UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

or

Commission File Number: 000-50425

Genitope Corporation

525 Penobscot Drive
Redwood City, CA 94063
(Address of principal executive offices, including zip code)

(650) 482-2000
(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK $.001 PAR VALUE
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Annual Report on Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No x

There was no established public trading market for the registrant’s common equity as of the last business day of the registrant’s most recently completed second fiscal quarter.

As of December 31, 2003, there were 16,819,501 shares of the registrant’s common stock outstanding. As of that date, there were approximately 11,110,202 shares held by non-affiliates of the registrant, with an

approximate aggregate market value of $101,991,654 based upon the $9.18 closing price of the registrant’s common stock listed on the Nasdaq National Market on December 31, 2003.**

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than April 29, 2004 in connection with the registrant’s 2004 Annual Meeting of Stockholders, are incorporated herein by reference into Part III of this Annual Report on Form 10-K.

GENITOPE CORPORATION

FORM 10-K

INDEX

     The terms “Genitope,” “we,” “us” and “our” as used in this report refer to Genitope Corporation.

     Genitope, Hi-GET, our logo and MyVax are our trademarks. In addition to Hi-GET, our logo and MyVax, we have applied to register Genitope with the United States Patent and Trademark Office. Other service marks, trademarks and trade names referred to in this report, such as Rituxan, are the property of their respective owners.

PART I

Forward-Looking Statements

This annual report on Form 10-K contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. These forward looking statements include, but are not limited to, statements about the progress of our clinical trials and research programs and the sufficiency of our cash resources and the timing of the completion of patient registration for our Phase 3 trial, immunization of the last patient registered in the Phase 3 trial and the first interim analysis of the data from the Phase 3 trial. These forward-looking statements are generally identified by words such as “believes,” “anticipates,” “plans,” “expects,” “will,” “intends” and other similar words and expressions. Discussions containing these forward-looking statements may be found in “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially form those expressed or implied in the forward-looking statements. The risks discussed in “Risk-Factors,” among other things, should be considered in evaluating our prospects and future financial performance. Genitope undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this report.

ITEM 1. BUSINESS

BUSINESS

Overview

     We are a biotechnology company focused on the research and development of novel immunotherapies for the treatment of cancer. Immunotherapies are treatments that utilize the immune system to combat diseases. Our lead product candidate, MyVax personalized immunotherapy, is a patient-specific active immunotherapy that is based on the unique genetic makeup of a patient’s tumor and is designed to activate a patient’s immune system to identify and attack cancer cells. MyVax is currently in a pivotal Phase 3 clinical trial and additional Phase 2 clinical trials for the treatment of B-cell non-Hodgkin’s lymphoma, or B-cell NHL. B-cells, also called B lymphocytes, are one of the two major classes of lymphocytes, which are types of white blood cells. In the United States, B-cell NHL represents approximately 85% to 90% of over 300,000 existing and approximately 55,000 newly diagnosed NHL patients each year. NHL is clinically classified as either slow-growing, referred to as indolent, or fast-growing, referred to as aggressive. There are approximately 25,000 patients diagnosed with indolent B-cell NHL in the United States each year. Our pivotal Phase 3 clinical trial is for the treatment of follicular B-cell NHL, which represents approximately half of the cases of indolent B-cell NHL. We believe that patient-specific active immunotherapies can also be applied successfully to the treatment of other cancers. As a result, we are also developing MyVax for the treatment of chronic lymphocytic leukemia, or CLL.

     We have exclusive worldwide sales and marketing rights for MyVax. Subject to regulatory approval, we intend to manufacture and commercialize MyVax and to establish a North American sales force to market and sell MyVax. Due to the concentrated nature of the oncology market, we believe that we can sell MyVax in North America with a small sales force. Results from our completed and ongoing clinical trials of MyVax for the treatment of B-cell NHL indicate that MyVax is generally safe and well tolerated. To date, we have successfully manufactured MyVax in a timely manner to support our clinical trials.

     Active immunotherapies similar to MyVax have been studied in clinical trials for over 14 years. Results from clinical trials at Stanford University Medical Center and the National Cancer Institute, or NCI, suggest that active immunotherapies may induce long-term remission and may improve survival in indolent B-cell NHL patients. Remission is the period of time during which patients have a partial or complete reduction in the amount or severity of the symptoms of their disease. Despite the results of the Stanford and NCI clinical trials, further development of an active immunotherapeutic approach to the treatment of NHL historically has been limited by significant manufacturing difficulties. We have developed a proprietary manufacturing process, which includes our patented Hi-GET gene amplification technology, that is designed to overcome many of these historical manufacturing limitations. As compared to other existing manufacturing methods for active immunotherapies, we believe that our process is efficient, modular and reproducible, which we believe will enable us to manufacture and commercialize

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patient-specific active immunotherapies for the treatment of NHL and potentially other cancers.

     We were incorporated in the State of Delaware on August 15, 1996. Our website address is www.genitope.com.

The Immune System and Cancer

     The immune system is the body’s natural defense mechanism to prevent and combat disease. The primary disease fighting functions of the immune system are carried out by white blood cells. In response to the presence of disease, white blood cells can mediate two types of immune responses, referred to as innate immunity and adaptive immunity. Together the innate and adaptive arms of the immune system generally provide an effective defense against a broad spectrum of diseases.

     Innate immunity is mediated by the white blood cells that engulf and digest infecting microorganisms known as pathogens. These white blood cells are the first line of defense against many common infections because they do not require that the body be previously exposed to the pathogens. The role of the innate immune system is to control infections while adaptive immunity is being established for that pathogen.

     Adaptive immunity is generated by the immune system throughout a person’s lifetime as he or she is exposed to particular pathogens. As a person is exposed to a pathogen, the adaptive immune response will, in many cases, confer life-long protection from re-infection by the same pathogen. This adaptive immune response is the basis for preventative vaccines that protect against viral and bacterial infections such as measles, polio, diphtheria and tetanus.

     Adaptive immunity is mediated by a subset of white blood cells called lymphocytes, which are divided into two types, B-cells and T-cells. B-cells and T-cells recognize molecules, usually proteins, known as antigens. An antigen is a molecule or substance that reacts with an antibody or a receptor on a T-cell. When a B-cell recognizes a specific antigen, it secretes proteins, known as antibodies, which in turn bind to a target containing that antigen and tag it for destruction by other white blood cells. When a T-cell recognizes an antigen, it either promotes the activation of other white blood cells or initiates destruction of the target cells directly. The collective group of B-cells and T-cells can recognize a wide array of antigens, but each individual B-cell or T-cell will recognize only one specific antigen. Because of this specificity, few lymphocytes will recognize the same antigen.

     Despite the effectiveness of the immune system in defending the body against infectious disease, it is generally ineffective in defending the body against a cancer once it has appeared. The immune system has developed numerous immune suppression mechanisms to prevent it from destroying a person’s normal tissue, and these same mechanisms are believed to prevent an immune response from being mounted against cancer cells. In addition, the cancer cells themselves can make changes that reduce the ability of the immune system to attack the tumor.

Immunotherapy and Cancer

     Immunotherapies utilize a person’s immune system in an attempt to combat diseases, including cancer. There are two forms of immunotherapy used to treat various diseases: passive and active. Both types of immunotherapy have been used with success to treat a number of different diseases. For example, active immunotherapies in the form of preventative vaccines have enabled the complete or virtual elimination of viral diseases such as smallpox and polio.

     Passive immunotherapy is characterized by the introduction into a patient of antibodies specific to a particular antigen. When antibodies are infused into a cancer patient, they attach to any cell that displays the antigen. The patient’s immune system then responds to eliminate those specific cells tagged by the antibody. Alternatively, radioactive molecules or toxins can be attached to an antibody before it is infused into the patient to kill the tagged cells directly. Although the protection that is provided by a passive immunotherapy is immediate, it is invariably temporary. Consequently, while passive immunotherapies have shown clinical benefits in some cancers, and some have improved safety profiles compared to existing therapies, they require repeated infusions and can cause the destruction of normal cells as well as cancer cells.

     An active immunotherapy generates an adaptive immune response by introducing an antigen into a patient, often in combination with other components that can enhance an immune response to the antigen. The specific adaptive immunity generated can include both the production of antigen-specific antibodies made by B-cells, known as humoral immunity, and the production of antigen-specific T-cells, known as cellular immunity.

     Active immunotherapies have been successful in preventing many infectious diseases, such as measles, mumps or diphtheria, but the approach has been less successful in treating cancer. Historically, the reasons that effective active immunotherapies for cancer have been difficult to develop included the:

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•		inability of tumor antigens to elicit an effective immune response;
•		difficulty in identifying suitable target tumor antigens;
•		inability to manufacture tumor antigens in sufficiently pure form;
•		inability to manufacture sufficient quantities of tumor antigens;
•		failure to identify effective components to combine with tumor antigens to enhance an immune response; and
•		failure to employ immunization methods that elicit an effective immune response.

     We believe that an effective active immunotherapeutic approach for cancer would result from immunizing patients with sufficient quantities of purified, tumor-specific antigens administered with additional components to increase the immunogenicity of these antigens. Immunogenicity is the ability of an antigen to evoke an immune response within an organism. Utilizing this type of immunotherapy should allow a patient’s own immune system to produce both B-cells and T-cells which recognize numerous portions of the tumor antigen and generate clinically significant immune responses. During the late 1980s, physicians at Stanford began development of an active immunotherapy with these characteristics for the treatment of indolent B-cell NHL.

Non-Hodgkin’s Lymphoma

     Background. NHL is a cancer of B-cell and T-cell lymphocytes. Currently, in the United States there are over 300,000 patients diagnosed with NHL, with approximately 55,000 newly diagnosed cases annually. Approximately 85% to 90% of patients diagnosed with NHL in the United States have B-cell NHL. The international market for NHL is estimated to be at least equal in size to the United States market. NHL is the sixth most common cancer and the sixth leading cause of death among cancers in the United States.

     NHL is clinically classified as being either slow-growing, referred to as indolent, or fast-growing, referred to as aggressive, depending on whether the patient’s survival time after relapse from the initial therapy is measured in years or in months. Indolent and aggressive NHL each constitute approximately half of all newly diagnosed B-cell NHL, and roughly half of the indolent B-cell NHL is follicular B-cell NHL. Although indolent B-cell NHL progresses at a slow rate, it is inevitably fatal and there is no cure currently available. According to the American Cancer Society, the median survival time from diagnosis for patients with indolent B-cell NHL having stage III/IV follicular B-cell NHL is between seven and ten years. Unlike indolent B-cell NHL, approximately 40% of aggressive B-cell NHL cases are cured by standard chemotherapy. The remaining patients with aggressive B-cell NHL relapse and cannot be effectively treated.

     Current Treatments. Chemotherapy is widely used as a first-line therapy for NHL and has been effective in managing some forms of these cancers. Although chemotherapy can substantially reduce the tumor mass and in most cases achieve a clinical remission, the remissions have not been durable. Indolent B-cell NHL patients relapse within a few months or years of initial treatment, and the cancer becomes increasingly resistant to further chemotherapy treatments. Eventually, patients may become refractory to chemotherapy, meaning their response to therapy is so brief that further chemotherapy regimens would offer no significant benefit.

     Several passive immunotherapies, such as Rituxan, have demonstrated the ability to induce remission in patients with indolent B-cell NHL. To date, these therapies administered alone have failed to provide long-term remissions for most patients.

     Salvage therapy consisting of high-dose chemotherapy may be performed to treat refractory indolent B-cell NHL patients or those at high risk for relapse from primary therapy. This therapy results in the destruction of essential levels of red and white blood cells and requires stem cell transplants to be performed to restore a patient’s blood count. Stem cell transplants continue to be expensive and associated with high morbidity and significant mortality. Ultimately, even these very aggressive treatment regimens do not provide long-term remission for most patients.

Active Idiotype Immunotherapy

     The active immunotherapy developed at Stanford was focused on the treatment of a cancer of B-lymphocytes known as indolent B-cell NHL. This immunotherapy consists of a patient-specific tumor protein and a foreign carrier protein administered with an adjuvant to enhance the immune response. Patient-specific tumor proteins, which include idiotype proteins, are proteins expressed by a tumor cell that are unique to an individual’s tumor cell.

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A foreign carrier protein is a type of protein, which when coupled to a non-immunogenic or weakly immunogenic antigen, increases the immunogenicity of the antigen. An adjuvant is a substance that is administered with an antigen to enhance or increase the immune response to that antigen.

     The key to the cancer immunotherapy developed at Stanford is the fact that the patient-specific tumor protein is the antibody expressed by the cancerous B-cells. Because the patient’s cancerous B-cells are replicates of a single malignant B-cell, all of the cancerous B-cells express the same antibody. Each antibody has unique portions, collectively known as the idiotype, which can be recognized by the immune system. This type of active immunotherapy is referred to as an active idiotype immunotherapy. It utilizes the patient- and tumor-specific antibody, or idiotype protein, as an antigen to direct the patient’s immune system to mount an immune response against the targeted tumor cells. Because the antigen is specific to the cancerous B-cells and not found on normal B-cells, the immune system should target the cancerous B-cells for destruction while leaving normal B-cells unharmed.

     The Stanford clinical trials began in 1988 for the treatment of a slower growing, or indolent, form of B-cell NHL. Indolent B-cell NHL has no cure and is treated primarily with chemotherapy. The first clinical trial involved 41 patients with indolent B-cell NHL who commenced their course of immunizations between November 1988 and December 1995. These patients were immunized while in remission following chemotherapy. The treated patients had either a complete response to chemotherapy, defined as no detectable tumor, or a partial response to chemotherapy, defined as at least a 50% reduction in their tumor volume. Of the 41 patients treated, 32 were in remission following their first course of chemotherapy, while the remaining patients were in remission following two or three courses of chemotherapy.

     Positive immune responses to the patient-specific active idiotype immunotherapy were detected in 20 of the 41 immunized patients, including 14 of the 32 patients in first remission following chemotherapy. The median time to disease progression for all 41 patients in the clinical trial was reported to be 4.4 years from the last chemotherapy regimen. Time to disease progression measures the interval of time between response to chemotherapy and recurrence of disease. The median time to disease progression was further analyzed by dividing patients into two groups based upon the presence or absence of an immune response. The median time to disease progression was calculated to be 7.9 years for the 20 immune response positive patients and 1.3 years for the 21 immune response negative patients. The median time to disease progression for the 32 patients in first remission was virtually identical to that for the 41 total patients, which suggests that patient-specific active idiotype immunotherapy may be as effective in the larger population of relapsed patients as in the smaller population of newly diagnosed patients. Median survival time was also measured for patients treated in the clinical trial. At the time of publication, the median survival time of all 41 immunized patients had not been reached, and the investigators reported that the median survival time of all 41 patients was significantly longer than the median survival time seen in patients having the same type of NHL who were treated with chemotherapy alone. NHL patients treated at Stanford with chemotherapy alone had a median survival time of 10.9 years. The fact that the median survival time had not been reached for the 41 immunized patients demonstrates that these patients have a median survival time that is greater than 10.9 years. The median survival time of the 20 immune response positive patients had not been reached versus a median survival time of seven years calculated for the 21 immune response negative patients. The results are statistically significant and suggest that an active idiotype immunotherapy, similar to MyVax, may induce long term remission and improve survival in NHL patients.

     Long-term results from the first Stanford clinical trial were published in the medical journal Blood in May 1997 and are presented in the following table.

* Indicates a median calculated based on available data using Kaplan-Meier analysis. Kaplan-Meier analysis is a statistical calculation that allows for the estimation of a median time when not all of the patients have reached the event being measured (e.g., survival or progression) at the time of analysis.

     An independent clinical trial of a patient-specific active idiotype immunotherapy similar to the one tested at Stanford was conducted at the NCI to treat patients with indolent B-cell NHL. The NCI clinical trial results were published in Nature Medicine in October 1999. Patients treated in the NCI clinical trial had previously achieved a clinical complete response following an initial course of chemotherapy, that is, no tumor was apparent by physical

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examination and CT scans. Positive immune responses to the patient-specific active idiotype immunotherapy were reported for 19 of 20 immunized patients. Despite the fact that all 20 patients were in clinical complete remission, 11 of these 20 patients were shown to have lymphoma cells in their peripheral blood following chemotherapy using a very sensitive DNA-based test. After completing the course of immunization with the active idiotype immunotherapy, eight of these 11 patients were shown to have no lymphoma cells in their peripheral blood using the DNA-based test. These results suggest that active idiotype immunotherapy was able to induce a molecular complete response in patients that had minimal residual disease following chemotherapy.

