##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, DC 20549





Form 10-K


FOR ANNUAL AND TRANSITION REPORTS


PURSUANT TO SECTIONS 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the year ended December 31, 2005                                                        
|          
|or        
|          
|o          |  | 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: 0-50440


CancerVax Corporation


(Exact name of registrant as specified in its charter)


|                                                                           |  |                                         
|-------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                   |  | 52-2243564                              
|(State or other jurisdiction of
    incorporation or organization)         |  | (I.R.S. Employer
    Identification No.)
|                                                                          
|2110 Rutherford Road, Carlsbad, CA(Address of principal executive offices) |  | 92008(Zip Code)                         

(760) 494-4200


(Registrants telephone number, including area code)


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


|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of Each Class |  | Name of Each Exchange on Which Registered
|                    |  |                                          
|None                |  | None                                     



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


Common Stock, par value $0.00004 per share


o þ


o þ




þ o


S-K 10-K 10-K. þ


12b-2


o þ o


12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE












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##### 










CANCERVAX CORPORATION


FORM 10-K
ANNUAL REPORT


For the Year Ended December 31, 2005


Table of Contents


|              |  |                                                                                                    |    |      |    | 
|------------- |  | -------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|              |  |                                                                                                    |    | Page |   
|              |  |                                                                                                    |    |      |   
|PART I        |  |                                                                                                    |    |      |    | 
|Item 1        |  | Business                                                                                           |    |      | 2  | 
|Item 1A       |  | Risk Factors                                                                                       |    |      | 14 | 
|Item 1B       |  | Unresolved Staff Comments                                                                          |    |      | 40 | 
|Item 2        |  | Properties                                                                                         |    |      | 40 | 
|Item 3        |  | Legal Proceedings                                                                                  |    |      | 40 | 
|Item 4        |  | Submission of Matters to a Vote of Security
    Holders                                            |    |      | 40 | 
|             
|PART II       |  |                                                                                                    |    |      |    | 
|Item 5        |  | Market for Registrants Common Equity
    and Related Stockholder Matters                          |    |      | 41 | 
|Item 6        |  | Selected Consolidated Financial Data                                                               |    |      | 42 | 
|Item 7        |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations          |    |      | 44 | 
|Item 7A       |  | Quantitative and Qualitative Disclosures
    About Market Risk                                     |    |      | 56 | 
|Item 8        |  | Financial Statements and Supplementary
    Data                                                    |    |      | 56 | 
|Item 9        |  | Changes in and Disagreements With
    Accountants on Accounting and Financial Disclosure           |    |      | 56 | 
|Item 9A       |  | Controls and Procedures                                                                            |    |      | 56 | 
|Item 9B       |  | Other Information                                                                                  |    |      | 58 | 
|             
|PART III      |  |                                                                                                    |    |      |    | 
|Item 10       |  | Directors and Executive Officers of the
    Registrant                                             |    |      | 59 | 
|Item 11       |  | Executive Compensation                                                                             |    |      | 59 | 
|Item 12       |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters |    |      | 59 | 
|Item 13       |  | Certain Relationships and Related
    Transactions                                                 |    |      | 59 | 
|Item 14       |  | Principal Accounting Fees and Services                                                             |    |      | 59 | 
|             
|PART IV       |  |                                                                                                    |    |      |    | 
|Item 15       |  | Exhibits and Financial Statement
    Schedules                                                     |    |      | 60 | 
|Signatures    |  |                                                                                                    | 64 |     
|EXHIBIT 21.01
|EXHIBIT 23.1 
|EXHIBIT 31.1 
|EXHIBIT 31.2 
|EXHIBIT 32   



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PART I


Forward-Looking Statements






Corporate Information




® tm







|        |         
|------- | --------
|Item 1. | Business

Overview






2



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S-4














3



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Industry Background




| |       
| | ------
| | Cancer







| |                                              
| | ---------------------------------------------
| | Anti-Angiogenesis for the Treatment of Cancer







| |                                          
| | -----------------------------------------
| | Immunotherapy for the Treatment of Cancer



cell-to






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Our Pipeline




|                                                 |  |                                       |  |                                |  |                         
|------------------------------------------------ |  | ------------------------------------- |  | ------------------------------ |  | ------------------------
|                                                
|Product Candidates                               |  | Targeted Disease                      |  | Status                         |  | Commercialization Rights
|                                                
|Anti-Angiogenesis                                |  |                                       |  |                                |  |                         
|D93                                              |  | Solid tumors                          |  | IND filed in
    February 2006 |  | CancerVax               
|Various other monoclonal antibodies and peptides |  | Solid tumors,
    ophthalmic diseases |  | Research                       |  | CancerVax               
|EGFR Signaling Pathway                           |  |                                       |  |                                |  |                         
|SAI-EGF                                          |  | Non-small-cell lung cancer            |  | Phase 1/2                      |  | CancerVax(*)            
|SAI-TGF-α                                        |  | Solid tumors                          |  | Preclinical                    |  | CancerVax(*)            
|SAI-EGFR-ECD                                     |  | Solid tumors                          |  | Preclinical                    |  | CancerVax(*)            
|                                                






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(*) | CancerVax has the right to commercialize
    SAI-EGF,
    SAI-TGF-α and
    SAI-EGFR-ECD in the
    United States, Canada, Japan, Australia, New Zealand, Mexico and
    specified countries in Europe, including but not limited to,
    Austria, Belgium, Czech Republic, Denmark, Finland, France,
    Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands,
    Norway, Poland, Portugal, Spain, Sweden and the United
    Kingdom.

Anti-Angiogenesis Programs


®




| |                               
| | ------------------------------
| | Our Anti-Angiogenesis Platform



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D93




in vivo ®








Product Candidates Targeting the EGF Receptor Signaling
Pathway


SAI-TGF- SAI-EGFR-ECD,


6



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| |                                                                     
| | --------------------------------------------------------------------
| | EGF Receptor Signaling Pathway  Role in Regulating
    Tumor Growth

TGF- TGF- TGF-






| |                                                                        
| | -----------------------------------------------------------------------
| | Our Product Candidates Targeting the EGF Receptor Signaling
    Pathway





| |                                            
| | -------------------------------------------
| | Phase 2 Clinical Trial Results with SAI-EGF

SAI-EGF


SAI-EGF


7



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| |                        
| | -----------------------
| | SAI-TGF-α (preclinical)





| |                           
| | --------------------------
| | SAI-EGFR-ECD (preclinical)



Other Technology




| |                           
| | --------------------------
| | Scripps Research Institute





| |                    
| | -------------------
| | New York University



8



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Our Strategy






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Initiate a Phase 1 Clinical Trial with D93. In
    February 2006, we filed an IND for D93, our leading
    anti-angiogenic monoclonal antibody product candidate and we
    plan to initiate a Phase 1 clinical trial with this product
    candidate later in 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Advance the Development of Our Preclinical Product Candidates
    and Identify Additional Product Candidates Based on Our
    Anti-Angiogenesis Technology Platform. We plan to continue
    the development of our other preclinical anti-angiogenesis
    antibodies and peptides, and to leverage our research and
    preclinical experience in anti-angiogenesis to identify
    additional product candidates that will interact with sites
    exposed during the denaturation and remodeling of the
    extracellular matrix. In addition, we intend to explore using
    our anti-angiogenesis product candidates in combination with
    other therapies, such as chemotherapy and radiation.
|
| |  | Seek Sublicensing Opportunities for Our Product Candidates
    Targeting the EGF Receptor Signaling Pathway. We plan to
    actively seek sublicensing opportunities for SAI-EGF and our
    other two product candidates that target the EGF receptor
    signaling pathway.                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Expand Our Product Pipeline and Technologies Through
    Acquisitions and Licensing. In addition to our internal
    development efforts, we plan to selectively license and acquire
    product opportunities, technologies and businesses that
    complement our target markets.                                                                                                                                                                                                                                                                                                                                                                                                                    

Patents and Proprietary Technology






| |   |                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------
| |  | maintain and obtain patent and other proprietary protection for
    cell lines, antigens, antibodies, peptides and delivery systems;
|
| |  | defend patents;                                                                                                                     
|
| |  | preserve trade secrets; and                                                                                                         
|
| |  | operate without infringing the patents and proprietary rights of
    third parties.                                                 







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Competition




® ® ®


tm tm tm ® ®




11



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Government Regulation and Product Approval




| |        
| | -------
| | General





| |                     
| | --------------------
| | FDA Approval Process





12



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| |                                
| | -------------------------------
| | Ongoing Regulatory Requirements



direct-to


13



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Employees




Available Information


10-K, 10-Q, 8-K www.cancervax.com.





Item 1A.     Risk Factors


The following information sets forth factors that could cause
our actual results to differ materially from those contained in
forward-looking statements we have made in this report, the
information incorporated herein by reference and those we may
make from time to time.




| |                               
| | ------------------------------
| | Risks Relating to Our Business

Our business to date has been largely dependent on the
success of Canvaxin, which was the subject of Phase 3
clinical trials that we terminated in 2005. Although we ceased
the development of Canvaxin and have reduced our workforce, we
may be unable to successfully manage our remaining resources,
including available cash, while we seek to implement the merger
with Micromet.




14



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The remaining product candidates in our pipeline are in early
stages of development and our efforts to develop and
commercialize these product candidates are subject to a high
risk of failure. If we fail to successfully develop our product
candidates, our ability to generate revenues will be
substantially impaired.












| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | be successfully developed;                                                                     
|
| |  | prove to be safe and effective in clinical trials;                                             
|
| |  | be approved for marketing by United States or foreign regulatory
    authorities;              
|
| |  | be adequately protected by our intellectual property rights or
    the rights of our licensors;
|
| |  | be capable of being produced in commercial quantities at
    acceptable costs;                 
|
| |  | achieve market acceptance and be commercially viable; or                                       
|
| |  | be eligible for third party reimbursement from governmental or
    private insurers.           

15



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We are subject to extensive government regulation that
increases the cost and uncertainty associated with our efforts
to gain regulatory approval of our product candidates.




We have no manufacturing capabilities or manufacturing
personnel and expect to depend on third parties to manufacture
the product candidates that we are currently developing. We will
be dependent on sole-source suppliers to provide our product
candidates for early-stage clinical trials.








scaling-up


Product liability claims may damage our reputation and, if
insurance proves inadequate, the product liability claims may
harm our business.




16



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Changes in the laws or regulations of the United States or
Cuba related to the conduct of our business with CIMAB may
adversely affect our ability to develop and commercialize or
sublicense our rights to SAI-EGF and the two other product
candidates that we have licensed from that company.








17



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U.S.-Cuba


As a result of the reduction in our workforce that we
announced in October 2005, and continuing restructuring
activities implemented in January 2006, we may not be successful
in retaining key employees and in attracting qualified new
employees as required in the future. If we are unable to retain
our management, scientific staff and scientific advisors or to
attract additional qualified personnel, our product development
efforts will be seriously jeopardized.










We may become involved in securities class action litigation
that could divert managements attention and harm our
business.




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




18



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® ® ®


tm tm tm ® ®


19



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| |                                                                  
| | -----------------------------------------------------------------
| | Risks Related to Our Financial Results and Need for
    Financing

We have a history of losses and expect to incur substantial
losses and negative operating cash flows for the foreseeable
future, and we may never achieve sustained profitability.






If we fail to obtain the capital necessary to fund our
operations, we will be unable to develop or commercialize our
product candidates and our ability to operate as a going concern
may be adversely affected.




20



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| |   |                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to complete the termination of our clinical trials
    of Canvaxin in patients with advanced-stage melanoma, as well as
    the associated development and manufacturing activities, and to
    sublease on satisfactory terms the manufacturing, administrative
    and warehouse facilities associated with the production of
    Canvaxin;
|
| |  | the costs involved in the research, preclinical and clinical
    development, and manufacturing of D93 and our other product
    candidates;                                                                                                                                                                                                             
|
| |  | our ability to successfully sublicense SAI-EGF and the other
    product candidates licensed from CIMAB on favorable terms and
    conditions;                                                                                                                                                                                                           
|
| |  | the costs involved in obtaining and maintaining regulatory
    approvals for our product candidates;                                                                                                                                                                                                                                                     
|
| |  | the scope, prioritization and number of programs we pursue;                                                                                                                                                                                                                                                                                              
|
| |  | the costs involved in preparing, filing, prosecuting,
    maintaining, enforcing and defending patent and other
    intellectual property claims;                                                                                                                                                                                                        
|
| |  | potential product liability claims associated with Canvaxin, D93
    or our other product candidates;                                                                                                                                                                                                                                                    
|
| |  | the costs associated with manufacturing our product candidates;                                                                                                                                                                                                                                                                                          
|
| |  | our ability to enter into corporate collaborations and the terms
    and success of these collaborations;                                                                                                                                                                                                                                                
|
| |  | our acquisition and development of new technologies and product
    candidates; and                                                                                                                                                                                                                                                                      
|
| |  | competing technological and market developments.                                                                                                                                                                                                                                                                                                         

If we do not establish and maintain strategic collaborations
to fund our product development activities, we may have to
reduce or delay our rate of product development and increase our
expenditures.




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| |   |                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------
| |  | significant time and effort from our management team;                                                                               
|
| |  | coordination of our research and development programs with the
    research and development priorities of our
    collaborators; and
|
| |  | effective allocation of our resources to multiple projects.                                                                         



Our operating and financial flexibility, including our
ability to borrow money, is limited by certain debt
arrangements.








| |   |                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------
| |  | financial reporting;                                                                                                           
|
| |  | limitation on liens;                                                                                                           
|
| |  | limitations on the occurrence of future indebtedness;                                                                          
|
| |  | maintenance of a minimum amount of cash in deposit accounts of
    our lenders or in the accounts of affiliates of our lenders;
|
| |  | limitations on mergers and other consolidations;                                                                               
|
| |  | limitations on dividends;                                                                                                      

22



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| |   |                                             
| | - | --------------------------------------------
| |  | limitations on investments; and             
|
| |  | limitations on transactions with affiliates.









| |   |                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to obtain additional financing, if necessary, for
    working capital, capital expenditures, acquisitions or other
    purposes may be impaired or such financing may not be available
    on favorable terms;
|
| |  | payments on our indebtedness will reduce the funds that would
    otherwise be available for our operations and future business
    opportunities;                                                                        
|
| |  | we may be more highly leveraged than our competitors, which may
    place us at a competitive disadvantage;                                                                                                               
|
| |  | our debt level reduces our flexibility in responding to changing
    business and economic conditions; and                                                                                                                
|
| |  | there would be an adverse effect on our business and financial
    condition if we are unable to service our indebtedness or obtain
    additional financing, as needed.                                                  

Our quarterly operating results and stock price may fluctuate
significantly.






| |   |                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the progress of our restructuring activities, including with
    respect to the discontinuation of our Phase 3 clinical
    trials for Canvaxin and the related termination of employees and
    closure of our manufacturing facilities;
|
| |  | the status of development of our other product candidates;                                                                                                                                                                               
|
| |  | the time at which we enter into research and license agreements
    with strategic collaborators that provide for payments to us,
    and the timing and accounting treatment of payments to us, if
    any, under those agreements;     
|
| |  | whether or not we achieve specified research or
    commercialization milestones under any agreement that we enter
    into with collaborators and the timely payment by commercial
    collaborators of any amounts payable to us;      
|
| |  | the addition or termination of research programs or funding
    support;                                                                                                                                                                 

23



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| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | the timing of milestone and other payments that we may be
    required to make to others; and                                         
|
| |  | variations in the level of expenses related to our product
    candidates or potential product candidates during any given
    period.





| |                                                          
| | ---------------------------------------------------------
| | Risks Related to Our Intellectual Property and Litigation

Our success depends on whether we are able to maintain and
enforce our licensing arrangements with various third party
licensors.






