FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

2. FAIR VALUE MEASUREMENTS

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

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

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

Cash Equivalents and Marketable Securities Available-for-Sale

     Certificates of deposit and money market funds are categorized as Level 1 within the fair value hierarchy as their fair values are based on quoted prices available in active markets. U.S. Treasury securities, U.S. government-sponsored enterprise securities, municipal securities, corporate notes and commercial paper are categorized as Level 2 within the fair value hierarchy as their fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.

     Cash equivalents, restricted cash and marketable securities by security type at March 31, 2012 were as follows:

			Gross		Gross
			Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
	(In thousands)
Included in cash and cash equivalents:
Money market funds	$	11,500	$	—	$	—		$	11,500
Commercial paper (due in less than 1 year)		3,899		1		—			3,900
	$	15,399	$	1	$	—		$	15,400
Restricted cash:
Certificates of deposit	$	793	$	—	$	—		$	793
Marketable securities:
Government-sponsored enterprise securities (due in
less than 1 year)	$	14,028	$	34	$	—		$	14,062
Commercial paper (due in less than 1 year)		33,228		16		—			33,244
Corporate notes (due in less than 1 year)		53,043		58		(13	)		53,088
Corporate notes (due in 1 to 2 years)		16,701		20		(9	)		16,712
	$	117,000	$	128	$	(22	)	$	117,106
Cash equivalents, restricted cash and marketable securities by security type at December 31, 2011 were as follows:
			Gross		Gross
			Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
	(In thousands)
Included in cash and cash equivalents:
Money market funds	$	12,885	$	—	$	—		$	12,885
Restricted cash:
Certificates of deposit	$	793	$	—	$	—		$	793
Marketable securities:
Certificate of deposit (due in less than 1 year)	$	329	$	—	$	—		$	329
Government-sponsored enterprise securities (due in
less than 1 year)		15,061		25		(1	)		15,085
Government-sponsored enterprise securities (due in
1 to 2 years)		6,998		18		(12	)		7,004
Commercial paper (due in less than 1 year)		39,206		41		—			39,247
Corporate notes (due in less than 1 year)		50,556		19		(28	)		50,547
Corporate notes (due in 1 to 2 years)		25,113		30		(14	)		25,129
	$	137,263	$	133	$	(55	)	$	137,341

     Marketable securities with unrealized losses at March 31, 2012 and December 31, 2011 were as follows:

	Less Than 12 Months					12 Months or Greater				Total
			Gross					Gross				Gross
	Estimated		Unrealized			Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses			Fair Value		Losses		Fair Value		Losses
	(In thousands)
As of March 31, 2012:
Corporate notes (due in less than 1 year)	$	20,372	$	(13	)	$	—	$	—	$	20,372	$	(13	)
Corporate notes (due in 1 to 2 years)		5,148		(9	)		—		—		5,148		(9	)
	$	25,520	$	(22	)	$	—	$	—	$	25,520	$	(22	)
As of December 31, 2011:
Government-sponsored enterprise
securities (due in less than 1 year)	$	5,021	$	(1	)	$	—	$	—	$	5,021	$	(1	)
Government-sponsored enterprise
securities (due in 1 to 2 years)		3,988		(12	)		—		—		3,988		(12	)
Corporate notes (due in less than 1 year)		33,847		(28	)		—		—		33,847		(28	)
Corporate notes (due in 1 to 2 years)		13,096		(14	)		—		—		13,096		(14	)
	$	55,952	$	(55	)	$	—	$	—	$	55,952	$	(55	)

     The gross unrealized losses related to government-sponsored enterprise securities and corporate notes as of March 31, 2012 and December 31, 2011 were due to changes in interest rates. We determined that the gross unrealized losses on our marketable securities as of March 31, 2012 and December 31, 2011 were temporary in nature. We review our investments quarterly to identify and evaluate whether any investments have indications of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which the fair value has been less than the cost basis and whether we intend to sell the security or whether it is more likely than not that we would be required to sell the security. We currently do not intend to sell these securities before recovery of their amortized cost basis.

Non-Marketable Investments in Licensees

As of March 31, 2012 and December 31, 2011, the carrying values of our investments in non-marketable nonpublic companies was zero. We recognized no charges related to other-than-temporary declines in fair values of investments in licensees for the three months ended March 31, 2012 and 2011. See Note 3 on Equity Method Investment for further discussion of investments in licensees.

Derivatives

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

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

	March 31, 2012	December 31, 2011
Dividend yield	None	None
Expected volatility	0.576	0.714
Risk-free interest rate	0.51%	0.36%
Expected term	3 yrs	3 yrs

Dividend yield is based on historical cash dividend payments and Geron has paid no dividends to date. The expected volatility is based on historical volatilities of our stock since traded options on Geron stock do not correspond to derivatives’ terms and trading volume of Geron options is limited. The risk-free interest rate is based on the U.S. Zero Coupon Treasury Strip Yields for the expected term in effect on the reporting date. The expected term of derivatives is equal to the remaining contractual term of the instrument.

As of March 31, 2012 and December 31, 2011, the following non-employee options to purchase common stock were considered derivatives and classified as current liabilities:

					At March 31, 2012			At December 31, 2011
					Number	Fair		Number	Fair
Issuance	Exercise		Exercisable	Expiration	of	Value		of	Value
Date	Price		Date	Date	Shares	(In thousands)		Shares	(In thousands)
March 2005	$	6.39	January 2007	March 2015	284,600	$	38	284,600	$	64

     Non-employee options whose performance obligations are complete are classified as derivative liabilities on our condensed consolidated balance sheets. Upon the exercise of these options, the instruments are marked to fair value and reclassified from derivative liabilities to stockholders’ equity. There were no reclassifications from current liabilities to stockholders’ equity for non-employee option exercises during the three months ended March 31, 2012.

Fair Value on a Recurring Basis

The following table presents information about our financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2012, and indicates the fair value category assigned.

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets / Liabilities		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market funds (1)	$	11,500	$	—	$	—	$	11,500
Government-sponsored enterprise securities (2)		—		14,062		—		14,062
Commercial paper (1) (2)		—		37,144		—		37,144
Corporate notes (2) (3)		—		69,800		—		69,800
Total	$	11,500	$	121,006	$	—	$	132,506
Liabilities
Derivatives (4)	$	—	$	—	$	38	$	38

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

Changes in Level 3 Recurring Fair Value Measurements

     The table below includes a rollforward of the balance sheet amounts for the three months ended March 31, 2012 (including the change in fair value), for financial instruments in the Level 3 category. When a determination is made to classify a financial instrument within Level 3, the determination is based upon the significance of the unobservable parameters to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable components, observable components (that is, components that are actively quoted and can be validated to external sources). Accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the methodology.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Three Months Ended March 31, 2012

Change in

Unrealized Gains

Total

Related to

Unrealized

Transfers

Financial

Fair Value at

Gains

Purchases

In and/or

Fair Value at

Instruments

December 31,

Included in

and

Sales and

Out of

March 31,

Held at

(In thousands)

2011

Earnings, net (1)

Issuances

Settlements

Level 3

2012

March 31, 2012 (1)

Derivative liabilities

$

64

$

(26

)

$

—

$

—

$

—

$

38

$

(26

)

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