     Despite the results of the Stanford and NCI clinical trials, further development of an active immunotherapeutic approach to the treatment of NHL historically has been limited by significant manufacturing difficulties. The production technology that was used to manufacture these active idiotype immunotherapies at Stanford and NCI is known as rescue fusion. Rescue fusion is a method that generates cell lines, referred to as hybridomas, which are created by combining, or fusing, the patient’s live tumor cells with cells from a cell line that grows indefinitely in culture. The resulting hybridomas are screened to identify those which secrete the idiotype protein present on the patient’s tumor cells. We believe that rescue fusion cannot be used to produce these patient-specific immunotherapies for the number of patients and at a cost that would enable widespread commercial use. The barriers to commercialization using the rescue fusion method include:

•		the need for a relatively large sample of fresh tumor cells, requiring a surgical biopsy;
•		the need for rapid processing, as viable tumor cells are required;
•		a 10% to 20% failure rate;
•		inconsistent and variable manufacturing timelines which frequently fall outside the desired clinical treatment timeline; and
•		low productivity on a per technician basis.

MyVax Personalized Immunotherapy

     MyVax is an injectable patient-specific active idiotype immunotherapy that we are developing initially for the treatment of indolent and aggressive B-cell NHL. MyVax combines a patient and tumor-specific antibody, or idiotype protein, with a foreign carrier protein and is administered with an adjuvant. We have developed a proprietary manufacturing process for MyVax, which includes our patented Hi-GET gene amplification technology. Our manufacturing process is designed to overcome the barriers to commercialization of active idiotype immunotherapies that are associated with the use of a hybridoma-based process such as rescue fusion. In comparison to other cancer therapies, MyVax is designed to provide:

     Efficacious and lasting treatment: We believe, based on our analysis of our clinical trials, that (1) MyVax has the potential to provide durable remissions and extend survival in a substantial percentage of the B-cell NHL patients that are treated with MyVax and (2) this therapeutic benefit could be greater than the benefit that is provided by currently available therapies, including passive immunotherapies such as Rituxan.

     Safety: MyVax has demonstrated an excellent safety profile to date. MyVax has been well tolerated in clinical trials, with the majority of side effects being only mild to moderate. In our clinical trials, these side effects have included injection site and systemic effects. The most commonly reported injection site effects were bruising, swelling, redness, itching, inflammation, pain and other similar reactions at the injection site. The most commonly reported systemic effects were fatigue, influenza-like illness, fever, chills, nausea, pain, back, chest or muscle pain, rash and diarrhea. Furthermore, MyVax is designed to target only the idiotype protein unique to tumor cells and, thus, should not harm normal cells or impair a patient’s immune system. With an intact immune system, patients are less likely to develop significant complications, such as infections which have been reported in patients treated with Rituxan.

     Ease of administration: The administration of MyVax can be accomplished during a 30-minute outpatient visit, which includes the immunizations followed by an observation period, with each injection taking less than a minute. In comparison, currently available passive immunotherapies such as Rituxan must be administered via a series of lengthy, intravenous infusions. Each infusion of a passive immunotherapy takes hours, requires patients to be monitored for infusion reactions on multiple occasions during the infusion and can have serious complications for patients.

     Ease of sample collection: The tumor samples used to produce MyVax are collected using standard medical

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procedures that are commonly used in the diagnosis and staging of cancer patients. Our manufacturing process is designed to require only a small number of tumor cells, which need not be living cells, in order to produce MyVax or any other active idiotype immunotherapies that we may develop. The required tumor samples can be acquired by surgical or non-surgical means, can be frozen and are shipped to our central facility, eliminating the need for on-site processing.

     Efficient manufacturing: Our manufacturing process is designed to enable MyVax to be produced within a clinically relevant time-frame for virtually every B-cell NHL patient whose tumor expresses an idiotype protein, enabling an oncologist to schedule a patient’s therapy with a high degree of certainty. In addition, our manufacturing process is designed to enable the reliable production of patient-specific active immunotherapies utilizing a less labor-intensive process than is associated with rescue fusion, permitting us to produce MyVax at cost levels that can yield margins that are competitive with current cancer treatments. Finally, our manufacturing process is designed to permit the expansion of production capacity to meet market demand.

     Commercial feasibility: We believe that our ability to combine a potentially safe and efficacious active idiotype immunotherapy that offers ease of administration and ease of sample collection with an efficient, scalable and reproducible manufacturing process should make MyVax a commercially feasible treatment for indolent and aggressive B-cell NHL. The safety and ease of administration of MyVax compared to currently available passive immunotherapies such as Rituxan should reduce the medical intervention required on behalf of patients during and after treatment and subsequently reduce the associated cost of care for patients with B-cell NHL.

Our Strategy

     Our objective is to commercialize MyVax for the treatment of NHL, as well as other immunotherapies for the treatment of other types of cancer. Our strategy to achieve this objective includes the following:

     Commercialize MyVax for NHL. In order to commercialize MyVax for NHL, we plan to:

     Obtain regulatory approval of MyVax. We are focused on completing clinical trials, filing a Biologics License application, or BLA, and obtaining regulatory approval for MyVax, initially in North America.

     Expand manufacturing capacity. We plan to expand our manufacturing capacity to meet anticipated demand upon commercialization. We believe that our scalable manufacturing process will enable us to expand our manufacturing capacity in an efficient and timely manner.

     Build North American sales and marketing infrastructure. Our goal is to directly commercialize MyVax in North America. We plan to build a small, highly-focused sales and marketing infrastructure to market MyVax to the relatively small and well-established community and institutional referral networks of cancer treatment physicians. We believe that the oncology market in North America is readily accessible by a limited sales and marketing presence due to the concentration of prescribing physicians.

     Commercialize MyVax internationally. We plan to commercialize MyVax in markets outside North America. As appropriate, we intend to establish collaborations to assist in the international commercialization of MyVax.

     Commercialize MyVax for other types of B-cell cancers. We believe that MyVax has potential applications beyond B-cell NHL. We plan to develop MyVax for additional types of B-cell cancers where we believe that it is a potentially effective treatment. In particular, we are currently developing MyVax for the treatment of CLL and intend to commence a Phase 2 clinical trial in 2004. We believe that the favorable safety profile of MyVax could accelerate the clinical development and approval of MyVax for additional types of B-cell cancers.

     Leverage our technology to other types of immunotherapies for other diseases. We believe that our patented Hi-GET technology has potential applications beyond MyVax. We believe our technology could be used to produce target proteins for other immunotherapies, such as monoclonal antibodies used in passive immunotherapies, and other therapeutic proteins. We plan to leverage our technology in these areas.

MyVax Clinical Development Program

     The following chart summarizes the results of our ongoing, recently completed and currently planned clinical trials for MyVax.

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     Pivotal Phase 3 Follicular B-cell NHL Clinical Trial — the 2000#03 Trial

     We filed an Investigational New Drug application, or IND, for MyVax with the Food and Drug Administration, or FDA, in April 1999. In November 2000, based on positive interim Phase 2 results from our 9901 trial, we initiated a pivotal, double-blind, controlled Phase 3 clinical trial, our 2000#03 trial, to treat patients with a type of indolent B-cell NHL known as follicular B-cell NHL, which represents approximately half of the cases of indolent B-cell NHL. Patients entering the clinical trial have previously untreated follicular B-cell NHL, are then treated with standard chemotherapy and are in their first remission. The clinical trial is being conducted at 34 treatment centers in the United States and Canada.. Two-thirds of the patients will be randomized to receive MyVax, while the remaining patients will receive the control substance consisting only of the foreign carrier protein used in MyVax and the adjuvant administered with MyVax.

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     The following chart summarizes the treatment schedule of patients in the clinical trial.

     Patients are receiving seven immunizations over a 24-week period, which represents two more immunizations than were administered in our 9901 Phase 2 clinical trial described below. Physical evaluations of the patients are conducted monthly during the immunization period and every three months after completion of the course of immunizations. A CT scan occurs prior to the first immunization and every six months following the last immunization for the two years of follow-up and then once a year to detect disease progression. CT scans are read by an independent, central radiology group, which is designed to ensure a consistent determination of patients’ responses to MyVax. The primary endpoint of the clinical trial is progression free survival, which is the interval of time measured from enrollment during which a patient is alive with no evidence of disease progression. Enrollment occurs when the patient is assigned to receive either MyVax or the control substance. The clinical trial is designed to evaluate whether a statistically significant increase in progression free survival is observed in patients receiving MyVax compared to patients receiving the control substance. We anticipate that patient registration, the process during which a patient is screened and a biopsy is taken to determine whether the patient is eligible to participate in the clinical trial, will be completed by March 31, 2004. The two planned interim analyses are expected to be conducted approximately 12 and 24 months after the last patient is registered, with the detailed follow-up period of the clinical trial scheduled to conclude approximately 42 months after the last patient is registered. Upon completion of the detailed follow-up period of the pivotal Phase 3 clinical trial, we intend to continue to follow the patients for survival. We believe that, if successful, the results of the trial will support regulatory approval of MyVax for the treatment of follicular B-cell NHL.

     Supporting Phase 2 Follicular B-cell NHL Clinical Trial — the 9901 Trial

     In June 2001, we completed the treatment of 21 patients in a Phase 2 clinical trial, our 9901 trial, to evaluate the ability of patients to mount an immune response to MyVax and to examine its safety profile. The clinical trial involved patients with follicular B-cell NHL in first remission following chemotherapy. The clinical trial was conducted at Stanford University Medical Center and University of Nebraska Medical Center. The primary endpoint of the clinical trial was the generation of a specific anti-idiotype immune response. Positive immune responses were observed. Patients who participated in this clinical trial continue to be monitored for safety, disease progression and survival.

     The clinical protocol for this Phase 2 clinical trial was based on the original treatment protocols used in the Stanford and NCI clinical trials. We used MyVax, which is comprised of the same basic components of active idiotype immunotherapy used in the Stanford and NCI trials. MyVax includes the tumor-specific idiotype protein linked to a foreign carrier protein called keyhole limpet hemocyanin, or KLH, which is derived from a giant sea snail, and was given in the same dose as used in the Stanford and NCI clinical trials. The adjuvant administered with MyVax was Leukine, a recombinant human granulocyte macrophage colony stimulating factor, or GM-CSF, which was also used in the NCI clinical trial. In addition, we produced MyVax using our proprietary manufacturing process instead of rescue fusion. Upon diagnosis, a biopsy was obtained to provide a tumor sample sufficient to produce the patient-specific active idiotype immunotherapy. After obtaining an adequate biopsy, a four-to-seven month regimen of conventional chemotherapy was administered to reduce the tumor mass in the patient. Following an approximately six month rest period to allow the immune system to recuperate from the chemotherapy, the patient received a series of five immunizations over 24 weeks. Patients were evaluated for an immune response during the course of immunizations and two weeks following the final immunization. The entire treatment protocol from the initiation of chemotherapy through the final immunization lasted about 18 months.

     A median time to disease progression of 37.7 months has been reached in the patients in this clinical trial, compared to a median time to disease progression of 15 months observed in another clinical trial in which follicular B-cell NHL patients were treated with chemotherapy alone. MyVax was generally well tolerated in our trial, with

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patients reporting side effects of injection site reactions and flu-like symptoms.

     Additional Phase 2 Follicular B-cell NHL Clinical Trials — the 2000#07, 2000#04 and 2002#09 Trials

     We have completed the treatment phase of two additional Phase 2 clinical trials to study the use of MyVax in treating follicular B-cell NHL. One Phase 2 clinical trial, our 2000#07 trial, evaluated the use of a reduced amount of the GM-CSF administered with MyVax. Patients in this clinical trial were in first remission following chemotherapy after initial diagnosis. This clinical trial is being conducted at the University of Nebraska Medical Center. The 11 patients in this clinical trial received five immunizations over 24 weeks between March 2001 and January 2002. The primary endpoint of the clinical trial was the generation of an anti-idiotype immune response using MyVax. Positive immune responses were observed. A median time to disease progression of 23.8 months has been reached in the patients in this clinical trial. Patients who participated in this clinical trial continue to be monitored for safety, disease progression and survival.

     A second Phase 2 clinical trial, our 2000#04 trial, evaluated the use of MyVax as the sole initial therapy for patients with follicular B-cell NHL. This clinical trial is being conducted at Stanford University Medical Center. A significant percentage of patients with follicular B-cell NHL do not clinically require immediate treatment upon diagnosis. As there is no curative treatment, many physicians elect to monitor this population of patients until their clinical symptoms require treatment. Patients in this clinical trial were initially administered five immunizations over 24 weeks. For those demonstrating an immune response or a clinical response, three additional immunizations were administered. The primary endpoint of the clinical trial was the generation of an anti-idiotype immune response using MyVax. Positive immune responses were observed. Patients who participated in this clinical trial continue to be monitored for safety, disease progression and survival.

     We initiated a Phase 2 clinical trial in March 2003, our 2002#09 trial, to treat approximately 40 patients with follicular B-cell NHL who have relapsed following chemotherapy. These patients will be treated with MyVax following a course of treatment with Rituxan. This clinical trial is designed to evaluate the use of MyVax in patients treated with Rituxan after relapsing following chemotherapy. The primary endpoint of the clinical trial is time to disease progression. The clinical trial will also evaluate whether an anti-idiotype immune response can be generated.

     Phase 2 Aggressive B-cell NHL Clinical Trial — the 9902 Trial

     We also have an ongoing Phase 2 clinical trial, our 9902 trial, to treat patients initially diagnosed with aggressive B-cell NHL. This is the first clinical trial of an active idiotype immunotherapy in newly diagnosed aggressive B-cell NHL patients. Patients enrolled are in first remission following chemotherapy after initial diagnosis. The clinical trial is being conducted at Stanford University Medical Center, University of Nebraska Medical Center and Weill Medical College of Cornell University. We have enrolled 27 patients in first remission following chemotherapy. The primary endpoint of the clinical trial is the generation of an anti-idiotype immune response using MyVax. Patients are also being monitored for safety, disease progression and survival.

     Because patients with aggressive B-cell NHL tend to relapse much sooner following the completion of chemotherapy than patients with indolent B-cell NHL, the treatment regimen was altered from the one used in indolent B-cell NHL clinical trials. Patients began immunization three months after the end of their chemotherapy, as opposed to after a six-month rest period. Two different administration schedules were examined: 14 patients on Schedule A received five immunizations over a 24-week period and 13 patients on Schedule B received eight immunizations over an 18-week period. Positive immune responses were observed on both Schedule A and Schedule B.

     The patients on Schedule A have a median time to disease progression of 10.8 months, which suggests that giving five immunizations over a 24-week period does not allow for the establishment of a clinically effective response before the fast-growing aggressive B-cell NHL reappears following chemotherapy. In contrast, patients on Schedule B have a median time to disease progression of 15.7 months. The results from Schedule B are encouraging as 10 of the 13 patients treated on Schedule B have a form of aggressive B-cell NHL called mantle cell lymphoma, which is a type of B-cell NHL that is widely viewed as incurable. Based on these results, we plan to initiate a larger clinical trial for patients with mantle cell lymphoma in 2005. This trial will be designed to obtain regulatory approval for the use of MyVax for the treatment of mantle cell lymphoma.

Additional Clinical Programs

     We believe active immunotherapy can be applied successfully to the treatment of other cancers. We are developing MyVax for the treatment of chronic lymphocytic leukemia, or CLL. Like NHL, CLL is primarily a B-cell cancer. We believe CLL can be treated with MyVax, and the same method of manufacturing would be used to

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produce active idiotype immunotherapies for CLL as is currently used for aggressive and indolent B-cell NHL patients. We plan to initiate a clinical program for an active immunotherapy to treat CLL during 2004.

Manufacturing Process

     Our manufacturing process is divided into three phases: molecular biology, cell culture and production, as illustrated below.

