UNITED
STATES


SECURITIES
AND EXCHANGE
COMMISSION


WASHINGTON D.C. 20549


_______________




FORM
10-Q


_______________




x  QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES


EXCHANGE ACT OF
1934




FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 2008




OR




oTRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES


EXCHANGE ACT
OF 1934




FOR THE TRANSITION
PERIOD FROM _____ TO _____.




COMMISSIONFILE
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.
      EMPLOYER IDENTIFICATION NO.)INCORPORATION
      OR ORGANIZATION)




230
CONSTITUTION DRIVE, MENLO PARK, CA 94025


(ADDRESS,
INCLUDING ZIP CODE, OF PRINCIPAL EXECUTIVE OFFICES)




REGISTRANT’S TELEPHONE
NUMBER, INCLUDING AREA CODE: (650)
473-7700




FORMER NAME, FORMER
ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST


REPORT: N/A




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          xNo           o




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        oNo          x




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 July 28, 2008:Common
      Stock, $0.001 par value
            78,647,393
      shares













GERON
CORPORATION




INDEX




PagePART
      I. FINANCIAL INFORMATIONItem
      1:
            Condensed
      Consolidated Financial
      Statements .............................................................................................................................................................................................
            2Condensed
      Consolidated Balance Sheets as of June 30, 2008 and December 31,
      2007 ...........................................................................................................................
            2Condensed
      Consolidated Statements of Operations for the three and six months ended
      June 30, 2008 and 2007
      .............................................................................
            3Condensed
      Consolidated Statements of Cash Flows for the six months ended June 30,
      2008 and 2007
      ..............................................................................................
            4Notes
      to Condensed Consolidated Financial
      Statements .............................................................................................................................................................................
            5Item
      2:
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations ................................................................................................................
            16Item
      3:
            Quantitative
      and Qualitative Disclosures About Market Risk
      .....................................................................................................................................................................
            23Item
      4:
            Controls
      and
      Procedures ....................................................................................................................................................................................................................................
            23PART
      II. OTHER INFORMATIONItem
      1:
            Legal
      Proceedings ...............................................................................................................................................................................................................................................
            24Item
      1A:
            Risk
      Factors
      ..........................................................................................................................................................................................................................................................
            24Item
      2:
            Unregistered
      Sales of Equity Securities and Use of Proceeds
      .....................................................................................................................................................................
            38Item
      3:
            Defaults
      Upon Senior Securities
      .......................................................................................................................................................................................................................
            39Item
      4:
            Submission
      of Matters to a Vote of Security Holders
      ...................................................................................................................................................................................
            39Item
      5:
            Other
      Information
      ................................................................................................................................................................................................................................................
            39Item
      6:
            Exhibits
      ..................................................................................................................................................................................................................................................................
            40SIGNATURE
      .........................................................................................................................................................................................................................................................
            40






1






PART I.
FINANCIAL INFORMATION




ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




GERON
      CORPORATION
              CONDENSED CONSOLIDATED BALANCE SHEETS
              (IN
      THOUSANDS)JUNE
      30,
              2008
            
            
            DECEMBER
      31,
              2007(UNAUDITED)ASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            127,080
            
            
            $
            146,025Restricted
      cash
            
            
            1,082
            
            
            
            2,440Marketable
      securities
            
            
            58,571
            
            
            
            59,979Interest
      and other receivables
            
            
            305
            
            
            
            788Current
      portion of prepaid assets
            
            
            5,879
            
            
            
            4,140Total
      current assets
            
            
            192,917
            
            
            
            213,372Noncurrent
      portion of prepaid assets
            
            
            2,897
            
            
            
            699Property
      and equipment, net
            
            
            4,092
            
            
            
            4,075Deposits
      and other assets
            
            
            702
            
            
            
            750$
            200,608
            
            
            $
            218,896LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable
            
            $
            2,443
            
            
            $
            2,857Accrued
      compensation
            
            
            1,844
            
            
            
            2,203Accrued
      liabilities (including amounts for related parties: 2008-$547,
      2007-$1,029)
            
            
            2,419
            
            
            
            4,514Current
      portion of deferred revenue
            
            
            134
            
            
            
            241Fair
      value of derivatives
            
            
            701
            
            
            
            1,602Current portion of advance payment from related party for research and
      development, net
            
            
            1,038
            
            
            
            1,300Total
      current liabilities
            
            
            8,579
            
            
            
            12,717Noncurrent
      portion of deferred revenue
            
            
            65
            
            
            
            78Noncurrent
      portion of advance payment from related party for research and
      development, net
            
            
            —
            
            
            
            427Commitments
      and contingenciesStockholders’
      equity:Common
      stock
            
            
            79
            
            
            
            76Additional
      paid-in capital
            
            
            664,104
            
            
            
            650,437Accumulated
      deficit
            
            
            (472,110
            )
            
            
            (444,872
            )Accumulated
      other comprehensive (loss) income
            
            
            (109
            )
            
            
            33Total
      stockholders’ equity
            
            
            191,964
            
            
            
            205,674$
            200,608
            
            
            $
            218,896






See
accompanying
notes.






2






GERON
CORPORATION




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(IN
THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


(UNAUDITED)




THREE
      MONTHS ENDED
            
            
            SIX
      MONTHS ENDEDJUNE
      30,
            
            
            JUNE
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Revenues
      from collaborative agreements (including amounts from related
      parties:  three months - 2008-$33; 2007-$236; six months
      -2008-$59; 2007-$448)
            
            $
            87
            
            
            $
            304
            
            
            $
            166
            
            
            $
            597License
      fees and royalties (including amounts from related parties: three months -
      2008-none; 2007-none; six months -2008-$1,500;
    2007-none)
            
            
            111
            
            
            
            585
            
            
            
            1,726
            
            
            
            1,208Total
      revenues
            
            
            198
            
            
            
            889
            
            
            
            1,892
            
            
            
            1,805Operating
      expenses:Research
      and development (including amounts for related parties: three months -
      2008-$169; 2007-$287; six months - 2008-$318; 2007-$499)
            
            
            11,614
            
            
            
            14,098
            
            
            
            25,227
            
            
            
            27,287General
      and administrative
            
            
            4,042
            
            
            
            3,557
            
            
            
            8,072
            
            
            
            7,686Total
      operating expenses
            
            
            15,656
            
            
            
            17,655
            
            
            
            33,299
            
            
            
            34,973Loss
      from operations
            
            
            (15,458
            )
            
            
            (16,766
            )
            
            
            (31,407
            )
            
            
            (33,168
            )Unrealized
      gain (loss) on derivatives
            
            
            495
            
            
            
            (36
            )
            
            
            901
            
            
            
            14,769Interest
      and other income
            
            
            1,423
            
            
            
            2,843
            
            
            
            3,316
            
            
            
            5,635Interest
      and other expense
            
            
            (24
            )
            
            
            (26
            )
            
            
            (48
            )
            
            
            (54
            )Net
      loss
            
            
            (13,564
            )
            
            
            (13,985
            )
            
            
            (27,238
            )
            
            
            (12,818
            )Deemed
      dividend on derivatives
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (3,661
            )Net
      loss applicable to common stockholders
            
            $
            (13,564
            )
            
            $
            (13,985
            )
            
            $
            (27,238
            )
            
            $
            (16,479
            )Basic
      and diluted net loss per share applicable to common
      stockholders
            
            $
            (0.17
            )
            
            $
            (0.19
            )
            
            $
            (0.35
            )
            
            $
            (0.23
            )Shares
      used in computing basic and diluted net loss per share applicable to
      common stockholders
            
            
            78,142,176
            
            
            
            74,077,733
            
            
            
            77,385,935
            
            
            
            72,937,395








See
accompanying notes.




