------ |  | - | -- | -
|              |  | Less Than 12 Months |        |                  | 12 Months or Greater |    | Total     | 
|              |  | FairValue           |        | UnrealizedLosses |                      |    | FairValue |  | UnrealizedLosses |   | FairValue |   | UnrealizedLosses | 
|              |  | (in thousands)      |       
|US treasuries |  | $                   | 10,091 |                  | $                    | (3 | )         |  | $                |  |           | $ |                 |  | $ | 10,091 |  | $ | (3 | )
|              |  |                     |        |                  |                      |    |           |  |                  |   |           |   |                  |  |   |        |  |   |    |  
|Total         |  | $                   | 10,091 |                  | $                    | (3 | )         |  | $                |  |           | $ |                 |  | $ | 10,091 |  | $ | (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, 2010 and December 31, 2009, classified by stated maturity date of the security:



|                             |  |                |        |                   |   |               |  |           |        |  |   |       
|---------------------------- |  | -------------- | ------ | ----------------- | - | ------------- |  | --------- | ------ |  | - | ------
|                             |  | March 31, 2010 |        | December 31, 2009
|                             |  | AmortizedCost  |        | FairValue         |   | AmortizedCost |  | FairValue
|                             |  | (in thousands)
|Mature in less than one year |  | $              | 23,039 |                   | $ | 23,035        |  | $         | 17,097 |  | $ | 17,095
|                             |  |                |        |                   |   |               |  |           |        |  |   |       
|Total                        |  | $              | 23,039 |                   | $ | 23,035        |  | $         | 17,097 |  | $ | 17,095
|                             |  |                |        |                   |   |               |  |           |        |  |   |       



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TELIK, INC.

Notes to Condensed Financial Statements(Continued)

(Unaudited)



7. Prepaids and Other Current Assets

Prepaids and other current assets consist of the following:



|                           |  |                |       |                  |   |      
|-------------------------- |  | -------------- | ----- | ---------------- | - | -----
|                           |  | March 31,2010  |       | December 31,2009
|                           |  | (in thousands)
|Prepaids                   |  | $              | 717   |                  | $ | 702  
|UBS Rights relating to ARS |  |                | 1,081 |                  |   | 3,420
|                           |  |                |       |                  |   |      
|Total                      |  | $              | 1,798 |                  | $ | 4,122
|                           |  |                |       |                  |   |      

On November 10, 2008, we entered into an
agreement with UBS whereby we received rights, or the Right, to sell all our ARS held in our UBS account at par value ($18.7 million) to UBS at any time during a two-year period beginning on June 30, 2010 and ending on July 2, 2012. If we
do not exercise the Right, our ARS will continue to accrue interest as determined by the auction process or the terms outlined in the prospectus of the ARS if the auction process fails. If the Right is not exercised on or before July 2, 2012,
it will expire and UBS will have no further obligation to buy our ARS. The Right is a nontransferable security registered with the SEC. UBSs obligations under the Right are not secured by its assets and do not require UBS to obtain any
financing to support its performance obligations under the Right. UBS has disclaimed any assurance that it will have sufficient financial resources to satisfy its obligations under the Right.

The enforceability of the Right results in a put option which is recognized as a separate freestanding asset and accounted for separately
from the ARS investment. On June 10, 2009 and February 12, 2010, UBS elected to repurchase a portion of our ARS under the agreement at par value of $4.9 million and $4.0 million, respectively. The put option was measured at its fair value
of $1.1 million at March 31, 2010, compared to fair value of $3.4 million at December 31, 2009. The decrease of $2.3 million was due primarily to a $2.4 million reduction in our put option as a result of UBS repurchase of a portion of our
ARS offset by an increase of $61,000 in fair value of our put option which was recorded in interest and other income, net in our Statement of Operations. We elected to measure the put option at fair value under ASC 825-10-25, which permits an entity
to elect the fair value option for recognized financial assets, in order to match the changes in the fair value of the ARS. We valued the Right using a discounted cash flow approach including estimates of, based on data available as of
March 31, 2010, interest rates, timing and amount of cash flow, adjusted for any bearer risk associated with UBSs financial ability to repurchase the ARS beginning June 30, 2010. These assumptions are volatile and subject to change
as the underlying sources of these assumptions and market conditions change.

Prior to accepting the UBS offer, we recorded
our ARS as available-for-sale investments, and therefore recorded resulting losses that were determined to be temporarily impaired in accumulated other comprehensive income in stockholders equity. In connection with the acceptance of the UBS
offer in November 2008, resulting in a right to require UBS to purchase the ARS at par value beginning on June 30, 2010, we have reclassified our ARS subject to the Right and held by UBS from available-for-sale to trading under ASC 320. The
transfer to trading securities reflects our intent to exercise our put option during the period June 30, 2010 to July 3, 2012.