     Each phase of our manufacturing process uses standard procedures that apply to each personalized immunotherapy that we produce. The manufacturing of each patient’s active idiotype immunotherapy begins with the collection of a tumor sample by routine biopsy of the patient. The tumor samples can be acquired by surgical or non-surgical means, can be frozen and are shipped via an overnight courier to our manufacturing facility for processing. After processing, each patient’s active idiotype immunotherapy is shipped to the clinical site or the treating physician for immunization of the patient.

     Molecular Biology

     Upon arrival of the tumor sample at our manufacturing facility, we extract genetic material from the sample and isolate the genes that encode the two unique regions of a patient’s tumor-specific idiotype protein. Our proprietary knowledge allows us to identify the genes encoding the idiotype protein generally within a few weeks. We then generate a pair of expression vectors encoding the idiotype protein. An expression vector is a DNA molecule that contains all of the elements required for the production of the tumor-derived idiotype protein in a host cell.

     Cell Culture

     The expression vectors encoding the idiotype protein are then introduced into mammalian cells. Individual mammalian cell lines producing the idiotype protein are then generated using a series of cycles of growth and selection steps. These cycles of growth and selection, known as gene amplification, are completed using our patented Hi-GET technology that provides for the rapid and efficient isolation of mammalian cell lines expressing increased levels of the idiotype protein. These cell lines are referred to as manufacturing cell lines.

     In comparison to alternative methods of gene amplification, our Hi-GET technology more efficiently and reproducibly generates stable cell lines containing increased copies of the expression vectors that encode the patient’s idiotype protein. Consequently, fewer candidate cell lines must be subjected to selection techniques in order to identify a suitable manufacturing cell line, thus reducing the amount of time a technician must spend to identify a cell line that is expressing sufficient levels of idiotype protein. This allows each of our technicians to work on the development of ten to 20 different manufacturing cell lines at the same time.

     Production

     Upon isolation of a manufacturing cell line, the size of the culture is expanded to allow for the production of an

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appropriate amount of the idiotype protein. Following a standard purification process, the idiotype protein is linked to KLH, a foreign carrier protein, resulting in MyVax. After release testing, the frozen MyVax product and GM-CSF adjuvant are shipped to the clinical trial site or the treating physician for immunization of the patient.

     We purchase KLH from biosyn Arzneimittel GmbH, a single source supplier. We have entered into a supply agreement with biosyn, dated December 9, 1998, pursuant to which biosyn has agreed to supply us with KLH. Pursuant to the supply agreement, biosyn is obligated to supply us a maximum amount of KLH in any one month and, up to December 9, 2003, a minimum amount of KLH per 12-month period. Under the agreement, biosyn may, but is not required to, supply us with KLH in excess of the contractual monthly maximum. Since early 2001, we have purchased an average amount of KLH per month that is greater than the monthly maximum amount and annual minimum amount of KLH that biosyn is required to supply us under the supply agreement. We expect to continue to purchase on a monthly basis through the next 12 months more KLH than biosyn is required to supply us under the supply agreement. Based on our projected use of KLH over the next 12 months and our discussions with biosyn, we believe biosyn can and will meet our anticipated needs for KLH. The supply agreement expires on December 9, 2005. Either party may terminate the supply agreement earlier upon a breach that is not cured within 60 days or other events relating to insolvency or bankruptcy.

     Manufacturing Safeguards

     We have instituted several safeguards in our manufacturing process that are designed to ensure batch integrity and prevent patient therapies from being sent to the incorrect patient. Throughout the process we carefully handle manufacturing materials and record data. The DNA sequences of the tumor-specific idiotype protein genes are determined early in the molecular biology phase of the process. These DNA sequences serve as a reference that permits the identification of manufacturing intermediates, such as expression vectors, and stable cell lines containing these vectors, as belonging to a specific patient’s sample. At later stages of the process, we use tests to demonstrate that the subtype of the idiotype protein present in both purified idiotype protein preparations and in the final MyVax product, the idiotype protein-KLH conjugate, is in conformance with the expected subtype.

     In addition to safeguards designed to ensure segregation of each patient’s therapy, we archive intermediates throughout the manufacturing process, which allows us to quickly produce additional vials of a patient’s therapy if needed. These archival procedures include the storage of the manufacturing cell line produced for each patient and purified preparations of the patient’s tumor-specific idiotype protein.

Additional Hi-GET Technology Applications

     Our patented Hi-GET technology has additional potential applications, including producing target proteins for other immunotherapies, such as monoclonal antibodies used in passive immunotherapies, and other therapeutic proteins. Our Hi-GET technology can also be used to produce proteins for research, for example, to support genomic companies’ needs to strengthen their patent positions by enabling them to link protein function with their DNA sequences more quickly. Our Hi-GET technology has also been used to produce both single and multi-chain proteins that are secreted into the culture medium, proteins that are located in the cytoplasm of the cell and proteins that are located in the membrane of the cell. Many proteins of therapeutic and diagnostic interest must be produced in mammalian cells in order for the proteins to retain their characteristic features and biologic activities. Our Hi-GET technology can be used to efficiently produce a wide variety of proteins in mammalian cell lines.

Competition

     The biotechnology and biopharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We face competition from many different sources, including commercial pharmaceutical and biotechnology enterprises, academic institutions, government agencies and private and public research institutions. Due to the high demand for new cancer therapies, research is intense and new treatments are being sought out and developed by our competitors.

     Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, clinical trials, regulatory approvals and marketing approved products than we do. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies and technology licenses complementary to our programs or advantageous to our business.

     Several companies, such as Corixa Corporation, Biogen Idec Inc. and Immunomedics, Inc. are involved in the

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development of passive immunotherapies for the treatment of NHL. Various products are currently marketed for treatment of NHL. Rituxan, a monoclonal antibody co-marketed by Genentech, Inc. and Biogen Idec Inc., is approved for the treatment of relapsed or refractory, low grade B-cell NHL. In addition, IDEC has received FDA approval for marketing its passive radioimmunotherapy product, Zevalin, and GlaxoSmithKline Plc and Corixa Corporation recently received FDA approval for marketing their version of passive radioimmunotherapy product, Bexxar, for the treatment of relapsed or refractory low grade, follicular, or transformed B-cell NHL.

     In addition, there are several companies focusing on the development of active immunotherapies for the treatment of NHL, including Antigenics, Inc., Favrille, Inc. and Large Scale Biology Corporation. These companies’ product candidates are in various stages of development. In addition, we are aware that the NCI, in collaboration with Biovest International, Inc., is currently conducting a Phase 3 clinical trial of active immunotherapy in patients with follicular NHL. If any are successfully developed and approved, they could compete directly with MyVax, if it is approved.

Sales and Marketing

     We recently began building our marketing capabilities. In order to commercially market our active immunotherapies if we obtain regulatory approval, we must either develop a sales and marketing infrastructure or collaborate with third parties with more sales and marketing experience. We plan to build a small, highly-focused sales and marketing infrastructure to market MyVax to the relatively small and well-established community and institutional referral networks of cancer treatment physicians. We believe that the oncology market in North America is readily accessible by a limited sales and marketing presence due to the concentration of prescribing physicians. To penetrate oncology markets outside the United States, as appropriate, we may establish collaborations to assist in the commercialization of MyVax.

Intellectual Property

     We rely on the proprietary nature of our technology and production processes for the protection of MyVax and any other immunotherapies that we may develop. We plan to prosecute and defend aggressively our patents and proprietary technology. Our policy is to patent the technology, inventions and improvements that we consider important to the development of our business. We hold two United States patents related to our core gene amplification technology, including composition of matter claims directed to cell lines and claims directed to methods of making proteins derived from patients’ tumors. These patents expire in 2016. Corresponding patents, although more constrained in scope due to rules not applicable in the United States, have been issued in Australia, Canada and South Africa, all of which expire in 2017. We have also filed additional United States and corresponding foreign patent applications relating to our Hi-GET gene amplification technology and expect to continue to file additional patent applications.

     We also rely on trade secrets, technical know-how and continuing innovation to develop and maintain our competitive position. We seek to protect our proprietary information by requiring our employees, consultants, contractors, outside scientific collaborators and other advisors to execute non-disclosure and assignment of invention agreements on commencement of their employment or engagement, through which we seek to protect our intellectual property. Agreements with our employees also prevent them from bringing the proprietary rights of third parties to us. We also require confidentiality or material transfer agreements from third parties that receive our confidential data or materials.

     The biotechnology and biopharmaceutical industries are characterized by the existence of a large number of patents and frequent litigation based on allegations of patent infringement. While our active immunotherapies are in clinical trials, and prior to commercialization, we believe our current activities fall within the scope of the exemptions provided by 35 U.S.C. Section 271(e) in the United States and Section 55.2(1) of the Canadian Patent Act, each of which covers activities related to developing information for submission to the FDA and its counterpart agency in Canada. As our active immunotherapies progress toward commercialization, the possibility of an infringement claim against us increases. While we attempt to ensure that our active immunotherapies and the methods we employ to manufacture them do not infringe other parties’ patents and other proprietary rights, competitors or other parties may assert that we infringe on their proprietary rights. In particular, we are aware of patents held jointly by Genentech, Inc. and City of Hope National Medical Center relating to expression of recombinant antibodies, by British Technology Group PLC relating to expression of recombinant proteins in mammalian cells, by the Board of Trustees of the Leland Stanford Junior University relating to expression of recombinant antibodies and by Stratagene relating to generation of DNA that encodes antibodies.

     We believe that we have valid defenses to any assertion that MyVax, or any other similar antibody-based active immunotherapies that we may develop, or the methods that we employ to manufacture them, infringes the claims of

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the patent held jointly by Genentech, Inc. and City of Hope National Medical Center relating to expression of recombinant antibodies. We also believe that the patent may be invalid and/or unenforceable. The relevant patent was issued to Genentech, Inc. in 2001 in connection with the settlement of an interference proceeding in the United States Patent and Trademark Office between Genentech, Inc. and Celltech R&D Ltd. We believe other biotechnology companies are aware of and are considering the possible impact of this patent. Other companies have negotiated license agreements for this patent. We have not attempted to obtain such a license because we believe that properly construed claims do not cover activities related to the manufacture of MyVax. If we decide to attempt to obtain a license for this patent, we cannot guarantee that we would be able to obtain such a license on commercially reasonable terms, or at all. We are aware of a complaint filed by Medimmune, Inc. against Genentech, Inc., City of Hope National Medical Center and Celltech in April 2003 in the United States District Court for the Central District of California seeking, among other things, judicial declarations that the patent is invalid and that the patent is unenforceable due to the patent applicants’ inequitable conduct before the United States Patent and Trademark Office. We cannot predict whether Medimmune will obtain the judicial declarations that it is seeking, whether we or others would seek or be able to obtain such or similar declarations or whether we would otherwise be successful in demonstrating that MyVax, or any other similar antibody-based active immunotherapies that we may develop, or the methods that we employ to manufacture them, does not infringe the claims of the patent held jointly by Genentech, Inc. and City of Hope National Medical Center or that the patent is invalid and/or unenforceable.

     We also believe that we have valid defenses to any assertion that MyVax, or any other active immunotherapies that we may develop, infringes the claims of the patent held by British Technology Group PLC relating to expression of recombinant proteins in mammalian cells, that MyVax, or any other similar antibody-based active immunotherapies that we may develop, infringes the claims of the patent held by the Board of Trustees of the Leland Stanford Junior University relating to expression of recombinant antibodies or that MyVax, or any other similar antibody-based active immunotherapies that we may develop, infringes the claims of the patent held by Stratagene relating to generation of DNA that encodes antibodies. The relevant British Technology Group patent was issued in 1990 and was subsequently assigned to British Technology Group. We believe that the patent is invalid and, therefore, that the patent does not impact our ability to commercialize MyVax. The relevant Stanford patent was issued in 1998. We believe that MyVax, and the methods that we employ to manufacture MyVax, do not infringe the claims of the patent. The relevant Stratagene patent was issued in 2002. We believe that the patent is invalid, and that the methods that we employ to manufacture MyVax do not infringe the claims of the patent.

     If any of these patents is found to cover MyVax, or any other immunotherapies that we may develop, or the methods that we employ to manufacture them, we could be required to pay damages and could be unable to commercialize MyVax, or any other immunotherapies that we may develop, unless we obtain a license from the applicable patent holder. A license may not be available to us on acceptable terms in the future, or at all. In addition, litigation of any intellectual property claims with any of these patent holders, with or without merit, would likely be expensive and time-consuming and divert management’s attention from our core business.

     See “Risk Factors — Because it is difficult and costly to protect our proprietary rights, we may not be able to ensure their protection.”

Government Regulation

     Regulation of MyVax and Any Other Active Immunotherapies that We May Develop in the United States and Canada

     MyVax and any other immunotherapies that we may develop will require regulatory approval prior to commercialization. At the present time, we believe that MyVax and any other immunotherapies that we may develop will be regulated in the United States by the FDA as biologics.

     The Investigational New Drug application, or IND, for our lead product candidate, MyVax personalized immunotherapy, was submitted to the FDA in April 1999. We received approval from the FDA to begin clinical trials with a Phase 2 clinical trial in May 1999. A pre-Phase 3 clinical trial meeting was held with the FDA in August 2000. Our pivotal Phase 3 clinical trial for the treatment of follicular B-cell NHL began in November 2000. The IND was submitted in Canada in December 2000. Our pivotal Phase 3 clinical trial is currently ongoing in the United States and Canada.

     We plan to submit marketing applications for approval of MyVax initially in the United States and Canada. The initial application is expected to be based on one adequate and well-controlled Phase 3 clinical trial, our 2000#03 trial, with supporting data from our Phase 2 clinical trials. In the United States, we expect the Biologics License application, or BLA, to be reviewed under accelerated approval, with time of progression free survival as a surrogate for survival. We expect to follow patients for long term survival as a post-approval commitment. We expect to

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conduct further clinical trials to support BLAs for approvals of MyVax for additional indications.

     We have not started the regulatory approval process in any jurisdiction other than the United States and Canada, and we are unable to estimate when, if ever, we will commence the regulatory approval process in any other foreign jurisdiction. In general, we will have to complete an approval process similar to the United States approval process in foreign markets for MyVax and any other immunotherapies that we may develop before we can commercialize them in those countries. The approval procedure and the time required for approval vary from country to country and can involve additional testing. Foreign approvals may not be granted on a timely basis, or at all. Regulatory approval of product prices is required in most countries other than the United States. The prices approved for our products may be too low to generate an acceptable return to us.

     Our manufacturing facility is currently subject to licensing requirements of the California Department of Health Services. We anticipate applying for a license in the first quarter of 2004. Our facility is subject to inspection by the FDA as well as by the California Department of Health Services at any time. Failure to obtain and maintain a license from the California Department of Health Services, or to meet the inspection criteria of the FDA or the California Department of Health Services, would disrupt our manufacturing processes and would harm our business.

     Product Regulation

     Governmental authorities in the United States and other countries extensively regulate the preclinical studies and clinical testing, manufacture, labeling, storage, record keeping, advertising, promotion, export and marketing, among other things, of drugs, medical devices and biological materials, including MyVax and any other immunotherapies that we may develop. In the United States, pharmaceutical products are regulated by the FDA under the Federal Food, Drug, and Cosmetic Act and other laws, including, in the case of biologics, the Public Health Service Act. The steps required before a novel biologic may be approved for marketing in the United States generally include:

•		preclinical laboratory tests and preclinical studies in animals;
•		the submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may commence;
•		adequate and well-controlled human clinical trials to establish the safety and efficacy of the product;
•		the submission to the FDA of a BLA; and
•		FDA review and approval of such application, including a pre-approval inspection of the manufacturing facility and FDA inspection of clinical study sites.

     The testing and approval process requires substantial time, effort and financial resources. We cannot be certain that any approval will be granted on a timely basis, if at all. Prior to and following approval, if granted, the establishment or establishments where the product is manufactured are subject to inspection by the FDA and must comply with current good manufacturing practices, or cGMP, requirements enforced by the FDA through its facilities inspection program. In addition, drug manufacturing facilities in California are subject to licensing requirements of the California Department of Health Services. Facilities are subject to inspection by the FDA as well as by the California Department of Health Services at any time.