3


GERON
CORPORATION




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


CHANGE
IN CASH AND CASH EQUIVALENTS


(IN
THOUSANDS)


(UNAUDITED)




SIX
      MONTHS ENDED
              JUNE
      30,2008
            
            
            2007Cash
      flows from operating activitiesNet
      loss
            
            $
            (27,238
            )
            
            $
            (12,818
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
            
            
            1,145
            
            
            
            630Accretion
      and amortization on investments, net
            
            
            (860
            )
            
            
            (1,634
            )Gain
      on sale of fixed assets
            
            
            (9
            )
            
            
            —Stock-based
      compensation in exchange for services by non-employees
            
            
            340
            
            
            
            4,247Stock-based
      compensation for awards to employees and directors
            
            
            5,609
            
            
            
            5,491Amortization
      related to 401(k) contributions
            
            
            231
            
            
            
            117Loss
      on equity investments in licensees
            
            
            44
            
            
            
            63Unrealized
      gain on derivatives
            
            
            (901
            )
            
            
            (14,769
            )Changes
      in assets and liabilities:Other
      current and noncurrent assets
            
            
            3,383
            
            
            
            408Other
      current and noncurrent liabilities
            
            
            (1,994
            )
            
            
            2,613Advance
      payment from related party for research
              and development
            
            
            (689
            )
            
            
            2,534Net cash used in
      operating activities
            
            
            (20,939
            )
            
            
            (13,118
            )Cash
      flows from investing activitiesRestrictedcash
      transfer
            
            
            1,358
            
            
            
            —Proceeds
      from sale of fixed assets
            
            
            15
            
            
            
            —Capital
      expenditures
            
            
            (1,168
            )
            
            
            (1,746
            )Purchases
      of marketable securities
            
            
            (35,868
            )
            
            
            (95,679
            )Proceeds
      from maturities of marketable securities
            
            
            38,000
            
            
            
            84,805Net cash provided by
      (used in) investing activities
            
            
            2,337
            
            
            
            (12,620
            )Cash
      flows from financing activitiesRepurchase
      of common stock
            
            
            (455
            )
            
            
            —Proceeds
      from issuances of common stock, net of issuance costs
            
            
            112
            
            
            
            1,636Proceeds
      from exercise of warrants
            
            
            —
            
            
            
            15,163Net cash (used in)
      provided by financing activities
            
            
            (343
            )
            
            
            16,799Net
      decrease in cash and cash equivalents
            
            
            (18,945
            )
            
            
            (8,939
            )Cash
      and cash equivalents at the beginning of the period
            
            
            146,025
            
            
            
            135,882Cash
      and cash equivalents at the end of the period
            
            $
            127,080
            
            
            $
            126,943








See
accompanying notes.




4


Geron
Corporation


Notes to Condensed
Consolidated Financial Statements


June
30, 2008


(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 condensed consolidated unaudited balance sheet as
of June 30, 2008 and condensed consolidated statements of operations for the
three and six months ended June 30, 2008 and 2007 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 and six month periods ended
June 30, 2008 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2008 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, 2007, included in the Company’s
Annual Report on Form 10-K. The accompanying condensed consolidated balance
sheet as of December 31, 2007 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.




FASB
Interpretation No. 46-R (FIN 46R), “Consolidation of Variable Interest Entities,
an Interpretation of ARB No. 51,” as amended, provides guidance on the
identification, classification and accounting of variable interest entities
(VIEs). We have variable interests in VIEs through marketable and non-marketable
equity investments in various companies with whom we have executed licensing
agreements and our joint venture, Start Licensing, Inc. In accordance with FIN
46R, we have concluded that we are not the primary beneficiary in any of these
VIEs and, therefore, have not consolidated such entities in our condensed
consolidated financial statements.




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 employee stock options, restricted
stock and warrants to purchase common stock and have been 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, which are all antidilutive. 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
additional shares of 316,545 and 2,175,946 for 2008 and 2007, respectively,
related to outstanding options, restricted stock and warrants (as determined
using the treasury stock method at an average market price during the
period).






5


Geron
Corporation
 Notes to Condensed
Consolidated Financial Statements
 June
30, 2008
 (UNAUDITED)




Use
of Estimates




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




Revenue
Recognition




We
recognize revenue related to license and research agreements with collaborators,
royalties, and milestone payments. The principles and guidance outlined in EITF
Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables,” provide a
framework to (i) determine whether an arrangement involving multiple
deliverables contains more than one unit of accounting, (ii) determine how the
arrangement consideration should be measured and allocated to the separate units
of accounting in the arrangement and (iii) apply relevant revenue recognition
criteria, under Staff Accounting Bulletin No. 104, “Revenue Recognition,” (SAB
104) separately for each of the separate units. Our arrangements generally do
not contain a general right of return relative to the delivered
item.




We have
several license and marketing 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 or license fees that are not dependent on future
performance under these agreements or the intellectual property related to the
license has been deliveredare
recognized as revenue when earned and over the estimated period of the
continuing performance obligations. Option payments are generally recognized as
revenue over the term of the option agreement. Milestone payments, earned based
on 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.




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 are as follows:


June
      30,
            
            December
      31,2008
            
            2007(In
      thousands)Certificate
      of deposit for unused equipment line of credit
            
            $
            530
            
            $
            530Certificate
      of deposit for credit card purchases
            
            
            255
            
            
            250Funds
      held in trust for creditors of TA Therapeutics, Ltd.
            
            
            297
            
            
            1,660$
            1,082
            
            $
            2,440






6


Geron
Corporation Notes to Condensed
Consolidated Financial Statements
 June
30, 2008
 (UNAUDITED)




Fair
Value of Financial Instruments




In
September 2006, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 157, “Fair Value Measurements,” (SFAS 157)
which defines fair value, establishes guidelines for measuring fair value and
expands disclosures regarding fair value measurements. SFAS 157 does not require
any new fair value measurements but rather eliminates inconsistencies in
guidance found in various prior accounting pronouncements and is effective for
fiscal years beginning after November 15, 2007. In
February 2008, the FASB issued FASB FSP 157-2 which delays the effective date of
SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those
that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually), until fiscal years beginning after November 15, 2008, and
interim periods within those fiscal years. These nonfinancial items include
assets and liabilities such as reporting units measured at fair value in a
goodwill impairment test and nonfinancial assets acquired and liabilities
assumed in a business combination. Effective January 1, 2008, we adopted SFAS
157 for financial assets and liabilities recognized at fair value on a recurring
basis. The partial adoption of SFAS 157 for financial assets and liabilities did
not have a material impact on our consolidated financial position, results of
operations or cash flows. See Note 2 for information and related disclosures
regarding our fair value measurements.




Cash
Equivalents and Marketable Debt Securities




We
consider all highly liquid investments purchased 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 available-for-sale securities. We place our
cash and cash equivalents in money market funds and U.S. government notes. Our
investments include U.S. government agency notes and commercial paper with
original maturities ranging from one to nine months and asset-backed securities
with original expected maturity dates ranging from eight to ten months and
original legal maturity dates ranging from 32 to 44 months.




We
classify our marketable debt 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. Realized gains and losses have been insignificant to date.
Dividend and interest income are recognized when earned and included in interest
and other income on our condensed consolidated statements of operations. We
recognize a charge when the declines in the fair values of our
available-for-sale securities below the amortized cost basis are judged to be
other-than-temporary. We consider various factors in determining whether to
recognize an other-than-temporary charge, including the length of time and
extent to which the fair value has been less than our amortized cost basis, the
financial condition and near-term prospects of the security issuer, and our
intent and ability to hold the investment for a period of time sufficient to
allow for any anticipated recovery in market value. Declines in market value
judged other-than-temporary result in a charge to interest and other
income.




Marketable
and Non-Marketable Equity Investments in Licensees and Joint
Venture




Investments
in non-marketable nonpublic companies 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. For marketable equity
securities, unrealized gains and losses are 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
monitor our equity investments in licensees and our joint venture for impairment
on a quarterly basis and make appropriate reductions in carrying values when
such reductions 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.




7


Geron
Corporation


Notes to Condensed
Consolidated Financial Statements


June
30, 2008


(UNAUDITED)






Fair
Value of Derivatives




We apply
the provisions of Statement of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Hedging Activities,” (SFAS 133),
Statement of Financial Accounting Standards No. 150, “Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity,”
(SFAS 150) and Emerging Issues Task Force Issue 00-19, “Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company’s Own Stock,” (Issue 00-19) in accounting for derivative financial
instruments.




For
warrants and non-employee options classified as assets or liabilities under
Issue 00-19, 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 an unrealized gain (loss) on fair value of
derivatives. Fair value of warrants and non-employee options subject to
Issue 00-19 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 under Issue 00-19, the fair value of the
warrants and non-employee options is recorded in stockholders’ equity and no
further adjustments are made.