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If we were to materially breach any of our license or
collaboration agreements, we could lose our ability to
commercialize the related technologies, and our business could
be materially and adversely affected.




We cannot be certain we will be able to obtain additional
patent protection to protect our product candidates and
technology.






| |   |                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we or our licensors might not have been the first to make the
    inventions covered by each of our patents and our pending patent
    applications;
|
| |  | we or our licensors might not have been the first to file patent
    applications for these inventions;                                             
|
| |  | others may independently develop similar or alternative
    technologies or duplicate any of our technologies;                                      

25



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| |   |                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | it is possible that none of our pending patent applications will
    result in issued patents;                                                                                                                                                                                                    
|
| |  | any patents under which we hold rights may not provide us with a
    basis for commercially-viable products, may not provide us with
    any competitive advantages or may be challenged by third parties
    as not infringed, invalid, or unenforceable under United States
    or foreign laws;
|
| |  | any of the issued patents under which we hold rights may not be
    valid or enforceable; or                                                                                                                                                                                                      
|
| |  | we may develop additional proprietary technologies that are not
    patentable and which may not be adequately protected through
    trade secrets, for example if a competitor independently
    develops duplicative, similar, or alternative technologies.                                     



If we are not able to protect and control our unpatented
trade secrets, know-how and other technological innovation, we
may suffer competitive harm.




If our products violate third party patents or were derived
from a patients cell lines without the patients
consent, we could be forced to pay royalties or cease selling
our products.








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We may be involved in lawsuits or proceedings to protect or
enforce our patent rights, trade secrets or know-how, which
could be expensive and time consuming.






| |                                        
| | ---------------------------------------
| | Risk Relating to CancerVax Common Stock

We face possible delisting from the Nasdaq National Market,
which would result in a limited public market for our common
stock.




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Future sales of our common stock may cause our stock price to
decline.




Our stock price may be volatile, and you may lose all or a
substantial part of your investment.






| |   |                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to successfully complete our merger with Micromet;                                                                                                                                                                            
|
| |  | developments in our restructuring activities, including with
    respect to the discontinuation of our Phase 3 clinical
    trials for Canvaxin, and the related termination of employees
    and closure of our manufacturing facilities;
|
| |  | changes in the regulatory status of our product candidates,
    including results of our clinical trials for D93, our leading
    humanized, anti-angiogenic monoclonal antibody;                                                         
|
| |  | changes in significant contracts, new technologies,
    acquisitions, commercial relationships, joint ventures or
    capital commitments;                                                                                                
|
| |  | announcements of the results of clinical trials by companies
    with product candidates in the same therapeutic category as our
    product candidates;                                                                                  
|
| |  | events affecting Serono or our collaboration agreement with
    Serono;                                                                                                                                                                   
|
| |  | fluctuations in stock market prices and trading volumes of
    similar companies;                                                                                                                                                         
|
| |  | announcements of new products or technologies, clinical trial
    results, commercial relationships or other events by us or our
    competitors;                                                                                         
|
| |  | our ability to successfully complete sublicensing arrangements
    with respect to our product candidates that target the EGFR
    signaling pathway;                                                                                     
|
| |  | variations in our quarterly operating results;                                                                                                                                                                                            
|
| |  | changes in securities analysts estimates of our financial
    performance;                                                                                                                                                               
|
| |  | changes in accounting principles;                                                                                                                                                                                                         
|
| |  | sales of large blocks of our common stock, including sales by
    our executive officers, directors and significant stockholders;                                                                                                         
|
| |  | additions or departures of key personnel; and                                                                                                                                                                                             
|
| |  | discussion of CancerVax or our stock price by the financial and
    scientific press and online investor communities such as chat
    rooms.                                                                                              

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If our officers and directors choose to act together, they
can significantly influence our management and operations in a
manner that may be in their best interests and not in the best
interests of other stockholders.




Our stockholder rights plan, anti-takeover provisions in our
organizational documents and Delaware law may discourage or
prevent a change in control, even if an acquisition would be
beneficial to our stockholders, which could affect our stock
price adversely and prevent attempts by our stockholders to
replace or remove our current management.






| |   |                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | dividing our board of directors into three classes serving
    staggered three-year terms;                                                                                              
|
| |  | prohibiting our stockholders from calling a special meeting of
    stockholders;                                                                                                        
|
| |  | permitting the issuance of additional shares of our common stock
    or preferred stock without stockholder approval;                                                                   
|
| |  | prohibiting our stockholders from making certain changes to our
    amended and restated certificate of incorporation or bylaws
    except with
    662/3%
    stockholder approval; and
|
| |  | requiring advance notice for raising matters of business or
    making nominations at stockholders meetings.                                                                           





| |                                             
| | --------------------------------------------
| | Risks Relating to the Life Sciences Industry

If our third-party manufacturers facilities do not
follow current good manufacturing practices, our product
development and commercialization efforts may be harmed.




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If we fail to obtain an adequate level of reimbursement for
our products by third-party payors, there may be no commercially
viable markets for our products or the markets may be much
smaller than expected.






We may not be successful in establishing additional strategic
collaborations, which could adversely affect our ability to
develop and commercialize products.




We expect to rely heavily on third parties for the conduct of
clinical trials of our product candidates. If these clinical
trials are not successful, or if we or our collaborators are not
able to obtain the necessary regulatory approvals, we will not
be able to commercialize our product candidates.






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




The development process necessary to obtain regulatory
approval is lengthy, complex and expensive. If we and our
collaborative partners do not obtain necessary regulatory
approvals, then our business will be unsuccessful and the market
price of our common stock will substantially decline.








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We, and our collaborators, are subject to governmental
regulations other than those imposed by the FDA. We, and any of
our collaborators, may not be able to comply with these
regulations, which could subject us, or such collaborators, to
penalties and otherwise result in the limitation of our or such
collaborators operations.




Failure to obtain regulatory approval in foreign
jurisdictions will prevent us from marketing our products
abroad.




We are subject to uncertainty relating to health care reform
measures and reimbursement policies which, if not favorable to
our product candidates, could hinder or prevent our product
candidates commercial success.






| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | our ability to generate revenues and achieve profitability;                                           
|
| |  | the future revenues and profitability of our potential
    customers, suppliers and collaborators; and
|
| |  | the availability of capital.                                                                          



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If physicians and patients do not accept the products that we
may develop, our ability to generate product revenue in the
future will be adversely affected.






| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | our ability to provide acceptable evidence of safety and
    efficacy;                         
|
| |  | convenience and ease of administration;                                                        
|
| |  | prevalence and severity of adverse side effects;                                               
|
| |  | availability of alternative treatments;                                                        
|
| |  | cost effectiveness;                                                                            
|
| |  | effectiveness of our marketing strategy and the pricing of any
    product that we may develop;
|
| |  | publicity concerning our products or competitive
    products; and                             
|
| |  | our ability to obtain third-party coverage or reimbursement.                                   



We face the risk of product liability claims and may not be
able to obtain insurance.




33



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##### Table of Contents





Our operations involve hazardous materials and we must comply
with environmental laws and regulations, which can be
expensive.




The life sciences industry is highly competitive and subject
to rapid technological change.






Legislative or regulatory reform of the healthcare system may
affect our ability to sell our products profitably.




34



---



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We may incur substantial costs enforcing our patents,
defending against third-party patents, invalidating third-party
patents or licensing third-party intellectual property, as a
result of litigation or other proceedings relating to patent and
other intellectual property rights.








We may not be successful in our efforts to expand our
portfolio of products and develop additional delivery
technologies.






| |   |                                                                                                 
| | - | ------------------------------------------------------------------------------------------------
| |  | research methodology used may not be successful in identifying
    potential product candidates;
|
| |  | potential delivery technologies may not safely or efficiently
    deliver our drugs; and        

35



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| |   |                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | product candidates may on further study be shown to have harmful
    side effects or other characteristics that indicate they are
    unlikely to be effective drugs.



If we are unable to protect our intellectual property rights,
our competitors may develop and market products with similar
features that may reduce demand for our potential products.






| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | receiving patent protection for our product candidates;                    
|
| |  | preventing others from infringing our intellectual property
    rights; and
|
| |  | maintaining our patent rights and trade secrets.                           







36



---



##### Table of Contents





If licensees or assignees of our intellectual property rights
breach any of the agreements under which we have licensed or
assigned our intellectual property to them, we could be deprived
of important intellectual property rights and future revenue.




We may be subject to damages resulting from claims that we or
our employees have wrongfully used or disclosed alleged trade
secrets of their former employers.




Changes in, or interpretations of, accounting rules and
regulations, such as expensing of stock options, could result in
unfavorable accounting charges or require us to change our
compensation policies.




37



---



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| |                                                    
| | ---------------------------------------------------
| | Risks Relating to the Proposed Merger With Micromet

After the merger, we will need to modify our finance and
accounting systems, procedures and controls to incorporate the
operations of Micromet, which modifications may be time
consuming and expensive to implement, and there is no guarantee
that will be able to do so.




If we are not successful in integrating our organization with
Micromet, we may not be able to operate efficiently after the
merger.




Integrating with Micromet may divert managements
attention away from our operations.




We expect to incur significant costs integrating CancerVax
and Micromet into a single business.






| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | employee redeployment, relocation or severance;                           
|
| |  | conversion of information systems;                                        
|
| |  | combining administrative teams and processes;                             
|
| |  | reorganization of facilities and disposition of excess
    facilities; and
|
| |  | relocation or disposition of excess equipment.                            

If we fail to retain key employees, the benefits of the
merger could be diminished.




38



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If one or more of the product candidates in the merged
company cannot be shown to be safe and effective in clinical
trials, is not approvable or not commercially successful, then
the benefits of the merger may not be realized.




Because Micromet Parent stockholders will receive a fixed
number of shares of CancerVax common stock in the merger, rather
than a fixed value, if the market price of CancerVax common
stock declines, Micromet Parent stockholders will receive
consideration in the merger of lesser value.




Failure to complete the merger could adversely affect
CancerVaxs stock price and CancerVaxs and
Micromets future business and operations.




Completion of the merger may result in dilution of future
earnings per share to the stockholders of CancerVax.




The costs associated with the merger are difficult to
estimate, may be higher than expected and may harm the financial
results of the combined company.




39



---



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Micromet executive officers and directors may have interests
that are different from, or in addition to, those of Micromet
shareholders generally.









Item 1B.     Unresolved Staff
Comments









|        |           
|------- | ----------
|Item 2. | Properties










|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings








|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders



40



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##### Table of Contents






PART II







|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity and Related
    Stockholder Matters

Market Information




|                             |  |      |       |  |     |   |      | 
|---------------------------- |  | ---- | ----- |  | --- | - | ---- | 
|                             |  | High |       |  | Low |  
|                             |  |      |       |  |     |  
|Year Ended December 31, 2004 |  |      |       |  |     |   |      | 
|First Quarter                |  | $    | 13.35 |  |     | $ | 9.25 | 
|Second Quarter               |  | $    | 12.27 |  |     | $ | 6.99 | 
|Third Quarter                |  | $    | 8.93  |  |     | $ | 5.55 | 
|Fourth Quarter               |  | $    | 11.45 |  |     | $ | 7.38 | 
|Year Ended December 31, 2005 |  |      |       |  |     |   |      | 
|First Quarter                |  | $    | 11.00 |  |     | $ | 6.02 | 
|Second Quarter               |  | $    | 6.71  |  |     | $ | 2.70 | 
|Third Quarter                |  | $    | 4.24  |  |     | $ | 2.76 | 
|Fourth Quarter               |  | $    | 3.46  |  |     | $ | 1.31 | 



Dividend Policy




41



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|        |                                      
|------- | -------------------------------------
|Item 6. | Selected Consolidated Financial Data.