     Preclinical studies generally include animal studies to evaluate the mechanism of action of the product, as well as animal studies to assess the potential safety and efficacy of the product. Compounds must be produced according to applicable cGMP requirements and preclinical safety tests must be conducted in compliance with FDA and international regulations regarding good laboratory practices. The results of the preclinical tests, together with manufacturing information and analytical data, are generally submitted to the FDA as part of an IND, which must become effective before human clinical trials may be commenced. The IND will automatically become effective 30 days after receipt by the FDA, unless the FDA before that time requests an extension or raises concerns about the conduct of the clinical trials as outlined in the application. In such latter case, the sponsor of the application and the FDA must resolve any outstanding concerns before clinical trials can proceed. Clinical trials involve the administration of the investigational product to healthy volunteers or to patients, under the supervision of a qualified principal investigator, and must be conducted in accordance with good clinical practices. Clinical trials are conducted in accordance with protocols that detail many items, including:

•

the objectives of the study;

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•		the parameters to be used to monitor safety; and
•		the efficacy criteria to be evaluated.

     Each protocol must be submitted to the FDA as part of the IND. Further, each clinical study must be reviewed and approved by an independent institutional review board, or IRB, at each institution at which the study will be commenced, prior to the recruitment of subjects. The IRB will consider, among other things, ethical factors, the safety of human subjects and the possible liability of the institution.

     Clinical trials typically are conducted in three sequential phases, but the phases may overlap. In Phase 1, the initial introduction of the drug into human subjects, the drug is tested for safety and, as appropriate, for absorption, metabolism, distribution, excretion, pharmacodynamics and pharmacokinetics. Phase 2 usually involves studies in a limited patient population to evaluate preliminarily the efficacy of the drug for specific targeted indications, determine dosage tolerance and optimal dosage and identify possible adverse effects and safety risks.

     Phase 3 clinical trials are undertaken to further evaluate clinical efficacy and to test further for safety within an expanded patient population at geographically dispersed clinical study sites. Phase 1, Phase 2 or Phase 3 testing may not be completed successfully within any specific time period, if at all, with respect to any products being tested by a sponsor. Furthermore, the FDA or the IRB may suspend clinical trials at any time on various grounds, including a finding that the healthy volunteers or patients are being exposed to an unacceptable health risk.

     The results of the preclinical studies and clinical trials, together with detailed information on the manufacture and composition of the product, are submitted to the FDA as part of a BLA requesting approval for the marketing of the product. The FDA may refuse to accept the BLA for review or deny approval of the application if applicable regulatory criteria are not satisfied, or if additional testing or information is required. Post-marketing testing and surveillance to monitor the safety or efficacy of a product may be required, and the FDA may limit further marketing of the product based on the results of post-market testing. FDA approval of any application may include many delays or never be granted. Moreover, if regulatory approval of a product is granted, such approval may entail limitations on the indicated uses for which it may be marketed. Finally, product approvals may be withdrawn if compliance with regulatory standards is not maintained or if safety or manufacturing problems occur following initial marketing. Among the conditions for approval is the requirement that the prospective manufacturer’s quality control and manufacturing procedures conform to cGMP requirements. These requirements must be followed at all times in the manufacture of the approved product. In complying with these requirements, manufacturers must continue to expend time, monies and effort in the area of production and quality control to ensure full compliance. Failure to comply may subject us to fines and civil penalties, suspension or delay in product approval, seizure or recall of the product, or product approval withdrawal.

     New products that are being developed for the treatment of serious or life-threatening diseases where the product would provide therapeutic advantage over the existing treatment may be considered for accelerated approval by the FDA. In these cases, approval can be based on criteria that are indicative of the desired clinical benefit. These products generally receive high priority review by the FDA. Sponsors of products that receive accelerated approval must carry out clinical trials post-approval to verify the desired clinical benefit.

     Both before and after the FDA approves a product, the manufacturer and the holder or holders of the BLA for the product are subject to comprehensive regulatory oversight. Violations of regulatory requirements at any stage, including the preclinical and clinical testing process, the review process, or at any time afterward, including after approval, may result in various adverse consequences, including the FDA’s delay in approving or refusal to approve a product, suspension or withdrawal of an approved product from the market, seizure or recall of a product and/or the imposition of criminal penalties against the manufacturer and/or the license holder. In addition, later discovery of previously unknown problems may result in restrictions on a product, its manufacturer, or the BLA holder, or market restrictions through labeling changes or product withdrawal. Also, new government requirements may be established that could delay or prevent regulatory approval of our products under development.

     With respect to post market product advertising and promotion, the FDA imposes a number of complex regulations on entities that advertise and promote pharmaceuticals and biologics, which include, among others, standards for and regulations of direct-to-consumer advertising, off-label promotion, industry sponsored scientific and educational activities, and promotional activities involving the Internet. The FDA has very broad enforcement authority under the Federal Food Drug and Cosmetic Act, and failure to abide by these regulations can result in penalties, including the issuance of a warning letter directing us to correct deviations from FDA standards, a requirement that future advertising and promotional materials be pre-cleared by the FDA, and state and federal civil and criminal investigations and prosecutions.

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     We are also subject to various laws and regulations regarding laboratory practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances in connection with our research. In each of these areas, as above, the FDA has broad regulatory and enforcement powers, including the ability to impose fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, and withdraw approvals, any one or more of which could have a material adverse effect upon us.

     No patient-specific active idiotype immunotherapeutic for cancer has been approved by the FDA for marketing. The FDA has not yet established particular regulatory guidelines for patient-specific immunotherapies, nor has it issued any interim guidelines.

     Other Regulations

     We are also subject to regulation by the Occupational Safety and Health Administration, or OSHA, and the state and federal environmental protection agencies and to regulation under the Toxic Substances Control Act and other regulatory statutes, and may in the future be subject to other federal, state or local regulations. Either OSHA or the environmental protection agencies, or all of them, may promulgate regulations that may affect our research and development programs. We are unable to predict whether any agency will adopt any regulation, which could limit or impede on our operations.

Employees

     As of December 31, 2003 we had 103 employees, of whom nine have Ph.D.s, one has a M.D., and one has a Pharm. D. Of the remaining employees, 11 are clinical staff, 65 are manufacturing staff and 16 are management or administrative staff. None of our employees is subject to a collective bargaining agreement. We believe that we have good relations with our employees.

Executive Officers of the Registrant

     The following table sets forth, as of February 29, 2004, information about our executive officers.

     Dan W. Denney Jr., Ph.D. is our founder and has served as our Chief Executive Officer since November 1999, Chairman of the Board since August 1996 and has served as our acting Chief Financial Officer since February 2004. Dr. Denney did his postdoctoral research in the laboratory of Dr. Harden McConnell in the Chemistry Department at Stanford University, where he was a Merck Fellow. Dr. Denney then served as a Visiting Scholar at the University of Alberta in Canada prior to founding Genitope. Dr. Denney holds a B.A. from Vanderbilt University and a Ph.D. in Microbiology and Immunology from Stanford University School of Medicine.

     Bonnie Charpentier, Ph.D. has served as our Vice President of Regulatory Affairs since December 2001. From June 1995 to December 2001, Dr. Charpentier held a number of regulatory positions at Roche Global Development, a division of F. Hoffman-La Roche Ltd., a pharmaceuticals and diagnostics company, including Vice President and Regulatory Site Head. From December 1993 to June 1995, Dr. Charpentier served as Regulatory Program Director at Syntex Corporation, a biopharmaceutical company, where she joined as a Manager of Human Pharmaceutical Regulatory in 1991. Dr. Charpentier holds a B.A. and a Ph.D. in Biology from the University of Houston.

     Thomas DeZao has served as our Vice President of Strategic Marketing and Sales since February 2002. From August 1999 to January 2002, Mr. DeZao was Vice President of Marketing and Medical Affairs at Corixa Corporation, a biopharmaceutical company, and Coulter Pharmaceutical, Inc., a wholly owned subsidiary of Corixa Corporation, where he was responsible for all aspects of the marketing plan for Bexxar, a radio-labeled monoclonal antibody developed to treat non-Hodgkin’s lymphoma. From July 1998 to June 1999, Mr. DeZao was the Vice President of Marketing and Sales for Asta Medica, a biopharmaceutical company, where he developed commercialization plans for an emerging United States oncology business. From October 1987 to March 1998, Mr.

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DeZao was the Director of Marketing for Chiron Corporation, a global pharmaceutical company, where he was responsible for product management and customer service for the Therapeutics Division. Mr. DeZao holds a B.A. from Montclair State University.

     Diane Ingolia, J.D., Ph.D. currently serves as our Vice President of Technical Development and Intellectual Property Counsel. Dr. Ingolia joined us in May 1997 as our Senior Scientist and Intellectual Property Counsel, a position she held until April 2000. From May 2000 to May 2002, Dr. Ingolia served as Vice President of Product Development and Intellectual Property Counsel. From 1994 to 1997, Dr. Ingolia was a patent attorney at Medlen & Carroll, LLP. Dr. Ingolia holds a B.S. degree from University of New Orleans and a Ph.D. in Biochemistry from Baylor College of Medicine. Dr. Ingolia conducted her postdoctoral research at Stanford University School of Medicine in the laboratory of Dr. Irving Weissman. Dr. Ingolia holds a J.D. from Santa Clara Law School.

     Claude Miller has served as our Vice President of Quality since February 2004. From September 2000 to November 2003, Mr. Miller held a number of key management positions at Alpha Therapeutic Corporation, a plasma fractionation biologics company, starting as Vice President of Regulatory and Quality before being elevated to the position of President and Chief Operating Officer in March 2002. From April 1997 to September 2000, Mr. Miller was Senior Director of Operations at SangStat Medical Corporation, a transplant company. Prior to joining SangStat, Mr. Miller held a number of positions in Quality and Compliance at Somatix, Collagen Corporation and LifeScan Inc. Claude Miller received his B.S. and M.S. in Molecular Biology/Microbiology from California State University, Long Beach.

     Scott M. Wheelwright, Ph.D. has served as our Vice President of BioProcessing since April 2002. From February 2000 to April 2002, Dr. Wheelwright held a number of manufacturing positions at DURECT Corporation, a pharmaceutical systems company, including Vice President of Manufacturing and Operations. From March 1998 to February 2000, he was Vice President of Development and Manufacturing at Calydon, Inc., a biopharmaceutical company. From October 1992 to March 1998, Dr. Wheelwright held a number of manufacturing positions at Scios Inc., including Senior Director of Process Development, Manufacturing and Engineering. Prior to Scios, Dr. Wheelwright held positions at Chiron Corporation and Abbott Laboratories. Dr. Wheelwright holds a B.S. from the University of Utah, Salt Lake City and a Ph.D. in Chemical Engineering from the University of California, Berkeley.

Available Information

     We maintain a site on the world wide web at www.genitope.com; however, information found on our website is not incorporated by reference into this report. We make available free of charge on or through our website our SEC filings, including our annual report of Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC

     In 2003, we adopted a Code of Business Conduct and Ethics (“Code”) that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted the text of our Code on our website at www.genitope.com in connection with “Investor” materials. We intend to satisfy the disclosure requirement under Item 10 of Form 8-K regarding an amendment to, or waiver from, a provision of this Code by posting such information on our website, at the address and location specified above. In addition, we intend to promptly disclose (1) the nature of any amendment to our Code that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and (2) the nature of any waiver, including an implicit waiver, from a provision of our Code that is granted to one of these specified officers, the name of such person who is granted the waiver and the date of the waiver on our website in the future. You may also request a copy of the Code of Business Conduct by contacting our investor relations department at [email protected].

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RISK FACTORS

Risks Related to Our Business

We have incurred losses since inception and anticipate that we will incur continued losses for the foreseeable future.

     We are a development stage company with a limited operating history. We have focused primarily on conducting clinical trials and seeking regulatory approval for our lead product candidate, MyVax personalized immunotherapy, a patient-specific active immunotherapy that is based on the unique genetic makeup of a patient’s tumor and is designed to activate a patient’s immune system to identify and attack cancer cells. We have incurred losses in each year since our inception in 1996. Net losses were $48.9 million in 2003, $19.9 million in 2002 and $9.8 million in 2001. As of December 31, 2003, we had an accumulated deficit of $87.8 million. These losses, among other things, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. We expect our research and development expenses to increase in connection with our ongoing pivotal Phase 3 clinical trial and additional Phase 2 clinical trials for MyVax and any other clinical trials that we may initiate. In addition, subject to regulatory approval of MyVax, we expect to incur sales, marketing and manufacturing expenses, including expenses associated with the construction and qualification of a commercial scale manufacturing facility. As a result, we expect to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing immunotherapeutic drugs, we are unable to predict the extent of any future losses or when we will become profitable, if at all.

     We currently have no source of revenue and may never become profitable.

     Our ability to become profitable depends upon our ability to generate revenue. To date, MyVax has not generated any revenue, and we do not know when or if MyVax will generate revenue. Our ability to generate revenue depends on a number of factors, including our ability to:

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successfully complete our ongoing pivotal Phase 3 clinical trial for MyVax;

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develop and obtain regulatory approval for MyVax, including regulatory approval for our commercial scale manufacturing facility and process;

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manufacture commercial quantities of MyVax at acceptable cost levels; and

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successfully market and sell MyVax.

     We do not anticipate that we will generate revenues until 2006, at the earliest. We do not anticipate that we will achieve profitability for at least several years after generating material revenues. If we are unable to generate revenue, we will not become profitable, and we may be unable to continue our operations.

We will need substantial additional funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our product development programs or commercialization efforts.

     Developing patient-specific active immunotherapies, conducting clinical trials, establishing manufacturing facilities and marketing immunotherapies that we may develop is expensive. We will need to raise additional capital to:

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fund our operations and clinical trials;

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continue our research and development;

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complete the construction and qualification of a commercial scale manufacturing facility; and

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commercialize MyVax, or any other immunotherapies that we may develop, if any such immunotherapies receive regulatory approval.

     We anticipate that the Company’s average quarterly cash used for operating and investing activities in 2004 will be approximately $6.0 million. Accordingly, we believe that the net proceeds from our recently completed initial public offering, together with the interest thereon, will provide us with sufficient financial resources to reach the first interim analysis of our pivotal Phase 3 trial, which we anticipate will occur at the end of the first quarter of 2005. Our forecast of the period of time through which our financial resources will be adequate to support our operations

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is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the risk factors discussed in this report. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. We estimate that we will need to raise additional funds in an anticipated amount of approximately $100 million in order to commercialize MyVax, including the completion of the construction and qualification of a commercial scale manufacturing facility, if MyVax receives regulatory approval for the treatment of follicular B-cell NHL. Our future funding requirements will depend on many factors, including, but not limited to:

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the rate of progress and cost of our clinical trials and other research and development activities;

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the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

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the cost and timing of completion of a commercial scale manufacturing facility;

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the costs and timing of regulatory approval;

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the costs of establishing sales, marketing and distribution capabilities;

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the effect of competing technological and market developments; and

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the terms and timing of any collaborative, licensing and other arrangements that we may establish.

     Future capital requirements will also depend on the extent to which we acquire or invest in businesses, products and technologies, but we currently have no commitments or agreements relating to any of these types of transactions.

     Even if we achieve positive interim results in our pivotal Phase 3 clinical trial and receive regulatory approval for MyVax, including regulatory approval of a commercial scale manufacturing facility, we will not have product revenue until 2006, at the earliest. Until we can generate a sufficient amount of product revenue, if ever, we expect to finance future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements, as well as through interest income earned on cash balances. We cannot be certain that additional funding will be available on acceptable terms, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of our research or development programs or our commercialization efforts.

Raising additional funds by issuing securities or through collaboration and licensing arrangements may cause dilution to existing stockholders or require us to relinquish rights to our technologies, MyVax or any other immunotherapies that we may develop.

     We may raise additional funds through public or private equity offerings, debt financings, corporate collaboration or licensing arrangements or other arrangements. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience additional dilution, and debt financing, if available, may involve restrictive covenants. To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies, MyVax or any other immunotherapies that we may develop, or grant licenses on terms that are not favorable to us.

If clinical trials of MyVax, or any other immunotherapies that we may develop, do not produce successful clinical trial results, we will be unable to commercialize these products.