8. Notes Payable

In
connection with our acceptance of the offer to enter into the agreement with UBS whereby we received the Right to sell all our ARS at par value to UBS at any time during a two-year period beginning on June 30, 2010 and ending on July 2,
2012, UBS would also make available to us no net cost loans up to 75% of the market value of our ARS. A no net cost loan as defined in the agreement means that the loan will bear interest at a rate equal to the average rate
of interest paid or deemed paid to Telik on the pledged ARS such that the interest cost, net of interest received by us on the pledged ARS, will be zero. The no net cost loans must be repaid upon commencement of the exercise of the
Right. According to the Rights Agreement, the loan is payable on demand. If UBS should exercise its discretionary right to demand repayment of any portion of the loan prior to the date we can exercise our repurchase rights, UBS and certain of its
affiliates will arrange for alternative financing on terms and conditions substantially the same as those contained in the loan, and if alternative financing cannot be established, then UBS or one of its affiliates will purchase our pledged ARS at
par. UBS obligation to arrange such alternative financing does not apply under certain circumstances, including, but not limited to, if we sell the ARS pledged as collateral. Proceeds of sales of our ARS will first be applied to repayment of
the credit line with the balance, if any, for our account.



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##### Table of Contents

TELIK, INC.

Notes to Condensed Financial Statements(Continued)

(Unaudited)



On December 31, 2008, we entered into a loan agreement with UBS and drew down $8
million with our ARS pledged as collateral. On June 10, 2009 and February 12, 2010, UBS elected to repurchase a portion of our ARS under the Rights Agreement at par value of $4.9 million and $4.0 million, respectively. Proceeds of both
sales of our ARS were applied to repayment of the credit line whereby $4.9 million was paid in June 2009 leaving a balance of $3.1 million due to UBS as of December 31, 2009. The remaining balance of $3.1 million was paid in full as of
March 31, 2010. For the three months ended March 31, 2010, interest paid on the loan was approximately $6,000 which was offset entirely by interest earned on the pledged securities. As of March 31, 2010, we had a credit line of
approximately $6.5 million available to us under the Rights Agreement.

9. Restructuring Plan

In February 2009, we implemented a restructuring plan to further reduce our operating expenses and to streamline our infrastructure to
focus on our most advanced preclinical and clinical development programs. As a result of the restructuring plan we reduced our workforce by 37 positions and recorded a charge of approximately $868,000 for the three months ended March 31, 2009
and an additional $83,000 in the quarter ended June 30, 2009. We paid $750,000 in the quarter ended March 31, 2009, $111,000 in the quarter ended June 30, 2009 and the remaining $90,000 in the quarter ended September 30, 2009, as
severance, payroll taxes and other personnel related costs.



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##### Table of Contents

|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 positive 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 and the sufficiency of our cash resources. 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, 2009 filed with the Securities and Exchange Commission on March 2, 2010.

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, 2010, loss from operations was $5.4 million and net loss was $5.3 million. Net cash used in operations for the three months ended
March 31, 2010 was $4.5 million and net cash, cash equivalents, investments and restricted investments at March 31, 2010 were $35.2 million. As of March 31, 2010, we had an accumulated deficit of $508.9 million.

Our expenses have consisted 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 may 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, and from non-equity payments from collaborative partners.



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##### Table of Contents

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 future capital, potential competition, use
of hazardous materials 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 three workforce reductions since 2007, the most recent of which was completed in February 2009. As a result of our restructuring plans, we believe our existing cash resources will be sufficient to satisfy our current operating plan until
mid-2011. 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 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 products is uncertain. As such, an accurate
prediction of future operating results is difficult or impossible.

Clinical Product Development

TELINTRA, our current drug product candidate in clinical development, is a small molecule glutathione analog inhibitor of the enzyme
glutathione S-transferase P1-1. We are developing TELINTRA for the treatment of blood disorders associated with low blood cell levels, such as neutropenia or anemia. In May 2008, we initiated a Phase 2 clinical trial of TELINTRA tablets for the
treatment of patients with MDS. In the second quarter of 2009, we initiated a Phase 2 randomized study in SCN to determine the effect of TELINTRA tablets on absolute neutrophil count in patients with this disease. The trial for MDS completed
enrollment of 86 patients and we expect to announce results by the end of the second quarter of 2010. The 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 enroll up to 30 patients for this study.