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. 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.
Accrued liabilities for raw materials to manufacture clinical trial drugs,
manufacturing costs, clinical trial expense, costs to maintain technology
licenses and sponsored research reimbursement fees are included in accrued
liabilities and research and development expenses.




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




Statement
of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,”
(SFAS 123R) requires the measurement and recognition of compensation expense for
all stock-based awards made to employees and directors, including stock options,
restricted stock awards and employee stock purchases related to our Employee
Stock Purchase Plan (ESPP purchases) based upon the grant-date fair value of
those awards.




On
January 1, 2006 we implemented the provisions of SFAS 123R using the modified
prospective transition method. In accordance with this method, for awards
expected to vest, 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 in
accordance with the original provisions of SFAS 123 and following the
straight-line attribution method elected originally upon the adoption of SFAS
123.




8


Geron
Corporation
 Notes to Condensed
Consolidated Financial Statements
 June
30, 2008
 (UNAUDITED)




The
following table summarizes the stock-based compensation expense related to stock
options, restricted stock awards and employee stock purchases under SFAS 123R
for the three and six months ended June 30, 2008 and 2007 which was allocated as
follows:




Three
      Months Ended
              June
      30,
            
            
            Six
      Months Ended
              June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007(In
      thousands)Research
      and
      development
            
            $
            1,294
            
            
            $
            1,302
            
            
            $
            2,665
            
            
            $
            2,554General
      and
      administrative
            
            
            1,572
            
            
            
            1,267
            
            
            
            2,944
            
            
            
            2,937Stock-based
      compensation expense included in operating expenses
            
            $
            2,866
            
            
            $
            2,569
            
            
            $
            5,609
            
            
            $
            5,491




Stock
Options




The fair
value of options granted during the six months ended June 30, 2008 and 2007 has
been estimated at the date of grant using the Black Scholes option-pricing model
with the following assumptions:




Six
      Months Ended June 30,2008
            
            2007Dividend
      yield
            
            None
            
            NoneExpected
      volatility
      range
            
            0.565
      to 0.596
            
            0.761
      to 0.774Risk-free
      interest rate
      range
            
            2.36%
      to 3.57%
            
            4.43%
      to 5.05%Expected
      term
            
            5
      yrs
            
            5
      yrs




Employee
Stock Purchase Plan




The fair
value of employees’ purchase rights during the six months ended June 30, 2008
and 2007 has been estimated using the Black Scholes option-pricing model with
the following assumptions:




Six
      Months Ended June 30,2008
            
            2007Dividend
      yield
            
            None
            
            NoneExpected
      volatility
      range
            
            0.458
      to 0.473
            
            0.419
      to 0.460Risk-free
      interest
      rate
            
            3.09%
      to 4.97%
            
            5.00%
      to 5.26%Expected
      term
            
            6 -
      12 mos
            
            6 -
      12 mos




The
expected volatility range is based on historical volatilities of our stock,
because traded options on Geron stock do not correspond to option terms or the
underlying stock trading volume. The risk-free interest rate is based on the
U.S. Zero Coupon Treasury Strip Yields for the expected term in effect on the
date of grant. 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. Dividend yield is based on historical cash
dividend payments, which have been none to date. We grant options under our
equity plans to employees, non-employee directors and consultants, which
generally vest over four years.




As
stock-based compensation expense recognized in the condensed consolidated
statements of operations for the three and six months ended June 30, 2008 and
2007 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. SFAS 123R requires forfeitures
to be estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates. Forfeitures were
estimated based on historical experience.




9


Geron
Corporation
 Notes
to Condensed Consolidated Financial Statements
 June
30, 2008
 (UNAUDITED)




Restricted
Stock Awards




The
stock-based compensation expense related to restricted stock awards is
determined using the fair value of Geron 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.
  We
continue to apply the provisions of EITF Issue No. 96-18, “Accounting for Equity
Instruments that are Issued to Other than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services,” (Issue 96-18) for our non-employee
stock-based awards. Under Issue 96-18, the measurement date at which the fair
value of the stock-based award is measured is equal to the earlier of 1) the
date at which a commitment for performance by the counterparty to earn the
equity instrument is reached or 2) 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 loss. Other comprehensive loss
includes certain changes in stockholders' equity which are excluded from net
loss. The activity in comprehensive loss during the three and six months
ended June 30, 2008 and 2007 are as follows:


Three
      Months Ended
              June
      30,
            
            
            Six
      Months Ended
              June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007(In
      thousands)Net
      loss
            
            $
            (13,564
            )
            
            $
            (13,985
            )
            
            $
            (27,238
            )
            
            $
            (12,818
            )Change
      in unrealized gain (loss) on securities available-for-sale and marketable
      equity securities
            
            
            (316
            )
            
            
            59
            
            
            
            (140
            )
            
            
            57Change
      in foreign currency translation adjustments
            
            
            (1
            )
            
            
            —
            
            
            
            (2
            )
            
            
            —Comprehensive
      loss
            
            $
            (13,881
            )
            
            $
            (13,926
            )
            
            $
            (27,380
            )
            
            $
            (12,761
            )




The
components of accumulated other comprehensive (loss) income are as
follows:


June
      30, 2008
            
            
            December
      31, 2007(In
      thousands)Net
      unrealized holding gains on available-for-sale securities and marketable
      equity investments
            $
            55
            
            
            $
            195Foreign
      currency translation adjustments
            
            (164
            )
            
            
            (162
            )$
            (109
            )
            
            $
            33




2.
FAIR VALUE MEASUREMENTS




Statement
of Financial Accounting Standards No. 157, “Fair Value Measurements,” (SFAS
157), defines “fair value” as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date, or an exit price. A liability’s fair value
is defined as the amount that would be paid to transfer the liability to a new
obligor, not the amount that would be paid to settle the liability with the
creditor. Where available, fair value is based on observable market prices or
parameters or derived from such prices or parameters. Where observable prices or
inputs are not available, valuation models are applied. These valuation
techniques involve some level of management estimation and judgment, the degree
of which is dependent on the price transparency for the instruments or market
and the instruments’ complexity.






10


Geron
Corporation
 Notes
to Condensed Consolidated Financial Statements
 June
30, 2008
 (UNAUDITED)




Beginning
January 1, 2008, assets and liabilities recorded at fair value in the condensed
consolidated balance sheet are categorized based upon the level of judgment
associated with inputs used to measure their value. SFAS 157 defines a
three-level valuation hierarchy for disclosure of fair value measurements as
follows:




Level 1 –
Inputs are unadjusted, quoted prices in active markets for identical assets or
liabilities at the measurement date.




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.




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 general classification of such instruments pursuant to the
valuation hierarchy.




Marketable
Debt Securities Available-for-Sale




Where
quoted prices are available in an active market, securities are classified as
Level 1 of the valuation hierarchy. Level 1 securities include highly liquid
government and agency 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 instruments include corporate
notes, asset-backed securities and commercial paper.




Equity
Investments in Licensees




Where
quoted prices are available in an active market, securities are classified as
Level 1 of the valuation hierarchy. Level 1 securities include publicly traded
equities.




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 classification of the valuation
hierarchy.




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




June
      30, 2008
            
            December
      31, 2007Dividend
      yield
            None
            
            NoneExpected
      volatility range
            0.506
      to 0.727
            
            0.435
      to 0.763Risk-free
      interest rate range
            2.63%
      to 3.61%
            
            3.06%
      to 3.73%Expected
      term
            2
      yrs to 7 yrs
            
            2
      yrs to 7 yrs




11


Geron
Corporation
 Notes
to Condensed Consolidated Financial Statements
 June
30, 2008
 (UNAUDITED)




Expected
volatilities are 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 expected term of derivatives is equal to
the remaining contractual term of the instrument. The risk-free interest rate is
based on the U.S. Zero Coupon Treasury Strip Yields for the expected term in
effect on the reporting date. Dividend yield is based on historical cash
dividend payments, which have been none to date.




Fair
Value on a Recurring Basis




Assets
and liabilities measured at fair value on a recurring basis are categorized in
the table below based upon the lowest level of significant input to the
valuations as of June 30, 2008.




