<SUBMISSION>
<ACCESSION-NUMBER>0001047469-03-010865
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>6
<PERIOD>20021231
<FILING-DATE>20030328
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>CERUS CORP
<CIK>0001020214
<ASSIGNED-SIC>2836
<IRS-NUMBER>680262011
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-K
<ACT>34
<FILE-NUMBER>000-21937
<FILM-NUMBER>03625068
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>2411 STANWELL DR
<CITY>CONCORD
<STATE>CA
<ZIP>94520
<PHONE>9252886000
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>2525 STANWELL DRIVE
<STREET2>STE 300
<CITY>CONCORD
<STATE>CA
<ZIP>94520
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>CERUS TECHNOLOGIES INC
<DATE-CHANGED>19960731
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>a2106076z10-k.htm
<DESCRIPTION>FORM 10-K
<TEXT>
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<P ALIGN="CENTER"><FONT SIZE=5><B>SECURITIES AND EXCHANGE COMMISSION<BR>  </B></FONT><FONT SIZE=2><B>Washington, D.C. 20549  </B></FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=5><B>FORM 10-K  </B></FONT></P>

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<TD WIDTH="11%" ALIGN="CENTER"><BR><FONT SIZE=3><FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="89%"><BR><FONT SIZE=3><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934</B></FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2><B>For the fiscal year ended December&nbsp;31, 2002  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> OR  </B></FONT></P>

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<TD WIDTH="11%" ALIGN="CENTER"><FONT SIZE=3><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="89%"><FONT SIZE=3><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934</B></FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2><B>Commission file number 0-21937  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B>CERUS CORPORATION<BR>  </B></FONT><FONT SIZE=2>(Exact name of registrant as specified in its charter) </FONT></P>

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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>Delaware</B></FONT><FONT SIZE=2><BR>
(State or other jurisdiction of<BR>
incorporation or organization)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>68-0262011</B></FONT><FONT SIZE=2><BR>
(IRS Employer Identification Number)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%" ALIGN="CENTER"><BR><FONT SIZE=2><B>2411 Stanwell Dr.<BR>
Concord, California<BR> </B></FONT><FONT SIZE=2><BR>
(Address of principal executive offices)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><BR>
<BR></FONT> <FONT SIZE=2><B>94520</B></FONT><FONT SIZE=2><BR>
(Zip Code)</FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2><B>(925)&nbsp;288-6000<BR>  </B></FONT><FONT SIZE=2>(Registrant's telephone number, including area code) </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Securities registered pursuant to Section&nbsp;12(b) of the Act:<BR>
None  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Securities registered pursuant to Section&nbsp;12(g) of the Act:<BR>
Common Stock, par value $.001 per share<BR>  </B></FONT><FONT SIZE=2>(Title of Class) </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=1>Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed by Section&nbsp;13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12&nbsp;months (or for such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been subject to such filing
requirements for the past 90&nbsp;days.&nbsp;Yes&nbsp;<FONT FACE="WINGDINGS">&#253;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=1>Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act
Rule&nbsp;12b-2).&nbsp;Yes&nbsp;<FONT FACE="WINGDINGS">&#253;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=1>Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation&nbsp;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&nbsp;III of this Form&nbsp;10-K or any amendment to this Form&nbsp;10-K.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=1>The approximate aggregate market value of the common stock held by non-affiliates of the
registrant as of the last business day of the registrant's most recently completed second fiscal quarter, based upon the closing sale price of the registrant's common stock listed on the Nasdaq
National Market, was $ 332,291,665. (1) </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=1>The approximate aggregate market value of the common stock held by non-affiliates of the
registrant as of February&nbsp;28, 2003, based upon the closing sale price of the registrant's common stock listed on the Nasdaq National Market, was $48,932,775. (2) </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=1>As of February&nbsp;28, 2003, there were 15,978,519 shares of the registrant's common stock outstanding. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>DOCUMENTS INCORPORATED BY REFERENCE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=1>Portions of the registrant's definitive Proxy Statement in connection with the registrant's 2003 Annual Meeting of
Stockholders, to be filed with the Securities and Exchange Commission pursuant to Regulation&nbsp;14A not later than April&nbsp;30, 2003, are incorporated by reference into Part&nbsp;II and
Part&nbsp;III of this annual report on Form&nbsp;10-K. </FONT></P>

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<DT style='margin-bottom:-11pt;'><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>Based
on a closing sale price of $33.88 per share on June&nbsp;28, 2002. Excludes approximately 9,512,741 shares of the registrant's common stock held by executive officers,
directors and stockholders whose ownership exceeds 5% of the common stock outstanding at June&nbsp;28, 2002.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=1>(2)</FONT></DT><DD><FONT SIZE=1>Based
on a closing price of $6.75 per share on February&nbsp;28, 2003. Excludes approximately 8,729,219 shares of the registrant's common stock held by executive officers, directors
and stockholders whose ownership exceeds 5% of the common stock outstanding at February&nbsp;28, 2003. </FONT></DD></DL>
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<BR></FONT><FONT SIZE=2><B>TABLE OF CONTENTS    <BR>  </B></FONT></P>

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<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="79%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Page</B></FONT><HR NOSHADE></TH>
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<TD COLSPAN=5 ALIGN="CENTER"><FONT SIZE=2><B>PART I</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2><BR>
Item 1.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2><BR>
Business</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>Item 2.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Properties</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>37</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>Item 3.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Legal Proceedings</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>37</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>Item 4.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Submission of Matters to a Vote of Security Holders</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>37</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><BR><FONT SIZE=2><B>PART II</B></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2><BR>
Item 5.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2><BR>
Market for Registrant's Common Equity and Related Stockholder Matters</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
37</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>Item 6.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Selected Financial Data</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>38</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>Item 7.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Management's Discussion and Analysis of Financial Condition and Results of Operations</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>39</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>Item 7A.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Quantitative and Qualitative Disclosures About Market Risk</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>44</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>Item 8.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Financial Statements and Supplementary Data</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>45</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>Item 9.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>45</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><BR><FONT SIZE=2><B>PART III</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2><BR>
Item 10.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2><BR>
Directors and Executive Officers of the Registrant</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
46</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>Item 11.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Executive Compensation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>Item 12.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>Item 13.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Certain Relationships and Related Transactions</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>Item 14.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2>Controls and Procedures</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><BR><FONT SIZE=2><B>PART IV</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2><BR>
Item 15.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="79%"><FONT SIZE=2><BR>
Exhibits, Financial Statement Schedules and Reports on Form 8-K</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
47</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><BR><FONT SIZE=2><B>SIGNATURES</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
67</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><B>CERTIFICATIONS</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>68</FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<BR></FONT><FONT SIZE=2><B>PART I    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>This report contains forward-looking statements. These forward-looking statements are based on Cerus Corporation's current expectations
about its business and industry, and include, but are not limited to, statements concerning Cerus' plans or expectations concerning development and commercialization of its current products and
product candidates; conduct of clinical trials of its product candidates; regulatory approvals; its ability to address certain markets; manufacturing and supply for its clinical trial and commercial
requirements; reliance on a third party for a marketing, sales and distribution capability; and evaluation of additional product candidates for subsequent clinical and commercial development. In some
cases, these statements may be identified by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the
negative of such terms and other comparable terminology. In addition, statements that refer to expectations or other characterizations of future events or circumstances are forward-looking statements.
These statements involve known and unknown risks and uncertainties that may cause Cerus' or its industry's results, levels of activity, performance or achievements to be materially different from
those expressed or implied by the forward-looking statements. Factors that may cause or contribute to such differences include, among others, those discussed under the captions "Business," "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements not specifically described above also may be found in these and other
sections of this report. Cerus undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this report.</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Helinx
is a U.S. registered trademark of Cerus Corporation. INTERCEPT Blood System, INTERSOL and Amicus are trademarks of Baxter International,&nbsp;Inc. </FONT></P>

<P><FONT SIZE=2><A
NAME="de1204_item_1._business"> </A>
<A NAME="toc_de1204_2"> </A>
<BR></FONT><FONT SIZE=2><B>Item 1. </B></FONT><FONT SIZE=2><B><I>Business    <BR>  </I></B></FONT></P>


<P><FONT SIZE=2><B>Overview  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus Corporation is developing medical systems and therapeutics based on its proprietary Helinx&reg; technology for controlling biological replication.
Cerus' most advanced programs are focused on systems to enhance the safety of blood products used for transfusion. The INTERCEPT Blood System, based
on the company's Helinx technology, is designed to inactivate viruses, bacteria, other pathogens and white blood cells. Cerus also is pursuing therapeutic applications of Helinx to treat and prevent
serious diseases. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
is developing the INTERCEPT Blood System for platelets, plasma and red blood cells with its development and commercialization partner, Baxter Healthcare Corporation. The INTERCEPT
Blood System targets and inactivates blood-borne pathogens, such as HIV and hepatitis B and C, as well as harmful white blood cells, while leaving intact the therapeutic properties of the blood
components. The INTERCEPT Blood System inactivates a broad array of pathogens and has the potential to reduce the risk of transmission of pathogens for which testing is not completely effective or is
not currently performed. Cerus believes that the INTERCEPT Blood System also has the potential to inactivate new pathogens before they are identified and before tests are developed to detect their
presence in donated blood. An estimated four million units of platelets, seven million units of plasma and 37&nbsp;million units of red blood cells are transfused annually in the United States,
Western Europe and Japan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
October&nbsp;2002, the INTERCEPT Blood System for platelets received CE Mark approval for sale in Europe. The system also received approval for use with buffy coat platelets in
Canada in 2002. Cerus and Baxter have submitted regulatory applications seeking marketing approval in Australia and have begun the regulatory submission process to obtain approval in the United
States. The companies are in late stage development of the INTERCEPT Blood System for plasma and red blood cells. Cerus' allogeneic cellular immune therapy (ACIT) program, designed to improve the
outcome of bone marrow </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<P><FONT SIZE=2>
transplantation procedures through use of T-cells treated with the Helinx technology, and Epstein-Barr virus (EBV) cellular vaccine program are in Phase I clinical trials. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
is conducting product development and commercialization activities with Baxter pursuant to agreements for the development, manufacturing and marketing of the INTERCEPT Blood
System. These agreements provide for Baxter and Cerus to generally share development expenses, for Baxter's exclusive right and responsibility to market the systems worldwide and for Cerus to receive
a share of the gross profits from the sale of the systems. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
was incorporated in California in 1991 and reincorporated in Delaware in 1996. Information regarding Cerus' revenue, losses and total assets for the last three fiscal years can be
found in the financial statements and related notes included elsewhere in this report. </FONT></P>

<P><FONT SIZE=2><B>Industry Background  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Blood Supply Market.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Blood transfusions are required to treat a variety of medical conditions, including anemia, low blood
volume, surgical bleeding, trauma, acquired and congenital bleeding disorders and chemotherapy-induced blood deficiencies. Worldwide, over 90&nbsp;million whole blood donations occur each year.
Approximately 40&nbsp;million of those donations occur in North America, Western Europe and Japan, the primary geographical markets for the INTERCEPT Blood System. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Whole
blood is composed of plasma, the liquid portion of blood containing essential clotting proteins, and three cellular blood components: platelets, red blood cells and white blood
cells (leukocytes). Platelets are essential to coagulation, or blood clotting, while red blood cells carry oxygen to tissues and carbon dioxide to the lungs. White blood cells play a critical role in
immune and other defense systems, but can cause harmful transfusion-related immune reactions in, or transmit disease to, transfusion recipients. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Blood
collection centers periodically experience shortages of critical blood components due to temporary increases in demand, reduced donor availability during holiday periods and the
limited shelf life of cellular blood components. To efficiently allocate the limited available blood supply and to optimize transfusion therapy, essentially all donated blood is separated into
platelets, plasma and red blood cells. These blood components are obtained either by manually processing donor units of whole blood or by apheresis, an automated process by which a specific blood
component is separated and collected from the donor's blood while the other components are simultaneously returned to the donor. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Patients
requiring transfusions typically are treated with one or more specific blood components required for their particular deficiency, except, very rarely, in cases of rapid, massive
blood loss, in which whole blood may be transfused. Platelets often are used to treat cancer patients following chemotherapy or organ transplantation. Red blood cells frequently are administered to
patients with trauma or surgical bleeding, acquired chronic anemia or genetic disorders, such as sickle cell anemia. Plasma used for transfusions is stored in frozen form and is referred to as fresh
frozen plasma, or FFP. FFP generally is used to control bleeding. Plasma also can be separated, or "fractionated," into different products that are administered to expand blood volume, fight
infections or treat diseases such as hemophilia. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Blood Supply Contaminants.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A primary goal of every blood collection center is to provide blood components for transfusion
that are free of viruses, bacteria and other pathogens. Despite improvements in donor screening and in the testing and processing of blood, patients receiving blood transfusions still face a number of
significant risks from blood contaminants, as well as adverse immune and other transfusion-related reactions induced by white blood cells. Viruses, such as hepatitis B (HBV), hepatitis C (HCV), human
immunodeficiency virus (HIV), cytomegalovirus (CMV), West Nile virus and human T-cell lymphotropic virus (HTLV), can present life-threatening risks. In addition, bacteria, the
most common agents of transfusion-transmitted disease, can cause complications, such as </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

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sepsis, which can result in serious illness or death. Many other agents can transmit disease during transfusion, including the protozoa that cause malaria, babesiosis and Chagas' disease. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Infectious
pathogens are not the only cause of adverse events arising from the transfusion of blood components. White blood cells present in a blood unit can multiply after transfusion,
mounting a potentially fatal graft-versus-host immune response against the recipient. Similarly, alloimmunization, an immune response that can develop from repeated exposure to transfused
white blood cells, can significantly reduce the efficacy of subsequent transfusions. Moreover, white blood cells themselves may harbor and transmit bacteria and infectious viruses, such as HIV, CMV
and HTLV. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Emerging
and unidentified pathogens also present a threat to the blood supply, a problem illustrated by HIV. It is estimated that HIV was present in the blood supply for at least seven
years before it was identified as the causative agent of AIDS and at least eight years before a test was commercially implemented to detect the presence of HIV antibodies in donated blood. During
those years, many transfusion recipients were infected with the virus, including approximately 70% of patients with severe hemophilia. More recently, West Nile virus has been transmitted through blood
transfusions. In addition, new variants of HIV and other viruses, such as hepatitis G, have been identified. Transfused blood is not routinely tested for these emerging viruses, despite the potential
risk to transfusion recipients. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
risk of transmission of pathogens from an infected donor is compounded by a number of factors. If a unit of blood contains an infectious pathogen, dividing the blood into its
components may expose three or more patients to the pathogen in that unit. Blood products are commonly pooled from several donors to form&nbsp;a single therapeutic dose, which increases the
recipient's risk of infection. Similarly, patient populations that require frequent transfusions, such as patients with cancer, suppressed immune systems, congenital anemias and kidney and liver
disorders, experience a heightened risk of infection due to multiple donor exposures. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current Approaches to Address Blood Supply Contamination.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Public awareness of the significant rates of hepatitis, HIV and
other viral transmission from blood transfusions has led to expanded efforts to improve the safety of the blood supply. For many years, the only approach available to reduce the risk of transmission
of diseases was donor screening through interviews. In addition to required donor screening, diagnostic tests have been developed over time to detect the presence of certain infectious pathogens that
are transmitted in blood. However, there remain a number of other blood-borne pathogens for which tests are not routinely administered, and for many of these, no tests have been developed. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
donor screening and diagnostic testing of donated blood have been successful in reducing the incidence of transmission of some known pathogens, these methods have significant
limitations. Tests are currently performed for only a limited number of blood-borne pathogens. Moreover, current methods of testing are not completely effective, which can lead to the release of
contaminated blood into transfusion inventory. Most tests used in blood centers in the United States are intended to detect antibodies directed against a pathogen or surface antigens. All tests
currently in use by blood centers can fail if performed during the "infectivity window," that is, early in the course of an infection before agents appear in detectable quantities. Nucleic acid
testing for HIV and HCV is mandatory in blood centers in Europe, and is used by most blood centers in the United States. Although nucleic acid testing is more effective at detecting HIV and HCV in
earlier stages of infection in a donor, it does not close the infectivity window completely. For example, transfusion recipients in the United States and
Europe have been infected from blood transfusions for which nucleic acid testing failed to detect the virus. Furthermore, nucleic acid testing, like other testing currently performed on donated blood,
is of limited benefit as it is effective only for specific viruses for which the testing is performed. In addition, tests for viral infection may be ineffective in detecting a genetic variant of the
virus that the test was not developed to detect. For instance, certain strains of HIV, such as Subtype O, are not always </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

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detected in standard HIV tests. Finally, there are no current tests available to screen effectively for many emerging pathogens, and testing cannot be performed for pathogens that have yet to be
identified. As a result of these limitations, many infected blood products continue to pass into the blood supply. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
light of these continuing concerns, many patients have attempted to mitigate the risks of transfusion through "autologous donation," which is the donation of the patient's own blood
for anticipated future use, or, where autologous donation is impracticable, through the designation of donors such as family members. Although autologous donations eliminate many risks, the blood
collected is still subject to the risk of bacterial growth during storage and is rarely available in emergency situations or when a patient is chronically ill. In addition, the statistical incidence
of infected units from designated donor blood has been found to be as high as in general volunteer donor blood. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Blood
centers and health care providers have initiated additional procedures in an effort to address pathogen transmission issues. For example, platelet apheresis is sometimes used to
limit donor exposure from pooled, manually collected platelets. In addition, blood centers may quarantine single donor plasma apheresis units until after the infectivity window has elapsed, followed
by confirmatory retesting of the donor, if the donor is available, to help verify the safety of the donated plasma. However, quarantining plasma is expensive, and inventory is difficult to manage.
Moreover, quarantining cannot be used with platelets and red blood cells because these components have shelf lives that are shorter than the infectivity window related to antibody production. No
commercial processes are currently available to eliminate pathogens in platelets and red blood cells. Two pathogen inactivation methods are used commercially for FFP: treatment with solvent-detergent
and methylene blue, which is used in Europe. Because the solvent-detergent process pools hundreds of units of plasma, the potential risk of transmitting pathogens not inactivated by the process is
increased. Methylene blue has not been shown to be effective in the inactivation of intracellular viruses and bacteria. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some
blood centers are currently using gamma irradiation to inactivate white blood cells. This nonspecific method has a narrow range of efficacy: insufficient treatment can leave viable
white blood cells in the blood, while excessive treatment can impair the therapeutic function of the desirable blood components being transfused. White blood cell depletion by filtration decreases the
concentration of these cells in transfusion units, but does not inactivate or completely eliminate white blood cells or inactivate the immunological functions of the cells not removed by the
filtration process. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Economic Costs of Blood Supply Contamination.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In economically developed countries, many of the tests and inactivation
measures described above are mandated by regulatory agencies, resulting in a safer and more uniform blood supply, but also significantly increasing costs of processing and delivering blood products. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Moreover,
the development and widespread implementation of testing for many unusual or low-incidence pathogens is not cost-effective or practical. For example,
the development of tests to specifically detect the presence of all forms of harmful bacteria would be extremely expensive. As a result, the only test specific to a bacterium that is conducted in all
blood products is the test for the bacterium that causes syphilis. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
continuing risk of transmission of serious diseases through transfusion of contaminated blood components from both known and unknown pathogens, together with the limitations of
current approaches to providing a safe blood supply, have created the need for a new approach to pathogen inactivation that is safe, easy to implement and cost-effective. Cerus believes
that such an approach should be effective in inactivating a broad spectrum of clinically significant pathogens, preserve the therapeutic properties of the blood components and be safe for use. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

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<P><FONT SIZE=2><B>The INTERCEPT Blood System and Helinx Technology  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus and its development and commercialization partner, Baxter, are developing the INTERCEPT Blood System to address the problem of transmission of infectious
diseases through blood transfusions. The INTERCEPT Blood System employs Cerus' proprietary nucleic-acid targeting Helinx technology. Cerus has conducted studies that have demonstrated the
ability of the Helinx technology to inactivate a broad array of viral and bacterial pathogens that may be transmitted in blood transfusions. Cerus believes that the mechanism of action of its Helinx
technology provides the potential to inactivate many new pathogens before they are identified and before tests are developed to detect their presence in the blood supply. Because the INTERCEPT Blood
System is designed to inactivate rather than merely test for pathogens, the system also has the potential to reduce the risk of transmission of pathogens that would otherwise remain undetected by
testing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Helinx
technology prevents the replication of DNA or RNA, which is present in viruses, bacteria and other pathogens. Therapeutic blood components (platelets, FFP and red blood cells) do
not contain nuclear DNA or RNA&#151;the targets for the Helinx technology. When Cerus' proprietary inactivation compounds are combined with the blood components for treatment, they cross
bacterial cell walls or viral membranes and move into the interior of the nucleic acid structure. When subsequently activated by an energy source, such as light, the compounds bind to the nucleic acid
of the viral or bacterial pathogen, preventing replication of the nucleic acid. This process prevents infection because a virus, bacteria or other pathogen must replicate its DNA or RNA to proliferate
and cause infection. The Helinx compounds react in a similar manner with the nucleic acid in white blood cells, inhibiting the activity that is responsible for certain adverse immune and other
transfusion-related reactions. These compounds are designed to react with nucleic acid only during the pathogen inactivation process and not after the treated blood component is transfused. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
INTERCEPT Blood System is being designed to integrate into current blood collection, processing and storage procedures. Furthermore, Cerus believes that the use of the INTERCEPT
Blood System, in addition to eliminating the need to implement costly new testing procedures, could potentially lead to a reduction in the use of certain costly procedures that are currently employed
in blood component transfusions, such as gamma irradiation, CMV testing and white blood cell filtration. </FONT></P>

<P><FONT SIZE=2><B>Cerus Strategy  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus' objective is to develop medical systems and therapeutics that provide safer and more effective treatment options to patients. The INTERCEPT Blood System,
based on the company's Helinx technology, is designed to inactivate viruses, bacteria, other pathogens and harmful white blood cells in blood components for transfusion. Cerus also is pursuing
therapeutic applications of Helinx technology to treat and prevent serious diseases. Cerus' strategy incorporates the following key elements: </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Establish the INTERCEPT Blood System as the Standard of Care.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Domestically, the target customers for the INTERCEPT Blood
System are the approximately 105 community blood center organizations that collect approximately 85% of blood in the United States. There is an even greater concentration among blood centers in
foreign countries. Baxter has a significant marketing presence in these blood centers in the United States and abroad. In addition, Cerus has developed strong relationships with prominent transfusion
medicine experts in a number of these centers as well as in the broader medical communities worldwide. Cerus intends to work with these experts to encourage support for the adoption of the INTERCEPT
Blood System as the standard of care. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Use Strategic Alliances.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus has received significant development funding from Baxter, and intends to leverage Baxter's
manufacturing, marketing and distribution expertise and resources. Cerus believes that Baxter's established position as a manufacturer and leading supplier of devices, disposables and other products
related to the transfusion of human blood products can provide Cerus </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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with access to an established marketing, sales and distribution network. The INTERCEPT Blood System is being designed to integrate into Baxter's current product line and into current blood
collection, processing and storage processes. Cerus has also entered into a collaborative agreement with, and received development funding from, the Pharmaceutical Division of Kirin Brewery
Co.,&nbsp;Ltd. to develop and market products for stem cell transplantation based on Cerus' Helinx technology. Under this agreement, Cerus and Kirin jointly develop the products with Kirin retaining
marketing rights in Asia. Cerus is also collaborating with the U.S. Armed Forces on several initiatives intended to improve the safety and availability of the military's blood supply. Cerus intends to
continue to develop its products together with partners that can provide direct funding and manufacturing, marketing and distribution resources and expertise. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Protect and Enhance Proprietary Position.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus believes that the protection of its proprietary technologies is important to
its business prospects and that its intellectual property position may create
competitive barriers to entry into the blood component treatment market. Cerus currently holds issued and allowed patents covering a number of fundamental aspects of its Helinx technology and its
blood component treatment system technology. Cerus intends to continue to pursue its patent filing strategy and to vigorously defend its intellectual property position against infringement. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Leverage Expertise and Helinx Technology.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus is using its broad expertise in nucleic acid chemistry to develop additional
products beyond the INTERCEPT Blood System. Cerus believes that its nucleic acid-targeting Helinx technology has potential application in a number of health and research-related fields,
such as bone marrow transplantation, cancer and cellular vaccines. </FONT></P>


<P><FONT SIZE=2><B>Product Development  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus is developing treatment systems to inactivate infectious pathogens and harmful white blood cells in platelets, FFP and red blood cells and to improve the
outcomes of bone marrow transplantation procedures. Cerus has incurred total research and development expenses of $56.4&nbsp;million, $48.2&nbsp;million and $34.8&nbsp;million for the years
ended December&nbsp;31, 2002, 2001 and 2000, respectively. The following table identifies Cerus' product development programs: </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="14%" ALIGN="LEFT"><FONT SIZE=1><B>Program<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" ALIGN="CENTER"><FONT SIZE=1><B>Therapeutic Indication</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Cerus Product<BR>
in Development</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" ALIGN="CENTER"><FONT SIZE=1><B>Development<BR>
Status</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="23%" ALIGN="CENTER"><FONT SIZE=1><B>Partner</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="14%"><FONT SIZE=1>Platelets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=1>Surgery, cancer chemotherapy, transplantation, bleeding disorders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>INTERCEPT Blood System for platelets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=1>Regulatory approvals received in Europe and Canada; regulatory application submitted in Australia; regulatory application process underway in the United States</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>Baxter</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="14%"><FONT SIZE=1>Plasma (FFP)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=1>Surgery, transplantation, bleeding disorders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>INTERCEPT Blood System for plasma</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=1>Phase IIIa and IIIb clinical trials completed; Phase IIIc clinical trial enrolling patients</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>Baxter</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="14%"><FONT SIZE=1>Red Blood Cells</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=1>Surgery, transplantation, anemia, cancer chemotherapy, trauma</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>INTERCEPT Blood System for red blood cells</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=1>Phase III clinical trials enrolling patients</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>Baxter</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="14%"><FONT SIZE=1>Allogeneic Cellular Immune Therapy (ACIT)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=1>Allogeneic bone marrow transplant to treat leukemia and lymphoma</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>T-Cells treated with Helinx technology</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=1>Phase I clinical trials</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>Kirin, National Marrow Donor Program</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="14%"><FONT SIZE=1>Epstein-Barr Virus (EBV) Vaccine</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=1>Build immunity to EBV in organ transplant recipients</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>EBV vaccine</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=1>Phase I clinical trial</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>Johns Hopkins University</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

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<P><FONT SIZE=2><A
NAME="page_dg1204_1_9"> </A> </FONT> <FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Clinical Trial Design.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus conducts clinical trials using several designs. In a controlled study,
treated and untreated
blood components are administered to subjects who are randomly assigned to either a test group or a control group, and the results are compared. In a cross-over study, each subject
receives both treated and untreated blood components in random order. To avoid bias in reporting side effects, studies are usually blinded. In a single-blind study, subjects are not told whether they
are receiving treated or untreated blood components. In a double-blind study, neither the subject (patient) nor the investigator (physician) knows whether the subject is receiving treated or untreated
blood components. </FONT></P>

<P><FONT SIZE=2><B><I>Platelet Program  </I></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Platelet Usage and Market.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Platelets are cellular components of blood that are an essential part of the clotting mechanism.
Platelets facilitate blood clotting and wound healing by adhering to damaged blood vessels and to other platelets. Platelet transfusions are used to prevent or control bleeding in platelet-deficient
patients, such as those undergoing chemotherapy or organ transplantation. Transfusion units of platelets are obtained either by combining the platelets from four to six whole blood donations (pooled
random donor platelets), or in an automated procedure in which a therapeutic dose of platelets is obtained from a single donor (apheresis or single donor platelets). A principal motivation for
platelet apheresis is to limit donor exposure from pooled, manually collected platelets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
estimates the production of platelets in 2002 to have been 2.2&nbsp;million transfusion units in North America, 1.4&nbsp;million transfusion units in Western Europe and
0.7&nbsp;million transfusion units in Japan. Based on the Report on Blood Collection and Transfusion in the United States in 2001 prepared by the National Blood Data Resource Center, the estimated
base cost for a transfusion unit of apheresis platelets ranged from approximately $461 to $489, and the estimated base cost for a transfusion unit of random donor platelets ranged from approximately
$209 to $345. These estimates include donor screening and diagnostic tests, such as those for HIV, HTLV, HBV and HCV. Blood centers may also charge for additional procedures, such as gamma irradiation
and CMV screening. The frequency of use and additional charge for each procedure vary widely. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INTERCEPT Blood System for Platelets.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The INTERCEPT Blood System for platelets uses Cerus' Helinx compound, amotosalen
(formerly S-59), which is a synthetic small molecule from a class of compounds known as psoralens. The selection of amotosalen was based on an extensive analysis of the compound's
safety, its ability to inactivate pathogens and harmful white blood cells and the preservation of platelet and plasma coagulation factor function following treatment with amotosalen. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
illuminated, amotosalen undergoes a specific and irreversible chemical reaction with DNA and RNA. This chemical reaction renders a broad array of pathogens and cells incapable of
replication. A virus, bacteria or other pathogenic cell cannot cause an infection if it cannot replicate. A similar reaction with the nucleic acid in white blood cells inhibits the activity that is
responsible for certain adverse immune and other transfusion-related reactions. Studies conducted by Cerus with pre-clinical models have indicated that, following transfusion, the
amotosalen and, following illumination, its breakdown products are rapidly metabolized and excreted. As a further safety measure, the INTERCEPT Blood System for platelets employs a removal process
designed to reduce the amount of residual amotosalen and breakdown products following treatment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
and Baxter have designed the INTERCEPT Blood System for platelets for use in the blood center. The system consists of a disposable processing set, containing the amotosalen
compound and a compound adsorption device (CAD), and an illumination device to deliver light to trigger the inactivation reaction. The system involves the collection of the platelets, as normally
performed, with two-thirds of the plasma replaced by a platelet additive solution, called INTERSOL, followed by transfer of the platelets through a pouch containing the amotosalen compound
into a container. The mixture of platelets, amotosalen and INTERSOL is then illuminated for approximately three to five </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

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minutes. Following the CAD treatment, a passive process that takes approximately four to six hours, the platelets are transferred to the final storage container. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Development Status.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In Europe, the INTERCEPT Blood System for platelets has received CE Mark approval for use with pooled
whole blood platelets collected using the buffy coat process and for apheresis platelets collected on Baxter's Amicus apheresis platform. CE Mark approval also has been received for preparation sets
for platelets collected using the Haemonetics and Cobe apheresis systems. In Canada, regulatory approval has been received for the INTERCEPT Blood System for use with buffy coat platelets. A
regulatory application for marketing approval in Australia has been submitted. In the United States, Baxter and Cerus have begun the regulatory application process for approval of the INTERCEPT Blood
System for platelets collected on the Amicus platform. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pathogen Inactivation Studies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Published results of laboratory and animal model studies conducted by Cerus have demonstrated
the efficacy of the INTERCEPT Blood System for the inactivation of a broad array of viral, bacterial and parasitic pathogens transmitted through platelet transfusions, including HIV, CMV, HTLV, model
hepatitis viruses and West Nile Virus, 19 strains of bacteria, including syphilis, and the parasites that cause malaria, leishmaniasis and Chagas' disease. A pre-clinical study conducted
by Cerus in collaboration with the National Institutes of Health demonstrated that platelet concentrates contaminated with high levels of hepatitis B virus or hepatitis C virus, and treated with the
INTERCEPT Blood System, did not transmit the viruses to susceptible animals. Cerus has tested these pathogens at and above concentrations that it believes may be present in contaminated platelet
concentrates. Similar laboratory studies have indicated inhibition of white blood cell activity, including the inhibition of synthesis of certain proteins associated with adverse immune reactions. In
addition,
three studies conducted by Cerus have indicated that use of the platelet pathogen inactivation system prevented graft-versus-host disease in two pre-clinical mouse models. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pre-Clinical Safety Studies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus has successfully completed and published the results of a comprehensive series
of pre-clinical safety studies for the INTERCEPT Blood System for platelets. Completed safety studies of amotosalen and the INTERCEPT Blood System for platelets include acute toxicology,
three-month tolerability, general pharmacology, reproductive toxicology, genotoxicity, carcinogenicity, phototoxicity and absorbance, distribution, metabolism and excretion (ADME) studies. Results
from each of these studies have consistently demonstrated a very strong safety profile for the INTERCEPT Platelet System. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Clinical Trials.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;1996, Cerus completed a Phase Ia single-blind, randomized clinical trial in 23 healthy human
subjects divided between two sites. This study used a cross-over design in which all subjects received both treated and untreated platelets. The study compared the proportion of transfused
platelets circulating in the first hours after transfusion (post-transfusion recovery) and the length of time the transfused platelets circulate in the recipient's bloodstream (lifespan)
of a small volume of five-day-old treated and untreated platelets. Under current FDA regulations, platelets may not be stored for more than five days after collection from the
donor. This pilot study was conducted without the use of the CAD, which was evaluated in Phase IIa. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September&nbsp;1996, Cerus completed a Phase Ib single-blind, randomized, cross-over clinical trial in ten healthy human subjects. This study compared the tolerability
and safety of photochemically treated platelets processed with the CAD with untreated platelets. This second study involved the transfusion of full therapeutic doses of platelets given at the maximum
tolerable transfusion rate. No adverse events attributable to transfusion with the treated platelets were reported. Post-transfusion levels of amotosalen in plasma and clearance of
amotosalen were measured. These clinical data, together with Cerus' pre-clinical data, reflected acceptable safety margins and cleared the INTERCEPT Platelet System for a Phase IIa
clinical trial. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
November&nbsp;1996, Cerus completed a Phase IIa clinical trial designed to measure the post-transfusion platelet recovery and lifespan of photochemically treated
platelets processed with the CAD and stored for five days. This study was conducted in 16 healthy subjects from the Phase Ia study to permit comparisons with prior results. In Cerus' Phase IIa
clinical study report, the average post-transfusion recovery of five-day-old platelets treated with Cerus' platelet pathogen inactivation system was lower than that
of the untreated five-day-old platelets. Although this difference was statistically significant, the average post-transfusion recovery was within the range of
average recoveries reported in most published studies funded by NIH and Baxter, as well as in a number of other studies reported in the scientific literature. These published studies used currently
approved processing and storage systems. In addition, in Cerus' clinical study, the average lifespan of treated platelets was shorter than that of untreated platelets. Although this difference was
statistically significant and the average lifespan was lower than the range of average untreated platelet lifespans reported in the published studies referred to above, the average lifespan was within
the distribution of ranges of untreated platelet lifespans reported in
such studies. Post-transfusion recovery and lifespan of five-day-old standard platelets varies widely, even in healthy individuals. As a result, there is no
established regulatory or clinical standard for post-transfusion recovery and lifespan of platelets. The clinical investigators reported no adverse events attributable to transfusion with
the treated platelets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
July&nbsp;1997, Cerus completed a Phase IIb clinical trial in 15 healthy subjects available from the Phase IIa clinical trial to assess the combined effect of treatment with the
INTERCEPT Blood System and gamma irradiation on post-transfusion platelet recovery and lifespan. The mean platelet recovery and life span data collected in Phase IIb were consistent with
those of the Phase IIa study, and fell within the range of published studies of currently approved platelet concentrates. The clinical investigators reported no adverse events attributable to
transfusion with the treated platelets. Cerus believes, based on discussions with the FDA, that the post-transfusion recovery and lifespan of platelets following treatment with the
INTERCEPT Blood System are clinically acceptable. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
November&nbsp;1998, Cerus completed a Phase IIc clinical trial in 42 platelet-deficient patients. The Phase IIc trial was initially designed as a double-blind, randomized,
cross-over study in which double dose platelet transfusions were given to platelet-deficient patients and post-transfusion platelet count increment and bleeding time correction
were measured. To increase its experience in patients prior to a Phase III trial, Cerus amended the Phase IIc protocol to include patients for whom platelet count increment, but not bleeding time
correction, would be measured and to add a second site to evaluate the system with platelets collected using alternate automated collection equipment. Based on the results from this study, the FDA
cleared Cerus to proceed into a Phase III clinical trial. The Phase IIc clinical trial, given its small size, was of limited statistical power. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
August&nbsp;2000, Cerus completed its European Phase III EuroSPRITE clinical trial of treated pooled random donor platelets in 103 patients requiring platelet transfusions. The
study was conducted in four European countries and served as the pivotal trial for the CE Mark approval in Europe, which was received in 2002. The whole blood platelets were collected using the buffy
coat process, which is the predominant method used in Europe to prepare platelet concentrates. The trial was a double-blind, randomized, controlled study designed to assess the therapeutic efficacy of
platelets treated with the INTERCEPT Blood System. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
trial had co-primary endpoints: corrected count increment and platelet count increment, each measured one hour after transfusion. The corrected count increment measures the increase
in the patient's platelet count after a platelet transfusion, corrected for transfusion platelet dose and the patient's blood volume. For this measure, one hour after transfusion, the performance of
treated platelets was similar to that of the untreated platelets. The platelet count increment, which measures the platelet count increase without correcting for dosage or blood volume, is influenced
by the platelet dose the patient receives. In this study the platelet dose per transfusion of treated platelets was approximately ten percent lower than that of untreated platelets. A preliminary
analysis of the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

