UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549  _______________
  FORM 10-Q _______________
   (Mark One)x
            
            QUARTERLY REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGEACT OF
      1934For the quarterly period ended March 31,
      2010ORo
            
            TRANSITION REPORT PURSUANT TO SECTION 13
      OR 15(d) OF THE SECURITIES EXCHANGEACT OF
      1934  For the transition period from _____ to _____.
  Commission File Number: 0-20859  ________________
  GERON CORPORATION (Exact name of registrant as specified in its
charter)
   DELAWARE
            75-2287752(State or other jurisdiction
      of
            (I.R.S. Employerincorporation or
      organization)
            Identification
  No.)   230 CONSTITUTION DRIVE, MENLO PARK,
      CA
            94025(Address of principal executive
      offices)
            (Zip
Code)  (650) 473-7700 (Registrant’s telephone number, including area code)
  N/A (Former name, former address and former fiscal year, if changed since
last report)
  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes xNoo
  Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).  Yes oNoo
  Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act.
   Large accelerated filer
            o
            Accelerated filer
            xNon-accelerated filer
            o
            Smaller reporting company
            o(Do not check if a smaller reporting
company)  Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).  Yes oNox
  Indicate the number of shares
outstanding of each of the issuer’s classes of common stock, as of the latest
practicable date.
  Class:
            Outstanding at April 26,
  2010:Common Stock, $0.001 par value
            98,181,475 shares


---



GERON CORPORATIONINDEX




PagePART I. FINANCIAL
      INFORMATIONItem 1:
            
            Condensed Consolidated Financial Statements
            1Condensed Consolidated Balance Sheets as
      of March 31, 2010 and December 31, 2009
            1Condensed Consolidated Statements of Operations for the three
      months ended March 31, 2010 and 2009
            2Condensed Consolidated Statements of
      Cash Flows for the three months ended March 31, 2010 and 2009
            3Notes to Condensed Consolidated Financial Statements
            4Item 2:
            
            Management’s Discussion and Analysis of
      Financial Condition and Results of Operations
            18Item 3:
            
            Quantitative and Qualitative Disclosures About Market
Risk
            24Item 4:
            
            Controls and Procedures
            25PART II. OTHER
    INFORMATIONItem 1:
            
            Legal Proceedings
            26Item 1A:
            
            Risk Factors
            26Item 2:
            
            Unregistered Sales of Equity Securities and Use of
    Proceeds
            41Item 3:
            
            Defaults Upon Senior
Securities
            42Item 4:
            
            (Removed and Reserved)
            42Item 5:
            
            Other Information
            42Item 6:
            
            Exhibits
            42SIGNATURE
            42


---



PART I. FINANCIAL INFORMATION




ITEM 1. CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS




GERON CORPORATION




CONDENSED CONSOLIDATED BALANCE SHEETS(IN
THOUSANDS)




MARCH 31,
            
            DECEMBER 31,2010
            
            2009(UNAUDITED)ASSETSCurrent assets:Cash and cash equivalents
            
            $
            35,900
            
            
            $
            34,601Restricted cash
            
            
            791
            
            
            
            791Current portion of marketable
      securities
            
            
            89,390
            
            
            
            77,009Interest and other receivables
            
            
            1,359
            
            
            
            1,318Current portion of prepaid
    assets
            
            
            5,794
            
            
            
            4,060Total current assets
            
            
            133,234
            
            
            
            117,779Noncurrent portion of marketable
      securities
            
            
            40,447
            
            
            
            54,669Noncurrent portion of prepaid assets
            
            
            1,966
            
            
            
            2,372Investments in licensees
            
            
            932
            
            
            
            1,328Property and equipment, net
            
            
            3,934
            
            
            
            3,938Deposits and other assets
            
            
            212
            
            
            
            296$
            180,725
            
            
            $
            180,382LIABILITIES AND STOCKHOLDERS’
      EQUITYCurrent liabilities:Accounts payable
            
            $
            1,807
            
            
            $
            2,176Accrued compensation
            
            
            1,534
            
            
            
            1,757Accrued liabilities
            
            
            1,925
            
            
            
            1,925Current portion of deferred
      revenue
            
            
            700
            
            
            
            700Fair value of derivatives
            
            
            839
            
            
            
            897Total current liabilities
            
            
            6,805
            
            
            
            7,455Noncurrent portion of deferred
      revenue
            
            
            175
            
            
            
            350Commitments and contingenciesStockholders’ equity:Common stock
            
            
            97
            
            
            
            92Additional paid-in capital
            
            
            767,831
            
            
            
            750,158Accumulated deficit
            
            
            (593,907
            )
            
            
            (577,267
            )Accumulated other comprehensive
      loss
            
            
            (276
            )
            
            
            (406
            )Total stockholders’
    equity
            
            
            173,745
            
            
            
            172,577$
            180,725
            
            
            $
            180,382


See accompanying
notes.




1




---



GERON CORPORATION




CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)(UNAUDITED)




THREE MONTHS ENDEDMARCH 31,2010
            
            2009Revenues from collaborative
      agreements
            $
            225
            
            
            $
            —License fees and royalties
            
            693
            
            
            
            444Total revenues
            
            918
            
            
            
            444Operating expenses:Research and development (including
      amountsfor related parties: 2010-$327, 2009-$429)
            
            13,545
            
            
            
            13,771General and administrative
            
            3,850
            
            
            
            3,378Total operating expenses
            
            17,395
            
            
            
            17,149Loss from operations
            
            (16,477
            )
            
            
            (16,705
            )Unrealized gain on derivatives, net
            
            58
            
            
            
            77Interest and other income
            
            202
            
            
            
            525Losses recognized under equity method investment
            
            (396
            )
            
            
            (656
            )Interest and other expense
            
            (27
            )
            
            
            (52
            )Net loss
            $
            (16,640
            )
            
            $
            (16,811
            )Basic and diluted
      net loss per share
            $
            (0.18
            )
            
            $
            (0.20
            )Shares used in computing basic and
      diluted net loss per share
            
            95,012,100
            
            
            
            84,160,889


See accompanying
notes.




2




---



GERON CORPORATION




CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWSCHANGE IN CASH AND CASH EQUIVALENTS (IN THOUSANDS)(UNAUDITED)




THREE MONTHS ENDEDMARCH 31,2010
            
            2009Cash flows from operating
      activities:Net loss
            $
            (16,640
            )
            
            $
            (16,811
            )Adjustments to reconcile net loss to net
      cash used in operating activities:Depreciation and
      amortization
            
            397
            
            
            
            431Accretion and amortization on investments,
      net
            
            909
            
            
            
            (9
            )Loss on retirement/sale of property and
      equipment
            
            —
            
            
            
            1Issuance of common stock in exchange for
      services by non-employees
            
            865
            
            
            
            745Stock-based compensation for employees and
      directors
            
            3,069
            
            
            
            2,520Amortization related to 401(k)
      contributions
            
            193
            
            
            
            127Loss on investments in
    licensees
            
            396
            
            
            
            656Unrealized gain on derivatives,
      net
            
            (58
            )
            
            
            (77
            )Changes in assets and liabilities:Other current and noncurrent
      assets
            
            1,299
            
            
            
            2,076Other current and noncurrent
      liabilities
            
            208
            
            
            
            1,292Advance payment from related party for
      researchand development
            
            —
            
            
            
            (241
            )Translation adjustment
            
            (3
            )
            
            
            —Net cash used in operating
      activities
            
            (9,365
            )
            
            
            (9,290
            )Cash flows from investing
      activities:Restricted cash transfer
            
            —
            
            
            
            (1
            )Purchases of property and
      equipment
            
            (393
            )
            
            
            (529
            )Purchases of marketable securities
            
            (32,935
            )
            
            
            (48,460
            )Proceeds from maturities of marketable
      securities
            
            34,000
            
            
            
            27,879Net cash provided by (used in) investing activities
            
            672
            
            
            
            (21,111
            )Cash flows from financing
      activities:Proceeds from issuances of common stock and warrants, net of
      issuance costs
            
            9,992
            
            
            
            46,654Net cash provided by financing
      activities
            
            9,992
            
            
            
            46,654Net increase in cash and cash equivalents
            
            1,299
            
            
            
            16,253Cash and cash equivalents at the
      beginning of the period
            
            34,601
            
            
            
            109,348Cash and cash equivalents at the end of the period
            $
            35,900
            
            
            $
            125,601


See accompanying
notes.




3




---



GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31,
2010(UNAUDITED)




1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES




Basis of Presentation




The terms “Geron”, the “Company”, “we” and “us” as used in this report
refer to Geron Corporation. The accompanying unaudited condensed consolidated
balance sheet as of March 31, 2010 and condensed consolidated statements of
operations for the three months ended March 31, 2010 and 2009 have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by U.S. generally accepted accounting principles for complete
financial statements. In the opinion of management of Geron, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended March 31, 2010 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2010 or any other period. These
financial statements and notes should be read in conjunction with the financial
statements for each of the three years ended December 31, 2009, included in the
Company’s Annual Report on Form 10-K. The accompanying condensed consolidated
balance sheet as of December 31, 2009 has been derived from audited financial
statements at that date.




Principles of Consolidation




The consolidated financial statements include the accounts of Geron, our
wholly-owned subsidiary, Geron Bio-Med Ltd. (Geron Bio-Med), a United Kingdom
company, and our majority-owned subsidiary, TA Therapeutics, Ltd. (TAT), a Hong
Kong company. We have eliminated intercompany accounts and transactions. We
prepare the financial statements of Geron Bio-Med using the local currency as
the functional currency. We translate the assets and liabilities of Geron
Bio-Med at rates of exchange at the balance sheet date and translate income and
expense items at average monthly rates of exchange. The resultant translation
adjustments are included in accumulated other comprehensive income (loss), a
separate component of stockholders’ equity. The functional currency for TAT is
U.S. dollars.




Net Loss Per Share




Basic earnings (loss) per share is calculated based on the weighted
average number of shares of common stock outstanding during the period. Diluted
earnings (loss) per share is calculated based on the weighted average number of
shares of common stock and dilutive securities outstanding during the period.
Potential dilutive securities primarily consist of outstanding employee stock
options, restricted stock and warrants to purchase common stock and are
determined using the treasury stock method at an average market price during the
period.




Because we were in a net loss position, diluted earnings per share
excludes the effects of potential dilutive securities. Had we been in a net
income position, diluted earnings per share would have included the shares used
in the computation of basic net loss per share as well as an additional
1,248,855 and 857,838 shares for 2010 and 2009, respectively,
related to outstanding options, restricted stock and warrants (as determined
using the treasury stock method at the estimated average market value).




Use of Estimates




The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires us to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. On a regular basis, management evaluates these estimates and
assumptions. Actual results could differ from those estimates.




4




---



GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31,
2010(UNAUDITED)




Fair Value of Financial Instruments




Cash Equivalents and Marketable
Securities




We consider all highly liquid investments with an original maturity of
three months or less to be cash equivalents. We are subject to credit risk
related to our cash equivalents and marketable securities. We place our cash and
cash equivalents in money market funds and municipal securities. Our current
investments include U.S. Treasury securities, U.S. government-sponsored
enterprise securities and corporate notes with original maturities ranging from
five to 24 months.




We classify our marketable securities as available-for-sale. We record
available-for-sale securities at fair value with unrealized gains and losses
reported in accumulated other comprehensive income (loss) in stockholders’
equity. Realized gains and losses are included in interest and other income and
are derived using the specific identification method for determining the cost of
securities sold and have been insignificant to date. Dividend and interest
income are recognized when earned and included in interest and other income in
our condensed consolidated statements of operations. We recognize a charge when
the declines in the fair values below the amortized cost basis of our
available-for-sale securities are judged to be other-than-temporary. We consider
various factors in determining whether to recognize an other-than-temporary
charge, including whether we intend to sell the security or whether it is more
likely than not that we would be required to sell the security. Declines in
market value associated with credit losses judged as other-than-temporary result
in a charge to interest and other income. Other-than-temporary charges not
related to credit losses are included in accumulated other comprehensive income
(loss) in stockholders’ equity. See Note 2 on Fair Value Measurements.




Marketable and Non-Marketable Investments in
Licensees




Investments in non-marketable nonpublic companies, in which we own less
than 20% of the outstanding voting stock and do not otherwise have the ability
to exert significant influence over the investees, are carried at cost, as
adjusted for other-than-temporary impairments. Investments in marketable equity
securities are carried at fair value as of the balance sheet date with
unrealized gains and losses reported in accumulated other comprehensive income
(loss) in stockholders’ equity. Realized gains or losses are included in
interest and other income and are derived using the specific identification
method.




We apply the equity method of accounting for investments in licensees in
which we own more than 20% of the outstanding voting stock or otherwise have the
ability to exert significant influence over the investees. Under this method, we
increase (decrease) the carrying value of our investment by a proportionate
share of the investee’s earnings (losses). If losses exceed the carrying value
of the investment, losses are then applied against any advances to the investee,
including any commitment to provide financial support, until those amounts are
reduced to zero. The equity method is then suspended until the investee has
earnings. Any proportionate share of investee earnings is first applied to the
share of accumulated losses not recognized during the period the equity method
was suspended.




We monitor our investments in licensees for impairment on a quarterly
basis and make appropriate reductions in carrying values when such impairments
are determined to be other-than-temporary. Other-than-temporary charges are
included in interest and other income. Factors used in determining whether an
other-than-temporary charge should be recognized include, but are not limited
to: the current business environment including competition and uncertainty of
financial condition; going concern considerations such as the rate at which the
investee company utilizes cash, and the investee company’s ability to obtain
additional private financing to fulfill its stated business plan; the need for
changes to the investee company’s existing business model due to changing
business environments and its ability to successfully implement necessary
changes; and the general progress toward product development, including clinical
trial results. See Note 2 on Fair Value Measurements.




5




---



GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31,
2010(UNAUDITED)




Fair Value of Derivatives




For warrants and non-employee options classified as assets or
liabilities, the fair value of these instruments is recorded on the condensed
consolidated balance sheet at inception of such classification and adjusted to
fair value at each financial reporting date. The change in fair value of the
warrants and non-employee options is recorded in the condensed consolidated
statements of operations as unrealized gain (loss) on derivatives. Fair value of
warrants and non-employee options is estimated using the Black Scholes
option-pricing model. The warrants and non-employee options continue to be
reported as an asset or liability until such time as the instruments are
exercised or expire or are otherwise modified to remove the provisions which
require this treatment, at which time these instruments are marked to fair value
and reclassified from assets or liabilities to stockholders’ equity. For
warrants and non-employee options classified as permanent equity, the fair value
of the warrants and non-employee options is recorded in stockholders’ equity and
no further adjustments are made. See Note 2 on Fair Value Measurements.




Revenue Recognition




We have several license agreements with various oncology, diagnostics,
research tools, agriculture and biologics production companies. With certain of
these agreements, we receive nonrefundable license payments in cash or equity
securities, option payments in cash or equity securities, royalties on future
sales of products, milestone payments, or any combination of these items.
Upfront nonrefundable signing, license or non-exclusive option fees are
recognized as revenue when rights to use the intellectual property related to
the license have been delivered and over the term of the agreement if we have
continuing performance obligations. Milestone payments, which are subject to
substantive contingencies, are recognized upon completion of specified
milestones, representing the culmination of the earnings process, according to
contract terms. Royalties are generally recognized upon receipt of the related
royalty payment. Deferred revenue represents the portion of research and license
payments received which has not been earned. When payments are received in
equity securities, we do not recognize any revenue unless such securities are
determined to be realizable in cash.