Fair
      Value Measurements at Reporting Date UsingQuoted
      Prices in Active Markets for Identical Assets
            
            
            Significant
      Other Observable Inputs
            
            
            Significant
      Unobservable Inputs(In
      thousands)
            
            Level
      1
            
            
            Level
      2
            
            
            Level
      3
            
            
            TotalAssetsMoney market funds
      (1)
            
            $
            125,359
            
            
            $
            —
            
            
            $
            —
            
            
            $
            125,359Government notes and
      agency securities (2)
            
            
            17,912
            
            
            
            —
            
            
            
            —
            
            
            
            17,912Asset-backed
      securities (2)
            
            
            —
            
            
            
            10,263
            
            
            
            —
            
            
            
            10,263Commercial paper
      (2)
            
            
            —
            
            
            
            31,130
            
            
            
            —
            
            
            
            31,130Equity
      investments in licensees (3)
            
            
            8
            
            
            
            —
            
            
            
            —
            
            
            
            8Total
            
            $
            143,279
            
            
            $
            41,393
            
            
            $
            —
            
            
            $
            184,672LiabilitiesDerivatives (4)
            
            $
            —
            
            
            $
            —
            
            
            $
            701
            
            
            $
            701


___________________




(1)
            Included
      in cash and cash equivalents on our condensed consolidated balance
      sheet.




(2)
            Included
      in cash and cash equivalents and marketable securities on our condensed
      consolidated balance sheet.




(3)
            Included
      in deposits and other assets on our condensed consolidated balance
      sheet.




(4)
            Included
      in fair value of derivatives on our condensed consolidated balance
      sheet.




Changes
in Level 3 Recurring Fair Value Measurements




The table
below includes a rollforward of the balance sheet amounts for the three and six
months ended June 30, 2008 (including the change in fair value), for financial
instruments classified as Level 3. 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.






12
 
 Geron
Corporation Notes
to Condensed Consolidated Financial Statements
 June
30, 2008
 (UNAUDITED)


Fair
      Value Measurements Using Significant Unobservable Inputs (Level
      3)
              Three
      Months Ended June 30, 2008(In
      thousands)
            
            Fair
      Value at
              March
      31, 2008
            
            
            Total
              Unrealized
              Gains
      Included in
              Earnings, net (1)
            
            
            Purchases,
      Sales, Issuances, Settlements, net
            
            
            Transfers
              In
      and/or
              Out
      of
              Level
      3
            
            
            Fair
      Value at
              June
      30, 2008
            
            
            Change
      in Unrealized Gains Related to Financial Instruments
              Held
      at
              June 30, 2008 (1)Derivative
      Liabilities
            
            $
            1,196
            
            
            $
            495
            
            
            $
            —
            
            
            $
            —
            
            
            $
            701
            
            
            $
            495




Fair
      Value Measurements Using Significant Unobservable Inputs (Level
      3)
              Six
      Months Ended June 30, 2008(In
      thousands)
            
            Fair
      Value at
              December
      31, 2007
            
            
            Total
              Unrealized
              Gains
      Included in
              Earnings, net (1)
            
            
            Purchases,
      Sales, Issuances, Settlements, net
            
            
            Transfers
              In
      and/or
              Out
      of
              Level
      3
            
            
            Fair
      Value at
              June
      30, 2008
            
            
            Change
      in Unrealized Gains Related to Financial Instruments
              Held
      at
              June 30, 2008 (1)Derivative
      Liabilities
            
            $
            1,602
            
            
            $
            901
            
            
            $
            —
            
            
            $
            —
            
            
            $
            701
            
            
            $
            901


___________________




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




3.
JOINT VENTURE AND RELATED PARTY TRANSACTIONS




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
pre-clinical and drug development activities, own 75% voting interest and have
unilateral right to wind up TAT. Upon 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 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
represents, in substance, a research and development arrangement between us and
BRC. Therefore, this arrangement is being accounted for as a research and
development arrangement. Contributions from BRC represent its share of
funding for future research and development activities that will be performed
principally by BRC and partly by us. Accordingly, BRC’s net contributions
have been recorded as an advance payment for research and development on our
condensed consolidated balance sheet. The advance payment from BRC has been
recognized as either reduction of research and development expenses or revenues
from collaborative agreements depending upon who performs the related research
and development activity. The
advance






13


Geron
Corporation
 Notes
to Condensed Consolidated Financial Statements
 June
30, 2008
 (UNAUDITED)




payment from BRC
has been recorded as a reduction of research and development expenses in our
condensed consolidated statements of operations in the period when BRC performs
the underlying research activity on behalf of TAT. The advance payment from BRC
has been recognized as revenue from collaborative agreements in our condensed
consolidated statements of operations in the period when we perform research
activity on behalf of TAT and the source of funds has not been derived from our
cash contributions to TAT. Amounts recognized in our condensed consolidated
statements of operations will be based on proportional performance over the
period of planned research activity, which is expected to be 18 months. For
the three and six months ended June 30, 2008, we incurred related party research
and development costs of $169,000 and $318,000, respectively, compared to
$287,000 and $499,000, for the comparable 2007 periods. For the three and six
months ended June 30, 2008, we earned related party revenue of $33,000 and
$59,000, respectively, compared to $236,000 and $448,000, for the comparable
2007 periods. As of June 30, 2008 and December 31, 2007, the net balance of the
advance payment from BRC was $1,038,000 and $1,727,000,
respectively.




4.
STOCKHOLDERS’ EQUITY




On April
21, 2008, as payment of the milestone achievement for filing an Investigational
New Drug application with the Food and Drug Administration for Geron’s human
embryonic stem cell-derived oligodendrocytes (GRNOPC1) for the treatment of
spinal cord injury, we issued to Wisconsin Alumni Research Foundation (WARF),
47,207 shares of our common stock, pursuant to a License Agreement dated as of
January 8, 2002. The total fair value of the common stock was $224,000 which has
been included in research and development expense.




On June
2, 2008, we issued 251,637 shares of Geron common stock to Samchully
Pharmaceutical Co., Ltd. (Samchully) in a private placement as advance
consideration under Amendment No.1 to Addendum Agreement No.8 to a manufacturing
agreement pursuant to which Samchully is manufacturing certain products for us
intended for therapeutic use in humans. The total fair value of the common stock
was $999,000, which has been 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 June 30, 2008, $999,000 remained as a prepaid asset which is
expected to be expensed over the next six months.




During
the second quarter of 2008, certain restricted stock awards vested for
employees, at which time payroll taxes were assessed on the fair value of the
vested awards. In accordance with our 2002 Equity Incentive Plan, we repurchased
a portion of the vested shares at fair value and provided the cash to the
respective tax authorities on behalf of the employees in order to satisfy
their minimum tax withholding requirements. As a result, we repurchased 114,914
shares of common stock tendered by the employees and recorded the fair value of
$455,000 as a reduction to additional paid-in capital. The repurchased shares
are available for future grant under the 2002 Equity Incentive
Plan.




5.
SEGMENT INFORMATION




Statement
of Financial Accounting Standards No. 131, “Disclosures about Segments of an
Enterprise and Related Information,” (SFAS 131) establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. SFAS 131 also establishes
standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about
which separate discrete financial information is available for evaluation by the
chief operating decision maker, or decision making group, in making decisions
how to allocate resources and assess performance. Our executive management team
represents our chief decision maker, as defined under SFAS 131. To date, we have
viewed our operations as principally 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.






14


Geron
Corporation Notes
to Condensed Consolidated Financial Statements
 June
30, 2008
 (UNAUDITED)




6.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS DATA




Supplemental
schedule of non-cash operating, investing and financing activities:




Six
      Months Ended
              June
      30,(In
      Thousands)
            
            2008
            
            
            2007(Unaudited)Supplemental
      Operating Activities:Net
      unrealized (loss) gain on equity investments in licensees
            
            $
            (4
            )
            
            $
            2Cash
      in transit from options
            
            
            —
            
            
            
            7Reclassification
      between derivative liabilities and equity
            
            
            —
            
            
            
            21,645Shares
      issued for 401(k) matching contribution and performance
    bonus
            
            
            640
            
            
            
            1,722Shares
      or warrants issued in exchange for services
            
            
            7,193
            
            
            
            3,275Supplemental
      Investing Activities:Net
      unrealized (loss) gain on marketable securities
            
            
            (136
            )
            
            
            55Supplemental
      Financing Activities:Deemed
      dividend
            
            
            —
            
            
            
            (3,661
            )






15


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




OVERVIEW




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 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 I, Item 1A, entitled “Risk Factors” in
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2007, and elsewhere in this Form 10-Q.