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<P><FONT SIZE=2>
EuroSPRITE data showed the resulting platelet count increment one hour after transfusion of treated platelets was statistically lower than that after transfusion of untreated platelets. However, both
the platelet dose per transfusion and the platelet count increment one hour after transfusion were within
the typical therapeutic range reported in medical literature for untreated platelets and considered clinically acceptable. Additional statistical analysis presented at the meeting of the American
Society of Hematology in December&nbsp;2000 showed comparable efficacy of INTERCEPT platelets to that of control platelets and the preservation of platelet performance and function following
pathogen inactivation with the INTERCEPT Blood System. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Secondary
endpoints for the study included multiple factors relevant to clinical efficacy and safety. The results for two important indicators of clinical efficacy, the number of
patients with a major bleeding episode and the number of red blood cell transfusions, were comparable for the treated and untreated patients. Similarly, the time between platelet transfusions, the
total platelet dose per patient and the number of adverse events were similar between the two groups. Both the platelet count increment and the corrected count increment measured 24&nbsp;hours after
transfusion, while statistically lower than those following the transfusion of untreated platelets, were within the typical therapeutic range reported in the medical literature for untreated
platelets. No serious adverse events were directly attributed to the use of the INTERCEPT Blood System for platelets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
also completed a 21-patient clinical trial in Europe to qualify the system for its commercial configuration and completed a 43-patient clinical trial in
Europe to extend qualification of the system to platelets collected by the Amicus apheresis platform. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
March&nbsp;2001, Cerus completed its United States Phase III SPRINT clinical trial. The randomized, controlled, double-blind 671-patient clinical trial was designed to
evaluate the therapeutic efficacy and safety of INTERCEPT platelets. In the trial, platelet transfusions were administered to reduce the risk of bleeding during severe thrombocytopenia and to treat
active bleeding. The primary endpoint of the study was comparison of the proportion of patients with moderate bleeding following platelet transfusion with either INTERCEPT platelets or platelets that
had not been treated with a pathogen inactivation process. The data showed that the proportion of patients with moderate bleeding between the patients who received INTERCEPT platelets and patients who
received control platelets was statistically equivalent and within 1% of each other, achieving the trial's primary endpoint of a less than 12.5% difference between the two groups. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
study also evaluated a number of secondary endpoints comparing INTERCEPT platelets to untreated platelets. Severe bleeding and duration of platelet support were not statistically
different between the groups. The trial data also demonstrated that INTERCEPT platelets were associated with a statistically lower number of transfusion reactions than untreated platelets. Evaluation
of other secondary measures of platelet count increment (measurements of post-transfusion platelet count increase) and number of platelet transfusions per patient showed a significant
difference between the group of patients who received INTERCEPT platelets and the group of patients who received untreated platelets, but these differences did not affect the primary trial endpoint of
demonstrating equivalence in the proportion of patients with moderate bleeding between the two groups. Although differences were observed for specific adverse event terms, adverse events and serious
adverse events in the aggregate were not statistically different between the groups and were consistent with expectations in the seriously ill patient population undergoing intensive chemotherapy. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Phase III United States SPRINT trial was designed to assess the therapeutic efficacy of platelets treated with the INTERCEPT Blood System for platelets collected by Baxter's
apheresis collection system. In order to obtain FDA approval of the INTERCEPT Blood System for use in treating pooled random donor platelets, Cerus will need to complete development of an additional
configuration of its platelet system and conduct additional clinical studies. Additionally, because of the risk of bacterial growth, current FDA rules require that pooled platelets be transfused
within four </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

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hours of pooling, and, as a result, most pooling occurs at hospitals. The INTERCEPT Blood System is intended to permit storage of platelets for five days after treatment and pooling by the blood
center, which would reduce hospital costs associated with the pooling process. In order for the INTERCEPT Blood System to be effectively implemented at blood centers for use with pooled random donor
platelets, the FDA-imposed limit on the time between pooling and transfusion will need to be lengthened or eliminated for INTERCEPT platelets. </FONT></P>

<P><FONT SIZE=2><B><I>Plasma Program  </I></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Plasma Usage and Market.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Plasma is a noncellular component of blood that contains coagulation factors and is essential for
maintenance of intravascular volume. Plasma is either separated from collected units of whole blood or collected directly by apheresis. The collected plasma is then packaged and frozen to preserve the
coagulation factors. The frozen plasma is then designated for use as FFP for transfusion or made available for fractionation into plasma derivatives. Plasma is the primary source of blood clotting
factors and is used to control bleeding in patients who have clotting factor deficiencies, such as patients undergoing transplants or other extensive surgical procedures and patients with chronic
liver disease or certain genetic clotting factor deficiencies, and to treat certain diseases that require plasma exchange therapy. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
estimates the production of FFP in 2002 to have been 3.7&nbsp;million units for transfusion in North America, 2.2&nbsp;million transfusion units in Western Europe and
2.4&nbsp;million transfusion units in Japan. Based on the Report on Blood Collection and Transfusion in the United States in 2001 prepared by the National Blood Data Resource Center, the estimated
base price of a 250 ml transfusion unit of FFP in the United States ranged from approximately $51 to $55. A typical therapeutic transfusion consists of four transfusion units of FFP. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INTERCEPT Blood System for Plasma.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The INTERCEPT Blood System for plasma uses the same psoralen compound and illumination
device and a CAD similar to that being used with the INTERCEPT Blood System for platelets. In the INTERCEPT Blood System for plasma, untreated plasma is transferred to a disposable container with
amotosalen. The mixture of amotosalen and plasma is then illuminated for approximately three to five minutes. The treated plasma then undergoes a removal step, which uses the CAD to reduce the amount
of residual amotosalen and amotosalen breakdown products, and is transferred into the final storage container and frozen in accordance with standard protocols. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Development Status.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The INTERCEPT Blood System for plasma currently is in Phase III clinical trials in the United States. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pathogen Inactivation Studies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Published results of laboratory studies conducted by Cerus to date have demonstrated the
efficacy of the INTERCEPT Blood System for plasma for the inactivation of a broad array of pathogens transmitted through blood transfusion, including HIV, model hepatitis viruses and syphilis. A
pre-clinical study conducted by Cerus in collaboration with the National Institutes of Health demonstrated that FFP contaminated with high levels of hepatitis B virus or hepatitis C virus,
and treated with the INTERCEPT Blood System, did not transmit the viruses to susceptible animals. Cerus has conducted laboratory studies indicating the efficacy of the INTERCEPT Blood System for the
inactivation of the parasite that causes Chagas' disease in FFP. Because of the mechanism of action of the INTERCEPT Blood System for plasma, Cerus believes that the system also inhibits white blood
cell activity. To date, Cerus has conducted no studies to detect inhibition of white blood cell activity in FFP. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

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<P><FONT SIZE=2><A
NAME="page_di1204_1_14"> </A> </FONT> <FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Coagulation Function Studies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus has assessed the impact of amotosalen photochemical treatment on
the function of plasma
proteins. Plasma derived from whole blood or apheresis must be frozen within eight hours of collection to meet the standard as "fresh frozen plasma." After freezing, FFP may be stored for up to one
year, thawed once and must be transfused within four hours of thawing. Cerus has performed laboratory studies measuring the coagulation function activity of various clotting factors in FFP after
photochemical treatment, CAD treatment, freezing and thawing. Cerus believes that data from these laboratory studies indicate that treated FFP maintained adequate levels of coagulation function for
FFP. There can be no assurance that the FDA or foreign regulatory authorities would view such levels of coagulation function as adequate. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pre-Clinical Safety Studies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus has successfully completed and published results of a series of
pre-clinical safety studies for the INTERCEPT Blood System for plasma. Completed safety studies include acute toxicology, three-month tolerability, general pharmacology, reproductive
toxicology, genotoxicity, carcinogenicity, phototoxicity and ADME studies. Results from each of these studies have consistently demonstrated a very strong safety profile for the INTERCEPT Blood System
for plasma. Cerus believes that all pre-clinical safety studies required for regulatory approval have been completed, however, regulatory authorities may require additional
pre-clinical safety studies to be performed. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Clinical Trials.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;1997, Cerus completed a Phase I clinical study in healthy subjects that demonstrated the
safety and tolerability of FFP treated with the INTERCEPT Blood System as well as the comparability of post-transfusion coagulation factors between subjects transfused with treated and
untreated FFP. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
November&nbsp;1998, Cerus completed a Phase IIa clinical trial. In this study, 27 healthy subjects donated plasma. The Phase IIa study showed that post-transfusion
coagulation factor levels of subjects receiving FFP treated with the INTERCEPT Blood System were comparable to those of subjects receiving untreated FFP. There were no safety issues attributable to
transfusion of the treated FFP. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
1999, Cerus completed a Phase IIb clinical trial of the INTERCEPT Blood System for plasma. The study was a controlled, double-blind trial in 13 patients diagnosed with chronic liver
diseases. Each patient, prior to an invasive surgical or diagnostic procedure, received a therapeutic dose of up to two liters of either treated or untreated FFP. Correction of patients' blood
clotting time and certain coagulation factor levels after transfusion of treated FFP were recorded and compared, and found to be comparable to those of patients receiving untreated FFP. The Phase IIb
clinical trial, given its small size, was of limited statistical power. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
January&nbsp;2001, Cerus completed a Phase IIIa clinical trial of the INTERCEPT Blood System for plasma. The open-label trial, which was conducted in collaboration with
the National Hemophilia Foundation's Hemophilia Research Society, included 34 patients with a variety of hereditary blood clotting factor deficiencies. Patients with these deficiencies are susceptible
to bleeding or increased blood clotting and may require plasma transfusions to prevent or stop bleeding. The Phase IIIa results, although not statistically powered, showed that infusions of plasma
treated with the INTERCEPT Blood System were well tolerated and resulted in an increase in blood clotting factor levels consistent with historical controls using non-pathogen inactivated
plasma. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
May&nbsp;2001, Cerus completed a Phase IIIb clinical trial of the INTERCEPT Blood System for plasma. The multi-center, randomized, controlled, double-blind trial included 121
patients with acquired defects in coagulation, primarily due to end-stage liver disease. These patients generally require plasma support during surgery or other invasive procedures,
including liver transplantation. The trial evaluated the blood clotting function of INTERCEPT plasma compared to untreated plasma to determine whether the pathogen inactivation treatment process
affected therapeutic performance. Blood clotting function was measured using prothrombin (PT) and partial thromboplastin (PTT) times, widely used measures of blood clotting function. The primary
endpoint of the trial was a comparison of PT and PTT responses between INTERCEPT plasma and untreated plasma during a seven-day treatment </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

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period. The results, which achieved the trial's statistical threshold, showed that the ability of INTERCEPT plasma to treat bleeding was statistically comparable to untreated plasma. In addition, the
safety and adverse events of INTERCEPT plasma compared to untreated plasma showed comparability between the two groups. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Patient
enrollment is ongoing in a Phase IIIc trial. The trial is a prospective, double-blind, randomized, controlled study of treated versus untreated FFP used in therapeutic plasma
exchange of 30 patients with a disease called thrombotic thrombocytopenic purpura (TTP). </FONT></P>

<P><FONT SIZE=2><B><I>Red Blood Cell Program  </I></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Red Blood Cell Usage and Market.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Red blood cells are essential components of blood that carry oxygen to tissues and carbon
dioxide to the lungs. Red blood cells may be transfused as a single treatment in surgical and trauma patients with active bleeding or on a repeated basis in patients with acquired anemia or genetic
disorders, such as sickle cell anemia, or in connection with chemotherapy. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
estimates the production of red blood cells in 2002 to have been 16&nbsp;million transfusion units in North America, 17&nbsp;million transfusion units in Western Europe and
4&nbsp;million transfusion units in Japan.
Based on the Report on Blood Collection and Transfusion in the United States in 2001 prepared by the National Blood Data Resource Center, the estimated base cost of a transfusion unit of red blood
cells ranged from approximately $143 to $164. A typical red blood cell transfusion consists of two or more red blood cell transfusion units. A red blood cell transfusion may also require one or more
additional procedures used to address problems presented by white blood cells and to conduct pathogen diagnostic testing beyond the standard testing. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INTERCEPT Blood System for Red Blood Cells.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The INTERCEPT Blood System for red blood cells uses a Helinx compound,
S-303, which undergoes irreversible chemical reactions with DNA and RNA, as does amotosalen, but does not require light. S-303, a small molecule synthesized by Cerus, is one of
a proprietary class of compounds called frangible anchor-linker-effectors (FRALEs). The selection of S-303 was based on an extensive analysis of the compound's safety and its ability to
inactivate pathogens and harmful white blood cells, and red blood cell survival and function after treatment with S-303. The active S-303 compound has been designed to rapidly
decompose into non-reactive byproducts following the pathogen inactivation process. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Development Status.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The INTERCEPT Blood System for red blood cells is in Phase III clinical trials in the United States. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pathogen Inactivation Studies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Published results of laboratory studies by Cerus have demonstrated the efficacy of the
INTERCEPT Blood System for the inactivation of a broad array of viral, bacterial and parasitic pathogens, including West Nile Virus, with preservation of red blood cell function. Cerus has also
conducted laboratory studies that have indicated inhibition of white blood cell activity. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pre-Clinical Safety Studies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus has successfully completed and published results of a number of
pre-clinical safety studies for the INTERCEPT Blood System for red blood cells. Completed safety studies include acute and chronic toxicology, reproductive toxicology, general
pharmacology, ADME, genotoxicity and carcinogenicity studies. The results of these studies have consistently demonstrated a strong safety profile for the INTERCEPT Blood System for red blood cells. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Clinical Trials.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;1999, Cerus completed a Phase Ia clinical trial of the INTERCEPT Blood System for red blood
cells. The study was a randomized, controlled trial in 42 healthy subjects. The study was designed to evaluate the post-transfusion viability of treated red blood cells that were stored
for 35&nbsp;days prior to transfusion. The study showed that the circulation of treated red blood cells exceeded the American Association of Blood Banks' standard for red blood cell recovery
24&nbsp;hours after transfusion. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
October&nbsp;1999, Cerus completed a Phase Ib clinical trial of the INTERCEPT Blood System for red blood cells. The study included 28 healthy subjects, each of whom received four
transfusions of treated
red blood cells. The study demonstrated that there was no detectable immune response directed against treated red blood cells that were stored for 35&nbsp;days prior to transfusion. The study also
showed that circulation of treated red blood cells exceeded the American Association of Blood Banks standard for red blood cell recovery in response to multiple small doses of treated red blood cells
24&nbsp;hours after transfusion. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
July&nbsp;2001, Cerus completed a Phase Ic clinical trial of the INTERCEPT Blood System for red blood cells. The two-part trial enrolled 29 individuals in a crossover
protocol under which individuals were transfused in random sequence with INTERCEPT red blood cells and conventional red blood cells that had not undergone a pathogen inactivation process. The results
of this trial showed that INTERCEPT red blood cells demonstrated comparable survival to conventional red blood cells. The average post-transfusion recovery for both types of red cells
exceeded the commonly accepted blood bank standard of 75&nbsp;percent. In the second part of the study, 11 additional subjects received full unit transfusions of 35&nbsp;day-old
INTERCEPT red blood cells. The full unit transfusions were well tolerated. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
January&nbsp;2002, Cerus initiated a Phase III clinical trial of the INTERCEPT Blood System for red blood cells for acute transfusion support. Patient enrollment and transfusion in
this trial is ongoing. The multi-center, double-blind, randomized trial is expected to enroll approximately 200 patients requiring acute red blood cell support as a result of cardiac surgery. The
primary endpoint of the trial is a comparison of the clinical performance of INTERCEPT red blood cells to control red blood cells, which are not prepared with a pathogen inactivation process. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
March&nbsp;2002, Cerus initiated a Phase III trial of the INTERCEPT Blood System for red blood cells for chronic transfusion support. Patient enrollment and transfusion in this
trial is ongoing. The multi-center, double-blind, randomized trial is expected to enroll approximately 50 patients who require red blood cell transfusion support for the treatment of chronic anemia
due to hereditary disorders, such as sickle cell disease or thalassemia. In this crossover trial, each patient will receive, in random order, red blood cells treated with the INTERCEPT process and
control red blood cells that are not prepared with a pathogen inactivation process. The primary endpoint of the trial is a comparison of the amount of INTERCEPT red blood cells and control red blood
cells transfused to manage the patients' chronic anemia. Data from the two Phase III trials are expected to support both European CE Mark and U.S. regulatory applications. </FONT></P>

<P><FONT SIZE=2><B><I>ACIT Program  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus believes its Helinx technology may have application in treating T-cells (white blood cells) that are transfused during stem cell (blood-forming)
transplantation procedures used to treat certain cancers such as lymphoma and leukemia. Cerus has conducted pre-clinical studies that have indicated that donor T-cells treated
with its technology may reduce the risk of serious complications and may also improve the availability and success rate of bone marrow transplantation. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stem Cell Transplantation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Stem cells used for transplantation can be harvested from either bone marrow or circulating blood.
ACIT uses donor T-cells, which are transfused to improve immune function in patients whose immune systems have been weakened by disease or disease-related therapies such as chemotherapy
and radiation therapy. Donor T-cells are typically transfused following a bone marrow or stem cell transplantation, which is used principally in leukemia and lymphoma patients to
reconstitute blood-forming cells after chemotherapy or radiation therapy to kill leukemia and lymphoma cells. The stem cells are collected from the patient (autologous transplantation) or from a
closely-matched donor (allogeneic transplantation). Autologous transplantation is typically safer but is not a curative therapy and often results in a relapse of the disease. </FONT></P>

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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Graft-Versus-Host Disease.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Allogeneic transplantation can be curative, but carries significant risk of
complications such as GVHD and viral and bacterial infections, which often lead to the patient's death. GVHD is nearly always fatal and occurs when the donor white blood cells recognize the patient's
body as foreign and proliferate and attack the patient's healthy tissue. Allogeneic transplantation also requires very close matching between the donor and the patient. Often, patients die from the
progression of disease while awaiting transplantation from a matched donor. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stem Cell Transplantation Market.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Bone marrow and stem cell transplantation are emerging as the primary treatments for many
patients diagnosed with a variety of advanced malignant diseases. Typical diseases for which this therapy is used include chronic and acute leukemias and non-Hodgkin's lymphoma where first
line therapies, such as chemotherapy, have not been effective. Each year, over 200,000 new cases of these diseases are diagnosed. Cerus believes that there are potential applications for its ACIT
program beyond allogeneic stem cell transplantation procedures for leukemia and lymphoma. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Donor T-Cell Treatment System.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus believes that it can apply its Helinx technology to treat donor
T-cells to improve the outcomes of stem cell transplantation procedures. Cerus is developing a system designed to treat the T-cells in a way that will preserve therapeutic
properties while eliminating the cells' ability to proliferate and attack the patient's healthy tissues. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Development Status.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus' ACIT program is in Phase I clinical trials in the United States. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pre-Clinical Studies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Laboratory and animal studies conducted and presented by Cerus have indicated that its
Helinx technology can treat T-cells to prevent proliferation while preserving the cells' ability to aid engraftment and to improve transplant outcomes. Cerus has also completed animal
studies that indicate that its technology can facilitate engraftment of donor stem cells, which suggests the system has the potential to increase the number of patients eligible to receive allogeneic
transplants. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Clinical Trials.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In 2001, Cerus completed a Phase Ia clinical study of its ACIT program designed to treat allogeneic donor
T-cells with amotosalen for use as supplemental therapy in conjunction with mismatched bone marrow transplantation for leukemia patients. The study measured the tolerability and safety of
amotosalen treated allogeneic T-cells in patients who received closely matched allogeneic bone marrow transplants. The study showed that the Helinx treated T-cells were
tolerated by the patients. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
is collaborating with the National Marrow Donor Program, which is preparing to conduct a Phase Ib clinical study of Cerus' ACIT program in bone marrow transplants from unrelated
donors. Cerus cannot provide assurance as to the timing of this or any further studies. </FONT></P>

<P><FONT SIZE=2><B><I>EBV Vaccine Program  </I></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EBV and Organ Transplantation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;EBV infections can cause serious complications in solid organ transplant patients, including
the development of malignant lymphoma, which can often be fatal. The incidence of these tumors varies according to the organ transplanted, the age group of the recipient and the immunosuppressive
regimen used. Patients not previously exposed to the virus prior to transplantation are at least ten times more likely to develop a malignant lymphoma than those who have been exposed. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus' EBV Vaccine.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus' EBV cellular vaccine utilizes the company's proprietary Helinx technology, which, when activated,
binds to and crosslinks nucleic acids (DNA and RNA), and has the ability to prevent the replication of viruses, bacteria and other pathogens, and to control cellular proliferation. The vaccine is
produced by taking immune cells from the patient, infecting the cells with EBV and then treating those cells with amotosalen to inactivate the virus. The resultant cellular vaccine will be
administered to the patient prior to organ transplantation. The photoinactivated EBV infected </FONT></P>

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immune cells are designed to stimulate a strong cellular immunity against the EBV-associated lymphoma. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Development Status.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus' EBV vaccine program is in a Phase I clinical trial in the United States. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Clinical Trials.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2003, a Phase I clinical trial was initiated. The study is being conducted at the Kimmel
Cancer Center at Johns Hopkins University, and is supported in part by a grant from the National Institutes of Health. The Phase I trial, expected to enroll up to 40 organ transplant patients, will
evaluate the safety and efficacy of the cellular vaccine in generating EBV-specific immune responses. </FONT></P>

<P><FONT SIZE=2><B><I>Future Product Development  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus believes that its Helinx technology may have applications beyond inactivating pathogens in blood products, in modifying T-cells to improve
clinical outcomes of cellular therapies and in producing a vaccine for EBV-associated lymphoma. In addition to its plans to pursue the therapeutic potential of its Helinx technology, Cerus
also plans to expand its product candidate pipeline by exploring other development areas where it can address large, unmet medical needs. </FONT></P>

<P><FONT SIZE=2><B><I>Alliance with Baxter  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus has established an alliance with Baxter for the development of the INTERCEPT Blood System. Under two primary development, manufacturing and marketing
agreements, Cerus and Baxter generally share development activities with the primary development activity for the compounds and the pre-clinical and clinical studies performed by Cerus and
the primary development activity for the system disposables and devices performed by Baxter. Upon commercialization, Cerus provides the inactivation compounds and Baxter is responsible for
manufacturing and assembling the system disposables and illumination devices. Baxter is also responsible for marketing, selling and distributing the system. The programs under these agreements can be
terminated by either party under certain circumstances, see "Risk Factors&#151;We rely heavily on Baxter for development funding, manufacturing, marketing and sales." </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Agreement with Baxter for the Development of the INTERCEPT Blood System for Platelets.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus has a development and
commercialization agreement with Baxter for the joint development of the INTERCEPT Blood System for inactivation of viruses, bacteria and other infectious pathogens in platelets used for transfusion.
This agreement provides for Baxter and Cerus to generally share system development costs equally, subject to mutually determined budgets established from time to time, and for Cerus to receive
approximately 33.5% of revenue from sales of inactivation system disposables after each party is reimbursed for its cost of goods to the extent the cost exceeds specified amounts. Baxter has an
exclusive, worldwide distribution license and is responsible for manufacturing and marketing the INTERCEPT Blood System for platelets. </FONT></P>

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<P><FONT SIZE=2><A
NAME="page_dk1204_1_19"> </A> </FONT> <FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Agreement with Baxter for the Development of the INTERCEPT Blood System for Red Blood Cells and INTERCEPT Blood System for
Plasma.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus also has a development and commercialization agreement with Baxter for the joint development of the INTERCEPT Blood System for inactivation of
viruses, bacteria and other infectious pathogens in red blood cells and FFP for transfusion. This agreement provides for Baxter and Cerus to generally share INTERCEPT Blood System for red blood cells
development costs equally, subject to mutually determined budgets established from time to time. Cerus is solely responsible for funding the development costs of the INTERCEPT Blood System for plasma.
Baxter has an exclusive, worldwide distribution license and will be responsible for manufacturing and marketing the INTERCEPT Blood System for red blood cells and INTERCEPT Blood System for plasma
following regulatory approvals. The agreement also provides for an equal sharing of revenue from sales of INTERCEPT Blood System for red blood cells disposables, and for Cerus to receive 75% and
Baxter to receive 25% of revenue from sales of INTERCEPT Blood System for plasma disposables, after each party is reimbursed for its cost of goods and a specified percentage allocation, not to exceed
14% of revenue, is retained by Baxter for marketing and administrative expenses. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
inception through December&nbsp;31, 2002, Cerus has received $46.7&nbsp;million in equity investments from Baxter and $25.9&nbsp;million in an equity investment from Baxter
International&nbsp;Inc. and Subsidiaries Pension Trust, and has recognized $30.0&nbsp;million in revenue from Baxter. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
January&nbsp;2003, Cerus received a $50.0&nbsp;million loan from Baxter Capital Corporation, a subsidiary of Baxter International,&nbsp;Inc. The interest rate for the loan is
12% per annum. No repayment of principal and interest is due until January&nbsp;2008. The loan is secured with collateral based on future revenue from sales of the INTERCEPT Blood System for
platelets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Baxter
has the ability to terminate any of the development programs under certain circumstances. </FONT></P>

<P><FONT SIZE=2><B><I>Agreement with Kirin Brewery Co.&nbsp;Ltd.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2001, Cerus entered into a collaborative agreement with the Pharmaceutical Division of Kirin to develop and market products for stem cell
transplantation based on Cerus' Helinx technology. Under the terms of the agreement, Cerus and Kirin will jointly develop the products. Cerus received an initial license fee of $1&nbsp;million. The
license fee is being deferred and recognized as development funding ratably over the development period. Cerus may not receive additional development funding from Kirin. Although the agreement calls
for Kirin to fund all development expenses for the Asia-Pacific
region and a portion of Cerus' development activities aimed at obtaining product approval in the United States, no such development activities by Cerus are currently ongoing. Upon product approval,
Kirin has exclusive rights to market the products in the Asia-Pacific region, including Japan, China, Korea and Australia, and Cerus will receive a specified share of product revenue,
including a royalty and reimbursement of its cost of goods. Cerus retains all marketing rights for the rest of the world, including the United States and Europe. </FONT></P>

<P><FONT SIZE=2><B><I>Cooperative Agreement with the Armed Forces of the United States  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2001, Cerus was awarded a $3.5&nbsp;million cooperative agreement by the Army Medical Research Acquisition Activity division of the
Department of Defense. In September&nbsp;2002, Cerus was awarded an additional $6.5&nbsp;million cooperative agreement to continue funding these projects. Cerus received the awards to develop its
pathogen inactivation technologies to improve the safety and availability of blood that may be used by the United States Armed Forces for medical transfusions. Under the conditions of the agreement,
Cerus will conduct research on the inactivation of infectious pathogens, including unusual viruses, bacteria and parasites, which are of particular concern to the Armed Forces. Cerus, in collaboration
with investigators at Walter Reed Army Institute of Research, also will investigate ways to improve the storage and shelf life of blood and blood components, which </FONT></P>

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may be used for medical transfusion support in the field. Also under the terms of the agreement, Cerus would receive commercial rights to the discoveries and inventions arising from the research
performed under the collaboration. </FONT></P>

<P><FONT SIZE=2><B>Product Engineering  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The INTERCEPT Blood System comprises mechanical instruments that activate the pathogen inactivation process and disposables that include plastic containers and
tubing, inactivation compounds and other fluids, and compound adsorption devices. The design and engineering of the system requires substantial effort. Although Cerus collaborates in these efforts,
the bulk of this work is undertaken by Baxter. </FONT></P>

<P><FONT SIZE=2><B>Manufacturing and Supply  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus has used, and intends to continue to use, third parties to manufacture and supply the amotosalen and S-303 inactivation compounds for its
systems for use in clinical trials and for the potential commercialization of its products in development. Cerus has no experience in manufacturing products for commercial purposes and does not have
any manufacturing facilities. Consequently, Cerus is dependent on contract manufacturers for the production of compounds and on Baxter for other system components for development and commercial
purposes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
its agreements with Baxter, Cerus is responsible for developing and delivering its proprietary compounds to Baxter for incorporation into the final system configuration. Baxter is
responsible for manufacturing or supplying the disposable units, such as blood storage containers and related tubing, as well as any device associated with the inactivation process. This arrangement
applies both to the current supply for clinical trials and, if applicable regulatory approvals are obtained, the future commercial supply. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
provide the inactivation compounds for the INTERCEPT Blood System for platelets and INTERCEPT Blood System for plasma, Cerus has contracted with one manufacturing facility for
synthesis of amotosalen. Under this contract, Cerus is not subject to minimum annual purchase requirements. If specified quantities of amotosalen are not purchased in any year, however, Cerus is
required to pay a maintenance fee of up to $50,000 for such year. Although Cerus believes that this manufacturer is capable of providing sufficient quantities of amotosalen for commercial use, based
on current expectations, additional production of amotosalen in larger quanitities will need to be completed in order to support product sales in the potential markets in which Cerus is seeking
approval. Cerus currently has a stock of compound sufficient to support the anticipated remaining product development planned for the INTERCEPT Blood System for platelets and INTERCEPT Blood System
for plasma, and to support near-term sales of the INTERCEPT Blood System for platelets in Europe. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
INTERCEPT Blood System for red blood cells requires the manufacture of S-303, which Cerus and its manufacturers have produced in only limited quantities, sufficient for
Cerus' research, pre-clinical and clinical development requirements to date. Additional quantities of S-303 will need to be manufactured in order to complete the ongoing Phase&nbsp;III
clinical trials. Cerus has contracted with two manufacturers to produce additional pilot-scale quantities of S-303 and to develop processes for the commercial-scale manufacture of
S-303. Cerus cannot be certain that these or any other manufacturers will be able to produce S-303 on a commercial scale or that Cerus will be able to enter into arrangements
for the commercial-scale manufacture of S-303 on reasonable terms, if at all. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
and its contract manufacturers purchase certain raw materials from a limited number of suppliers. While Cerus believes that there are alternative sources of supply for such
materials, establishing additional or replacement suppliers for any of the raw materials, if required, may not be accomplished quickly and could involve significant additional costs. Any failure by
Cerus to obtain any </FONT></P>

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of the materials used to manufacture Cerus' compounds from alternative suppliers, if required, would limit Cerus' ability to manufacture its compounds. </FONT></P>