TELCYTA, our first product candidate, is a small molecule cancer drug product candidate designed to be activated in cancer cells. TELCYTA
has shown clinical antitumor activity alone and in combination with standard chemotherapeutic agents in multiple Phase 2 clinical trials in refractory or resistant ovarian, non-small cell lung, breast and colorectal cancer. In addition, TELCYTA
demonstrated clinical activity in two Phase 2 trials in combination regimens as first line treatment in patients with Stage IIIb or IV non-small cell lung cancer.

We have completed multiple Phase 1, Phase 2 and Phase 3 clinical trials with TELCYTA alone and in combination with standard chemotherapy
drugs. These trials were conducted in refractory ovarian and non-small cell lung cancer. The Phase 3 trials did not achieve their primary endpoints. At the ASCO meeting in June 2009, we reported results of the trial comparing treatment with Doxil
alone and TELCYTA plus Doxil in platinum refractory ovarian cancer in which a sub-set of patients with platinum refractory disease demonstrated a statistically significant improvement in progression free survival when treated with the combination
containing TELCYTA as compared to Doxil alone. In addition, we published in a peer reviewed publication the results of a Phase 2 multicenter trial treating previously untreated lung cancer patients for the first time with carboplatin, paclitaxel and
TELCYTA followed by TELCYTA maintenance that demonstrated a statistically significant improvement in the group of patient undergoing TELCYTA maintenance. We plan to seek a partnership with a pharmaceutical or biotechnology company to advance the
development and potential 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.

TLK58747Cytotoxic Small Molecule

TLK58747 is a novel metabolically activated cytotoxic small molecule. TLK58747 induces apoptosis and G2/M, or cell division, cell cycle
arrest in a broad array of human cancer cell lines including those not expressing GST P1-1. It has shown significant antitumor activity in human breast, pancreatic, brain and colon tumors in preclinical models of human cancer when administered
either orally or by injection.

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) and giving us 180 days to regain compliance. Nasdaq subsequently implemented temporary suspensions of the minimum bid
price requirement, allowing us until January 4, 2010 to regain compliance. Effective January 7, 2010, we transferred the listing of our common stock from the Nasdaq Global Market to the Nasdaq Capital Market. In accordance with Listing
Rule 5810(c)(3)(A), we were provided with an additional 180-day period, or until July 6, 2010, to regain compliance with the minimum bid price requirement. On April 22, 2010, we received notification from Nasdaq that we have regained
compliance with the minimum bid price requirement.



17



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##### Table of Contents

UBS Purchase Rights and Loan

On November 10, 2008, we entered into an agreement with UBS AG and with its affiliates, or UBS, whereby we received rights, or the
Right, to sell all our auction rate securities, or ARS, held in our UBS account at par value to UBS at any time during a two-year period beginning on June 30, 2010 and ending on July 2, 2012. If we do not exercise the Right, the ARS will
continue to accrue and pay interest as determined by the auction process or the terms specified in the prospectus of the ARS if the auction process fails. If the Right is not exercised on or before July 2, 2012, it will expire and UBS will have
no further obligation to buy our ARS. UBS is also granted the right to purchase or sell our ARS at any time after acceptance of the Agreement until July 2, 2012, so long as we receive par value for the ARS. The Right is a nontransferable
security registered with the SEC.

In connection with our acceptance of the offer to enter into the agreement, UBS has made
available to us no net cost loans for up to 75% of the market value of our ARS, where interest payable on the loan does not exceed interest earned on our ARS. The loan is secured by our ARS. On December 31, 2008, we borrowed $8
million from UBS in accordance with such a secured, no net cost demand facility. On June 10, 2009 and February 12, 2010, UBS elected to repurchase a portion of our ARS under the Rights Agreement at par value of $4.9 million and
$4.0 million, respectively. Proceeds of both sales of our ARS were applied to the repayments of the credit line which was paid in full as of March 31, 2010. For the three months ended March 31, 2010, interest paid on the loan was
approximately $6,000 which was offset entirely by interest earned on the pledged securities.

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.

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, 2009.

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 in 2009 and currently do not expect to record any revenues 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, 2010 and 2009 were $2.8 million and $4.0 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.