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 Quarterly Report on 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,
2007.




Geron is
a Menlo Park, California-based biopharmaceutical company that is developing
first-in-class therapeutic products for the treatment of cancer and chronic
degenerative diseases, including spinal cord injury, heart failure and diabetes.
The products are based on our core expertise in telomerase and human embryonic
stem cells.




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 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




Our
condensed consolidated financial statements have been prepared in accordance
with U.S. generally accepted accounting principles. The preparation of these
financial statements requires management to make estimates and assumptions that
affect the reported amounts of 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.




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.






16


Other
than the adoption of SFAS 157 as discussed below, we believe that there have
been no significant changes in our critical accounting policies and estimates
during the six months ended June 30, 2008 as compared to the critical accounting
policies and estimates disclosed in our Annual Report on Form 10-K for the year
ended December 31, 2007.




Fair
Value of Financial Instruments




In
September 2006, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 157, “Fair Value Measurements,” (SFAS
157), which defines fair value, establishes guidelines for measuring fair value
and expands disclosures regarding fair value measurements. SFAS 157 does not
require any new fair value measurements but rather eliminates inconsistencies in
guidance found in various prior accounting pronouncements and is effective for
fiscal years beginning after November 15, 2007.




Beginning
January 1, 2008, assets and liabilities recorded at fair value in our condensed
consolidated balance sheet are categorized based upon the level of judgment
associated with inputs used to measure their fair value. SFAS 157 defines a
three-level valuation hierarchy for disclosure of fair value measurements as
follows:




Level 1 –
Inputs are unadjusted, quoted prices in active markets for identical assets or
liabilities at the measurement date.




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.




We
classify inputs to derive fair values for marketable debt securities
available-for-sale and marketable equity investments in licensees as Level 1 and
2. Instruments classified as Level 1 include highly liquid government and agency
securities, money market funds and publicly traded equity securities in active
markets. Instruments classified as Level 2 include corporate notes, asset-backed
securities and commercial paper.




We
classify inputs to calculate fair value of derivatives as Level 3 which includes
warrants and non-employee options classified as liabilities under Issue 00-19.
The fair value for these instruments is calculated using the Black Scholes
option-pricing model. The model’s inputs reflect assumptions that market
participants would use in pricing the instrument in a current period
transaction. Inputs to the model include stock volatility, dividend yields,
expected term of the warrants and non-employee options and risk-free interest
rates. Expected volatilities are based on historical volatilities of our stock
since traded options on Geron stock do not correspond to derivatives’ terms and
trading volume of options is limited. The expected term of derivatives is equal
to the remaining contractual term of the instrument. The risk-free interest rate
is based on the U.S. Zero Coupon Treasury Strip Yields for the expected term in
effect on the reporting date. Changes to the model’s inputs are not changes to
valuation methodologies, but instead reflect direct or indirect impacts from
changes in market conditions. Accordingly, results from the valuation model in
one period may not be indicative of future period measurements.




For a
further discussion regarding fair value measurements, see Note 2, “Fair Value
Measurements,” of Notes to Condensed Consolidated Financial
Statements.






17


RESULTS
OF OPERATIONS




Revenues




We
recognized revenues from collaborative agreements of $87,000 and $166,000 for
the three and six months ended June 30, 2008, respectively, compared to $304,000
and $597,000 for the comparable 2007 periods. Revenues for 2008 and 2007
primarily reflect related party reimbursement we received from our joint venture
in Hong Kong, TA Therapeutics, Ltd. (TAT), for scientific research services and
revenue recognized under our collaboration with Corning Life
Sciences.  Since June 16, 2007, we have been consolidating TAT’s
results of operations and have eliminated any related party revenue when the
source of funds has been derived from our contributions to the related
party.




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 $92,000 and $1.7
millionfor
the three and six months ended June 30, 2008, respectively, compared to $564,000
and $1.1 million for the comparable 2007 periods related to our various
agreements. In 2008, license fee revenues primarily reflects recognition of a
$1.5 million milestone payment in connection with our joint venture agreement
with Exeter Life Sciences, Inc. as
a result of the final Risk Assessment released by the U.S. Food and Drug
Administration addressing food products made from cloned animals or their
progeny. In 2007, license fee revenues primarily reflected recognition of
revenues from the Merck license agreement. We expect to recognize revenues of
$120,000 for the remainder of 2008, $27,000 in 2009, $27,000 in 2010, $25,000 in
2011 and none thereafter related to our existing deferred revenue. Current
revenues may not be predictive of future revenues.




We
received royalties of $19,000 and $52,000 for the three and six months ended
June 30, 2008, respectively, compared to $21,000 and $149,000 for the comparable
2007 periods 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 $11.6 million and $25.2 million for the three and
six months ended June 30, 2008, respectively, compared to $14.1 million and
$27.3 million for the comparable 2007 periods. The decrease in research and
development expenses for the 2008 second quarter compared to the 2007
second quarter as well as the overall decrease for 2008 compared to
2007 was primarily the net result of reduced drug product purchases of
GRN163L of $2.4 million and reduced consulting expense of $2.2 million
related to GRNVAC1, offset by increased personnel-related expense of $1.6
million due to increased regulatory and product development headcount and
increased GRN163L and GRNVAC1 clinical trial costs of $870,000 as a result of
increased activity. Overall, we expect research and development expenses to
increase in the next year as we incur expenses related to clinical trials for
GRN163L and GRNVAC1 and 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. We have initiated the following clinical trials for
our telomerase inhibitor drug, GRN163L: 1) Phase I trial in patients with
chronic lymphocytic leukemia; 2) Phase I trial in patients with solid tumor
malignancies; 3) Phase I trial in patients with advanced non-small cell lung
cancer when administered intravenously in combination with a standard
paclitaxel/carboplatin regimen and 4) Phase I trial in patients with multiple
myeloma. Preliminary data from these studies showed safety and tolerability of
the drug in low-dose cohorts as well as the expected pharmacokinetic properties
after multiple intravenous infusions of the drug. 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 cancer vaccine (GRNVAC1) using the
prime/boost scheme in patients with acute myelogenous leukemia.






18




Our hESC
therapy programs focus on treating injuries and degenerative diseases with cell
therapies based on cells derived from hESCs. A 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 project,
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. 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.
Moreover, we have developed scalable processes to differentiate these cells into
therapeutically relevant cells, including cryopreserved formulations in order to
deliver these therapeutic cells “on demand”. We are now testing six different
hESC-derived therapeutic cell types in animal models. From these studies, we are
advancing development of two hESC-based therapeutics to clinical testing. We
received notice from the Food and Drug Administration (FDA) that our Initial New
Drug (IND) application to initiate clinical testing of our hESC-derived
oligodendrocyte progenitor cells (GRNOPC1) for the treatment of acute spinal
cord injury has been placed on clinical hold.




Research
and development expenses allocated to programs are as follows (in
thousands):





Three
      Months Ended
              June
      30,
            
            
            Six
      Months Ended
              June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007(Unaudited)Oncology
            $
            6,196
            
            
            $
            9,010
            
            
            $
            13,714
            
            
            $
            16,785hESC
      Therapies
            
            5,418
            
            
            
            5,088
            
            
            
            11,513
            
            
            
            10,502Total
            $
            11,614
            
            
            $
            14,098
            
            
            $
            25,227
            
            
            $
            27,287




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 U.S. 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 IND. An IND becomes effective within 30 days of
filing with the FDA unless the FDA imposes a clinical hold on the IND. In
addition, the FDA may, at any time, impose a clinical hold on ongoing clinical
trials. If the FDA imposes a clinical hold, clinical trials cannot commence or
recommence, as the case may be, without prior FDA authorization, and then only
under terms authorized by the FDA. Clinical development typically involves three
phases of study: 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.






19


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
“Obtaining regulatory approvals to clinically test and 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” and “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” in Part II,
Item 1A entitled “Risk Factors” and elsewhere in this quarterly
report.




General
and Administrative Expenses




General
and administrative expenses were $4.0 million and $8.1 million for the three and
six months ended June 30, 2008, respectively, compared to $3.6 million and $7.7
million for the comparable 2007 periods. The increase in general and
administrative expenses for the 2008 second quarter compared to the 2007
second quarter as well as the overall increase for 2008 compared to 2007 was
primarily the result of increased patent legal costs. We currently anticipate
general and administrative expenses to remain consistent with current
levels.