<P><FONT SIZE=2><B>Marketing, Sales and Distribution  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The target market for the INTERCEPT Blood System consists of the blood centers and hospitals that collect, store and distribute blood and blood components. In the
United States, the American Red Cross collects and distributes approximately 50% of the nation's supply of blood and blood components. Other major blood centers include the New York Blood Center and
United Blood Services, each of which distributes approximately 6% of the nation's supply of blood and blood components. In many countries of Western Europe and in Japan, various national blood
transfusion services or Red Cross organizations collect, store and distribute virtually all of their respective nations' blood and blood components supply. Hospital-affiliated blood banks also store
and dispense blood and blood components but generally do not collect significant quantities of blood. Cerus believes that the relatively concentrated nature of the market may facilitate Baxter's
ability to penetrate the market. However, if Baxter fails to gain market acceptance from any of these participants, Cerus' business will suffer materially. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
believes that market acceptance of the INTERCEPT Blood System will depend, in part, on its ability to provide acceptable evidence of the safety, efficacy and
cost-effectiveness of the systems, as well as the ability of blood centers to obtain appropriate FDA licenses and adequate reimbursement for such systems. Cerus believes that market
acceptance of the INTERCEPT Blood System will also depend upon the extent to which physicians, patients and health care payors perceive that the benefits of using blood components treated with the
systems justify the additional costs and processing requirements in a blood supply that has become safer. While Cerus believes that the INTERCEPT Blood System is able to inactivate pathogens up to
concentrations that Cerus believes are present in contaminated blood components when the blood is donated, Cerus cannot be certain that contamination will never exceed such levels. Cerus does not
expect that the INTERCEPT Blood System will be able to inactivate all known and unknown pathogens, and the inability to inactivate certain pathogens may affect the market acceptance of the systems.
The INTERCEPT Blood System may not gain any significant degree of market acceptance among blood centers, physicians, patients and health care payors, even if clinical trials demonstrate safety and
efficacy and necessary regulatory approvals and health care reimbursement approvals are obtained. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Baxter
is responsible for the worldwide marketing, sales and distribution of the INTERCEPT Blood System. Cerus currently has a small marketing group that helps support Baxter's marketing
organization; however, Cerus does not intend to develop its own independent marketing and sales organization and expects to continue to rely on Baxter to market and sell the INTERCEPT Blood System. If
Baxter is not successful in marketing the INTERCEPT Blood System, Cerus will not receive revenue from the systems and its business will suffer. </FONT></P>

<P><FONT SIZE=2><B>Competition  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus believes that the INTERCEPT Blood System has certain competitive advantages over competing pathogen inactivation methods that are either on the market, or
in development. The INTERCEPT Blood System is designed for use in blood centers, to integrate with current blood collection, processing and storage procedures. Competing products in development or
currently on the market, such as
solvent-detergent treated plasma, use centralized processing, taking the blood product away from the blood center. The INTERCEPT Blood System is designed for use with single units of blood products.
Some potential competitors utilize a pooling process prior to pathogen inactivation, which significantly increases the risk of contamination by pathogens that are not inactivated. Additionally, the
INTERCEPT Blood System is being developed for each of the three transfused blood components&#151;platelets, plasma and red blood cells. There are currently no competitors that have </FONT></P>

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pathogen inactivation methods approved or in clinical trials for all three of these components. In addition to competition from other pathogen inactivation methods, Cerus expects to encounter
competition from other approaches to blood safety, including methods of testing blood products for pathogens. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
believes that the primary competitive factors in the market for pathogen inactivation of blood products will include the breadth and effectiveness of pathogen inactivation
processes, ease of use, the scope and enforceability of patent or other proprietary rights, product price, product supply and marketing and sales capability. In addition, the length of time required
for products to be developed and to receive regulatory and, in some cases, reimbursement approval is an important competitive factor. Cerus believes it competes favorably with respect to these
factors, although there can be no assurance that it will be able to continue to do so. The biopharmaceutical field is characterized by rapid and significant technological changes. Accordingly, Cerus'
success will depend in part on its ability to respond quickly to medical and technological changes through the development and introduction of new products. Product development involves a high degree
of risk, and there can be no assurance that Cerus' product development efforts will result in any commercially successful products. </FONT></P>

<P><FONT SIZE=2><B>Patents, Licenses and Proprietary Rights  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus' success depends in part on its ability to obtain patents, to protect trade secrets, to operate without infringing upon the proprietary rights of others and
to prevent others from infringing on the proprietary rights of Cerus. Cerus' policy is to seek to protect its proprietary position by, among other methods, filing United States and foreign patent
applications related to its proprietary technology, inventions and improvements that are important to the development of its business. As of December&nbsp;31, 2002, Cerus owned 61 issued or allowed
United States patents and 55 issued or allowed foreign patents. Cerus' patents expire at various dates between 2003 and 2018. In addition, Cerus has 23 pending United States patent applications and
has filed 16 corresponding patent applications under the Patent Cooperation Treaty, which are currently pending in Europe, Japan, Australia and Canada, and of which seven are also pending in China and
Hong Kong. Proprietary rights relating to Cerus' planned and potential products will be protected from unauthorized use by third parties only to the extent that they are covered by valid and
enforceable patents or are effectively maintained as trade secrets. There can be no assurance that any patents owned by, or licensed to, Cerus will afford protection against competitors or that any
pending patent applications now or hereafter filed by, or licensed to, Cerus will result in patents being issued. In addition, the laws of certain foreign countries do not protect Cerus' intellectual
property rights to the same extent as do the laws of the United States. </FONT></P>

<P><FONT SIZE=2><B>Government Regulation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus and its products are comprehensively regulated in the United States by the FDA and, in some instances, by state and local governments, and by comparable
governmental authorities in other countries. The FDA regulates drugs, medical devices and biologics under the Federal Food, Drug, and Cosmetic Act and other laws, including, in the case of biologics,
the Public Health Service Act. These laws and implementing regulations govern, among other things, the development, testing, manufacturing, record keeping, storage, labeling, advertising, promotion
and premarket clearance or approval of products subject to regulation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
believes the INTERCEPT Blood System will be regulated by the FDA as a medical device. It is also possible, however, that the FDA will decide to regulate the INTERCEPT Blood System
as a biologic, drug or a combination product including drugs or biologics and one or more medical devices (the blood bags and light source) requiring separate approval or clearance. Whether the FDA
regulates the INTERCEPT Blood System as a device or as one or more of the other alternatives, it is likely that </FONT></P>

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the FDA's Center for Biologics Evaluation and Research will be principally responsible for regulating the INTERCEPT Blood System. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before
a medical device may be marketed in the United States, the FDA must clear a premarket notification (a 510(k)) or approve a premarket approval (PMA) for the product. Before a new
drug may be marketed in the United States, the FDA must approve an NDA for the product. Before a biologic may be marketed in the United States, the FDA must approve a Biologic License Application
(BLA). Before a combination product can be marketed in the United States, it must have an approved PMA, NDA or BLA, depending on which statutory authority the FDA elects to use. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite
the multiplicity of statutory and regulatory possibilities, the steps required before approval are essentially the same whether the product is ultimately regulated as a medical
device, biologic, drug, a combination product or a combination thereof. The steps required before a medical device, drug or biologic may be approved for marketing in the United States pursuant to a
PMA, NDA or BLA, respectively, generally include (i)&nbsp;pre-clinical laboratory and animal tests, (ii)&nbsp;submission to the FDA of an investigational device exemption (IDE) (for
medical devices) or an investigational new drug application (IND) (for drugs or biologics) for human clinical testing, which must become effective before human clinical trials may begin,
(iii)&nbsp;appropriate tests to show the product's safety, (iv)&nbsp;adequate and well-controlled human clinical trials to establish the product's safety and efficacy for its intended
indications, (v)&nbsp;submission to the FDA of a PMA, NDA or BLA, as appropriate and (vi)&nbsp;FDA review of the PMA, NDA or BLA in order to determine, among other things, whether the product is
safe and effective for its intended uses. In addition, the FDA inspects the facilities at which the product is manufactured and will not approve the product unless compliance with current Good
Manufacturing Practices (cGMP) or Quality System Regulation requirements is satisfactory. Cerus believes the FDA will require a PMA for each of the INTERCEPT Blood Systems for platelets, plasma and
red blood cells. Cerus and Baxter's European investigational plan is based on the INTERCEPT Blood System being categorized as Class&nbsp;III drug/device combinations under the Medical Device
Directives (MDD) of the European Union. The European Union requires that medical devices affix the CE Mark, an
international symbol of adherence to quality assurance standards and compliance with the MDD. The INTERCEPT Blood System for platelets received the CE Mark in October&nbsp;2002. Separate CE Mark
certifications must be received for Baxter to sell the INTERCEPT Blood System for plasma and INTERCEPT Blood System for red blood cells in the European Union. Many individual European countries
require additional in-country studies to support an approval to market the products in such countries. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Baxter
is using a modular process for its PMA application for the INTERCEPT Blood System for platelets, and may use a modular process for the PMA application for the INTERCEPT Blood
System for plasma. The content, order and submission timing of the modules must be approved by the FDA, and a modular PMA application cannot be approved until all modules have been submitted to,
reviewed by and accepted by the FDA. Cerus cannot guarantee that the FDA will approve the use of modular submissions for any of Cerus' future product candidates. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the regulatory requirements applicable to Cerus and its products, there are regulatory requirements applicable to Cerus' prospective customers, the blood centers that
process and distribute blood and blood products. Blood centers and others will likely be required to obtain approved license supplements from the FDA before using the INTERCEPT Blood System. There can
be no assurance that any blood centers will be able to obtain the required licenses on a timely basis, or at all. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
support Baxter's requests for regulatory approval to market the INTERCEPT Blood System, Cerus and Baxter conduct various types of studies, including toxicology studies to evaluate
product safety, laboratory and animal studies to evaluate product effectiveness and human clinical trials to evaluate the safety, tolerability and effectiveness of treated blood components. Cerus
believes that, in </FONT></P>

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deciding whether the INTERCEPT Blood System is safe and effective, the regulatory authorities are likely to take into account whether it adversely affects the therapeutic efficacy of blood components
as compared to the therapeutic efficacy of blood components not treated with the system, and the regulatory authorities will weigh the system's safety, including potential toxicities of the
inactivation compounds, and other risks against the benefits of using the system in a blood supply that has become safer. Cerus has conducted many toxicology studies designed to demonstrate the
INTERCEPT Blood System's safety. There can be no assurance that regulatory authorities will not require further toxicology or other studies of Cerus' products. Based on discussions with the FDA and
European regulatory authorities, Cerus believes that data from human clinical studies is required to demonstrate the safety of treated blood components and their therapeutic comparability to untreated
blood components, but that only data from laboratory and animal studies, not data from human clinical studies, will be required to demonstrate the system's efficacy in inactivating pathogens. In light
of these criteria, Cerus' clinical trial programs for the INTERCEPT Blood System consists of studies that differ from typical Phase I, Phase II and Phase III clinical studies. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
of Cerus' clinical trials have been and are being conducted using prototype system disposables and devices. Cerus and Baxter plan to perform laboratory studies to demonstrate
equivalency between the prototype and the commercial configuration. Cerus cannot be certain that these studies will be successful or the FDA will not require additional studies, which could delay
commercialization. If Cerus
and Baxter decide to seek FDA approval of the INTERCEPT Blood System for platelets for use in treating pooled random donor platelets, additional clinical studies will be required. In addition, there
currently are three principal manufacturers of automated apheresis collection equipment, including Baxter. The equipment of each manufacturer collects platelets into plastic disposables designed for
that equipment; thus, a pathogen inactivation system designed for disposables used by one manufacturer will not necessarily be compatible with other manufacturers' collection equipment. Under an
agreement with Haemonetics Corporation, Baxter has agreed to provide Haemonetics with a platelet storage solution proprietary to Cerus and Baxter, with the objective that platelets collected on
certain future Haemonetics apheresis collection equipment may be directly treated using the INTERCEPT Blood System. However, Cerus and Baxter intend initially to seek FDA approval of the INTERCEPT
Blood System for platelets configured for Baxter's apheresis collection equipment. If Cerus and Baxter determine that compatibility with other equipment is desirable, additional processing procedures
and system configurations will need to be developed. Cerus believes that the FDA will also require supplemental clinical data before approving its system for use with platelets collected using other
equipment. </FONT></P>

<P><FONT SIZE=2><B>Health Care Reimbursement and Reform  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The future revenue and profitability of biopharmaceutical and related companies as well as the availability of capital to such companies may be affected by the
continuing efforts of the United States and foreign governments and third-party payors to contain or reduce costs of health care through various means. In the United States, given federal and state
government initiatives directed at lowering the total cost of health care, it is likely that the United States Congress and state legislatures will continue to focus on health care reform and the cost
of pharmaceuticals and on the reform of the Medicare and Medicaid systems. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus'
ability to commercialize its products successfully will depend in part on the extent to which appropriate reimbursement levels for the cost of the products and related treatment
are obtained from governmental authorities, private health insurers and other organizations, such as HMOs. Third-party payors are increasingly challenging the prices charged for medical products and
services. The trend toward managed health care in the United States and other countries and the concurrent growth of organizations such as HMOs, which could control or significantly influence the
purchase of health care </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>24</FONT></P>

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services and products, as well as legislative proposals to reform health care or reduce government insurance programs, may all affect the prices for Cerus' products. </FONT></P>


<P><FONT SIZE=2><B>Employees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of February&nbsp;28, 2003, Cerus had 158 employees, 107 of whom were engaged in research and development and 51 in general and administrative. No employees
of Cerus are covered by collective bargaining agreements, and Cerus believes that its relationship with its employees is good. </FONT></P>

<P><FONT SIZE=2><B>Available Information  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain a site on the world wide web at </FONT><FONT SIZE=2><I>www.cerus.com</I></FONT><FONT SIZE=2>; however, information found on our web site is not
incorporated by reference into this report. We make available free of charge on or through our web site our annual report of Form&nbsp;10-K, quarterly reports on
Form&nbsp;10-Q, current reports on Form&nbsp;8-K and amendments to those reports filed or furnished pursuant to Section&nbsp;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. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>25</FONT></P>

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<BR></FONT><FONT SIZE=2><B>RISK FACTORS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>Cerus' business faces significant risks. If any of the events or circumstances described in the following risks actually occur, Cerus'
business may suffer, the trading price of Cerus' common stock could decline and Cerus' financial condition or results of operations could be harmed. These risks should be read in conjunction with the
other information set forth in this report.</I></FONT></P>

<P><FONT SIZE=2><B>If our pre-clinical and clinical trials are not successful or the data are not considered sufficient by regulatory authorities to grant marketing approval, Baxter
and we will be unable to commercialize our products and generate revenue.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for the INTERCEPT Blood System for platelets, which is approved for sale in Europe and Canada, we have no products that have received regulatory approval
for commercial sale. Our product candidates are in various stages of development, and we face the risks of failure inherent in developing medical devices and biotechnology products based on new
technologies. Our products must satisfy rigorous standards of safety and efficacy before the United States Food and Drug Administration and international regulatory authorities can approve them for
commercial use. Our INTERCEPT Blood System and stem cell transplantation programs are undergoing clinical testing. We must provide the FDA and foreign regulatory authorities with
pre-clinical, clinical and manufacturing data that demonstrate our products are safe, effective and in compliance with federal regulations before the products can be approved for
commercial sale. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
October&nbsp;2002, the INTERCEPT Blood System for platelets received CE Mark approval in Europe. Our development and marketing partner, Baxter Healthcare Corporation, will need to
complete validation studies and obtain reimbursement approvals in some individual European countries to market our products in those countries. In certain countries, including the United Kingdom,
France and Germany, the system must be approved for purchase or use by various governmental or non-governmental (such as the Paul Ehrlich Institute in Germany) entity or entities in order
for it to be adopted by a specific customer. The level of additional product testing varies by country, but could take more than six months to complete after CE Mark approval. We completed our Phase
III clinical trial of the INTERCEPT Blood System for platelets in the United States in March&nbsp;2001, but Baxter and we have not yet submitted all of the modules of our pre-market
approval application to the FDA. We have completed Phase IIIa and Phase IIIb clinical trials of the INTERCEPT Blood System for plasma in the United States and are conducting a Phase IIIc clinical
trial. We are conducting Phase III clinical trials of INTERCEPT red blood cells in the United States. Our allogeneic cellular immune therapy (referred to as ACIT) program, designed to improve the
outcome of bone marrow transplantation procedures
through use of T-cells treated with the Helinx technology, is in Phase I clinical trials in the United States. Last, our Epstein-Barr virus (referred to as EBV) cellular
vaccine program is in a Phase I clinical trial in the United States. We will have to conduct significant additional research and pre-clinical (animal) and clinical (human) testing before
we can file additional applications for product approval with the FDA and foreign regulatory authorities. Clinical trials in particular are expensive and have a high risk of failure. In addition, to
compete effectively, our products must be easy to use, cost-effective and economical to manufacture on a commercial scale. Any of our product candidates may fail in the testing phase or
may not attain market acceptance, which could prevent us from achieving profitability. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
may take us several years to complete our clinical testing, and failure can occur at any stage of testing. We cannot rely on interim results of trials to predict their final results,
and acceptable results in early trials might not be repeated in later trials. Any trial may fail to produce results satisfactory to the FDA or foreign regulatory authorities. Pre-clinical
and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approval. Negative or inconclusive results from a pre-clinical study or clinical
trial or adverse medical events during a clinical trial could cause a pre-clinical study or clinical trial to be repeated, require other studies to be performed or cause a </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>26</FONT></P>

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program to be terminated, even if other studies or trials relating to a program are successful. The FDA has requested additional analyses of our United States Phase III clinical trial data. We are
currently in discussions with the FDA to determine what additional information, which could include futher clinical studies, may be required to approve our platelet system. </FONT></P>

<P><FONT SIZE=2><B>We may fail to complete our clinical trials on time or be unable to complete the trials at all.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant clinical trial delays would impair our ability to commercialize our products and could allow competitors to bring products to market before we do.
Some of our clinical trials involve patient groups with rare medical conditions, which has in the past made, and may continue to make, it difficult to identify and enroll a sufficient number of
patients to complete the trials on time. Our Phase III clinical trials of the INTERCEPT Blood System for red blood cells involves patient groups that include a significant percentage of children,
which has made, and may continue to make, it difficult to obtain consent to enroll these patients in our trials. Other factors, including the unavailability of blood products or delays in the supply
of clinical product material, could also delay our clinical trials. We are planning clinical trials of our ACIT and EBV vaccine programs to be sponsored by other organizations, which will further
reduce our ability to control the progress of these trials. Our product development costs will increase if we have additional delays in testing or approvals. </FONT></P>

<P><FONT SIZE=2><B>We are using prototype components in our pre-clinical studies and clinical trials and have not completed the components' commercial design.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we fail to develop commercial versions of the systems on schedule, our potential revenue would be delayed or diminished and our competitors may be able to
bring products to market before we do. The system disposables and instruments we use in our pre-clinical studies and clinical trials are prototypes of
those to be used in the final products. As a result, we plan to perform studies, both pre-clinical and clinical, to demonstrate the acceptability of the commercial configuration and the
equivalence of the prototype and the commercial design. However, regulatory authorities may require us to perform additional studies, both pre-clinical and clinical, using the commercial
versions of the systems, which may increase our expenses and delay the commercialization of our products. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the design and engineering effort required to complete the final commercial product is substantial and time-consuming. As with any complex development effort, we
expect to encounter design, engineering and manufacturing issues. Such issues have previously arisen, sometimes unexpectedly, and solutions to these issues have not always been readily forthcoming.
For example, in the system for plasma, fluid leakage was discovered in some components during the scale-up process for commercial manufacturing, resulting in a delay in expected
commercialization. The solution to this issue remains under study, and the time required to identify and implement a solution remains uncertain. Additional unforeseen design, engineering and
manufacturing issues may arise in the future, which could increase the development cost and delay commercialization of our products. </FONT></P>

<P><FONT SIZE=2><B>Because our product candidates have not been manufactured on a commercial scale, we face manufacturing uncertainties that could limit their commercialization. If our
third-party manufacturers fail to produce our compounds and other product components satisfactorily and in sufficient quantities, we may incur delays, shortfalls and additional expenses.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our product candidates, including many of the components, have never been manufactured on a commercial scale. We intend to use third-party manufacturers to
produce commercial quantities of the chemical compounds and other components to be used in our products to inactivate viruses, bacteria and other pathogens. These inactivation compounds and other
components have never been produced in commercial quantities. We have an agreement with a manufacturer to produce commercial quantities of amotosalen, which is the compound used in our platelet and
plasma systems. We currently do not have any other third-party manufacturing agreements in place for commercial production of other </FONT></P>

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compounds or components. Any additional commercial manufacturer will need to develop new methods and processes to manufacture these compounds on a commercial scale and demonstrate to us, the FDA and
foreign regulatory authorities that its commercial scale manufacturing processes comply with government regulations. It may be difficult or impossible to economically manufacture our products on a
commercial scale. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
limited number of suppliers manufacture our inactivation compounds for our use in product development, including clinical trials. We are pursuing contracts with manufacturers to
produce intermediates to our S-303 compound and to produce S-303 itself. If any of these manufacturers cannot produce our compounds in the required quantities or to the
required standards, we may face delays and shortfalls before we are able to identify alternate or additional manufacturers to meet these requirements. Contracts have not yet been signed for the
long-term supply in commercial quantities of the compounds used in our red blood cell system. While alternative suppliers for the inactivation compounds exist, any new manufacturer will
have to prove both to us and to the FDA and foreign
regulatory authorities that its manufacturing process complies with government regulations. Identifying and qualifying such new suppliers could be expensive and time-consuming. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Baxter
is responsible for manufacturing and assembling our pathogen inactivation systems. Baxter intends to rely on third parties to manufacture and assemble some of the system
components, many of which are customized and have not been manufactured on a commercial scale. Baxter has not produced the pathogen inactivation systems in commercial quantities and may not be able to
manufacture and assemble them, or do so economically. In the United States, studies related to the platelet system disposable and compound manufacturing need to be completed and included in FDA
submissions before the FDA would consider the applications for approval. Efforts to modify the design for manufacturing of our plasma system continue, and the timing of our regulatory submission for
the plasma system is dependent on the successful completion of this design, which is uncertain. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Baxter
has advised us that it intends to purchase certain key components of the pathogen inactivation systems from a limited number of suppliers. Contracts for the long-term
supply of certain components have not yet been signed. While we believe there are alternative suppliers for these components, it would be expensive and time-consuming to establish
additional or replacement suppliers for these components. If Baxter were unable to find adequate suppliers for these components, we may be required to redesign the systems, which could lead to
additional testing and clinical trials. If we were required to redesign the products, our development costs would increase, and our programs could be delayed significantly. </FONT></P>

<P><FONT SIZE=2><B>We will need to establish a sufficient shelf life for the components of our products before the FDA can approve our products for sale.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product stability studies to establish the shelf life of the platelet system and plasma system disposables have not yet demonstrated a sufficient shelf life.
Accordingly, certain disposables and packaging are being redesigned, and product stability will need to be validated through additional studies, which are expensive and time consuming. If sufficient
shelf life cannot be demonstrated, the products may not achieve customer acceptance and may not receive regulatory approval in the United States. </FONT></P>

<P><FONT SIZE=2><B>Our products may not achieve acceptance in, or be rapidly adopted by, the health care community.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Even if our product candidates receive regulatory approval for commercial sale, physicians, patients and healthcare payors may not believe that the benefits of
using our systems justify their additional cost, because the blood supply has become safer or for other reasons. Baxter's ability to successfully commercialize our products will depend in part on the
availability of adequate reimbursement for product costs and related treatment of blood components from governmental authorities and private </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>28</FONT></P>

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health care insurers (including health maintenance organizations), which are increasingly attempting to contain health care costs by limiting both the extent of coverage and the reimbursement rate
for new tests and treatments. In addition, our products do not inactivate all known pathogens, and the inability of our systems to inactivate certain pathogens may inhibit their acceptance. For
logistical and financial reasons, the transfusion industry has not always integrated new technologies into their processes, even those with the potential to improve the safety of the blood supply. Our
products may require significant changes to our potential customers' space and staffing requirements and require significant capital investment. If our products fail to achieve market acceptance, we
may never become profitable. </FONT></P>

<P><FONT SIZE=2><B>We will need to develop and test additional configurations of our pathogen inactivation systems to address the entire market.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the United States, our efforts to develop our systems to inactivate viruses, bacteria and other pathogens in platelets have focused almost entirely on
apheresis platelets collected on Baxter's automated collection platform. Apheresis platelets are platelets that are collected from a single donor using an automated collection machine. Currently, we
estimate that the majority of platelets used in the United States are collected by apheresis, with the remainder prepared from pooled random donor platelets. Blood centers in the United States
preparing random donor platelets may be reluctant to switch to apheresis collection, and the FDA may require us to make our systems to inactivate viruses, bacteria and other pathogens in platelets
compatible with random donor platelets. In order to develop a platelet pathogen inactivation system compatible with random donor platelets, we plan to perform additional product development and
testing, including clinical trials. These development activities would increase our costs significantly, and may not be successful. In addition, FDA regulations limit the time from pooling to
transfusion to four hours to minimize the proliferation of bacterial contamination in the pooled product. As a result, most pooling occurs in hospitals. Our platelet system is designed for use in
blood centers, not at hospitals, and is intended to permit storage and transfusion of treated platelets for up to five days after pooling. The FDA's time limit between pooling and transfusion
currently precludes the use of our system with pooled random donor platelets. Although our system is designed to reduce the risk of bacterial contamination, we cannot predict whether the FDA would
remove this process time constraint to allow our system to be used with pooled random donor platelets, and we have not yet made a formal request for the FDA to do so. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Baxter
is one of three primary manufacturers of equipment for the collection of apheresis platelets in the United States. The equipment, design and materials used to collect the
platelets vary from manufacturer to manufacturer. We have conducted our pre-clinical and clinical studies in the United States for apheresis platelets collected using only Baxter's
equipment and materials. Under an agreement with Haemonetics Corporation, Baxter has agreed to provide Haemonetics with a platelet storage solution proprietary to Cerus and Baxter, with the objective
that platelets collected on certain future Haemonetics apheresis collection equipment may be directly treated using our platelet system. Baxter and we also are adapting our platelet system to allow
compatibility with other manufacturers' equipment. Such adaptations will require additional product development and testing, including clinical trials. These development activities will increase our
costs significantly, and may not be successful. Market acceptance of the platelet system in the United States may be delayed until the system receives regulatory approval for use on such other
equipment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
Europe, platelets also are typically prepared from several units of whole blood using a semi-automated process known as the buffy coat process. For platelets prepared by
the buffy coat process, our platelet system is approved for use only with Baxter's platelet collection and pooling materials. As a result, market acceptance in Europe of our platelet system for
platelets prepared by the buffy coat process will depend on market acceptance of Baxter's platelet collection and pooling sets or on our ability to develop products compatible with other
manufacturers' platelet collection and pooling sets. Our platelet system is also approved in Europe for use with Baxter's apheresis collection equipment as well as the apheresis collection equipment
of two other manufacturers through the use of preparation kits. </FONT></P>

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In Canada, our platelet system is approved for use with platelets prepared by the buffy coat process. Blood centers in Canada currently use the platelet rich plama and single donor
collection methods, and do not use the buffy coat process. The primary difference between the methods is the centrifugation process for separating the component from whole blood to obtain a
therapeutic dose of platelets. Baxter and we intend to apply for the license to use the platelet system in Canada with single-donor platlets. We will not have product sales in Canada unless we apply
for and receive approval for our system in Canada for use with single-donor platelets or Canadian blood centers implement the buffy coat method. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fresh
frozen plasma and red blood cells are also collected by different methods and equipment and in different volumes. Our systems for plasma and red blood cells being developed and
tested will not be suitable for all methods, equipment and volumes used to collect these blood components. We will need to develop and test additional configurations of these systems in order to
address the entire market. </FONT></P>

<P><FONT SIZE=2><B>A small number of customers will determine market acceptance of our pathogen inactivation systems.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Even if our products receive regulatory approval to be commercialized and marketed, due to the intense market concentration, failure to properly market, price or
sell our products to any of these large customers could significantly diminish potential product revenue. The market for our pathogen inactivation systems is dominated by a small number of blood
collection organizations. In the United States, the American Red Cross collects and distributes approximately 50% of the nation's supply of blood and blood components. Other major United States blood
collection organizations include the New York Blood Center and United Blood Services, each of which distributes approximately 6% of the nation's supply of blood and blood components. In many countries
of Western Europe and in Japan, various national blood transfusion services or Red Cross organizations collect, store and distribute virtually all of their respective nations' blood and blood
components supply. In Europe, the largest markets for our products are in Germany, the United Kingdom and France. Decisions on product adoption are centralized in the United Kingdom and France. In
Germany, decision on product adoption is expected to be on a blood center-by-blood center basis. We have not received in-country approvals to market our platelet
system in these countries. If we do not receive approvals to market our products in these countries, or if the products are not adopted in these countries, our potential product revenue in Europe will
be significantly decreased. </FONT></P>

<P><FONT SIZE=2><B>We rely heavily on Baxter for development funding, product engineering, manufacturing, marketing and sales.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have two development and commercialization agreements with Baxter for our systems to inactivate viruses, bacteria and other pathogens in each of the three
commonly transfused blood components: platelets, fresh frozen plasma and red blood cells, and we rely on Baxter for significant financial and technical contributions to these programs. Since the
beginning of our relationship with Baxter in 1993 through December&nbsp;31, 2002, we have received $46.7&nbsp;million in equity investments from Baxter and $25.9&nbsp;million from Baxter
International&nbsp;Inc. and Subsidiaries Pension Trust, and we have recognized $30.0&nbsp;million in revenue from Baxter. In January&nbsp;2003, we received a $50.0&nbsp;million loan from
Baxter Capital Corporation. Our ability to develop, manufacture and market these products successfully depends significantly on Baxter's performance under these agreements. </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>We rely on Baxter for engineering, manufacturing and supplying components of our pathogen inactivation
systems.</I></FONT><FONT SIZE=2> Under the terms of our agreements, Baxter is responsible for manufacturing or supplying the disposable units, such as blood storage containers and related tubing, as
well as any device associated with the inactivation processes. If these agreements were terminated or if Baxter otherwise failed to design or deliver an adequate supply of components, we would be
required to identify other third-party component manufacturers. We cannot assure you that we </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>30</FONT></P>

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<UL>

<P><FONT SIZE=2>would
be able to identify such manufacturers on a timely basis or enter into contracts with such manufacturers on reasonable terms, if at all. Any delay in the availability of devices or disposables
from Baxter could delay the submission of the INTERCEPT Blood System for regulatory approval or the market introduction and subsequent sales of the systems. Moreover, the inclusion of components
manufactured by others could require us to seek new approvals from regulatory authorities, which could result in delays in product delivery. We may not receive any such required regulatory approvals. </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>We rely on Baxter for the marketing, sales and distribution of our pathogen inactivation systems</I></FONT><FONT SIZE=2>. We
currently have a small marketing group that helps support Baxter's marketing organization; however, we do not intend to develop our own independent marketing and sales organization and expect to
continue to rely on Baxter to market and sell the INTERCEPT Blood System. If our joint development agreements with Baxter are terminated or if Baxter is unable to market the products successfully, we
will be required to find another marketing, sales and distribution partner or develop these capabilities ourselves. We may not be able to find a suitable partner on favorable terms or on a timely
basis, if at all. Developing marketing, sales and distribution capabilities ourselves would delay commercialization of our pathogen inactivation systems and increase our costs.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>We share control over management decisions</I></FONT><FONT SIZE=2>. Baxter and we share responsibility for managing the development
programs for the pathogen inactivation systems. Management decisions are made by a governance committee, which has equal representation from both Baxter and us. Our interests and Baxter's may not
always be aligned. Disagreements with Baxter may be time-consuming to resolve and cause significant delays in the development of our products. If we disagree with Baxter on program
direction, a neutral party will make the decision. The neutral party may not decide in our best interest. Under the agreements, Baxter may independently develop a pathogen inactivation system for
fresh
frozen plasma using a pre-existing technology. Such an effort by Baxter could create conflicts in our joint program for the development of a pathogen inactivation system for fresh frozen
plasma.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Baxter can terminate our agreements or fail to perform</I></FONT><FONT SIZE=2>. Baxter can terminate the agreements without cause
under certain circumstances. Any development program under the agreements may be terminated by either party, with 90&nbsp;days' notice in the case of the platelet program, or 270&nbsp;days'
written notice in the case of the plasma or red blood cell programs. If Baxter terminates the agreements or fails to provide adequate funding to support the product development efforts, we will need
to obtain additional funding from other sources and will be required to devote additional resources to the development of our products. We cannot assure you that we would be able to find a suitable
substitute partner in a timely manner, on reasonable terms or at all. If we fail to find a suitable partner, our research, development or commercialization of certain planned products would be delayed
significantly, which would cause us to incur additional expenditures. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Our products are subject to extensive regulation by domestic and foreign governments.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our products under development, and anticipated future products, are subject to extensive and rigorous regulation by United States local, state and federal
regulatory authorities and by foreign regulatory bodies. These regulations are wide-ranging and govern, among other things: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>product
development;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>product
testing;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>product
manufacturing;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>product
labeling; </FONT></DD></DL>
</UL>
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<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>product
storage;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>product
premarket clearance or approval;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>product
sales and distribution;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>product
use standards and documentation;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>product
advertising and promotion; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>product
reimbursement. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
FDA and other agencies in the United States and in foreign countries impose substantial requirements upon the manufacturing and marketing of products such as those we are developing.
The process of obtaining FDA and other required regulatory approvals is long, expensive and uncertain. The time required for regulatory approvals is uncertain, and the process typically takes a number
of years, depending on the type, complexity and novelty of the product. We may encounter significant delays or excessive costs in our efforts to secure necessary approvals or licenses, or we may not
be successful at all. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Even
if our product candidates receive approval for commercial sale, their marketing and manufacturing will be subject to continuing FDA and other regulatory requirements, such as
requirements to comply with good manufacturing practices. The failure to comply with these requirements could result in enforcement action, which could harm our business. Later discovery of problems
with a product, manufacturer or facility may result in additional restrictions on the product or manufacturer, including withdrawal of the product from the market. Regulatory authorities may also
require post-marketing testing, which can involve significant expense. The government may impose new regulations that could further delay or preclude regulatory approval of our potential
products. We cannot predict the impact of adverse governmental regulation that might arise from future legislative or administrative action. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distribution
of our products outside the United States also is subject to extensive government regulation. These regulations vary by country, including the requirements for approvals or
clearance to market, the time required for regulatory review and the sanctions imposed for violations. In addition to CE Mark approval in Europe, we will need to obtain regulatory approvals in
individual European countries to market our products. The level of additional product testing varies by country, but could take up to six months or more to complete after CE Mark approval. Failure to
obtain necessary regulatory approvals or any other failure to comply with regulatory requirements could result in reduced revenue and earnings. In some countries, we may also need to obtain government
approvals for reimbursement in order for our product to be adopted. Reimbursement levels in some countries are determined by annual budgeting processes which, in addition to affecting product
adoption, will affect the price we will be able to charge for our products. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
support our requests for regulatory approval to market our product candidates, we have conducted and intend to conduct various types of studies including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>toxicology
studies to evaluate product safety;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>laboratory
and animal studies to evaluate product effectiveness;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>human
clinical trials to evaluate the safety, tolerability and effectiveness of treated blood components; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>manufacturing
and stability studies. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have conducted many toxicology studies to demonstrate our product candidates' safety, and we plan to conduct additional toxicology studies throughout the product development process.
At any time, the FDA and other regulatory authorities may require further toxicology or other studies to further </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>32</FONT></P>