We recognize revenue under collaborative agreements as the related
research and development costs for services are rendered. We recognize related
party revenue under collaborative agreements as the related research and
development costs for services are rendered and when the source of funds have
not been derived from our contributions to the related party.




Restricted Cash




The components of restricted cash
were as follows:




March 31,
            
            December 31,2010
            
            2009(In thousands)Certificate of deposit for unused
      equipment line of credit
            $
            530
            
            $
            530Certificate of deposit for credit card purchases
            
            261
            
            
            261$
            791
            
            $
            791


Research and Development Expenses




All research and development costs are expensed as incurred. The value of
acquired in-process research and development is charged to research and
development expense on the date of acquisition, if not acquired in connection
with a business combination. Research and development expenses include, but are
not limited to, acquired in-process technology deemed to have no alternative
future use, payroll and personnel expense, lab supplies, preclinical studies,
raw materials to manufacture clinical trial drugs, manufacturing costs for
research and clinical trial materials, sponsored research at other labs,
consulting, costs to maintain technology licenses and research-related overhead.




6




---



GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31,
2010(UNAUDITED)




Depreciation and Amortization




We record property and equipment at cost and calculate depreciation using
the straight-line method over the estimated useful lives of the assets,
generally four years. Leasehold improvements are amortized over the shorter of
the estimated useful life or remaining term of the lease.




Stock-Based Compensation




We recognize compensation expense on a straight-line basis for
stock-based awards granted after January 1, 2006, plus unvested awards granted
prior to January 1, 2006 based on the grant-date fair value estimated using
accounting guidance in effect at that time and following the straight-line
attribution method.




The following table summarizes the stock-based compensation expense
related to stock options, restricted stock awards and employee stock purchases
for the three months ended March 31, 2010 and 2009 which was allocated as
follows:




Three Months EndedMarch 31,2010
            
            2009(In thousands)Research and development
            $
            1,647
            
            $
            1,226General and administrative
            
            1,422
            
            
            1,294Stock-based compensation expense
      included inoperating expenses
            $
            3,069
            
            $
            2,520


Stock Options




The fair value of options granted during the three months ended March 31,
2010 and 2009 has been estimated at the date of grant using the Black Scholes
option-pricing model with the following assumptions:




Three Months Ended March
      31,2010
            
            2009Dividend yield
            None
            
            NoneExpected volatility
            0.627
            
            0.630Risk-free interest rate range
            2.38% to 2.65%
            
            1.54% to 1.81%Expected term
            5 yrs
            
            5
yrs


Employee Stock Purchase
Plan




The fair value of employees’ purchase rights during the three months
ended March 31, 2010 and 2009 has been estimated using the Black Scholes
option-pricing model with the following assumptions:




Three Months Ended March
      31,2010
            
            2009Dividend yield
            None
            
            NoneExpected volatility range
            0.592 to 0.995
            
            0.536 to 1.016Risk-free interest rate range
            0.18% to 0.54%
            
            0.28% to 2.38%Expected term range
            6 - 12 mos
            
            6 - 12
mos


7




---



GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31,
2010(UNAUDITED)




Dividend yield is based on historical cash dividend payments, which have
been none to date. The expected volatility is based on historical volatilities
of our stock since traded options on Geron stock do not correspond to option
terms and the trading volume of options is limited. The risk-free interest rate
range is based on the U.S. Zero Coupon Treasury Strip Yields for the expected
term in effect on the date of grant for an award. The expected term of options
is derived from actual historical exercise data and represents the period of
time that options granted are expected to be outstanding. The expected term of
employees’ purchase rights is equal to the purchase period. We grant options
under our equity plans to employees, non-employee directors and consultants, for
whom the vesting period is generally four years.




As stock-based compensation expense recognized in the condensed
consolidated statements of operations for the three months ended March 31, 2010
and 2009 is based on awards ultimately expected to vest, it has been reduced for
estimated forfeitures but at a minimum, reflects the grant-date fair value of
those awards that actually vested in the period. Forfeitures have been estimated
at the time of grant based on historical experience and revised, if necessary,
in subsequent periods if actual forfeitures differ from those
estimates.




Restricted Stock Awards




The stock-based compensation expense related to restricted stock awards
is determined using the fair value of our common stock on the date of grant and
reduced for estimated forfeitures as applicable. The fair value is amortized as
compensation expense over the service period of the award on a straight-line
basis.




Non-Employee Stock-Based
Awards




For our non-employee stock-based awards, the measurement date on which
the fair value of the stock-based award is calculated is equal to the earlier of
(i) the date at which a commitment for performance by the counterparty to earn
the equity instrument is reached or (ii) the date at which the counterparty’s
performance is complete. We recognize stock-based compensation expense for the
fair value of the vested portion of non-employee awards in our condensed
consolidated statements of operations.




Comprehensive Loss




Comprehensive loss is comprised of net loss and other comprehensive
income (loss). Other comprehensive income (loss) includes certain changes in
stockholders’ equity which are excluded from net loss. The activity in
comprehensive loss during the three months ended March 31, 2010 and 2009 was as
follows:




Three Months EndedMarch 31,2010
            
            2009(In thousands)Net loss
            $
            (16,640
            )
            
            $
            (16,811
            )Change in unrealized loss on available-for-sale
securitiesand marketable investments in
      licensees
            
            133
            
            
            
            3Change in foreign currency translation
      adjustments
            
            (3
            )
            
            
            —Comprehensive loss
            $
            (16,510
            )
            
            $
            (16,808
            )


8




---



GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31,
2010(UNAUDITED)




The components of accumulated other
comprehensive loss were as follows:




March 31, 2010
            
            December 31, 2009(In thousands)Unrealized loss on available-for-sale
      securities andmarketable investments in licensees, net
            $
            (101
            )
            
            $
            (234
            )Foreign currency translation adjustments
            
            (175
            )
            
            
            (172
            )Accumulated other comprehensive
      loss
            $
            (276
            )
            
            $
            (406
            )


Recently Issued Accounting Guidance




In January 2010, the Financial Accounting Standards Board (FASB) issued
authoritative guidance to amend the disclosure requirements related to recurring
and nonrecurring fair value measurements. The guidance requires new disclosures
on the transfers of assets and liabilities between Level 1 and Level 2 of the
fair value measurement hierarchy, including the reasons and timing of the
transfers. Additionally, the guidance requires a roll forward of activities
related to the purchases, sales, issuances and settlements of assets and
liabilities measured using Level 3 fair value measurements. We adopted this
guidance as of January 1, 2010 and have reflected the increased level of
disclosures in our notes to condensed consolidated financial statements. See
Note 2 on Fair Value Measurements.




In January 2010, the FASB issued authoritative guidance to amend the
accounting and reporting requirements for decreases in ownership of a
subsidiary. This guidance requires that a decrease in the ownership interest of
a subsidiary that does not result in a change of control be treated as an equity
transaction. The guidance also expands the disclosure requirements about the
deconsolidation of a subsidiary. We adopted this guidance on January 1, 2010 and
it did not have a material impact on our consolidated financial position,
results of operations or cash flows, as no applicable deconsolidation of a
subsidiary or derecognition of assets occurred subsequent to the effective date
of such guidance.




In February 2010, the FASB issued authoritative guidance to define a
Securities and Exchange Commission (SEC) filer within the FASB Accounting
Standards Codification and eliminate the requirement for a SEC filer to disclose
the date through which subsequent events have been evaluated in order to remove
potential conflicts with current SEC guidance. We adopted the FASB guidance on
the date of issuance, February 24, 2010. As the new guidance only pertained to
disclosures, it had no impact on our consolidated financial position, results of
operations or cash flows upon adoption.




2. FAIR VALUE MEASUREMENTS




We categorize assets and liabilities recorded at fair value on our
condensed consolidated balance sheet based upon the level of judgment associated
with inputs used to measure their fair value. The categories are as
follows:




Level 1
            –
            Inputs are unadjusted, quoted prices in active markets for
      identical assets or liabilities at the measurement date. An active market
      for the asset or liability is a market in which transactions for the asset
      or liability occur with sufficient frequency and volume to provide pricing
      information on an ongoing basis.Level 2
            –
            Inputs (other than quoted market prices included in Level 1) are
      either directly or indirectly observable for the asset or liability
      through correlation with market data at the measurement date and for the
      duration of the instrument’s anticipated life.Level 3
            –
            Inputs reflect management’s best estimate of what market
      participants would use in pricing the asset or liability at the
      measurement date. Consideration is given to the risk inherent in the
      valuation technique and the risk inherent in the inputs to the
      model.


9




---



GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31,
2010(UNAUDITED)




A financial instrument’s categorization within the valuation hierarchy is
based upon the lowest level of input that is significant to the fair value
measurement. Following is a description of the valuation methodologies used for
instruments measured at fair value on our condensed consolidated balance sheet,
including the category for such instruments.




Cash Equivalents and Marketable Securities
Available-for-Sale




Where quoted prices are available in an active market, securities are
categorized as Level 1. Examples of such Level 1 securities include highly
liquid U.S. Treasury securities, U.S. government-sponsored enterprise
securities, municipal securities and money market funds. If quoted market prices
are not available for the specific security, then fair values are estimated by
using pricing models, quoted prices of securities with similar characteristics
or discounted cash flows. Examples of such Level 2 securities include corporate
notes, asset-backed securities and commercial paper.




Marketable securities by security
type at March 31, 2010 were as follows:




Gross
            
            Gross
            
            EstimatedUnrealized
            
            Unrealized
            
            FairCost
            
            Gains
            
            Losses
            
            Value(In thousands)Included in cash and cash
      equivalents:Money market funds
            $
            31,336
            
            $
            —
            
            $
            —
            
            
            $
            31,336Municipal securities
            
            3,500
            
            
            —
            
            
            —
            
            
            
            3,500$
            34,836
            
            $
            —
            
            $
            —
            
            
            $
            34,836Restricted cash:Certificates of
    deposit
            $
            791
            
            $
            —
            
            $
            —
            
            
            $
            791Marketable securities:U.S. Treasury securities (due
      in less than 1 year)
            $
            32,862
            
            $
            11
            
            $
            (7
            )
            
            $
            32,866Government-sponsored enterprise securities(due in less than 1 year)
            
            4,457
            
            
            —
            
            
            (8
            )
            
            
            4,449Government-sponsored
      enterprise securities(due in 1 to 2 years)
            
            4,000
            
            
            —
            
            
            (4
            )
            
            
            3,996Corporate notes (due in less than 1 year)
            
            52,107
            
            
            16
            
            
            (48
            )
            
            
            52,075Corporate notes (due in 1 to 2
      years)
            
            36,512
            
            
            1
            
            
            (62
            )
            
            
            36,451$
            129,938
            
            $
            28
            
            $
            (129
            )
            
            $
            129,837Marketable securities by
      security type at December 31, 2009 were as follows:Gross
            
            Gross
            
            EstimatedUnrealized
            
            Unrealized
            
            FairCost
            
            Gains
            
            Losses
            
            Value(In thousands)Included in cash and cash
      equivalents:Money market funds
            $
            33,395
            
            $
            —
            
            $
            —
            
            
            $
            33,395Restricted cash:Certificate of
    deposit
            $
            791
            
            $
            —
            
            $
            —
            
            
            $
            791Marketable securities:U.S. Treasury securities (due
      in less than 1 year)
            $
            58,146
            
            $
            20
            
            $
            (7
            )
            
            $
            58,159Government-sponsored enterprise securities(due in 1 to 2 years)
            
            14,058
            
            
            —
            
            
            (37
            )
            
            
            14,021Corporate notes (due in less
      than 1 year)
            
            18,847
            
            
            11
            
            
            (8
            )
            
            
            18,850Corporate notes (due in 1 to 2 years)
            
            40,861
            
            
            —
            
            
            (213
            )
            
            
            40,648$
            131,912
            
            $
            31
            
            $
            (265
            )
            
            $
            131,678


10




---



GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31,
2010(UNAUDITED)




Marketable securities with unrealized losses at March 31, 2010 and
December 31, 2009 were as follows:




Less Than 12 Months
            
            12 Months or Greater
            
            TotalGross
            
            
            
            
            Gross
            
            
            
            
            GrossEstimated
            
            Unrealized
            
            Estimated
            
            Unrealized
            
            Estimated
            
            UnrealizedFair Value
            
            Losses
            
            Fair Value
            
            Losses
            
            Fair Value
            
            Losses(In thousands)As of March 31, 2010:U.S. Treasury securities(due in less than 1
      year)
            $
            17,291
            
            $
            (7
            )
            
            $
            —
            
            $
            —
            
            $
            17,291
            
            $
            (7
            )Government-sponsored
enterprisesecurities (due in less than 1
      year)
            
            4,449
            
            
            (8
            )
            
            
            —
            
            
            —
            
            
            4,449
            
            
            (8
            )Government-sponsored enterprisesecurities (due in 1 to 2
      years)
            
            3,996
            
            
            (4
            )
            
            
            —
            
            
            —
            
            
            3,996
            
            
            (4
            )Corporate notes (due in less than 1
      year)
            
            31,963
            
            
            (48
            )
            
            
            —
            
            
            —
            
            
            31,963
            
            
            (48
            )Corporate notes (due in 1 to 2 years)
            
            35,395
            
            
            (62
            )
            
            
            —
            
            
            —
            
            
            35,395
            
            
            (62
            )$
            93,094
            
            $
            (129
            )
            
            $
            —
            
            $
            —
            
            $
            93,094
            
            $
            (129
            )As of December 31,
2009:U.S. Treasury securities(due in less than 1
      year)
            $
            18,859
            
            $
            (7
            )
            
            $
            —
            
            $
            —
            
            $
            18,859
            
            $
            (7
            )Government-sponsored
enterprisesecurities (due in 1 to 2 years)
            
            14,021
            
            
            (37
            )
            
            
            —
            
            
            —
            
            
            14,021
            
            
            (37
            )Corporate notes (due in less than 1 year)
            
            7,524
            
            
            (8
            )
            
            
            —
            
            
            —
            
            
            7,524
            
            
            (8
            )Corporate notes (due in 1 to 2
      years)
            
            40,648
            
            
            (213
            )
            
            
            —
            
            
            —
            
            
            40,648
            
            
            (213
            )$
            81,052
            
            $
            (265
            )
            
            $
            —
            
            $
            —
            
            $
            81,052
            
            $
            (265
            )


The gross unrealized losses related to U.S. Treasury securities,
government-sponsored enterprise securities and corporate notes as of March 31,
2010 and December 31, 2009, were due to changes in interest rates. We determined
the gross unrealized losses on our marketable securities as of March 31, 2010
and December 31, 2009 were temporary in nature. We review our investments
quarterly to identify and evaluate whether any investments have indication of
possible impairment. Factors considered in determining whether a loss is
temporary include the length of time and extent to which the fair value has been
less than cost basis, the financial condition and near-term prospects of the
investee, and whether we intend to sell the security or whether it is more
likely than not that we would be required to sell the security.




Marketable and Non-Marketable Investments in
Licensees




Where quoted prices are available in an active market, securities are
categorized as Level 1. Level 1 securities include publicly traded equities.
Significant investments in licensees accounted for using the equity method of
accounting or equity securities in non-marketable companies are not measured at
fair value and are not assigned a category level.




As of March 31, 2010 and December 31, 2009, the carrying values of our
investments in non-marketable nonpublic companies were $932,000 and $1,328,000,
respectively. We recognized no charges related to other-than-temporary declines
in fair values of investments in licensees for the three months ended March 31,
2010 and 2009. See Note 3 on Joint Venture and Related Party Transactions for
further discussion of investments in licensees.




11




---



GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31,
2010(UNAUDITED)




Derivatives




Warrants to purchase common stock and non-employee options are normally
traded less actively, have trade activity that is one way, and/or traded in
less-developed markets and are therefore valued based upon models with
significant unobservable market parameters, resulting in Level 3 categorization.