Unrealized
Gain (Loss) on Derivatives




Unrealized
gain (loss) on derivatives reflects a non-cash adjustment for changes in fair
value of warrants and options held by non-employees to purchase common stock
that are classified as current liabilities. Under Issue 00-19, derivatives
classified as assets or liabilities are marked to market 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 this treatment, at which time the fair value of these instruments is
updated and reclassified from assets or liabilities to stockholders’ equity. We
incurred an unrealized gain on derivatives of $495,000 and $901,000 for the
three and six months ended June 30, 2008, respectively, compared to an
unrealized loss of $36,000 and an unrealized gain of $14.8 million for the
comparable 2007 periods. The total unrealized gain on derivatives for 2008
reflects the decreasing value of derivative liabilities currently on the
condensed consolidated balance sheet. The total unrealized gain on derivatives
for 2007 primarily reflects the result of amendments executed in March 2007 to
certain warrant agreements to address the presumption under Issue 00-19 of
net-cash settlement in the event that registered shares are not available to
settle the warrants and the change in fair value for warrants held at December
2006.




Interest
and Other Income




Interest
income was $1.4 million and $3.3 million for the three and six months ended June
30, 2008, respectively, compared to $2.8 million and $5.6 million for the
comparable 2007 periods. The decrease in interest income for 2008 compared to
2007 was primarily due to decreased 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.






20


Interest
and Other Expense




Interest
and other expense was $24,000 and $48,000 for the three and six months ended
June 30, 2008, respectively, compared to $26,000 and $54,000 for the comparable
2007 periods. The decrease in interest and other expense for 2008 compared to
2007 was primarily due to decreased investment management charges as a result of
lower cash and investment balances.




Net
Loss Applicable to Common Stockholders




Net loss
applicable to common stockholders was $13.6 million and $27.2 million for the
three and six months ended June 30, 2008, respectively, compared to $14.0
million and $16.5 million for the comparable 2007 periods. Excluding the effect
of unrealized gain on derivatives, net loss increased in the second quarter of
2008 compared to the second quarter of 2007 as a net result of decreased
interest income and revenues, offset by decreased operating expenses due to
reduced drug product purchases and manufacturing-related costs. Excluding the
effect of unrealized gain on derivatives and deemed dividend on derivatives, net
loss increased in 2008 compared to 2007 primarily as a result of decreased
interest income.




Deemed
Dividend on Derivatives




In
conjunction with the warrant exercise in February 2007, we issued warrants to
purchase 1,125,000 shares of common stock, at a premium, exercisable from June
2007. The new warrants are substantially the same as the A Warrants issued in
the December 2006 financing. The aggregate fair value of $3.7 million for
these new instruments, as calculated using the Black Scholes option-pricing
model, was recognized as a deemed dividend in the condensed consolidated
statements of operations.




LIQUIDITY
AND CAPITAL RESOURCES




Cash,
restricted cash, cash equivalents and marketable securities at June 30, 2008
totaled $186.7 million compared to $208.4 million at December 31, 2007. 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. The decrease in cash, restricted cash, cash equivalents and
marketable securities in 2008 was primarily due to use of cash for
operations.




Cash
Flows from Operating Activities.Net cash used in operations was $20.9
million for the six months ended June 30, 2008 compared to $13.1 million for the
comparable 2007 period. The increase in net cash used for operations in 2008 was
primarily the result of payments to Biotechnology Research Corporation, our
joint venture partner in TA Therapeutics, Ltd., for scientific research
services, cash payments to vendors for equipment purchases and general
operations and use of the advance payment for related party research and
development.




Cash
Flows from Investing Activities.Net cash provided by investing
activities was $2.3 million for the six months ended June 30, 2008, compared to
net cash used in investment activities of $12.6 million for the comparable 2007
period. The increase in cash provided by investing activities reflected reduced
marketable securities purchases offset by increased
maturities.




Since
inception through June 30, 2008, we have invested approximately $20.6million
in property and equipment, of which approximately $8.3 million was financed
through an equipment financing arrangement. As of June 30, 2008, no payments
were due under our equipment financing facility. As of June 30, 2008, we had
approximately $500,000 available for borrowing under our equipment financing
facility. We intend to renew the commitment for a new equipment financing
facility in 2008 to further fund equipment purchases. If we are unable to renew
the commitment, we will use our cash resources for capital
expenditures.




Cash
Flows from Financing Activities.Net cash used in financing activities
for the six months ended June 30, 2008 was $343,000, compared to net cash
provided by financing activities of $16.8 million for the comparable 2007
period. During the second quarter of 2008, certain restricted stock awards
vested for employees, at which time payroll taxes were assessed on the fair
value of the vested awards. In accordance with our 2002 Equity Incentive Plan,
we repurchased a portion of the vested stock from employees at a fair value of
$455,000 and provided the cash to the respective tax authorities on behalf of
the employees in order to satisfy their minimum tax withholding
requirements. In 2007, we received $15.0 million in proceeds from the exercise
of warrants issued to institutional investors in connection with a financing in
December 2006.






21


Contractual
Obligations




As of
June 30, 2008, our contractual obligations for the next five years and
thereafter are as follows:




Principal
      Payments Due by PeriodContractual
      Obligations (1)
            
            Total
            
            
            Remainder
              in
      2008
            
            
            
            2009
      -2010
            
            
            
            2011-
              2012
            
            
            After
              2012(Amounts
      in thousands)Equipment
      leases
            
            $
            33
            
            
            $
            9
            
            
            $
            24
            
            
            $
            —
            
            
            $
            —Operating
      leases (2)
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Research
      funding (3)
            
            
            3,173
            
            
            
            1,114
            
            
            
            685
            
            
            
            594
            
            
            
            780Total
      contractual cash obligations
            
            $
            3,206
            
            
            $
            1,123
            
            
            $
            709
            
            
            $
            594
            
            
            $
            780


______________




(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 if there was a change in control of the Company
      or severance payments to key employees under involuntary
      termination.(2)
            In
      March 2004, we issued 363,039 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 February 1, 2004 through July 31, 2008. 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. The fair value of the common stock
      issuances has been recorded as a prepaid asset and is being amortized to
      rent expense on a straight-line basis over the lease
    periods.(3)
            Research
      funding is comprised of sponsored research and license commitments at
      various laboratories around the world, including commitments of our
      majority-owned subsidiary, TAT.




We
estimate that our existing capital resources, interest income and equipment
financing facilities will be sufficient to fund our current level of operations
through at least December 2009. 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, and in any event, we
will need to raise substantial additional capital to fund our operations in the
future. We intend to seek additional funding through strategic collaborations,
public or private equity financings, equipment loans or other financing sources
that may be available.




Off-Balance
Sheet Arrangements




None






22




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.




Credit
Risk. We place our cash, restricted cash, cash equivalents, and
marketable securities with six financial institutions in the United States.
Generally, these deposits may be redeemed upon demand and therefore, bear
minimal risk. Deposits with banks may exceed the amount of insurance provided on
such deposits. Financial instruments that potentially subject us to
concentrations of credit risk consist primarily of marketable securities.
Marketable securities consist of U.S. government and agency securities,
commercial paper and asset-backed securities. 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.




Interest
Rate Sensitivity. The fair value of our cash equivalents and marketable
securities at June 30, 2008 was $184.7 million. These investments include $126.1
million of cash and cash equivalents which are due in less than 90 days, $10.3
million of asset-backed securities which have varying maturity dates, and $48.3
million of short-term investments which are due in less than one
year.




Foreign
Currency Exchange Risk. Because we translate foreign currencies into
United States dollars for reporting purposes, currency fluctuations can have an
impact, though generally immaterial, on our 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 June
30, 2008, there was an immaterial currency exchange impact from our intercompany
transactions. As of June 30, 2008, 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 is recorded, processed, summarized and
reported, within the time periods specified in the 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 June 30,
2008 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.