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<P><FONT SIZE=2>
demonstrate our products' safety, which could delay commercialization. We believe the FDA and other regulatory authorities are likely to weigh the potential risks of using our pathogen inactivation
products against the incremental benefits, which may be less compelling in light of improved safety in the blood supply. In addition, our clinical development plan assumes that we will not be required
to perform human clinical studies to demonstrate our systems' ability to inactivate pathogens. Although we have discussed this plan with the FDA and other regulatory authorities, they may find it
unacceptable at any time and may require human clinical trials to demonstrate efficacy in inactivating pathogens. Trials of this type may be too large and expensive to be practical. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regulatory
agencies may limit the uses, or indications, for which any of our products is approved. For example, we believe that we will be able to claim the inactivation of particular
pathogens only to the extent we have laboratory or animal data to support such claims. After regulatory approval for the initial indications, further clinical trials may be necessary to gain approval
for the use of the product for additional indications. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the regulatory requirements applicable to us and to our products, there are regulatory requirements applicable to our prospective customers, the blood centers that process
and distribute blood and blood products. Blood centers and others will likely be required to obtain approved license supplements from the FDA before using products processed with our pathogen
inactivation systems. This requirement or FDA delays in approving these supplements may deter some blood centers from using our products. Blood centers that do submit supplements may face disapproval
or delays in
approval that could provide further delay or deter them from using our products. The regulatory impact on potential customers could slow or limit the potential sales of our products. </FONT></P>

<P><FONT SIZE=2><B>Customer adoption of our products will be affected by the availability of reimbursement from the government or other third parties.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of our products may be affected by the availability of reimbursement from governments or other third parties, such as insurance companies. It is difficult
to predict the reimbursement status of newly approved, novel medical products. In certain foreign markets, governments have issued regulations relating to the pricing and profitability of medical
products and medical products companies. There have been proposals in the United States, at both the federal and state government level, to implement such controls. The growth of managed care in the
United States has also placed pressure on the pricing of medical products. These pressures can be expected to continue and may limit the prices Baxter and we can obtain for our products. </FONT></P>

<P><FONT SIZE=2><B>We have only a limited operating history, and we expect to continue to generate losses.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may never achieve a profitable level of operations. To date, we have engaged primarily in research and development. Our development and general and
administrative expenses have resulted in substantial losses each year since our inception, including net losses of $36.0&nbsp;million in 2000, $49.4&nbsp;million in 2001 and $57.2&nbsp;million
in 2002. As of December&nbsp;31, 2002, we had an accumulated deficit of approximately $230.3&nbsp;million. Except for our platelet system, which is approved for sale in Europe, all of our products
are in the research and development stage, and we have not received significant revenue from product sales. We have received substantially all of our revenue from our agreements with Baxter and other
development partners and from federal research grants and cooperative agreements. We will be required to conduct significant research, development, clinical testing and regulatory compliance
activities for each of these products. We expect our losses to continue at least until our product candidates are commercialized and achieve significant market acceptance. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>33</FONT></P>

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<P><FONT SIZE=2><B>If we fail to obtain the capital necessary to fund our future operations, we will not be able to develop product candidates in our pipeline.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our product development programs are capital-intensive. We expect to continue to spend substantial funds for our operations for the foreseeable future. We believe
that our existing capital resources, together with anticipated product revenue, funding from Baxter and the United States government, our loan commitment from Baxter and projected interest income,
will support our current and planned operations until at least mid-2004. Our cash, liquidity and capital requirements will depend on many factors, including the development progress and
costs of our programs, payments by Baxter and the
United States government, costs related to creating, maintaining and defending our intellectual property position, regulatory approval and successful commercialization of our product candidates,
competitive developments and regulatory factors. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
expect to require substantial additional funds for our long-term product development, marketing programs and operating expenses. We do not know if we will be able to raise
additional funds on acceptable terms. If we are unable to obtain sufficient additional capital, we may need to delay or cease certain development programs. If we raise additional funds by issuing
equity securities, our existing stockholders may experience substantial dilution. </FONT></P>

<P><FONT SIZE=2><B>If our competitors develop and market products that are more effective than our product candidates, our commercial opportunity will be reduced or eliminated.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect our products to encounter significant competition. Our products may compete with other approaches to blood safety and improving the outcome of stem cell
transplantation currently in use, as well as with future products developed by biotechnology and pharmaceutical companies, hospital supply companies, national and regional blood centers and
governmental organizations and agencies. Our success will depend in part on our ability to respond quickly to medical and technological changes through the development and introduction of new
products. Product development is risky and uncertain, and we cannot assure you that we will develop our products successfully. Competitors' products or technologies may make our products obsolete or
non-competitive before we are able to generate any significant revenue. Competitors or potential competitors may have substantially greater financial and other resources than we have. They
may also have greater experience in pre-clinical testing, human clinical trials and other regulatory approval procedures. Our ability to compete successfully will depend, in part, on our
ability to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>attract
and retain skilled scientific personnel;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>develop
technologically superior products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>develop
lower cost products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>obtain
patent or other proprietary protection for our products and technologies;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>obtain
required regulatory approvals for our products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>be
early entrants to the market; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>manufacture,
market and sell our products, independently or through collaborations. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Several
companies are developing technologies that are, or in the future may be, the basis for products that will directly compete with or reduce the market for our pathogen inactivation
systems. A number of companies are specifically focusing on alternative strategies for pathogen inactivation in various blood components. In Europe, several companies, including Grifols, Octapharma AG
and Maco Pharma International GmbH, are developing or have developed commercial systems to treat fresh frozen plasma. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>34</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
groups are developing synthetic blood product substitutes and products to stimulate the growth of platelets, and new methods of testing blood for specific pathogens have recently
been approved by the FDA, including tests for bacteria. Several companies are developing tests for West Nile Virus in blood products, although none have been approved for sale to date. Development of
any of these technologies could impair the potential market for our products. </FONT></P>

<P><FONT SIZE=2><B>We may not be able to protect our intellectual property or operate our business without infringing intellectual property rights of others.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our commercial success will depend, in part, on obtaining and maintaining patent protection on our products and successfully defending our products against
third-party challenges. Our technology will be protected from unauthorized use by others only to the extent that it is covered by valid and enforceable patents or effectively maintained as trade
secrets. As a result, our success depends in part on our ability to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>obtain
patents;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>protect
trade secrets;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>operate
without infringing upon the proprietary rights of others; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>prevent
others from infringing on our proprietary rights. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2002, we owned 61 issued or allowed United States patents and 55 issued or allowed foreign patents. Our patents expire at various dates between 2003 and 2018.
In addition, we have 23 pending United States patent applications and have filed 16 corresponding patent applications under the Patent Cooperation Treaty, which are currently pending in Europe, Japan,
Australia and Canada, and of which seven are also pending in China and Hong Kong. In addition, we are a licensee under a license agreement with respect to two United States patents covering inventions
pertaining to psoralen-based photochemical decontamination treatment of whole blood or blood components and four United States patents relating to vaccines, as well as related foreign patents. We
cannot be certain that our patents or patents that we license from others will be enforceable and afford protection against competitors. Our patents or patent applications, if issued, may be
challenged, invalidated or circumvented. Our patent rights may not provide us with proprietary protection or competitive advantages against competitors with similar technologies. Others may
independently develop technologies similar to ours or independently duplicate our technologies. For example, a patent has recently issued to a third-party covering methods to remove psoralen compounds
from blood products. We have reviewed the patent and believe our work predates the invention disclosed in that patent. We are continuing to review that patent and will make a determination as to
whether any action is necessary. Due to the extensive time required for development, testing and regulatory review of our potential products, our patents may expire or remain in existence for only a
short period following commercialization. This would reduce or eliminate any advantage of the patents. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
cannot be certain that we were the first to make the inventions covered by each of our issued patents or pending patent applications or that we were the first to file patent
applications for such inventions. We may need to license the right to use third-party patents and intellectual property to continue development and commercialization of our products. We may not be
able to acquire such required licenses on acceptable terms, if at all. If we do not obtain such licenses, we may need to design around other parties' patents, or we may not be able to proceed with the
development, manufacture or sale of our products. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
may face litigation to defend against claims of infringement, assert claims of infringement, enforce our patents, protect our trade secrets or know-how or determine the
scope and validity of others' proprietary rights. Patent litigation is costly. In addition, we may require interference proceedings declared by the United States Patent and Trademark Office to
determine the priority of inventions relating to our patent applications. Litigation or interference proceedings could be expensive and time consuming, and we could be unsuccessful in our efforts to
enforce our intellectual property rights. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>35</FONT></P>

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<P><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may rely, in certain circumstances, on trade secrets to protect our technology. However, trade secrets are difficult to protect. We protect our proprietary technology and processes,
in part, by confidentiality agreements with employees and certain contractors. However, these agreements may be breached, we may not have adequate remedies for any breach or our trade secrets may
otherwise become known or be independently discovered by competitors. To the extent that our employees, consultants or contractors use intellectual property owned by others, disputes may also arise as
to the rights in related or resulting know-how and inventions. </FONT></P>

<P><FONT SIZE=2><B>We may be liable if our products harm people.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are exposed to potential liability risks inherent in the testing and marketing of medical devices and products. We may be liable if any of our products causes
injury, illness or death. We maintain product liability insurance, but do not know whether the insurance will provide adequate coverage against potential liabilities. If we cannot successfully defend
ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our products. </FONT></P>

<P><FONT SIZE=2><B>We may be liable if hazardous materials used in the development of our products harm the environment, our employees or other people.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our research and development activities involve the controlled use of hazardous materials, including certain hazardous chemicals, radioactive materials and
infectious pathogens, such as HIV and hepatitis viruses. Although we believe that our safety procedures for handling and disposing of hazardous materials comply with regulatory requirements, we cannot
eliminate the risk of accidental contamination or injury. If an accident occurs, we could be held liable for any damages that result. </FONT></P>

<P><FONT SIZE=2><B>If we do not generate sufficient cash flow through product sales revenue or by raising additional capital, then we may not be able to meet our debt obligation in 2008.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2003, we received a $50.0&nbsp;million loan from Baxter Capital Corporation. The interest rate for the loan is 12% per annum. No repayment of
principal and interest is due until January&nbsp;2008. The loan is secured with collateral based on future revenue from sales of the INTERCEPT Blood System for platelets. Our substantial
indebtedness will significantly increase our interest expense in future periods.
Our indebtedness could have significant additional negative consequences, including limiting our ability to obtain additional financing and to plan for, or react to, changes in our business and the
industry in which we compete. If we are unable to satisfy our debt obligation, substantial liquidity problems could result, which would negatively impact our future prospects. </FONT></P>

<P><FONT SIZE=2><B>The market price of our stock may be highly volatile.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market prices for our securities and those of other emerging medical device and biotechnology companies have been, and may continue to be, volatile. For
example, during the period from January&nbsp;1, 2001 to December&nbsp;31, 2002, the closing sale price of our common stock as quoted on the Nasdaq National Market fluctuated from a low of $11.87
to a high of $75.35. Announcements may have a significant impact on the market price of our common stock. Such announcements may include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>biological
or medical discoveries;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>technological
innovations or new commercial services by us or our competitors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>developments
concerning proprietary rights, including patents and litigation matters;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>regulatory
developments in both the United States and foreign countries;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>public
concern as to the safety of new technologies;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>general
market conditions; </FONT></DD></DL>
</UL>
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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>comments
made by analysts, including changes in analysts' estimates of our financial performance; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>quarterly
fluctuations in our revenue and financial results. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
stock market has from time to time experienced extreme price and volume fluctuations, which have particularly affected the market prices for emerging biotechnology and medical device
companies, and which have often been unrelated to the operating performance of such companies. These broad market fluctuations may adversely affect the market price of our common stock. In the past,
following periods of volatility in the market price of a company's stock, securities class action litigation has occurred against the issuing company. Such litigation could result in substantial costs
and a diversion of management's attention and resources, which could have a material adverse effect on our revenue and earnings. Any adverse determination in such litigation could also subject us to
significant liabilities. </FONT></P>

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NAME="dq1204_item_2._properties"> </A>
<A NAME="toc_dq1204_1"> </A>
<BR></FONT><FONT SIZE=2><B>Item 2. </B></FONT><FONT SIZE=2><B><I>Properties    <BR>  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus leases approximately 21,400 square feet for its main office facility in Concord, California. The lease of the main facility extends through
July&nbsp;2004, with options to renew for two additional three-year periods. Cerus also has leases for approximately 17,400 square feet, approximately 9,900 square feet and approximately
31,808 square feet at three facilities, all of which contain laboratory and office space and are located near its main building in Concord. These leases extend through June&nbsp;2004, with one
five-year renewal option, January&nbsp;2005 and November&nbsp;2006, with five one-year renewal options and an option for Cerus to terminate the lease in July&nbsp;2004,
respectively. Cerus has a lease for approximately 11,300 square feet of office space in a facility located near its main building in Concord. This lease extends through August&nbsp;31, 2003, with
three one-year renewal options. Cerus believes that its current facilities and available additional space will be adequate for the foreseeable future. </FONT></P>


<P><FONT SIZE=2><A
NAME="dq1204_item_3._legal_proceedings"> </A>
<A NAME="toc_dq1204_2"> </A>
<BR></FONT><FONT SIZE=2><B>Item 3. </B></FONT><FONT SIZE=2><B><I>Legal Proceedings    <BR>  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None. </FONT></P>

<P><FONT SIZE=2><A
NAME="dq1204_item_4._submission_of_m__dq102401"> </A>
<A NAME="toc_dq1204_3"> </A>
<BR></FONT><FONT SIZE=2><B>Item 4. </B></FONT><FONT SIZE=2><B><I>Submission of Matters to a Vote of Security Holders    <BR>  </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dq1204_part_ii"> </A>
<A NAME="toc_dq1204_4"> </A>
<BR></FONT><FONT SIZE=2><B>PART II    <BR>  </B></FONT></P>

<P><FONT SIZE=2><A
NAME="dq1204_item_5._market_for_registrant___ite03067"> </A>
<A NAME="toc_dq1204_5"> </A></FONT> <FONT SIZE=2><B>Item 5. </B></FONT><FONT SIZE=2><B><I>Market for Registrant's Common Equity and Related Stockholder Matters    <BR>  </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus' common stock is traded on the Nasdaq National Market under the symbol "CERS." The following table sets forth, for the periods indicated, the high and low
sales prices for the common stock as reported by the Nasdaq National Market: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>High</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Low</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Year Ended December 31, 2001:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="69%"><FONT SIZE=2>First Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>76.56</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>31.69</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="69%"><FONT SIZE=2>Second Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>76.00</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>32.25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="69%"><FONT SIZE=2>Third Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>75.80</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>41.64</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="69%"><FONT SIZE=2>Fourth Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>57.41</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>39.55</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Year Ended December 31, 2002:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="69%"><FONT SIZE=2>First Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>53.99</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>43.50</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="69%"><FONT SIZE=2>Second Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>59.69</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>29.79</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="69%"><FONT SIZE=2>Third Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>33.88</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>14.79</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%">&nbsp;</TD>
<TD WIDTH="69%"><FONT SIZE=2>Fourth Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>25.00</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11.38</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>37</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=2,SEQ=37,EFW="2106076",CP="CERUS CORPORATION",DN="1",CHK=777157,FOLIO='37',FILE='DISK023:[03PAL4.03PAL1204]DQ1204A.;15',USER='DLAQUIA',CD='26-MAR-2003;07:09' -->
<A NAME="page_dq1204_1_38"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
February&nbsp;28, 2003, the last reported sale price of Cerus' common stock on the Nasdaq National Market was $6.75 per share. On February&nbsp;28, 2003, Cerus had approximately
147 holders of record of common stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
has not paid dividends on its common stock and does not intend to pay cash dividends on its common stock in the foreseeable future. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information
concerning securities authorized for issuance under equity compensation plans is contained in our definitive proxy statement with respect to our 2003 Annual Meeting of
Stockholders, to be filed with the SEC before April&nbsp;30, 2003, under the caption "Equity Compensation Plan Information," and is incorporated herein by reference. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
November&nbsp;2002, Cerus issued 129,968 shares of unregistered common stock to Baxter Healthcare Corporation in connection with the conversion of all 5,000 outstanding shares of
Cerus' Series&nbsp;A preferred stock. Such issuance of common stock was exempt from registration under the Securities Act of 1933 pursuant to Section&nbsp;3(a)(9) thereof, as securities exchanged
by an issuer with existing security holders. </FONT></P>

<P><FONT SIZE=2><A
NAME="dq1204_item_6._selected_financial_data"> </A>
<A NAME="toc_dq1204_6"> </A>
<BR></FONT><FONT SIZE=2><B>Item 6. </B></FONT><FONT SIZE=2><B><I>Selected Financial Data    <BR>  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes certain selected financial data for the five years ended December&nbsp;31, 2002. The information presented should be read in
conjunction with the financial statements and notes included elsewhere herein. The selected financial data for the periods prior to the financial statements included herein are derived from audited
financial statements. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Years Ended December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands, except per share data)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Statement of Operations Data:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Revenue</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8,490</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,535</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,851</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,408</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,903</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Research and development</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>56,421</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>48,247</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>34,823</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>22,514</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>29,783</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>General and administrative</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11,346</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10,166</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,160</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,837</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,841</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="36%"><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>67,767</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>58,413</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>41,983</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>27,351</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>33,624</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Loss from operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(59,277</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(53,878</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(40,132</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(24,943</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(30,721</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net interest income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,085</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,611</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,099</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,315</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,163</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Loss before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(57,192</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(49,267</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(36,033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(22,628</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(29,558</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Provision for income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(57,192</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(49,367</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(36,033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(22,628</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(29,558</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net loss per share-basic and diluted(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3.61</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3.27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2.04</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3.17</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Shares used in computing net loss per share-basic and diluted(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15,833</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15,105</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>13,086</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11,102</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>9,325</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>As of December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><B>Balance Sheet Data:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="36%"><FONT SIZE=2>Cash, cash equivalents and short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>64,318</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>123,461</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>90,260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>40,419</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>19,802</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="36%"><FONT SIZE=2>Working capital</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>50,486</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>108,606</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>78,884</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>31,951</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>537</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="36%"><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>72,947</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>128,260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>94,161</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>41,780</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>20,934</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="36%"><FONT SIZE=2>Capital lease obligations, less current portion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>51</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>84</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>115</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="36%"><FONT SIZE=2>Redeemable convertible preferred stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="36%"><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(230,287</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(173,095</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(123,728</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(87,518</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(64,428</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="36%"><FONT SIZE=2>Total stockholders' equity (deficit)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>56,169</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>106,755</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>76,921</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>27,959</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3,656</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>See
Note&nbsp;1 of Notes to Financial Statements for a description of the method used in computing the net loss per share. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>38</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=3,SEQ=38,EFW="2106076",CP="CERUS CORPORATION",DN="1",CHK=24889,FOLIO='38',FILE='DISK023:[03PAL4.03PAL1204]DQ1204A.;15',USER='DLAQUIA',CD='26-MAR-2003;07:09' -->
<A NAME="page_dq1204_1_39"> </A>

<P><FONT SIZE=2><A
NAME="dq1204_item_7._management_s_discussio__ite03668"> </A>
<A NAME="toc_dq1204_7"> </A>
<BR></FONT><FONT SIZE=2><B>Item 7. </B></FONT><FONT SIZE=2><B><I>Management's Discussion and Analysis of Financial Condition and Results of Operations    <BR>  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>The following discussion of the financial condition and results of operations of Cerus should be read in conjunction with the financial
statements and related notes included elsewhere in this report. This report contains forward-looking statements that involve risks and uncertainties. Results for the periods presented are not
necessarily indicative of future results.</I></FONT></P>

<P><FONT SIZE=2><B>Overview  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since its inception in 1991, Cerus has devoted substantially all of its efforts and resources to the research, development and clinical testing of medical systems
based on its Helinx technology. Cerus has been unprofitable since inception and, as of December&nbsp;31, 2002, had an accumulated deficit of approximately $230.3&nbsp;million. Except for the
INTERCEPT Blood System for platelets, which is approved for sale in Europe, all of Cerus' product candidates are in the research and development stage, and Cerus has not received significant revenue
from product sales. Cerus must conduct significant research, development, pre-clinical and clinical evaluation, commercialization and regulatory compliance activities on these product
candidates that, together with anticipated general and administrative expenses, are expected to result in substantial losses at least until after commercialization of additional products. Cerus'
ability to achieve a profitable level of operations in the future will depend on its ability to successfully complete development and obtain additional regulatory approvals and on Baxter's ability to
commercialize and achieve market acceptance of the INTERCEPT Blood System. Cerus may never achieve a profitable level of operations. Further, under the agreements discussed below, Baxter provides
significant funding for development of the INTERCEPT Blood System, based on an annual budgeting process, and is responsible for manufacturing and marketing the products following regulatory approvals.
These agreements may be modified or terminated. </FONT></P>


<P><FONT SIZE=2><B>Critical Accounting Policies  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates including those related to collaborative arrangements, contract research and
other contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for
making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates under different assumptions or
conditions. We record accrued liabilities for certain contract research activities, including clinical trials, pre-clinical safety studies, external laboratory studies and development
activities performed by Baxter, for research and development services performed.
Some of those accrued liabilities are based on estimates because billings for these activities may not occur on a timely basis consistent with the performance of the services. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe the following critical accounting policies, which have been reviewed by our Audit Committee, affect our more significant judgments and estimates used in the preparation of our
financial statements: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Revenue
and research and development expenses&#151;Revenue related to the cost reimbursement provisions under development contracts is recognized as
the costs on the project are incurred. Revenue related to at risk milestones specified under development contracts is recognized as the milestones are achieved. License fees and payments for achieved
milestones are non-refundable and are not subject to future performance. Cerus receives certain United States government grants that support its research effort in defined research
projects. These grants generally </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>39</FONT></P>

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<UL>

<P><FONT SIZE=2>provide
for reimbursement of approved costs incurred as defined in the various grants. Revenue associated with these grants is recognized as costs under each grant are incurred. </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Investments&#151;Cerus
considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash
equivalents. Cash equivalents consist principally of short-term money market instruments and commercial paper. Cerus has classified all debt securities as
available-for-sale at the time of purchase and reevaluates such designation as of each balance sheet date. The cost of securities sold is based on the specific identification
method.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Accrued
liabilities&#151;Cerus records accrued liabilities for certain contract research activities, including clinical trials,
pre-clinical safety studies, external laboratory studies and development activities performed by Baxter, for research and development services performed. Some of those accrued liabilities
are based on estimates because billings for these activities may not occur on a timely basis consistent with the performance of the services. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Development Partners  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Agreement with Baxter for the Development of the INTERCEPT Blood System for Platelets.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus has a development and
commercialization agreement with Baxter for the joint development of the INTERCEPT Blood System for inactivation of viruses, bacteria and other infectious pathogens in platelets used for transfusion.
This agreement provides for Baxter and Cerus to generally share system development costs equally, subject to mutually determined budgets established from time to time, and for Cerus to receive
approximately 33.5% of revenue from sales of inactivation system disposables after
each party is reimbursed for its cost of goods to the extent the cost exceeds specific amounts. Baxter has an exclusive, worldwide distribution license and is responsible for manufacturing and
marketing the INTERCEPT Blood System for platelets. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Agreement with Baxter for the Development of the INTERCEPT Blood System for Red Blood Cells and INTERCEPT Blood System for
Plasma.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cerus also has a development and commercialization agreement with Baxter for the joint development of the INTERCEPT Blood System for inactivation of
viruses, bacteria and other infectious pathogens in red blood cells and fresh frozen plasma, or FFP, for transfusion. This agreement provides for Baxter and Cerus generally to share INTERCEPT Blood
System for red blood cells development costs equally, subject to mutually determined budgets established from time to time. Cerus is solely responsible for funding the development costs of the
INTERCEPT Blood System for plasma. Baxter has an exclusive, worldwide distribution license and will be responsible for manufacturing and marketing the INTERCEPT Blood System for red blood cells and
INTERCEPT Blood System for plasma following regulatory approvals. The agreement also provides for an equal sharing of revenue from sales of INTERCEPT Blood System for red blood cells disposables, and
for Cerus to receive 75% and Baxter to receive 25% of revenue from sales of INTERCEPT Blood System for plasma disposables, after each party is reimbursed for its cost of goods and a specified
percentage allocation, not to exceed 14% of revenue, is retained by Baxter for marketing and administrative expenses. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
inception through December&nbsp;31, 2002, Cerus has received $46.7&nbsp;million in equity investments from Baxter and $25.9&nbsp;million in an equity investment from Baxter
International&nbsp;Inc. and Subsidiaries Pension Trust, and has recognized $30.0&nbsp;million in revenue from Baxter. Development funding is in the form of balancing payments made by Baxter to
Cerus, if necessary, to reimburse Cerus for development spending in excess of the levels determined by Baxter and Cerus. Development funding revenue is recognized as the related project costs are
incurred. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
October&nbsp;2002, Cerus received a $50.0&nbsp;million loan commitment from Baxter Capital Corporation. In January&nbsp;2003, Cerus drew $50.0&nbsp;million under the loan
facility. The interest rate for the loan is 12% per annum. No repayment of principal and interest is due until January&nbsp;2008. The loan </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>40</FONT></P>

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<P><FONT SIZE=2>
is secured with collateral based on future revenue from sales of the INTERCEPT Blood System for platelets. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Agreement with Kirin.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2001, Cerus entered into a collaborative agreement with the Pharmaceutical Division
of Kirin to develop and market products for stem cell transplantation based on Cerus' Helinx technology. Under the terms of the agreement, Cerus and Kirin will jointly develop the products. Cerus
received an initial license fee of $1&nbsp;million. The license fee is being deferred and recognized as development funding ratably over the development period. Cerus may not receive additional
funding from Kirin. Although the agreement calls for Kirin to fund all development expenses for the Asia-Pacific region and a portion of Cerus' development activities aimed at obtaining
product approval in the United States, no such development activities by Cerus are currently ongoing. Upon product approval, Kirin has exclusive rights to market the products in the
Asia-Pacific region, including Japan, China, Korea and Australia, and Cerus will receive a specified share of product revenue,
including a royalty and reimbursement of its cost of goods. Cerus retains all marketing rights for the rest of the world, including the United States and Europe. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cooperative Agreement with the Armed Forces of the United States.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2001, Cerus was awarded a
$3.5&nbsp;million cooperative agreement by the Army Medical Research Acquisition Activity division of the Department of Defense. Cerus received the award to develop its pathogen inactivation
technologies to improve the safety and availability of blood that may be used by the United States Armed Forces for medical transfusions. Under the conditions of the agreement, Cerus will conduct
research on the inactivation of infectious pathogens, including unusual viruses, bacteria and parasites, which are of particular concern to the Armed Forces. Cerus, in collaboration with investigators
at Walter Reed Army Institute of Research, also will investigate ways to improve the storage and shelf life of blood and blood components, which may be used for medical transfusion support in combat
zones. Also under the terms of the agreement, Cerus would receive commercial rights to the discoveries and inventions arising from the research performed under the collaboration. In
September&nbsp;2002, Cerus was awarded an additional $6.5&nbsp;million cooperative agreement to continue funding of these projects. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Agreement with the National Marrow Donor Program.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2001, Cerus and the National Marrow Donor Program, a
non-profit corporation, entered into an agreement under which the NMDP would sponsor a clinical trial of Cerus' Helinx T-cells in patients receiving matched unrelated bone
marrow transplants. The agreement was amended in December&nbsp;2002. Under the amended agreement, Cerus will provide its Helinx compound amotosalen, illumination devices, training of clinical sites
and program oversight in exchange for reimbursement by the NMDP of Cerus' related costs. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Agreement with the Consortium for Plasma Science.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;1998, Cerus and the Consortium entered into an agreement
for the development of a pathogen inactivation system for source plasma used for fractionation. The Consortium is co-funded by four plasma fractionation companies: Alpha Therapeutics
Corporation, Aventis Behring, Bayer Corporation and Baxter. The Consortium, which is a separate entity from its members, provides research and development funding worldwide for technologies to improve
the safety of source plasma. Under the agreement, the Consortium funded development of Cerus' proprietary technology for use with source plasma. Cerus does not expect to receive additional funding
from the Consortium. Subject to the Consortium having met certain funding requirements, Cerus will pay the Consortium a royalty based on a percentage of product sales, if any. </FONT></P>


<P><FONT SIZE=2><B>Results of Operations  </B></FONT></P>

<P><FONT SIZE=2><B><I>2002 Compared with 2001  </I></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December&nbsp;31, 2002, milestone and development funding from Baxter and the Consortium, which
are related parties of Cerus, increased to $5.0&nbsp;million from $2.1&nbsp;million for 2001. The increase was due to a $5.0&nbsp;million milestone payment from Baxter earned in </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>41</FONT></P>

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<P><FONT SIZE=2>
2002 upon regulatory approval of the INTERCEPT Blood System for platelets in Europe. Cerus does not expect to receive additional development funding from Baxter or the Consortium. Development funding
from Baxter was 59% of total revenue for 2002. Development funding from the Consortium was less than 1% of total revenue for 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Development
funding from other sources, which includes Kirin and the NMDP, decreased 25% to $0.7&nbsp;million for 2002 from $1.0&nbsp;million for 2001. The decrease was due to a
$0.7&nbsp;million decrease in development funding from Kirin in 2002. Development funding from the NMDP was 6% of total revenue for 2002. Development funding from Kirin was 2% of total revenue for
2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue
from government grants and cooperative agreements increased 90% to $2.7&nbsp;million for 2002 from $1.4&nbsp;million for 2001. The increase was principally due to a
$1.4&nbsp;million increase in program expenditures under the cooperative agreements with the Armed Forces of the United States entered into in February&nbsp;2001 and September&nbsp;2002. During
2002, Cerus also recognized revenue under a grant from the National Institutes of Health that expired in July&nbsp;2002. There can be no assurance that Cerus will receive additional government
grants in the future. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
recognized $3,000 of product sales revenue in 2002 from sales of the INTERCEPT Blood System for platelets in Europe. Cerus expects that product sales revenue in 2003 will increase
relative to 2002. Cerus does not expect product sales revenue in 2003 to be sufficient for the company to achieve a level of profitable operations. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and Development Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses include salaries and related expenses for scientific
personnel, payments to consultants, supplies and chemicals used in in-house laboratories, costs of research and development facilities, depreciation of equipment and external contract
research expenses, including clinical trials, pre-clinical safety studies, compound manufacturing and other laboratory studies. Research and development expenses increased 17% to
$56.4&nbsp;million for 2002 from $48.2&nbsp;million for 2001. The increase was due primarily to the addition of scientific personnel, increased facilities costs and increased development spending
at Baxter. Cerus' total research and development costs incurred included $48.7&nbsp;million for the INTERCEPT Blood System program and $7.7&nbsp;million for all other programs for 2002, and
$40.5&nbsp;million for the INTERCEPT Blood System program and $7.8&nbsp;million for all other programs for 2001. Cerus anticipates that its research and development expenses will continue to
increase as additional filings for regulatory approval are prepared, submitted and addressed with the FDA and product configuration and testing are completed, Phase III clinical trials of the
INTERCEPT Blood System for red blood cells continue and research and development activity relating to its other pre-clinical programs increases. Due to the inherent uncertainties and risks
associated with developing biomedical products, including but not limited to intense and changing government regulation, uncertainty of future pre-clinical and clinical study results and
uncertainty associated with manufacturing, it is not possible to reasonably estimate the cost to
complete these research and development projects. Cerus faces numerous risks and uncertainties associated with the successful completion of its research and development projects; see "Risk Factors"
above. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and Administrative Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses increased 12% to $11.3&nbsp;million for 2002 from
$10.2&nbsp;million for 2001. The increase was principally attributable to the addition of administrative personnel, increased costs for insurance and increased facilities expenses associated with
expansion of Cerus' operations. Cerus expects its general and administrative expenses to continue to increase as development activities expand. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Interest Income.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net interest income decreased 55% to $2.1&nbsp;million for 2002 from $4.6&nbsp;million for 2001. The
decrease was primarily due to reduced investment balances carried by Cerus in 2002 and less favorable yields on investments as a result of declining interest rates. Cerus expects to earn interest at
market rates in proportion to the balances it maintains. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>42</FONT></P>