18



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##### Table of Contents

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



|                               |  |                                    |       |         |   |       |  |     |   
|------------------------------ |  | ---------------------------------- | ----- | ------- | - | ----- |  | --- | --
|                               |  | Three Months EndedMarch 
31,       |       | %Change |  
|                               |  | 2010                               |       | 2009    |  
|                               |  | (In thousands, except percentages) |      
|Research and preclinical       |  | $                                  | 733   |         | $ | 2,114 |  | (65 | )%
|Clinical development           |  |                                    | 2,092 |         |   | 1,876 |  | 12  | % 
|                               |  |                                    |       |         |   |       |  |     |   
|Total research and development |  | $                                  | 2,825 |         | $ | 3,990 |  | (29 | )%
|                               |  |                                    |       |         |   |       |  |     |   

The decrease of 29%, or $1.2 million, in research and development expenses for the three months ended
March 31, 2010 compared to the same period in 2009 was principally due to the following:



| |  |  | decreased costs of approximately $1.4 million in connection with headcount reduction as a result of our February 2009 restructuring and reduced
research activities;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | decreased clinical trial expenses of approximately $213,000 related to the completion of patient enrollment in our Phase 2 TELINTRA tablets for MDS in
2009 and the discontinuation of our Phase 2 TELINTRA tablets for CIN; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in addition, the three months ended March 31, 2009 included approximately $306,000 reduction in accrued clinical trials expenses as a result of
final close-out of clinical sites related to Phase 2 TELCYTA ovarian and lung cancer combination trial and TELINTRA tablets Phase 1-2a trial in MDS while there were no such adjustments in 2010.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We expect total research and development expenditures to decrease in 2010 as we complete our Phase 2 TELINTRA tablets for MDS clinical
trial and continue other smaller ongoing TELINTRA Phase 2 trials as well as advancing new drug candidates into the clinic.

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



|                                        |  |                                                   |       |      |   |      
|--------------------------------------- |  | ------------------------------------------------- | ----- | ---- | - | -----
|                                        |  | Related R&D 
ExpensesThree Months ended March 31,
|Product                                 |  | 2010                                              |       | 2009
|                                        |  | (in thousands)                                   
|TELCYTA                                 |  | $                                                 | 605   |      | $ | 423  
|TELINTRA                                |  |                                                   | 1,698 |      |   | 1,660
|TLK58747                                |  |                                                   | 60    |      |   | 596  
|TLK60404                                |  |                                                   | 158   |      |   | 503  
|Other (1)                               |  |                                                   | 304   |      |   | 808  
|                                        |  |                                                   |       |      |   |      
|Total research and development expenses |  | $                                                 | 2,825 |      | $ | 3,990
|                                        |  |                                                   |       |      |   |      



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



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##### Table of Contents

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,       |       | %    |  
|                           |  | 2010                               |       | 2009 |   | Change | 
|                           |  | (In thousands, except percentages) |      
|General and administrative |  | $                                  | 2,558 |      | $ | 2,887  |  | (11 | )%

The decrease
in general and administrative expenses of 11%, or $329,000 for the three months ended March 31, 2010 compared to the same period in 2009 was primarily due to decreased stock-based compensation expense of approximately $107,000 as a result of
higher fair value options fully vested and a decrease of $381,000 in corporate administrative expenses which were partially offset by increased allocation of facility related expenses of approximately $159,000.

We expect 2010 general and administrative expenses to be lower than the 2009 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,
|                                              |  | 2010                         |     | 2009
|                                              |  | (in thousands)              
|Research and development                      |  | $                            | 257 |      | $ | 202
|General and administrative                    |  |                              | 457 |      |   | 564
|                                              |  |                              |     |      |   |    
|Stock-based compensation expense before taxes |  |                              | 714 |      |   | 766
|Related income tax benefits                   |  |                              |    |      |   |   
|                                              |  |                              |     |      |   |    
|Effect on net loss                            |  | $                            | 714 |      | $ | 766
|                                              |  |                              |     |      |   |    

The decrease in employee stock-based compensation
expense for the three months ended March 31, 2010 compared with the same period in 2009 was principally due to higher fair value options fully vested during the three months ended March 31, 2009.



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##### Table of Contents

Restructuring Costs

In February 2009, we implemented a restructuring plan and reduced our workforce by 37 positions and recorded an initial charge of
approximately $868,000 for the three months ended March 31, 2009 of which $750,000 was paid during the quarter as severance, payroll taxes and other personnel related costs. There were no restructuring costs recorded for the three months ended
March 31, 2010.