The fair value of derivatives has been calculated at each reporting date
using the Black Scholes option-pricing model with the following assumptions:




March 31, 2010
            
            December 31, 2009Dividend yield
            None
            
            NoneExpected volatility range
            0.307 to 0.627
            
            0.607 to 0.632Risk-free interest rate range
            0.15% to 2.55%
            
            0.06% to 2.69%Expected term range
            1 mo to 5 yrs
            
            4 mos to 5
yrs


Dividend yield is based on historical cash dividend payments, which have
been none to date. The expected volatility range is based on historical
volatilities of our stock since traded options on Geron stock do not correspond
to derivatives’ terms and trading volume of Geron options is limited. The
risk-free interest rate range is based on the U.S. Zero Coupon Treasury Strip
Yields for the expected term in effect on the reporting date. The expected term
of derivatives is equal to the remaining contractual term of the
instrument.




As of March 31, 2010 and December 31, 2009, the following warrants and
non-employee options to purchase common stock were considered derivatives and
classified as current liabilities:




At March 31, 2010
            
            At December 31, 2009Number
            
            Fair
            
            Number
            
            FairIssuance
            
            Exercise
            
            Exercisable
            
            Expiration
            
            of
            
            Value
            
            of
            
            ValueDate
            
            Price
            
            Date
            
            Date
            
            Shares
            
            (In thousands)
            
            Shares
            
            (In thousands)April 2005
            
            $
            7.95
            
            April 2005
            
            April 2010
            
            351,852
            
            $
            —
            
            351,852
            
            $
            58March
      2005
            
            $
            6.39
            
            January 2007
            
            March 2015
            
            284,600
            
            
            839
            
            284,600
            
            
            839636,452
            
            $
            839
            
            636,452
            
            $
            897


No reclassifications from current liabilities to stockholders’ equity
were made for derivatives during the three months ended March 31, 2010.




Fair Value on a Recurring Basis




The following table presents information about our financial assets and
liabilities that are measured at fair value on a recurring basis as of March 31,
2010, and indicates the fair value category assigned.




Fair Value Measurements at Reporting
      Date UsingSignificantQuoted Prices in
            
            Other
            
            SignificantActive Markets for
            
            Observable
            
            UnobservableIdentical Assets
            
            Inputs
            
            Inputs(In thousands)
            Level 1
            
            Level 2
            
            Level 3
            
            TotalAssetsMoney market funds (1)
            $
            31,336
            
            $
            —
            
            $
            —
            
            $
            31,336Municipal securities (1)
            
            3,500
            
            
            —
            
            
            —
            
            
            3,500U.S. Treasury securities (2)
            
            32,866
            
            
            —
            
            
            —
            
            
            32,866Government-sponsored enterprise
      securities (2)
            
            8,445
            
            
            —
            
            
            —
            
            
            8,445Corporate notes (2)
            
            —
            
            
            88,526
            
            
            —
            
            
            88,526Total
            $
            76,147
            
            $
            88,526
            
            $
            —
            
            $
            164,673


12




---



GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31,
2010(UNAUDITED)




Fair Value Measurements at Reporting
      Date UsingSignificantQuoted Prices in
            
            Other
            
            SignificantActive Markets for
            
            Observable
            
            UnobservableIdentical Assets
            
            Inputs
            
            Inputs(In thousands)
            Level 1
            
            Level 2
            
            Level 3
            
            TotalLiabilitiesDerivatives (3)
            $
            —
            
            $
            —
            
            $
            839
            
            $
            839____________________


(1)
            
            Included in cash and cash equivalents on our condensed consolidated
      balance sheets.(2)
            
            Included in current and noncurrent marketable securities on our
      condensed consolidated balance sheets.(3)
            
            Included in fair value of derivatives on our condensed consolidated
      balance sheets.




Changes in Level 3 Recurring Fair Value
Measurements




The table below includes a rollforward of the balance sheet amounts for
the three months ended March 31, 2010 (including the change in fair value), for
financial instruments in the Level 3 category. When a determination is made to
classify a financial instrument within Level 3, the determination is based upon
the significance of the unobservable parameters to the overall fair value
measurement. However, Level 3 financial instruments typically include, in
addition to the unobservable components, observable components (that is,
components that are actively quoted and can be validated to external sources).
Accordingly, the gains and losses in the table below include changes in fair
value due in part to observable factors that are part of the methodology.




Fair Value Measurements Using
      Significant Unobservable Inputs (Level 3)Three Months Ended March 31,
      2010Change inUnrealized GainsTotal
            
            
            
            
            
            
            
            
            
            
            Related toUnrealized
            
            Purchases,
            
            
            
            
            
            
            
            FinancialGains Included
            
            Sales,
            
            Transfers
            
            
            
            
            InstrumentsFair Value at
            
            in
            
            Issuances,
            
            In and/or
            
            Fair Value at
            
            Held atDecember 31,
            
            Earnings, net
            
            Settlements,
            
            Out of
            
            March 31,
            
            March 31, 2010(In thousands)
            
            2009
            
            (1)
            
            net
            
            Level 3
            
            2010
            
            (1)Derivative liabilities
            
            $
            897
            
            $
            (58
            )
            
            $
            —
            
            $
            —
            
            $
            839
            
            $
            (58
            )






(1)
            
            Reported as unrealized gain on derivatives in our condensed
      consolidated statements of operations.




3. JOINT VENTURE AND RELATED PARTY
TRANSACTIONS




Start Licensing and ViaGen, Inc.




In April 2005, Geron and Exeter Life Sciences, Inc. (Exeter) established
Start Licensing, Inc. (Start), a joint venture to manage and license a broad
portfolio of intellectual property rights related to animal reproductive
technologies. We and Exeter owned 49.9% and 50.1% of Start, respectively. In
connection with the establishment of Start, we granted a worldwide, exclusive,
non-transferable license to our patent rights to nuclear transfer technology for
use in animal cloning, with the right to sublicense such patent rights. Since
there was no net book value associated with the patent rights at the execution
of the joint venture, no initial value was recognized for our investment in
Start. We suspended the equity method of accounting since our proportionate
share of net losses in Start exceeded our original carrying value of the
investment and we had no commitments to provide financial support or obligations
to perform services or other activities for Start.




13




---



GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31,
2010(UNAUDITED)




In August 2008, Geron and Exeter entered into Contribution Agreements
whereby we and Exeter exchanged our equity interests in Start for equity
interests in ViaGen, Inc. (ViaGen). As a result of the exchange, Start became a
wholly-owned subsidiary of ViaGen. Ownership of ViaGen immediately following the
transaction was as follows: Exeter – 69%; Geron – 27%; and Smithfield Foods –
4%. Since no value had been recorded for our investment in Start, the same zero
carrying value was applied to our investment in ViaGen. Geron’s share of equity
method losses from Start that were not recognized during the period the equity
method was suspended has been carried over to the investment in ViaGen.




In September 2009, Geron made a
net equity investment in ViaGen of $2,010,000 and simultaneously Exeter
converted its outstanding debt with ViaGen into equity. The new equity purchase
did not fund prior ViaGen losses and represented additional financial support to
ViaGen. Ownership of ViaGen upon consummation of the transactions and at March
31, 2010 was as follows: Exeter – 70%; Geron – 28%; and Smithfield Foods – 2%.
We have no commitments to provide financial support or obligations to perform
services or other activities for ViaGen.




In applying the equity method of accounting to our investment in ViaGen,
we increase (decrease) the carrying value of our investment by our proportionate
share of ViaGen’s earnings (losses). If equity method losses exceed the carrying
value of the investment, losses will be applied against any advances to ViaGen,
including any commitments to provide financial support until those amounts are
reduced to zero. The equity method of accounting shall then be suspended until
income is subsequently reported. If income is reported, Geron’s proportionate
share of income shall first be applied to recognize the equity method losses
accumulated during the time the equity method was suspended.




For the three months ended March 31, 2010 and 2009, we recognized
$396,000 and $656,000, respectively, for our proportionate share of ViaGen’s
operating losses. Our share of losses is recorded in the condensed consolidated
statements of operations under losses recognized under equity method investment.
The adjusted basis of our investment in ViaGen at March 31, 2010 and December
31, 2009 was $932,000 and $1,328,000, respectively, which is reflected under
investments in licensees on our condensed consolidated balance sheets.




TA Therapeutics, Ltd.




In March 2005, we and the Biotechnology Research Corporation (BRC), a
subsidiary of Hong Kong University of Science and Technology, established a
joint venture company in Hong Kong called TA Therapeutics, Ltd. (TAT). TAT
conducts research and was established to commercially develop products that
utilize telomerase activator drugs to restore the regenerative and functional
capacity of cells in various organ systems that have been impacted by
senescence, injury or chronic disease. On June 15, 2007, we and BRC entered into
an agreement to restructure the TAT joint venture. Under the amended agreements,
we direct the preclinical and drug development activities, own a 75% voting
interest and exercise control over the company. Upon any winding up of TAT, all
intellectual property of TAT is assigned to us and BRC is entitled to royalties
on sales of future products developed from TAT’s efforts up to a fixed amount
based on BRC’s cash contributions. Upon a winding up of TAT, if the assets
available for distribution, other than the intellectual property, are
insufficient to repay the whole of the paid-up capital, such assets shall be
distributed so that the losses shall be borne by the shareholders in proportion
to the cash contributed by both parties.




As a result of our obtaining control over TAT, we have included the
results of TAT in our condensed consolidated financial statements beginning June
16, 2007. Based on consideration of the relevant rights described above, we have
determined that BRC’s 25% equity interest in TAT is not substantive. The amended
arrangement represented, in substance, a research and development arrangement
between us and BRC. Therefore, this arrangement was accounted for as a research
and development arrangement. As of December 31, 2009, all of BRC’s contributions
had been fully expended on research and development activities.




14




---



GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31,
2010(UNAUDITED)




For the three months ended March 31, 2010 and 2009, we incurred related
party research and development costs of $327,000 and $429,000, respectively. As
the source of funds used to perform this research activity on behalf of TAT was
derived from our cash contributions to TAT, no related party revenue has been
recognized for research and development services rendered for TAT for the three
months ended March 31, 2010 and 2009.




4. STOCKHOLDERS’ EQUITY




Vendor Stock Issuances




In January 2010, we issued 133,357 shares of our common stock to MPI
Research, Inc. (MPI) in a private placement as consideration under an amendment
to a master services agreement under which MPI has provided and will continue to
provide certain preclinical services in support of our clinical programs. The
fair value of the common stock of $829,000 was recorded as a prepaid asset and
is being amortized to research and development expense on a pro-rata basis as
services are performed. As of March 31, 2010, $290,000 remained as a prepaid
asset which is expected to be expensed over the next six months.




In January 2010, we issued 94,741 shares of our common stock to Exponent,
Inc. (Exponent), the lessor of the premises at 149 Commonwealth Drive, as a
first installment payment of rent due under the extended lease agreement for the
period from May 1, 2010 through July 31, 2012. The fair value of the common
stock of $589,000 was recorded as a prepaid asset and will be amortized to rent
expense on a pro-rata basis over the lease term.




In January 2010, we issued 287,401 shares of our common stock to
Samchully Pharm Co. Ltd. (Samchully) in a private placement as consideration
related to an addendum agreement to a manufacturing agreement pursuant to which
Samchully is performing certain services and manufacturing certain raw materials
and products for us intended for use in human clinical trials. The fair value of
the common stock of $1,704,000 was recorded as a prepaid asset and is being
amortized to research and development expense on a pro-rata basis upon the
performance of services and the proper receipt of materials. As of March 31,
2010, $1,704,000 remained as a prepaid asset which is expected to be expensed
over the next six months.




Warrant Exchange and Direct Equity Issuance




On January 14, 2010, we exchanged outstanding warrants to purchase
5,559,426 shares of common stock held by certain institutional investors for
2,700,000 shares of common stock. In connection with the warrant exchange, we
sold an additional 1,481,481 shares of common stock to the investors at a
premium to the market price and issued warrants to the investors to purchase an
additional 740,741 shares of common stock for gross proceeds of $10,000,000. The
warrants are immediately exercisable from time to time at a price of $6.75 per
share of common stock, and expire on October 31, 2010. A number of shares of
common stock equal to those issued in exchange for the outstanding warrants
cannot be sold during the 12 month period from the date of issuance unless the
sales are at prices in excess of $9.11 per share.




5. COLLABORATIVE AGREEMENT




In June 2009, we entered into a
worldwide exclusive license and alliance agreement with GE Healthcare UK Limited (GEHC) to develop and
commercialize cellular assay products derived from human embryonic stem cells
(hESCs) for use in drug discovery, development and toxicity screening. Under the
terms of the agreement, GEHC has been granted an exclusive license under Geron’s
intellectual property portfolio covering the growth and differentiation of
hESCs, as well as a sublicense under Geron’s rights to the hESC patents held by
the Wisconsin Alumni Research Foundation. We have established a multi-year
alliance program with GEHC under which scientists from both companies will work
to develop hESC-based products for drug discovery.




15




---



GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31,
2010(UNAUDITED)




In connection with the agreement, we received upfront non-refundable
license payments under the exclusive license and sublicense and can receive
milestone payments upon achievement of certain commercial development and
product sales events and royalties on future product sales. Under the alliance
program, GEHC is responsible for all costs incurred by GEHC and all costs
incurred by Geron for activities undertaken at Geron, including the funding of
Geron scientists working on the alliance program. An Alliance Steering
Committee, with representatives from each company, coordinates and manages the
alliance program.




License payments under the GEHC agreement were recorded as deferred
revenue upon receipt and are being recognized ratably as license fee revenue
over the alliance program period as a result of our continuing involvement in
the collaboration. Funding received for Geron’s efforts under the alliance
program is being recognized as revenue from collaborative agreements as costs
are incurred, which approximates our level of effort over the period of the
alliance program. Since the milestone payments are subject to substantive
contingencies, any such payments will be recognized upon completion of the
specified milestones. Royalties received under the agreement will generally be
recognized as revenue upon receipt of the related royalty payment. For the three
months ended March 31, 2010, we recognized $225,000 as revenue from
collaborative agreements and $175,000 in license fee revenue in connection with
this agreement.




6. SEGMENT INFORMATION




Our executive management team represents our chief decision maker. To
date, we have viewed our operations as one segment, the discovery and
development of therapeutic and diagnostic products for oncology and human
embryonic stem cell therapies. As a result, the financial information disclosed
herein materially represents all of the financial information related to our
principal operating segment.




7. CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS DATA




Supplemental schedule of non-cash
operating and investing activities:




Three Months EndedMarch 31,(In Thousands)
            2010
            
            2009(Unaudited)Supplemental Operating
    Activities:Cash in transit from option
      exercises
            $
            —
            
            $
            33Reclassification of derivative liabilities to equity
            
            —
            
            
            30Issuance of common stock for
      401(k) matching contributions
            
            972
            
            
            665Issuance of common stock and warrants to purchase common stockfor services rendered to date or to be received in future
periods
            
            2,587
            
            
            1,353Reclassification of deposits
      to other current assets
            
            83
            
            
            350Supplemental Investing
    Activities:Net unrealized gain on
      marketable securities
            
            133
            
            
            3


8. SUBSEQUENT EVENTS




In April 2010, we issued to Girindus America, Inc. (Girindus) 293,225
shares of our common stock in a private placement as consideration for a project
order under a manufacturing agreement pursuant to which Girindus is
manufacturing certain materials for us intended for therapeutic use in humans.
The fair value of the common stock of $1,680,000 will be recorded as a prepaid
asset and amortized to research and development expense on a pro-rata basis upon
the performance of services and the proper receipt of materials, which is
expected to be over the next six months.