23


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 begun
clinical testing of our lead anti-cancer drug, GRN163L, in patients with chronic
lymphocytic leukemia, solid tumor malignancies, non-small cell lung cancer and
multiple myeloma. We have begun clinical testing of our telomerase cancer
vaccine, GRNVAC1, in patients with acute myelogenous leukemia. We have no other
product candidates in clinical testing. 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;




·
            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 approved by regulators or
marketed successfully. Physicians may not prescribe our products or patients or
third party payors may not accept such products. Competitors may have
proprietary rights which prevent us from marketing our products or 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, human embryonic
stem cells, GRN163L and GRNVAC1, which could adversely affect our business and
cause a sharp drop in our stock price.




The
science and technology of telomere biology and telomerase, human embryonic stem
cells and nuclear transfer 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.




24


Restrictions
on the use of human embryonic stem cells, political commentary and the ethical
and social implications of research involving human embryonic stem cells 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 human embryonic stem cells gives rise to ethical and
social issues regarding the appropriate use of these cells. Our research related
to human embryonic stem cells 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 have been created
for in
vitro fertilization procedures but are no longer desired or suitable for
that use and are donated with appropriate informed consent for research use.
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
human embryonic stem cells, thereby impairing our ability to conduct research in
this field.




In
addition, the United States government and its agencies have until recently
refused to fund research which involves the use of human embryonic tissue.
President Bush announced on August 9, 2001 that he would permit federal funding
of research on human embryonic stem cells using the limited number of embryonic
stem cell lines that had already been created, but relatively few federal grants
have been made so far. The President’s Council on Bioethics monitors stem cell
research, and the guidelines and regulations it recommends may include
restrictions on the scope of research using human embryonic or fetal tissue.
Certain states are considering, or have in place, legislation relating to stem
cell research, including California whose voters approved Proposition 71 to
provide state funds for stem cell research in November 2004. It is not yet clear
what, if any, affect such state actions may have on our ability to commercialize
stem cell products. In the United Kingdom and other countries, the use of
embryonic or fetal tissue in research (including the derivation of human
embryonic stem cells) is regulated by the government, whether or not the
research involves government funding.




Government-imposed
restrictions with respect to use of embryos or human embryonic stem cells 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 and development;
  and




·
            causing
      a decrease in the price of our
stock.




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
June 30, 2008, our accumulated deficit was approximately $472.1 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.






25


While we
receive royalty revenue from licenses of diagnostic product candidates,
telomerase-immortalized cell lines and other licensing activities, we do not
currently expect to receive sufficient royalty revenues from these licenses to
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 products,
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 our current and 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
      in 2008 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




·
            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.






RISKS
RELATED TO CLINICAL AND COMMERCIALIZATION ACTIVITIES




Obtaining
regulatory approvals to clinically test and 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.






26


The
regulatory process, particularly for biopharmaceutical product candidates like
ours, is uncertain, can take many years and requires the expenditure of
substantial resources. 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. Biological drugs and
non-biological drugs are rigorously regulated. In particular, human
pharmaceutical therapeutic product candidates are subject to rigorous
preclinical and clinical testing and other requirements by the Food and Drug
Administration (FDA) in the United States and similar health authorities in
other countries in order to demonstrate safety and efficacy. We will need to
receive regulatory approvals for any product candidates before they may be
marketed and distributed. Such approval will require, among other things,
completing carefully controlled and well-designed clinical trials demonstrating
the safety and efficacy of each product candidate. This process is lengthy,
expensive and uncertain. 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.




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 manufacture, distribution, sales and marketing;
  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.




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.




Our
potential product candidates will require preclinical and extensive clinical
trials prior to submission of any regulatory application for commercial sales.
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.




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




·
            demonstrating
      sufficient safety and efficacy to obtain regulatory approval to commence a
      clinical trial;




·
            reaching
      agreement on acceptable terms with our collaborators on all aspects of the
      clinical trial, including the contract research organizations and the
      trial sites;




27


·
            reaching
      agreement on acceptable terms with prospective contract research
      organizations and trial sites;




·
            manufacturing
      sufficient quantities or producing drug meeting our quality standards of a
      product candidate;




·
            obtaining
      approval of an IND application or proposed trial design from the FDA;
      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
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.




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.




Positive
preliminary results from clinical trials of GRN163L and GRNVAC1 may not be
indicative of successful outcomes in later stage trials. Negative or limited
results from any current or future clinical trials could delay or prevent
further development of our product candidates which would adversely affect our
business.




We have
no experience as a company in conducting large-scale, late stage clinical
trials, and our experience with early-stage clinical trials with small numbers
of patients is limited. In part because of this limited experience, 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, clinical research
organizations (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 affect our business.






28


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. In the
event that we are unsuccessful in obtaining and enforcing patents, our business
would be negatively impacted. Further, our patents may be challenged,
invalidated or circumvented, and our patent rights may not provide proprietary
protection or competitive advantages to us.




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 recently proposed by the United
States Patent and Trademark Office (the Patent Office). These amendments were
widely regarded as detrimental to the interests of biotechnology and
pharmaceutical companies. The implementation of the amendments was blocked by a
court injunction requested by a pharmaceutical company. At this time we do not
know whether the Patent Office will seek to reintroduce the amendments in a
modified form.




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 is presently interpreting this
prohibition broadly, and is applying it to reject patent claims that pertain to
human embryonic stem cells (hESCs). However, this broad interpretation is being
challenged through the European Patent Office appeals system. As a result, we do
not yet know whether or to what extent we will be able to obtain patent
protection for our human embryonic stem cell technologies in Europe. If we are
unable to protect our inventions related to hESCs in Europe, our business would
be negatively impacted.




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.




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




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. 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.




The
interference process can also be used to challenge a patent that has been issued
to another party. For example, in 2004 we were party to two interferences
declared by the Patent Office at our request. These interferences involved two
of our pending applications relating to nuclear transfer technology and two
issued patents, held by the University of Massachusetts (U. Mass) and licensed
to Advanced Cell Technology, Inc. (ACT) of Worcester, Massachusetts. We
requested these interferences in order to clarify our patent rights to this
technology and to facilitate licensing to companies wishing to utilize this
technology in animal cloning. The Board of Patent Appeals and Interferences
issued final judgments in each of these cases, finding in both instances that
all of the claims in the U. Mass patents in question were unpatentable, and
upholding the patentability of Geron’s pending claims. These judgments were
appealed by U. Mass and ACT, but the appeals have now been dismissed as part of
a settlement agreement, resulting in invalidation of the U. Mass
patents.






29


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 recently
been involved in two patent oppositions before the European Patent Office (EPO)
with a Danish company, Pharmexa. Pharmexa (which acquired the Norwegian company
GemVax in 2005) is developing a cancer vaccine that employs a short telomerase
peptide to induce an immune response against telomerase and is conducting Phase
III clinical trials. 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
those patent claims are issued, they too may be subject to an opposition
proceeding.




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 the Wisconsin Alumni Research Foundation (WARF) and
relating to human embryonic stem cells. These three patents (U.S. Patent Nos.
5,843,780, 6,200,806 and 7,029,913) 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 human embryonic stem cells, as well as nonexclusive rights for
other product opportunities. In October 2006, the Patent Office initiated the
reexamination proceedings. After initially rejecting the patent claims, the
Patent Office recently 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 has filed
a notice of appeal against the decision on the 7,029,913 patent. We cooperated
with WARF in these reexamination actions and expect that WARF will continue to
vigorously defend its patent position in this appeal. While these decisions are
all favorable to our patent position, the outcome of the appeal 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 would negatively impact
Geron’s proprietary position in this technology.




30


Successful
challenges to our patents through interferences, oppositions or reexamination
proceedings could result in a loss of patent rights in the relevant
jurisdiction(s). If we are unsuccessful in actions we bring against the patents
of other parties, we may be subject to litigation, or otherwise prevented from
commercializing potential products in the relevant jurisdiction, or may be
required to obtain licenses to those patents or develop or obtain alternative
technologies, any of which could harm our business.




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 platform 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.




Patent
litigation may also be necessary to enforce patents issued or licensed to us or
to determine the scope and validity of our proprietary rights or the proprietary
rights of others. We may not be successful in any patent litigation. Patent
litigation can be extremely expensive and time-consuming, even if the outcome is
favorable to us. An adverse outcome in a patent litigation, patent opposition,
patent interference, or any other proceeding in a court or patent office could
subject our business to significant liabilities to other parties, require
disputed rights to be licensed from other parties or require us to cease using
the disputed technology, any of which could severely harm our
business.