Interest Income and Interest Expense



|                               |  |                                    |    |   |      |   |     |        |  |     |   
|------------------------------ |  | ---------------------------------- | -- | - | ---- | - | --- | ------ |  | --- | --
|                               |  | Three Months EndedMarch 
31,       |    |   | %    |  
|                               |  | 2010                               |    |   | 2009 |   |     | Change | 
|                               |  | (In thousands, except percentages) |   
|Interest and other income, net |  | $                                  | 62 |   |      | $ | 70  |        |  | (11 | )%
|Interest expense               |  |                                    | (6 | ) |      |   | (30 | )      |  | (80 | )%

Interest and
other income, net resulted primarily from investment activities including our ARS. The decrease of approximately $8,000 for the three months ended March 31, 2010 compared to the same period in 2009 was due primarily to a decrease of $131,000 in
investment income resulting from lower investment cash balances. The decrease was partially offset by a net change of $125,000 in fair values of our ARS and the UBS ARS Rights.

Interest expenses for the three months ended March 31, 2010 and 2009 were for interest payments on our UBS loan. The decrease of
approximately $24,000 for the three months ended March 31, 2010 compared to the same period in 2009 was due primarily to the payment in full of our UBS loan balance in February 2010.

Liquidity and Capital Resources



|                                                               |  |                              |          |                   |   |        
|-------------------------------------------------------------- |  | ---------------------------- | -------- | ----------------- | - | -------
|                                                               |  | March 31,2010                |          | December 
31,2009
|                                                               |  | (in millions, except ratios)
|Cash, cash equivalents, investments and restricted investments |  | $                            | 35.2     |                   | $ | 40.4   
|Working capital                                                |  | $                            | 34.9     |                   | $ | 39.2   
|Current ratio                                                  |  |                              | 21.6 : 1 |                   |   | 9.1 : 1



|                              |  |                             |      |   |      |   |      |  
|----------------------------- |  | --------------------------- | ---- | - | ---- | - | ---- | -
|                              |  | Three Months EndedMarch 31, |     
|                              |  | 2010                        |      |   | 2009 |  
|                              |  | (in millions)               |     
|Cash (used in) / provided by: |  |                             |      |   |      |   |      |  
|Operating activities          |  | $                           | (4.5 | ) |      | $ | (7.3 | )
|Investing activities          |  | $                           |     |   |      | $ | (9.9 | )
|Financing activities          |  | $                           | (3.1 | ) |      | $ |     |  

Sources and Uses
of Cash. Due to the 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 and equipment lease and loan financings. At March 31, 2010, we had available cash,
cash equivalents, investments and restricted investments of $35.2 million. Our cash and investment balances are held in a variety of interest-bearing instruments including obligations of U.S. government agencies, auction rate securities 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.



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##### Table of Contents

Cash Flows from Operating Activities. Cash used in operations for the three months
ended March 31, 2010 was $4.5 million compared with $7.3 million for the same period in 2009. Net loss of $5.3 million in 2010 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 were partially offset by a $61,000 reduction in value of the put option associated with the UBS ARS Rights. Cash used in operations was further impacted by a $148,000 reduction
in accrued liabilities related primarily to payments made during the three months ended March 31, 2010 related to 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. Operating cash outflows for the same period in 2009 resulted primarily from a net loss of $7.7 million which included non-cash charges of $766,000 for stock-based compensation, $188,000 for depreciation and amortization
and $1.3 million for the change in value of the put option associated with the UBS ARS Rights and were partially offset by a $1.2 million gain in the fair value of marketable securities. Cash used in operations was further impacted by a $572,000
reduction in accrued clinical trials related primarily to the completion of our ASSIST 1, 2, 3 and 5 Phase 3 clinical trials.

Cash Flows from Investing Activities. Cash provided by investing activities for the three months ended March 31, 2010 was
$382,000 compared with cash used in investing activities of $9.9 million for the same period in 2009. Cash provided in the three months ended March 31, 2010 was primarily from $8 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 used in the same period in 2009 was primarily from $10.1 million
in purchases of available-for-sale investments and was partially offset by $224,000 in investment sales. We had no capital expenditures for the three months ended March 31, 2010 or 2009.

Cash Flows from Financing Activities. Cash used in financing activities for the three months ended March 31, 2010 was
approximately $3.1 million compared with cash provided by financing activities of $23,000 for the same period in 2009. Cash used in financing activities for the three months ended March 31, 2010 was primarily due to $3.1 million payment on
February 16, 2010 of our remaining UBS loan balance and offset by $33,000 in proceeds from stock purchases under our employee stock purchase plan. Financing activities for the same period in 2009 comprised of $23,000 in proceeds from stock
option exercises and purchases under our employee stock purchase plan.

Working Capital. Working capital decreased to
$34.9 million at March 31, 2010 from $39.2 million at December 31, 2009. The decrease in working capital was primarily due to our use of cash for our TELINTRA program and operating expenses.