In April 2010, we issued to ReSearch Pharmaceutical Services, Inc. (RPS)
259,965 shares of our common stock in a private placement as consideration for a
project agreement under a master services agreement under which RPS is providing
certain services in support of our clinical programs. The fair value of the
common stock of $1,490,000 will be recorded as a prepaid asset and amortized to
research and development expense on a pro-rata basis as services are performed,
which is expected to be over the next seven months.




16




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GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31,
2010(UNAUDITED)




In April 2010, we issued to Prime Synthesis, Inc. (Prime Synthesis)
24,536 shares of our common stock in a private placement as consideration for an
addendum agreement under a master supply agreement pursuant to which Prime
Synthesis is manufacturing certain materials for us intended for therapeutic use
in humans. The fair value of the common stock of $141,000 will be recorded as a
prepaid asset and amortized to research and development expense on a pro-rata
basis upon the performance of services and the proper receipt of materials,
which is expected to be over the next six months.




In April 2010, we issued to Exponent, the lessor of the premises at 149
Commonwealth Drive, 93,258 shares of our common stock in a private placement as
a final installment payment of rent due under the extended lease agreement for
the period from May 1, 2010 through July 31, 2012. The fair value of the common
stock of $540,000 will be recorded as a prepaid asset and amortized to rent
expense on a pro-rata basis over the lease term.




17




---



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




FORWARD-LOOKING STATEMENTS




This Form 10-Q contains forward-looking statements that involve risks and
uncertainties. We use words such as “anticipate”, “believe”, “plan”, “expect”,
“future”, “intend” and similar expressions to identify forward-looking
statements. These statements are within the meaning of the “safe harbor”
provisions of the Private Securities Litigation Reform Act of 1995. These
statements appear throughout the Form 10-Q and are statements regarding our
intent, belief, or current expectations, primarily with respect to our
operations and related industry developments. You should not place undue
reliance on these forward-looking statements, which apply only as of the date of
this Form 10-Q. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by us and described in Part II, Item 1A, entitled “Risk Factors” and
in “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Part I, Item 2 of this Form 10-Q.




OVERVIEW




The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in Part
I, Item 1 of this Form 10-Q and with Management’s Discussion and Analysis of
Financial Condition and Results of Operations contained in the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, as filed with
the Securities and Exchange Commission on February 26, 2010.




Geron is developing first-in-class biopharmaceuticals for the treatment
of cancer and chronic degenerative diseases, including spinal cord injury, heart
failure and diabetes. We are advancing an anti-cancer drug and a cancer vaccine
that target the enzyme telomerase through multiple clinical trials in different
cancers.




Our results of operations have fluctuated from period to period and may
continue to fluctuate in the future, as well as the progress of our research and
development efforts and variations in the level of expenses related to
developmental efforts during any given period. Results of operations for any
period may be unrelated to results of operations for any other period. In
addition, historical results should not be viewed as indicative of future
operating results. We are subject to risks common to companies in our industry
and at our stage of development, including risks inherent in our research and
development efforts, reliance upon our collaborative partners, enforcement of
our patent and proprietary rights, need for future capital, potential
competition and uncertainty of clinical trial results or regulatory approvals or
clearances. In order for a product to be commercialized based on our research,
we and our collaborators must conduct preclinical tests and clinical trials,
demonstrate the efficacy and safety of our product candidates, obtain regulatory
approvals or clearances and enter into manufacturing, distribution and marketing
arrangements, as well as obtain market acceptance. We do not expect to receive
revenues or royalties based on therapeutic products for a period of years, if at
all.




CRITICAL ACCOUNTING POLICIES AND ESTIMATES




We believe that there have been no significant changes in our critical
accounting policies and estimates during the three months ended March 31, 2010
as compared to the critical accounting policies and estimates disclosed in our
Annual Report on Form 10-K for the year ended December 31, 2009, as filed with
the Securities and Exchange Commission on February 26, 2010.




Our condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported assets, liabilities, revenues
and expenses. Note 1 of Notes to Condensed Consolidated Financial Statements
describes the significant accounting policies used in the preparation of the
condensed consolidated financial statements.




18




---



Estimates and assumptions about future events and their effects cannot be
determined with certainty. We base our estimates on historical experience and on
various other assumptions believed to be applicable and reasonable under the
circumstances. These estimates may change as new events occur, as additional
information is obtained and as our operating environment changes. These changes
have historically been minor and have been included in the condensed
consolidated financial statements as soon as they became known. Based on a
critical assessment of our accounting policies and the underlying judgments and
uncertainties affecting the application of those policies, management believes
that our condensed consolidated financial statements are fairly stated in
accordance with accounting principles generally accepted in the United States,
and present a meaningful presentation of our financial condition and results of
operations.




RESULTS OF OPERATIONS




Revenues




We recognized revenues of $225,000 from collaborative agreements for the
three months ended March 31, 2010, compared to none for the comparable 2009
period. Revenues in 2010 reflect revenue recognized under our collaboration with
GE Healthcare UK Limited.




We have entered into license and option agreements with companies
involved in oncology, diagnostics, research tools, agriculture and biologics
production. In each of these agreements, we have granted certain rights to our
technologies. In connection with the agreements, we are entitled to receive
license fees, option fees, milestone payments and royalties on future sales, or
any combination thereof. We recognized license fee revenues of $605,000 for the
three months ended March 31, 2010, compared to $380,000 for the comparable 2009
period related to our various agreements. The increase in license fees for the
2010 first quarter compared to the 2009 first quarter primarily reflected
revenue recognized from upfront license fee payments under our worldwide
exclusive license agreement with GE Healthcare UK Limited effective June 2009.
We expect to recognize revenues of $525,000 for the remainder of 2010, $350,000
in 2011 and no revenues thereafter related to our existing deferred revenue.
Current revenues may not be predictive of future revenues.




We received royalties of $88,000 for the three months ended March 31,
2010, compared to $64,000 for the comparable 2009 period on product sales of
telomerase detection and telomere measurement kits to the research-use-only
market, cell-based research products and agricultural products. License and
royalty revenues are dependent upon additional agreements being signed and
future product sales.




Research and Development
Expenses




Research and development expenses were $13.5 million for the three months
ended March 31, 2010, compared to $13.8 million for the comparable 2009 period.
The decrease in research and development expenses for the 2010 first quarter
compared to the 2009 first quarter was primarily the net result of reduced
manufacturing costs of $670,000 due to the completion of patient enrollment in
our Phase II trial of GRNVAC1 and lower clinical trial costs of $437,000 due to
completion of patient enrollment in four of six trials of imetelstat, partially
offset by increased preclinical study costs of $291,000 for GRNOPC1 and higher
non-cash compensation expense of $421,000 associated with equity-based awards.
Overall, we expect research and development expenses to increase as we incur
expenses related to clinical trials for imetelstat along with continued
development of our human embryonic stem cell (hESC) programs.




Our research and development activities have arisen from our two major
technology platforms, telomerase and hESCs. The oncology programs focus on
treating or diagnosing cancer by targeting or detecting the presence of
telomerase, either inhibiting activity of the telomerase enzyme, diagnosing
cancer by detecting the presence of telomerase, or using telomerase as a target
for therapeutic vaccines. Our core knowledge base in telomerase and telomere
biology supports all these approaches, and our scientists may contribute to any
or all of these programs in a given period. The following table gives the status
of our oncology clinical trials:




19




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PatientProduct
            
            
            
            Development
            
            EnrollmentProduct
            
            Description
            
            Application
            
            Stage
            
            StatusImetelstat
            
            Telomerase
            
            Chronic Lymphoproliferative
            
            Phase I Trial
            
            Completed(GRN163L)
            
            Inhibitor
            
            Diseases
            
            (single agent)Imetelstat
            
            Telomerase
            
            Solid Tumors
            
            Phase I Trial
            
            Open(GRN163L)
            
            Inhibitor
            
            
            
            (single
    agent)Imetelstat
            
            Telomerase
            
            Multiple Myeloma*
            
            Phase I Trial
            
            Completed(GRN163L)
            
            Inhibitor
            
            
            
            (single agent)Imetelstat
            
            Telomerase
            
            Non-Small Cell Lung
            
            Phase I Trial
            
            Completed(GRN163L)
            
            Inhibitor
            
            Cancer*
            
            (combination)Imetelstat
            
            Telomerase
            
            Breast Cancer*
            
            Phase I/II Trial
            
            Open(GRN163L)
            
            Inhibitor
            
            
            
            (combination)Imetelstat
            
            Telomerase
            
            Multiple Myeloma
            
            Phase I Trial
            
            Completed(GRN163L)
            
            Inhibitor
            
            
            
            (combination)GRNVAC1
            
            Telomerase
            
            Acute Myelogenous
            
            Phase II Trial
            
            CompletedCancer
      Vaccine
            
            Leukemia (AML)*     Initiation of Phase II clinical trials in
      non-small cell lung cancer, multiple myeloma, breast cancer and essential
      thrombocythemia is planned for 2010.


Interim data from the Phase I single agent trial in patients with
relapsed and refractory multiple myeloma has shown that imetelstat inhibits
telomerase both in the bulk myeloma fraction as well as the stem-cell containing
fraction in patients’ bone marrow. Interim data from the trial in patients with
refractory, advanced solid cancers has shown that with a modified dosing
schedule, the exposures to imetelstat exceeded the levels associated with
inhibiting tumor growth from several models of human cancers. From the above
trials, we have obtained data to assess the safety, tolerability,
pharmacokinetics and pharmacodynamics of imetelstat. With this information, we
have established the single agent Phase II dose and dosing schedule and are
planning to advance imetelstat to Phase II clinical trials in four different
malignancies in 2010.




Taking the results from the Duke University clinical studies in prostate
cancer, hematologic malignancies and renal cell carcinoma, we optimized the
vaccine manufacturing process and transferred it to a contract manufacturer. We
are conducting a Phase II clinical trial of our telomerase vaccine using the
prime/boost vaccination protocol in patients with acute myelogenous leukemia in
complete clinical remission. Recent data from the trial showed that GRNVAC1 was
safe and generally well tolerated over multiple vaccinations. Continued
follow-up of patients for an additional nine months is required to estimate the
impact of vaccination on disease-free survival.




Our hESC therapy programs focus on treating injuries and degenerative
diseases with cell therapies based on cells derived from hESCs. Core knowledge
of hESC biology, as well as a significant continuing effort in deriving,
growing, maintaining, and differentiating hESCs, underlies all aspects of this
group of programs. Many of our researchers are allocated to more than one hESC
program, and the percentage allocations of time change as the resource needs of
individual programs vary. In our hESC therapy programs, we have concentrated our
resources on several specific cell types, including:


- GRNOPC1, hESC-derived
  oligodendrocyte progenitor cells, for the treatment of acute spinal cord
  injury;
- GRNCM1, hESC-derived
  cardiomyocytes, for toxicology drug testing and the treatment of myocardial
  disease;
- GRNIC1, hESC-derived pancreatic
  islet ß cells for the treatment of diabetes;
- GRNCHND1, hESC-derived
  chondrocytes for the treatment of osteoarthritis;
- hESC-derived hepatocytes for ADME
  drug testing;

20




---



- hESC-derived dendritic cells for
  cancer immunotherapy and to prevent immune rejection of the other cell types
  used in therapeutic applications; and
- hESC-derived osteoblasts for the
  treatment of osteoporosis.

We have developed proprietary methods to grow, maintain, and scale the
culture of undifferentiated hESCs that use feeder cell-free and serum-free media
with chemically defined components. We have also developed scalable processes to
differentiate these cells into therapeutically relevant cells. Currently, the
human clinical trial of GRNOPC1, our hESC-derived therapy targeted for the
treatment of acute spinal cord injury, has been placed on clinical hold by the
United States Food and Drug Administration (FDA). We are in discussions with the
agency to answer its questions and proceed with the clinical trial.




Research and development expenses
allocated by program are as follows (in thousands):




Three Months EndedMarch 31,2010
            
            2009(Unaudited)Oncology
            
            $
            6,163
            
            $
            7,306hESC Therapies
            
            
            7,382
            
            
            6,465Total
            
            $
            13,545
            
            $
            13,771


At this time, we cannot provide reliable estimates of how much time or
investment will be necessary to commercialize products from the programs
currently in progress. Drug development in the United States is a process that
includes multiple steps defined by the FDA under applicable statutes,
regulations and guidance documents. After the preclinical research process of
identifying, selecting and testing in animals a potential pharmaceutical
compound, the clinical development process begins with the filing of an
Investigational New Drug (IND) application. Clinical development typically
involves three phases of trials: Phase I, II and III. The most significant costs
associated with clinical development are incurred in Phase III trials, which
tend to be the longest and largest studies conducted during the drug development
process. After the completion of a successful preclinical and clinical
development program, a New Drug Application (NDA) or Biologics License
Application (BLA) must be filed with the FDA, which includes, among other
things, very large amounts of preclinical and clinical data and results and
manufacturing-related information necessary to support requested approval of the
product. The NDA/BLA must be reviewed and approved by the FDA.




According to industry statistics, it generally takes 10 to 15 years to
research, develop and bring to market a new prescription medicine in the United
States. In light of the steps and complexities involved, the successful
development of our potential products is highly uncertain. Actual timelines and
costs to develop and commercialize a product are subject to enormous variability
and are very difficult to predict. In addition, various statutes and regulations
also govern or influence the manufacturing, safety reporting, labeling, storage,
record keeping and marketing of each product.




The lengthy process of seeking these regulatory reviews and approvals,
and the subsequent compliance with applicable statutes and regulations, require
the expenditure of substantial resources. Any failure by us to obtain, or any
delay in obtaining, regulatory approvals could materially adversely affect our
business. In responding to an NDA/BLA submission, the FDA may grant marketing
approval, may request additional information, may deny the application if it
determines that the application does not provide an adequate basis for approval,
and may also refuse to review an application that has been submitted if it
determines that the application does not provide an adequate basis for filing
and review. We cannot provide assurance that any approval required by the FDA
will be obtained on a timely basis, if at all.




For a more complete discussion of the risks and uncertainties associated
with completing development of potential products, see the sub-section titled
“Delays in the commencement of clinical testing of our current and potential
product candidates could result in increased costs to us and delay our ability
to generate revenues” and “Obtaining regulatory approvals to market our product
candidates in the United States and other countries is a costly and lengthy
process and we cannot predict whether or when we will be permitted to
commercialize our product candidates” in Part II, Item 1A entitled “Risk
Factors” and elsewhere in this quarterly report.




21




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General and Administrative
Expenses




General and administrative expenses were $3.9 million for the three
months ended March 31, 2010, compared to $3.4 million for the comparable 2009
period. The increase in general and administrative expenses for the 2010 first
quarter compared to the 2009 first quarter was primarily due to higher non-cash
compensation expense of $128,000 associated with equity-based awards, increased
legal costs associated with our patents of $102,000 and higher consulting costs
of $111,000. We currently anticipate general and administrative expenses to
remain consistent with current levels.




Unrealized Gain (Loss) on
Derivatives




Unrealized gain (loss) on fair value of derivatives reflects a non-cash
adjustment for changes in fair value of warrants to purchase common stock and
options held by non-employees that are classified as current liabilities.
Derivatives classified as assets or liabilities are marked to fair value at each
financial reporting date with any resulting unrealized gain (loss) recorded in
the condensed consolidated statements of operations. The derivatives continue to
be reported as an asset or liability until such time as the instruments are
exercised or expire or are otherwise modified to remove the provisions which
require them to be recorded as assets or liabilities, at which time these
instruments are marked to fair value and reclassified from assets or liabilities
to stockholders’ equity. We incurred unrealized gains on derivatives of $58,000
and $77,000 for the three months ended March 31, 2010 and 2009, respectively.
The unrealized gains on derivatives for 2010 and 2009 primarily reflected
reduced fair values of derivative liabilities resulting from shortening of their
contractual terms and changes in other inputs factored into the estimate of
their fair value such as the volatility of our common stock.