     To receive regulatory approval for the commercial sale of MyVax, or any other immunotherapies that we may develop, we must conduct, at our own expense, extensive clinical trials to demonstrate safety and efficacy in humans. Clinical testing is expensive, can take many years and has an uncertain outcome. Failure can occur at any stage of the testing. We may experience numerous unforeseen events during, or as a result of, the testing process that could delay or prevent commercialization of MyVax, or any other immunotherapies that we may develop, including the following:

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our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and/or preclinical testing;

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•

registration and/or enrollment in our ongoing pivotal Phase 3 clinical trial for MyVax may be slower than we currently anticipate, resulting in significant delays;

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safety and efficacy results attained in our pivotal Phase 3 clinical trial for MyVax may be less positive than the results obtained in our Phase 2 clinical trials for MyVax;

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costs of our clinical trials may be greater than we currently anticipate;

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after reviewing test results, we may abandon projects that we might have previously believed to be promising;

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we, or regulators, may suspend or terminate our clinical trials if the participating patients are being exposed to unacceptable health risks; and

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the effects of MyVax, or any other immunotherapies that we may develop, on patients may not be the desired effects or may include undesirable side effects or other characteristics that may delay or preclude regulatory approval or limit their commercial use if approved.

     Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful. For example, positive time to disease progression results in small scale Phase 2 clinical trials are not necessarily indicative of the time to disease progression results in larger Phase 3 clinical trials. Moreover, all clinical data reported from time to time prior to the release of final results of a trial regarding time to disease progression is not fully audited and has been taken from databases that have not been fully reconciled against medical records kept at the clinical sites or that may not include the most current information on patient disease progressions. A number of companies in the pharmaceutical industry, including biotechnology companies, have suffered significant setbacks in advanced clinical trials, even after promising results in earlier clinical trials. The data collected from our clinical trials may not be sufficient to support regulatory approval of MyVax, or any other immunotherapies that we may develop. We do not know whether our existing or any future clinical trials will demonstrate safety and efficacy sufficiently to result in marketable products. Our failure to adequately demonstrate the safety and efficacy of MyVax, or any other immunotherapies that we may develop, will prevent receipt of regulatory approval and, ultimately, commercialization of MyVax, or any other immunotherapies that we may develop.

Delays in clinical testing could result in increased costs to us and delay our ability to generate revenue.

     Significant delays in clinical testing could materially impact our product development costs. We do not know whether planned clinical trials will begin on time, will need to be restructured or will be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including delays in obtaining regulatory approval to commence and continue a study, delays in reaching agreement on acceptable clinical study agreement terms with prospective sites, delays in obtaining institutional review board approval to conduct a study at a prospective site and delays in recruiting patients to participate in a study.

     In addition, we typically rely on third-party clinical investigators to conduct our clinical trials and other third-party organizations to oversee the operations of such clinical trials and to perform data collection and analysis. As a result, we may face additional delays outside of our control if these parties do not perform their obligations in a timely fashion. If we have significant delays in testing or regulatory approvals, our financial results and the commercial prospects for MyVax, or any other immunotherapies that we may develop, will be harmed, our costs could increase and our ability to generate revenue could be delayed.

We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize MyVax, or any other immunotherapies that we may develop.

     Our pivotal Phase 3 clinical trial of MyVax for the treatment of follicular B-cell NHL is being conducted at 34 treatment centers in the United States and Canada. We do not have the ability to independently conduct clinical trials for MyVax, or any other immunotherapies that we may develop, and we must rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct our clinical trials. In addition, we rely on third-party couriers to transport patient tissue samples and MyVax. If any of our relationships with these contract research organizations, medical institutions, clinical investigators, contract laboratories or third-party couriers terminate, we believe that we would be able to enter into arrangements with alternative third parties. If certain of these third parties, such as medical institutions, clinical investigators or contract laboratories, do not successfully carry out their contractual duties or obligations, meet expected deadlines or need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or for other reasons, our clinical trials may be extended, delayed or terminated, and we may

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not be able to obtain regulatory approval for or successfully commercialize MyVax, or any other immunotherapies that we may develop.

If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation would have a material adverse effect on our business.

     Our ability to commercialize MyVax, or any other immunotherapies that we may develop, depends upon our ability to develop, manufacture, market and sell MyVax, or any other immunotherapies that we may develop, without infringing the proprietary rights of third parties. Numerous United States and foreign issued patents and pending patent applications, which are owned by third parties, exist in the general field of immunotherapy and gene expression. In addition, because patent applications can take many years to issue, there may be currently pending applications, unknown to us, which may later result in issued patents that MyVax, or any other immunotherapies that we may develop, may infringe. There could also be existing patents of which we are not aware that MyVax, or any other immunotherapies that we may develop, may inadvertently infringe.

     In particular, we are aware of patents held jointly by Genentech, Inc. and City of Hope National Medical Center relating to expression of recombinant antibodies, by British Technology Group PLC relating to expression of recombinant proteins in mammalian cells, by the Board of Trustees of the Leland Stanford Junior University relating to expression of recombinant antibodies and by Stratagene relating to generation of DNA that encodes antibodies. To date, we have elected not to seek licenses for these patents because, among other reasons, we believe that our pre-commercialization activities fall within the scope of an available exemption. In addition, we do not believe that we will be required to seek any licenses upon completion of our pre-commercialization activities. For more information, please refer to the section in this report entitled “Business — Intellectual Property”. We may be exposed to future litigation by the companies holding these patents or other third parties based on claims that MyVax, or any other immunotherapies that we may develop, or the methods we employ to manufacture them, infringe their intellectual property rights. Our ability to manufacture and commercialize MyVax, or any other immunotherapies that we may develop, may depend on our ability to demonstrate that MyVax, or any other immunotherapies that we may develop, and our manufacturing processes do not infringe third-party patents. If these patents were found to cover MyVax, or any other immunotherapies that we may develop, or our manufacturing process, we could be required to pay damages and could be unable to commercialize MyVax, or any other immunotherapies that we may develop, unless we obtained a license. A license may not be available to us on acceptable terms in the future, if at all.

     There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and biopharmaceutical industries generally. If a third party claims that we infringe on their technology, we could face a number of issues, including:

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infringement and other intellectual property claims which, with or without merit, can be expensive and time-consuming to litigate and can divert management’s attention from our core business;

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substantial damages for past infringement which we may have to pay if a court decides that our product infringes on a competitor’s patent;

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a court prohibiting us from selling or licensing our product unless the patent holder licenses the patent to us, which it is not required to do;

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if a license is available from a patent holder, we may have to pay substantial royalties or grant cross licenses to our patents; and

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redesigning our process so it does not infringe which may not be possible or could require substantial funds and time.

Because it is difficult and costly to protect our proprietary rights, we may not be able to ensure their protection.

     Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of MyVax, or any other immunotherapies that we may develop, and the method we use to manufacture them, as well as successfully defending these patents against third-party challenges. We will only be able to protect our technologies from unauthorized use by third parties to the extent that valid and enforceable patents or trade secrets cover them.

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     As of December 31, 2003, we held two United States patents covering our core gene amplification technology, including composition of matter claims directed to cell lines and claims directed to methods of making proteins derived from patients’ tumors. These patents expire in 2016. Corresponding patents, although more constrained in scope due to rules not applicable in the United States, have been issued in South Africa, Canada and Australia, all of which expire in 2017. We have also filed additional United States and corresponding foreign patent applications relating to our Hi-GET gene amplification technology. We expect to continue to file additional patent applications.

     The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date in the United States. The biotechnology patent situation outside the United States is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents.

     The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:

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we might not have been the first to make the inventions covered by each of our pending patent applications and issued patents;

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we might not have been the first to file patent applications for these inventions;

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others may independently develop similar or alternative technologies or duplicate any of our technologies;

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it is possible that none of our pending patent applications will result in issued patents;

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our issued patents may not provide a basis for commercially-viable active immunotherapies, or may not provide us with any competitive advantages, or may be challenged by third parties;

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we may not develop additional proprietary technologies that are patentable; or

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the patents of others may have an adverse effect on our business.

     We also rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. While we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third party illegally obtained and is using our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.

We are not able to prevent others, including potential competitors, from using the patient-specific idiotype protein-KLH conjugate, comprising a single idiotype protein, that we use in our lead product candidate, MyVax, for the treatment of indolent B-cell NHL.

     The patient-specific idiotype-KLH conjugate, comprising a single idiotype protein, and its use for the treatment of indolent B-cell NHL is in the public domain and therefore cannot be patented. Consequently, we are only able to receive patent protection for our amplified cell lines and the process we use to manufacture the tumor-derived idiotype protein used in MyVax. As a result, we cannot prevent other companies using different manufacturing processes from developing active immunotherapies that directly compete with MyVax.

Opposition proceedings to assert our rights to register the GENITOPE trademark may be time consuming and costly and the outcome is uncertain.

     In June 2002, Pharmacia & UpJohn AB filed an opposition to the registration of our “GENITOPE” trademark alleging that a likelihood of confusion exists between our Genitope trademark and Pharmacia’s “GENOTROPIN” trademark. Pharmacia’s GENOTROPIN trademark has been registered for use with pharmaceutical preparations, namely human growth hormones. In our trademark application, we are seeking to register the GENITOPE trademark for use with biopharmaceutical preparations for the treatment of cancer. Opposition proceedings can be time consuming and expensive and the outcome uncertain. We may be required to expend significant resources to assert

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our rights to register the GENITOPE trademark. In November 2003, we reached settlement terms with Pharmacia & Upjohn, pending execution of the final settlement agreement by all parties. Under the terms of the settlement agreement, we agreed to use the mark “Genitope” primarily as a house mark and not as a product mark, amend the trademark application for “Genitope” accordingly, avoid use of the mark “Genitope” in conjunction with growth hormone products or injections devices for growth hormone products, avoid the use of the mark with similar trade dress used by the Genotropin mark and not interfere with the Pharmacia Corporation and Pharmacia & Upjohn AB “Genotropin” trademark registration. Pharmacia Corporation and Pharmacia & Upjohn AB agreed to withdraw the trademark opposition filed against the “Genitope” mark and agreed to not interfere with or object to the use or registration by us of our “Genitope” house marks, Genitope Corporation’s trade names or Genitope Corporation’s “genitope.com” domain name. Until final signatures are obtained, we cannot guarantee that the settlement will be concluded on these or any terms. If we are unable to reach an acceptable settlement with Pharmacia or prevail in the opposition proceeding, we may be required to abandon our application and to adopt a new trademark

We are subject to extensive regulation, which can be costly, time consuming and subject us to unanticipated delays or prevent us from obtaining the required approvals to commercialize MyVax, or any other immunotherapies that we may develop.

     MyVax and any other immunotherapies that we may develop, clinical trials and manufacturing activities are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries. The process of obtaining these approvals is expensive, often takes many years and can vary substantially based upon the type, complexity and novelty of the products involved. Approval policies or regulations may change. In addition, patient-specific active immunotherapies are complex, and regulatory agencies lack experience with them, which may lengthen the regulatory review process, increase our development costs and delay or prevent commercialization of our lead product candidate, MyVax, or any other immunotherapies that we may develop. The FDA has not approved for marketing any cancer immunotherapeutic drug based on a patient-specific active idiotype immunotherapy. Consequently, there is no precedent for the successful commercialization of a patient-specific active idiotype immunotherapeutic drug. In addition, we have not previously filed the marketing applications necessary to gain regulatory approvals. This lack of experience may impede our ability to obtain timely FDA approval, if at all. We will not be able to commercialize MyVax, or any other immunotherapies that we may develop, until we obtain FDA approval in the United States or approval by comparable authorities in other countries. We do not expect to receive regulatory approval for the commercial sale of MyVax until 2006, at the earliest. Any delay in obtaining, or inability to obtain, FDA approval would prevent us from commercializing MyVax, or any other immunotherapies that we may develop.

Even if MyVax, or any other immunotherapies that we may develop, receives regulatory approval, we may still face development and regulatory difficulties relating to MyVax, or any other immunotherapies that we may develop, in the future.

     If we receive regulatory approval to sell MyVax, or any other immunotherapies that we may develop, the FDA and foreign regulatory authorities may, nevertheless, impose significant restrictions on the indicated uses or marketing of MyVax, or any other immunotherapies that we may develop, or impose ongoing requirements for post-approval studies. In addition, regulatory agencies subject a marketed product, its manufacturer and the manufacturer’s facilities to continual review and periodic inspections. If we discover previously unknown problems with a product or our manufacturing and laboratory facility, a regulatory agency may impose restrictions on that product or on us, including requiring us to withdraw the product from the market. We will be subject to ongoing FDA requirements for submission of safety and other post-market information. If we fail to comply with applicable regulatory requirements, a regulatory agency may:

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issue warning letters;

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impose civil or criminal penalties;

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suspend our regulatory approval;

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suspend any of our ongoing clinical trials;

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refuse to approve pending applications or supplements to approved applications filed by us;

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impose restrictions on our operations, including closing our facility; or

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seize or detain products or require a product recall.

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Obtaining regulatory approval of our manufacturing facility or disruptions in our manufacturing process may delay or disrupt our commercialization efforts.

     Before we can begin to commercially manufacture MyVax, we must obtain regulatory approval from the FDA of our manufacturing facility and process. In addition, we must pass a pre-approval inspection of our manufacturing facility by the FDA before MyVax can obtain marketing approval. In order to obtain approval, we will need to ensure that all of our processes, methods and equipment are compliant with the current Good Manufacturing Practices, or cGMP, and perform extensive audits of vendors, contract laboratories and suppliers. The cGMP requirements govern quality control of the manufacturing process and documentation policies and procedures. We have only undertaken initial steps towards achieving compliance with these regulatory requirements. In complying with cGMP, we will be obligated to expend time, money and effort in production, record keeping and quality control to assure that the product meets applicable specifications and other requirements. If we fail to comply with these requirements, we would be subject to possible regulatory action and may be limited in the jurisdictions in which we are permitted to sell MyVax, or any other immunotherapies that we may develop.

     We are currently manufacturing the necessary quantities of MyVax for our clinical trials at our existing facility in Redwood City, California. Our manufacturing facility is currently subject to licensing requirements of the California Department of Health Services, and we anticipate applying for a license in the first quarter of 2004. Our facility is subject to inspection by the FDA as well as by the California Department of Health Services at any time. Failure to obtain and maintain a license from the California Department of Health Services or to meet the inspection criteria of the FDA and the California Department of Health Services would disrupt our manufacturing processes and would harm our business. If an inspection by the FDA, California Department of Health Services or foreign regulatory authorities indicates that there are deficiencies, we could be required to take remedial actions, or our facility may be closed.

     In order to commercialize MyVax, or any other immunotherapies that we may develop, we will need to construct and qualify a commercial scale manufacturing facility. Preparing a facility for commercial manufacturing may involve unanticipated delays and the costs of complying with FDA regulations may be higher than we anticipated. In addition, any material changes we make to the manufacturing process may require approval by the FDA and state or foreign regulatory authorities. Obtaining these approvals is a lengthy, involved process, and we may experience delays. Such delays could increase costs and adversely affect our business.

We have no experience manufacturing MyVax, or any other immunotherapies, for the number of patients and at a cost that would enable widespread commercial use.

     To date, we have only manufactured MyVax in quantities necessary to support our ongoing pivotal Phase 3 clinical trial and Phase 2 clinical trials for MyVax. We have no experience in manufacturing MyVax, or any other immunotherapies, for the number of patients and at a cost that would enable commercial use. In addition, since no other company has manufactured an immunotherapeutic product for commercial sale, there are no precedents from which we could learn. To commercialize MyVax, we will need to construct and qualify a commercial scale manufacturing facility that meets cGMP standards. In doing so, we may encounter problems with, among other things, controlling costs and quality control and assurance.

     If we cannot manufacture a sufficient supply of MyVax on acceptable terms, the commercialization of MyVax will be delayed or prevented.

We may experience difficulties in manufacturing MyVax, or any other immunotherapies that we may develop, which could prevent us from completing our ongoing clinical trials and delay the commercialization of MyVax, or any other immunotherapies that we may develop.