10-K.


|                                                                                             |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |         |        |   |   |         |        |  
|-------------------------------------------------------------------------------------------- | ----------------------------------------------------- | ---------------------------------------- | ------- | ------ | ---- | - | ------- | ------ | - | - | ------- | ------ | - | ---- | ------- | ------ | - | - | ------- | ------ | -
|                                                                                             |                                                       | Years Ended December 31,                 |        
|                                                                                             |                                                       |                                          |        
|                                                                                             |                                                       | 2005                                     |         |        | 2004 |   |         | 2003   |   |   | 2002    |        |   | 2001 |        
|                                                                                             |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|                                                                                             |                                                       | (In thousands, except per share amounts) |        
|Consolidated Statement of Operations Data:                                                   |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |         |        |   |   |         |       
|Revenues:                                                                                    |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |         |        |   |   |         |       
|                                                                                             | License fee                                           |                                          | $       | 24,683 |      |   | $       | 316    |   |   | $       |       |   |      | $       |       |   |   | $       |       |  
|                                                                                             | Collaborative research and development                |                                          |         | 15,925 |      |   |         | 1,210  |   |   |         |       |   |      |         |       |   |   |         |       |  
|                                                                                             |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Total revenues                                                                               |                                                       |                                          | 40,608  |        |      |   | 1,526   |        |   |   |        |        |   |      |        |        |   |   |        |       
|                                                                                             |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Operating expenses:                                                                          |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |         |        |   |   |         |       
|                                                                                             | Research and development                              |                                          |         | 38,751 |      |   |         | 43,102 |   |   |         | 27,725 |   |      |         | 24,517 |   |   |         | 13,910 |  
|                                                                                             | General and administrative                            |                                          |         | 11,993 |      |   |         | 12,310 |   |   |         | 6,826  |   |      |         | 6,514  |   |   |         | 5,441  |  
|                                                                                             | Amortization of employee stock- based compensation(1) |                                          |         | 555    |      |   |         | 1,864  |   |   |         | 2,643  |   |      |         | 1,412  |   |   |         |       |  
|                                                                                             | Restructuring charges                                 |                                          |         | 4,918  |      |   |         |       |   |   |         |       |   |      |         |       |   |   |         |       |  
|                                                                                             | Impairment of long-lived assets                       |                                          |         | 25,366 |      |   |         |       |   |   |         |       |   |      |         |       |   |   |         |       |  
|                                                                                             | Purchased in-process research and development         |                                          |         |       |      |   |         |       |   |   |         |       |   |      |         | 2,840  |   |   |         |       |  
|                                                                                             |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Total operating expenses                                                                     |                                                       |                                          | 81,583  |        |      |   | 57,276  |        |   |   | 37,194  |        |   |      | 35,283  |        |   |   | 19,351  |       
|                                                                                             |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Other income (expense):                                                                      |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |         |        |   |   |         |       
|                                                                                             | Interest income                                       |                                          |         | 1,843  |      |   |         | 920    |   |   |         | 553    |   |      |         | 691    |   |   |         | 909    |  
|                                                                                             | Interest expense                                      |                                          |         | (487   | )    |   |         | (756   | ) |   |         | (932   | ) |      |         | (621   | ) |   |         | (140   | )
|                                                                                             |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Total other income (expense)                                                                 |                                                       |                                          | 1,356   |        |      |   | 164     |        |   |   | (379    | )      |   |      | 70      |        |   |   | 769     |       
|                                                                                             |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Net loss                                                                                     |                                                       |                                          | (39,619 | )      |      |   | (55,586 | )      |   |   | (37,573 | )      |   |      | (35,213 | )      |   |   | (18,582 | )     
|Accretion to redemption value of redeemable convertible
    preferred stock                  |                                                       |                                          |        |        |      |   |        |        |   |   | (7,867  | )      |   |      | (7,635  | )      |   |   | (4,105  | )     
|Deemed dividend resulting from beneficial conversion feature on
    Series C preferred stock |                                                       |                                          |        |        |      |   |        |        |   |   | (14,775 | )      |   |      |        |        |   |   |        |       
|                                                                                             |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Net loss applicable to common stockholders                                                   |                                                       | $                                        | (39,619 | )      |      | $ | (55,586 | )      |   | $ | (60,215 | )      |   | $    | (42,848 | )      |   | $ | (22,687 | )     
|                                                                                             |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Basic and diluted net loss per share                                                         |                                                       | $                                        | (1.42   | )      |      | $ | (2.08   | )      |   | $ | (13.30  | )      |   | $    | (153.85 | )      |   | $ | (266.02 | )     
|                                                                                             |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Weighted average shares used to compute basic and diluted net
    loss per share             |                                                       |                                          | 27,848  |        |      |   | 26,733  |        |   |   | 4,527   |        |   |      | 279     |        |   |   | 85      |       
|                                                                                             |                                                       |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        

42



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|    |                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------
|(1) | Amortization of employee stock-based compensation is allocated
    among operating expense categories as follows (in thousands):

|                           |  |                          |     |  |      |   |       |      |  |   |       |  |  |   |       | 
|-------------------------- |  | ------------------------ | --- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                           |  | Years Ended December 31, |    
|                           |  |                          |    
|                           |  | 2005                     |     |  | 2004 |   |       | 2003 |  |   | 2002  | 
|                           |  |                          |     |  |      |   |       |      |  |   |       | 
|Research and development   |  | $                        | 81  |  |      | $ | 531   |      |  | $ | 838   |  |  | $ | 379   | 
|General and administrative |  |                          | 474 |  |      |   | 1,333 |      |  |   | 1,805 |  |  |   | 1,033 | 
|                           |  |                          |     |  |      |   |       |      |  |   |       | 
|                           |  |                          | 555 |  |      |   | 1,864 |      |  |   | 2,643 |  |  |   | 1,412 | 
|                           |  |                          |     |  |      |   |       |      |  |   |       | 

|                                                         |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|-------------------------------------------------------- |  | ------------------ | -------- | - | ---- | - | -------- | ---- |  | - | -------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                         |  | As of December 31, |         
|                                                         |  |                    |         
|                                                         |  | 2005               |          |   | 2004 |   |          | 2003 |  |   | 2002     |   |  | 2001 |        
|                                                         |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |        
|                                                         |  | (In thousands)     |         
|Consolidated Balance Sheet Data:                         |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         |   |  |   |         |  
|Cash, cash equivalents and securities available-for-sale |  | $                  | 51,195   |   |      | $ | 65,073   |      |  | $ | 107,092  |   |  | $    | 36,201  |   |  | $ | 10,103  |  
|Working capital                                          |  |                    | 24,319   |   |      |   | 73,382   |      |  |   | 97,268   |   |  |      | 29,466  |   |  |   | 5,853   |  
|Total assets                                             |  |                    | 63,297   |   |      |   | 116,160  |      |  |   | 127,007  |   |  |      | 55,187  |   |  |   | 20,795  |  
|Long-term debt, net of current portion                   |  |                    |         |   |      |   | 6,355    |      |  |   | 1,811    |   |  |      | 7,379   |   |  |   | 3,353   |  
|Redeemable convertible preferred stock                   |  |                    |         |   |      |   |         |      |  |   |         |   |  |      | 96,582  |   |  |   | 32,455  |  
|Accumulated deficit                                      |  |                    | (224,397 | ) |      |   | (184,778 | )    |  |   | (129,192 | ) |  |      | (68,977 | ) |  |   | (26,129 | )
|Total stockholders equity (deficit)                     |  |                    | 32,711   |   |      |   | 71,458   |      |  |   | 112,773  |   |  |      | (55,878 | ) |  |   | (20,663 | )

43



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|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations.

The following discussion contains forward-looking statements,
which involve risks and uncertainties. Our actual results could
differ materially from those anticipated in these
forward-looking statements as a result of various factors,
including those set forth under the caption Risk
Factors. This Managements Discussion and Analysis of
Financial Condition and Results of Operations should be read in
conjunction with our consolidated financial statements and
related notes included elsewhere in this
Form 10-K.


Overview






| |                                 
| | --------------------------------
| | Proposed Merger with Micromet AG

S-4




| |                                                                                             
| | --------------------------------------------------------------------------------------------
| | Discontinuation of Canvaxin Clinical Trials and Development
    and Manufacturing Activities





44



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| |                            
| | ---------------------------
| | Ongoing Business Activities











| |   |                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------
| |  | advance our preclinical anti-angiogenesis product candidates
    into clinical development;                               
|
| |  | expand our research and development programs; and                                                                         
|
| |  | in-license technology and acquire or invest in businesses,
    products or technologies that are complementary to our own.





45



---



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Research and Development














Critical Accounting Policies and Estimates




46



---



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10-K.




| |                    
| | -------------------
| | Revenue Recognition

Revenue Recognition in Financial
Statements 00-21, Accounting for Revenue Arrangements with Multiple
Deliverables










| |         
| | --------
| | Goodwill

Goodwill and Other Intangible
Assets




47



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| |                                                                 
| | ----------------------------------------------------------------
| | Impairment of Long-Lived Assets and Restructuring
    Activities

Accounting for the
Impairment or Disposal of Long-Lived Assets






48



---



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Results of Operations




| |                                                             
| | ------------------------------------------------------------
| | Comparison of the Years Ended December 31, 2005 and
    2004

Revenues.


Research and Development Expenses.


49



---



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General and Administrative Expenses.




Amortization of Employee Stock-based Compensation.


Restructuring Charges.


Impairment of Long-lived Assets.


Interest Income.


Interest Expense.


50



---



##### Table of Contents





| |                                                             
| | ------------------------------------------------------------
| | Comparison of the Years Ended December 31, 2004 and
    2003

Revenues.


Research and Development Expenses.




General and Administrative Expenses.




Amortization of Employee Stock-based Compensation.


Interest Income.


Interest Expense.


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Liquidity and Capital Resources














| |   |                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to rapidly and cost-effectively complete the closure
    activities associated with our clinical trials and development
    and manufacturing activities for Canvaxin, and to sublease our
    manufacturing and warehouse facilities associated with Canvaxin
    on satisfactory terms;
|
| |  | our ability to sublease our corporate headquarters and research
    and development facility;                                                                                                                                                                                                        
|
| |  | the costs involved in the research and preclinical and clinical
    development of D93 and our other anti-angiogenesis product
    candidates;                                                                                                                                                       
|
| |  | the costs involved in obtaining and maintaining regulatory
    approvals for our product candidates;                                                                                                                                                                                                 
|
| |  | the scope, prioritization and number of programs we pursue;                                                                                                                                                                                                                                          
|
| |  | the costs involved in preparing, filing, prosecuting,
    maintaining, enforcing and defending patent and other
    intellectual property claims;                                                                                                                                                    
|
| |  | the manufacturing costs associated with our product candidates;                                                                                                                                                                                                                                      
|
| |  | our ability to enter into corporate collaborations and the terms
    and success of these collaborations;                                                                                                                                                                                            
|
| |  | our acquisition and development of new technologies and product
    candidates;                                                                                                                                                                                                                      

52



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| |   |                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the risk of product liability claims inherent in the
    manufacturing, testing and marketing of therapies for treating
    people with cancer or other diseases; and
|
| |  | competing technological and market developments.                                                                                                                     











53



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Contractual Obligations




|                                                                                 |  |       |        |                        |        |   |        |         |  |      |         |  |       |         |       |  |  |   |       | 
|-------------------------------------------------------------------------------- |  | ----- | ------ | ---------------------- | ------ | - | ------ | ------- |  | ---- | ------- |  | ----- | ------- | ----- |  |  | - | ----- | 
|                                                                                 |  |       |        | Payments Due by Period |       
|                                                                                 |  |       |        |                        |       
|                                                                                 |  |       |        | Less than              |        |   | 1 to   |         |  | 4 to |         |  | After |        
|Contractual Obligations                                                          |  | Total |        |                        | 1 Year |   |        | 3 Years |  |      | 5 Years |  |       | 5 Years |      
|                                                                                 |  |       |        |                        |        |   |        |         |  |      |         |  |       |         |      
|Operating leases                                                                 |  | $     | 18,463 |                        |        | $ | 2,762  |         |  | $    | 5,794   |  |       | $       | 6,210 |  |  | $ | 3,697 | 
|Contractual payments under licensing and research and
    development agreements |  |       | 2,805  |                        |        |   | 1,955  |         |  |      | 410     |  |       |         | 110   |  |  |   | 330   | 
|Equipment and tenant improvement loans                                           |  |       | 18,000 |                        |        |   | 18,000 |         |  |      |        |  |       |         |      |  |  |   |      | 
|Installment obligation due to JWCI                                               |  |       | 125    |                        |        |   | 125    |         |  |      |        |  |       |         |      |  |  |   |      | 
|                                                                                 |  |       |        |                        |        |   |        |         |  |      |         |  |       |         |      
|                                                                                 |  | $     | 39,393 |                        |        | $ | 22,842 |         |  | $    | 6,204   |  |       | $       | 6,320 |  |  | $ | 4,027 | 
|                                                                                 |  |       |        |                        |        |   |        |         |  |      |         |  |       |         |      



54



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Related Party Transactions


10-K.


Off-Balance Sheet Arrangements


10-K.


Recent Accounting Pronouncements


The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain
Investments 115-1 115-1 115-1


Share-Based Payment 4-01(a) S-X


55



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|         |                                                           
|-------- | ----------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk










|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements With Accountants on Accounting
    and Financial Disclosures








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls
and Procedures




13a-15(b),


56



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##### Table of Contents



Changes in Internal Control Over Financial Reporting




| |                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There has been no change in our internal controls over financial
    reporting during our most recent fiscal quarter that has
    materially affected, or is reasonably likely to materially
    affect, our internal controls over financial reporting.

Managements Report on Internal Control Over Financial
Reporting






| |                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Pertain to the maintenance of records that in
    reasonable detail accurately and fairly reflect the transactions
    and dispositions of our assets;                                                                                                                                                                                   
|
| | (2) Provide reasonable assurance that transactions are
    recorded as necessary to permit preparation of financial
    statements in accordance with generally accepted accounting
    principles, and that our receipts and expenditures are being
    made only in accordance with authorizations of our management
    and directors; and
|
| | (3) Provide reasonable assurance regarding prevention or
    timely detection of unauthorized acquisition, use or disposition
    of our assets that could have a material effect on the financial
    statements.                                                                                                                           



Internal Control 
Integrated Framework Internal
Control  Integrated Framework




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






Internal Control  Integrated Framework


57



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










Item 9B. Other Information




58



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##### Table of Contents






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting Fees and Services



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PART IV







|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and Reports on
    Form 8-K

Documents filed as part of this report.