Interest and Other Income




Interest income was $202,000 for the three months ended March 31, 2010,
compared to $525,000 for the comparable 2009 period. The decrease in interest
income for the 2010 first quarter compared to the 2009 first quarter was
primarily due to lower interest rates and lower cash and investment balances.
Interest earned in future periods will depend on the size of our securities
portfolio and prevailing interest rates.




Losses Recognized Under Equity Method
Investment




We own 28% of ViaGen, Inc. (ViaGen), a licensee with in-house breeding
services and expertise in advanced reproductive technologies for animal cloning.
In accordance with the equity method of accounting, we recognized losses of
$396,000 and $656,000 for the three months ended March 31, 2010 and 2009,
respectively, for our proportionate share of ViaGen’s losses.




Interest and Other Expense




Interest and other expense was $27,000 for the three months ended March
31, 2010, compared to $52,000 for the comparable 2009 period. The decrease in
interest and other expense for the 2010 first quarter compared to the 2009 first
quarter was primarily due to lower investment management charges.




Net Loss




Net loss was $16.6 million for the three months ended March 31, 2010,
compared to $16.8 million for the comparable 2009 period. The decrease in net
loss for the 2010 first quarter compared to the 2009 first quarter was primarily
the net result of increased revenues under our license and collaboration with GE
Healthcare UK Limited, partially offset by decreased interest income due to
lower interest rates and lower cash and investment balances.




22




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LIQUIDITY AND CAPITAL
RESOURCES




Cash, restricted cash, cash equivalents and marketable securities at
March 31, 2010 were $166.5 million, compared to $167.1 million at December 31,
2009. We have an investment policy to invest these funds in liquid, investment
grade securities, such as interest-bearing money market funds, U.S. government
and agency securities, corporate notes, commercial paper, asset-backed
securities and municipal securities. Our investment portfolio does not contain
securities with exposure to sub-prime mortgages, collateralized debt obligations
or auction rate securities and to date we have not recognized an
other-than-temporary impairment on our marketable securities or any significant
changes in aggregate fair value that would impact our cash resources or
liquidity. To date, we have not experienced lack of access to our invested cash
and cash equivalents; however, we cannot provide assurances that access to our
invested cash and cash equivalents will not be impacted by adverse conditions in
the financial markets. The decrease in cash, restricted cash, cash equivalents
and marketable securities in 2010 was the net result of use of cash for
operations, partially offset by the receipt of $10.0 million in gross proceeds
from the sale of shares of common stock and warrants to purchase additional
shares of common stock to institutional investors in January 2010.




We estimate that our existing capital resources, interest income and
equipment financing facility will be sufficient to fund our current level of
operations through at least December 2011. However, our future capital
requirements will be substantial. Changes in our research and development plans
or other changes affecting our operating expenses or cash balances may result in
the expenditure of available resources before such time. Factors that may
require us to use our available capital resources sooner than we anticipate
include:


- continued clinical development of
  our product candidates, imetelstat, GRNVAC1 and GRNOPC1;
- our ability to meaningfully reduce
  manufacturing costs of current product candidates;
- future clinical trial
  results;
- progress of product and
  preclinical development of our other product candidates, such as GRNCM1,
  GRNIC1 and GRNCHND1;
- cost and timing of regulatory
  approvals; and
- filing, maintenance, prosecution,
  defense and enforcement of patent claims and other intellectual property
  rights.

If our capital resources are insufficient to meet future capital
requirements, we will need to raise additional capital to fund our operations.
We intend to seek additional funding through strategic collaborations, public or
private equity financings, equipment loans or other financing sources that may
be available. However, we may be unable to raise sufficient additional capital
when we need it, on favorable terms or at all. If we are unable to obtain
adequate funds on reasonable terms, we may be required to curtail operations
significantly or obtain funds by entering into financing, supply or
collaboration agreements on unattractive terms or we may be required to
relinquish rights to technology or product candidates or to grant licenses on
terms that are unfavorable to us.




Cash Flows from Operating Activities. Net cash used in operations for the three
months ended March 31, 2010 and 2009 was $9.4 million and $9.3 million,
respectively. The increase in net cash used for operations in 2010 was primarily
the result of reduced interest income.




Cash Flows from Investing Activities. Net cash provided by investing activities was
$672,000 for the three months ended March 31, 2010. Net cash used in investing
activities was $21.1 million for the three months ended March 31, 2009. The
decrease in net cash used in investing activities reflected decreased purchases
of marketable securities and increased maturities of marketable securities.




As of March 31, 2010 we had approximately $500,000 available for
borrowing under our equipment financing facility. We renewed the commitment for
this equipment financing facility in 2009 to further fund equipment purchases.
If we are unable to renew the commitment in the future, we will use our cash
resources for capital expenditures.




23




---



Cash Flows from Financing Activities. Net cash provided by financing activities was
$10.0 million and $46.7 million for the three months ended March 31, 2010 and
2009, respectively. In January 2010, we exchanged outstanding warrants held by
certain institutional investors for shares of our common stock. In connection
with the warrant exchange, we sold 1,481,481 shares of our common stock and
warrants to purchase an additional 740,741 shares of common stock to the
investors for gross proceeds of $10.0 million. In February 2009, we completed a
public offering of 7,250,000 shares of our common stock at a public offering
price of $6.60 per share, resulting in net proceeds of approximately $45.9
million after deducting underwriting discounts and commissions and offering
expenses.




Contractual Obligations




As of March 31, 2010, our contractual obligations for the next five years
and thereafter were as follows:




Principal Payments Due by
      PeriodRemainder
            
            2011-
            
            2013-
            
            AfterContractual Obligations
    (1)
            
            Total
            
            in 2010
            
            2012
            
            2014
            
            2014(Amounts in
  thousands)Equipment leases
            
            $
            39
            
            $
            12
            
            $
            25
            
            $
            2
            
            $
            —Operating leases (2)
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Research funding (3)
            
            
            1,588
            
            
            315
            
            
            389
            
            
            374
            
            
            510Total contractual cash obligations
            
            $
            1,627
            
            $
            327
            
            $
            414
            
            $
            376
            
            $
            510


(1)
            
            This table does not include any milestone payments under research
      collaborations or license agreements as the timing and likelihood of such
      payments are not known. In addition, this table does not include payments
      under our severance plan in the event of a change in control of the
      company or severance payments to key employees under involuntary
      termination.(2)
            
            In March 2008, we issued 742,158 shares of our common stock to the
      lessor of our premises at 200 and 230 Constitution Drive in payment of our
      monthly rental obligation from August 1, 2008 through July 31, 2012. In
      May 2007, we issued 210,569 shares of our common stock to the lessor of
      our premises at 149 Commonwealth Drive in payment of our monthly rental
      obligation from May 1, 2007 through April 30, 2010. In January 2010, we
      extended our lease at the premises at 149 Commonwealth Drive. We issued an
      aggregate of 187,999 shares of our common stock to the lessor of those
      premises in payment of our monthly rental obligation from May 1, 2010
      through July 31, 2012. The fair value of the common stock issuances has
      been recorded as a prepaid asset and will be amortized to rent expense on
      a straight-line basis over the lease periods.  Future minimum
      payments under non-cancelable operating leases are zero through July 31,
      2012, as a result of the prepayments of rent with our common
    stock.(3)
            
            Research funding is comprised of sponsored research and license
      commitments at various laboratories around the
world.




Off-Balance Sheet Arrangements




None.




ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK




The following discussion about our market risk disclosures contains
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements. We are exposed to market risk
related to changes in interest rates and foreign currency exchange rates. We do
not use derivative financial instruments for speculative or trading purposes.




24




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Credit Risk . We
place our cash, restricted cash, cash equivalents and marketable securities with
six financial institutions in the United States. Deposits with banks may exceed
the amount of insurance provided on such deposits. While we monitor the cash
balances in our operating accounts and adjust the cash balances as appropriate,
these cash balances could be impacted if the underlying financial institutions
fail or could be subject to other adverse conditions in the financial markets.
Financial instruments that potentially subject us to concentrations of credit
risk consist primarily of cash equivalents and marketable securities. Cash
equivalents and marketable securities currently consist of U.S. Treasury
securities, U.S. government-sponsored enterprise securities, municipal
securities, corporate notes and money market funds. Our investment policy,
approved by our Board of Directors, limits the amount we may invest in any one
type of investment issuer, thereby reducing credit risk concentrations. We limit
our credit and liquidity risks through our investment policy and through regular
reviews of our portfolio against our policy. To date, we have not experienced
any loss or lack of access to cash in our operating accounts or to our cash
equivalents and marketable securities in our investment portfolios.




Interest Rate Sensitivity . The primary objective of our investment activities is to manage our
marketable securities portfolio to preserve principal and liquidity while
maximizing the return on the investment portfolio through the full investment of
available funds without significantly increasing risk. To achieve this
objective, we invest in widely diversified investments consisting of both fixed
rate and floating rate interest earning instruments, and both carry a degree of
interest rate risk. Fixed rate securities may have their fair value adversely
impacted due to a rise in interest rates, while floating rate securities may
produce less income than expected if interest rates fall. Due in part to these
factors, our future interest income may fall short of expectations due to
changes in market conditions and in interest rates or we may suffer losses in
principal if forced to sell securities which may have declined in fair value due
to changes in interest rates.




The fair value of our cash equivalents and marketable securities at March
31, 2010 was $164.7 million. These investments include $34.8 million of cash
equivalents which are due in less than 90 days, $89.4 million of short-term
investments which are due in less than one year and $40.5 million of long-term
investments which are due in one to two years. We primarily invest our
marketable securities portfolio in securities with at least an investment grade
rating to minimize interest rate and credit risk as well as to provide for an
immediate source of funds. Although changes in interest rates may affect the
fair value of the marketable securities portfolio and cause unrealized gains or
losses, such gains or losses would not be realized unless the investments are
sold. Due to the nature of our investments, which are primarily U.S. Treasury
securities, U.S. government-sponsored enterprise securities, municipal
securities, corporate notes and money market funds, we have concluded that there
is no material market risk exposure.




Foreign Currency Exchange Risk . Because we translate foreign currencies into
U.S. dollars for reporting purposes, currency fluctuations can have an impact,
though generally immaterial, on our operating results. We believe that our
exposure to currency exchange fluctuation risk is insignificant primarily
because our wholly-owned international subsidiary, Geron Bio-Med Ltd., satisfies
its financial obligations almost exclusively in its local currency. As of March
31, 2010, there was an immaterial currency exchange impact from our intercompany
transactions. As of March 31, 2010, we did not engage in foreign currency
hedging activities.




ITEM 4. CONTROLS AND
PROCEDURES




(a) Evaluation of Disclosure Controls and
Procedures . The Securities
and Exchange Commission defines the term “disclosure controls and procedures” to
mean a company’s controls and other procedures that are designed to ensure that
information required to be disclosed in the reports that it files or submits
under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission’s rules and forms. Our Chief Executive Officer and our Chief
Financial Officer have concluded, based on the evaluation of the effectiveness
of our disclosure controls and procedures by our management, with the
participation of our Chief Executive Officer and our Chief Financial Officer, as
of the end of the period covered by this report, that our disclosure controls
and procedures were effective for this purpose.




(b) Changes in Internal Controls Over Financial
Reporting . There was no
change in our internal control over financial reporting for the three months
ended March 31, 2010 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.




It should be noted that any system of controls, however well designed and
operated, can provide only reasonable assurance, and not absolute assurance,
that the objectives of the system are met. In addition, the design of any
control system is based in part upon certain assumptions about the likelihood of
future events. Because of these and other inherent limitations of control
systems, there can be no assurance that any design will succeed in achieving its
stated goals in all future circumstances.




25




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PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS




None.




ITEM 1A. RISK FACTORS




Our business is subject to various risks, including those described
below. You should carefully consider these risk factors, together with all of
the other information included in this Form 10-Q. Any of these risks could
materially adversely affect our business, operating results and financial
condition.




RISKS RELATED TO OUR BUSINESS




Our business is at an early stage of development.




Our business is at an early stage of development, in that we do not yet
have product candidates in late-stage clinical trials or on the market. We have
sponsored six Phase I or I/II trials of our lead anti-cancer drug, imetelstat,
in patients with chronic lymphoproliferative diseases, solid tumor malignancies,
non-small cell lung cancer, breast cancer and multiple myeloma. Four of those
trials have completed patient enrollment and the remaining two are expected to
complete enrollment in 2010. We currently plan to advance imetelstat to Phase II
trials in 2010 in four different malignancies. Patient enrollment for our
telomerase cancer vaccine, GRNVAC1, in patients with acute myelogenous leukemia
is now complete and we are awaiting the results from this Phase II trial. We
have no other product candidates in clinical testing. Currently, the clinical
trial of GRNOPC1, our human embryonic stem cell (hESC)-derived therapy targeted
for the treatment of acute spinal cord injury, has been placed on clinical hold
by the U.S. Food and Drug Administration (FDA). We are in discussions with the
FDA to answer its questions and seek the release of the clinical hold to permit
us to proceed with the clinical trial. Our ability to develop product candidates
that progress to and through clinical trials is subject to our ability to, among
other things:


- succeed in our research and
  development efforts;
- select therapeutic compounds or
  cell therapies for development;
- obtain required regulatory
  approvals, including release by the FDA of the clinical hold for
  GRNOPC1;
- manufacture product candidates;
  and
- collaborate successfully with
  clinical trial sites, academic institutions, physician investigators, clinical
  research organizations and other third parties.

Potential lead drug compounds or other product candidates and
technologies require significant preclinical and clinical testing prior to
regulatory approval in the United States and other countries. Our product
candidates may prove to have undesirable and unintended side effects or other
characteristics adversely affecting their safety, efficacy or cost-effectiveness
that could prevent or limit their commercial use. In addition, our product
candidates may not prove to be more effective for treating disease or injury
than current therapies. Accordingly, we may have to delay or abandon efforts to
research, develop or obtain regulatory approvals to market our product
candidates. In addition, we will need to determine whether any of our potential
products can be manufactured in commercial quantities at an acceptable cost. Our
research and development efforts may not result in a product that can be or will
be approved by regulators or marketed successfully. Competitors may have
proprietary rights which prevent us from developing and marketing our products
or they may sell similar, superior or lower-cost products. Because of the
significant scientific, regulatory and commercial milestones that must be
reached for any of our development programs or product candidates to be
successful, any program or product candidate may be abandoned, even after we
have expended significant resources, such as our investments in telomerase
technology, hESCs, imetelstat, GRNVAC1 and GRNOPC1, which could adversely affect
our business and cause a sharp drop in our stock price.




26




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The science and technology of telomere biology and telomerase and hESCs
are relatively new. There is no precedent for the successful commercialization
of therapeutic product candidates based on our technologies. These development
programs are therefore particularly risky. In addition, we, our licensees or our
collaborators must undertake significant research and development activities to
develop product candidates based on our technologies, which will require
additional funding and may take years to accomplish, if ever.




Restrictions on the use of hESCs, political commentary and the ethical
and social implications of research involving hESCs could prevent us from
developing or gaining acceptance for commercially viable products based upon
such stem cells and adversely affect the market price of our common stock.