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<P><FONT SIZE=2><B><I>2001 Compared with 2000  </I></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December&nbsp;31, 2001, development revenue from Baxter and the Consortium increased 29% to
$2.1&nbsp;million from $1.6&nbsp;million for 2000. The increase was primarily from increased development revenue from Baxter for the INTERCEPT Blood System for red blood cells as a result of
increased expenses incurred by Cerus for pre-clinical safety studies, compound manufacturing and clinical trials in 2001. Revenue earned under the agreements with Baxter is dependent on
the relative spending by Cerus and Baxter on the programs for which development costs are shared. Development funding from Baxter was 41% of total revenue for 2001. Development funding from the
Consortium was 5% of total revenue for the year ended December&nbsp;31, 2001. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Development
funding from other sources, which includes Kirin, was $1.0&nbsp;million for 2001. Development funding from Kirin was 20% of total revenue for 2001. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue
from government grants and cooperative agreements increased 557% to $1.4&nbsp;million for 2001 from $0.2&nbsp;million for 2000. The increase was principally due to revenue
recognized from a cooperative agreement with the Armed Forces of the United States entered into in February&nbsp;2001. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and Development Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses increased 39% to $48.2&nbsp;million for 2001 from
$34.8&nbsp;million for 2000. The increase was due primarily to the addition of scientific personnel and consultants, increased development spending at Baxter and increased costs for
pre-clinical safety studies and compound manufacturing. Cerus' total research and development costs incurred included $40.5&nbsp;million for the INTERCEPT Blood System program and
$7.8&nbsp;million for all other programs for 2001, and $30.8&nbsp;million for the INTERCEPT Blood System program and $4.1&nbsp;million for all other programs for 2000. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and Administrative Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses increased 42% to $10.2&nbsp;million for 2001 from
$7.2&nbsp;million for 2000. The increase was principally attributable to the addition of administrative personnel and increased facilities expenses associated with expansion of Cerus' operations. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Interest Income.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net interest income increased 12% to $4.6&nbsp;million for 2001 from $4.1&nbsp;million for 2000. The
increase was attributable primarily to increased average cash and investments balances from proceeds of the private placements of common stock to institutional investors in August&nbsp;2000 and
May&nbsp;2001, net of reduced yields on investments due to declining interest rates. </FONT></P>

<P><FONT SIZE=2><B>Liquidity and Capital Resources  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus' primary sources of capital to date have consisted of public offerings and private placements of equity securities, payments received under its agreements
with Baxter, Kirin, the Consortium and the NMDP, United States government grants and cooperative agreements, the loan from Baxter Capital Corporation and interest income. To date, Cerus has not
received significant revenue from product sales, and it will not derive significant revenue from product sales unless and until more products under development receive regulatory approval and achieve
market acceptance. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December&nbsp;31, 2002, Cerus had cash, cash equivalents and short-term investments of $64.3&nbsp;million. Net cash used in operating activities was
$55.7&nbsp;million in 2002, compared to $44.0&nbsp;million in 2001. The use of cash primarily resulted from a net loss of $57.2&nbsp;million offset by changes in other operating balances. Net
cash provided by investing activities in 2002 of approximately $12.0&nbsp;million resulted principally from the sales and maturities of $117.2&nbsp;million of short-term investments,
offset by the purchases of $100.2&nbsp;million of short-term investments and the purchase of $5.0&nbsp;million of furniture and equipment. Working capital decreased to
$50.5&nbsp;million at December&nbsp;31, 2002 from $108.6&nbsp;million at December&nbsp;31, 2001, primarily due to decreased cash, cash equivalents and short-term investments
balances from operating activities. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>43</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
October&nbsp;2002, Cerus received a $50.0&nbsp;million loan commitment from Baxter Capital Corporation. In January&nbsp;2003, Cerus drew $50.0&nbsp;million under the loan
facility. The interest rate for the loan is 12% per annum. No repayment of principal and interest is due until January&nbsp;2008. The loan is secured with collateral based on future revenue from
sales of the INTERCEPT Blood System for platelets. Baxter Capital Corporation is a subsidiary of Baxter International, Inc. and is a related party to Cerus. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus
believes that its available cash balances, including proceeds from the loan, together with anticipated cash flows from existing development and grant arrangements, will be
sufficient to meet its capital requirements until at least mid-2004. These near-term capital requirements are dependent on various factors, including the development progress
and costs of the INTERCEPT Blood System and other programs; payments by Baxter and the United States government; and costs related to creating, maintaining and defending Cerus' intellectual property
position. Cerus' long-term capital requirements will be dependent on these factors and on Cerus' ability to raise capital through public or private equity or debt financings or through
additional collaborative arrangements or government grants, regulatory approval and successful commercialization of the INTERCEPT Blood System and other product candidates under development,
competitive developments and regulatory factors. If Baxter were to terminate its agreements with Cerus, Cerus might not be able to meet its long-term capital requirements. Future capital
funding transactions may result in dilution to investors in Cerus, and may not be available on favorable terms, if at all. In August&nbsp;2001, Cerus filed a shelf registration statement on
Form&nbsp;S-3 with the Securities and Exchange Commission to offer and sell up to $300&nbsp;million of common stock and/or debt securities. Cerus has no current commitments to offer or
sell securities pursuant to this registration statement. </FONT></P>

<P><FONT SIZE=2><B>Commitments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our commitments were as follows: </FONT></P>

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<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Payments Due by Period</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Less than<BR>
1 year</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1-3 years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>4-5 years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>After 5<BR>
years</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>Contractual obligations:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="41%"><FONT SIZE=2>Long-term debt obligation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>79,917</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>79,917</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="41%"><FONT SIZE=2>Minimum purchase requirements</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>250</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>150</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="41%"><FONT SIZE=2>Capital lease obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>60</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>40</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="41%"><FONT SIZE=2>Operating leases</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,023</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,197</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>826</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="41%"><FONT SIZE=2>Total contractual cash obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>82,250</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,287</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>996</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>79,917</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2><A
NAME="dq1204_item_7a._quantitative_and_qual__ite02669"> </A>
<A NAME="toc_dq1204_8"> </A>
<BR></FONT><FONT SIZE=2><B>Item 7A. </B></FONT><FONT SIZE=2><B><I>Quantitative and Qualitative Disclosures About Market Risk    <BR>  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus maintains an investment portfolio of various issuers, types and maturities. These securities are generally classified as
available-for-sale and, consequently, are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component of stockholders' equity,
if material. Unrealized gains and losses at December&nbsp;31, 2002 and 2001 were not material. Cerus' investments primarily consist of short-term money market mutual funds, United States
government obligations and commercial paper. Cerus does not believe its exposure to interest rate risk to be material given the short-term nature of its investment portfolio. The table
below presents the amortized </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>44</FONT></P>

<HR NOSHADE>
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<A NAME="page_dq1204_1_45"> </A>
<BR>

<P><FONT SIZE=2>
principal amount, which approximates fair value, and related weighted average interest rates for our investment portfolio at December&nbsp;31, 2002: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="82%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="55%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amortized<BR>
Principal Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" ALIGN="CENTER"><FONT SIZE=1><B>Weighted Average<BR>
Interest Rate</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="55%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>22,414</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1.36</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Short-term investments (91 days-1 year)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>24,776</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>1.84</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Short-term investments (1-2 years)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>17,108</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>2.85</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Total investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>64,298</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><A
NAME="dq1204_item_8._financial_statements_and_supplementary_data"> </A>
<A NAME="toc_dq1204_9"> </A>
<BR></FONT><FONT SIZE=2><B>Item 8. </B></FONT><FONT SIZE=2><B><I>Financial Statements and Supplementary Data    <BR>  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financial statements, together with related notes and report of Ernst&nbsp;&amp; Young LLP, independent auditors, are listed in Item 15(a) and included herein. </FONT></P>

<P><FONT SIZE=2><A
NAME="dq1204_item_9._changes_in_and_disagre__ite03576"> </A>
<A NAME="toc_dq1204_10"> </A>
<BR></FONT><FONT SIZE=2><B>Item 9. </B></FONT><FONT SIZE=2><B><I>Changes in and Disagreements with Accountants on Accounting and Financial Disclosure    <BR>  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>45</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ds1204_1_46"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ds1204_part_iii"> </A>
<A NAME="toc_ds1204_1"> </A>
<BR></FONT><FONT SIZE=2><B>PART III    <BR>  </B></FONT></P>

<P><FONT SIZE=2><A
NAME="ds1204_item_10._directors_and___ds102287"> </A>
<A NAME="toc_ds1204_2"> </A></FONT> <FONT SIZE=2><B>Item 10. </B></FONT><FONT SIZE=2><B><I>Directors and Executive Officers of the Registrant    <BR>  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information regarding Cerus' directors and officers, and the compliance of certain reporting persons with Section&nbsp;16(a) of the Securities Exchange Act of
1934 will be set forth under the captions "Election of Directors," "Management" and "Section&nbsp;16(a) Beneficial Ownership Reporting Compliance" in our definitive proxy statement for use in
connection with the annual meeting of stockholders to be held on June&nbsp;13, 2003 (the "Proxy Statement") and is incorporated herein by reference. Cerus intends to file the Proxy Statement with
the Securities and Exchange Commission within 120&nbsp;days after the end of Cerus' 2002 fiscal year. </FONT></P>

<P><FONT SIZE=2><A
NAME="ds1204_item_11._executive_compensation"> </A>
<A NAME="toc_ds1204_3"> </A>
<BR></FONT><FONT SIZE=2><B>Item 11. </B></FONT><FONT SIZE=2><B><I>Executive Compensation    <BR>  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this item is incorporated herein by reference from the information set forth under the caption "Executive Compensation" in the Proxy
Statement. </FONT></P>

<P><FONT SIZE=2><A
NAME="ds1204_item_12._security_ownership_of__ite04004"> </A>
<A NAME="toc_ds1204_4"> </A>
<BR></FONT><FONT SIZE=2><B>Item 12. </B></FONT><FONT SIZE=2><B><I>Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters    <BR>  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this item is incorporated herein by reference from the information set forth under the captions "Security Ownership of Certain
Beneficial Owners and Management" and "Equity Compensation Plan Information" in the Proxy Statement. </FONT></P>

<P><FONT SIZE=2><A
NAME="ds1204_item_13._certain_relati__ds102130"> </A>
<A NAME="toc_ds1204_5"> </A>
<BR></FONT><FONT SIZE=2><B>Item 13. </B></FONT><FONT SIZE=2><B><I>Certain Relationships and Related Transactions    <BR>  </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this item is incorporated herein by reference from the information set forth under the option "Certain Transactions" in the Proxy
Statement. </FONT></P>

<P><FONT SIZE=2><A
NAME="ds1204_item_14._controls_and_procedures"> </A>
<A NAME="toc_ds1204_6"> </A>
<BR></FONT><FONT SIZE=2><B>Item 14. </B></FONT><FONT SIZE=2><B><I>Controls and Procedures    <BR>  </I></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Evaluation of Disclosure Controls and Procedures.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our chief executive officer and chief financial officer have concluded that
Cerus' disclosure controls and procedures (as defined in Rules&nbsp;13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act of 1934, as amended) are
sufficiently effective to ensure that the information required to be disclosed by Cerus in the reports we file under the Exchange Act is gathered, analyzed and disclosed with adequate timeliness,
accuracy and completeness, based on an evaluation of such controls and procedures conducted within 90&nbsp;days prior to the date hereof. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in Internal Controls.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;There have been no significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the date of the evaluation referred to above, nor were there any significant deficiencies or material weaknesses in Cerus' internal controls.
Accordingly, no corrective actions were required or undertaken. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Limitations on the Effectiveness of Controls.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A controls system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues, if any, within a company have been detected. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>46</FONT></P>

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<A NAME="page_ds1204_1_47"> </A>
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ds1204_part_iv"> </A>
<A NAME="toc_ds1204_7"> </A>
<BR></FONT><FONT SIZE=2><B>PART IV    <BR>  </B></FONT></P>

<P><FONT SIZE=2><A
NAME="ds1204_item_15._exhibits,_financial_s__ite02586"> </A>
<A NAME="toc_ds1204_8"> </A></FONT> <FONT SIZE=2><B>Item 15. </B></FONT><FONT SIZE=2><B><I>Exhibits, Financial Statement Schedules and Reports on Form&nbsp;8-K    <BR>  </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following documents are being filed as part of this report on Form&nbsp;10-K: </FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2><I>Financial Statements.</I></FONT></DD></DL>
<BR>

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<TR VALIGN="BOTTOM">
<TH WIDTH="91%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Page</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Report of Ernst &amp; Young LLP, Independent Auditors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>50</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Balance Sheets as of December 31, 2002 and 2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>51</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Statements of Operations for the three years ended December 31, 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>52</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Statements of Stockholders' Equity for the three years ended December 31, 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>53</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Statements of Cash Flows for the three years ended December 31, 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>54</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Notes to Financial Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>55</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
information is omitted because it is either presented elsewhere, is inapplicable or is immaterial as defined in the instructions. </FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD><FONT SIZE=2>No
reports on Form&nbsp;8-K were filed during the quarter ended December&nbsp;31, 2002.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(c)</FONT></DT><DD><FONT SIZE=2><I>Exhibits</I></FONT></DD></DL>
<BR>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Exhibit<BR>
Number</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="81%" ALIGN="CENTER"><FONT SIZE=1><B>Description of Exhibit</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3.1.1(4)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Restated Certificate of Incorporation of Cerus Corporation, as amended to date.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3.2(1)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Bylaws of Cerus.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>4.2(1)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Specimen Stock Certificate.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.1(1)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Form of Indemnity Agreement entered into between Cerus and each of its directors and executive officers.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.2(1)*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>1996 Equity Incentive Plan.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.3(1)*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Form of Incentive Stock Option Agreement under the 1996 Equity Incentive Plan.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.4(1)*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Form of Nonstatutory Stock Option Agreement under the 1996 Equity Incentive Plan.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.5(1)*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>1996 Employee Stock Purchase Plan Offering.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.14(1)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Series E Preferred Stock Purchase Agreement, dated April 1, 1996, between Cerus and Baxter Healthcare Corporation.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.15(1)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Common Stock Purchase Agreement, dated September 3, 1996 between Cerus and Baxter Healthcare Corporation.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.16(1)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Amended and Restated Investors' Rights Agreement, dated April 1, 1996, among Cerus and certain investors.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.17&#134;(9)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Development, Manufacturing and Marketing Agreement, dated December 10, 1993 between Cerus and Baxter Healthcare Corporation.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.21(1)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Industrial Real Estate Lease, dated October 1, 1992, between Cerus and Shamrock Development Company, as amended on May 16, 1994 and December 21, 1995.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.22(1)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Real Property Lease, dated August 8, 1996, between the Registrant and S.P. Cuff.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.23(1)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Lease, dated February 1, 1996, between Cerus and Holmgren Partners.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.24(1)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>First Amendment to Common Stock Purchase Agreement, dated December 9, 1996, between Cerus and Baxter Healthcare Corporation.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.25&#134;(1)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Amendment, dated as of January 3, 1997, to the Agreement filed as Exhibit 10.17.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.26(1)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Memorandum of Agreement, dated as of January 3, 1997, between Cerus and Baxter Healthcare Corporation.</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>47</FONT></P>

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<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.27&#134;(11)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>License Agreement, dated as of November 30, 1992, by and among the Company, Miles Inc. and Diamond Scientific Corporation.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.28&#134;(2)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Amendment to Development, Manufacturing and Marketing Agreement, dated as of March 6, 1998, by and between Cerus and Baxter Healthcare Corporation.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.29(3)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Series A Preferred Stock Purchase Agreement, dated as of June 30, 1998, by and between Cerus and Baxter Healthcare Corporation.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.30(3)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Series B Preferred Stock Purchase Agreement, dated as of June 30, 1998, by and between Cerus and Baxter Healthcare Corporation.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.31(3)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Memorandum of Agreement, dated as of June 30, 1998, by and between Cerus and Baxter Healthcare Corporation.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.32(9)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Second Amendment to Development, Manufacturing and Marketing Agreement, dated as of June 30, 1998, by and between Cerus and Baxter Healthcare Corporation.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.33&#134;(3)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Development, Manufacturing and Marketing Agreement, dated April 1, 1996, by and between Cerus and Baxter Healthcare Corporation, as amended and restated June 30, 1998.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.34(4)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Stockholder Rights Plan, dated November 3, 1999.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.35(5)*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>1999 Equity Incentive Plan, adopted April 30, 1999, approved by stockholders July 2, 1999</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.36(6)*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Employment Agreement with Howard G. Ervin.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.37&#134;(7)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Collaborative License Agreement between Cerus and Kirin Brewery Company, Limited.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.38(8)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Amendment to Section 4.2 of the June 30, 1998 Development Agreement between Cerus and Baxter.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.39(10)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Lease, dated December 17, 1999 between Cerus and Redwoods Office Center, L.P.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.40(10)</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Lease, dated October 12, 2001 between Cerus and California Development, Inc.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.41</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Loan Agreement, dated November 15, 2002, between Cerus and Baxter Capital Corporation.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.42&#134;&#134;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Letter of Understanding between Cerus and Baxter, dated November 1, 2002.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>23.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Consent of Ernst &amp; Young LLP, Independent Auditors.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>24.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Power of Attorney (see signature page).</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>99.1**</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</FONT></TD>
</TR>
</TABLE>
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#134;</FONT></DT><DD><FONT SIZE=2>Certain
portions of this exhibit are subject to a confidential treatment order.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#134;&#134;</FONT></DT><DD><FONT SIZE=2>Confidential
treatment has been requested with respect to certain portions of this exhibit.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>Compensatory
Plan.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>**</FONT></DT><DD><FONT SIZE=2>The
certification attached as Exhibit&nbsp;99.1 accompanies this Annual Report on Form&nbsp;10-K pursuant to &sect; 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed "filed" by Cerus for purposes of Section&nbsp;18 of the Securities Exchange Act of 1934, as amended.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference to Cerus' Registration Statement on Form&nbsp;S-1 (File No.&nbsp;333-11341) and amendments thereto.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference to Cerus' Quarterly Report on Form&nbsp;10-Q for the quarter ended March&nbsp;31, 1998.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference to Cerus' Current Report on Form&nbsp;8-K, dated June&nbsp;30, 1998. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>48</FONT></P>

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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference to Cerus' Current Report on Form&nbsp;8-K, dated November&nbsp;3, 1999.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference to Cerus' Registration Statement on Form&nbsp;S-8, dated August&nbsp;4, 1999.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference to Cerus' Annual Report on Form&nbsp;10-K, for the year ended December&nbsp;31, 2000.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference to Cerus' Quarterly Report on Form&nbsp;10-Q for the quarter ended March&nbsp;31, 2001.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(8)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference to Cerus' Quarterly Report on Form&nbsp;10-Q for the quarter ended June&nbsp;30, 2001.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(9)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference to Cerus' Current Report on Form&nbsp;8-K, dated August&nbsp;28, 2001.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(10)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference to Cerus' Annual Report on Form&nbsp;10-K, for the year ended December&nbsp;31, 2001.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(11)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference to Cerus' Annual Report on Form&nbsp;10-K for the fiscal year ended December&nbsp;31, 1997. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>49</FONT></P>

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NAME="page_fb1204_1_50"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fb1204_report_of_ernst___young_llp,_independent_auditors"> </A>
<A NAME="toc_fb1204_1"> </A>
<BR></FONT><FONT SIZE=2><B>REPORT OF ERNST&nbsp;&amp; YOUNG LLP, INDEPENDENT AUDITORS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>The
Board of Directors and Stockholders<BR>
Cerus Corporation </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying balance sheets of Cerus Corporation as of December&nbsp;31, 2002 and 2001, and the related statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December&nbsp;31, 2002. 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. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cerus Corporation at December&nbsp;31, 2002 and 2001, and
the results of its operations and its cash flows for each of the three years in the period ended December&nbsp;31, 2002 in conformity with accounting principles generally accepted in the United
States. </FONT></P>

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<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>ERNST &amp; YOUNG LLP</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="49%" VALIGN="TOP"><FONT SIZE=2><BR>
Palo Alto, California<BR>
January&nbsp;30, 2003</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>50</FONT></P>

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NAME="page_fc1204_1_51"> </A> </FONT></P>

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<A NAME="toc_fc1204_1"> </A>
<BR></FONT><FONT SIZE=2><B>CERUS CORPORATION    <BR>    <BR>    BALANCE SHEETS    <BR>    <BR>    (in thousands, except share and per share data)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=10 ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2>ASSETS</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Current assets:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>22,435</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>64,503</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Short-term investments</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>41,883</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>58,958</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Accounts receivable from related parties</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>26</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Accounts receivable and other current assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,884</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,573</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Total current assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>67,248</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>125,060</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Furniture and equipment at cost:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Laboratory and office equipment</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,353</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,951</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Leasehold improvements</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,295</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,665</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12,648</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,616</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Less accumulated depreciation and amortization</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,101</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>4,604</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Net furniture and equipment</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,547</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,012</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Other assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>152</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>188</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>72,947</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>128,260</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=10 ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
LIABILITIES AND STOCKHOLDERS' EQUITY</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Current liabilities:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Accounts payable to a related party</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,538</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,029</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,022</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,220</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Accrued compensation and related expenses</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,476</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,634</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Accrued contract research expenses</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,554</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,796</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Other accrued expenses</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,419</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,817</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Deferred revenue</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>718</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>927</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Current portion of capital lease obligations</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>31</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Total current liabilities</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>16,762</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>16,454</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Capital lease obligations, less current portion</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>51</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2><BR>
Commitments and contingencies</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2><BR>
Redeemable convertible preferred stock, $.001 par value; 5,000,000 shares authorized: issuable in series; none issued and outstanding at December 31, 2002 and 5,000 shares issued and outstanding at December 31, 2001</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
5,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2>Stockholders' equity:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Preferred stock, $0.001 par value: issuable in series; 3,327 shares issued and outstanding at December 31, 2002 and 2001; aggregate liquidation preference of $9,496 at December 31, 2002 and 2001</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9,496</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9,496</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Common stock, $.001 par value; 50,000,000 shares authorized: 15,949,663 and 15,737,165 shares issued and outstanding at December 31, 2002 and 2001, respectively</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>276,944</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>270,338</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(230,287</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(173,095</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Total stockholders' equity</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>56,169</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>106,755</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="62%" VALIGN="TOP"><FONT SIZE=2>Total liabilities and stockholders' equity</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>72,947</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>128,260</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See accompanying notes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>51</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=51,EFW="2106076",CP="CERUS CORPORATION",DN="1",CHK=582475,FOLIO='51',FILE='DISK023:[03PAL4.03PAL1204]FC1204A.;9',USER='KSMITHE',CD='26-MAR-2003;18:43' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fe1204_1_52"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fe1204_cerus_corporation_statements_o__cer03517"> </A>
<A NAME="toc_fe1204_1"> </A>
<BR></FONT><FONT SIZE=2><B>CERUS CORPORATION    <BR>    <BR>    STATEMENTS OF OPERATIONS    <BR>    <BR>    (in thousands, except share and per share data)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Years ended December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Revenue:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Milestone and development funding, related parties</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5,002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,103</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,632</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Development funding, other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>747</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>993</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Government grants and cooperative agreements</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,738</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,439</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>219</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Product sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="45%"><FONT SIZE=2>Total revenue</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>8,490</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4,535</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,851</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Research and development</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>56,421</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>48,247</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>34,823</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>General and administrative</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11,346</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10,166</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,160</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="45%"><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>67,767</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>58,413</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>41,983</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Loss from operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(59,277</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(53,878</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(40,132</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Interest income (expense):</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Interest income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,095</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4,626</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4,124</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Interest expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(10</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(15</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(25</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net interest income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,085</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4,611</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4,099</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Loss before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(57,192</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(49,267</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(36,033</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Provision for income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(57,192</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(49,367</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(36,033</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net loss per share&#151;basic and diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(3.61</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(3.27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(2.75</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Shares used in computing net loss per share&#151;basic and diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>15,833,403</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>15,105,003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>13,086,401</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>52</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=52,EFW="2106076",CP="CERUS CORPORATION",DN="1",CHK=723285,FOLIO='52',FILE='DISK023:[03PAL4.03PAL1204]FE1204A.;7',USER='DLAQUIA',CD='26-MAR-2003;07:32' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fg1204_1_53"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fg1204_cerus_corporation_statements_o__cer03399"> </A>
<A NAME="toc_fg1204_1"> </A>
<BR></FONT><FONT SIZE=2><B>CERUS CORPORATION<BR>  <BR>    STATEMENTS OF STOCKHOLDERS' EQUITY<BR>  <BR>    (in thousands, except share data)    <BR>  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Preferred Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Common Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Additional<BR>
Paid-in<BR>
Capital</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Deferred<BR>
Compensation</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Accumulated<BR>
Deficit</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total<BR>
Stockholders'<BR>
Equity</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="4%" ALIGN="CENTER"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Balances at December 31, 1999</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>3,327</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>9,496</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11,744,092</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>105,977</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(87,519</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>27,959</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Issuance of common stock, net of expenses of $1,314</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,200,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>83,683</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>83,685</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Issuance of common stock under stock option and employee stock purchase plans</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>108,589</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,479</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,479</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Common shares reacquired</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(919</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Accretion of cash dividend on preferred stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(176</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(176</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Amortization of deferred compensation</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(36,033</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(36,033</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Balances at December 31, 2000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>3,327</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>9,496</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>14,051,762</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>14</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>191,139</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(123,728</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>76,921</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Issuance of common stock, net of expenses of $2,812</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,500,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>75,186</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>75,188</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Issuance of common stock for services</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11,665</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>756</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>756</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Issuance of common stock under stock option and employee stock purchase plans</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>173,738</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3,257</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,257</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(49,367</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(49,367</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Balances at December 31, 2001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>3,327</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>9,496</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15,737,165</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>270,338</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(173,095</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>106,755</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Conversion of Series B preferred stock to common stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>129,968</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Issuance of common stock for services</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>33</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>33</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Issuance of common stock under stock option and employee stock purchase plans</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>81,530</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,573</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,573</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(57,192</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(57,192</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Balances at December 31, 2002</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>3,327</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>9,496</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15,949,663</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>276,944</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(230,287</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>56,169</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>53</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=53,EFW="2106076",CP="CERUS CORPORATION",DN="1",CHK=813019,FOLIO='53',FILE='DISK023:[03PAL4.03PAL1204]FG1204A.;11',USER='DLAQUIA',CD='26-MAR-2003;07:32' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fi1204_1_54"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fi1204_cerus_corporation_state__fi102312"> </A>
<A NAME="toc_fi1204_1"> </A>
<BR></FONT><FONT SIZE=2><B>CERUS CORPORATION    <BR>    <BR>    STATEMENTS OF CASH FLOWS    <BR>    <BR>    (in thousands)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Years ended December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Operating activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(57,192</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(49,367</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(36,033</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Adjustments to reconcile net loss to net cash used in operating activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,497</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,193</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>627</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Issuance of common stock for services</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>33</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>756</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Amortization of deferred compensation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Accrued cash dividend on preferred stock, payable to a related party</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(176</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Changes in operating assets and liabilities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="55%"><FONT SIZE=2>Accounts receivable from a related party</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(20</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>241</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(267</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="55%"><FONT SIZE=2>Other current assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,311</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,061</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(274</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="55%"><FONT SIZE=2>Other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>36</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(60</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="55%"><FONT SIZE=2>Accounts payable to a related party</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,509</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,238</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,260</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="55%"><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,198</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,059</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,799</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="55%"><FONT SIZE=2>Accrued compensation and related expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(158</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>673</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>830</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="55%"><FONT SIZE=2>Accrued contract research expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,242</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>455</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(816</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="55%"><FONT SIZE=2>Accrued cash dividend on preferred stock, payable to a related party</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>176</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="55%"><FONT SIZE=2>Other accrued expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(398</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>64</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(160</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="55%"><FONT SIZE=2>Deferred revenue</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(209</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>927</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net cash used in operating activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(55,653</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(44,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(32,031</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><BR><FONT SIZE=2><B>Investing activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Purchases of furniture and equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(5,032</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,236</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2,622</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Proceeds from sale of equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Purchases of short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(100,157</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(78,892</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(18,657</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Sale of short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>53,033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Maturities of short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>64,199</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>27,323</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>34,650</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net cash provided by (used in) investing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12,043</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(41,780</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15,871</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><BR><FONT SIZE=2><B>Financing activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net proceeds from issuance of common stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,573</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>78,445</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>85,164</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Payment of cash dividend on preferred stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(639</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Payments on capital lease obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(31</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(33</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(31</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net cash provided by financing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,542</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>78,412</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>84,494</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net increase (decrease) in cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(42,068</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(7,368</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>68,334</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Cash and cash equivalents, beginning of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>64,503</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>71,871</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,537</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Cash and cash equivalents, end of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>22,435</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>64,503</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>71,871</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Supplemental disclosures:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Interest paid</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See accompanying notes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>54</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fk1204_1_55"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fk1204_cerus_corporation_notes_to_fin__cer02253"> </A>
<A NAME="toc_fk1204_1"> </A>
<BR></FONT><FONT SIZE=2><B>CERUS CORPORATION<BR>  <BR>    NOTES TO FINANCIAL STATEMENTS<BR>  <BR>    December&nbsp;31, 2002    <BR>  </B></FONT></P>

<P><FONT SIZE=2><B>1.&nbsp;&nbsp;&nbsp;&nbsp;The Company and Its Significant Accounting Policies  </B></FONT></P>

<P><FONT SIZE=2><B>Basis of Presentation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cerus Corporation (the "Company") (formerly Steritech,&nbsp;Inc.), incorporated on September&nbsp;19, 1991, is developing medical systems and therapeutics
based on its proprietary technology for controlling biological replication. The Company's most advanced programs are focused on systems to inactivate viruses, bacteria, other pathogens and white blood
cells in platelets, plasma and red blood cells intended for transfusion. The Company also is pursuing therapeutic applications of its technology to treat and prevent serious diseases. The Company has
collaboration agreements with Baxter Healthcare Corporation ("Baxter"), the Pharmaceutical Division of Kirin Brewery Co.,&nbsp;Ltd. ("Kirin") and the Consortium for Plasma Science ("the Consortium")
(see Note&nbsp;2). The Company has not received material revenue from product sales, and substantially all revenue recognized by the Company to date has resulted from the Company's agreements with
Baxter, Kirin and the Consortium and federal research grants and collaborative agreements. The Company will be required to conduct significant research, development, testing and regulatory compliance
activities on its pathogen inactivation systems that, together with anticipated general and administrative expenses, are expected to result in substantial additional losses, and the Company may need
to adjust its operating plans and programs based on the availability of cash resources. The Company's ability to achieve a profitable level of operations will depend on successfully completing
development, obtaining additional regulatory approvals and achieving market acceptance of its pathogen inactivation systems. There can be no assurance that the Company will ever achieve a profitable
level of operations. </FONT></P>

<P><FONT SIZE=2><B>Use of Estimates  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities,
revenue and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, which are based on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates under different assumptions or conditions. The Company records accrued
liabilities for certain contract research activities, including clinical trials, pre-clinical safety studies, external laboratory studies and development activities performed by Baxter,
for research and development services performed. Some of those accrued liabilities are based on estimates because billings for these activities may not occur on a timely basis consistent with the
performance of the services. </FONT></P>


<P><FONT SIZE=2><B>Revenue and Research and Development Expenses  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Development funding is in the form of payments made (i)&nbsp;by Baxter to the Company to reimburse the Company for development spending in excess of the levels
determined by Baxter and the Company and (ii)&nbsp;by Kirin and the Consortium to reimburse the Company for certain fee-for-service development activities. Revenue related to
the cost reimbursement provisions under development contracts is recognized as the costs on the project are incurred. Revenue related to at risk milestones specified under development contracts is
recognized as the milestones are achieved. License fees and payments for achieved milestones are non-refundable and are not subject to future performance. During the year ended
December&nbsp;31, 2002, the Company recognized $5,000,000 of milestone revenue from Baxter upon European regulatory approval for the platelet system. There was no revenue recognized related to </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>55</FONT></P>

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<P><FONT SIZE=2>
license fees, milestones or other up-front payments during the years ended December&nbsp;31, 2001 and 2000. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
accordance with Statement of Financial Accounting Standards No.&nbsp;2, "Accounting for Research and Development Expenses," research and development costs are charged to expense
when incurred. Research and development expenses include salaries and related expenses for scientific personnel, payments to consultants, supplies and chemicals used in in-house
laboratories, costs of research and development facilities, depreciation of equipment and external contract research expenses, including clinical trials, pre-clinical safety studies,
compound manufacturing and other laboratory studies. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company's use of estimates in recording accrued liabilities for research and development activities (described previously in this Note under the heading "Use of Estimates") affects
the amounts of research and development expenses and development funding revenue recorded from Baxter. Actual results may differ from those estimates under different assumptions or conditions. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company receives certain United States government grants that support the Company's research effort in defined research projects. These grants generally provide for reimbursement of
approved costs incurred as defined in the various grants. Revenue associated with these grants is recognized as costs under each grant are incurred. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company complies with the Securities and Exchange Commission's Staff Accounting Bulletin No.&nbsp;101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides
guidance on the recognition, presentation and disclosure of revenue in financial statements. </FONT></P>


<P><FONT SIZE=2><B>Cash, Cash Equivalents and Short-Term Investments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents. Cash
equivalents consist principally of short-term money market instruments and commercial paper. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
accordance with Statement of Financial Accounting Standards No.&nbsp;115, "Accounting for Certain Investments in Debt and Equity Securities," the Company has classified all debt
securities as available-for-sale at the time of purchase and reevaluates such designation as of each balance sheet date. The Company reports the amortization of any discount or
premium resulting from the purchase of debt securities as a component of interest income. The available-for-sale securities recorded at amounts that approximate fair value at
December&nbsp;31, 2002 and 2001 totaled $64,298,000 and $123,461,000, respectively. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized
gains and losses at December&nbsp;31, 2002 and 2001 and realized gains and losses for the years then ended were not material. Accordingly, the Company has not made a
provision for such amounts in its balance sheets. The cost of securities sold is based on the specific identification method. Substantially all of the Company's cash, cash equivalents and
short-term investments are maintained by three major financial institutions. </FONT></P>