     Manufacturing MyVax is complex and requires coordination internally among our employees as well as externally with physicians, hospitals and third-party suppliers and carriers. This process involves several risks that may lead to failures or delays in manufacturing MyVax, including:

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difficulties in obtaining adequate tumor samples from physicians;

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difficulties in the timely shipping of tumor samples to us or in the shipping of MyVax to the treating physicians due to errors by third-party carriers, transportation restrictions or other reasons;

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destruction of, or damage to, tumor samples or MyVax during the shipping process due to improper handling by third-party carriers, hospitals, physicians or us;

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•

destruction of, or damage to, tumor samples or MyVax during storage at our facility; and

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difficulties in ensuring the quality and consistency of materials provided by our suppliers.

     If we experience any difficulties in manufacturing MyVax, or any other immunotherapies that we may develop, our ongoing clinical trials may be delayed and commercialization of MyVax, or any other immunotherapies that we may develop, may be delayed.

We rely on the availability and condition of our sole manufacturing facility in Redwood City, California. If we are not able to renew the subleases or if the facility is damaged or destroyed, then our ability to manufacture products will be significantly affected and we will be delayed or prevented from completing our clinical trials and commercializing MyVax, or any other immunotherapies that we may develop.

     We currently rely on the availability and condition of our sole manufacturing facility, located in Redwood City, California, to manufacture MyVax. Our facility is located in a seismic zone, and there is the possibility of an earthquake which, depending on its magnitude, could be disruptive to our operations. Our subleases for this facility expire in May 2005 and November 2006, and because we have no options to extend the terms of these subleases, we may not be able to negotiate new subleases for this facility. In addition, if the facility or the equipment in the facility is significantly damaged or destroyed for any reason, we will not be able to quickly or inexpensively replace our manufacturing capacity. The inability to renew the subleases or the damage or destruction of the facility would significantly affect our ability to manufacture MyVax, or any other immunotherapies that we may develop, and would delay or prevent us from completing our clinical trials and commercializing MyVax, or any other immunotherapies that we may develop.

We currently depend on single source suppliers for critical raw materials for manufacturing, as well as other components required for the administration of MyVax. The loss of these suppliers could delay our clinical trials or prevent or delay commercialization of MyVax.

     We currently depend on single source suppliers for critical raw materials used in MyVax and other components used in the manufacturing process and required for the administration of MyVax. In particular, manufacturing of MyVax requires keyhole limpet hemocyanin, or KLH, a foreign carrier protein. We purchase KLH from biosyn Arzneimittel GmbH, a single source supplier. We have entered into a supply agreement with the supplier, dated December 9, 1998, pursuant to which biosyn has agreed to supply us with KLH. The supply agreement expires on December 9, 2005. Either party may terminate the supply agreement earlier upon a breach that is not cured within 60 days or other events relating to insolvency or bankruptcy. Biosyn is not contractually obligated to supply us with the amounts of KLH currently being supplied and necessary for our current clinical trial purposes or for commercialization. There may be no other supplier of KLH of suitable quality for our purposes.

     In addition, we currently purchase specialized cell culture containers, which are critical components of our manufacturing process, from Medtronic, Inc. a single source supplier. We do not have a long-term contract with Medtronic and rely on purchase orders to obtain the necessary cell culture containers. To date, Medtronic has met our requirements for our clinical trials. There are, in general, few alternative sources of supply for this product.

     Administration of MyVax requires an adjuvant to enhance the immune response. We use Leukine sargramostim, a commercially available recombinant human granulocyte-macrophage colony stimulating factor known as GM-CSF, as an adjuvant for MyVax. An adjuvant is a substance that is administered with an antigen to enhance or increase the immune response to that antigen. We currently rely on purchase orders to purchase GM-CSF from Berlex Laboratories, Inc. We do not have a long-term contract with Berlex. GM-CSF is not commercially available from other sources in the United States or Canada.

     Establishing additional or replacement suppliers for these materials or components may take a substantial amount of time. In addition, we may have difficulty obtaining similar components from other suppliers that are acceptable to the FDA. If we have to switch to a replacement supplier, we may face additional regulatory delays and the manufacture and delivery of MyVax, or any other immunotherapies that we may develop, could be interrupted for an extended period of time, which may delay completion of our clinical trials or commercialization of MyVax, or any other immunotherapies that we may develop. If we are unable to obtain adequate amounts of these components, our clinical trials will be delayed. In addition, we will be required to obtain regulatory clearance from the FDA to use different components that may not be as safe or as effective. As a result, regulatory approval of MyVax may not be received at all.

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The commercial success of MyVax, or any other immunotherapies that we may develop, will depend upon the degree of market acceptance of these products among physicians, patients, health care payors and the medical community.

     MyVax, or any other immunotherapies that we may develop, may not gain market acceptance among physicians, patients, health care payors and the medical community. The degree of market acceptance of any approved immunotherapies will depend on a number of factors, including:

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market acceptance of patient-specific active immunotherapies;

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the prevalence and severity of any side effects;

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potential advantages over alternative treatments;

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ability to produce an active immunotherapy at a competitive price;

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relative convenience and ease of administration;

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the strength of marketing and distribution support; and

•

sufficient third-party coverage or reimbursement.

     If MyVax, or any other immunotherapies that we may develop, are approved but do not achieve an adequate level of acceptance by physicians, healthcare payors and patients, we may not generate product revenue and we may not become profitable.

If we are unable to obtain acceptable prices or adequate reimbursement from third-party payors for MyVax, or any other immunotherapies that we may develop, our revenues and prospects for profitability will suffer.

     Our ability to commercialize MyVax, or any other immunotherapies that we may develop, is highly dependent on the extent to which coverage and reimbursement for MyVax, or any other immunotherapies that we may develop, will be available from:

•

governmental payors, such as Medicare and Medicaid;

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private health insurers, including managed care organizations; and

•

other third-party payors.

     Many patients will not be capable of paying for MyVax, or any other immunotherapies that we may develop, themselves and will rely on third-party payors to pay for their medical needs. A primary current trend in the United States health care industry is toward cost containment. Large private payors, managed care organizations, group purchasing organizations and similar organizations are exerting increasing influence on decisions regarding the use of, and reimbursement levels for, particular treatments. Such third-party payors, including Medicare, are challenging the prices charged for medical products and services, and many third-party payors limit reimbursement for newly approved health care products. In particular, third-party payors may limit the indications for which they will reimburse patients who use MyVax, or any other immunotherapies that we may develop. Cost-control initiatives could decrease the price we might establish for MyVax, or any other immunotherapies that we may develop, which would result in lower product revenues. If the prices for MyVax, or any other immunotherapies that we may develop, decrease or if governmental and other third-party payors do not provide adequate coverage and reimbursement levels for MyVax, or any other immunotherapies that we may develop, our revenue and prospects for profitability will suffer.

If we are unable to establish sales and marketing capabilities or enter into agreements with companies to sell and market MyVax, we may be unable to generate product revenue.

     We do not have a sales organization and have no experience as a company in the sales, marketing and distribution of pharmaceutical products. In order to commercialize any products, we must develop our sales, marketing and distribution capabilities or make arrangements with a third party to perform these services. If MyVax is approved for commercial sale, we currently plan to establish our own sales force to market it in the United States. Developing a sales force is expensive and time consuming and could delay any product launch. We cannot be certain that we would be able to develop this capacity. If we are unable to establish our sales and marketing

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capability, we will need to contract with third parties to market and sell MyVax in the United States. We will also need to develop a plan to market and sell MyVax outside the United States. To the extent that we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenues are likely to be lower than if we directly marketed and sold MyVax, or any other immunotherapies that we may develop. If we are unable to establish adequate sales, marketing and distribution capabilities, independently or with others, we may not be able to generate product revenue and may not become profitable.

If product liability lawsuits are successfully brought against us, we will incur substantial liabilities and may be required to limit commercialization of MyVax, or any other immunotherapies that we may develop.

     We face an inherent risk of product liability exposure related to the testing of MyVax, or any other immunotherapies that we may develop, in human clinical trials and will face an even greater risk if we sell MyVax, or any other immunotherapies that we may develop, commercially. Currently, we are not aware of any historical or anticipated product liability claims. In the future, an individual may bring a liability claim against us if MyVax, or any other immunotherapies that we may develop, causes, or merely appears to have caused, an injury. If we cannot successfully defend ourselves against the product liability claim, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

•

decreased demand for MyVax, or any other immunotherapies that we may develop;

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injury to our reputation;

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withdrawal of clinical trial participants;

•

costs of related litigation;

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substantial monetary awards to patients;

•

loss of revenues; and

•

the inability to commercialize MyVax, or any other immunotherapies that we may develop.

     We have product liability insurance that covers our clinical trials up to a $3.0 million annual aggregate limit. We intend to expand our insurance coverage to include the sale of commercial products if marketing approval is obtained for MyVax, or any other immunotherapies that we may develop. We believe that our current insurance coverage is adequate. However, insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost and we may not be able to obtain insurance coverage that will be adequate to satisfy any liability that may arise.

We may incur significant costs complying with environmental laws and regulations.

     We use hazardous materials that could be dangerous to human health, safety or the environment. As appropriate, we store these materials and various wastes resulting from their use at our facility pending ultimate use and disposal. We currently contract with a third party to dispose of these materials and various wastes resulting from the use of such materials at our facility. We are subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these materials and wastes resulting from the use of such materials. While our costs for compliance, including costs related to the disposal of hazardous materials, to date have been nominal, we may incur significant costs complying with both existing and future environmental laws and regulations. We are subject to regulation by the Occupational Safety and Health Administration, or OSHA, the California and federal environmental protection agencies and to regulation under the Toxic Substances Control Act. OSHA or the California or federal EPA may adopt regulations that may affect our research and development programs. We are unable to predict whether any agency will adopt any regulations that could have a material adverse effect on our operations.

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

     Our research and development and manufacturing activities involve the use of biological and hazardous materials. While we have not been found in violation of any environmental laws or been the subject of any investigations for violations of environmental laws, we cannot entirely eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of these materials. In the event of contamination or injury, we could be held liable for any resulting damages. We have general liability insurance of up to $3.0 million per

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occurrence. We believe our current insurance coverage is adequate. However, this insurance may not cover a claim that arises if it is related to our biological or hazardous materials. However, if we were to be held liable for an accident involving our biological or hazardous materials, this liability could exceed our insurance coverage and our other financial resources.

If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop MyVax, or any other immunotherapies that we may develop, conduct our clinical trials and commercialize MyVax, or any other immunotherapies that we may develop.

     Our success depends on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel and on our ability to develop and maintain important relationships with leading academic institutions, clinicians and scientists. We are highly dependent upon our senior management and scientific staff, particularly Dan W. Denney Jr., our founder, Chairman, Chief Executive Officer and acting Chief Financial Officer. The loss of services of Dr. Denney or one or more of our other members of senior management could delay or prevent the successful completion of our pivotal Phase 3 clinical trial or the commercialization of MyVax. Since February 2004, Dr. Denney has served as our acting Chief Financial Officer. We are actively recruiting a full-time Chief Financial Officer. We cannot estimate how long it will take to hire a qualified candidate. Currently, we do not have employment agreements with any members of senior management. The 1,258,500 shares of our common stock owned by Dr. Denney are not subject to any vesting. We do not carry “key person” insurance covering members of senior management other than Dr. Denney. The insurance covering Dr. Denney is in the amount of $10.0 million.

     The competition for qualified personnel in the biotechnology field is intense. In particular, our ability to deliver patient therapies depends on our ability to attract and retain quality assurance and control personnel. We will need to hire additional personnel as we continue to expand our manufacturing, research and development activities. We are not aware of any key personnel planning to retire or leave us in the near future.

If our competitors are better able to develop and market products that are more effective than MyVax, or any other immunotherapies that we may develop, our commercial opportunity will be reduced or eliminated.

     We face competition from established pharmaceutical and biotechnology companies, as well as from academic institutions, government agencies and private and public research institutions. Various products are currently marketed for the treatment of NHL, and a number of companies are developing new treatments. Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Our commercial opportunity will be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer side effects or are less expensive than MyVax, or any other immunotherapies that we may develop. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies and technology licenses complementary to our programs or advantageous to our business.

     We expect that our ability to compete effectively will depend upon our ability to:

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successfully and rapidly complete clinical trials and obtain all requisite regulatory approvals in a cost-effective manner;

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maintain a proprietary position for our manufacturing process and other technology;

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attract and retain key personnel; and

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build an adequate sales and marketing infrastructure for MyVax.

     Several companies, such as Corixa Corporation, Biogen Idec Inc. and Immunomedics, Inc. are involved in the development of passive immunotherapies for the treatment of NHL. Various products are currently marketed for treatment of NHL. Rituxan, a passive immunotherapy co-marketed by Genentech, Inc. and Biogen Idec Inc., is approved for the treatment of relapsed or refractory, low grade B-cell NHL. In addition, IDEC has received FDA approval for marketing its passive radioimmunotherapy product, Zevalin, and GlaxoSmithKline Plc and Corixa Corporation recently received FDA approval for marketing their version of passive radioimmunotherapy product, Bexxar, for the treatment of relapsed or refractory low grade, follicular, or transformed B-cell NHL. For more information, please refer to the section in this report entitled “Business — MyVax Personalized Immunotherapy”.

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     In addition, there are several companies focusing on the development of active immunotherapies for the treatment of NHL, including Antigenics, Inc., Favrille, Inc. and Large Scale Biology Corporation. While these companies’ product candidates are in various stages of development, none are in Phase 3 clinical trials for the treatment of NHL. In addition, we are aware that the National Cancer Institute, or NCI, in collaboration with Biovest International, Inc., is currently conducting a Phase 3 clinical trial of active immunotherapy in patients with follicular NHL. If any are successfully developed and approved, they could compete directly with MyVax, if it is approved. In addition, researchers are continually learning more about NHL and other forms of cancer, and new discoveries may lead to new technologies for treatment. As a result, MyVax, or any other immunotherapies that we may develop, may be rendered obsolete and noncompetitive at any time.

We will need to increase the size of our organization, and we may experience difficulties in managing growth.

     In order to continue our clinical trials and commercialize MyVax, or any other immunotherapies that we may develop, we will need to expand our employee base for managerial, operational, financial and other resources. We anticipate that we will need between 350 and 400 employees by the time MyVax is initially commercialized. We do not expect to be able to commercially launch MyVax until 2006, at the earliest. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees. Our future financial performance and our ability to commercialize MyVax, or any other immunotherapies that we may develop, and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to:

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manage our research and development efforts effectively;

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manage our clinical trials effectively;

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integrate additional management, administrative, manufacturing and sales and marketing personnel;

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develop our administrative, accounting and management information systems and controls; and

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hire and train additional qualified personnel.

     We may not be able to accomplish these tasks, and our failure to accomplish any of them could harm our financial results.

Other Risks

Our stock price may be volatile, and your investment in our stock could decline in value.

     The market prices for securities of biotechnology companies in general have been highly volatile and may continue to be highly volatile in the future. The following factors, in addition to other risk factors described in this section, may have a significant impact on the market price of our common stock:

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announcements of technological innovations or new products by us or our competitors;

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announcement of FDA approval or non-approval of MyVax, or any other immunotherapies that we may develop, or delays in the FDA review process;

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actions taken by regulatory agencies with respect to MyVax, or any other immunotherapies that we may develop, clinical trials, manufacturing process or sales and marketing activities;

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regulatory developments in the United States and foreign countries;

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the success of our research efforts and clinical trials;

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any intellectual property infringement lawsuit involving us;

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announcements concerning our competitors, or the biotechnology or biopharmaceutical industries in general;

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actual or anticipated fluctuations in our operating results;

•

changes in financial estimates or recommendations by securities analysts;

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•

sales of large blocks of our common stock;

•

sales of our common stock by our executive officers, directors and 5% stockholders;

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changes in accounting principles; and

•

the loss of any of our key scientific or management personnel.

     In particular, you may not be able to resell your shares at or above your purchase price. The stock markets in general, and the markets for biotechnology stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. In the past, class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Any such litigation brought against us could result in substantial costs and a diversion of management’s attention and resources, which would hurt our business, operating results and financial condition.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

     Provisions in our amended and restated certificate of incorporation and our bylaws may delay or prevent an acquisition of us or a change in our management. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors. Because our Board of Directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. These provisions include a classified board of directors and a prohibition on actions by our stockholders by written consent. In addition, our Board of Directors has the right to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our Board of Directors. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us in certain circumstances. Finally, these provisions establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon at stockholder meetings. Although we believe these provisions together provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our Board of Directors, they would apply even if the offer may be considered beneficial by some stockholders.