Some of our most important programs involve the use of stem cells that
are derived from human embryos. The use of hESCs gives rise to ethical and
social issues regarding the appropriate use of these cells. Our research related
to hESCs may become the subject of adverse commentary or publicity, which could
significantly harm the market price for our common stock.




Some political and religious groups have voiced opposition to our
technology and practices. We use stem cells derived from human embryos that had
been created for in vitro fertilization procedures but were no longer
desired or suitable for that use and were donated with appropriate informed
consent. Many research institutions, including some of our scientific
collaborators, have adopted policies regarding the ethical use of human
embryonic tissue. These policies may have the effect of limiting the scope of
research conducted using hESCs, thereby impairing our ability to conduct
research in this field.




Furthermore, on March 9, 2009, President Obama issued Executive Order
13505, entitled “Removing Barriers to Responsible Scientific Research Involving
Human Stem Cells” (the Executive Order). As a result, in July 2009 the Secretary
of Health and Human Services, through the Director of the National Institutes of
Health (NIH), issued new guidelines relating to human stem cell research. Under
the new guidelines, federal funding is allowed for research using hESCs derived
from embryos created by in vitro fertilization for reproductive purposes, but are no longer needed for that
purpose. Strict ethics requirements must be followed to qualify new stem cell
lines, including extensive documentation around consent forms and written
policies and procedures. Certain states are considering enacting, or already
have enacted, legislation relating to stem cell research, including California,
whose voters approved Proposition 71 to provide state funds for stem cell
research in November 2004. In the United Kingdom and other countries, the use of
embryonic or fetal tissue in research (including the derivation of hESCs) is
regulated by the government, whether or not the research involves government
funding.




Government-imposed restrictions with respect to use of embryos or hESCs
in research and development could have a material adverse effect on us,
including:


- harming our ability to establish
  critical partnerships and collaborations;
- delaying or preventing progress in
  our research, product development or clinical testing;
- preventing commercialization of
  therapies derived from hESCs; and
- as a result of the potential
  adverse effects above, causing a decrease in the price of our common
  stock.

27




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RISKS RELATED TO OUR FINANCIAL POSITION AND
NEED FOR ADDITIONAL FINANCING




We have a history of losses and anticipate future losses, and continued
losses could impair our ability to sustain operations.




We have incurred operating losses every year since our operations began
in 1990. As of March 31, 2010, our accumulated deficit was approximately $593.9
million. Losses have resulted principally from costs incurred in connection with
our research and development activities and from general and administrative
costs associated with our operations. We expect to incur additional operating
losses and, as our development efforts and clinical testing activities continue,
our operating losses may increase in size.




Substantially all of our revenues to date have been research support
payments under collaboration agreements and revenues from our licensing
arrangements. We may be unsuccessful in entering into any new corporate
collaboration or license agreement that results in revenues. We do not expect
that the revenues generated from these arrangements will be sufficient alone to
continue or expand our research or development activities and otherwise sustain
our operations.




While we receive royalty revenue from licenses, we do not currently
expect to receive sufficient royalty revenues from these licenses to
independently sustain our operations. Our ability to continue or expand our
research and development activities and otherwise sustain our operations is
dependent on our ability, alone or with others, to, among other things,
manufacture and market therapeutic products.




We also expect to experience negative cash flow for the foreseeable
future as we fund our operating losses and capital expenditures. This will
result in decreases in our working capital, total assets and stockholders’
equity, which may not be offset by future financings. We will need to generate
significant revenues to achieve profitability. We may not be able to generate
these revenues, and we may never achieve profitability. Our failure to achieve
profitability could negatively impact the market price of our common stock. Even
if we do become profitable, we cannot assure you that we would be able to
sustain or increase profitability on a quarterly or annual basis.




We will need additional capital to conduct our operations and develop our
product candidates, and our ability to obtain the necessary funding is
uncertain.




We will require substantial capital resources in order to conduct our
operations and develop our product candidates, and we cannot assure you that our
existing capital resources, interest income and equipment financing arrangement
will be sufficient to fund future planned operations. The timing and degree of
any future capital requirements will depend on many factors,
including:


- the accuracy of the assumptions
  underlying our estimates for our capital needs for the 2010 fiscal year and
  beyond;
- the magnitude and scope of our
  research and development programs;
- the progress we make in our
  research and development programs, preclinical development and clinical
  trials;
- our ability to establish, enforce
  and maintain strategic arrangements for research, development, clinical
  testing, manufacturing and marketing;
- the number and type of product
  candidates that we pursue;
- the time and costs involved in
  obtaining regulatory approvals and clearances; and
- the costs involved in preparing,
  filing, prosecuting, maintaining, defending and enforcing patent
  claims.

We do not have any committed sources of capital. Additional financing
through strategic collaborations, public or private equity financings, capital
lease transactions or other financing sources may not be available on acceptable
terms, or at all. The receptivity of the public and private equity markets to
proposed financings is substantially affected by the general economic, market
and political climate and by other factors which are unpredictable and over
which we have no control. Additional equity financings, if we obtain them, could
result in significant dilution to stockholders. Further, in the event that
additional funds are obtained through arrangements with collaborative partners,
these arrangements may require us to relinquish rights to some of our
technologies, product candidates or proposed products that we would otherwise
seek to develop and commercialize ourselves. If sufficient capital is not
available, we may be required to delay, reduce the scope of or eliminate one or
more of our programs, any of which could have a material adverse effect on our
business.




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RISKS RELATED TO CLINICAL AND
COMMERCIALIZATION ACTIVITIES




Delays in the commencement of clinical testing of our current and
potential product candidates could result in increased costs to us and delay our
ability to generate revenues.




The commencement of clinical trials
can be delayed for a variety of reasons, including delays in:


- demonstrating sufficient safety
  and efficacy to obtain regulatory clearance to commence a clinical
  trial;
- manufacturing sufficient
  quantities or producing drugs meeting our quality standards of a product
  candidate;
- obtaining approval of an
  Investigational New Drug (IND) application or proposed trial design from the
  FDA;
- reaching agreement on acceptable
  terms with our collaborators on all aspects of the clinical trial, including
  the contract research organizations (CROs) and the trial sites;
  and
- obtaining institutional review
  board approval to conduct a clinical trial at a prospective site.

In addition, clinical trials may be delayed due to insufficient patient
enrollment, which is a function of many factors, including the size and nature
of the patient population, the nature of the protocol, the proximity of patients
to clinical sites, the availability of effective treatments for the relevant
disease, and the eligibility criteria for the clinical trial. Delays in
commencing clinical testing of our product candidates could have a material
adverse effect on our business.




We do not have experience as a company conducting large-scale clinical
trials, or in other areas required for the successful commercialization and
marketing of our product candidates.




We have no experience as a company in conducting large-scale, late stage
clinical trials. We cannot be certain that planned clinical trials will begin or
be completed on time, if at all. Large-scale trials would require either
additional financial and management resources, or reliance on third-party
clinical investigators, CROs or consultants. Relying on third-party clinical
investigators or CROs may force us to encounter delays that are outside of our
control. Any such delays could have a material adverse effect on our
business.




We also do not currently have marketing and distribution capabilities for
our product candidates. Developing an internal sales and distribution capability
would be an expensive and time-consuming process. We may enter into agreements
with third parties that would be responsible for marketing and distribution.
However, these third parties may not be capable of successfully selling any of
our product candidates. The inability to commercialize and market our product
candidates could materially adversely affect our business.




Obtaining regulatory approvals to market our product candidates in the
United States and other countries is a costly and lengthy process and we cannot
predict whether or when we will be permitted to commercialize our product
candidates.




Federal, state and local governments in the United States and governments
in other countries have significant regulations in place that govern many of our
activities and may prevent us from creating commercially viable products from
our discoveries. The regulatory process, particularly for biopharmaceutical
product candidates like ours, is uncertain, can take many years and requires the
expenditure of substantial resources.




29




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Our potential product candidates will require extensive preclinical and
clinical testing prior to submission of any regulatory application to commence
commercial sales. In particular, human pharmaceutical therapeutic product
candidates are subject to rigorous requirements of the FDA in the United States
and similar health authorities in other countries in order to demonstrate safety
and efficacy. Data obtained from preclinical and clinical activities is
susceptible to varying interpretations that could delay, limit or prevent
regulatory agency approvals. In addition, delays or rejections may be
encountered as a result of changes in regulatory agency policy during the period
of product development and/or the period of review of any application for
regulatory agency approval for a product candidate.




Any product candidate that we or our collaborators develop must receive
all relevant regulatory agency approvals before it may be marketed in the United
States or other countries. Obtaining regulatory approval is a lengthy, expensive
and uncertain process. Because certain of our product candidates involve the
application of new technologies or are based upon a new therapeutic approach,
they may be subject to substantial additional review by various government
regulatory authorities, and, as a result, the process of obtaining regulatory
approvals for them may proceed more slowly than for product candidates based
upon more conventional technologies.




Delays in obtaining regulatory
agency approvals could:


- significantly harm the marketing
  of any products that we or our collaborators develop;
- impose costly procedures upon our
  activities or the activities of our collaborators;
- diminish any competitive
  advantages that we or our collaborators may attain; or
- adversely affect our ability to
  receive royalties and generate revenues and profits.

Even if we commit the
necessary time and resources, the required regulatory agency approvals may not
be obtained for any product candidates developed by us or in collaboration with
us. If we obtain regulatory agency approval for a new product, this approval may
entail limitations on the indicated uses for which it can be marketed that could
limit the potential commercial use of the product.




Failure to achieve continued compliance with government regulation over
approved products could delay or halt commercialization of our
products.




Approved products and their manufacturers are subject to continual
review, and discovery of previously unknown problems with a product or its
manufacturer may result in restrictions on the product or manufacturer,
including withdrawal of the product from the market. The sale by us or our
collaborators of any commercially viable product will be subject to government
regulation from several standpoints, including the processes of:


- manufacturing;
- advertising and
  promoting;
- selling and
  marketing;
- labeling; and
- distribution.

If, and to the extent
that, we are unable to comply with these regulations, our ability to earn
revenues will be materially and negatively impacted.




Failure to comply with regulatory requirements can result in severe civil
and criminal penalties, including but not limited to:


- recall or seizure of
  products;
- injunction against the
  manufacture, distribution and sales and marketing of products;
  and
- criminal prosecution.

The imposition of any of these penalties or other commercial
limitations could significantly impair our business, financial condition and
results of operations.




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RISKS RELATED TO PROTECTING OUR INTELLECTUAL
PROPERTY




Impairment of our intellectual property rights may adversely affect the
value of our technologies and product candidates and limit our ability to pursue
their development.




Protection of our proprietary technology is critically important to our
business. Our success will depend in part on our ability to obtain and enforce
our patents and maintain trade secrets, both in the United States and in other
countries. Further, our patents may be challenged, invalidated or circumvented,
and our patent rights may not provide proprietary protection or competitive
advantages to us. In the event that we are unsuccessful in obtaining and
enforcing patents, our business would be negatively impacted.




The patent positions of pharmaceutical and biopharmaceutical companies,
including ours, are highly uncertain and involve complex legal and technical
questions. In particular, legal principles for biotechnology patents in the
United States and in other countries are evolving, and the extent to which we
will be able to obtain patent coverage to protect our technology, or enforce
issued patents, is uncertain. In the United States, recent court decisions in
patent cases as well as proposed legislative changes to the patent system only
exacerbate this uncertainty. Furthermore, significant amendments to the
regulations governing the process of obtaining patents were proposed in a new
rule package by the United States Patent and Trademark Office (the Patent
Office) in 2007. The proposed new rules were widely regarded as detrimental to
the interests of biotechnology and pharmaceutical companies. The implementation
of the rule package was blocked by a court injunction requested by a
pharmaceutical company. The Patent Office challenged the court decision through
an appeal to the U.S. Court of Appeals for the Federal Circuit (CAFC), but the
appeal was dismissed in November 2009, after the Patent Office changed course
and rescinded the proposed new rules. At this point we do not know whether the
Patent Office will attempt to introduce new rules to replace those that were
recently withdrawn or whether any such new rules would also be
challenged.




In Europe, the European Patent Convention prohibits the granting of
European patents for inventions that concern “uses of human embryos for
industrial or commercial purposes.” The European Patent Office (EPO) was earlier
interpreting this prohibition broadly, and applying it to reject claims in any
patent application that pertained to hESCs. An early patent application filed by
the Wisconsin Alumni Research Foundation (WARF) with claims covering the
original isolation of hESCs was appealed as a test case, and examination of
other hESC patent applications was suspended while that case was heard. In
November 2008, the EPO Enlarged Board of Appeals held that the claims in the
WARF application were unpatentable. Geron holds a worldwide license under this
patent family, and since the decision is not subject to further appeal, this
WARF patent family will not afford protection to Geron’s hESC-based product
candidates in Europe. However, the reason given by the EPO for the decision was
narrowly focused: the EPO found the claims objectionable on the basis that at
the time that WARF filed the patent application it was necessary to use a human
embryo to obtain hESCs since no cell lines were available. In contrast, the
hESCs that we use, and which we employed in the technologies claimed in our own
European patent applications, were sourced from established hESC lines.
Consequently, the decision in the WARF case does not directly address the
patentability of the subject matter in our filings. The EPO has recently
restarted examination of hESC patent applications, but is being inconsistent in
its application of the WARF decision to these later filed cases. At this time,
we do not know whether or to what extent we will be able to obtain patent
protection for our hESC technologies in Europe. If we are unable to protect our
inventions related to hESCs in Europe, our business would be negatively
impacted.




Challenges to our patent rights can result in costly and time-consuming
legal proceedings that may prevent or limit development of our product
candidates.




Publication of discoveries in scientific or patent literature tends to
lag behind actual discoveries by at least several months and sometimes several
years. Therefore, the persons or entities that we or our licensors name as
inventors in our patents and patent applications may not have been the first to
invent the inventions disclosed in the patent applications or patents, or the
first to file patent applications for these inventions. As a result, we may not
be able to obtain patents for discoveries that we otherwise would consider
patentable and that we consider to be extremely significant to our future
success.




31




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Where several parties seek U.S. patent protection for the same
technology, the Patent Office may declare an interference proceeding in order to
ascertain the party to which the patent should be issued. Patent interferences
are typically complex, highly contested legal proceedings, subject to appeal.
They are usually expensive and prolonged, and can cause significant delay in the
issuance of patents. Moreover, parties that receive an adverse decision in an
interference can lose important patent rights. Our pending patent applications,
or our issued patents, may be drawn into interference proceedings which may
delay or prevent the issuance of patents, or result in the loss of issued patent
rights. By way of example, we are currently a party to an interference
proceeding that involves patent filings for making endoderm cells from hESCs. We
requested that the Patent Office declare this interference after Novocell Inc.
was granted patent claims that conflict with subject matter we filed in an
earlier patent application. The interference proceeding will determine whether
we or Novocell are entitled to such patent claims. Since this interference is
still ongoing, we cannot predict what the outcome will be.




Outside of the United States, certain jurisdictions, such as Europe, New
Zealand and Australia, permit oppositions to be filed against the granting of
patents. Because our intent is to commercialize products internationally,
securing both proprietary protection and freedom to operate outside of the
United States is important to our business. We are involved in both opposing the
grant of patents to others through such opposition proceedings and in defending
our patent applications against oppositions filed by others. For example, we
have been involved in two patent oppositions before the EPO with a Danish
company, Pharmexa. Pharmexa (which acquired the Norwegian company GemVax in
2005) was developing a cancer vaccine that employs a short telomerase peptide to
induce an immune response against telomerase and was conducting a Phase III
clinical trial. Pharmexa obtained a European patent with broad claims to the use
of telomerase vaccines for the treatment of cancer, and Geron opposed that
patent in 2004. In 2005, the Opposition Division (OD) of the EPO revoked the
claims originally granted to Pharmexa, but permitted Pharmexa to add new,
narrower claims limited to five specific small peptide fragments of telomerase.
The decision was appealed to the Technical Board of Appeals (TBA). In August
2007, the TBA ruled, consistent with the decision of the OD, that Pharmexa was
not entitled to the originally granted broad claims but was only entitled to the
narrow claims limited to the five small peptides.