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.






31




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 our collaborators and joint venture partners to help us develop 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 or
joint venture 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
the dendritic cell-based vaccines that we are developing; Cell Genesys is
developing oncolytic virus therapeutics utilizing the telomerase promoter; and
Roche and Sienna are developing cancer diagnostics using our telomerase
technology. 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 collaborators and joint venture partners, we may rely
significantly on these parties 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 or
      joint ventures.




The
development and commercialization of potential products will be delayed if
collaborators or joint venture 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.




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.






32




We face
intense competition for qualified individuals from numerous pharmaceutical,
biopharmaceutical and biotechnology companies, as well as academic and other
research institutions. We may not be able to attract and retain these
individuals on acceptable terms. Failure to do so could materially harm our
business.




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 non-commercial 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.




We also
rely on other companies for certain process development, manufacturing or other
technical scientific work, especially with respect to our GRN163L, GRNVAC1 and
GRNOPC1 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 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 or manufacture 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.
Competition for personnel is intense and we may be unable to retain our current
personnel or attract or assimilate other highly qualified management and
scientific personnel in the future. 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
products 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, GRN163L, 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 GRN163L is
greater than the cost of making most small-molecule drugs. Our present
manufacturing processes are conducted at a small scale and are at an early stage
of development. 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. Similarly, we currently make differentiated
cells from hESCs on a laboratory scale, 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, human
embryonic stem cells, and nuclear transfer. 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.






33


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.




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 collaborative or joint venture
partners, 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.






34


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. Significant uncertainty
exists as to the reimbursement status of newly-approved health care products,
including pharmaceuticals. 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.




In both
U.S. and other markets, sales of our potential products, if any, will depend in
part on the availability of reimbursement from third-party payors, examples of
which include:




·
            government
      health administration authorities;




·
            private
      health insurers;




·
            health
      maintenance organizations; and




·
            pharmacy
      benefit management companies.




Both
federal and state governments in the United States and governments in other
countries continue to propose and pass legislation designed to contain or reduce
the cost of health care. Legislation and regulations affecting the pricing of
pharmaceuticals and other medical products may be adopted before any of our
potential products are approved for marketing. Cost control initiatives could
decrease the price that we receive for any product candidate we may develop in
the future. In addition, third-party payors are increasingly challenging the
price and cost-effectiveness of medical products and services and any of our
potential products may ultimately not be considered cost-effective by these
third parties. Any of these initiatives or developments could materially harm
our business.






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.






35


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. As a result, we may not be able to
obtain or maintain product liability insurance in the future on acceptable terms
or with adequate coverage against potential liabilities that could have a
material adverse effect on our business.






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 1998 and June 2008,
our stock has traded as high as $75.88 per share and as low as $1.41 per share.
Between January 1, 2003 and June 30, 2008, the price has ranged between a high
of $16.80 per share and a low of $1.41 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 human embryonic stem cell
  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. 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.




36


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




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 June 30, 2008, we had
200,000,000 shares of common stock authorized for issuance and 78,600,283 shares
of common stock outstanding. In addition, as of June 30, 2008, we have reserved
for future issuance approximately 27,224,539 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 of our
stock.




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
the rights, preferences, privileges and restrictions of these shares without
further vote or action by our stockholders. As of the date of this filing,
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. 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 of 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 of 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.




37


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.




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 and include a report of management on our internal control
over 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 April
21, 2008, as payment of the milestone achievement for filing an Investigational
New Drug application with the Food and Drug Administration for Geron’s human
embryonic stem cell-derived oligodendrocytes (GRNOPC1) for the treatment of
spinal cord injury, we issued to Wisconsin Alumni Research Foundation (WARF),
47,207 shares of our common stock, pursuant to a License Agreement dated as of
January 8, 2002. The total fair value of the common stock was $224,000 which has
been included in research and development expense.




On June
2, 2008, we issued 251,637 shares of Geron common stock to Samchully
Pharmaceutical Co., Ltd. (Samchully) in a private placement as advance
consideration under Amendment No.1 to Addendum Agreement No.8 to a manufacturing
agreement pursuant to which Samchully is manufacturing certain products for us
intended for therapeutic use in humans. The total fair value of the common stock
was $999,000, which has been 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 June 30, 2008, $999,000 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 reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended.
WARF and Samchully represented to us that they are accredited investors 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.






38




Purchases
of Equity Securities by the Issuer and Affiliated Purchases




Period
            
            Total
      Number of Shares Purchased
            
            
            Average
      Price Paid per Share
            
            
            Total
      Number of Shares Purchased as Part of Publicly Announced Plans or
      Programs
            
            
            Maximum
      Number of Shares that May Yet be Purchased Under the Plans or
      ProgramsApril
      1, 2008 to April 30, 2008 (1)
            
            
            4,468
            
            
            $
            4.97
            
            
            
            —
            
            
            
            —May
      1, 2008 to May 31, 2008 (1)
            
            
            110,446
            
            
            $
            3.92
            
            
            
            —
            
            
            
            —June
      1, 2008 to June 30, 2008
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Total
            
            
            114,914
            
            
            $
            3.96
            
            
            
            —
            
            
            
            —


__________________




(1)           Represents
shares withheld from vested restricted stock awards in payment of payroll tax
withholdings.






ITEM 3. DEFAULTS UPON SENIOR SECURITIES




None




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




The 2008
Annual Meeting of Stockholders of the Company was held pursuant to notice on May
28, 2008 at 8:30 a.m. local time at the Company’s headquarters, 230 Constitution
Drive, Menlo Park, California. There were present at the meeting, in person or
represented by proxy, the holders of 56,017,440 shares of Common Stock. The
matters voted on at the meeting and the votes cast were as follows:




(a)         The
nominees for Class III Directors listed below were elected at the
meeting.




NAME
      OF NOMINEE
            NO.
      OF COMMON
                VOTES
      IN FAVOR
            NO.
      OF COMMON
                VOTES
                ABSTAINING
            NO.
      OF COMMON
                VOTES
      WITHHELDAlexander
      E. Barkas
            47,174,783
            0
            8,842,657Charles
      J. Homcy
            47,306,105
            0
            8,711,335




Thomas B.
Okarma, Ph.D., M.D., John P. Walker and Patrick J. Zenner are Class I Directors
and were not up for election at the 2008 Annual Meeting. Edward V. Fritzky and
Thomas D. Kiley are Class II Directors and were not up for election at the 2008
Annual Meeting. Messrs. Fritzky, Kiley, Walker, Zenner and Dr. Okarma continue
to serve as directors of the Company.




(b) The
appointment of Ernst & Young LLP as the Company’s independent accountants
for the fiscal year ending December 31, 2008 was ratified. There were 55,073,370
shares of Common Stock voting in favor, 619,650 shares of Common Stock voting
against and 324,420 shares of Common Stock abstaining.




ITEM 5. OTHER INFORMATION




On July
29, 2008, we changed our licensing relationship with Roche Diagnostics in order
to regain our rights for the development and commercialization of PCR
(polymerase chain reaction) and ELISA (Enzyme-Linked ImmunoSorbent Assay) based
methods to detect telomerase for in
vitro cancer diagnosis. Roche and its sublicensee, Dako, will
continue to sell telomerase detection assays for the research-use-only market
under a new license agreement from Geron which terminates and supersedes our
previous license agreement with Roche.






39


ITEM 6. EXHIBITS




Exhibit
              Number
            Description31.1
            Certification
      of Chief Executive Officer pursuant to Form of Rule 13a-14(a), as Adopted
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 31,
      2008.31.2
            Certification
      of Chief Financial Officer pursuant to Form of Rule 13a-14(a), as Adopted
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 31,
      2008.32.1
            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 July 31,
      2008.32.2
            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 July 31,
      2008.








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 and ChiefFinancial
      Officer (Duly AuthorizedDate:
      July 31, 2008
            Signatory)







40


EXHIBIT
INDEX




Exhibit
              Number
            Description31.1
            Certification
      of Chief Executive Officer pursuant to Form of Rule 13a-14(a), as Adopted
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 31,
      2008.31.2
            Certification
      of Chief Financial Officer pursuant to Form of Rule 13a-14(a), as Adopted
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 31,
      2008.32.1
            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 July 31,
      2008.32.2
            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 July 31,
      2008.