The ownership interests of our officers, directors and largest stockholders could conflict with the interests of our other stockholders.

     As of December 31, 2003, our officers, directors and holders of 5% or more of our outstanding common stock beneficially owned approximately 33.9% of our common stock (assuming no exercise of outstanding options or warrants). As a result, these stockholders, acting together, are able to significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. The interests of this group of stockholders may not always coincide with our interests or the interests of other stockholders.

Future sales of our common or preferred stock could lower the market price of our common stock.

     Sales of substantial amounts of shares in the public market following our initial public offering could harm the market price of our common stock. As of December 31, 2003, we had 16,819,501 shares of common stock outstanding, assuming no exercise of outstanding options or warrants. Of these shares, all of the 4,179,860 shares sold in our initial public offering are freely tradable under federal and state securities laws. Each of our officers, directors and stockholders have agreed, subject to specified exceptions, that without the prior written consent of WR Hambrecht+Co, they will not, directly or indirectly, sell, offer, contract to sell, transfer the economic risk of ownership in, make any short sale, pledge or otherwise dispose of any shares of our capital stock or any securities convertible into or exchangeable or exercisable for or any other rights to purchase or acquire our capital stock before April 27, 2004. WR Hambrecht+Co, may, in its sole discretion, permit early release of shares subject to the lock-up agreements. All but 1,224,265 of the 12,640,201 shares of our common stock that were not sold in our initial public offering, but which were outstanding as of December 31, 2003, will be eligible for sale in the public market under Rules 144, 144(k) and 701 on April 27, 2004, subject in some cases to volume and other limitations. In addition, of

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the 961,997 shares issuable upon exercise of options to purchase our common stock outstanding as of December 31, 2003, approximately 375,147 shares will be vested and eligible for sale on April 27, 2004. For a full discussion of shares eligible for sale following our initial public offering, see “Shares Eligible for Future Sale” in our Registration Statement on Form S-1, as amended, filed with the SEC on October 28, 2003. In addition, if we propose to register any of our securities under the Securities Act either for our own account or for the accounts of other securityholders after our initial public offering, subject to certain conditions and limitations, the holders of registration rights will be entitled to include their shares of common stock. In addition, holders of registration rights may require us on not more than two occasions at any time beginning approximately six months from the date of the closing of our initial public offering, to file a registration statement under the Securities Act with respect to their shares of common stock. Further, the holders of registration rights may require us to register their shares on Form S-3 when this form becomes available. These rights shall terminate altogether three years after the effective date of our initial public offering, and, with respect to each holder of such rights, on the date when such holder holds less than 1% of our outstanding shares of common stock and is able to sell all of its shares pursuant to Rule 144 under the Securities Act in any 90-day period. These registration rights are subject to certain conditions and limitations, including the right of the underwriters to limit the number of shares included in any such registration under certain circumstances. In the future, we may also issue additional shares to our employees, directors or consultants, in connection with corporate alliances or acquisitions, and issue additional shares in follow-on offerings to raise additional capital. Due to these factors, sales of a substantial number of shares of our common stock in the public market could occur at any time. Such sales could reduce the market price of our common stock.

ITEM 2. PROPERTIES

     We sublease 13,426 square feet of laboratory and production space in Redwood City, California, under lease agreements that terminate in May 2005 and November 2006. In the same facility, we also sublease an additional 18,512 square feet of corporate office space under a lease agreement that terminates in March 2005. We believe that our facilities will be sufficient for the production of active immunotherapies for our planned clinical trials. We plan to build a new manufacturing facility for the commercialization of MyVax and any other immunotherapies that we may develop. We anticipate completion of the construction of a commercial manufacturing facility in 2005. Unless we are able to renew our existing leases, we may need to find temporary facilities until our new facility can be completed.

ITEM 3. LEGAL PROCEEDINGS

     None.

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

No matters were submitted to a vote of our stockholders, through solicitation of proxies or otherwise, during the fourth quarter of fiscal year 2003.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock has traded on the Nasdaq National Market under the symbol “GTOP” since October 30, 2003. The following table sets forth, for the period indicated, the high and low closing sales prices for our common stock as reported by the Nasdaq National Market:

Holders

As of February 29, 2004, there were approximately 443 stockholders of record of Genitope common stock.

Dividends

Since inception, we have not paid dividends on our common stock. We currently intend to retain all future earnings, if any, for use in our business and currently do not plan to pay any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors.

Securities Authorized for Issuance Under Equity Compensation Plans

Information required by this item will be contained in the Proxy Statement under the caption “Equity Compensation Plan Information” and is hereby incorporated by reference thereto.

Recent Sales of Unregistered Securities

The following list sets forth information regarding all unregistered securities sold by us in 2003 and gives effect to a 1 for 3 reverse stock split which occurred on October 24, 2003:

1. During the first two fiscal quarters of 2003, we issued and sold 2,082 shares of our common stock that were not registered under the Securities Act of 1933, as amended (the “Securities Act”), to our employees and consultants for cash consideration with an aggregate exercise price of $2,500. During the same period, we granted options to purchase 52,994 shares of common stock at an exercise price of $1.80 per share.

2. During the fourth fiscal quarter of 2003, we issued and sold 12,407 shares of our common stock that were not registered under the Securities Act, to our employees and consultants for cash consideration with an aggregate exercise price of $1.71. During the same period, we granted options to purchase 141,766 shares of common stock at an exercise price of $11.62 per share.

3. In April and May 2003, we issued an aggregate of 2,830,901 shares of our Series E preferred stock. 520,901 shares were issued and sold at $4.50 per share to accredited investors for an aggregate offering price of $2,344,055, 133,327 of which were sold to two of our current directors (and related entities). 2,310,000 shares of Series E preferred stock were issued to pre-existing Series E stockholders in accordance with the Series E stock purchase agreement amended in March 2003, to allow for a purchase price adjustment in the event that additional shares of Series E preferred were sold for less than $9.00 per share.

4. In April 2003, we issued and sold convertible promissory notes in aggregate principal amount of $4,280,009 and warrants to purchase 285,327 shares of Series E preferred stock with an exercise price of $4.50 per share and an aggregate value of $1,624,517 to 17 accredited investors.

5. In April 2003, we issued and sold an aggregate of 6,166 shares of our common stock at $1.80 per share to two accredited investors for an aggregate offering price of $11,100.

6. In August 2003, we issued a warrant to purchase 533,333 shares of Series F preferred stock with an exercise price of $4.50 per share and an aggregate value of $1,933,000.00 to one accredited investor.

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7. In August 2003, we issued 977,966 shares of Series E preferred stock upon conversion of the convertible promissory notes referred to in paragraph (4) above.

     We claimed exemption from registration under the Securities Act for the sales and issuances of securities in the transactions described in paragraphs (1) and (2) above by virtue of Rule 701 promulgated under the Securities Act, in that they were offered and sold either pursuant to written compensatory plans or pursuant to a written contract relating to compensation, as provided by Rule 701.

     We claimed exemption from registration under the Securities Act for the sales and issuances of securities in the transactions described in paragraphs (3) through (7) above by virtue of Rule 506 of Regulation D. Such sales and issuances did not involve any public offering, were made without general solicitation or advertising and each purchaser was a sophisticated investor with access to all relevant information necessary to evaluate the investment and represented to us that the shares were being acquired for investment.

Use of Proceeds

     The Securities and Exchange Commission declared our first registration statement, filed on Form S-1 (SEC File No. 333-107719) under the Securities Act in connection with the initial public offering of our common stock, effective on October 29, 2003, covering an aggregate of 4,179,860 shares of common stock, including shares that were issued upon the partial exercise by the underwriters of their over-allotment option. The aggregate gross proceeds from the shares of common stock sold were approximately $37,619,000. In connection with the offering, we paid the underwriters a commission of approximately $2,633,000 and incurred offering expenses of $1,251,000. After deducting the underwriters’ commission and the estimated offering expenses, we received net proceeds of approximately $33,735,000 from the offering. Approximately $1.0 million of the proceeds from the initial public offering was used in November 2003 to repay a portion of the outstanding borrowings under our line of credit facilities. On November 14, 2003, we terminated both credit facilities. Approximately $3.9 million of the proceeds from the initial public offering were used in the fourth quarter of 2003, of which approximately $2.9 million was used to fund operations and approximately $1.0 million was used to repay a portion of the outstanding borrowings under our two line of credit facilities.

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ITEM 6. SELECTED FINANCIAL DATA

     The selected financial data set forth below are derived from our financial statements. The statement of operations data for the years ended December 31, 2001, 2002 and 2003, and the balance sheet data as of December 31, 2002 and 2003 are derived from our audited financial statements included elsewhere in this Form 10-K. The statement of operations data for the years ended December 31, 1999 and 2000, and the balance sheet data as of December 31, 1999, 2000 and 2001 are derived from our audited financial statements not included in this Form 10-K. The historical results are not necessarily indicative of results to be expected for any future period. The data presented below has been derived from financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America and should be read with our financial statements, including the accompanying Notes to the Financial Statements, and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion of the financial condition and results of operations should be read in conjunction with our financial statements and notes to those statements included elsewhere in this Form 10-K.

Overview

     We are a biotechnology company focused on the research and development of novel immunotherapies for the treatment of cancer. Immunotherapies are treatments that utilize the immune system to combat diseases. Our lead product candidate, MyVax personalized immunotherapy, is a patient-specific active immunotherapy that is based on the unique genetic makeup of a patient’s tumor and is designed to activate a patient’s immune system to identify and attack cancer cells. MyVax is currently in a pivotal Phase 3 clinical trial and additional Phase 2 clinical trials for the treatment of B-cell NHL.

     To date, we have not generated any revenues, and except for our recently completed initial public offering, we have financed our operations and internal growth almost exclusively through private placements of common and preferred stock. We are a development stage enterprise and have incurred significant losses since our inception in 1996 as we have devoted substantially all of our efforts to research and development activities, including clinical trials. As of December 31, 2003, we had an accumulated deficit of $87.8 million. Our accumulated deficit resulted principally from our research and development activities associated with MyVax, including our pivotal Phase 3 clinical trial and additional Phase 2 clinical trials, and several non-cash charges associated with our preferred stock financings. Our accumulated deficit includes a non-cash dividend of $18.4 million related to our preferred stock financings in April and May of 2003, a non-cash charge of $3.5 million associated with the extinguishment of convertible notes and cancellation of the related warrants issued to preferred stockholders in April 2003 and $771,000 of non-cash interest expense relating to the amortization of the discount on the convertible notes, and non-cash interest expense of $1.9 million associated with the amortization of warrants issued to the guarantor of our lines of credit. We have repaid all outstanding borrowings under these facilities, and in November 2003, we terminated both facilities. As of December 31, 2003, we had cash and cash equivalents of $29.8 million.

     We anticipate working on a number of long-term development projects which will involve experimental and unproven technology. The projects may require many years and substantial expenditures to complete and may ultimately be unsuccessful. We will need operating funds to continue our research and development activities, clinical trials, pursue regulatory approvals and build production, sales and marketing capabilities, as necessary.

     Since 1996, we have been successful in completing several rounds of private equity financing. In 2002, the sale of Series E convertible preferred stock generated $20.7 million of cash proceeds. In April and May of 2003, we raised $6.5 million through the sale of additional Series E convertible preferred stock, convertible notes (which converted into Series E convertible preferred stock during the quarter ended September 30, 2003) and warrants.

     On October 29, 2003, we sold 4,179,860 shares of common stock in an initial public offering for aggregate gross proceeds of $37.6 million. After deducting the underwriters’ commission and offering expenses, we received net proceeds of $33.7 million.

     We anticipate that in 2004 our average quarterly cash used for operating and investing activities will be approximately $6.0 million. We believe that the net proceeds from the recently completed initial public offering, together with the interest thereon, will provide us with sufficient financial resources to reach the first interim analysis of our pivotal Phase 3 trial, which we anticipate will occur at the end of the first quarter of 2005. We estimate that we will need to raise additional funds in an anticipated amount of approximately $100 million in order to commercialize MyVax, including the completion of the construction and qualification of a commercial scale manufacturing facility, if MyVax receives regulatory approval for the treatment of follicular B-cell NHL.

     Research and development expenses represented approximately 81% of our total operating expenses for the year ended December 31, 2003 and 79% of our total operating expenses for the year ended December 31, 2002. Research and development expenses include the personnel costs related to our development activities and clinical trial preparations, preclinical and clinical trial expenses, including costs related to registration, treatment and monitoring expenses, costs related to regulatory matters and the costs of developing our manufacturing process.

     In the fourth quarter of 2000, we commenced a pivotal Phase 3 clinical trial for MyVax for the treatment of follicular B-cell NHL. We expect that we will close patient registration, the process during which a patient is screened and a biopsy is taken to determine whether the patient is eligible to participate in the clinical trial, at the end of the first quarter of 2004. The two planned interim analyses of the clinical trial are expected to be conducted

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approximately 12 and 24 months after the last patient is registered, with the detailed follow-up period of the clinical trial scheduled to conclude approximately 42 months after the last patient is registered. The total research and development costs associated with and incurred for the development of MyVax for the treatment of B-cell NHL were $19.7 million for the year ended December 31, 2003, $15.9 million for the year ended December 31, 2002 and $8.8 million for the year ended December 31, 2001. From inception through December 31, 2003, the total research and development costs associated with and incurred for the development of MyVax for the treatment of B-cell NHL were approximately $52.5 million.

     Drug development in the United States is a process that includes several steps defined by the FDA. The FDA approval process for a new biologic or drug involves completion of preclinical studies and the submission of the results of these studies to the FDA, together with proposed clinical protocols, manufacturing information, analytical data and other information in an Investigational New Drug application, or IND, which must become effective before human clinical trials may begin. Clinical development typically involves three phases of study: Phase 1, 2 and 3. The most significant costs associated with clinical development are the Phase 3 clinical trials as they tend to be the longest and largest studies conducted during the drug development process. After completion of clinical trials, a New Drug application, or NDA, or a Biologics License application, or BLA, may be filed with the FDA. In responding to an NDA or a BLA, the FDA may grant marketing approval, request additional information or deny the application if it determines that the application does not provide an adequate basis for approval.

     The successful development of our drug candidates is highly uncertain. We cannot estimate with certainty or know the exact nature, timing and estimated costs of the efforts necessary to complete the development of MyVax or the date of completion of these development efforts. We do not anticipate that we will generate any revenues until 2006, at the earliest, and we cannot reasonably estimate when we may have material net cash inflows from sales of MyVax, if ever. We cannot estimate with certainty any of the foregoing due to the numerous risks and uncertainties associated with developing MyVax, including:

•		the uncertainty of the timing of completion of patient registration in our pivotal Phase 3 clinical trial;
•		the possibility of delays in the collection of clinical trial data and the uncertainty of the timing of the interim analyses of our pivotal Phase 3 clinical trial;
•		the uncertainty of clinical trial results;
•		extensive governmental regulation, both foreign and domestic, for approval of new therapies; and
•		the uncertainty related to the completion of construction and qualification of a commercial scale manufacturing facility.

     If we fail to complete the development of MyVax in a timely manner, it could have a material adverse effect on our operations, financial position and liquidity. In addition, any failure by us to obtain, or any delay in obtaining, regulatory approvals could have a material adverse effect on our results of operations.

     A further discussion of the risks and uncertainties associated with completing our projects on schedule, or at all, and certain consequences of failing to do so are set forth in the risk factors entitled “We will need substantial additional funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our product development programs or commercialization efforts,” “We currently have no source of revenue and may never become profitable” and “If clinical trials of MyVax, or any other immunotherapies that we may develop, do not produce successful clinical trial results, we will be unable to commercialize these products,” as well as other risk factors.

     We expect to continue to incur net losses over the next several years as we continue our clinical development, apply for regulatory approvals, construct and qualify a commercial scale facility for the manufacture of MyVax, develop active immunotherapies for CLL and T-cell NHL and potentially other forms of cancer, establish sales and marketing and distribution capabilities and expand our operations.