S-K:


Exhibits.


|        |          |             |  |                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | -------- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |          |            
|Number  |          | Description
|        |          |            
|        | 2.01(1)  |             |  | Agreement and Plan of Merger, dated as of January 6, 2006,
    by and among CancerVax Corporation, Carlsbad Acquisition
    Corporation, Micromet, Inc., and Micromet AG                                                                                                                                                                                                                                 
|        | 2.02(1)  |             |  | Voting Agreement, dated as of January 6, 2006, by and among
    CancerVax Corporation and certain stockholders of Micromet AG                                                                                                                                                                                                                                                                            
|        | 2.03(1)  |             |  | Voting Agreement, dated as of January 6, 2006, by and among
    Micromet AG and certain stockholders of CancerVax Corporation                                                                                                                                                                                                                                                                            
|        | 2.04(2)  |             |  | Agreement and Plan of Merger, dated January 8, 2002, by and
    among CancerVax Corporation, CMI Acquisition Corp. and
    Cell-Matrix, Inc.                                                                                                                                                                                                                                                             
|        | 3.01(3)  |             |  | Amended and Restated Certificate of Incorporation                                                                                                                                                                                                                                                                                                                                                        
|        | 3.03(3)  |             |  | Amended and Restated Bylaws                                                                                                                                                                                                                                                                                                                                                                              
|        | 3.04(4)  |             |  | Certificate of Designations for Series A Junior
    Participating Preferred Stock of CancerVax Corporation                                                                                                                                                                                                                                                                                               
|        | 4.01(5)  |             |  | Form of Specimen Common Stock Certificate                                                                                                                                                                                                                                                                                                                                                                
|        | 4.02(6)  |             |  | Third Amended and Restated Investors Rights Agreement,
    dated as of December 15, 2004, by and between CancerVax
    Corporation, Serono B.V. and the investors listed on
    Schedule A thereto                                                                                                                                                                                                      
|        | 4.03(2)  |             |  | Form of Warrant to Purchase Vendor Preferred Stock, Series 1                                                                                                                                                                                                                                                                                                                                             
|        | 4.04(2)  |             |  | Warrant to Purchase Vendor Preferred Stock, Series 2, dated
    September 6, 2002, issued to Venture Lending &
    Leasing III, LLC                                                                                                                                                                                                                                                                      
|        | 4.05(2)  |             |  | Form of Incidental Registration Rights Agreement                                                                                                                                                                                                                                                                                                                                                         
|        | 4.06(4)  |             |  | Rights Agreement, dated as of November 3, 2004, between
    CancerVax Corporation and Mellon Investor Services LLC, which
    includes the form of Certificate of Designations of the
    Series A Junior Participating Preferred Stock of CancerVax
    Corporation as Exhibit A, the form of Right Certificate as
    Exhibit B and the Summary of Rights to Purchase Preferred
    Shares as Exhibit C
|        | 10.01(2) |             |  | Standard Industrial/ Commercial Single-Tenant Lease-Net, dated
    August 31, 2001, between Blackmore Airport Centre and
    CancerVax Corporation                                                                                                                                                                                                                                                       
|        | 10.02(2) |             |  | Lease, made as of July 22, 1999, between Spieker
    Properties, L.P. and John Wayne Cancer Institute                                                                                                                                                                                                                                                                                                    
|        | 10.03(2) |             |  | Agreement of Lease Assignment, dated as of August 4, 2000,
    between John Wayne Cancer Institute and CancerVax Corporation                                                                                                                                                                                                                                                                             
|        | 10.04(2) |             |  | First Amendment to Lease, entered into as of October 1,
    2001, between EOP  Marina Business Center, L.L.C. (as
    successor in interest to Spieker Properties, L.P.) and CancerVax
    Corporation (as successor in interest to John Wayne Cancer
    Institute)                                                                                                                                    
|        | 10.05(2) |             |  | Second Amendment to Lease, entered into as of September 4,
    2002, between EOP  Marina Business Center, L.L.C. (as
    successor in interest to Spieker Properties, L.P.) and CancerVax
    Corporation (as successor in interest to John Wayne Cancer
    Institute)                                                                                                                                 

60



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|        |           |             |  |                                                                                                                                                                                                              
|------- | --------- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |           |            
|Number  |           | Description
|        |           |            
|        | 10.06(7)  |             |  | Third Amendment to Lease, entered into as of November 14,
    2003, between CA-Marina Business Center Limited Partnership and
    CancerVax Corporation                                                      
|        | 10.07(8)  |             |  | Fourth Amendment to Lease entered into as of January 18,
    2005, between Marina Business Center, LLC and CancerVax
    Corporation                                                                         
|        | 10.08(9)  |             |  | Standard Industrial/ Commercial Multi-Tenant Lease 
    Net for 18120 Central Avenue, Los Angeles, California, executed
    as of August 18, 2004                                                           
|        | 10.09(2)# |             |  | Third Amended and Restated 2000 Stock Incentive Plan                                                                                                                                                         
|        | 10.10(2)# |             |  | 2003 Employee Stock Purchase Plan                                                                                                                                                                            
|        | 10.11(10) | #           |  | CancerVax 2004 Management Incentive Compensation Plan                                                                                                                                                        
|        | 10.12(10) | #           |  | CancerVax 2005 Management Incentive Compensation Plan                                                                                                                                                        
|        | 10.13(2)# |             |  | Form of Indemnification Agreement entered into by CancerVax
    Corporation with its directors and executive officers                                                                                        
|        | 10.14(9)# |             |  | Form of Amended and Restated Employment Agreement, dated as of
    November 15, 2004, between CancerVax Corporation and its
    executive officers                                                           
|        | 10.15(9)# |             |  | Amended and Restated Employment Agreement, dated as of
    November 15, 2004, between CancerVax Corporation and David
    F. Hale                                                                            
|        | 10.16(2)  |             |  | Assignment of Cross-License Agreement, dated as of July 31,
    2000, by and among 3DLM, Inc., the John Wayne Cancer Institute
    and CancerVax Corporation                                                 
|        | 10.17(2) |             |  | Cross-License Agreement, dated as of July 24, 1998, by and
    between CancerVax, Inc. and the John Wayne Cancer Institute                                                                                   
|        | 10.18(2) |             |  | Agreement, dated as July 31, 2000, by and between Cancer
    Diagnostic Laboratories, Inc. and CancerVax Corporation                                                                                         
|        | 10.19(2)  |             |  | Amendment No. 1 to CDL Agreement, dated as of
    December 15, 2000, by and between Cancer Diagnostic
    Laboratories, Inc. and CancerVax Corporation                                                       
|        | 10.20(2)  |             |  | Second Amendment to CDL Agreement, dated as of May 1, 2002,
    between Cancer Diagnostic Laboratories, Inc. and CancerVax
    Corporation                                                                   
|        | 10.21(2)  |             |  | Contribution of Technology and Exchange Agreement, dated as of
    December 15, 2000, by and between Donald L.
    Morton, M.D. and CancerVax Corporation                                                    
|        | 10.22(2)  |             |  | First Amendment to Contribution of Technology and Exchange
    Agreement, entered into as of May 1, 2002, between Donald
    L. Morton, M.D. and CancerVax Corporation                                       
|        | 10.23(2)  |             |  | Fetal Antigen License Agreement, dated as of December 15,
    2000, by and between Donald L. Morton, M.D. and CancerVax
    Corporation                                                                      
|        | 10.24(2) |             |  | License Agreement, dated May 23, 2000, by and between the
    University of Southern California and Bio-Management, Inc.                                                                                     
|        | 10.25(2) |             |  | License Agreement, dated September 19, 1999, by and between
    the University of Southern California and Bio-Management, Inc.                                                                               
|        | 10.26(2) |             |  | License Agreement, dated October 26, 2001, by and between
    The Scripps Research Institute and Cell-Matrix, Inc.                                                                                           
|        | 10.27(2) |             |  | License Agreement, effective as of June 2, 2003, between
    New York University and Cell-Matrix, Inc.                                                                                                       
|        | 10.28(2)  |             |  | Assignment of Supply Agreement, entered into as of July 31,
    2000, between 3DLM, Inc., f/k/a CancerVax, Inc., and CancerVax
    Corporation                                                               
|        | 10.29(2) |             |  | Supply Agreement, entered into as of April 15, 1998,
    between CancerVax, Inc. and Organon Teknika Corporation                                                                                             
|        | 10.30(2)  |             |  | Letter Agreement, entered into as of January 22, 2002,
    between the John Wayne Cancer Institute and CancerVax Corporation                                                                                 
|        | 10.31(11) |            |  | TGF-α HER-1 Vaccine License, Development, Manufacturing and
    Supply Agreement, dated July 13, 2004, by and among
    Tarcanta, Inc., Tarcanta, Ltd., CIMAB, S.A., YM BioSciences,
    Inc. and CIMYM, Inc.

61



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|        |           |             |  |                                                                                                                                                                                       
|------- | --------- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |           |            
|Number  |           | Description
|        |           |            
|        | 10.32(11) |            |  | EGF Vaccine License, Development, Manufacturing and Supply
    Agreement, dated July 13, 2004, by and among Tarcanta,
    Inc., Tarcanta, Ltd. and CIMAB, S.A.                        
|        | 10.33(12) |            |  | Amended and Restated Collaboration Agreement, dated as of
    October 15, 2004, by and between Cell-Matrix, Inc., and
    Applied Molecular Evolution                                 
|        | 10.34(6) |             |  | Collaboration and License Agreement, dated as of
    December 15, 2004, by and between CancerVax Corporation and
    Serono Technologies S.A.                                         
|        | 10.35(6)  |             |  | Stock Purchase Agreement, dated as of December 15, 2004, by
    and between CancerVax Corporation and Serono B.V                                                                      
|        | 10.36(7)  |             |  | Loan and Security Agreement, dated December 23, 2004,
    entered into between CancerVax Corporation and Silicon Valley
    Bank                                                      
|        | 10.37(13) | #           |  | CancerVax Corporation Amended and Restated 2003 Equity Incentive
    Award Plan                                                                                                       
|        | 10.38(13) | #           |  | Form of Time Based Vesting Option Agreement under the CancerVax
    Corporation Amended and Restated 2003 Equity Incentive Award Plan                                                 
|        | 10.39(14) |             |  | Amendment No. 1 to Collaboration Agreement, dated as of
    December 22, 2005, by and among CancerVax Corporation and
    Serono Technologies, S.A.                                   
|        | 10.40(15) | #           |  | Form of Employment Agreement between CancerVax Corporation and
    its executive officers                                                                                             
|        | 10.41(16) | #           |  | Form of Restricted Stock Award Agreement (Performance Vesting)                                                                                                                        
|        | 10.42(16) | #           |  | Form of Option Agreement (Time Vesting)                                                                                                                                               
|        | 10.43(16) | #           |  | Form of Option Agreement (Performance Vesting)                                                                                                                                        
|        | 21.01     |             |  | List of Subsidiaries                                                                                                                                                                  
|        | 23.01     |             |  | Consent of Independent Registered Public Accounting Firm                                                                                                                              
|        | 31.1      |             |  | Certification of Chief Executive Officer pursuant to
    Rules 13a-14 and 15d-14 promulgated under the Securities
    Exchange Act of 1934                                            
|        | 31.2      |             |  | Certification of Chief Financial Officer pursuant to
    Rules 13a-14 and 15d-14 promulgated under the Securities
    Exchange Act of 1934                                            
|        | 32*       |             |  | Certifications of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002






| |     |                                                                                                                                                                                      
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated by reference to CancerVax Corporations
    Proxy/Registration Statement on
    Form S-1 filed
    with the Securities and Exchange Commission on February 13,
    2006.
|
| | (2) | Incorporated by reference to CancerVax Corporations
    Proxy/Registration Statement on
    Form S-4 filed
    with the Securities and Exchange Commission on October 24,
    2003. 
|
| | (3) | Incorporated by reference to CancerVax Corporations
    Quarterly Report on
    Form 10-Q filed
    with the Securities and Exchange Commission on December 11,
    2003.           
|
| | (4) | Incorporated by reference to CancerVax Corporations
    Current Report on
    Form 8-K filed
    with the Securities and Exchange Commission on November 8,
    2004.               
|
| | (5) | Incorporated by reference to CancerVax Corporations
    Registration Statement on
    Form S-3 filed
    with the Securities and Exchange Commission on December 9,
    2004.       
|
| | (6) | Incorporated by reference to CancerVax Corporations
    Current Report on
    Form 8-K filed
    with the Securities and Exchange Commission on December 21,
    2004.              
|
| | (7) | Incorporated by reference to CancerVax Corporations
    Current Report on
    Form 8-K filed
    with the Securities and Exchange Commission on December 29,
    2004.              
|
| | (8) | Incorporated by reference to CancerVax Corporations
    Current Report on
    Form 8-K filed
    with the Securities and Exchange Commission on January 20,
    2005.               
|
| | (9) | Incorporated by reference to CancerVax Corporations
    Quarterly Report on
    Form 10-Q filed
    with the Securities and Exchange Commission on November 15,
    2004.           

62



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|     |                                                                                                                                                                                
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to CancerVax Corporations
    Current Report on
    Form 8-K filed
    with the Securities and Exchange Commission on February 14,
    2005.        
|    
|(11) | Incorporated by reference to CancerVax Corporations
    Quarterly Report on
    Form 10-Q filed
    with the Securities and Exchange Commission on August 13,
    2004.       
|    
|(12) | Incorporated by reference to CancerVax Corporations
    Current Report on
    Form 8-K filed
    with the Securities and Exchange Commission on October 21,
    2004.         
|    
|(13) | Incorporated by reference to CancerVax Corporations
    Registration Statement on
    Form S-8 filed
    with the Securities and Exchange Commission on November 17,
    2004.
|    
|(14) | Incorporated by reference to CancerVax Corporations
    Current Report on
    Form 8-K filed
    with the Securities and Exchange Commission on December 29,
    2005.        
|    
|(15) | Incorporated by reference to CancerVax Corporations
    Quarterly Report on
    Form 10-Q filed
    with the Securities and Exchange Commission on August 8,
    2005.        
|    
|(16) | Incorporated by reference to CancerVax Corporations
    Quarterly Report on
    Form 10-Q filed
    with the Securities and Exchange Commission on May 6, 2005.               



| |   |                                                    
| | - | ---------------------------------------------------
| | # | Indicates management contract or compensatory plan.



| |   |                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | CancerVax Corporation has been granted confidential treatment
    with respect to certain portions of this exhibit (indicated by
    asterisks), which have been filed separately with the Securities
    and Exchange Commission.



| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | + | Portions of this exhibit (indicated by asterisks) have been
    omitted pursuant to a request for confidential treatment and
    have been separately filed with the Securities and Exchange
    Commission.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | These certifications are being furnished solely to accompany
    this annual report pursuant to 18 U.S.C. Section 1350,
    and are not being filed for purposes of Section 18 of the
    Securities Exchange Act of 1934 and are not to be incorporated
    by reference into any filing of CancerVax Corporation, whether
    made before or after the date hereof, regardless of any general
    incorporation language in such filing.