<P><FONT SIZE=2><B>Furniture and Equipment  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furniture and equipment is recorded at cost less accumulated depreciation. Depreciation on furniture and equipment is calculated on a straight-line
basis over the estimated useful lives of the assets (generally three to five years). Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the
estimated useful lives of the improvements. </FONT></P>

<P><FONT SIZE=2><B>Long-Lived Assets  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;1, 2002, the Company adopted Statement of Financial Accounting Standards No.&nbsp;144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("FAS&nbsp;144"). FAS&nbsp;144 supersedes </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>56</FONT></P>

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<P><FONT SIZE=2>
Statement of Financial Accounting Standards No.&nbsp;121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and provides a single
accounting model for long-lived assets to be disposed. The adoption of FAS&nbsp;144 did not have a material effect on the Company's results of operations and financial position. </FONT></P>


<P><FONT SIZE=2><B>Stock-Based Compensation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company accounts for employee stock options in accordance with Accounting Principles Board Opinion No.&nbsp;25 ("APB 25"), including Interpretation
No.&nbsp;44, "Accounting for Certain Transactions Involving Stock Compensation: An Interpretation of APB No.&nbsp;25," ("FIN 44"), and has adopted the "disclosure only" alternative described in
Statement of Financial Accounting Standards No.&nbsp;123, "Accounting for Stock-Based Compensation," as amended by Statement of Financial Accounting Standards No.&nbsp;148, "Accounting for
Stock-Based Compensation&#151;Transition and Disclosure" ("FAS&nbsp;123"). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table illustrates the effect on net loss and related net loss per share, had compensation expense for stock-based compensation plans been determined based on the fair value
method prescribed under FAS&nbsp;123: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="82%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands, except per share data)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net loss:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>As reported</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(57,192</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(49,367</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(36,033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Add:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="50%"><FONT SIZE=2>Stock-based employee compensation expense included in reported net loss, net of related tax effects</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Less:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="50%"><FONT SIZE=2>Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>15,491</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>12,239</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,407</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Pro forma</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(72,693</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(61,606</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(43,440</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net loss per share&#151;basic and diluted, as reported</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3.61</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3.27</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Net loss per share&#151;basic and diluted, pro forma</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(4.59</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(4.08</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3.32</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><B>Income Taxes  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company accounts for income taxes based upon Statement of Financial Accounting Standards No.&nbsp;109, "Accounting for Income Taxes" ("FAS&nbsp;109").
Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted
tax rates and laws that will be in effect when the differences are expected to reverse. </FONT></P>


<P><FONT SIZE=2><B>Net Loss Per Share&#151;Basic and Diluted  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company calculates basic and diluted earnings per share in accordance with Statement of Financial Accounting Standards No.&nbsp;128, "Earnings Per Share"
("FAS&nbsp;128"). Under FAS&nbsp;128, basic earnings per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the assumed conversion of all dilutive securities, such as options, warrants, convertible debt and convertible preferred stock. Common stock equivalent shares from
redeemable convertible preferred stock and from stock options are not included as the effect is anti-dilutive. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>57</FONT></P>

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<P><FONT SIZE=2><B>Comprehensive Income (Loss)  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Statement of Financial Accounting Standards No.&nbsp;130, "Reporting Comprehensive Income," requires that all items that are required to be recognized under
accounting standards as comprehensive income (revenues, expenses, gains and losses) be reported in a financial statement that is displayed with the same prominence as other financial statements. The
Company does not have material components of other comprehensive income. Therefore, comprehensive loss is equal to net loss reported for all periods presented. </FONT></P>

<P><FONT SIZE=2><B>Disclosures About Segments of an Enterprise  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Statement of Financial Accounting Standards No.&nbsp;131, "Disclosures about Segments of an Enterprise and Related Information," establishes standards for the
way public business enterprises report information about operating segments in annual financial statements. The Company has one reportable operating segment under this statement, which is the
development of biomedical systems to treat blood products, and the required disclosures are reflected in the financial statements. </FONT></P>


<P><FONT SIZE=2><B>New Accounting Pronouncements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November 2002, the FASB issued Interpretation No.&nbsp;45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others" ("FIN&nbsp;45"). FIN&nbsp;45 requires that the Company recognize the fair value for guarantee and indemnification arrangements issued or modified by the Company after
December&nbsp;31, 2002, if these arrangements are within the scope of the Interpretation. In addition, the Company must continue to monitor the conditions that are subject to the guarantees and
indemnifications, as required under previously existing generally accepted accounting principles, in order to identify if a loss has occurred. If the Company determines it is probable that a loss has
occurred then any such estimable loss would be recognized under those guarantees and indemnifications. Some of the development arrangements of the Company contain provisions that indemnify the
counterparty of the Company's technology from damages and costs resulting from claims alleging that the Company's technology infringes the intellectual property rights of a third party. The Company
has not received any such requests for indemnification under these provisions and has not been required to make material payments pursuant to these provisions. Accordingly, the Company has not
recorded a liability related to these indemnification provisions. The Company does not have any guarantees or indemnification arrangements other than the indemnification clause in some of its
development arrangements. The Company will be required to implement the provisions of FIN&nbsp;45 as of January&nbsp;1, 2003 and does not believe that FIN&nbsp;45 will have a material impact on
its financial position, results of operations or cash flows. </FONT></P>

<P><FONT SIZE=2><B>2.&nbsp;&nbsp;&nbsp;&nbsp;Development Agreements  </B></FONT></P>

<P><FONT SIZE=2><B>Agreements with Baxter, a Related Party of the Company  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a development and commercialization agreement with Baxter for the joint development of a system for inactivation of viruses, bacteria and other
infectious pathogens in platelets used for transfusion. This agreement provides for Baxter and the Company to generally share system development costs equally, subject to mutually determined budgets
established from time to time, and for the Company to receive approximately 33.5% of revenue from sales of inactivation system disposables after each party is reimbursed for its cost of goods to the
extent the cost exceeds specific amounts. Baxter has an exclusive, worldwide distribution license and is responsible for manufacturing and marketing the system following regulatory approval. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company also has a development and commercialization agreement with Baxter for the joint development of the systems for inactivation of viruses, bacteria and other infectious
pathogens in red </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>58</FONT></P>

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<P><FONT SIZE=2>
blood cells and plasma for transfusion. This agreement provides for Baxter and the Company generally to share red blood cell system development costs equally, subject to mutually determined budgets
established from time to time. The Company is solely responsible for funding the development costs of the system for plasma. Baxter has an exclusive, worldwide distribution license and will be
responsible for manufacturing and marketing the systems following regulatory approvals. The agreement also provides for an equal sharing of revenue from sales of red blood cell system disposables, and
for the Company to receive 75% and Baxter to receive 25% of revenue from sales of plasma system disposables, after each party is reimbursed for its cost of goods and a specified percentage allocation,
not to exceed 14% of revenue, is retained by Baxter for marketing and administrative expenses. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
agreement also provided that Baxter and its affiliates would not acquire capital stock of the Company if the acquisition would result in Baxter and its affiliates owning 20.1% or
more of the outstanding voting power of the Company. In June&nbsp;2001, the Company and Baxter amended this provision to reduce the ownership limit from 20.1% to 5.4% of the outstanding voting power
of the Company. The provision excludes the conversion of preferred stock and will not apply in the event a third party makes a tender offer for a majority of the outstanding voting shares of the
Company, the Board of Directors decides to liquidate or sell to a third party substantially all of the Company's assets or a majority of the Company's voting securities approve a merger in which the
Company's stockholders do not own a majority of the voting securities of the post-merger company. As of December&nbsp;31, 2002, Baxter owned less than 5% of the Company's outstanding
common stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2002, the Company has received $46.7&nbsp;million in equity investments from Baxter and $25.9&nbsp;million in an equity investment from Baxter
International&nbsp;Inc. and Subsidiaries Pension Trust, and has recognized approximately $30.0&nbsp;million in revenue from Baxter, since inception. Development funding is in the form of balancing
payments made by Baxter to the Company, if necessary, to reimburse the Company for development spending in excess of the levels determined by Baxter and the Company. </FONT></P>

<P><FONT SIZE=2><B>Agreement with Kirin Brewery Co.&nbsp;Ltd.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2001, the Company entered into a collaborative agreement with Kirin to develop and market products for stem cell transplantation based on the
Company's proprietary technology. Under the terms of the agreement, the Company and Kirin will jointly develop the products. The Company has received an initial license fee of $1&nbsp;million, and
may receive additional payments upon achievement of development milestones. The license fee is being deferred and recognized as development funding ratably over the term of the agreement. Although
Kirin will fund all development expenses for the Asia-Pacific region and a portion of the Company's development activities aimed at obtaining product approval in the United States, no such
development activities by the Company are currently ongoing. Upon product approval, Kirin will market the products in the Asia-Pacific region, including Japan, China, Korea and Australia,
and the Company will receive a specified share of product revenue. The Company retains all marketing rights in the rest of the world, including the United States and Europe. The Company recognized
$209,000 and $914,000 in development funding from Kirin during the years ended December&nbsp;31, 2002 and 2001, respectively. </FONT></P>


<P><FONT SIZE=2><B>Cooperative Agreement with the Armed Forces of the United States  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2001, the Company was awarded a $3.5&nbsp;million cooperative agreement by the Army Medical Research Acquisition Activity division of the
Department of Defense. The Company received the award to develop its pathogen inactivation technologies to improve the safety and availability of blood that may be used by the United States Armed
Forces for medical transfusions. In September&nbsp;2002, the Company was awarded an additional $6.5&nbsp;million cooperative agreement to continue funding of these projects. The Company recognized
$1,949,000 and $999,000 of revenue under this agreement during the years ended December&nbsp;31, 2002 and 2001, respectively. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>59</FONT></P>

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<A NAME="page_fk1204_1_60"> </A>
<BR>

<P><FONT SIZE=2><B>Agreement with the National Marrow Donor Program  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2001, the Company and the National Marrow Donor Program ("NMDP"), a non-profit corporation, entered into an agreement under which
the NMDP would sponsor a clinical trial in patients receiving matched unrelated bone marrow transplants. The agreement was amended in December&nbsp;2002. Under the amended agreement, the Company
will provide amotosalen, illumination devices, training of clinical sites and program oversight in exchange for reimbursement by the NMDP of the Company's related costs. The Company recognized
$538,000 and $79,000 in development funding from the NMDP during the years ended December&nbsp;31, 2002 and 2001, respectively. </FONT></P>

<P><FONT SIZE=2><B>Agreement with the Consortium for Plasma Science  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;1998, the Company and the Consortium entered into an agreement for the development of a pathogen inactivation system for source plasma used for
fractionation. The Consortium is co-funded by four plasma fractionation companies, one of which is Baxter, a related party of the Company. The Consortium, which is a separate entity from
its members, provides research and development funding worldwide for technologies to improve the safety of source plasma. Under the agreement, the Consortium has funded development of the Company's
proprietary technology for use with source plasma. The Company does not expect to receive additional funding from the Consortium. Subject to the Consortium having met certain funding requirements, the
Company will pay the Consortium a royalty based on a percentage of product sales, if any. The Company recognized $2,000, $226,000 and $679,000 in development funding from the Consortium during the
years ended December&nbsp;31, 2002, 2001 and 2000, respectively. </FONT></P>

<P><FONT SIZE=2><B>3.&nbsp;&nbsp;&nbsp;&nbsp;Investments  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Available-for-sale securities are recorded at amounts that approximate fair market value. Realized and unrealized gains and losses at
December&nbsp;31, 2002 and 2001 were not material. Investments classified as available-for-sale were as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="72%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="65%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="65%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="65%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>Money market mutual funds</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,929</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>51,419</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>United States and state government obligations</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>22,761</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>31,688</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>Commercial paper</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>34,608</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>40,354</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>Total investments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>64,298</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>123,461</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>Less: amounts classified as cash equivalents</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(22,415</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(64,503</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>Short-term investments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>41,883</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>58,958</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Of
the Company's debt securities at December&nbsp;31, 2002, securities in the aggregate amount of $15,486,000 have original maturity dates of less than three months, securities in the
aggregate amount of $24,776,000 have original maturities of three months to one year and securities in the aggregate amount of $17,107,000 have original maturities of one to two years. </FONT></P>

<P><FONT SIZE=2><B>4.&nbsp;&nbsp;&nbsp;&nbsp;Commitments and Contingencies  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company leases its office facilities and certain equipment under non-cancelable operating leases with initial terms in excess of one year that
require the Company to pay operating costs, property taxes, insurance and maintenance. These facility leases generally contain renewal options and provisions adjusting the lease payments. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>60</FONT></P>

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<P><FONT SIZE=2><A
NAME="page_fm1204_1_61"> </A> </FONT> <FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital lease obligations represent the present value of future rental payments under capital lease agreements for laboratory and office equipment. The original cost and accumulated
amortization on the equipment under capital leases was $173,000 and $173,000, respectively, at December&nbsp;31, 2002 and $173,000 and $141,000, respectively, at December&nbsp;31, 2001. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future
minimum payments under capital and operating leases are as follows: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=1><B>Year ending December 31,<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Capital<BR>
Leases</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Operating<BR>
Leases</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>40</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,197</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>818</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Total minimum lease payments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>60</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,023</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Amount representing interest</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Present value of net minimum lease payments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>51</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Current portion</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Long-term portion</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rent
expense for office facilities and certain equipment was $1,219,000, $900,000 and $592,000 for the years ended December&nbsp;31, 2002, 2001 and 2000, respectively. </FONT></P>

<P><FONT SIZE=2><B>5.&nbsp;&nbsp;&nbsp;&nbsp;Preferred Stock  </B></FONT></P>

<P><FONT SIZE=2><B>Series&nbsp;A Redeemable Convertible Preferred Stock  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon regulatory approval of the platelet system in Europe, all 5,000 outstanding shares of Series&nbsp;A preferred stock were converted to common shares in July
2002. The Company issued a total of 129,968 common shares to Baxter, the holder of the Series&nbsp;A preferred stock, in connection with this conversion. The conversion price was based on the
average of 120% of the average closing price of the common stock 30&nbsp;trading days prior to CE&nbsp;Mark approval of the disposable set for the platelet system and 120% of the average closing
price of the common stock 30&nbsp;trading days prior to CE&nbsp;Mark of the illumination device for the platelet system. </FONT></P>

<P><FONT SIZE=2><B>Series&nbsp;B Preferred Stock  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Baxter holds 3,327 shares of the Company's Series&nbsp;B preferred stock. The holder of Series&nbsp;B preferred stock has no voting rights, except with
respect to the authorization of any class or series of stock having preference or priority over the Series&nbsp;B preferred stock as to voting, liquidation or conversion or with respect to the
determination of fair market value of non-publicly traded shares received by the holder of Series&nbsp;B stock in the event of a liquidation, or except as required by Delaware law. At
any time, the holder may convert each share of Series&nbsp;B preferred stock into 100 common shares. If all shares of Series&nbsp;B preferred stock were converted to common stock, 332,700 shares
would be issued, which represents 2.1% of the outstanding common shares of the Company at December&nbsp;31, 2002. The Company has the right to redeem the Series&nbsp;B preferred stock prior to
conversion for a payment of $9.5&nbsp;million. </FONT></P>

<P><FONT SIZE=2><B>6.&nbsp;&nbsp;&nbsp;&nbsp;Stockholders' Equity  </B></FONT></P>

<P><FONT SIZE=2><B>Common Stock  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;1999, the Company's Board of Directors adopted a stockholder rights plan, commonly referred to as a "poison pill," that is intended to deter
hostile or coercive attempts to </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>61</FONT></P>

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<P><FONT SIZE=2>
acquire the Company. The stockholder rights plan enables stockholders to acquire shares of the Company's common stock, or the common stock of an acquiror, at a substantial discount to the public
market price should any person or group acquire more than 15% of the Company's common stock without the approval of the Board of Directors under certain circumstances. Baxter will be exempt from the
rights plan, unless it and its pension plan acquire beneficial ownership in aggregate of 20.1% or more of the Company's common stock, excluding shares of the Company's common stock issuable upon
conversion of Series&nbsp;B preferred stock currently held by Baxter. The Company has designated 250,000 shares of Series&nbsp;C Junior Participating preferred stock for issuance in connection
with the stockholder rights plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
February&nbsp;2000, the Company completed a private placement of 1,000,000 shares of common stock to accredited investors, including Baxter, which purchased 390,000 shares. The
purchase price was $25.00 per share, and the Company received net proceeds of $23.9&nbsp;million, after deducting related expenses. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
August&nbsp;2000, the Company completed a private placement of 1,200,000 shares of common stock to an institutional investor. The purchase price was $50.00 per share, and the
Company received net proceeds of $59.8&nbsp;million, after deducting related expenses. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
May&nbsp;2001, the Company completed private placements of an aggregate of 1,500,000 shares of common stock at $52.00 per share, and received net proceeds of $75.2&nbsp;million,
after deducting related expenses. Baxter International&nbsp;Inc. and Subsidiaries Pension Trust purchased 500,000 shares and another institutional investor purchased 1,000,000 shares. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
August&nbsp;2001, the Company filed a shelf registration statement on Form&nbsp;S-3 with the Securities and Exchange Commission to offer and sell up to
$300&nbsp;million of common stock and/or debt securities. The Company has no current commitments to offer or sell securities pursuant to this registration statement. </FONT></P>


<P><FONT SIZE=2><B>Stock Option Plans  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has reserved 1,470,000 shares of common stock for issuance under its 1996 Equity Incentive Plan (the "1996 Plan"). The 1996 Plan provides for grants
of Incentive Stock Options ("ISOs") to employees and Nonstatutory Stock Options ("NSOs"), restricted stock purchase awards, stock appreciation rights and stock bonuses to employees, directors and
consultants of the Company.
The ISOs may be granted at a price per share not less than the fair market value at the date of grant. The NSOs may be granted at a price per share not less than 85% of the fair market value at the
date of grant. The option term is ten years. Vesting, as determined by the Board of Directors, generally occurs ratably over four years. In the event option holders cease to be employed by the
Company, except in the event of death or disability or as otherwise provided in the option grant, all unvested options are forfeited and all vested options must be exercised within a three-month
period, otherwise the options are forfeited. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has reserved 240,000 shares of common stock for issuance under its 1998 Non-Officer Stock Option Plan. Under the terms of this plan, options may be granted to
employees or consultants at an exercise price of at least 85% of the fair market value per share at the date of grant. The option term is ten years. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has reserved 4,080,000 shares of common stock for issuance under its 1999 Equity Incentive Plan (the "1999 Plan"). The 1999 Plan provides for grants of ISOs to employees and
NSOs, stock bonuses and restricted stock purchase awards to employees, directors and consultants of the Company. The option term is ten years. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>62</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=2,SEQ=62,EFW="2106076",CP="CERUS CORPORATION",DN="1",CHK=968736,FOLIO='62',FILE='DISK023:[03PAL4.03PAL1204]FM1204A.;14',USER='KSMITHE',CD='26-MAR-2003;20:57' -->
<A NAME="page_fm1204_1_63"> </A>
<BR>

<P><FONT SIZE=2><B>Stock-Based Compensation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has elected to follow APB 25 and related interpretations, including FIN 44, in accounting for its employee stock awards because, as discussed below,
the alternative fair value accounting provided for under FAS&nbsp;123 requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee common stock options equals the market price of the underlying common stock on the grant date (for certain Company common stock grants), no
compensation expense is recorded. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pro
forma information regarding net loss and net loss per share is required by FAS&nbsp;123, and has been determined as if the Company had accounted for its employee stock options and
employee stock purchase plan under the fair value method of that Statement. The fair value for these options and shares was estimated at the date of grant using a Black-Scholes model with the
following weighted-average assumptions for the years ended December&nbsp;31: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="45%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Stock Option Plans</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Employee Stock<BR>
Purchase Plan</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="45%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>Expected volatility</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>.6374</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>.6837</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>.8564</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>.6374</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>.6837</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>.8564</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>Risk-free interest rate</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>2.80</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3.50</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>4.80</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1.50</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3.50</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>4.50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>Expected life of the option (years)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options and purchased shares have
characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion,
the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock awards. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Activity
under the stock option plans is set forth below: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Options<BR>
Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted Average<BR>
Exercise Price<BR>
per Share</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Balances at December&nbsp;31, 1999</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,066,776</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>14.725</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="58%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>752,525</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>33.415</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="58%"><FONT SIZE=2>Cancelled</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(56,889</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>21.669</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="58%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(95,013</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>11.943</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Balances at December&nbsp;31, 2000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,667,399</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>23.101</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="58%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>715,195</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>44.953</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="58%"><FONT SIZE=2>Cancelled</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(39,625</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>24.792</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="58%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(161,258</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>16.711</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Balances at December&nbsp;31, 2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,181,711</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>30.686</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="58%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,162,871</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>42.597</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="58%"><FONT SIZE=2>Cancelled</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(131,408</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>43.672</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="58%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(54,084</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>17.692</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Balances at December&nbsp;31, 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3,159,090</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>34.703</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>63</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=3,SEQ=63,EFW="2106076",CP="CERUS CORPORATION",DN="1",CHK=968035,FOLIO='63',FILE='DISK023:[03PAL4.03PAL1204]FM1204A.;14',USER='KSMITHE',CD='26-MAR-2003;20:57' -->
<A NAME="page_fm1204_1_64"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
weighted average fair value of options granted during the years ended December&nbsp;31, 2002, 2001 and 2000 was $19.650, $21.824, and $19.761 per share, respectively. At
December&nbsp;31, 2002, options to purchase 1,702,840 shares of common stock were available for future grant. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="99%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="36%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=6 ALIGN="CENTER"><FONT SIZE=1><B>Options Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="36%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Remaining<BR>
Contractual<BR>
Life (Years)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Options Vested</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="36%" ALIGN="LEFT"><FONT SIZE=1><B>Range of Exercise Prices<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
of Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
of Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise Price</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>$0.544 &#151; 2.721</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>152,020</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3.28</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2.631</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>152,020</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2.631</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>$8.163 &#151; 15.500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>323,292</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5.96</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>15.229</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>309,366</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>15.280</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>$16.100 &#151; 21.060</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>340,171</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8.65</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>19.926</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>113,748</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>18.366</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>$21.061 &#151; 24.875</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>416,673</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6.94</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>24.560</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>309,922</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>24.502</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>$25.375 &#151; 33.180</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>230,517</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7.64</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>27.688</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>137,177</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>27.526</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>$33.625 &#151; 38.188</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>460,469</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8.22</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>38.081</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>200,570</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>38.095</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>$39.063 &#151; 50.050</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>344,698</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8.41</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>45.947</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>148,143</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>45.427</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>$50.180 &#151; 50.180</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>642,422</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9.22</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>50.180</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>121,488</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>50.180</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>$50.900 &#151; 75.250</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>248,828</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8.36</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>61.500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>120,289</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>64.758</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,159,090</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7.82</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>34.703</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,612,723</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>29.046</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Employee Stock Purchase Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has reserved 220,500 shares of common stock for issuance under its Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan is intended
to qualify as an employee stock purchase plan within the meaning of Section&nbsp;423(b) of the Internal Revenue Code. Under the Purchase Plan, the Board of Directors may authorize participation by
eligible employees, including officers, in periodic offerings following the adoption of the Purchase Plan. The offering period for any offering will be no more than 27&nbsp;months. Employees
purchased 27,446, 12,480 and 12,953 shares under the Purchase Plan during the years ended December&nbsp;31, 2002, 2001 and 2000, respectively. At December&nbsp;31, 2002, 95,818 shares were
available for issuance. The weighted average fair value per share of the rights granted during the years ended December&nbsp;31, 2002, 2001 and 2000 using the Black-Scholes model was $19.357,
$10.636 and $10.260, respectively. </FONT></P>

<P><FONT SIZE=2><B>7.&nbsp;&nbsp;&nbsp;&nbsp;Income Taxes  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="72%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="64%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="64%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="64%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="64%"><FONT SIZE=2>Net operating loss carryforward</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>81,300</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>60,100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="64%"><FONT SIZE=2>Research and development credit carryforward</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>13,500</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,900</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="64%"><FONT SIZE=2>Certain expenses not currently deductible for tax purposes</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,500</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,800</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="64%"><FONT SIZE=2>Accrued liabilities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,400</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="64%"><FONT SIZE=2>Capitalized research and development</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,300</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="64%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,100</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>800</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="64%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="64%"><FONT SIZE=2>Gross deferred tax assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>103,100</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>78,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="64%"><FONT SIZE=2>Valuation allowance</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(103,100</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(78,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="64%"><FONT SIZE=2>Net deferred tax assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="64%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>64</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=4,SEQ=64,EFW="2106076",CP="CERUS CORPORATION",DN="1",CHK=83011,FOLIO='64',FILE='DISK023:[03PAL4.03PAL1204]FM1204A.;14',USER='KSMITHE',CD='26-MAR-2003;20:57' -->
<A NAME="page_fm1204_1_65"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
valuation allowance increased by $25,100,000 and $21,700,000 for the years ended December&nbsp;31, 2002 and 2001, respectively. The increase is primarily attributable to the
increase in the net operating loss and tax credit carryforwards. The Company believes that, based on a number of factors, the available objective evidence creates sufficient uncertainty regarding the
realizability of the deferred tax assets such that a full valuation allowance has been recorded. These factors include the Company's history of net losses since its inception, the need for regulatory
approval of the Company's products prior to commercialization, expected near-term future losses and the absence of taxable income in prior carryback years. The valuation allowance at
December&nbsp;31, 2002 includes $2,800,000 related to deferred tax assets arising from tax benefits associated with stock option plans. This benefit, when realized, will be recorded as an increase
in stockholders' equity rather than as a reduction in the income tax provision. For the year ended December&nbsp;31, 2001, the Company recorded a tax provision of $100,000, which consisted of
foreign withholding taxes on license fees received. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
management's operating plans assume, beyond the near-term, taxable and operating income in future periods, management evaluation of all available information in
assessing the realizability of the deferred tax assets in accordance with FAS&nbsp;109, indicates that such plans were subject to considerable uncertainty. Therefore, the valuation allowance was
increased to fully reserve the Company's deferred tax assets. The Company will continue to assess the realizability of the deferred tax assets based on actual and forecasted operating results. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December&nbsp;31, 2002, the Company had net operating loss carryforwards of approximately $208,500,000 for federal and $173,000,000 for state income tax purposes. The Company also
had research and development tax credit carryforwards of approximately $8,600,000 for federal income tax purposes and approximately $7,400,000 for state income tax purposes at December&nbsp;31,
2002. The federal net operating loss and tax credit carryforwards expire between the years 2007 and 2022. The state net operating loss carryforwards expire between the years 2004 and 2013. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Utilization
of the Company's net operating losses and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue
Code. The annual limitation may result in the expiration of net operating losses and credits before utilization. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>65</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=5,SEQ=65,EFW="2106076",CP="CERUS CORPORATION",DN="1",CHK=810509,FOLIO='65',FILE='DISK023:[03PAL4.03PAL1204]FM1204A.;14',USER='KSMITHE',CD='26-MAR-2003;20:57' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->

<P><FONT SIZE=2><A
NAME="page_fo1204_1_66"> </A> </FONT> <FONT SIZE=2><B>8.&nbsp;&nbsp;&nbsp;&nbsp;Retirement Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company maintains a defined contribution savings plan (the "401(k) Plan") that qualifies under the provisions of Section&nbsp;401(k) of the Internal Revenue
Code and covers all employees of the Company. Under the terms of the 401(k) Plan, employees may contribute varying amounts of their annual compensation. The Company may contribute a discretionary
percentage of qualified individual employee's salaries, as defined, to the 401(k) Plan. The Company did not contribute to the 401(k) Plan in the years ended December&nbsp;31, 2002, 2001 and 2000. </FONT></P>

<P><FONT SIZE=2><B>9.&nbsp;&nbsp;&nbsp;&nbsp;Quarterly Financial Information (Unaudited)  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>March 31,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June 30,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>September 30,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31,<BR>
2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>(In thousands, except per share data)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Revenue:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Milestone and development funding, related parties</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Development funding, other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>103</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>36</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>167</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>441</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Government grants and cooperative agreements</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>398</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>613</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>563</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,164</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Product sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="38%"><FONT SIZE=2>Total revenue</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>503</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,649</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>730</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,608</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Research and development</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>11,921</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>14,484</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>14,881</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>15,135</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>General and administrative</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,802</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,024</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,925</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,595</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="38%"><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>14,723</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>17,508</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>17,806</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>17,730</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Loss from operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(14,220</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(11,859</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(17,076</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(16,122</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Net interest income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>673</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>575</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>485</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>352</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Loss before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(13,547</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(11,284</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(16,591</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(15,770</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Provision for income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(13,547</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(11,284</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(16,591</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(15,770</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Net loss per share&#151;basic and diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(0.86</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.71</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(1.05</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(0.99</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>March 31,<BR>
2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June 30,<BR>
2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>September 30,<BR>
2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31,<BR>
2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>(In thousands, except per share data)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Revenue:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Milestone and development funding, related parties</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>845</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,021</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>69</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>168</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Development funding, other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>226</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>224</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>231</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>312</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Government grants and cooperative agreements</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>373</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>314</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>217</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>535</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="38%"><FONT SIZE=2>Total revenue</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,444</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,559</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>517</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,015</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>Research and development</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>11,318</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>12,086</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>12,194</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>12,649</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD COLSPAN=2><FONT SIZE=2>General and administrative</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,379</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,658</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,347</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,782</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="38%"><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>13,697</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>14,744</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>14,541</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>15,431</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Loss from operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(12,253</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(13,185</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(14,024</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(14,416</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Net interest income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,188</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,210</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,298</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>915</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Loss before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(11,065</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(11,975</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(12,726</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(13,501</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Provision for income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(11,165</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(11,975</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(12,726</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(13,501</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Net loss per share&#151;basic and diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(0.79</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.80</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(0.81</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(0.86</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>10.&nbsp;&nbsp;Subsequent Event  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2002, Cerus received a $50.0&nbsp;million loan commitment from Baxter Capital Corporation. In January&nbsp;2003, Cerus drew
$50.0&nbsp;million under the loan facility. The interest rate for the loan is 12% per annum. No repayment of principal and interest is due until January&nbsp;2008. The loan is secured with
collateral based on future revenue from sales of the INTERCEPT Blood System for platelets. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>66</FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=66,EFW="2106076",CP="CERUS CORPORATION",DN="1",CHK=291978,FOLIO='66',FILE='DISK023:[03PAL4.03PAL1204]FO1204A.;9',USER='DLAQUIA',CD='26-MAR-2003;07:32' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_jc1204_1_67"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="jc1204_signatures"> </A>
<A NAME="toc_jc1204_1"> </A>
<BR></FONT><FONT SIZE=2><B>SIGNATURES    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirement of Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Concord, State of California, on the 27th day of March, 2003. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>CERUS CORPORATION</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="45%" ALIGN="CENTER"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>STEPHEN T. ISAACS</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Stephen T. Isaacs<BR></FONT> <FONT SIZE=2><I>President and Chief Executive Officer</I></FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="jc1204_power_of_attorney"> </A>
<A NAME="toc_jc1204_2"> </A>
<BR></FONT><FONT SIZE=2><B>POWER OF ATTORNEY    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each person whose signature appears below constitutes and appoints Stephen T. Isaacs and Gregory W. Schafer, his true and lawful
attorney-in-fact and agent, each acting alone, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign
any or all amendments to the Annual Report on Form&nbsp;10-K and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="42%" ALIGN="CENTER"><FONT SIZE=1><B>Signature<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="33%" ALIGN="CENTER"><FONT SIZE=1><B>Title<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" ALIGN="CENTER"><FONT SIZE=1><B>Date<BR> </B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="42%" ALIGN="CENTER" VALIGN="CENTER"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="33%" VALIGN="CENTER"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%" VALIGN="CENTER"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="42%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>STEPHEN T. ISAACS</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Stephen T. Isaacs</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="33%" VALIGN="CENTER"><FONT SIZE=2>President, Chief Executive<BR>
Officer and Director<BR></FONT> <FONT SIZE=2><I>(Principal Executive Officer)</I></FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>March 27, 2003</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="42%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>GREGORY W. SCHAFER</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Gregory W. Schafer</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="33%" VALIGN="CENTER"><FONT SIZE=2>Chief Financial Officer and<BR>
Vice President, Finance<BR></FONT> <FONT SIZE=2><I>(Principal Financial and<BR>
Accounting Officer)</I></FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>March 27, 2003</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="42%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>B. J. CASSIN</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> B. J. Cassin</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="33%" VALIGN="CENTER"><FONT SIZE=2>Chairman of the Board</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>March 27, 2003</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="42%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>LAURENCE M. CORASH, M.D.</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Laurence M. Corash, M.D.</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="33%" VALIGN="CENTER"><FONT SIZE=2>Director</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>March 27, 2003</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="42%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>BRUCE C. COZADD</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Bruce C. Cozadd</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="33%" VALIGN="CENTER"><FONT SIZE=2>Director</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>March 27, 2003</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="42%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>C. RAYMOND LARKIN, JR.</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> C. Raymond Larkin, Jr.</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="33%" VALIGN="CENTER"><FONT SIZE=2>Director</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>March 27, 2003</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="42%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>WILLIAM R. ROHN</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> William R. Rohn</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="33%" VALIGN="CENTER"><FONT SIZE=2>Director</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>March 27, 2003</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>67</FONT></P>

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NAME="page_jf1204_1_68"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="jf1204_certification"> </A>
<A NAME="toc_jf1204_1"> </A>
<BR></FONT><FONT SIZE=2><B>CERTIFICATION    <BR>  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I, Stephen T. Isaacs, certify that: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;I
have reviewed this annual report on Form&nbsp;10-K of Cerus Corporation; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Based
on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Based
on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;The
registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules&nbsp;13a-14 and 15d-14) for the registrant and have: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;&nbsp;&nbsp;&nbsp;designed
such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this annual report is being prepared; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;&nbsp;&nbsp;&nbsp;evaluated
the effectiveness of the registrant's disclosure controls and procedures as of a date within 90&nbsp;days prior to the filing date of this annual report (the
"Evaluation Date"); and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)&nbsp;&nbsp;&nbsp;&nbsp;presented
in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;The
registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions): </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;&nbsp;&nbsp;&nbsp;all
significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and
report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;&nbsp;&nbsp;&nbsp;any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;The
registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. </FONT></P>