We believe our existing cash resources will be sufficient to satisfy our current operating plan until mid-2011. 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;
| | - |  | -------------------------------------------------------------------



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##### Table of Contents

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



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



| |  |  | the timing and scope of commercialization expenses for our product candidates as they approach regulatory approval.
| | - |  | -------------------------------------------------------------------------------------------------------------------

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 continue development of our product candidates, or we could be required to delay, scale back or eliminate some or
all of our research and development programs.

Our future contractual obligations at March 31, 2010 were as follows:



|                 |  |                |        |      |   |           |  |           |       |           |   |       |  |   |  
|---------------- |  | -------------- | ------ | ---- | - | --------- |  | --------- | ----- | --------- | - | ----- |  | - | -
|                 |  | Total          |        | 2010 |   | 2011-2012 |  | 2013-2014 |       | After2014
|                 |  | (in thousands)
|Operating leases |  | $              | 15,748 |      | $ | 2,806     |  | $         | 7,823 |           | $ | 5,119 |  | $ | 

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.

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.

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 corporate debt securities and commercial papers with an average maturity of under 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:



|                              |  |                                    |        |   |               |   |       |       |  |   |                            |   |  |   |       
|----------------------------- |  | ---------------------------------- | ------ | - | ------------- | - | ----- | ----- |  | - | -------------------------- | - |  | - | ------
|                              |  | 2010                               |        |   | 2011andBeyond |   |       | Total |  |   | Fair Value atMarch 31,2010
|                              |  | (In thousands, except percentages)
|Available-for-sale securities |  | $                                  | 23,039 |   |               |   |      |       |  | $ | 23,039                     |   |  | $ | 23,035
|Trading securities            |  |                                    |       |   |               | $ | 9,800 |       |  | $ | 9,800                      |   |  | $ | 8,719 
|Average interest rate         |  |                                    | 0.22   | % |               |   | 1.45  | %     |  |   | 0.59                       | % |  |   |       



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##### Table of Contents

Trading securities are comprise of corporate securities, student loans and municipal notes
investments with an auction reset feature in the form of auction rate certificates and auction preferred stock, collectively known as ARS, held in our account with UBS. As discussed previously, while we continue to earn interest on the ARS, these
investments are not liquid and their carrying amounts are impaired due to the adverse change in the debt market. As a result, our ability to liquidate our investment and fully recover the carrying value of our investment in the near term may be
limited or not exist. In November 2008, we entered into an agreement with UBS whereby we received the Right to sell all our ARS held in our UBS account at par value to UBS at any time during a two-year period beginning on June 30, 2010 and
ending on July 2, 2012. We intend to exercise this right and recover par value of the ARS. The value of the Right largely offset the decline in fair value of the ARS. However, UBS obligations under the Right are not secured by its assets
and do not require UBS to obtain any financing to support its performance obligations under the Right. UBS has disclaimed any assurance that it will have sufficient financial resources to satisfy its obligations under the Right. If UBS has
insufficient funding to buy back the ARS and the auction process continues to fail, then we may incur further losses on the carrying value of the ARS. On December 31, 2008, we entered into a loan agreement with UBS and drew down $8 million with
our ARS pledged as collateral. The loan is treated as a no net cost loan as defined in the agreement, meaning that the loan will bear interest at a rate equal to the average rate of interest paid or deemed paid to us on the pledged ARS
such that the interest cost, net of interest received by us on the pledged ARS, will be zero. On June 10, 2009 and February 12, 2010, UBS elected to repurchase a portion of our ARS under the Rights Agreement at par value of $4.9 million
and $4.0 million, respectively. Proceeds of both sales of our ARS were applied to the repayments of the credit line which was paid in full as of March 31, 2010. Other than the UBS loan, there were no material changes to our market exposure risk
since December 31, 2009.



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

Evaluation of disclosure controls and procedures. Based on our managements evaluation (with the participation of our chief
executive officer and chief financial officer), our chief executive officer and chief financial officer have 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, 2010.

Changes in internal
control over financial reporting. There were no changes in our internal controls over financial reporting during the quarter ended March 31, 2010 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 chief financial officer 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.



24



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##### Table of Contents

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, 2009, as filed with the SEC on March 2, 2010, are set forth below. These risk factors have not substantively changed, except for those identified by asterisk
and restated below.

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, 2010, we had an accumulated deficit of $508.9 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 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.