63



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SIGNATURES






| |                      
| | ---------------------
| | Cancervax Corporation



| |     |                  
| | --- | -----------------
| | By: | /s/ David F. Hale

| |  | 
| |  | 
| |  | 

| |                                      
| | -------------------------------------
| | David F. Hale                        
| | President and Chief Executive Officer



|                                                     |  |                                                                                                       |  |                |  | 
|---------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Name                                                 |  | Title                                                                                                 |  | Date          
|                                                     |  |                                                                                                       |  |               
|                                                    
|/s/ David F. HaleDavid F. Hale                       |  | President, Chief Executive
    Officer and Director(Principal Executive Officer)                      |  | March 16, 2006
|                                                    
|/s/ William R. LaRueWilliam R. LaRue                 |  | Senior Vice President and
    Chief Financial Officer(Principal Financial and
    Accounting Officer) |  | March 16, 2006
|                                                    
|/s/ Ivor RoystonIvor Royston                         |  | Director(Chairman of the Board of Directors)                                                          |  | March 16, 2006
|                                                    
|/s/ Michael G. CarterMichael G. Carter               |  | Director                                                                                              |  | March 16, 2006
|                                                    
|/s/ Clayburn La Force,
    Jr.Clayburn La Force, Jr. |  | Director                                                                                              |  | March 16, 2006
|                                                    
|/s/ Donald L. MortonDonald L. Morton                 |  | Director                                                                                              |  | March 16, 2006
|                                                    
|/s/ Barclay A. PhillipsBarclay A. Phillips           |  | Director                                                                                              |  | March 16, 2006
|                                                    
|/s/ Phillip M.
    SchneiderPhillip M. Schneider     |  | Director                                                                                              |  | March 16, 2006
|                                                    
|/s/ Gail S. SchoettlerGail S. Schoettler             |  | Director                                                                                              |  | March 16, 2006

64



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##### Table of Contents



CANCERVAX CORPORATION


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                                                                       |  |      |     | 
|---------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                       |  | Page |    
|                                                                                                                       |  |      |    
|Report of Independent Registered Public
    Accounting Firm                                                            |  |      | F-2 | 
|Consolidated Balance Sheets as of
    December 31, 2005 and 2004                                                       |  |      | F-3 | 
|Consolidated Statements of Operations for
    the years ended December 31, 2005, 2004 and 2003                         |  |      | F-4 | 
|Consolidated Statements of
    Stockholders Equity (Deficit) for the years ended
    December 31, 2005, 2004 and 2003 |  |      | F-5 | 
|Consolidated Statements of Cash Flows for
    the years ended December 31, 2005, 2004 and 2003                         |  |      | F-7 | 
|Notes to Consolidated Financial
    Statements                                                                         |  |      | F-8 | 

F-1



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##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM












Internal Control 
Integrated Framework




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







F-2



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##### Table of Contents



CANCERVAX CORPORATION





CONSOLIDATED BALANCE SHEETS


(In thousands, except par value amounts)


|                                           |                                                                                                                                                                |              |        |          |      |   |         |          |  
|------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | ------ | -------- | ---- | - | ------- | -------- | -
|                                           |                                                                                                                                                                | December 31, |       
|                                           |                                                                                                                                                                |              |       
|                                           |                                                                                                                                                                | 2005         |        |          | 2004 |  
|                                           |                                                                                                                                                                |              |        |          |      |  
|Assets                                     |                                                                                                                                                                |              |        |          |      |   |         |         
|Current assets:                            |                                                                                                                                                                |              |        |          |      |   |         |         
|                                           | Cash and cash equivalents                                                                                                                                      |              | $      | 38,932   |      |   | $       | 40,588   |  
|                                           | Securities available-for-sale                                                                                                                                  |              |        | 12,263   |      |   |         | 24,485   |  
|                                           | Receivables under collaborative agreement                                                                                                                      |              |        | 1,695    |      |   |         | 26,210   |  
|                                           | Other current assets                                                                                                                                           |              |        | 969      |      |   |         | 1,573    |  
|                                           |                                                                                                                                                                |              |        |          |      |  
|Total current assets                       |                                                                                                                                                                |              | 53,859 |          |      |   | 92,856  |         
|Property and equipment, net                |                                                                                                                                                                |              | 1,805  |          |      |   | 15,650  |         
|Goodwill                                   |                                                                                                                                                                |              | 5,381  |          |      |   | 5,381   |         
|Patents, net                               |                                                                                                                                                                |              | 842    |          |      |   | 625     |         
|Restricted cash                            |                                                                                                                                                                |              | 1,280  |          |      |   | 1,280   |         
|Other assets                               |                                                                                                                                                                |              | 130    |          |      |   | 368     |         
|                                           |                                                                                                                                                                |              |        |          |      |  
|Total assets                               |                                                                                                                                                                | $            | 63,297 |          |      | $ | 116,160 |         
|                                           |                                                                                                                                                                |              |        |          |      |  
|                                          
|Liabilities and stockholders equity       |                                                                                                                                                                |              |        |          |      |   |         |         
|Current liabilities:                       |                                                                                                                                                                |              |        |          |      |   |         |         
|                                           | Accounts payable and accrued liabilities                                                                                                                       |              | $      | 11,415   |      |   | $       | 11,354   |  
|                                           | Current portion of deferred revenue                                                                                                                            |              |        |         |      |   |         | 7,595    |  
|                                           | Current portion of long-term debt                                                                                                                              |              |        | 18,125   |      |   |         | 525      |  
|                                           |                                                                                                                                                                |              |        |          |      |  
|Total current liabilities                  |                                                                                                                                                                |              | 29,540 |          |      |   | 19,474  |         
|Deferred revenue, net of current portion   |                                                                                                                                                                |              |       |          |      |   | 17,139  |         
|Long-term debt, net of current portion     |                                                                                                                                                                |              |       |          |      |   | 6,355   |         
|Other liabilities                          |                                                                                                                                                                |              | 1,046  |          |      |   | 1,734   |         
|Commitments                                |                                                                                                                                                                |              |        |          |      |   |         |         
|Stockholders equity:                      |                                                                                                                                                                |              |        |          |      |   |         |         
|                                           | Preferred stock, $.00004 par value; 10,000 shares
    authorized; no shares issued and outstanding                                                             |              |        |         |      |   |         |         |  
|                                           | Common stock, $.00004 par value; 75,000 shares
    authorized; 27,924 and 27,808 shares issued and outstanding
    at December 31, 2005 and 2004, respectively |              |        | 1        |      |   |         | 1        |  
|                                           | Additional paid-in capital                                                                                                                                     |              |        | 257,347  |      |   |         | 257,582  |  
|                                           | Accumulated other comprehensive loss                                                                                                                           |              |        | (10      | )    |   |         | (71      | )
|                                           | Deferred compensation                                                                                                                                          |              |        | (230     | )    |   |         | (1,276   | )
|                                           | Accumulated deficit                                                                                                                                            |              |        | (224,397 | )    |   |         | (184,778 | )
|                                           |                                                                                                                                                                |              |        |          |      |  
|Total stockholders equity                 |                                                                                                                                                                |              | 32,711 |          |      |   | 71,458  |         
|                                           |                                                                                                                                                                |              |        |          |      |  
|Total liabilities and stockholders equity |                                                                                                                                                                | $            | 63,297 |          |      | $ | 116,160 |         
|                                           |                                                                                                                                                                |              |        |          |      |  



F-3



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##### Table of Contents



CANCERVAX CORPORATION





CONSOLIDATED STATEMENTS OF OPERATIONS


(In thousands, except per share amounts)


|                                                                                             |                                                   |                          |         |        |      |   |         |        |   |   |         |        |  
|-------------------------------------------------------------------------------------------- | ------------------------------------------------- | ------------------------ | ------- | ------ | ---- | - | ------- | ------ | - | - | ------- | ------ | -
|                                                                                             |                                                   | Years Ended December 31, |        
|                                                                                             |                                                   |                          |        
|                                                                                             |                                                   | 2005                     |         |        | 2004 |   |         | 2003   |  
|                                                                                             |                                                   |                          |         |        |      |   |         |        |  
|Revenues:                                                                                    |                                                   |                          |         |        |      |   |         |        |   |   |         |       
|                                                                                             | License fee                                       |                          | $       | 24,683 |      |   | $       | 316    |   |   | $       |       |  
|                                                                                             | Collaborative research and development            |                          |         | 15,925 |      |   |         | 1,210  |   |   |         |       |  
|                                                                                             |                                                   |                          |         |        |      |   |         |        |  
|Total revenues                                                                               |                                                   |                          | 40,608  |        |      |   | 1,526   |        |   |   |        |       
|Operating expenses:                                                                          |                                                   |                          |         |        |      |   |         |        |   |   |         |       
|                                                                                             | Research and development                          |                          |         | 38,751 |      |   |         | 43,102 |   |   |         | 27,725 |  
|                                                                                             | General and administrative                        |                          |         | 11,993 |      |   |         | 12,310 |   |   |         | 6,826  |  
|                                                                                             | Amortization of employee stock-based compensation |                          |         | 555    |      |   |         | 1,864  |   |   |         | 2,643  |  
|                                                                                             | Restructuring charges                             |                          |         | 4,918  |      |   |         |       |   |   |         |       |  
|                                                                                             | Impairment of long-lived assets                   |                          |         | 25,366 |      |   |         |       |   |   |         |       |  
|                                                                                             |                                                   |                          |         |        |      |   |         |        |  
|Total operating expenses                                                                     |                                                   |                          | 81,583  |        |      |   | 57,276  |        |   |   | 37,194  |       
|                                                                                             |                                                   |                          |         |        |      |   |         |        |  
|Other income (expense):                                                                      |                                                   |                          |         |        |      |   |         |        |   |   |         |       
|                                                                                             | Interest income                                   |                          |         | 1,843  |      |   |         | 920    |   |   |         | 553    |  
|                                                                                             | Interest expense                                  |                          |         | (487   | )    |   |         | (756   | ) |   |         | (932   | )
|                                                                                             |                                                   |                          |         |        |      |   |         |        |  
|Total other income (expense)                                                                 |                                                   |                          | 1,356   |        |      |   | 164     |        |   |   | (379    | )     
|                                                                                             |                                                   |                          |         |        |      |   |         |        |  
|Net loss                                                                                     |                                                   |                          | (39,619 | )      |      |   | (55,586 | )      |   |   | (37,573 | )     
|Accretion to redemption value of redeemable convertible
    preferred stock                  |                                                   |                          |        |        |      |   |        |        |   |   | (7,867  | )     
|Deemed dividend resulting from beneficial conversion feature on
    Series C preferred stock |                                                   |                          |        |        |      |   |        |        |   |   | (14,775 | )     
|                                                                                             |                                                   |                          |         |        |      |   |         |        |  
|Net loss applicable to common stockholders                                                   |                                                   | $                        | (39,619 | )      |      | $ | (55,586 | )      |   | $ | (60,215 | )     
|                                                                                             |                                                   |                          |         |        |      |   |         |        |  
|Basic and diluted net loss per share                                                         |                                                   | $                        | (1.42   | )      |      | $ | (2.08   | )      |   | $ | (13.30  | )     
|                                                                                             |                                                   |                          |         |        |      |   |         |        |  
|Weighted averaged shares used to compute basic and diluted net
    loss per share            |                                                   |                          | 27,848  |        |      |   | 26,733  |        |   |   | 4,527   |       
|                                                                                             |                                                   |                          |         |        |      |   |         |        |  
|The allocation of employee stock-based compensation is as
    follows:                       |                                                   |                          |         |        |      |   |         |        |   |   |         |       
|                                                                                             | Research and development                          |                          | $       | 81     |      |   | $       | 531    |   |   | $       | 838    |  
|                                                                                             | General and administrative                        |                          |         | 474    |      |   |         | 1,333  |   |   |         | 1,805  |  
|                                                                                             |                                                   |                          |         |        |      |   |         |        |  
|                                                                                             |                                                   | $                        | 555     |        |      | $ | 1,864   |        |   | $ | 2,643   |       
|                                                                                             |                                                   |                          |         |        |      |   |         |        |  



F-4



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##### Table of Contents



CANCERVAX CORPORATION





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(DEFICIT)


(In thousands)