In parallel, Pharmexa opposed a European patent held by Geron, the claims
of which cover many facets of human telomerase, including the use of telomerase
peptides in cancer vaccines. In June 2006, the OD of the EPO revoked three of
the granted claims in Geron’s patent, specifically the three claims covering
telomerase peptide cancer vaccines. We have appealed that decision to the TBA,
and that appeal is still pending. Because this appeal is ongoing, the outcome
cannot be determined at this time. We are also seeking to obtain patent coverage
in Europe for telomerase peptides through a European divisional patent
application. If and when those patent claims are issued, they too may be subject
to an opposition proceeding. In late 2008, Pharmexa reported that it sold its
telomerase vaccine program to a Korean company, KAEL Co. Ltd.




European opposition and appeal proceedings can take several years to
reach final decision. The oppositions discussed above reflect the complexity of
the patent landscape in which we operate, and illustrate the risks and
uncertainties. We are also currently involved in other patent opposition
proceedings in Europe and Australia.




Patent opposition proceedings are not currently available in the U.S.
patent system, but legislation has been proposed to introduce them. However,
issued U.S. patents can be reexamined by the Patent Office at the request of a
third party. Patents owned or licensed by Geron may therefore be subject to
reexamination. As in any legal proceeding, the outcome of patent reexaminations
is uncertain, and a decision adverse to our interests could result in the loss
of valuable patent rights.




In July 2006, requests were filed on behalf of the Foundation for
Taxpayer and Consumer Rights (now renamed as “Consumer Watchdog”) for
reexamination of three issued U.S. patents owned by WARF and relating to hESCs.
These three patents (U.S. Patent Nos. 5,843,780, 6,200,806 and 7,029,913), which
are the U.S. equivalents of the European WARF case discussed above, are licensed
to Geron pursuant to a January 2002 license agreement with WARF. The license
agreement conveys exclusive rights to Geron under the WARF patents for the
development and commercialization of therapeutics based on neural cells,
cardiomyocytes and pancreatic islet cells, derived from hESCs, as well as
non-exclusive rights for other product opportunities. In October 2006, the
Patent Office initiated the reexamination proceedings. After initially rejecting
the patent claims, the Patent Office issued decisions in all three cases
upholding the patentability of the claims. The decisions to uphold the 5,843,780
and 6,200,806 patents are final and not subject to further appeal. Consumer
Watchdog appealed the decision on the 7,029,913 patent. In April 2010, the Board
of Patent Appeals and Interferences reversed the earlier decision of the Patent
Office on the 7,029,913 patent. WARF will now have the opportunity
to present the claims for further examination at the Patent
Office. We cooperated with WARF in these reexamination actions and expect that
WARF will continue to vigorously defend its patent position. The final outcome of these or of any future
reexamination proceedings cannot be determined at this time. Reduction or loss
of claim scope in these WARF embryonic stem cell patents could negatively impact
Geron’s proprietary position in this technology.




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As more groups become engaged in scientific research and product
development in the areas of telomerase biology and embryonic stem cells, the
risk of our patents being challenged through patent interferences, oppositions,
reexaminations or other means will likely increase. Challenges to our patents
through these procedures can be extremely expensive and time-consuming, even if
the outcome is favorable to us. An adverse outcome in a patent dispute could
severely harm our business by:


- causing us to lose patent rights
  in the relevant jurisdiction(s);
- subjecting us to litigation, or
  otherwise preventing us from commercializing potential products in the
  relevant jurisdiction(s);
- requiring us to obtain licenses to
  the disputed patents;
- forcing us to cease using the
  disputed technology; or
- requiring us to develop or obtain
  alternative technologies.

Furthermore, if such
challenges to our patent rights are not resolved promptly in our favor, our
existing business relationships may be jeopardized and we could be delayed or
prevented from entering into new collaborations or from commercializing certain
products, which could materially harm our business.




If we fail to meet our obligations under license agreements, we may lose
our rights to key technologies on which our business
depends.




Our business depends on several critical technologies that are based in
part on patents licensed from third parties. Those third-party license
agreements impose obligations on us, such as payment obligations and obligations
to diligently pursue development of commercial products under the licensed
patents. If a licensor believes that we have failed to meet our obligations
under a license agreement, the licensor could seek to limit or terminate our
license rights, which could lead to costly and time-consuming litigation and,
potentially, a loss of the licensed rights. During the period of any such
litigation our ability to carry out the development and commercialization of
potential products could be significantly and negatively affected. If our
license rights were restricted or ultimately lost, our ability to continue our
business based on the affected technology would be severely adversely
affected.




We may be subject to litigation that will be costly to defend or pursue
and uncertain in its outcome.




Our business may bring us into conflict with our licensees, licensors, or
others with whom we have contractual or other business relationships, or with
our competitors or others whose interests differ from ours. If we are unable to
resolve those conflicts on terms that are satisfactory to all parties, we may
become involved in litigation brought by or against us. That litigation is
likely to be expensive and may require a significant amount of management’s time
and attention, at the expense of other aspects of our business. The outcome of
litigation is always uncertain, and in some cases could include judgments
against us that require us to pay damages, enjoin us from certain activities, or
otherwise affect our legal or contractual rights, which could have a significant
adverse effect on our business.




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We may be subject to infringement claims that are costly to defend, and
which may limit our ability to use disputed technologies and prevent us from
pursuing research and development or commercialization of potential
products.




Our commercial success depends significantly on our ability to operate
without infringing patents and the proprietary rights of others. Our
technologies may infringe the patents or proprietary rights of others. In
addition, we may become aware of discoveries and technology controlled by third
parties that are advantageous to our programs. In the event our technologies
infringe the rights of others or we require the use of discoveries and
technology controlled by third parties, we may be prevented from pursuing
research, development or commercialization of potential products or may be
required to obtain licenses to those patents or other proprietary rights or
develop or obtain alternative technologies. We have obtained licenses from
several universities and companies for technologies that we anticipate
incorporating into our potential products, and we initiate negotiation for
licenses to other technologies as the need or opportunity arises. We may not be
able to obtain a license to patented technology on commercially favorable terms,
or at all. If we do not obtain a necessary license, we may need to redesign our
technologies or obtain rights to alternate technologies, the research and
adoption of which could cause delays in product development. In cases where we
are unable to license necessary technologies, we could be prevented from
developing certain potential products. Our failure to obtain alternative
technologies or a license to any technology that we may require to research,
develop or commercialize our product candidates would significantly and
negatively affect our business.




Much of the information and know-how that is critical to our business is
not patentable and we may not be able to prevent others from obtaining this
information and establishing competitive enterprises.




We sometimes rely on trade secrets to protect our proprietary technology,
especially in circumstances in which we believe patent protection is not
appropriate or available. We attempt to protect our proprietary technology in
part by confidentiality agreements with our employees, consultants,
collaborators and contractors. We cannot assure you that these agreements will
not be breached, that we would have adequate remedies for any breach, or that
our trade secrets will not otherwise become known or be independently discovered
by competitors, any of which would harm our business significantly.




RISKS RELATED TO OUR RELATIONSHIPS WITH THIRD
PARTIES




We depend on other parties to help us develop, manufacture and test our
product candidates, and our ability to develop and commercialize potential
products may be impaired or delayed if collaborations are
unsuccessful.




Our strategy for the development, clinical testing and commercialization
of our product candidates requires that we enter into collaborations with
corporate partners, licensors, licensees and others. We are dependent upon the
subsequent success of these other parties in performing their respective
responsibilities and the continued cooperation of our partners. By way of
examples: Merck is developing cancer vaccines targeted to telomerase other than
dendritic cell-based vaccines; Sienna is developing cancer diagnostics using our
telomerase technology; and GE Healthcare is developing cell-based assays using
cells derived from our hESCs. Our collaborators may not cooperate with us or
perform their obligations under our agreements with them. We cannot control the
amount and timing of our collaborators’ resources that will be devoted to
activities related to our collaborative agreements with them. Our collaborators
may choose to pursue existing or alternative technologies in preference to those
being developed in collaboration with us.




Under agreements with
other parties, we may rely significantly on them to, among other
activities:


- conduct research and development
  activities in conjunction with us;
- design and conduct advanced
  clinical trials in the event that we reach clinical trials;
- fund research and development
  activities with us;
- manage and license certain patent
  rights;
- pay us fees upon the achievement
  of milestones; and
- market with us any commercial
  products that result from our collaborations.

34




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The development and commercialization of potential products will be
delayed if collaborators or other partners fail to conduct these activities in a
timely manner or at all. In addition, our collaborators could terminate their
agreements with us and we may not receive any development or milestone payments.
If we do not achieve milestones set forth in the agreements, or if our
collaborators breach or terminate their collaborative agreements with us, our
business may be materially harmed.




We also rely on other companies for certain process development,
manufacturing or other technical scientific work, especially with respect to our
imetelstat, GRNVAC1, GRNOPC1 and GRNCM1 programs. We have contracts with these
companies that specify the work to be done and results to be achieved, but we do
not have direct control over their personnel or operations. If these companies
do not perform the work which they were assigned, our ability to develop or
manufacture our product candidates could be significantly harmed.




Our reliance on the activities of our non-employee consultants, research
institutions, and scientific contractors, whose activities are not wholly within
our control, may lead to delays in development of our product
candidates.




We rely extensively upon and have relationships with scientific
consultants at academic and other institutions, some of whom conduct research at
our request, and other consultants who assist us in formulating our research and
development and clinical strategy or other matters. These consultants are not
our employees and may have commitments to, or consulting or advisory contracts
with, other entities that may limit their availability to us. We have limited
control over the activities of these consultants and, except as otherwise
required by our collaboration and consulting agreements, can expect only limited
amounts of their time to be dedicated to our activities.




In addition, we have formed research collaborations with many academic
and other research institutions throughout the world. These research facilities
may have commitments to other commercial and noncommercial entities. We have
limited control over the operations of these laboratories and can expect only
limited amounts of their time to be dedicated to our research
goals.




If any of these third parties are unable or refuse to contribute to
projects on which we need their help, our ability to generate advances in our
technologies and develop our product candidates could be significantly
harmed.




RISKS RELATED TO COMPETITIVE
FACTORS




The loss of key personnel could slow our ability to conduct research and
develop product candidates.




Our future success depends to a significant extent on the skills,
experience and efforts of our executive officers and key members of our
scientific staff. We face intense competition for qualified individuals from
numerous pharmaceutical, biopharmaceutical and biotechnology companies, as well
as academic and other research institutions. We may be unable to retain our
current personnel or attract or assimilate other highly qualified management and
scientific personnel in the future on acceptable terms. The loss of any or all
of these individuals could harm our business and might significantly delay or
prevent the achievement of research, development or business
objectives.




Our product candidates are likely to be expensive to manufacture, and
they may not be profitable if we are unable to significantly reduce the costs to
manufacture them.




Our telomerase inhibitor compound, imetelstat, our telomerase cancer
vaccine, GRNVAC1, and our hESC-based products are likely to be more expensive to
manufacture than most other drugs currently on the market today.
Oligonucleotides are relatively large molecules with complex chemistry, and the
cost of manufacturing an oligonucleotide like imetelstat is greater than the
cost of making most small-molecule drugs. Our present manufacturing processes
are conducted at a modest scale and we hope to substantially reduce
manufacturing costs through process improvements, as well as through scale
increases. If we are not able to do so, however, and, depending on the pricing
of the potential product, the profit margin on the telomerase inhibitor may be
significantly less than that of most drugs on the market today.




35




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GRNVAC1 is an autologous therapy that is produced from a patient’s blood
using a unique process that generates highly activated dendritic cells that
contain RNA coding for the protein component of telomerase. If we are unable to
scalably produce dendritic cells at a lower manufacturing cost, the cost of
GRNVAC1 may reduce the affordability of the therapy for patients and reduce our
potential profitability.




Our manufacturing processes for differentiated cells from hESCs are
conducted at a small scale and at a high cost per unit measure. The cell-based
therapies we are developing based on hESCs will probably require large
quantities of cells. We continue to develop processes to scale up production of
the cells in a cost-effective way. We may not be able to charge a high enough
price for any cell therapy product we develop, even if it is safe and effective,
to make a profit. If we are unable to realize significant profits from our
potential product candidates, our business would be materially
harmed.




Some of our competitors may develop technologies that are superior to or
more cost-effective than ours, which may impact the commercial viability of our
technologies and which may significantly damage our ability to sustain
operations.




The pharmaceutical and biotechnology industries are intensely
competitive. Other pharmaceutical and biotechnology companies and research
organizations currently engage in or have in the past engaged in efforts related
to the biological mechanisms that are the focus of our programs in oncology and
human embryonic stem cell therapies, including the study of telomeres,
telomerase and hESCs. In addition, other products and therapies that could
compete directly with the product candidates that we are seeking to develop and
market currently exist or are being developed by pharmaceutical and
biopharmaceutical companies and by academic and other research
organizations.




Many companies are developing alternative therapies to treat cancer and,
in this regard, are competitors of ours. According to public data from the FDA
and NIH, there are more than 200 approved anti-cancer products on the market in
the United States, and several thousand in clinical development.




Many of the pharmaceutical companies developing and marketing these
competing products (including GlaxoSmithKline, Bristol-Myers Squibb Company and
Novartis AG, among others) have significantly greater financial resources and
expertise than we do in:


- research and
  development;
- manufacturing;
- preclinical and clinical
  testing;
- obtaining regulatory approvals;
  and
- marketing and distribution.

Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and established
companies. Academic institutions, government agencies and other public and
private research organizations may also conduct research, seek patent protection
and establish collaborative arrangements for research, clinical development and
marketing of products similar to ours. These companies and institutions compete
with us in recruiting and retaining qualified scientific and management
personnel as well as in acquiring technologies complementary to our
programs.




In addition to the above factors, we expect to face competition in the
following areas:


- product efficacy and
  safety;
- the timing and scope of regulatory
  consents;
- availability of
  resources;
- reimbursement
  coverage;
- price; and
- patent position, including
  potentially dominant patent positions of others.

36




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As a result of the
foregoing, our competitors may develop more effective or more affordable
products, or achieve earlier patent protection or product commercialization than
we do. Most significantly, competitive products may render any product
candidates that we develop obsolete, which would negatively impact our business
and ability to sustain operations.




To be successful, our product candidates must be accepted by the health
care community, which can be very slow to adopt or unreceptive to new
technologies and products.




Our product candidates and those developed by our collaborators, if
approved for marketing, may not achieve market acceptance since hospitals,
physicians, patients or the medical community in general may decide not to
accept and utilize these products. The product candidates that we are attempting
to develop represent substantial departures from established treatment methods
and will compete with a number of conventional drugs and therapies manufactured
and marketed by major pharmaceutical companies. The degree of market acceptance
of any of our developed potential products will depend on a number of factors,
including:


- our establishment and
  demonstration to the medical community of the clinical efficacy and safety of
  our product candidates;
- our ability to create products
  that are superior to alternatives currently on the market;
- our ability to establish in the
  medical community the potential advantage of our treatments over alternative
  treatment methods; and
- reimbursement policies of
  government and third-party payors.

If the health care
community does not accept our potential products for any of the foregoing
reasons, or for any other reason, our business would be materially
harmed.