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 January 2007, we completed a Phase 2 clinical trial of the intravenous formulation of TELINTRA in MDS, a form of pre-leukemia, to
evaluate safety, pharmacokinetics, pharmacodynamics and efficacy. In February 2006, we initiated a Phase 1-2a clinical trial of a tablet formulation of TELINTRA in MDS and announced final data at the American Society of Hematology meeting in
December 2007. In May 2008, we initiated a Phase 2 clinical trial of TELINTRA tablets for the treatment of patients with MDS. In April 2009, we initiated another randomized Phase 2 clinical trial in Severe Chronic Neutropenia, or 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.



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TELCYTA has been evaluated in multiple Phase 1, Phase 2 and Phase 3 clinical trials. On
June 3, 2007, we announced that the Phase 3 trials did not achieve their primary endpoints. Subsequently, on June 4, 2007, the FDA initiated a full clinical hold for TELCYTA. On June 15, 2007, the FDA converted the full clinical hold
to a partial hold, thereby enabling patients that had been enrolled in the trials the opportunity to continue to receive study treatments, including TELCYTA in combination with chemotherapy, subject to re-consenting procedures. In October 2007,
after completing their review of the detailed safety and other information we submitted, the FDA removed the partial hold, permitting the resumption of our TELCYTA clinical development. As a result of these circumstances, the FDA requires that we
conduct additional studies of TELCYTA to complete clinical development.

Our success depends in part on our ability to
continue clinical development of TELINTRA. 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 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 TELCYTA 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.

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 intend to seek a partnership with a pharmaceutical or biotechnology company to further advance the development and commercialization of 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.



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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.

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 mid-2011. Unanticipated 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 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 recent tightening of credit markets and concerns regarding the availability of credit, particularly in the United States, may also have negatively impacted our ability to raise additional capital to fund our business. As of
March 31, 2010, our accumulated deficit was $508.9 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.



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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 in accordance with
Nasdaq Marketplace Rule 5810(c)(3)(A), 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, allowing us until January 4, 2010 to regain compliance. Effective January 7, 2010, we transferred the listing of our
common stock from the Nasdaq Global Market to the Nasdaq Capital Market. In accordance with Listing Rule 5810(c)(3)(A), we were provided an additional 180-day period, or until July 6, 2010, to regain compliance with the minimum bid price
requirement. On April 22, 2010, we received notice from Nasdaq that we have regained compliance with the minimum bid price requirement. However, there are no assurances that in the future we will not have periods when our common stock is traded
below the levels required by Nasdaq rules.

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.

We believe that our ability to compete depends, in part, on our ability to use our proprietary

TRAP technology to discover new pharmaceutical products.

TRAP, our proprietary drug discovery technology, is a relatively new drug discovery method that uses a protein panel of approximately 20
proteins selected for their distinct patterns of interacting with small molecules. This panel may lack essential types of interactions that we have not yet identified, which may result in our inability to identify active compounds that we could
potentially develop into commercially viable drugs.

The investment of our substantial cash balance and our investments
in marketable debt securities are subject to risks, have resulted in a lack of liquidity which may cause losses and continue to affect the liquidity of these investments.*

At March 31, 2010, we had $5.5 million in cash, cash equivalents and restricted cash and $29.7 million in investments in marketable
debt securities. We have historically invested these amounts in U.S. government agencies, municipal notes which may have an auction reset feature, corporate notes and bonds, commercial paper and money market funds meeting certain criteria. Certain
of these investments are subject to general credit, liquidity, market and interest rate risks, which have been exacerbated by U.S. sub-prime mortgage defaults that have affected various sectors of the financial markets and caused credit and
liquidity issues. These market risks associated with our investment portfolio may have an adverse effect on our operations, liquidity and financial condition.

As of March 31, 2010, $9.8 million (par value) of our investment portfolio was invested in corporate and municipal notes investments
with an auction reset feature in the form of auction rate certificates and auction preferred stock, collectively known as auction rate securities, or ARS. Historically, the fair value of ARS investments approximated par value due to the frequent
resets through the auction process. Beginning in late 2007, our securities invested in ARS failed to settle in scheduled auctions due to liquidity crises. An auction failure means that the parties wishing to sell securities could not make the sale,
but does not result in the securities going into default because the issuer continues to pay interest. These investments are not liquid and their carrying amounts are impaired due to the adverse change in the corporate debt market. As a result, we
have written-down the carrying amount of these investments and recognized a loss of approximately $1.1 million through March 31, 2010. If the issuers are unable to successfully close future auctions and their credit ratings deteriorate, we may
in the future be required to record additional impairment charges on these investments.