|                             |                                                                                                                     |                                                  |        |         |              |   |   |            |       |             |               |        |   |          |   |       |             |               |         |              |   |   |         |   |    |           |        |        |   |   |          |         |         |   |         |         |         |  
|---------------------------- | ------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ------ | ------- | ------------ | - | - | ---------- | ----- | ----------- | ------------- | ------ | - | -------- | - | ----- | ----------- | ------------- | ------- | ------------ | - | - | ------- | - | -- | --------- | ------ | ------ | - | - | -------- | ------- | ------- | - | ------- | ------- | ------- | -
|                             |                                                                                                                     |                                                  |        |         |              |   |   |            |       | Accumulated |               |        |   |          |   |       |            
|                             |                                                                                                                     | Convertible                                      |        |         |              |   |   |            | Other |             |               |        |   |          |   | Total |            
|                             |                                                                                                                     | Preferred Stock                                  |        |         | Common Stock |   |   | Additional |       |             | Comprehensive |        |   |          |   |       |             | Stockholders |        
|                             |                                                                                                                     |                                                  |        |         |              |   |   | Paid-In    |       |             | Income        |        |   | Deferred |   |       | Accumulated |               |         | Equity       |  
|                             |                                                                                                                     | Shares                                           |        |         | Amount       |   |   | Shares     |       |             | Amount        |        |   | Capital  |   |       | (Loss)      |               |         | Compensation |   |   | Deficit |   |    | (Deficit) |       
|                             |                                                                                                                     |                                                  |        |         |              |   |   |            |       |             |               |        |   |          |   |       |             |               |         |              |   |   |         |   |    |           |       
|Balance at December 31, 2002 |                                                                                                                     |                                                  | 27,189 |         |              | $ | 1 |            |       |             | 496           |        |   | $        |  |       |             | $             | 14,409  |              |   | $ | (43     | ) |    | $         | (1,268 | )      |   | $ | (68,977  | )       |         | $ | (55,878 | )      
|                             | Issuance of common stock under equity compensation plans and
    upon exercise of warrants                          |                                                  |        |        |              |   |   |           |       |             |               | 133    |   |          |   |      |             |               |         | 263          |   |   |         |  |    |           |        |       |   |   |          |        |         |   |         | 263     |        
|                             | Deferred employee stock-based compensation                                                                          |                                                  |        |        |              |   |   |           |       |             |               |       |   |          |   |      |             |               |         | 4,999        |   |   |         |  |    |           |        | (4,999 | ) |   |          |        |         |   |         |        |        
|                             | Amortization of deferred employee stock-based compensation, net                                                     |                                                  |        |        |              |   |   |           |       |             |               |       |   |          |   |      |             |               |         | (271         | ) |   |         |  |    |           |        | 2,914  |   |   |          |        |         |   |         | 2,643   |        
|                             | Issuance of stock options to consultants                                                                            |                                                  |        |        |              |   |   |           |       |             |               |       |   |          |   |      |             |               |         | 131          |   |   |         |  |    |           |        |       |   |   |          |        |         |   |         | 131     |        
|                             | Issuance of warrants in conjunction with a research consulting
    agreement                                        |                                                  |        |        |              |   |   |           |       |             |               |       |   |          |   |      |             |               |         | 245          |   |   |         |  |    |           |        |       |   |   |          |        |         |   |         | 245     |        
|                             | Issuance of common stock in initial public offering                                                                 |                                                  |        |        |              |   |   |           |       |             |               | 6,000  |   |          |   |      |             |               |         | 65,139       |   |   |         |  |    |           |        |       |   |   |          |        |         |   |         | 65,139  |        
|                             | Conversion of redeemable convertible preferred stock into common
    stock                                          |                                                  |        |        |              |   |   |           |       |             |               | 13,892 |   |          |   | 1     |             |               |         | 145,623      |   |   |         |  |    |           |        |       |   |   |          |        |         |   |         | 145,624 |        
|                             | Conversion of convertible preferred stock into common stock                                                         |                                                  |        | (27,189 | )            |   |   | (1         | )     |             |               | 6,215  |   |          |   |      |             |               |         | 1            |   |   |         |  |    |           |        |       |   |   |          |        |         |   |         |        |        
|                             | Deemed dividend resulting from beneficial conversion feature on
    Series C redeemable convertible preferred stock |                                                  |        |        |              |   |   |           |       |             |               |       |   |          |   |      |             |               |         | 14,775       |   |   |         |  |    |           |        |       |   |   |          | (14,775 | )       |   |         |        |        
|                             | Accretion to redemption value of redeemable convertible
    preferred stock                                         |                                                  |        |        |              |   |   |           |       |             |               |       |   |          |   |      |             |               |         |             |   |   |         |  |    |           |        |       |   |   |          | (7,867  | )       |   |         | (7,867  | )      
|                             | Comprehensive loss:                                                                                                 |                                                  |        |         |              |   |   |            |       |             |               |        |   |          |   |       |             |               |         |              |   |   |         |   |    |           |        |        |   |   |          |         |         |   |         |         |        
|                             |                                                                                                                     | Net loss                                         |        |         |             |   |   |            |      |             |               |        |  |          |   |       |            |               |         |              |  |   |         |   |   |           |        |        |  |   |          |         | (37,573 | ) |         |         | (37,573 | )
|                             |                                                                                                                     | Unrealized gain on securities available-for-sale |        |         |             |   |   |            |      |             |               |        |  |          |   |       |            |               |         |              |  |   |         |   | 46 |           |        |        |  |   |          |         |        |   |         |         | 46      |  
|                             |                                                                                                                     |                                                  |        |         |              |   |   |            |       |             |               |        |   |          |   |       |             |               |         |              |   |   |         |   |    |           |       
|                             | Total comprehensive loss                                                                                            |                                                  |        |        |              |   |   |           |       |             |               |       |   |          |   |      |             |               |         |             |   |   |         |  |    |           |        |       |   |   |          |        |         |   |         | (37,527 | )      
|                             |                                                                                                                     |                                                  |        |         |              |   |   |            |       |             |               |        |   |          |   |       |             |               |         |              |   |   |         |   |    |           |       
|Balance at December 31, 2003 |                                                                                                                     |                                                  |       |         |              |   |  |            |       |             | 26,736        |        |   |          | 1 |       |             |               | 245,314 |              |   |   | 3       |   |    |           | (3,353 | )      |   |   | (129,192 | )       |         |   | 112,773 |        
|                             | Issuance of common stock under equity compensation plans, net                                                       |                                                  |        |        |              |   |   |           |       |             |               | 72     |   |          |   |      |             |               |         | 376          |   |   |         |  |    |           |        |       |   |   |          |        |         |   |         | 376     |        
|                             | Amortization of deferred employee stock-based compensation, net                                                     |                                                  |        |        |              |   |   |           |       |             |               |       |   |          |   |      |             |               |         | (213         | ) |   |         |  |    |           |        | 2,077  |   |   |          |        |         |   |         | 1,864   |        
|                             | Issuance of stock options to consultants                                                                            |                                                  |        |        |              |   |   |           |       |             |               |       |   |          |   |      |             |               |         | 105          |   |   |         |  |    |           |        |       |   |   |          |        |         |   |         | 105     |        
|                             | Issuance of common stock in connection with collaboration
    agreement                                             |                                                  |        |        |              |   |   |           |       |             |               | 1,000  |   |          |   |      |             |               |         | 12,000       |   |   |         |  |    |           |        |       |   |   |          |        |         |   |         | 12,000  |        

F-5



---



##### Table of Contents



|                             |                                                                 |                                                  |   |              |        |   |            |       |   |               |        |     |          |   |       |             |               |   |              |      |   |         |     |   |           |   |        |       |   |   |          |         |   |   |        |         |     |  
|---------------------------- | --------------------------------------------------------------- | ------------------------------------------------ | - | ------------ | ------ | - | ---------- | ----- | - | ------------- | ------ | --- | -------- | - | ----- | ----------- | ------------- | - | ------------ | ---- | - | ------- | --- | - | --------- | - | ------ | ----- | - | - | -------- | ------- | - | - | ------ | ------- | --- | -
|                             |                                                                 |                                                  |   |              |        |   |            |       |   | Accumulated   |        |     |          |   |       |             |              
|                             |                                                                 | Convertible                                      |   |              |        |   |            | Other |   |               |        |     |          |   | Total |            
|                             |                                                                 | Preferred Stock                                  |   | Common Stock |        |   | Additional |       |   | Comprehensive |        |     |          |   |       |             | Stockholders |  
|                             |                                                                 |                                                  |   |              |        |   | Paid-In    |       |   | Income        |        |     | Deferred |   |       | Accumulated |               |   | Equity       |     
|                             |                                                                 | Shares                                           |   |              | Amount |   | Shares     |       |   | Amount        |        |     | Capital  |   |       | (Loss)      |               |   | Compensation |      |   | Deficit |     |   | (Deficit) |  
|                             |                                                                 |                                                  |   |              |        |   |            |       |   |               |        |     |          |   |       |             |               |   |              |      |   |         |     |   |           |  
|                             | Comprehensive loss:                                             |                                                  |   |              |        |   |            |       |   |               |        |     |          |   |       |             |               |   |              |      |   |         |     |   |           |   |        |       |   |   |          |         |   |   |        |         |    
|                             | Net loss                                                        |                                                  |   |             |        |   |            |      |   |               |        |    |          |   |       |            |               |   |              |     |   |         |     |  |           |   |        |      |   |   |          | (55,586 | ) |   |        | (55,586 | )  
|                             |                                                                 | Unrealized loss on securities available-for-sale |   |              |       |   |            |       |  |               |        |     |         |   |       |             |              |   |              |      |  |         |     |   | (74       | ) |        |       |  |   |          |         |  |   |        |         | (74 | )
|                             |                                                                 |                                                  |   |              |        |   |            |       |   |               |        |     |          |   |       |             |               |   |              |      |   |         |     |   |           |   |       
|                             | Total comprehensive loss                                        |                                                  |   |             |        |   |            |      |   |               |        |    |          |   |       |            |               |   |              |     |   |         |     |  |           |   |        |      |   |   |          |        |   |   |        | (55,660 | )  
|                             |                                                                 |                                                  |   |              |        |   |            |       |   |               |        |     |          |   |       |             |               |   |              |      |   |         |     |   |           |   |       
|Balance at December 31, 2004 |                                                                 |                                                  |  |              |        |   |           |       |   |               | 27,808 |     |          |   | 1     |             |               |   | 257,582      |      |   |         | (71 | ) |           |   | (1,276 | )     |   |   | (184,778 | )       |   |   | 71,458 |        
|                             | Issuance of common stock under equity compensation plans, net   |                                                  |   |             |        |   |            |      |   |               |        | 116 |          |   |       |            |               |   |              | 242  |   |         |     |  |           |   |        |      |   |   |          |        |   |   |        | 242     |    
|                             | Deferred employee stock-based compensation                      |                                                  |   |             |        |   |            |      |   |               |        |    |          |   |       |            |               |   |              | 324  |   |         |     |  |           |   |        | (324  | ) |   |          |        |   |   |        |        |    
|                             | Amortization of deferred employee stock-based compensation, net |                                                  |   |             |        |   |            |      |   |               |        |    |          |   |       |            |               |   |              | (815 | ) |         |     |  |           |   |        | 1,370 |   |   |          |        |   |   |        | 555     |    
|                             | Issuance of stock options to consultants                        |                                                  |   |             |        |   |            |      |   |               |        |    |          |   |       |            |               |   |              | 14   |   |         |     |  |           |   |        |      |   |   |          |        |   |   |        | 14      |    
|                             | Comprehensive loss:                                             |                                                  |   |              |        |   |            |       |   |               |        |     |          |   |       |             |               |   |              |      |   |         |     |   |           |   |        |       |   |   |          |         |   |   |        |         |    
|                             | Net loss                                                        |                                                  |   |             |        |   |            |      |   |               |        |    |          |   |       |            |               |   |              |     |   |         |     |  |           |   |        |      |   |   |          | (39,619 | ) |   |        | (39,619 | )  
|                             |                                                                 | Unrealized gain on securities available-for-sale |   |              |       |   |            |       |  |               |        |     |         |   |       |             |              |   |              |      |  |         |     |   | 61        |   |        |       |  |   |          |         |  |   |        |         | 61  |  
|                             |                                                                 |                                                  |   |              |        |   |            |       |   |               |        |     |          |   |       |             |               |   |              |      |   |         |     |   |           |   |       
|                             | Total comprehensive loss                                        |                                                  |   |             |        |   |            |      |   |               |        |    |          |   |       |            |               |   |              |     |   |         |     |  |           |   |        |      |   |   |          |        |   |   |        | (39,558 | )  
|                             |                                                                 |                                                  |   |              |        |   |            |       |   |               |        |     |          |   |       |             |               |   |              |      |   |         |     |   |           |   |       
|Balance at December 31, 2005 |                                                                 |                                                  |  |              |        | $ |           |       |   |               | 27,924 |     |          | $ | 1     |             |               | $ | 257,347      |      |   | $       | (10 | ) |           | $ | (230   | )     |   | $ | (224,397 | )       |   | $ | 32,711 |        
|                             |                                                                 |                                                  |   |              |        |   |            |       |   |               |        |     |          |   |       |             |               |   |              |      |   |         |     |   |           |   |       



F-6



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##### Table of Contents



CANCERVAX CORPORATION





CONSOLIDATED STATEMENTS OF CASH FLOWS


(In thousands)


|                                              |                                                                                 |                                                      |                                           |         |        |         |   |         |       |        |   |         |       |       |  
|--------------------------------------------- | ------------------------------------------------------------------------------- | ---------------------------------------------------- | ----------------------------------------- | ------- | ------ | ------- | - | ------- | ----- | ------ | - | ------- | ----- | ----- | -
|                                              |                                                                                 | Years Ended December 31,                             |                                          
|                                              |                                                                                 |                                                      |                                          
|                                              |                                                                                 | 2005                                                 |                                           |         | 2004   |         |   | 2003    |      
|                                              |                                                                                 |                                                      |                                           |         |        |         |   |         |      
|Cash flows from operating activities:         |                                                                                 |                                                      |                                           |         |        |         |   |         |       |        |   |        
|                                              | Net loss                                                                        |                                                      | $                                         | (39,619 | )      |         | $ | (55,586 | )     |        | $ | (37,573 | )    
|                                              | Adjustments to reconcile net loss to net cash used in operating
    activities: |                                                      |                                           |         |        |         |   |         |       |        |   |         |      
|                                              |                                                                                 | Non-cash stock-based compensation                    |                                           |         | 631    |         |   |         | 2,113 |        |   |         | 2,913 |      
|                                              |                                                                                 | Investment income from securities available-for-sale |                                           |         | 148    |         |   |         | 413   |        |   |         | 216   |      
|                                              |                                                                                 | Depreciation                                         |                                           |         | 2,359  |         |   |         | 2,071 |        |   |         | 1,891 |      
|                                              |                                                                                 | Amortization of patents and other intangible assets  |                                           |         | 64     |         |   |         | 225   |        |   |         | 252   |      
|                                              |                                                                                 | Deferred rent                                        |                                           |         | (309   | )       |   |         | 324   |        |   |         | 446   |      
|                                              |                                                                                 | Impairment of long-lived assets                      |                                           |         | 25,366 |         |   |         |      |        |   |         |      |      
|                                              |                                                                                 | Changes in operating assets and liabilities:         |                                           |         |        |         |   |         |       |        |   |         |       |      
|                                              |                                                                                 |                                                      | Receivables under collaborative agreement |         |        | 24,515  |   |         |       | (1,210 | ) |         |       |      |  
|                                              |                                                                                 |                                                      | Other assets                              |         |        | 780     |   |         |       | (599   | ) |         |       | (759  | )
|                                              |                                                                                 |                                                      | Accounts payable and accrued liabilities  |         |        | (289    | ) |         |       | 6,433  |   |         |       | 1,742 |  
|                                              |                                                                                 |                                                      | Deferred revenue                          |         |        | (24,734 | ) |         |       | (266   | ) |         |       |      |  
|                                              |                                                                                 |                                                      |                                           |         |        |         |   |         |      
|                                              | Net cash used in operating activities                                           |                                                      |                                           | (11,088 | )      |         |   | (46,082 | )     |        |   | (30,872 | )    
|Cash flows from investing activities:         |                                                                                 |                                                      |                                           |         |        |         |   |         |       |        |   |        
|                                              | Purchases of property and equipment, net                                        |                                                      |                                           | (13,751 | )      |         |   | (7,192  | )     |        |   | (1,575  | )    
|                                              | Purchases of securities available-for-sale                                      |                                                      |                                           | (23,687 | )      |         |   | (56,722 | )     |        |   | (2,942  | )    
|                                              | Maturities of securities available-for-sale                                     |                                                      |                                           | 35,822  |        |         |   | 37,161  |       |        |   | 1,998   |      
|                                              | Sale of securities available-for-sale                                           |                                                      |                                           |        |        |         |   |        |       |        |   | 5,481   |      
|                                              | Increase in patents                                                             |                                                      |                                           | (439    | )      |         |   | (331    | )     |        |   | (183    | )    
|                                              | (Increase) decrease in restricted cash                                          |                                                      |                                           |        |        |         |   | 720     |       |        |   | (450    | )    
|                                              |                                                                                 |                                                      |                                           |         |        |         |   |         |      
|                                              | Net cash (used in) provided by investing activities                             |                                                      |                                           | (2,055  | )      |         |   | (26,364 | )     |        |   | 2,329   |      
|Cash flows from financing activities:         |                                                                                 |                                                      |                                           |         |        |         |   |         |       |        |   |        
|                                              | Proceeds from long-term debt                                                    |                                                      |                                           | 11,770  |        |         |   | 6,230   |       |        |   | 462     |      
|                                              | Payments on long-term debt                                                      |                                                      |                                           | (525    | )      |         |   | (7,253  | )     |        |   | (2,900  | )    
|                                              | Proceeds from equity compensation plans, net                                    |                                                      |                                           | 242     |        |         |   | 376     |       |        |   | 263     |      
|                                              | Proceeds from issuance of common stock, net                                     |                                                      |                                           |        |        |         |   | 12,000  |       |        |   | 65,139  |      
|                                              | Proceeds from issuance of preferred stock, net                                  |                                                      |                                           |        |        |         |   |        |       |        |   | 41,177  |      
|                                              |                                                                                 |                                                      |                                           |         |        |         |   |         |      
|                                              | Net cash provided by financing activities                                       |                                                      |                                           | 11,487  |        |         |   | 11,353  |       |        |   | 104,141 |      
|                                              | (Decrease) increase in cash and cash equivalents                                |                                                      |                                           | (1,656  | )      |         |   | (61,093 | )     |        |   | 75,598  |      
|                                              | Cash and cash equivalents at beginning of year                                  |                                                      |                                           | 40,588  |        |         |   | 101,681 |       |        |   | 26,083  |      
|                                              |                                                                                 |                                                      |                                           |         |        |         |   |         |      
|                                              | Cash and cash equivalents at end of year                                        |                                                      | $                                         | 38,932  |        |         | $ | 40,588  |       |        | $ | 101,681 |      
|                                              |                                                                                 |                                                      |                                           |         |        |         |   |         |      
|Supplemental cash flow information:           |                                                                                 |                                                      |                                           |         |        |         |   |         |       |        |   |        
|                                              | Cash paid during the year for interest                                          |                                                      | $                                         | 783     |        |         | $ | 751     |       |        | $ | 750     |      
|                                              |                                                                                 |                                                      |                                           |         |        |         |   |         |      
|Supplemental schedule of non-cash activities: |                                                                                 |                                                      |                                           |         |        |         |   |         |       |        |   |        
|                                              | Unrealized gain (loss) on securities available-for-sale                         |                                                      | $                                         | 61      |        |         | $ | (74     | )     |        | $ | 46      |      
|                                              |                                                                                 |                                                      |                                           |         |        |         |   |         |      
|                                              | Issuance of warrants in connection with research consulting
    agreement       |                                                      | $                                         |        |        |         | $ |        |       |        | $ | 245     |      
|                                              |                                                                                 |                                                      |                                           |         |        |         |   |         |      
|                                              | Conversion of preferred stock into common stock                                 |                                                      | $                                         |        |        |         | $ |        |       |        | $ | 145,624 |      
|                                              |                                                                                 |                                                      |                                           |         |        |         |   |         |      
|                                              | Deferred up-front license fee receivable under collaborative
    agreement      |                                                      | $                                         |        |        |         | $ | 24,684  |       |        | $ |        |      
|                                              |                                                                                 |                                                      |                                           |         |        |         |   |         |      