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<TD WIDTH="40%" VALIGN="TOP"><FONT SIZE=2>Date: March 27, 2003</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="40%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>STEPHEN T. ISAACS</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="40%" VALIGN="TOP"><FONT SIZE=2>Stephen T. Isaacs<BR>
Chief Executive Officer</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>68</FONT></P>

<HR NOSHADE>
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<A NAME="page_jf1204_1_69"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="jf1204_certification_1"> </A>
<A NAME="toc_jf1204_2"> </A>
<BR></FONT><FONT SIZE=2><B>CERTIFICATION    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I, Gregory W. Schafer, certify that: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;I
have reviewed this annual report on Form&nbsp;10-K of Cerus Corporation; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Based
on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Based
on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;The
registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules&nbsp;13a-14 and 15d-14) for the registrant and have: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;&nbsp;&nbsp;&nbsp;designed
such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this annual report is being prepared; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;&nbsp;&nbsp;&nbsp;evaluated
the effectiveness of the registrant's disclosure controls and procedures as of a date within 90&nbsp;days prior to the filing date of this annual report (the
"Evaluation Date"); and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)&nbsp;&nbsp;&nbsp;&nbsp;presented
in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;The
registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions): </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;&nbsp;&nbsp;&nbsp;all
significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and
report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;&nbsp;&nbsp;&nbsp;any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;The
registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. </FONT></P>

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<TR VALIGN="BOTTOM">
<TD WIDTH="40%" VALIGN="TOP"><FONT SIZE=2>Date: March 27, 2003</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="40%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>GREGORY W. SCHAFER</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="40%" VALIGN="TOP"><FONT SIZE=2>Gregory W. Schafer<BR>
Chief Financial Officer</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>69</FONT></P>

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NAME="page_ka1204_1_70"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ka1204_index_to_exhibits"> </A>
<A NAME="toc_ka1204_1"> </A>
<BR></FONT><FONT SIZE=2><B>INDEX TO EXHIBITS    <BR>  </B></FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Exhibit<BR>
Number</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="88%" ALIGN="CENTER"><FONT SIZE=1><B>Description of Exhibit</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%"><FONT SIZE=2>10.41</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2>Loan Agreement, dated November 15, 2002, between Cerus and Baxter Capital Corporation.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%"><FONT SIZE=2><BR>
10.42</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&#134;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Letter of Understanding between Cerus and Baxter, dated November 1, 2002.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%"><FONT SIZE=2><BR>
23.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Consent of Ernst &amp; Young LLP, Independent Auditors.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="10%"><FONT SIZE=2><BR>
99.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>*</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=2><BR>
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#134;</FONT></DT><DD><FONT SIZE=2>Confidential
treatment has been requested with respect to certain portions of this exhibit.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>The
certification attached as Exhibit&nbsp;99.1 accompanies this Annual Report on Form&nbsp;10-K pursuant to &sect; 906 of the Sarbanes-Oxley Act of 2002 and
shall not be deemed "filed" by Cerus for purposes of Section&nbsp;18 of the Securities Exchange Act of 1934, as amended. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>70</FONT></P>

<HR NOSHADE>
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<BR>
<P><br><A NAME="03PAL1204_1">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_bg1204_1">TABLE OF CONTENTS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_de1204_1">PART I</A></FONT><BR>
<UL>
<FONT SIZE=2><A HREF="#toc_de1204_2">Item 1. Business</A></FONT><BR>
</UL>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dm1204_1">RISK FACTORS</A></FONT><BR>
<!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2><A HREF="#toc_dq1204_1">Item 2. Properties</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dq1204_2">Item 3. Legal Proceedings</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dq1204_3">Item 4. Submission of Matters to a Vote of Security Holders</A></FONT><BR>
</UL>
<FONT SIZE=2><A HREF="#toc_dq1204_4">PART II</A></FONT><BR>
<UL>
<FONT SIZE=2><A HREF="#toc_dq1204_5">Item 5. Market for Registrant's Common Equity and Related Stockholder Matters</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dq1204_6">Item 6. Selected Financial Data</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dq1204_7">Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dq1204_8">Item 7A. Quantitative and Qualitative Disclosures About Market Risk</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dq1204_9">Item 8. Financial Statements and Supplementary Data</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dq1204_10">Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</A></FONT><BR>
</UL>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ds1204_1">PART III</A></FONT><BR>
<UL>
<FONT SIZE=2><A HREF="#toc_ds1204_2">Item 10. Directors and Executive Officers of the Registrant</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ds1204_3">Item 11. Executive Compensation</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ds1204_4">Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ds1204_5">Item 13. Certain Relationships and Related Transactions</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ds1204_6">Item 14. Controls and Procedures</A></FONT><BR>
</UL>
<FONT SIZE=2><A HREF="#toc_ds1204_7">PART IV</A></FONT><BR>
<UL>
<FONT SIZE=2><A HREF="#toc_ds1204_8">Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K</A></FONT><BR>
</UL>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fb1204_1">REPORT OF ERNST &amp; YOUNG LLP, INDEPENDENT AUDITORS</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fc1204_1">CERUS CORPORATION BALANCE SHEETS (in thousands, except share and per share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fe1204_1">CERUS CORPORATION STATEMENTS OF OPERATIONS (in thousands, except share and per share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fg1204_1">CERUS CORPORATION STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands, except share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fi1204_1">CERUS CORPORATION STATEMENTS OF CASH FLOWS (in thousands)</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fk1204_1">CERUS CORPORATION NOTES TO FINANCIAL STATEMENTS December 31, 2002</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_jc1204_1">SIGNATURES</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_jc1204_2">POWER OF ATTORNEY</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_jf1204_1">CERTIFICATION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_jf1204_2">CERTIFICATION</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ka1204_1">INDEX TO EXHIBITS</A></FONT><BR>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.41
<SEQUENCE>3
<FILENAME>a2106076zex-10_41.htm
<DESCRIPTION>EX-10.41
<TEXT>
<HTML>
<HEAD>

</HEAD>
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<div style="font-family:'Times New Roman';">

<p align="right" style="margin:0in 0in .0001pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit
10.41</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-weight:bold;margin:0in 0in 12.0pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">LOAN
AND SECURITY AGREEMENT</font></b></p>

<p style="margin:0in 0in 6.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; THIS
LOAN AND SECURITY AGREEMENT made this 15th day of November, 2002 (this
&#147;Agreement&#148;) by and between CERUS CORPORATION, a Delaware corporation with an
address and principal place of business at 2411 Stanwell Dr., Concord, CA 94520
(hereinafter called the &#147;Borrower&#148;) and BAXTER CAPITAL CORPORATION, a Delaware
corporation with a principal place of business at One Baxter Parkway,
Deerfield, Illinois 60015 (the &#147;Lender&#148;).</font></p>

<p style="margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">W
I T N E S S E T H:</font></p>

<p style="margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; WHEREAS, the Borrower has requested that the Lender
extend a credit facility to the Borrower in the aggregate principal amount of
$50 Million;</font></p>

<p style="margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; WHEREAS, the Lender has agreed to make such credit
facility available to the Borrower subject to the terms and conditions set
forth herein;</font></p>

<p style="margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; NOW THEREFORE, in consideration of the mutual
promises set forth herein, the following constitutes the agreement of the
parties:</font></p>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION 1</font></h1>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">AMOUNT AND TERMS OF CREDIT AND INTEREST</font></h1>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Loan
Commitment</u>.&#160; Beginning on January 3,
2003 (the &#147;Availability Date&#148;) and subject to the terms and conditions of this
Agreement and in reliance upon the covenants and the representations and
warranties of the Borrower set forth herein, the Lender agrees to make certain
loans available to the Borrower as the Borrower may from time to time request
(such loans referred to hereinafter as the &#147;Revolving Loans&#148;) until, but not
including January 2, 2008 (&#147;Maturity Date&#148;), provided, however, that the
aggregate principal balance of all Revolving Loans outstanding at any time
shall not exceed $50 Million (the &#147;Loan Commitment&#148;).&#160; Loans made hereunder and repaid may be reborrowed.&#160; The Revolving Loans shall be used by the
Borrower for the purpose of working capital and other general corporate
purposes.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Interest</u>.&#160; Interest shall accrue on the outstanding
principal amount of the Revolving Loans at 12% per annum (the &#147;Interest
Rate&#148;).&#160; Except as set forth in <u>Section
1.4</u> below, all outstanding principal together with all accrued and unpaid
interest shall be due and payable on the Maturity Date.&#160; Interest shall be computed for the actual
number of days elapsed on the basis of a 360 day year.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Conversion
to Term Loan</u>.&#160; Upon the occurrence
of an event reasonably determined by the Lender to cause a material adverse
change upon the business, operations, financial condition or properties of the
Borrower (such change referred to hereinafter as a &#147;Material Adverse Change&#148;,
for the purposes of this definition the following shall not be considered to be
a Material Adverse Change (i) any change in the Borrower&#146;s cash position in the
ordinary course of business; or (ii) any change in the price of the Borrower&#146;s
common stock </font></h2>

<h2 align="center" style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>


<h2 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

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</font></h2>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<h2 align="center" style="font-size:12.0pt;font-weight:normal;margin:0in 0in 12.0pt;text-align:center;">&nbsp;</h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">as such common stock is traded on various stock
exchanges from time to time) all outstanding amounts at such time shall,
together with any amounts subsequently advanced hereunder, become principal
under a term loan (the &#147;Term Loan&#148;, together with the Revolving Loan the
&#147;Loans&#148;).&#160; Interest shall accrue on such
outstanding principal amount at the Interest Rate and shall be payable in
arrears with such principal as set forth on a payment schedule to be provided
by the Lender.&#160; Such payment schedule
shall reflect payments due on the first business day of each quarter and
principal amortized, on a quarterly basis, such that all outstanding amounts
are paid in full no later than the Maturity Date.&#160; Interest shall be computed for the actual number of days elapsed
on the basis of a 360 day year.&#160; During
the period of the Term Loan, Borrower shall continue to be able to draw loans
up to the amount of the Loan Commitment.&#160;
Any loan repayments in excess of the amortization schedule provide for
in this section may be reborrowed.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.4&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Manner
of Borrowing</u>.&#160; Each Loan shall be
made available to the Borrower upon its request, such request being from an
authorized officer whose authority to so act has not been revoked by the
Borrower in writing previously received by the Lender.&#160; A request by the Borrower for a Loan must be
received by the Lender no later than 11:00 a.m. Chicago, Illinois time, on the
day that is not less than 5 business days prior to the day it is to be
funded.&#160; All Loans hereunder shall be in
an amount not less than $5,000,000 and integral of $5,000,000 in excess
thereof.&#160; The proceeds of each Loan
shall be made available at the office of the Lender by means requested by the
Borrower and acceptable to the Lender.&#160;
The Lender is authorized to rely on any written, verbal, electronic,
telephonic or telecopy loan request which the Lender believes in its good faith
judgment to emanate from a properly authorized representative of the Borrower,
whether or not that is in fact the case.&#160;
The Borrower hereby irrevocably confirms, ratifies and approves all such
advances by the Lender and hereby indemnifies the Lender against losses and
expenses (including court costs and reasonable attorneys&#146; fees) and shall hold
the Lender harmless with respect thereto.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.5&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Non-Use
Fee</u>.&#160; Beginning on the Availability
Date, the Borrower agrees to pay to the Lender, until the Maturity Date, or
such earlier date as Borrower provides written notice to Lender that it elects
to terminate the Loan Commitment as to the then unused amount, a non-use fee at
rate of 1.5% per annum of the unused amount of the Loan Commitment.&#160; For the purposes of calculating usage under
this Section, the Loan Commitment shall be deemed used at any time to the
extent of the Loan Commitment drawn and outstanding (whether that amount drawn
and outstanding is deemed a Revolving Loan or a Term Loan) at such time.&#160; Such non-use fee shall be payable for each
quarter in arrears on the first business day of the immediately following
quarter and on the Maturity Date for any period then ending for which such
non-use fee shall not have previously been paid.&#160; The non-use fee shall be computed for the actual number of days
elapsed on the basis of a 360 day year.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.6&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Liabilities</u>.&#160; All of the Borrower&#146;s obligations to the
Lender, of every kind and description arising under this Agreement, direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, including obligations to perform acts and refrain from
taking action, as well as obligations to repay the Loans, shall constitute the
Borrower&#146;s &#147;Liabilities&#148; to the Lender, as the same may be modified, amended, replaced
or extended from time to time, in accordance with the terms hereof.</font></h2>

<h2 align="center" style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></h2>


<h2 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></h2>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<h2 align="center" style="font-size:12.0pt;font-weight:normal;margin:0in 0in 12.0pt;text-align:center;">&nbsp;</h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.7&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Notes
Evidencing Loans</u>.&#160; The Revolving
Loans shall be evidenced by a single Revolving Note in the form of <u>Exhibit A</u>
attached hereto (the &#147;Revolving Note&#148;) and the Term Loan, if any, shall be
evidenced by a Term Note in the form of <u>Exhibit B</u> attached hereto (the
&#147;Term Note&#148; together with the Revolving Note referred to herein individually as
a &#147;Note&#148; and collectively as the &#147;Notes&#148;).&#160;
Each Note is incorporated herein to the same extent as if it was set
forth in full in this Agreement.</font></h2>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION 2</font></h1>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WARRANTIES AND REPRESENTATIONS</font></h1>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; To
induce the Lender to enter into this Loan Agreement and to make the Loans, the
Borrower warrants and represents, as of this date and as of the date of each
Loan, unless such representation and warranty expressly indicates that it is
made as of a specific date, in which case, solely as of such date that:</font></h2>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The Borrower is a validly organized and
existing corporation under the laws of the State of Delaware and is in good
standing under the laws of said State.&#160;
The Borrower&#146;s state issued organizational number is 3332373.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The Borrower is duly qualified to do
business and in good standing as a foreign corporation in each state or other
jurisdiction where the nature of the business conducted by it or the property
owned by it requires such qualification except where failure to qualify would
not be reasonably likely to cause a Material Adverse Change.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The Borrower is the sole owner of the
Collateral free and clear of all liens, pledges, charges, security interests
and encumbrances, other than those being granted to the Lender.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The Borrower owns and holds or licenses
or leases all real and personal property necessary or incidental to the present
conduct of its business, including, without limitation, patents, trademarks,
service marks, trade names, copyrights and licenses and other rights with
respect to the foregoing except where failure to so own, license or lease would
not cause a Material Adverse Change.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(e)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Except as set forth on <u>Schedule 1</u>,
as of the date hereof, there are no actions, suits, investigations or
proceedings pending, or to the knowledge of the Borrower threatened, against
the Borrower or any of its properties in any court, before any governmental
authority, arbitration board, or any other tribunal which, singly or in the
aggregate, would reasonably be expected to cause a Material Adverse
Change.&#160; The Borrower is not, as of the
date hereof, nor by execution and delivery of this Agreement and the
performance of its obligations hereunder (with or without the passage of time)
will the Borrower be in default with respect to any order of any court,
governmental authority, arbitration board or other tribunal.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The Borrower has filed all federal and
state income tax returns, excise tax returns, and all other tax returns of
every kind and nature which are required to be filed by </font></h3>

<h3 align="center" style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></h3>


<h3 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

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</font></h3>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<h3 align="center" style="font-size:12.0pt;font-weight:normal;margin:0in 0in 12.0pt;text-align:center;">&nbsp;</h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">the Borrower as of the date hereof and has paid all
taxes due as of the date hereof, except where the failure to comply would not
reasonably be expected to cause a Material Adverse Change.&#160; The foregoing shall not preclude the
Borrower from contesting, in good faith, any such taxes.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(g)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The Borrower keeps all records concerning
its accounts (as such term is defined in the Illinois Uniform Commercial Code)
and has its chief executive office and principal place of business at the
address set forth at the beginning of the Agreement.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(h)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The execution and delivery of this
Agreement, the borrowing by the Borrower as herein provided, the execution and
delivery by the Borrower of all instruments, agreements and documents of every
kind and nature pursuant hereto and the performance by the Borrower of all of
its obligations to the Lender hereunder have been duly authorized by the Board
of Directors of the Borrower and, to the extent required by law or otherwise,
by the Borrower&#146;s stockholders, and this Agreement and all instruments,
agreements and documents executed pursuant hereto are valid and binding
obligations of the Borrower enforceable in accordance with their terms except
to the extent such enforceability may be limited by laws of general application
affecting the rights of creditors.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The execution and delivery by the
Borrower of this Agreement and the performance of Borrower&#146;s obligations
hereunder are not in contravention of any law or laws.&#160; As of the date hereof, Borrower is in
compliance with all laws, orders, regulations and ordinances of all federal,
foreign, state and local governmental authorities relating to their business,
operations and assets, except where the failure to comply would not reasonably
be expected to cause a Material Adverse Change.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(j)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">There is no provision in the certificate
of incorporation or the by-laws of the Borrower, or any indenture, contract or
agreement to which it is a party or by which it is bound, which prohibits the
execution and delivery of this Agreement or the performance by the Borrower of
its obligations hereunder.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(k)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">No event has occurred and no condition
exists, which, upon the execution and delivery of this Agreement would
constitute an Event of Default hereunder.&#160;
No consent, approval, or authorization of or filing, registration, or
qualification with, any governmental authority on the part of the Borrower is
required as a condition of the execution and delivery of this Agreement or any
other instrument, agreement or document contemplated hereby, or the performance
by the Borrower of its obligations hereunder or thereunder.</font></h3>

<h3 align="center" style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></h3>


<h3 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

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</font></h3>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<h3 align="center" style="font-size:12.0pt;font-weight:normal;margin:0in 0in 12.0pt;text-align:center;">&nbsp;</h3>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION 3</font></h1>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CONDITIONS PRECEDENT TO THE LOANS</font></h1>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The
obligations of the Lender to make the Loans are subject, at the time of the
making of each such Loan, to the satisfaction of the following conditions:</font></h2>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Borrower shall have delivered two copies
of this Agreement duly executed by an authorized officer of the Borrower;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Borrower shall have delivered the
Revolving Note duly executed by an authorized officer of the Borrower;</font></h3>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION 4</font></h1>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">AFFIRMATIVE COVENANTS</font></h1>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Payment</u>.&#160; The Borrower will duly and punctually pay
all interest and principal becoming due to the Lender and will duly and
punctually perform all things on its part to be done or performed under this
Agreement, or pursuant to any instrument, document or agreement executed
pursuant hereto.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Additional
Information</u>.&#160; The Borrower will,
from time to time, furnish the Lender with such information and statements
concerning the Loans and the Collateral as the Lender may reasonably request,
which information, if confidential information of the Borrower, will be kept
confidential by the Lender.&#160; For the
purposes of this section, the term Lender shall mean Baxter Capital Corporation
and its affiliates.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Corporate
Existence</u>.&#160; The Borrower will
maintain its corporate existence in good standing, comply with all laws and
regulations of the United States, of any state or states thereof, of any
political subdivision thereof and of any governmental authority which may be
applicable to the Borrower or to the Borrower&#146;s business except where failure
would not reasonably be expected to cause a Material Adverse Change.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.4&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Compliance
with Laws</u>.&#160; Borrower shall comply
with all laws, orders, regulations and ordinances of any federal, foreign,
state or local governmental authority, except where the failure to comply would
not reasonably be expected to cause a Material Adverse Change.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.5&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Insurance</u>.&#160; The Borrower shall maintain, at its expense,
such public liability and casualty and property damage insurance in such
amounts as is ordinarily carried by other businesses similar to Borrower.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.6&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Expenses</u>.&#160; The Borrower will pay or reimburse the
Lender, on demand, for all reasonable expenses (including, without limitation, reasonable
counsel fees and expenses) incurred or paid by the Lender in connection with
the enforcement by the Lender of its rights hereunder; protection or
realization on any Collateral held by the Lender as security for the
Liabilities of the Borrower and in the defense of any action against the Lender
with respect to its rights or liabilities hereunder.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.7&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Reports
to the SEC and to Shareholders</u>.&#160; The
Borrower will furnish to Lender promptly upon the filing or sending thereof,
copies of all regular, periodic or special reports of Borrower filed with the
SEC; copies of all registration statements of the Borrower filed with the </font></h2>

<h2 align="center" style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></h2>


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</font></h2>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<h2 align="center" style="font-size:12.0pt;font-weight:normal;margin:0in 0in 12.0pt;text-align:center;">&nbsp;</h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SEC (other than on Form S-8); and copies of all proxy
statements or other communications made to security holders generally.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.8&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Notice
of Default</u>.&#160; Borrower shall provide
written notice to Lender promptly upon becoming aware of any Event of Default
or any event which, if left uncured, with the passing of time or notice or both
would constitute an Event of Default describing the same together with the
steps taken by Borrower with respect thereto.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.9&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Use
of Proceeds</u>.&#160; The Borrower shall use
the proceeds of the Loans for working capital and general corporate purposes.</font></h2>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION 5</font></h1>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">NEGATIVE COVENANTS</font></h1>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Merger</u>.&#160; The Borrower will not sell all or
substantially all its assets to any other person or entity, or be acquired by
merger or consolidation with or into any other entity without the consent of
the Lender, which consent shall not be unreasonably withheld or delayed.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Liens</u>.&#160; The Borrower will not grant or suffer to
exist any mortgage, pledge, title retention agreement, security interest, lien,
charge or encumbrance with respect to the Collateral for the Loans.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Business</u>.&#160; The Borrower will not engage in any business
other than the business in which it is currently engaged or a business
reasonably allied thereto without the consent of the Lender, which consent will
not be unreasonably withheld or delayed.</font></h2>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION
6</font></h1>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;page-break-after:avoid;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECURITY</font></h1>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Grant
of Security Interest</u>.&#160; As security
for the repayment of each Loan and the payment of all other Liabilities of the
Borrower to the Lender, the Borrower does hereby pledge, assign and transfer to
the Lender and does hereby grant to the Lender a continuing and unconditional
security interest in and to all accounts (as such term is defined in Article 9
of the Illinois Uniform Commercial Code) of the Borrower existing now or
hereafter arising directly or indirectly from product sales under the
Development, Manufacturing and Marketing Agreement dated as of December 10,
1993 between the Borrower and Baxter Healthcare Corporation, as such agreement
may have been or may be amended, extended, restated or modified from time to
time (the &#147;Platelet Agreement&#148;), all of which, along with proceeds therefrom
are individually and collectively referred to herein as the &#147;Collateral&#148;.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Disposal</u>.&#160; Except as set forth herein, the Borrower
shall not sell, assign (by operation of law or otherwise) or otherwise dispose
of, or grant any rights with respect to any of the Collateral.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Further
Assurances</u>.&#160; The Borrower shall, at
the Lender&#146;s request, at any time and from time to time execute and deliver
such financing statements, amendments and other </font></h2>

<h2 align="center" style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></h2>


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</font></h2>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- ZEQ.=1,SEQ=6,EFW="2106076",CP="CERUS CORPORATION",DN="2",CHK=117192,FOLIO='6',FILE="DISK023:[03PAL5.03PAL1205.EDGAR]EX10-41_1205.CHC",USER="DNICHOL",CD='Mar 26 16:39 2003' -->
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<h2 align="center" style="font-size:12.0pt;font-weight:normal;margin:0in 0in 12.0pt;text-align:center;">&nbsp;</h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">documents and do such acts as the Lender deems
necessary in order to establish and maintain a valid, attached and perfected
first priority security interests in the Collateral in favor of the Lender,
free and clear of all liens and claims and rights of third parties
whatsoever.&#160; The Borrower hereby
irrevocably authorizes the Lender at any time, and from time to time, to file
in any jurisdiction any initial financing statement, amendments thereto or
other documents in the form and substance that the Lender deems necessary to
protect its interest in the Collateral.</font></h2>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION 7</font></h1>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">DEFAULT</font></h1>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Events
of Default</u>.&#160; The occurrence of any
of the following events shall be an Event of Default hereunder:</font></h2>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The Borrower shall fail to pay any
installment of principal or interest on account of any Loan or any other
Liabilities of the Borrower to the Lender (i) within two (2) days of the date
when such payment is due, or (ii) on demand, if such payment is due on demand.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The Borrower shall fail to observe or
perform any covenant or agreement contained in this Agreement or in any
instrument, document or agreement executed in connection therewith and the
expiration of thirty (30) days from written notice of such failure.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Any warranty, representation or statement
made or furnished to the Lender by or on behalf of the Borrower proves to have
been false in any material respect when made or furnished or deemed made.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Any event which results in the
acceleration of the maturity of the indebtedness of the Borrower to others for
borrowed money in excess of $100,000.00 under any indenture, agreement,
undertaking or otherwise, or which would permit the holders of such
indebtedness to accelerate the maturity thereof.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(e)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The acquisition by any person or entity of
15% or more of any voting equity security of the Borrower or its affiliates.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Dissolution, termination of existence,
insolvency, or business failure of the Borrower.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(g)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The Borrower shall: (i) cease, be unable,
or admit in writing its inability, to pay its debts as they mature, or make a
general assignment for the benefit of, or enter into any composition, trust
mortgage or other arrangement with creditors; (ii) apply for, or consent (by
admission of material allegations of a petition or otherwise) to the
appointment of a receiver, trustee or liquidator of the Borrower or of a
substantial part of its assets, or authorize such application or consent, or
proceedings seeking such appointment shall be commenced against the Borrower
and continue undismissed for sixty (60) days; or (iii) apply for, or consent
(by admission of material allegations of a petition or otherwise) to the
application of </font></h3>

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<h3 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

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</font></h3>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<h3 align="center" style="font-size:12.0pt;font-weight:normal;margin:0in 0in 12.0pt;text-align:center;">&nbsp;</h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">any bankruptcy, reorganization, readjustment of debt,
insolvency, dissolution, liquidation or other similar law of any jurisdiction,
or authorize such application or consent, or proceedings to such end shall be
instituted against the Borrower and remain unstayed and undismissed for sixty
(60) days, be approved as properly instituted or result in adjudication of
bankruptcy or insolvency.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(h)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The occurrence of an Event of Default or
default under any other agreement between the Borrower and the Lender or any
affiliate of the Lender, or instrument or paper given to the Lender by the
Borrower in each case evidencing or effectuating this Agreement as amended from
time to time.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The occurrence of an impairment of the
Collateral which causes the Lender to reasonably believe that it is insecure.</font></h3>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Acceleration
and Default Rate</u>.&#160; Upon the
occurrence of any Event of Default, all commitments of the Lender to the
Borrower shall immediately terminate and all Liabilities of the Borrower to the
Lender shall, at the Lender&#146;s option and without demand, and notwithstanding
any terms of payment in any note or other instrument evidencing such
Liabilities, become immediately due and payable.&#160; Upon the occurrence of an Event of Default and without notice
therefore all amounts owed hereunder shall accrue interest at the Interest Rate
<u>plus</u> 2% per annum (the &#147;Default Rate&#148;).</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Collateral</u>.&#160; The Lender shall have, to the extent
permitted by applicable state and federal laws, rules and regulations, the
right and power to: (i) directly notify the account debtor (as such term is
defined in Article 9 of the Illinois Uniform Commercial Code) under the
Platelet Agreement of the security interest of the Lender, and/or of the
assignment to the Lender of the Collateral and direct such account debtor to
make payments to the Lender if any amounts due or to become due with respect
thereto, and thereafter, collect any such amounts due on the Collateral
directly from such account debtor.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.4&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Other
Remedies</u>.&#160; The Lender may exercise,
from time to time, any and all remedies available to it under the Illinois
Uniform Commercial Code or under any other applicable law in addition to, and
not in lieu of, any rights and remedies expressly granted in this Agreement.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.5&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Application
of Proceeds</u>.&#160; The Lender shall upon
receipt of cash or solvent credits from collection of items of payment or
proceeds of Collateral, apply the whole or any part against the Liabilities
secured hereby.&#160; The Lender shall
further have the exclusive right to determine how, when and what applications of
such payments and such credit shall be made on the Liabilities and such
determination shall be conclusive upon the Borrower, absent manifest
error.&#160; Any proceeds of any disposition
by the Lender of all or any part of the Collateral by the Lender may, at the
Lender&#146;s option, be first applied to the payment of expenses incurred by the
Lender in connection with the Collateral, including attorneys&#146; fees and other
legal expenses as otherwise provided herein.</font></h2>

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<h2 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

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</font></h2>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<h2 align="center" style="font-size:12.0pt;font-weight:normal;margin:0in 0in 12.0pt;text-align:center;">&nbsp;</h2>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION 8</font></h1>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">NOTICE</font></h1>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Notices</u>.&#160; All notices and other communications
hereunder shall be in writing and made or delivered by telecopy, e-mail or
overnight air courier, and shall be deemed to be received by the party to whom
it was sent one (1) business day after sending.&#160; All such notices and other communications to a party hereto shall
be addressed to such party at the address set forth at the beginning of this
Agreement or to such other address as such party may designate for itself in a
notice to the other party given in accordance with this section.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Addresses</u>.&#160; The addresses to which such communications
shall be sent are as follows:</font></h2>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">If intended for the Borrower, to:&#160; Cerus Corporation, 2411 Stanwell Dr.,
Concord, CA 94520 Attn:&#160; Chief Executive
Officer.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in 12.0pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">If intended for the Lender, to:&#160; Baxter Capital Corporation, One Baxter
Parkway DF4-3E, Deerfield, Illinois 60015-4633 Attn: President with copies
to:&#160; Baxter Capital Corporation, One
Baxter Parkway DF2-2W, Deerfield, IL 60015-4633 Attn: Legal Counsel.</font></h3>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Change
of Address</u>.&#160; The addresses set forth
herein may be changed by notice hereunder.</font></h2>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SECTION 9</font></h1>

<h1 style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">MISCELLANEOUS</font></h1>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.1&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Further
Assurances</u>.&#160; The Borrower will from
time to time execute and deliver to the Lender all such other and further
instruments and documents and take or cause to be taken all such other and
further action as the Lender may reasonably request in order to effect and
confirm or vest more securely in the Lender all rights contemplated in this
Agreement.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.2&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Waiver</u>.&#160; The Borrower may take any action herein
prohibited or omit to perform any act required to be performed by the Borrower
if the Borrower shall obtain the Lender&#146;s prior written consent to each such
action, or omission to act.&#160; No waiver
on the Lender&#146;s part on any one occasion shall be deemed a waiver on any other
occasion.&#160; The Lender shall not be
deemed to have waived any of its rights hereunder unless such waiver shall be
in writing and duly signed by an authorized officer of the Lender.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.3&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Amendment</u>.&#160; This Agreement may be amended only by an
instrument in writing and duly signed by the Borrower and the Lender.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.4&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Assignment</u>.&#160; The Borrower&#146;s rights and obligations under
this Agreement shall not be assigned, transferred or delegated by operation of
law or otherwise.&#160;&#160; The Lender may,
without the consent of the Borrower, assign or transfer its rights or delegate
or transfer its obligations set forth in this Loan Agreement by operation of
law or otherwise</font></h2>

<h2 align="center" style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9</font></h2>


<h2 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></h2>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- ZEQ.=1,SEQ=9,EFW="2106076",CP="CERUS CORPORATION",DN="2",CHK=164673,FOLIO='9',FILE="DISK023:[03PAL5.03PAL1205.EDGAR]EX10-41_1205.CHC",USER="DNICHOL",CD='Mar 26 16:39 2003' -->
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</font>

<h2 align="center" style="font-size:12.0pt;font-weight:normal;margin:0in 0in 12.0pt;text-align:center;">&nbsp;</h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.5&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Binding
Effect</u>.&#160; All covenants, agreements,
representations and warranties contained in this Agreement shall bind the
Borrower, its respective successors and permitted assigns, and shall inure to
the Lender&#146;s benefit and the benefit of the Lender&#146;s successors and permitted
assigns, whether expressed or not.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.6&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Rights</u>.&#160; All rights of the Lender hereunder shall be
cumulative.&#160; The Lender shall not be
required to have recourse to any Collateral before enforcing its rights or
remedies against the Borrower.&#160; The
Borrower hereby waives presentment, demand and protest of any instrument and
any notice thereof.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.7&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Severability</u>.&#160; If any provisions of this Agreement shall be
held to be illegal or unenforceable, such illegality or unenforceability shall
relate solely to such provision and shall not affect the remainder of this
Agreement.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.8&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Governing
Law</u>.&#160; This Agreement shall be
construed and enforced in accordance with the internal laws (as opposed to the
conflicts of law provisions) of the State of Illinois.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.9&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>WAIVER
OF JURY TRIAL</u>.&#160; THE BORROWER AND THE
LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT
MAY HAVE OR HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.&#160; THE BORROWER HEREBY CERTIFIES THAT NEITHER
THE LENDER NOR ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT, IN THE EVENT OF ANY SUCH
SUIT, ACTION OR PROCEEDING, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY
JURY.&#160; THE BORROWER ACKNOWLEDGES THAT
THE LENDER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THIS WAIVER.&#160; THE BORROWER
ACKNOWLEDGES THAT IT HAS READ THE PROVISIONS OF THIS AGREEMENT AND IN
PARTICULAR, THIS SECTION; HAS CONSULTED LEGAL COUNSEL; UNDERSTANDS THE RIGHT IT
IS GRANTING IN THIS AGREEMENT AND IS WAIVING IN THIS SECTION IN PARTICULAR, AND
MAKES THE ABOVE WAIVER KNOWINGLY, VOLUNTARILY AND INTENTIONALLY.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.10&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Venue.</u>&#160; The Borrower and the Lender agree that any
action or proceeding to enforce or arising out of this Agreement shall be
commenced in any court of the State of Illinois sitting in Chicago, or in the
District Court of the United States for the Northern District of Illinois, and
the Borrower waives personal service of process and agrees that a summons and
complaint commencing an action or proceeding in any such court shall be
properly served and confer personal jurisdiction if served by registered or
certified mail to the Borrower or as otherwise provided by the laws of the
State of Illinois or the United States of America.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.11&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Indemnification</u>.&#160; The Borrower agrees to defend (with counsel
satisfactory to the Lender), protect, indemnify and hold harmless each
Indemnified Party (for the purposes herein &#147;Indemnified Party&#148; and &#147;Indemnified
Parties&#148; shall mean each of the Lender and any parent corporation, affiliated
corporation or subsidiaries of the Lender, and each of their respective
officers, directors, employees, attorney and agents and all of such parties and
entities) from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, </font></h2>