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On November 10, 2008, we entered into an agreement with UBS AG and its affiliates, or
UBS, whereby we received rights to sell all ARS held in our UBS account at par value to UBS at any time during a two-year period beginning on June 30, 2010 and ending on July 2, 2012. In connection with our acceptance of UBS offer to
enter into that agreement, UBS made available to us no net cost loans, secured by our ARS, for up to 75% of the market value of our ARS, where interest payable on the loan does not exceed interest earned on our ARS. On December 31,
2008, we borrowed $8 million from UBS in accordance with such a secured, no net cost demand facility. On June 10, 2009 and February 12, 2010, UBS elected to purchase a portion of our ARS under the Rights Agreement at par value
of $4.9 million and $4.0 million, respectively. Proceeds of both sales of our ARS were applied to the full repayment of the credit line as of March 31, 2010. If we are unable to liquidate our remaining ARS to obtain funds when needed we may be
unable to fund our operations. There can be no assurance as to the timing of when, or if, the market for ARS will recover in a manner that will allow us to receive a return of some or all of our principal or to meet our liquidity needs.

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 three workforce reductions since
2007, the most recent of which was completed in February 2009. 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.

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.



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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;
| | - |  | ---------------------------------------------------



| |  |  | 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.



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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.

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
| | - |  | ----------------------------------------------------------



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| |  |  | 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 TRAP, we hold patents in the United States that will expire between 2014 and 2015. For TELCYTA, we hold compound patents in the
United States and internationally that will expire in 2013 and 2014. For TELINTRA, we hold compound patents in the United States and internationally that will expire in 2014. We can generally apply for patent term extensions on the patents for
TELCYTA and TELINTRA 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.

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.



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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 TELCYTA and TELINTRA 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.

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.

We presently depend upon one source of supply, Isochem, for clinical quantities of the active ingredient in TELINTRA. We currently depend
upon one source, Patheon, for the manufacture of TELINTRA tablets. While we are evaluating potential alternative sources of these materials, we have no such alternative sources that are immediately available.

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 TELCYTA and TELINTRA 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.

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.



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If we use biological and hazardous materials in a manner that causes injury, we may be
liable for damages.

Our research and development activities involve the controlled use of potentially harmful
biological materials, hazardous materials, chemicals and various radioactive compounds, and are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specified waste
products. We cannot eliminate the risk of accidental contamination or injury from the use, storage, handling or disposal of these materials. We currently have insurance applying to various types of biological and pollution exposures for a total
amount of $350,000 in coverage. However, in the event of contamination or injury, we could be held liable for damages that result from our use of hazardous materials, and any liability could significantly exceed our coverage and resources.

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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.



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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, 2010, our common stock traded between $0.72 and $1.09, and on March 31, 2010, our common stock closed at $0.83. You may not be able to sell your
shares quickly or at the market price 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
| | - |  | -------------------------------------------------------------------



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



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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.

Beginning on June 6, 2007, a series of putative securities class action lawsuits were commenced in the United States District Courts
for the Southern District of New York and the Northern District of California, naming as defendants Telik, Inc. and certain of our current officers, one of whom is also a director. The complaints filed in the Southern District of New York, which
were consolidated and amended in 2007, also name as defendants the underwriters of our November 2003 and/or January 2005 stock offerings. Plaintiffs in the Northern District of California subsequently voluntarily dismissed their complaints without
prejudice. The complaints alleged violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 arising out of the issuance of allegedly false and misleading statements about our business and prospects, including the efficacy,
safety and likelihood of success of our product candidate TELCYTA. The allegations of the consolidated amended complaint were similar, but more narrow than the original complaints. Plaintiffs sought unspecified damages and injunctive relief on
behalf of purchasers of our common stock during the period between March 27, 2003 and June 4, 2007, including purchasers in the January 2005 stock offering.

In January 2008, the parties to the securities class action reached an agreement in principle to settle the claims, the settlement to be
funded primarily by proceeds from insurance. In October 2008, the court entered a final judgment approving the settlement and resolving all class claims. Although the parties settled the class action claims and the court entered a final order
approving the settlement, the order is the subject of a pro se appeal by an unaffiliated, individual shareholder.

We
may in the future be the target of securities class action or shareholder derivative claims. Any such action or claims could result in substantial damages and may divert managements time and attention from our business.



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##### Table of Contents

|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).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



37



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##### Table of Contents

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/    CYNTHIA M.
BUTITTACynthia M. ButittaChief Operating Officer and Chief Financial Officer(Duly Authorized Officer and Principal Financial Officer)


Date: May 6, 2010



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##### Table of Contents

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).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



39