F-7



---



##### Table of Contents



CANCERVAX CORPORATION





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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



| |                          
| | -------------------------
| | Organization and Business









| |                            
| | ---------------------------
| | Principles of Consolidation





| |                 
| | ----------------
| | Use of Estimates





| |                          
| | -------------------------
| | Cash and Cash Equivalents





| |                              
| | -----------------------------
| | Securities Available-for-Sale





F-8



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





| |                       
| | ----------------------
| | Concentrations of Risk





| |                                
| | -------------------------------
| | Impairment of Long-Lived Assets

Accounting for the Impairment or
Disposal of Long-Lived Assets








F-9



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                       
| | ----------------------
| | Property and Equipment



|                                               |  |              |         |   |      |   |        |  
|---------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------ | -
|                                               |  | December 31, |        
|                                               |  |              |        
|                                               |  | 2005         |         |   | 2004 |  
|                                               |  |              |         |   |      |  
|Leasehold improvements                         |  | $            | 22,966  |   |      | $ | 10,335 |  
|Manufacturing and laboratory equipment         |  |              | 8,967   |   |      |   | 6,364  |  
|Office equipment and furniture                 |  |              | 1,919   |   |      |   | 1,735  |  
|Computer equipment                             |  |              | 1,480   |   |      |   | 1,362  |  
|Construction in progress                       |  |              |        |   |      |   | 1,908  |  
|                                               |  |              |         |   |      |  
|                                               |  |              | 35,332  |   |      |   | 21,704 |  
|Less accumulated depreciation and amortization |  |              | (33,527 | ) |      |   | (6,054 | )
|                                               |  |              |         |   |      |  
|                                               |  | $            | 1,805   |   |      | $ | 15,650 |  
|                                               |  |              |         |   |      |  









| |        
| | -------
| | Patents







| |         
| | --------
| | Goodwill

Goodwill and Other
Intangible Assets


F-10



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                    
| | -------------------
| | Revenue Recognition

Revenue Recognition in Financial
Statements 00-21, Accounting for Revenue Arrangements with Multiple
Deliverables










| |                         
| | ------------------------
| | Research and Development





| |                   
| | ------------------
| | Net Loss Per Share

Earnings Per Share


F-11



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                     |                                                                                              |                                 |       |         |      |   |       |         |   |   |        |         |  
|------------------------------------ | -------------------------------------------------------------------------------------------- | ------------------------------- | ----- | ------- | ---- | - | ----- | ------- | - | - | ------ | ------- | -
|                                     |                                                                                              | Years Ended December 31,        |      
|                                     |                                                                                              |                                 |      
|                                     |                                                                                              | 2005                            |       |         | 2004 |   |       | 2003    |  
|                                     |                                                                                              |                                 |       |         |      |   |       |         |  
|                                     |                                                                                              | (In thousands, except per share |      
|                                     |                                                                                              | amounts)                        |      
|Numerator:                           |                                                                                              |                                 |       |         |      |   |       |         |   |   |        |        
|                                     | Net loss, as reported                                                                        |                                 | $     | (39,619 | )    |   | $     | (55,586 | ) |   | $      | (37,573 | )
|                                     | Accretion to redemption value of redeemable convertible
    preferred stock                  |                                 |       |        |      |   |       |        |   |   |        | (7,867  | )
|                                     | Deemed dividend resulting from beneficial conversion feature on
    Series C preferred stock |                                 |       |        |      |   |       |        |   |   |        | (14,775 | )
|                                     |                                                                                              |                                 |       |         |      |   |       |         |  
|                                     | Net loss applicable to common stockholders, as reported                                      |                                 | $     | (39,619 | )    |   | $     | (55,586 | ) |   | $      | (60,215 | )
|                                     |                                                                                              |                                 |       |         |      |   |       |         |  
|Denominator:                         |                                                                                              |                                 |       |         |      |   |       |         |   |   |        |        
|                                     | Weighted average common shares outstanding                                                   |                                 |       | 27,856  |      |   |       | 26,784  |   |   |        | 4,643   |  
|                                     | Weighted average unvested common shares subject to repurchase                                |                                 |       | (8      | )    |   |       | (51     | ) |   |        | (116    | )
|                                     |                                                                                              |                                 |       |         |      |   |       |         |  
|                                     | Weighted average common shares used to calculate basic and
    diluted loss per share        |                                 |       | 27,848  |      |   |       | 26,733  |   |   |        | 4,527   |  
|                                     |                                                                                              |                                 |       |         |      |   |       |         |  
|Basic and diluted net loss per share |                                                                                              | $                               | (1.42 | )       |      | $ | (2.08 | )       |   | $ | (13.30 | )      
|                                     |                                                                                              |                                 |       |         |      |   |       |         |  



|                                   |  |              |       |  |      |  |       |      |  |  |       | 
|---------------------------------- |  | ------------ | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                   |  | December 31, |      
|                                   |  |              |      
|                                   |  | 2005         |       |  | 2004 |  |       | 2003 | 
|                                   |  |              |       |  |      |  |       |      | 
|Common stock subject to repurchase |  |              | 2     |  |      |  | 25    |      |  |  | 91    | 
|Stock options                      |  |              | 5,599 |  |      |  | 3,182 |      |  |  | 2,032 | 
|Restricted stock awards            |  |              | 172   |  |      |  |      |      |  |  |      | 
|Stock warrants                     |  |              | 86    |  |      |  | 86    |      |  |  | 86    | 
|                                   |  |              |       |  |      |  |       |      | 
|                                   |  |              | 5,859 |  |      |  | 3,293 |      |  |  | 2,209 | 
|                                   |  |              |       |  |      |  |       |      | 



| |                         
| | ------------------------
| | Stock-Based Compensation

Accounting for Stock Issued to Employees Accounting for Stock Appreciation Rights and
Other Variable Stock Option or Award Plans


F-12



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Accounting for Stock-based Compensation


|                                                                                                                       |  |                                 |         |   |      |   |         |      |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                                       |  | Years Ended December 31,        |        
|                                                                                                                       |  |                                 |        
|                                                                                                                       |  | 2005                            |         |   | 2004 |   |         | 2003 | 
|                                                                                                                       |  |                                 |         |   |      |   |         |      | 
|                                                                                                                       |  | (In thousands, except per share |        
|                                                                                                                       |  | amounts)                        |        
|Net loss applicable to common stockholders, as reported                                                                |  | $                               | (39,619 | ) |      | $ | (55,586 | )    |  | $ | (60,215 | )
|Add: Stock-based employee compensation expense included in net
    loss applicable to common stockholders, as reported |  |                                 | 555     |   |      |   | 1,864   |      |  |   | 2,643   |  
|Deduct: Stock-based employee compensation expense determined
    under the fair value based method for all awards      |  |                                 | (5,091  | ) |      |   | (6,256  | )    |  |   | (3,763  | )
|                                                                                                                       |  |                                 |         |   |      |   |         |      | 
|Pro forma net loss applicable to common stockholders                                                                   |  | $                               | (44,155 | ) |      | $ | (59,978 | )    |  | $ | (61,335 | )
|                                                                                                                       |  |                                 |         |   |      |   |         |      | 
|Loss per share:                                                                                                        |  |                                 |         |   |      |   |         |      |  |   |         |  
|Basic and diluted net loss per share, as reported                                                                      |  | $                               | (1.42   | ) |      | $ | (2.08   | )    |  | $ | (13.30  | )
|                                                                                                                       |  |                                 |         |   |      |   |         |      | 
|Pro forma basic and diluted net loss per share                                                                         |  | $                               | (1.59   | ) |      | $ | (2.24   | )    |  | $ | (13.55  | )
|                                                                                                                       |  |                                 |         |   |      |   |         |      | 



|                                                  |                                                                |                          |      |      |      |  |      |      |  |  |      |      | 
|------------------------------------------------- | -------------------------------------------------------------- | ------------------------ | ---- | ---- | ---- |  | ---- | ---- |  |  | ---- | ---- | 
|                                                  |                                                                | Years Ended December 31, |     
|                                                  |                                                                |                          |     
|                                                  |                                                                | 2005                     |      |      | 2004 |  |      | 2003 | 
|                                                  |                                                                |                          |      |      |      |  |      |      | 
|Dividend yield                                    |                                                                |                          | 0    | %    |      |  | 0    | %    |  |  | 0    | %   
|Expected volatility                               |                                                                |                          | 71   | %    |      |  | 70   | %    |  |  | 70   | %   
|Risk-free interest rate                           |                                                                |                          | 4.00 | %    |      |  | 3.25 | %    |  |  | 2.63 | %   
|Expected life in years                            |                                                                |                          | 4.64 |      |      |  | 4.89 |      |  |  | 4.85 |     
|Weighted average per share grant date fair value: |                                                                |                          |      |      |      |  |      |      |  |  |      |     
|                                                  | Stock options granted with exercise prices below fair value    |                          | $    |     |      |  | $    |     |  |  | $    | 7.14 | 
|                                                  | Stock options granted with exercise prices equal to fair value |                          | $    | 2.71 |      |  | $    | 6.47 |  |  | $    | 6.29 | 





F-13



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Share-Based Payment


Accounting for Equity Instruments That are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling
Goods and Services




| |             
| | ------------
| | Income Taxes





| |                    
| | -------------------
| | Segment Information





| |           
| | ----------
| | Guarantees

Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others




F-14



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                   
| | ----------------------------------
| | Effect of New Accounting Standards

115-1 124-1, The Meaning
of Other-Than-Temporary Impairment and Its Application to
Certain Investments




|   |                         
|-- | ------------------------
|2. | Restructuring Activities



Accounting for the
Costs of Exit or Disposal Activities




F-15



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                              
|-- | -----------------------------
|3. | Securities Available-For-Sale



|                           |  |           |        |  |          |       |     |            |  |            |   |  |            |   |     |   |  |   |        | 
|-------------------------- |  | --------- | ------ |  | -------- | ----- | --- | ---------- |  | ---------- | - |  | ---------- | - | --- | - |  | - | ------ | 
|                           |  |           |        |  |          | Gross |     | Gross      |  |            |  
|                           |  | Amortized |        |  | Accrued  |       |     | Unrealized |  | Unrealized |   |  |           
|                           |  | Cost      |        |  | Interest |       |     | Gains      |  | Losses     |   |  | Fair Value |  
|                           |  |           |        |  |          |       |     |            |  |            |   |  |            |  
|December 31, 2005:         |  |           |        |  |          |       |     |            |  |            |   |  |            |   |     |   |  |   |        | 
|U.S. government securities |  | $         | 5,237  |  |          | $     | 45  |            |  | $          |  |  |            | $ | (5  | ) |  | $ | 5,277  | 
|Corporate debt securities  |  |           | 6,938  |  |          |       | 53  |            |  |            |  |  |            |   | (5  | ) |  |   | 6,986  | 
|                           |  |           |        |  |          |       |     |            |  |            |   |  |            |   |    
|                           |  | $         | 12,175 |  |          | $     | 98  |            |  | $          |  |  |            | $ | (10 | ) |  | $ | 12,263 | 
|                           |  |           |        |  |          |       |     |            |  |            |   |  |            |   |    
|December 31, 2004:         |  |           |        |  |          |       |     |            |  |            |   |  |            |   |     |   |  |   |        | 
|U.S. government securities |  | $         | 9,897  |  |          | $     | 90  |            |  | $          |  |  |            | $ |    |   |  | $ | 9,987  | 
|Corporate debt securities  |  |           | 14,468 |  |          |       | 101 |            |  |            |  |  |            |   | (71 | ) |  |   | 14,498 | 
|                           |  |           |        |  |          |       |     |            |  |            |   |  |            |   |    
|                           |  | $         | 24,365 |  |          | $     | 191 |            |  | $          |  |  |            | $ | (71 | ) |  | $ | 24,485 | 
|                           |  |           |        |  |          |       |     |            |  |            |   |  |            |   |    







|   |                                         
|-- | ----------------------------------------
|4. | Accounts Payable and Accrued Liabilities



|                                                                             |  |              |        |  |      |   |        | 
|---------------------------------------------------------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                                                                             |  | December 31, |       
|                                                                             |  |              |       
|                                                                             |  | 2005         |        |  | 2004 |  
|                                                                             |  |              |        |  |      |  
|Accounts payable                                                             |  | $            | 3,748  |  |      | $ | 4,963  | 
|Accrued employee benefits                                                    |  |              | 1,032  |  |      |   | 2,967  | 
|Accrued clinical trial patient costs                                         |  |              | 914    |  |      |   | 1,047  | 
|Accrued payments under collaborative research and development
    agreements |  |              | 1,900  |  |      |   | 800    | 
|Liability for restructuring activities                                       |  |              | 2,469  |  |      |   |       | 
|Other accrued liabilities and expenses                                       |  |              | 1,352  |  |      |   | 1,577  | 
|                                                                             |  |              |        |  |      |  
|                                                                             |  | $            | 11,415 |  |      | $ | 11,354 | 
|                                                                             |  |              |        |  |      |  



|   |                           
|-- | --------------------------
|5. | Related Party Transactions