<h2 align="center" style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10</font></h2>


<h2 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></h2>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- ZEQ.=1,SEQ=10,EFW="2106076",CP="CERUS CORPORATION",DN="2",CHK=693717,FOLIO='10',FILE="DISK023:[03PAL5.03PAL1205.EDGAR]EX10-41_1205.CHC",USER="DNICHOL",CD='Mar 26 16:39 2003' -->
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</font>

<h2 align="center" style="font-size:12.0pt;font-weight:normal;margin:0in 0in 12.0pt;text-align:center;">&nbsp;</h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">claims, costs, expenses and distributions of any kind
or nature (including, without limitation, the disbursements and the reasonable
fees of counsel for the Lender, which shall not include, attorneys&#146; fees and
time charges of attorneys who may be employees of the Lender, any parent
corporation or affiliated corporation of the Lender), which may be imposed on,
incurred by, or asserted against the Lender (whether direct, indirect or
consequential and whether based on any federal, state or local laws or
regulations, including, without limitation, securities, environmental laws and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any related agreement, or any act, event or transaction related or
attendant thereto, unless as to any Indemnified Party it shall be determined in
a final, nonappealable judgment by a court of competent jurisdiction that such
losses, claims, damages, liabilities , or expenses resulted primarily from the
gross negligence or willful misconduct of such Indemnified Party.&#160; Any liability, obligation, loss, damage,
penalty, cost or expense covered by this indemnity shall be paid to the Lender
on demand, and, failing prompt payment, shall, together with interest thereon
at the Default Rate from the date incurred by the Lender until paid by the
Borrower, be added to the Liabilities of the Borrower and be secured by the
Collateral.&#160; The provisions of this <u>Section
9.11</u> shall survive the satisfaction and payment of the other Liabilities
and the termination of this Agreement.&#160;
The above obligation to indemnify and hold harmless applies only in
connection with Lender&#146;s capacity as a lender under the Loans, and does not
create an obligation of Borrower to indemnify or hold harmless in connection
with rights or obligations arising under any other agreement or matter involving
Borrower and Lender or affiliates of Lender.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.12&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The
headings herein contained are inserted as a matter of convenience only and such
captions do not form a part of this Agreement and shall not be utilized in the
construction hereof.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 align="center" style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">*&#160; *&#160; *&#160; *&#160; *&#160; *</font></b></h2>

<h2 align="center" style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 align="center" style="font-weight:normal;margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11</font></h2>


<h2 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></h2>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- ZEQ.=1,SEQ=11,EFW="2106076",CP="CERUS CORPORATION",DN="2",CHK=496219,FOLIO='11',FILE="DISK023:[03PAL5.03PAL1205.EDGAR]EX10-41_1205.CHC",USER="DNICHOL",CD='Mar 26 16:39 2003' -->
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</font>

<h2 align="center" style="font-size:12.0pt;font-weight:normal;margin:0in 0in 12.0pt;text-align:center;">&nbsp;</h2>

<h2 style="font-weight:normal;margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">IN
WITNESS WHEREOF, the Borrower and the Lender have executed this Loan and
Security Agreement as of the date first above written.</font></h2>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="53%" valign="top" style="padding:0in .7pt 0in .7pt;width:53.32%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="46%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:46.68%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CERUS CORPORATION, as the Borrower</font></p>
  </td>
 </tr>
 <tr>
  <td width="53%" valign="top" style="padding:0in .7pt 0in .7pt;width:53.32%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="46%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:46.68%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="53%" valign="top" style="padding:0in .7pt 0in .7pt;width:53.32%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.64%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="40%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:40.02%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/&#160; STEPHEN
  T. ISAACS</font></p>
  </td>
 </tr>
 <tr>
  <td width="53%" valign="top" style="padding:0in .7pt 0in .7pt;width:53.32%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.64%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="40%" valign="top" style="padding:0in .7pt 0in .7pt;width:40.02%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="53%" valign="top" style="padding:0in .7pt 0in .7pt;width:53.32%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.64%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name:</font></p>
  </td>
  <td width="40%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:40.02%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Stephen T. Isaacs</font></p>
  </td>
 </tr>
 <tr>
  <td width="53%" valign="top" style="padding:0in .7pt 0in .7pt;width:53.32%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.64%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="40%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:40.02%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="53%" valign="top" style="padding:0in .7pt 0in .7pt;width:53.32%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.64%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title:</font></p>
  </td>
  <td width="40%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:40.02%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">President &amp; CEO</font></p>
  </td>
 </tr>
</table>

<p style="margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="line-height:normal;margin:0in 0in .0001pt 3.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="53%" valign="top" style="padding:0in .7pt 0in .7pt;width:53.32%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="46%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:46.68%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">BAXTER CAPITAL CORPORATION, as the Lender</font></p>
  </td>
 </tr>
 <tr>
  <td width="53%" valign="top" style="padding:0in .7pt 0in .7pt;width:53.32%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="46%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:46.68%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="53%" valign="top" style="padding:0in .7pt 0in .7pt;width:53.32%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.64%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="40%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:40.02%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/&#160; STEVEN
  J. MEYER</font></p>
  </td>
 </tr>
 <tr>
  <td width="53%" valign="top" style="padding:0in .7pt 0in .7pt;width:53.32%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.64%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="40%" valign="top" style="padding:0in .7pt 0in .7pt;width:40.02%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="53%" valign="top" style="padding:0in .7pt 0in .7pt;width:53.32%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.64%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name:</font></p>
  </td>
  <td width="40%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:40.02%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Steven J. Meyer</font></p>
  </td>
 </tr>
 <tr>
  <td width="53%" valign="top" style="padding:0in .7pt 0in .7pt;width:53.32%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.64%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="40%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:40.02%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="53%" valign="top" style="padding:0in .7pt 0in .7pt;width:53.32%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.64%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title:</font></p>
  </td>
  <td width="40%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:40.02%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">President</font></p>
  </td>
 </tr>
</table>

<p style="line-height:normal;margin:0in 0in 12.0pt 3.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12</font></p>


<div style="margin:0in 0in 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- ZEQ.=1,SEQ=12,EFW="2106076",CP="CERUS CORPORATION",DN="2",CHK=995782,FOLIO='12',FILE="DISK023:[03PAL5.03PAL1205.EDGAR]EX10-41_1205.CHC",USER="DNICHOL",CD='Mar 26 16:39 2003' -->
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</font>

<p align="center" style="font-size:12.0pt;margin:0in 0in 12.0pt;text-align:center;">&nbsp;</p>

<p style="font-weight:bold;margin:12.0pt 0in 3.0pt;text-align:center;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">Schedule
1</font></u></b></p>

<p style="font-weight:bold;margin:12.0pt 0in 3.0pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">&nbsp;</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>


<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- ZEQ.=1,SEQ=13,EFW="2106076",CP="CERUS CORPORATION",DN="2",CHK=397233,FOLIO='',FILE="DISK023:[03PAL5.03PAL1205.EDGAR]EX10-41_1205.CHC",USER="DNICHOL",CD='Mar 26 16:39 2003' -->
<br clear="all" style="page-break-before:always;">
</font>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">EXHIBIT
A</font></u></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">REVOLVING
NOTE</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="80%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:80.5%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$50,000,000.00</font></p>
  </td>
  <td width="19%" colspan="3" valign="bottom" style="padding:0in 5.75pt 0in 0in;width:19.5%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chicago, Illinois</font></p>
  </td>
 </tr>
 <tr>
  <td width="80%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:80.5%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="9%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 5.75pt 0in 0in;width:9.8%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="2%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 0in;width:2.2%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="7%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:7.5%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">, 2002</font></p>
  </td>
 </tr>
</table>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">FOR VALUE RECEIVED, the undersigned, <b><font style="font-weight:bold;">CERUS CORPORATION</font></b>, a Delaware Corporation
(the &#147;Borrower&#148;), HEREBY PROMISES TO PAY to the order of <b><font style="font-weight:bold;">BAXTER CAPITAL CORPORATION</font></b>, a Delaware
corporation<b><font style="font-weight:bold;">  </font></b>(&#147;Lender&#148;) the sum of
FIFTY MILLION AND 00/100 DOLLARS ($50,000,000.00) or so much thereof as shall
be borrowed hereunder and all remaining amounts due hereunder in the amounts,
on the dates and in the manner as set forth in the Loan and Security Agreement
by and among the Borrower and the Lender dated as of even date herewith (&#147;Loan
Agreement&#148;).&#160; Interest shall accrue on
the unpaid principal amount hereunder at the Interest Rate until such time as
the amounts hereunder are paid in full, such interest payable at the times set
forth in the Loan Agreement with all outstanding amounts due and payable no
later than the Maturity Date.&#160; All
interest shall be calculated on the basis of a 360-day year for the actual
number of days elapsed.&#160; The Borrower
may prepay in whole or in part any time without any premium or penalty,
notwithstanding any refinancing, renewal, extension or modification of this
note.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Both principal and interest are payable exclusively lawful money of the
United States of America so that the funds are available to the Lender not
later than 11:00 a.m. (Chicago time) on the due dates and in the amounts
specified in the Loan Agreement.&#160; All
amounts shall be paid to the Lender&#146;s account at Bank One, N.A., Indianapolis,
Indiana.&#160; All advances made by the
Lender to the Borrower, and the respective maturities thereof, and all payments
made on account of principal thereof, shall be recorded in the books and
records of the Lender and shall be deemed to be conclusively correct absent
manifest error.&#160; Failure by the Lender
to record such advances or payments shall not relieve the Borrower of any
obligation with respect to such loan or payment.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Note is the Revolving Note referred to in, and is entitled to the
benefits of, the Loan Agreement.&#160; The
Loan Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events, and also for
prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.&#160;
In addition, upon the occurrence of an Event of Default as therein
defined, this Revolving Note and all amounts owed hereunder shall accrue
interest at two hundred basis points (2.0%) above the interest rate applicable
immediately before such event occurred.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Presentment and demand for payment, notice of dishonor, protest and
notice of protest are hereby waived.&#160; In
the event of an Event of Default the Borrower agrees to pay costs of collection
and reasonable attorneys&#146; fees in connection therewith.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Capitalized terms used but not defined herein have the same meanings as
in the Loan Agreement.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>


<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- ZEQ.=1,SEQ=14,EFW="2106076",CP="CERUS CORPORATION",DN="2",CHK=15835,FOLIO='',FILE="DISK023:[03PAL5.03PAL1205.EDGAR]EX10-41_1205.CHC",USER="DNICHOL",CD='Mar 26 16:39 2003' -->
<br clear="all" style="page-break-before:always;">
</font>

<p align="center" style="font-size:12.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Revolving Note shall be governed by, and construed in accordance
with, the internal laws (as distinguished from the conflicts of laws rules) of
the State of Illinois.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="50%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:50.78%;">
  <p style="font-size:1.0pt;margin:0in -35.1pt .0001pt 0in;">&nbsp;</p>
  </td>
  <td width="49%" colspan="2" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:49.22%;">
  <p style="margin:0in -35.1pt .0001pt 0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">CERUS
  CORPORATION</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:50.78%;">
  <p style="font-size:12.0pt;margin:0in -35.1pt .0001pt 0in;">&nbsp;</p>
  </td>
  <td width="49%" colspan="2" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:49.22%;">
  <p style="font-size:12.0pt;margin:0in -35.1pt .0001pt 0in;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:50.78%;">
  <p style="font-size:1.0pt;margin:0in -35.1pt .0001pt 0in;">&nbsp;</p>
  </td>
  <td width="6%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:6.84%;">
  <p style="margin:0in -35.1pt .0001pt 0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By: </font></p>
  </td>
  <td width="42%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt;width:42.38%;">
  <p style="font-size:1.0pt;margin:0in -35.1pt .0001pt 0in;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:50.78%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:6.84%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name:</font></p>
  </td>
  <td width="42%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt;width:42.38%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:50.78%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:6.84%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title:</font></p>
  </td>
  <td width="42%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt;width:42.38%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
</table>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>


<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- ZEQ.=1,SEQ=15,EFW="2106076",CP="CERUS CORPORATION",DN="2",CHK=837715,FOLIO='',FILE="DISK023:[03PAL5.03PAL1205.EDGAR]EX10-41_1205.CHC",USER="DNICHOL",CD='Mar 26 16:39 2003' -->
<br clear="all" style="page-break-before:always;">
</font>

<p align="center" style="font-size:12.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

<p style="font-weight:bold;margin:12.0pt 0in 3.0pt;text-align:center;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">EXHIBIT
B</font></u></b></p>

<p style="font-weight:bold;margin:12.0pt 0in 3.0pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">TERM
NOTE</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="1%" valign="bottom" style="padding:0in 0in 0in 5.75pt;width:1.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 0in 0in 5.75pt;width:10.66%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="67%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:67.38%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="19%" colspan="4" valign="bottom" style="padding:0in 5.75pt 0in 0in;width:19.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chicago, Illinois</font></p>
  </td>
 </tr>
 <tr>
  <td width="80%" colspan="3" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:80.02%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="9%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 5.75pt 0in 0in;width:9.64%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="3%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 5.75pt 0in 0in;width:3.86%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="4%" valign="bottom" style="padding:0in 0in 0in 0in;width:4.34%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">, 200</font></p>
  </td>
  <td width="2%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt;width:2.14%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
</table>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">FOR VALUE RECEIVED, the undersigned,<b><font style="font-weight:bold;"> CERUS COPORATION</font></b>, a Delaware corporation
(the &#147;Borrower&#148;), HEREBY PROMISES TO PAY to the order of <b><font style="font-weight:bold;">BAXTER CAPITAL CORPORATION</font></b>, a Delaware
corporation<b><font style="font-weight:bold;">  </font></b>(&#147;Lender&#148;) the sum of
__________________________________________ AND 00/100 DOLLARS ($____________)
or so much thereof as shall be borrowed hereunder and all remaining amounts due
hereunder in the amounts, on the dates and in the manner as set forth in the
Loan and Security Agreement by and among the Borrower and the Lender dated as
of November __, 2002 (&#147;Loan Agreement&#148;).&#160;
The Borrower shall pay interest on the unpaid principal amount hereunder
until such time as the amounts hereunder are paid in full, such interest
payable at the rate(s) and at the times set forth in the Loan Agreement with
all outstanding amounts due and payable no later than the Maturity Date.&#160; All interest shall be calculated on the
basis of a 360-day year for the actual number of days elapsed.&#160; The Borrower may prepay in whole or in part
any time without any premium or penalty, notwithstanding any refinancing,
renewal, extension or modification of this note.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Both principal and interest are payable exclusively in lawful money of
the United States of America so that the funds are available to the Lender not
later than 11:00 a.m. (Chicago time) on the due dates and in the amounts
specified in the Loan Agreement.&#160; All
amounts shall be paid to the Lender&#146;s account at Bank One, N.A., Indianapolis,
Indiana.&#160; All loans made by the Lender
to the Borrower, and the respective maturities thereof, and all payments made
on account of principal thereof, shall be recorded in the books and records of
the Lender and shall be deemed to be conclusively correct absent manifest
error.&#160; Failure by the Lender to record
such loans or payments shall not relieve the Borrower of any obligation with
respect to such loan or payment.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Note is the Term Note referred to in, and is entitled to the
benefits of, the Loan Agreement.&#160; The
Loan Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events, and also for
prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.&#160;
In addition, upon the occurrence of an Event of Default as therein
defined, this Term Note and all amounts owed hereunder shall accrue interest at
two hundred basis points (2.0%) above the interest rate applicable immediately
before such event occurred.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Presentment and demand for payment, notice of dishonor, protest and
notice of protest are hereby waived.&#160; In
the event of an Event of Default the Borrower agrees to pay costs of collection
and reasonable attorneys&#146; fees in connection therewith.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Term Note evidences the same indebtedness as did the Revolving
Note dated November __, 2002 in the original principal amount of $50,000,000.00
from the undersigned to the Lender (the &#147;Revolving Note&#148;) which is amended and
restated hereby.&#160; This note is issued in
substitution for (and not in discharge of the indebtedness evidenced by) the
Revolving Note.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Capitalized terms used but not defined herein have the same meanings as
in the Loan Agreement.</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>


<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- ZEQ.=1,SEQ=16,EFW="2106076",CP="CERUS CORPORATION",DN="2",CHK=54115,FOLIO='',FILE="DISK023:[03PAL5.03PAL1205.EDGAR]EX10-41_1205.CHC",USER="DNICHOL",CD='Mar 26 16:39 2003' -->
<br clear="all" style="page-break-before:always;">
</font>

<p align="center" style="font-size:12.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Term Note shall be governed by, and construed in
accordance with, the internal laws (as distinguished from the conflicts of laws
rules) of the State of Illinois.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="50%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:50.78%;">
  <p style="font-size:1.0pt;margin:0in -35.1pt .0001pt 0in;">&nbsp;</p>
  </td>
  <td width="49%" colspan="2" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:49.22%;">
  <p style="margin:0in -35.1pt .0001pt 0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">CERUS
  CORPORATION</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:50.78%;">
  <p style="font-size:12.0pt;margin:0in -35.1pt .0001pt 0in;">&nbsp;</p>
  </td>
  <td width="49%" colspan="2" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:49.22%;">
  <p style="font-size:12.0pt;margin:0in -35.1pt .0001pt 0in;">&nbsp;</p>
  </td>
 </tr>
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  <td width="50%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:50.78%;">
  <p style="font-size:1.0pt;margin:0in -35.1pt .0001pt 0in;">&nbsp;</p>
  </td>
  <td width="6%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:6.84%;">
  <p style="margin:0in -35.1pt .0001pt 0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By: </font></p>
  </td>
  <td width="42%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt;width:42.38%;">
  <p style="font-size:1.0pt;margin:0in -35.1pt .0001pt 0in;">&nbsp;</p>
  </td>
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  <td width="50%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:50.78%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:6.84%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name:</font></p>
  </td>
  <td width="42%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt;width:42.38%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:50.78%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="6%" valign="bottom" style="padding:0in 5.4pt 0in 5.4pt;width:6.84%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title:</font></p>
  </td>
  <td width="42%" valign="bottom" style="border:none;border-bottom:solid windowtext .5pt;padding:0in 5.4pt 0in 5.4pt;width:42.38%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
</table>

<p style="margin:0in -35.1pt .0001pt 0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>


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<DOCUMENT>
<TYPE>EX-10.42
<SEQUENCE>4
<FILENAME>a2106076zex-10_42.htm
<DESCRIPTION>EXHIBIT 10.42
<TEXT>
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<p align="right" style="margin:0in 0in .0001pt .5in;text-align:right;text-indent:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;text-transform:uppercase;">EXHIBIT 10.42</font></b></p>

<p align="left" style="margin:0in 0in .0001pt .5in;text-align:left;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;text-transform:uppercase;">CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES AND
EXCHANGE ACT OF 1934, AS AMENDED.</font></b></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></b></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">LETTER
OF UNDERSTANDING</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This will serve as a letter of understanding
between Baxter and Cerus regarding the resolution of six points.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">G and A rate
resolution is as follows:</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Cerus will pay Baxter
$977,500 for FTE rate issues through 2001 by December 2002.</font></p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Baxter will stop an
additional $608,000 claim on overcharges.</font></p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The current G&amp;A
methodology will remain in effect through December 2003 for both companies.</font></p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The G&amp;A rate for both
companies will be $60,000 per FTE starting January, 2004, and will continue
through the development period of all programs.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font size="2" style="font-size:10.0pt;font-weight:bold;">[&nbsp;&nbsp;*&nbsp;&nbsp;]</font></b><font size="2" style="font-size:10.0pt;"> providing they are capable
(as qualified as other competing suppliers) as per the Governance Committee,
will be the primary supplier of <b><font style="font-weight:bold;">[&nbsp;&nbsp;*&nbsp;&nbsp;]</font></b>.&#160; Should there be a more favorable monetary
bid from a competitive supplier, <b><font style="font-weight:bold;">[&nbsp;&nbsp;*&nbsp;&nbsp;]</font></b>
will be allowed to match the lower bid.</font></p>

<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Phase IV
studies will be reviewed by the Governance Committee.&#160; Baxter will pay for Phase IV marketing trials.&#160; Trials that provide additional claims or are
required by Regulatory Agencies will be considered R&amp;D expense and shared
between both companies per development expense sharing in the respective
contracts.</font></p>

<p style="margin:0in 0in .0001pt .25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Net Sales
Definition</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Cerus agrees not to share in
SDP conversion kit revenues, except as noted below.</font></p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Cerus will receive the
appropriate revenue split from the sales of the Intersol portion of products,
including the following:</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">o</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Amicus Kits</font></p>

<p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">o</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">RDP Collection
Kits</font></p>

<p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">o</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Buffy Coat
Pooling Sets</font></p>

<p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">o</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">SDP Conversion
Kits</font></p>

<p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">o</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Intersol to any
platform manufacturers</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;text-transform:uppercase;">[&#160;
* ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>


<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- ZEQ.=1,SEQ=1,EFW="2106076",CP="CERUS CORPORATION",DN="3",CHK=776890,FOLIO='',FILE="DISK023:[03PAL5.03PAL1205.EDGAR]EX10-42_1205.CHC",USER="DNICHOL",CD='Mar 19 08:45 2003' -->
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<p align="center" style="font-size:12.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

<p style="margin:0in 0in .0001pt .75in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="2" style="font-size:10.0pt;">&#160;&#160;&#160;&#160;&#160; Cerus agrees to receive no revenue from <b><font style="font-weight:bold;">[&nbsp;&nbsp;*&nbsp;&nbsp;]</font></b> or
Leukoreduction Filters, assuming they are sold at pricing similar to
non-INTERCEPT uses.</font></p>

<p style="margin:0in 0in .0001pt .75in;page-break-after:avoid;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="2" style="font-size:10.0pt;">&#160;&#160;&#160;&#160;&#160; Cerus agrees to share in the development
cost of manual or apheresis (Alyx) collection systems to allow for INTERCEPT
ready usage.&#160; This development would
principally include <b><font style="font-weight:bold;">[&nbsp;&nbsp;*&nbsp;&nbsp;]</font></b>
of <b><font style="font-weight:bold;">[&nbsp;&nbsp;*&nbsp;&nbsp;]</font></b> and
<b><font style="font-weight:bold;">[&nbsp;&nbsp;*&nbsp;&nbsp;]</font></b> with <b><font style="font-weight:bold;">[&nbsp;&nbsp;*&nbsp;&nbsp;]</font></b>.&#160; In this case the revenue sharing will only
be on the incremental premium for the INTERCEPT-ready kit over the standard
Alyx Kit.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">In determining Net Sales,
the following guidelines will be used:</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">For products that are
currently marketed, Baxter will continue to retain all revenues assuming they
are sold at pricing similar to non-INTERCEPT uses.</font></p>

<p style="margin:0in 0in .0001pt 1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">F</font><font size="2" style="font-size:10.0pt;">or new products that are developed to be used solely with Intercept,
Cerus will have the option to participate in the development effort.&#160; If Cerus chooses to participate, the
products will be included in the revenue sharing.&#160; (See examples below)</font></p>

<p style="margin:0in 0in .0001pt 1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 1.25in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">The Governance Committee
will review whether Cerus will have the option to participate in the
development based upon the above guidelines.&#160;&#160;
If the Governance Committee is deadlocked on a product sharing decision,
it will be decided by the neutral committee of three individuals.</font></p>

<p style="margin:0in 0in .0001pt 1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Examples:</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 1.5in;text-indent:-.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">RBC conversion kit &#151; for
competitive collection systems. This kit most likely would consist of the
addition of <b><font style="font-weight:bold;">[&nbsp;&nbsp;*&nbsp;&nbsp;]</font></b>
to an already marketed <b><font style="font-weight:bold;">[&nbsp;&nbsp;*&nbsp;&nbsp;]</font></b>.
In this case the revenue sharing will only be on the incremental premium for
the INTERCEPT-ready kit over the standard SD Kit.</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:.25in;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&#149;</font><font size="2" style="font-size:10.0pt;">&#160;&#160;&#160;&#160;&#160; Data Management for the INTERCEPT process.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Cerus agrees to
relinquish its claim to any revenues to the Haemonetics upfront and milestone
payments.&#160; From the Haemonetics
payments, $<b><font style="font-weight:bold;">[&nbsp;&nbsp;*&nbsp;&nbsp;]</font></b>
has been earmarked for product development of the <b><font style="font-weight:bold;">[&nbsp;&nbsp;*&nbsp;&nbsp;]</font></b>.&#160;
These funds will be used to cover Baxter&#146;s and Cerus&#146; costs incurred
related to the development and regulatory approvals of the <b><font style="font-weight:bold;">[&nbsp;&nbsp;*&nbsp;&nbsp;]</font></b>.&#160; Any funds remaining at the conclusion of the
development and regulatory approvals of the <b><font style="font-weight:bold;">[&nbsp;&nbsp;*&nbsp;&nbsp;]</font></b>
will be split 50-50 between Baxter and Cerus but applied to </font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>

<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;text-transform:uppercase;">&nbsp;</font></b></p>

<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;text-transform:uppercase;">[&#160;
* ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>


<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- ZEQ.=1,SEQ=2,EFW="2106076",CP="CERUS CORPORATION",DN="3",CHK=764004,FOLIO='2',FILE="DISK023:[03PAL5.03PAL1205.EDGAR]EX10-42_1205.CHC",USER="DNICHOL",CD='Mar 19 08:45 2003' -->
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<p align="center" style="font-size:12.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

<p style="margin:0in 0in .0001pt .5in;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">product development efforts
in other Cerus-Baxter pathogen inactivation programs.</font></p>

<p style="margin:0in 0in .0001pt .25in;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Additionally, any upfront
and milestone payments Baxter receives from similar deals will be retained by
Baxter.&#160; Section 6.3 of the Platelet
Contract will apply to these deals and Baxter will keep Cerus apprised of
negotiations of additional deals.&#160; The
provisions of this paragraph relating to Baxter retention of up-front and
milestone payments apply only to the existing Haemonetics transaction and to
future platelet deals for access to Intersol.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" style="font-size:10.0pt;">Baxter agrees
that section 6.3 of the Platelet agreement will remain in place.&#160; In order to resolve deadlocked issues, a
panel of three individuals will be established to affect a resolution.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="45%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:45.64%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;text-transform:uppercase;">CERUS
  CORPORATION</font></b></p>
  </td>
  <td width="3%" valign="top" style="padding:0in .7pt 0in .7pt;width:3.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="50%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:50.62%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;text-transform:uppercase;">BAXTER
  HEALTHCARE CORPORATION</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.38%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="39%" valign="top" style="padding:0in .7pt 0in .7pt;width:39.26%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="3%" valign="top" style="padding:0in .7pt 0in .7pt;width:3.74%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.6%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="45%" valign="top" style="padding:0in .7pt 0in .7pt;width:45.02%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.38%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="39%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:39.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/
  STEPHEN T. ISAACS</font></p>
  </td>
  <td width="3%" valign="top" style="padding:0in .7pt 0in .7pt;width:3.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.6%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="45%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:45.02%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/
  GREGORY P. YOUNG</font></p>
  </td>
 </tr>
 <tr>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.38%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="39%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:39.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Stephen
  T. Isaacs<br>
  President &amp; CEO</font></p>
  </td>
  <td width="3%" valign="top" style="padding:0in .7pt 0in .7pt;width:3.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.6%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="45%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:45.02%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Gregory
  P. Young<br>
  Corporate Vice President &amp; President, Fenwal, Baxter Healthcare
  Corporation</font></p>
  </td>
 </tr>
 <tr>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.38%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="39%" valign="top" style="padding:0in .7pt 0in .7pt;width:39.26%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="3%" valign="top" style="padding:0in .7pt 0in .7pt;width:3.74%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.6%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="45%" valign="top" style="padding:0in .7pt 0in .7pt;width:45.02%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.38%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date:</font></p>
  </td>
  <td width="39%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:39.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10-30-02</font></p>
  </td>
  <td width="3%" valign="top" style="padding:0in .7pt 0in .7pt;width:3.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.6%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date:</font></p>
  </td>
  <td width="45%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:45.02%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11-1-02</font></p>
  </td>
 </tr>
 <tr>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.38%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="39%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:39.26%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="3%" valign="top" style="padding:0in .7pt 0in .7pt;width:3.74%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="5%" valign="top" style="padding:0in .7pt 0in .7pt;width:5.6%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="45%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:45.02%;">
  <p style="font-size:12.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
</table>

<p style="margin:0in 0in .0001pt .25in;text-indent:-.25in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;text-transform:uppercase;">&nbsp;</font></b></p>

<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;text-transform:uppercase;">[&#160;
* ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>


<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- ZEQ.=1,SEQ=3,EFW="2106076",CP="CERUS CORPORATION",DN="3",CHK=209277,FOLIO='3',FILE="DISK023:[03PAL5.03PAL1205.EDGAR]EX10-42_1205.CHC",USER="DNICHOL",CD='Mar 19 08:45 2003' -->
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>5
<FILENAME>a2106076zex-23_1.htm
<DESCRIPTION>EX-23.1
<TEXT>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="kc1204_exhibit_23.1"> </A>
<A NAME="toc_kc1204_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXHIBIT 23.1    <BR>  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="kc1204_consent_of_ernst___young_llp,_independent_auditors"> </A>
<A NAME="toc_kc1204_2"> </A></FONT> <FONT SIZE=2><B>CONSENT OF ERNST&nbsp;&amp; YOUNG LLP, INDEPENDENT AUDITORS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We consent to the incorporation by reference in the Registration Statements (Form&nbsp;S-8) pertaining to the 1996 Equity Incentive Plan, Employee
Stock Purchase Plan, 1998 Non-Officer Stock Option Plan and 1999 Equity Incentive Plan, and Registration Statements on Form&nbsp;S-3 (Nos. 333-93481,
333-47224, 333-61460, 333-61910 and 333-67286), of Cerus Corporation of our report dated January&nbsp;30, 2003 with respect to the financial
statements of Cerus Corporation included in its Annual Report (Form&nbsp;10-K) for the year ended December&nbsp;31, 2002, filed with the Securities and Exchange Commission. </FONT></P>

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<TR VALIGN="BOTTOM">
<TD WIDTH="45%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="53%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="45%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="53%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><B>
<IMG SRC="g571654.jpg" ALT="SIGNATURE" WIDTH="193" HEIGHT="54">
 </B></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="45%" VALIGN="TOP"><FONT SIZE=2><BR>
Palo Alto, California<BR>
March 25, 2003<BR></FONT>
</TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="53%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P><br><A NAME="03PAL1204_4">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_kc1204_1">EXHIBIT 23.1</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_kc1204_2">CONSENT OF ERNST &amp; YOUNG LLP, INDEPENDENT AUDITORS</A></FONT><BR>

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<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>6
<FILENAME>a2106076zex-99_1.htm
<DESCRIPTION>EX-99.1
<TEXT>
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<HEAD>

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NAME="km1204_exhibit_99.1"> </A>
<A NAME="toc_km1204_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXHIBIT 99.1    <BR>  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="km1204_certification"> </A>
<A NAME="toc_km1204_2"> </A>
<BR></FONT><FONT SIZE=2><B>CERTIFICATION    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.&sect; 1350, as adopted), Stephen T. Isaacs, Chief Executive Officer of Cerus
Corporation (the "Company"), and Gregory W. Schafer, Chief Financial Officer of the Company, each hereby certify that, to the best of their knowledge: </FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>1.</B></FONT></DT><DD><FONT SIZE=2>The Company's Annual Report on Form&nbsp;10-K for the period ended December&nbsp;31, 2002, to which this Certification
is attached as Exhibit&nbsp;99.1 (the "</FONT><FONT SIZE=2><B><I>Annual Report</I></B></FONT><FONT SIZE=2>") fully complies with the requirements of section&nbsp;13(a) or section&nbsp;15(d) of the
Securities Exchange Act of 1934, and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>2.</B></FONT></DT><DD><FONT SIZE=2>The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of
operations of the Company. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>In Witness Whereof,</B></FONT><FONT SIZE=2> the undersigned have set their hands hereto as of the 27th&nbsp;day of March, 2003. </FONT></P>

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<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>STEPHEN T. ISAACS</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Chief Executive Officer</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>GREGORY W. SCHAFER</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Chief Financial Officer</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">

<P><FONT SIZE=2>A
signed original of this written statement required by Section&nbsp;906 has been provided to Cerus and will be retained by Cerus and furnished to the Securities and Exchange Commission or its staff
upon request. </FONT></P>

<HR NOSHADE>
<!-- ZEQ.=1,SEQ=1,EFW="2106076",CP="CERUS CORPORATION",DN="5",CHK=122030,FOLIO='blank',FILE='DISK023:[03PAL4.03PAL1204]KM1204A.;9',USER='ATOBAK',CD='27-MAR-2003;14:08' -->
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<UL>
<FONT SIZE=2><A HREF="#toc_km1204_1">EXHIBIT 99.1</A></FONT><BR>
</UL>
<FONT SIZE=2><A HREF="#toc_km1204_2">CERTIFICATION</A></FONT><BR>
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<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>7
<FILENAME>g571654.jpg
<DESCRIPTION>G571654.JPG
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`
end

</TEXT>
</DOCUMENT>
</SUBMISSION>