If we fail to obtain acceptable prices or adequate reimbursement for our
product candidates, the use of our potential products could be severely
limited.




Our ability to successfully commercialize our product candidates will
depend significantly on our ability to obtain acceptable prices and the
availability of reimbursement to the patient from third-party payors. In March
2010, President Obama signed the Patient Protection and Affordability Care
Act, as amended by the Health Care and Education Affordability
Reconciliation Act (collectively, the PPACA) into law. Focused on expanding
healthcare coverage to millions of uninsured Americans and reducing the rate of
increase in healthcare costs, the PPACA contains numerous initiatives that
impact the pharmaceutical industry. These include, among other
things:


- increasing existing price rebates
  in federally funded health care programs;
- expanding rebates, or other
  pharmaceutical company discounts, into new programs;
- imposing a new non-deductible
  excise tax on sales of certain prescription pharmaceutical products by
  prescription drug manufacturers and importers;
- reducing incentives for
  employer-sponsored health care;
- creating an independent commission
  to propose changes to Medicare with a particular focus on the cost of
  biopharmaceuticals in Medicare Part D;
- providing a government-run public
  option with biopharmaceutical price-setting capabilities;
- allowing the Secretary of Health
  and Human Services to negotiate drug prices within Medicare Part D directly
  with pharmaceutical manufacturers;
- reducing the number of years of
  data exclusivity for innovative biological products potentially leading to
  earlier biosimilar competition;
- increasing oversight by the FDA of
  pharmaceutical research and development processes and commercialization
  tactics; and
- adding a tax credit for qualifying
  therapeutic discovery projects (QTDP).

37




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While the PPACA may increase the
number of patients who have insurance coverage for our product candidates, its
cost containment measures could also adversely affect reimbursement for our
potential products. Cost control initiatives could decrease the price that we
receive for any product candidate we may develop in the future. If our potential
products are not considered cost-effective or if we fail to generate adequate
third-party reimbursement for the users of our potential products and
treatments, then we may be unable to maintain price levels sufficient to realize
an appropriate return on our investment for potential products currently in
development, which could have an adverse impact on our
business.




The QTDP tax credit is equal to 50% of qualifying expenses incurred or
directly related to the conduct of a qualifying therapeutic discovery project
for taxable years beginning in 2009 and 2010. The credit can be used to either
reduce the federal tax liability for an eligible taxpayer or be received as a
grant for the same amount tax free. Eligible taxpayers must be a single employer
of not more than 250 employees. To qualify for the credit, a project must be
submitted to and certified by the Treasury Department. As of April 30, 2010, the
final guidelines for the QTDP tax credit have not been released. Although our
research and development activities appear to meet the initial criteria to
receive a tax credit, we cannot predict the availability or amount of funds that
could be received. If we are unsuccessful in obtaining the benefits of the QTDP
tax credit and our competitors are successful, our business may be adversely
impacted.




RISKS RELATED TO ENVIRONMENTAL AND PRODUCT
LIABILITY




Our activities involve hazardous materials, and improper handling of
these materials by our employees or agents could expose us to significant legal
and financial penalties.




Our research and development activities involve the controlled use of
hazardous materials, chemicals and various radioactive compounds. As a
consequence, we are subject to numerous environmental and safety laws and
regulations, including those governing laboratory procedures, exposure to
blood-borne pathogens and the handling of biohazardous materials. We may be
required to incur significant costs to comply with current or future
environmental laws and regulations and may be adversely affected by the cost of
compliance with these laws and regulations.




Although we believe that our safety procedures for using, handling,
storing and disposing of hazardous materials comply with the standards
prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be eliminated. In the event
of such an accident, state or federal authorities could curtail our use of these
materials and we could be liable for any civil damages that result, the cost of
which could be substantial. Further, any failure by us to control the use,
disposal, removal or storage, or to adequately restrict the discharge, or assist
in the clean up, of hazardous chemicals or hazardous, infectious or toxic
substances could subject us to significant liabilities, including joint and
several liability under certain statutes. Any such liability could exceed our
resources and could have a material adverse effect on our business, financial
condition and results of operations. Additionally, an accident could damage our
research and manufacturing facilities and operations.




Additional federal, state and local laws and regulations affecting us may
be adopted in the future. We may incur substantial costs to comply with these
laws and regulations and substantial fines or penalties if we violate any of
these laws or regulations, which would adversely affect our
business.




We may not be able to obtain or maintain sufficient insurance on
commercially reasonable terms or with adequate coverage against potential
liabilities in order to protect ourselves against product liability
claims.




Our business exposes us to potential product liability risks that are
inherent in the testing, manufacturing and marketing of human therapeutic and
diagnostic products. We may become subject to product liability claims if the
use of our potential products is alleged to have injured subjects or patients.
This risk exists for product candidates tested in human clinical trials as well
as potential products that are sold commercially. We currently have limited
clinical trial liability insurance and we may not be able to maintain this type
of insurance for any of our clinical trials. In addition, product liability
insurance is becoming increasingly expensive. Being unable to obtain or maintain
product liability insurance in the future on acceptable terms or with adequate
coverage against potential liabilities could have a material adverse effect on
our business.




38




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RISKS RELATED TO OUR COMMON STOCK AND
FINANCIAL REPORTING




Our stock price has historically been very
volatile.




Stock prices and trading volumes for many biopharmaceutical companies
fluctuate widely for a number of reasons, including factors which may be
unrelated to their businesses or results of operations such as media coverage,
legislative and regulatory measures and the activities of various interest
groups or organizations. This market volatility, as well as general domestic or
international economic, market and political conditions, could materially and
adversely affect the market price of our common stock and the return on your
investment.




Historically, our stock price has been extremely volatile. Between
January 2000 and March 2010, our stock has traded as high as $75.88 per share
and as low as $1.41 per share. Between January 1, 2007 and March 31, 2010, the
price has ranged between a high of $9.85 per share and a low of $1.95 per share.
The significant market price fluctuations of our common stock are due to a
variety of factors, including:


- the demand in the market for our
  common stock;
- the experimental nature of our
  product candidates;
- fluctuations in our operating
  results;
- market conditions relating to the
  biopharmaceutical and pharmaceutical industries;
- announcements of technological
  innovations, new commercial products, or clinical progress or lack thereof by
  us, our collaborative partners or our competitors;
- announcements concerning
  regulatory developments, developments with respect to proprietary rights and
  our collaborations;
- comments by securities
  analysts;
- general market
  conditions;
- political developments related to
  hESC research;
- public concern with respect to our
  product candidates; or
- the issuance of common stock to
  partners, vendors or to investors to raise additional capital.

In addition, the stock market is subject to other factors outside our
control that can cause extreme price and volume fluctuations. In the third and
fourth quarters of 2008, as well as during 2009, broad distress in the financial
markets and the economy have resulted in greatly increased market uncertainty
and instability in both U.S. and international capital and credit markets. These
conditions, combined with volatile oil prices, declining business and consumer
confidence and increased unemployment have recently contributed to substantial
market volatility, and if such market conditions persist, the price of our
common stock may fluctuate or decline. Securities class action litigation has
often been brought against companies, including many biotechnology companies,
which experience volatility in the market price of their securities. Litigation
brought against us could result in substantial costs and a diversion of
management’s attention and resources, which could adversely affect our
business.




The sale of a substantial number of shares may adversely affect the
market price for our common stock.




The sale of a substantial number of shares of our common stock in the
public market, or the perception that such sales could occur, could
significantly and negatively affect the market price for our common stock. As of
March 31, 2010, we had 200,000,000 shares of common stock authorized for
issuance and 97,458,243 shares of common stock outstanding. In addition, as of
March 31, 2010, we have reserved for future issuance approximately 22,266,272
shares of common stock for our stock plans, potential milestone payments and
outstanding warrants.




In addition, we have issued common stock to certain parties, such as
vendors and service providers, as payment for products and services. Under these
arrangements, we typically agree to register the shares for resale soon after
their issuance. We may continue to pay for certain goods and services in this
manner, which would dilute your interest in us. Also, sales of the shares issued
in this manner could negatively affect the market price for our common stock.




39




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Our undesignated preferred stock may inhibit potential acquisition bids;
this may adversely affect the market price for our common stock and the voting
rights of holders of our common stock.




Our certificate of incorporation provides our Board of Directors with the
authority to issue up to 3,000,000 shares of undesignated preferred stock and to
determine or alter the rights, preferences, privileges and restrictions granted
to or imported upon these shares without further vote or action by our
stockholders. As of the date of this Form 10-Q, 50,000 shares of preferred stock
have been designated Series A Junior Participating Preferred Stock and the Board
of Directors still has authority to designate and issue up to 2,950,000 shares
of preferred stock in one or more classes or series. The issuance of shares of
preferred stock may delay or prevent a change in control transaction without
further action by our stockholders. As a result, the market price for our common
stock may be adversely affected.




In addition, if we issue preferred stock in the future that has
preference over our common stock with respect to the payment of dividends or
upon our liquidation, dissolution or winding up, or if we issue preferred stock
with voting rights that dilute the voting power of our common stock, the rights
of holders of our common stock or the market price for our common stock could be
adversely affected.




Provisions in our share purchase rights plan, charter and bylaws, and
provisions of Delaware law, may inhibit potential acquisition bids for us, which
may prevent holders of our common stock from benefiting from what they believe
may be the positive aspects of acquisitions and takeovers.




Our Board of Directors has adopted a share purchase rights plan, commonly
referred to as a “poison pill.” This plan entitles existing stockholders to
rights, including the right to purchase shares of common stock, in the event of
an acquisition of 15% or more of our outstanding common stock.




Our share purchase rights plan could prevent stockholders from profiting
from an increase in the market value of their shares as a result of a change of
control of us by delaying or preventing a change of control. In addition, our
Board of Directors has the authority, without further action by our
stockholders, to issue additional shares of common stock, and to fix the rights
and preferences of one or more series of preferred stock.




In addition to our share purchase rights plan and the undesignated
preferred stock, provisions of our charter documents and bylaws may make it
substantially more difficult for a third party to acquire control of us and may
prevent changes in our management, including provisions that:


- prevent stockholders from taking
  actions by written consent;
- divide the Board of Directors into
  separate classes with terms of office that are structured to prevent all of
  the directors from being elected in any one year; and
- set forth procedures for
  nominating directors and submitting proposals for consideration at
  stockholders’ meetings.

Provisions of Delaware law may also inhibit potential acquisition bids
for us or prevent us from engaging in business combinations. In addition, we
have severance agreements with several employees and a change of control
severance plan which could require an acquiror to pay a higher price. Either
collectively or individually, these provisions may prevent holders of our common
stock from benefiting from what they may believe are the positive aspects of
acquisitions and takeovers, including the potential realization of a higher rate
of return on their investment from these types of transactions.




We do not intend to pay cash dividends on our common stock in the
foreseeable future.




We do not anticipate paying cash dividends on our common stock in the
foreseeable future. Any payment of cash dividends will depend upon our financial
condition, results of operations, capital requirements and other factors and
will be at the discretion of the Board of Directors. Furthermore, we may incur
additional indebtedness that may severely restrict or prohibit the payment of
dividends.




40




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Failure to achieve and maintain effective internal controls in accordance
with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse
effect on our business and stock price.




Section 404 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act)
requires that we establish and maintain an adequate internal control structure
and procedures for financial reporting. Our annual report on Form 10-K must
contain an assessment by management of the effectiveness of our internal control
over financial reporting and must include disclosure of any material weaknesses
in internal control over financial reporting that we have identified. In
addition, our independent registered public accounting firm must annually
provide an opinion on the effectiveness of our internal control over financial
reporting.




The requirements of Section 404 of the Sarbanes-Oxley Act are ongoing and
also apply to future years. We expect that our internal control over financial
reporting will continue to evolve as our business develops. Although we are
committed to continue to improve our internal control processes and we will
continue to diligently and vigorously review our internal control over financial
reporting in order to ensure compliance with Section 404 requirements, any
control system, regardless of how well designed, operated and evaluated, can
provide only reasonable, not absolute, assurance that its objectives will be
met. Therefore, we cannot be certain that in the future material weaknesses or
significant deficiencies will not exist or otherwise be discovered. If material
weaknesses or other significant deficiencies occur, these weaknesses or
deficiencies could result in misstatements of our results of operations,
restatements of our consolidated financial statements, a decline in our stock
price, or other material adverse effects on our business, reputation, results of
operations, financial condition or liquidity.




ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS




On January 5, 2010, we issued 133,357 shares of our common stock to MPI
Research, Inc. (MPI) in a private placement as consideration under an amendment
to a master services agreement under which MPI has provided and will continue to
provide certain preclinical services in support of our clinical programs. The
fair value of the common stock of $829,000 was recorded as a prepaid asset and
is being amortized to research and development expense on a pro-rata basis as
services are performed. As of March 31, 2010, $290,000 remained as a prepaid
asset which is expected to be expensed over the next six months.




On January 5, 2010, we issued 94,741 shares of our common stock to
Exponent, Inc. (Exponent), the lessor of the premises at 149 Commonwealth Drive,
as a first installment payment of rent due under the extended lease agreement
for the period from May 1, 2010 through July 31, 2012. The fair value of the
common stock of $589,000 was recorded as a prepaid asset and will be amortized
to rent expense on a pro-rata basis over the lease term.




On January 25, 2010, we issued 287,401 shares of our common stock to
Samchully Pharm Co. Ltd. (Samchully) in a private placement as consideration
related to an addendum agreement to a manufacturing agreement pursuant to which
Samchully is performing certain services and manufacturing certain raw materials
and products for us intended for use in human clinical trials. The fair value of
the common stock of $1,704,000 was recorded as a prepaid asset and is being
amortized to research and development expense on a pro-rata basis upon the
performance of services and the proper receipt of materials. As of March 31,
2010, $1,704,000 remained as a prepaid asset which is expected to be expensed
over the next six months.




We issued the above-described shares of common stock in independent
transactions and in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended. Each of MPI, Exponent
and Samchully represented to us that it is an accredited investor as defined in
Rule 501(a) of the Securities Act of 1933, as amended, and that the securities
issued pursuant thereto were being acquired for investment purposes.




Purchases of Equity Securities by the Issuer
and Affiliated Purchasers




None.




41




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ITEM 3. DEFAULTS UPON SENIOR
SECURITIES




None.




ITEM 4. (REMOVED AND
RESERVED)




None.




ITEM 5. OTHER INFORMATION




None.




ITEM 6. EXHIBITS




ExhibitNumber
            
            Description31.1
            
            Certification of
      Chief Executive Officer pursuant to Form of Rule 13a-14(a) and 15d-14(a),
      as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
      dated April 30, 2010.31.2
            
            Certification of
      Chief Financial Officer pursuant to Form of Rule 13a-14(a) and 15d-14(a),
      as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
      dated April 30, 2010.32.1
            
            Certification of
      Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 30,
      2010.32.2
            
            Certification of
      Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 30,
      2010.


SIGNATURE




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




GERON
      CORPORATIONBy:
            /s/ DAVID L.
      GREENWOODDavid L. GreenwoodExecutive Vice President
andChief Financial OfficerDate: April 30, 2010
            
            (Duly Authorized
  Signatory)


42




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EXHIBIT INDEX




ExhibitNumber
            
            Description31.1
            
            Certification of
      Chief Executive Officer pursuant to Form of Rule 13a-14(a) and 15d-14(a),
      as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
      dated April 30, 2010.31.2
            
            Certification of
      Chief Financial Officer pursuant to Form of Rule 13a-14(a) and 15d-14(a),
      as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
      dated April 30, 2010.32.1
            
            Certification of
      Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 30,
      2010.32.2
            
            Certification of
      Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 30,
      2010.


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