Surgeon-in


F-16



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|   |                                       
|-- | --------------------------------------
|6. | Debt Obligations and Lease Commitments



| |                 
| | ----------------
| | Debt Obligations



|                                             |  |              |         |   |      |   |       |  
|-------------------------------------------- |  | ------------ | ------- | - | ---- | - | ----- | -
|                                             |  | December 31, |        
|                                             |  |              |        
|                                             |  | 2005         |         |   | 2004 |  
|                                             |  |              |         |   |      |  
|Equipment and tenant improvement loans       |  | $            | 18,000  |   |      | $ | 6,630 |  
|Installment obligations due to JWCI (Note 5) |  |              | 125     |   |      |   | 250   |  
|                                             |  |              |         |   |      |  
|                                             |  |              | 18,125  |   |      |   | 6,880 |  
|Current portion of debt                      |  |              | (18,125 | ) |      |   | (525  | )
|                                             |  |              |         |   |      |  
|Long-term debt, less current portion         |  | $            |        |   |      | $ | 6,355 |  
|                                             |  |              |         |   |      |  





F-17



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










| |                  
| | -----------------
| | Lease Commitments









F-18



---



##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|           |  |                   |        |  |             |   |     |           |  |   |        | 
|---------- |  | ----------------- | ------ |  | ----------- | - | --- | --------- |  | - | ------ | 
|           |  | Equipment         |        |  | Installment |   |     |          
|           |  | and Tenant        |        |  | Obligation  |   |     | Operating | 
|           |  | Improvement Loans |        |  | Due to JWCI |   |     | Leases    | 
|           |  |                   |        |  |             |   |     |           | 
|2006       |  | $                 | 18,000 |  |             | $ | 125 |           |  | $ | 2,762  | 
|2007       |  |                   |       |  |             |   |    |           |  |   | 2,848  | 
|2008       |  |                   |       |  |             |   |    |           |  |   | 2,946  | 
|2009       |  |                   |       |  |             |   |    |           |  |   | 3,051  | 
|2010       |  |                   |       |  |             |   |    |           |  |   | 3,159  | 
|Thereafter |  |                   |       |  |             |   |    |           |  |   | 3,697  | 
|           |  |                   |        |  |             |   |     |           | 
|           |  | $                 | 18,000 |  |             | $ | 125 |           |  | $ | 18,463 | 
|           |  |                   |        |  |             |   |     |           | 



|   |                                                                    
|-- | -------------------------------------------------------------------
|7. | Collaborative Research and Development and Licensing
    Agreements



| |       
| | ------
| | Serono









| |                                     
| | ------------------------------------
| | CIMAB, S.A. and YM BioSciences, Inc.



F-19



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










| |                                                        
| | -------------------------------------------------------
| | Other Licensing and Research and Development Agreements



F-20



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|           |  |   |       | 
|---------- |  | - | ----- | 
|2006       |  | $ | 1,955 | 
|2007       |  |   | 355   | 
|2008       |  |   | 55    | 
|2009       |  |   | 55    | 
|2010       |  |   | 55    | 
|Thereafter |  |   | 330   | 
|           |  |   |      
|           |  | $ | 2,805 | 
|           |  |   |      



|   |                     
|-- | --------------------
|8. | Stockholders Equity



| |                
| | ---------------
| | Preferred Stock





| |               
| | --------------
| | Stock Warrants





| |                          
| | -------------------------
| | Equity Compensation Plans



F-21



---



##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                 |                                   |                                     |       |          |                |   |      |       |       | 
|-------------------------------- | --------------------------------- | ----------------------------------- | ----- | -------- | -------------- | - | ---- | ----- | ----- | 
|                                 |                                   |                                     |       | Weighted |               
|                                 |                                   | Number of                           |       |          | Average        |  
|                                 |                                   | Options                             |       |          | Exercise Price |  
|                                 |                                   |                                     |       |          |                |  
|Outstanding at December 31, 2002 |                                   |                                     | 1,058 |          |                | $ | 2.12 |      
|                                 | Granted:                          |                                     |       |          |                |   |      |       |      
|                                 |                                   | Exercise prices below fair value    |       |          | 895            |   |      |       | 3.45  | 
|                                 |                                   | Exercise prices equal to fair value |       |          | 301            |   |      |       | 10.76 | 
|                                 | Exercised                         |                                     |       | (131     | )              |   |      | 2.00  |      
|                                 | Cancelled                         |                                     |       | (91      | )              |   |      | 2.44  |      
|                                 |                                   |                                     |       |          |                |  
|Outstanding at December 31, 2003 |                                   |                                     | 2,032 |          |                |   | 3.98 |      
|                                 | Granted (all equal to fair value) |                                     |       | 1,371    |                |   |      | 10.96 |      
|                                 | Exercised                         |                                     |       | (42      | )              |   |      | 2.66  |      
|                                 | Cancelled                         |                                     |       | (179     | )              |   |      | 8.39  |      
|                                 |                                   |                                     |       |          |                |  
|Outstanding at December 31, 2004 |                                   |                                     | 3,182 |          |                |   | 6.76 |      
|                                 | Granted (all equal to fair value) |                                     |       | 4,131    |                |   |      | 4.64  |      
|                                 | Exercised                         |                                     |       | (11      | )              |   |      | 2.66  |      
|                                 | Cancelled                         |                                     |       | (1,703   | )              |   |      | 7.35  |      
|                                 |                                   |                                     |       |          |                |  
|Outstanding at December 31, 2005 |                                   |                                     | 5,599 |          |                | $ | 5.02 |      
|                                 |                                   |                                     |       |          |                |  

F-22



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                    |  |                  |                     |  |                  |  |      |          |  |          |             |  |  |          |       |  |  |   |       | 
|------------------- |  | ---------------- | ------------------- |  | ---------------- |  | ---- | -------- |  | -------- | ----------- |  |  | -------- | ----- |  |  | - | ----- | 
|Options Outstanding |  |                  | Options Exercisable | 
|                    |  |                  |                     | 
|                    |  | Weighted Average |                     |  | Weighted         |  |      |          |  | Weighted |            
|Range of            |  | Number           |                     |  | Remaining        |  |      | Average  |  |          | Number      |  |  | Average  |      
|Exercise            |  | Outstanding      |                     |  | Contractual Life |  |      | Exercise |  |          | Exercisable |  |  | Exercise |      
|Prices              |  | (thousands)      |                     |  | (years)          |  |      | Price    |  |          | (thousands) |  |  | Price    |      
|                    |  |                  |                     |  |                  |  |      |          |  |          |             |  |  |          |      
|$1.08-1.08          |  |                  | 386                 |  |                  |  | 4.99 |          |  | $        | 1.08        |  |  |          | 386   |  |  | $ | 1.08  | 
|1.48-1.60           |  |                  | 1,041               |  |                  |  | 9.84 |          |  |          | 1.48        |  |  |          | 82    |  |  |   | 1.48  | 
|2.16-2.82           |  |                  | 990                 |  |                  |  | 9.09 |          |  |          | 2.77        |  |  |          | 854   |  |  |   | 2.77  | 
|2.97-3.30           |  |                  | 966                 |  |                  |  | 7.02 |          |  |          | 3.30        |  |  |          | 951   |  |  |   | 3.30  | 
|3.44-7.84           |  |                  | 524                 |  |                  |  | 9.07 |          |  |          | 6.94        |  |  |          | 57    |  |  |   | 6.67  | 
|7.93-8.62           |  |                  | 776                 |  |                  |  | 9.10 |          |  |          | 7.94        |  |  |          | 133   |  |  |   | 8.01  | 
|9.15-11.55          |  |                  | 420                 |  |                  |  | 8.27 |          |  |          | 10.37       |  |  |          | 291   |  |  |   | 10.24 | 
|11.98-12.87         |  |                  | 496                 |  |                  |  | 8.12 |          |  |          | 12.22       |  |  |          | 298   |  |  |   | 12.30 | 
|                    |  |                  |                     |  |                  |  |      |          |  |          |             |  |  |          |      
|$1.08-12.87         |  |                  | 5,599               |  |                  |  | 8.44 |          |  | $        | 5.02        |  |  |          | 3,052 |  |  | $ | 4.57  | 
|                    |  |                  |                     |  |                  |  |      |          |  |          |             |  |  |          |      









F-23



---



##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                        
| | -----------------------
| | Stockholder Rights Plan





| |                                           
| | ------------------------------------------
| | Common Shares Reserved For Future Issuance





|   |             
|-- | ------------
|9. | Income Taxes





|                     |                                                               |              |   |          |      |   |   |         |  
|-------------------- | ------------------------------------------------------------- | ------------ | - | -------- | ---- | - | - | ------- | -
|                     |                                                               | December 31, |  
|                     |                                                               |              |  
|                     |                                                               | 2005         |   |          | 2004 |  
|                     |                                                               |              |   |          |      |  
|Deferred tax assets: |                                                               |              |   |          |      |   |   |        
|                     | Net operating loss carryforwards                              |              | $ | 46,198   |      |   | $ | 32,713  |  
|                     | Orphan drug and research and development credit carryforwards |              |   | 43,390   |      |   |   | 37,791  |  
|                     | Property and equipment and intangibles                        |              |   | 12,983   |      |   |   | 2,787   |  
|                     | Deferred revenues                                             |              |   | 20       |      |   |   | 10,078  |  
|                     | Accrued liabilities and deferred rent                         |              |   | 1,618    |      |   |   | 1,485   |  
|                     | Other, net                                                    |              |   | 1,437    |      |   |   | 1,304   |  
|                     |                                                               |              |   |          |      |  
|                     | Total net deferred tax assets                                 |              |   | 105,646  |      |   |   | 86,158  |  
|                     | Valuation allowance for deferred tax assets                   |              |   | (105,646 | )    |   |   | (86,158 | )
|                     |                                                               |              |   |          |      |  
|Net deferred taxes   |                                                               | $            |  |          |      | $ |  |        
|                     |                                                               |              |   |          |      |  

F-24



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|    |                          
|--- | -------------------------
|10. | Subsequent Event  Merger







F-25



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##### Table of Contents



CANCERVAX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


S-4




|    |                                     
|--- | ------------------------------------
|11. | Quarterly Financial Data (unaudited)



|                                            |  |                              |        |   |         |   |        |         |  |   |         |   |  |   |         |  
|------------------------------------------- |  | ---------------------------- | ------ | - | ------- | - | ------ | ------- |  | - | ------- | - |  | - | ------- | -
|                                            |  | Year Ended December 31, 2005 |       
|                                            |  |                              |       
|                                            |  | First                        |        |   | Second  |   |        | Third   |  |   | Fourth  |  
|                                            |  | Quarter                      |        |   | Quarter |   |        | Quarter |  |   | Quarter |  
|                                            |  |                              |        |   |         |   |        |         |  |   |         |  
|Total revenues(1)                           |  | $                            | 6,626  |   |         | $ | 6,246  |         |  | $ | 26,015  |   |  | $ | 1,721   |  
|Total operating expenses(2)(3)              |  |                              | 13,602 |   |         |   | 13,841 |         |  |   | 36,415  |   |  |   | 17,725  |  
|Net loss                                    |  |                              | (6,613 | ) |         |   | (7,194 | )       |  |   | (9,990  | ) |  |   | (15,822 | )
|Basic and diluted net loss per common share |  |                              | (0.24  | ) |         |   | (0.26  | )       |  |   | (0.36   | ) |  |   | (0.57   | )

|                                            |  |                              |         |   |         |   |         |         |  |   |         |   |  |   |         |  
|------------------------------------------- |  | ---------------------------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | - | ------- | -
|                                            |  | Year Ended December 31, 2004 |        
|                                            |  |                              |        
|                                            |  | First                        |         |   | Second  |   |         | Third   |  |   | Fourth  |  
|                                            |  | Quarter                      |         |   | Quarter |   |         | Quarter |  |   | Quarter |  
|                                            |  |                              |         |   |         |   |         |         |  |   |         |  
|Total revenues                              |  | $                            |        |   |         | $ |        |         |  | $ |        |   |  | $ | 1,526   |  
|Total operating expenses                    |  |                              | 12,890  |   |         |   | 12,851  |         |  |   | 15,768  |   |  |   | 15,767  |  
|Net loss                                    |  |                              | (12,831 | ) |         |   | (12,754 | )       |  |   | (15,656 | ) |  |   | (14,345 | )
|Basic and diluted net loss per common share |  |                              | (0.48   | ) |         |   | (0.48   | )       |  |   | (0.59   | ) |  |   | (0.53   | )






|    |                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Included in total revenues in the third quarter of 2005 is the
    remaining deferred up-front license fee received from Serono of
    $19.7 million (see Note 7).                                                                 
|   
|(2) | Included in total operating expenses in the third and fourth
    quarters of 2005 are non-recurring, non-cash charges for the
    impairment of long-lived assets of $22.8 million and
    $2.6 million, respectively (see Note 1).
|   
|(3) | Included in total operating expenses in the fourth quarter of
    2005 is a non-recurring charge associated with our restructuring
    activities totaling $5.1 million (see Note 2).                                              

F-26