Recent Developments

     Our Registration Statement (SEC File No. 333-107719) for our initial public offering became effective on October 29, 2003. Our common stock commenced trading on the Nasdaq National Market on October 30, 2003 under the trading symbol “GTOP”. WR Hambrecht + Co acted as the lead underwriter of the offering. Punk, Ziegel & Company and Brean Murray & Co., Inc. acted as co-managers. 4,179,860 shares of common stock were sold in the offering, including shares that were issued upon the partial exercise by the underwriters of their over-allotment

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option, at $9.00 per share, for aggregate gross proceeds of $37.6 million. In connection with the offering, we paid underwriters’ commission of approximately $2.6 million and incurred offering expenses of $1.3 million. After deducting the underwriters’ commission and the offering expenses, we received net proceeds of approximately $33.7 million from the offering.

     During October and November of 2003, we repaid all outstanding borrowings under our two line of credit facilities. Approximately $1.0 million of the proceeds from the initial public offering was used to repay a portion of the outstanding borrowings. In November 2003, we terminated both facilities.

Results of Operations

Comparison of Years Ended December 31, 2003 and 2002

     Research and Development. Research and development expenses increased 24% to $19.7 million for the year ended December 31, 2003, from $15.9 million for the year ended December 31, 2002. The increase in research and development costs reflected the continued increase in patient registration in our pivotal Phase 3 clinical trial, which resulted in increased staffing costs of $2.4 million, of which $1.3 million was for manufacturing personnel and $1.0 million was for quality personnel. Clinical trial costs increased $1.8 million to meet the requirements of the increase in patient registration in our pivotal Phase 3 clinical trial. Additionally, non-cash stock-based compensation expense associated with option issuances to our research and development staff increased by $457,000. These increases were offset by a decrease in depreciation expense of $759,000 and a reduction in rent expense of $477,000 reflecting the renegotiation of our facility leases to extended terms with lower rates. We expect to devote substantial resources to research and development in future periods as we continue our development of MyVax for the treatment of B-cell NHL.

     Sales and Marketing. Sales and marketing expenses increased 19% to $1.6 million for the year ended December 31, 2003, from $1.3 million for the year ended December 31, 2002. This increase was primarily due to increased product advocacy costs of $133,000, which consisted primarily of professional fees and activities related to industry symposiums, and increased staffing costs of $97,000. Additionally, non-cash stock-based compensation expense increased by $35,000. We expect sales and marketing spending to remain relatively constant in 2004.

     General and Administrative. General and administrative expenses increased 4% to $2.9 million for the year ended December 31, 2003, from $2.8 million for the year ended December 31, 2002. This increase reflected an increase in staffing costs of $318,000 and an increase in non-cash stock-based compensation expense of $44,000. Also, professional fees and corporate insurance costs increased $74,000 to support the organizational growth and responsibilities of being a public company. These increases were partially offset by a decrease in professional fees of $326,000 incurred in 2002 associated with unsuccessful financings. We expect our general and administrative expenses to increase slightly in 2004 as a result of the additional administrative and infrastructure costs associated with being a public company, including costs associated with implementing procedures for compliance with the requirements of the Sarbanes-Oxley Act.

     Other Income (Expense), Net. We incurred $6.3 million of net other expense for the year ended December 31, 2003. Other expense relates to the $3.5 million loss on extinguishment of convertible notes and cancellation of convertible preferred stock warrants, $771,000 of interest expense related to the amortization of the discount on our convertible notes and $121,000 of interest expense related to the stated interest on the convertible notes. Additionally, other expense includes $1.9 million of interest expense related to the amortization of the warrant issued in connection with the lines of credit. No such charges were recorded during the year ended December 31, 2002. These increases were partially offset by a decrease in interest income of $123,000 from the corresponding period in 2002 as a result of a decrease in the average cash and cash equivalents balance and overall interest rates.

     Dividend Related to Issuance of Convertible Preferred Shares and the Beneficial Conversion Feature of Preferred Stock. We recorded a non-cash dividend of $18.4 million related to the issuance of convertible preferred shares and the beneficial conversion feature of preferred stock for the year ended December 31, 2003. No such charge was recorded for the year ended December 31, 2002.

Comparison of Years Ended December 31, 2002 and 2001

     Research and Development. Research and development expenses increased 81% to $15.9 million for the year ended December 31, 2002, from $8.8 million for the year ended December 31, 2001. The increase in research and development expenses reflected the continued increase in patient registration in our pivotal Phase 3 clinical trial, which resulted in increased staffing costs of $3.0 million, of which $1.3 million was for manufacturing personnel, $680,000 was for clinical trial personnel, $500,000 was for quality and technical development personnel and

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$520,000 was for regulatory personnel. Clinical trial costs increased $887,000 to meet the requirements of the increase in patient registration in our pivotal Phase 3 clinical trial. The depreciation expense increase of $724,000 reflected the addition of leasehold improvements associated with our manufacturing capacity that were placed in service at the end of 2001. The rent expense increase of $424,000 reflects the full year impact of leases initiated in 2001. In addition, $408,000 of this increase was due to the increase in non-cash stock based compensation expenses associated with option issuances to our research and development staff.

     Sales and Marketing. Sales and marketing expenses commenced and were $1.3 million for the period ended December 31, 2002. The primary components are product advocacy expenses, which consist primarily of professional fees and activities related to industry symposiums of $677,000, staffing expenses of $400,000 and non-cash stock based compensation expenses of $141,000.

     General and Administrative. General and administrative expenses increased 94% to $2.8 million for the year ended December 31, 2002, from $1.5 million for the year ended December 31, 2001. This increase was due to costs of $550,000 associated with increases in staffing levels, $86,000 in legal fees related to unsuccessful financings and additional costs related to the increase in infrastructure required to support the growth of our clinical trial programs. In addition, $378,000 of this increase was due to non-cash stock-based compensation expenses.

     Other Income (Expense), Net. Interest income decreased 53% to $221,000 for the year ended December 31, 2002, from $474,000 for the year ended December 31, 2001. The decrease was primarily due to lower average cash and cash equivalent balances during the year ended December 31, 2002 as compared to the prior year.

Liquidity and Capital Resources

     We have not generated any revenues, and except for our recently completed initial public offering, we have financed our operations and internal growth almost exclusively through private placements of preferred stock and have incurred significant losses since our inception in 1996. As of December 31, 2003, we had an accumulated deficit of $87.8 million. Our accumulated deficit resulted principally from our research and development activities associated with MyVax, including our pivotal Phase 3 clinical trial and additional Phase 2 clinical trials, and several non-cash charges associated with our preferred stock financings. Included in our accumulated deficit is a non-cash dividend of $18.4 million related to our preferred stock financings in April and May 2003. Also, our accumulated deficit includes a non-cash charge of $3.5 million associated with the extinguishment of convertible notes and cancellation of the related warrants issued to preferred stockholders in April 2003 and $771,000 of non-cash interest expense relating to the amortization of the discount on the convertible notes. Additionally, there was non-cash interest expense of $1.9 million associated with the amortization of the warrant issued to the guarantor of our lines of credit. Through December 31, 2003, we had amortized and expensed non-cash stock-based compensation of $3.7 million.

     At December 31, 2003, we had cash and cash equivalents of $29.8 million, compared to $9.4 million at December 31, 2002.

     Net cash used in operating activities was $20.2 million for the year ended December 31, 2003 and $16.6 million for the year ended December 31, 2002. The use of cash in operations was primarily for our continued research and development activities associated with MyVax for the treatment of B-cell NHL.

     Net cash used in investing activities was $307,000 for the year ended December 31, 2003 and $946,000 for the year ended December 31, 2002. Capital expenditures consisted of purchases of equipment and leasehold improvements to our facilities.

     Net cash provided by financing activities was $40.9 million for the year ended December 31, 2003 and $20.9 million for the year ended December 31, 2002. The net cash provided by financing activities in 2003 was primarily attributable to the sale of common stock in our initial public offering for net proceeds of $33.7 million, the private sale of $2.2 million of preferred stock and the sale of $4.3 million of convertible promissory notes and warrants. The net cash provided by financing activities in 2002 was primarily attributable to the sale of $20.7 million of preferred stock. All outstanding shares of preferred stock were converted into shares of common stock upon the closing of our initial public offering.

     In August 2003, $8.0 million was made available to us through two line of credit facilities with Bank One, N.A. The first line of credit was for $3.0 million, bore interest at prime and had a maturity date of December 6, 2003. The second line of credit was for $5.0 million, bore interest at prime plus one-half percent and had a maturity date of December 6, 2003. In September 2003, we borrowed $8.0 million under these lines of credit. During October and November 2003, we repaid all outstanding borrowings under these facilities, and on November 14, 2003, we

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terminated both facilities.

     The Company anticipates working on a number of long-term development projects which will involve experimental and unproven technology. The projects may require many years and substantial expenditures to complete and may ultimately be unsuccessful. The Company will need operating funds to continue its research and development activities, clinical trials, pursue regulatory approvals and build production, sales and marketing capabilities, as necessary.

     We anticipate that in 2004 our average quarterly cash used for operating and investing activities will be approximately $6.0 million. Accordingly, we believe that the net proceeds from our recently completed initial public offering, together with the interest thereon, will provide us with sufficient financial resources to reach the first interim analysis of our pivotal Phase 3 trial, which we anticipate will occur at the end of first quarter of 2005. We estimate that we will need to raise additional funds in an anticipated amount of approximately $100 million in order to commercialize MyVax, including the completion of the construction and qualification of a commercial scale manufacturing facility, if MyVax receives regulatory approval for the treatment of follicular B-cell NHL.

     Even if we achieve positive interim results in our pivotal Phase 3 clinical trial and receive regulatory approval for MyVax, including regulatory approval of our commercial scale manufacturing facility, we will not have product revenue until 2006, at the earliest. Until we can generate a sufficient amount of product revenue, if ever, we expect to finance future cash needs through public or private equity offerings, debt financings, corporate collaboration or licensing arrangements or other arrangements, as well as through interest income earned on cash balances. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience dilution, and debt financing, if available, may involve restrictive covenants. To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies, MyVax or any other immunotherapies that we may develop, or grant licenses on terms that are not favorable to us. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of our research or development programs or our commercialization efforts.

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     Our long term commitments under operating leases shown above consist of payments relating to three real estate subleases covering the 31,938 square feet of our present facility. These subleases expire between March 2005 and November 2006.

     We expect to begin spending for a commercial scale manufacturing facility in 2004. We estimate that the total cost of the facility will be between $50.0 million and $60.0 million. We anticipate seeking additional funding for the completion of construction and qualification of a commercial scale manufacturing facility. We anticipate that we will need to raise approximately $100 million in addition to the proceeds from our initial public offering to commercialize MyVax if MyVax receives regulatory approval for the treatment of follicular B-cell NHL.

Off-balance Sheet Arrangements

     As of December 31, 2003, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Critical Accounting Policies

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Actual results could differ from those estimates. We believe the following critical accounting policies, among others, affect the more significant judgments and estimates used in the preparation of our financial statements.

     Clinical Trial Accruals. We record accruals for estimated clinical study costs. These costs are a significant component of research and development expenses. We accrue for the costs of clinical studies conducted by contract research organizations based on estimated costs over the life of the individual study. Further, we monitor patient registration levels and related activity to the extent possible and adjust our estimates on a quarterly basis; accordingly, however, our estimates may not match the timing of actual services performed by the organizations, which may result in adjustments to our research and development expenses in future periods.

     Accounting for Income Taxes. Our income tax policy records the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss and tax credit carry forwards. We have recorded a full valuation allowance to reduce our deferred tax asset, as based on available objective evidence; it is more likely than not that the deferred tax asset will not be realized. While we have considered potential future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the full valuation allowance, in the event that we were to determine that we would be able to realize our deferred tax assets in the future, an adjustment to the deferred tax asset would increase net income in the period such determination was made.

     Stock-Based Compensation. We have a stock option plan to reward our employees which is described more fully in Note 9 to the financial statements. We account for this plan under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25 and related interpretations and apply the disclosure provisions of Statements of Financial Accounting Standards No. 123 (“SFAS”), as amended by SFAS No. 148. We amortize stock-based compensation in accordance with FASB Interpretation No. 28, an accelerated vesting model.

     For financial reporting purposes, we have recorded stock-based compensation representing the difference between the deemed fair value of common stock and the option exercise price. Prior to the closing of our initial public offering, we determined the deemed fair value of our common stock based upon several factors, including significant clinical milestones attained, sales of our convertible preferred stock, changes in valuations of existing comparable publicly-registered biotech companies, trends in the broad market for biotechnology stocks and the expected valuation we would obtain in our initial public offering. Subsequent to the offering, we determined the deemed fair value of our common stock based on quoted market prices. All stock options granted subsequent to the offering were granted at exercise prices equal to the fair market value. We recorded deferred stock-based

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compensation of $3.4 million, $1.6 million and $1.0 million for stock options granted to employees during the years ended December 31, 2003, 2002 and 2001, respectively, and we have amortized $1.7 million, $1.2 million and $328,000 of these amounts in the years ended December 31, 2003, 2002 and 2001, respectively. We anticipate we will record amortization of stock-based compensation of approximately $1.4 million for the year ended December 31, 2004. The compensation expense will be decreased in the period of forfeiture for any accrued but unvested compensation arising from the early termination of an option holder’s services.

     We disclose in Note 1 to the financial statements the pro forma impact of applying the provision of SFAS 123, as amended, to our stock awards. Prior to the closing of our initial public offering, the fair value of options issued, pursuant to our option plan at the grant date, were estimated using the minimum value method. This model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Following the offering, the value of each option has been estimated using the Black-Scholes Model with a volatility rate of 92% which is based upon the expected volatility of the our stock price over the life of the option. The effects of applying pro forma disclosures of net loss and net loss per share are not likely to be representative of the pro forma effects on net loss and net loss per share in the future as the number of shares to be issued under the plan (including any future plans) is not known and the assumptions used to determine the fair value can vary significantly.

     Additionally as described more fully in Note 1 to the financial statements, we issue stock options to non-employees, generally for services, which we account for under the provisions of SFAS 123 and Emerging Issues Task Force (“EITF”) No. 96-18. These options are also valued using the Black-Scholes option valuation model. For stock options issued to non-employees, we amortized $208,000, $122,000 and $110,000 of stock compensation expense for the years ended December 31, 2003, 2002 and 2001, respectively.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Interest Rate Risk. Our exposure to market risk for changes in interest rates relates to our cash equivalents on deposit in highly liquid money market funds of financial institutions. The primary objective of our cash investment activities is to preserve principal while at the same time maximizing the income we receive from our invested cash without significantly increasing risk of loss. We do not use derivative financial instruments in our investment portfolio. Our cash and investments policy emphasizes liquidity and preservation of principal over other portfolio considerations. Accordingly, we believe that while the cash and cash equivalents we hold are subject to changes in the financial standing of the financial institution, we are not subject to any material risks arising from changes in interest rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments. We also believe that we are not subject to any material risks arising from changes in interest rates. During October and November 2003 we repaid the outstanding borrowings under both line of credit facilities. On November 14, 2003 we terminated both line of credit facilities. As of December 31, 2003, we had no borrowings other than the equipment capital lease described above under contractual obligations.

     In addition, we do not have any material exposure to foreign currency rate fluctuations as we operate primarily in the United States.

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ITEM 8. FINANCIAL STATEMENTS

(A DEVELOPMENT STAGE ENTERPRISE)
INDEX TO FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders
   of Genitope Corporation
   (a development stage enterprise)

     In our opinion, the accompanying balance sheets and the related statements of operations, stockholders’ equity (deficit) and cash flows present fairly, in all material respects, the financial position of Genitope Corporation (a development stage enterprise) at December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003 and cumulatively, for the period from August 15, 1996 (date of inception) to December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PRICEWATERHOUSECOOPERS LLP

San Jose, California

March 25, 2004

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GENITOPE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
(in thousands, except share and per share data)

The accompanying notes are an integral part of these financial statements.

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GENITOPE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(in thousands, except per share data)

The accompanying notes are an integral part of these financial statements.

45

GENITOPE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE PERIOD
FROM AUGUST 15, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 2003
(in thousands)

The accompanying notes are an integral part of these financial statements.

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GENITOPE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE PERIOD
FROM AUGUST 15, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 2003
(in thousands)

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GENITOPE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(in thousands)