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corresp

December 15, 2005

VIA EDGAR AND OVERNIGHT DELIVERY

Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, D.C. 20549-1004

    Attention:

    Jim B. Rosenberg

Oscar M. Young, Jr.

Tabatha Akins

    Re:

    Cell Genesys, Inc.

    Form 10-K for the Fiscal Year Ended December 31, 2004

    Filed March 14, 2005

    File No. 000-19986

Ladies and Gentlemen:

     On behalf of Cell Genesys, Inc. (the “Company”), we submit this letter in response to comments
from the Staff of the Securities and Exchange Commission received by letter dated December 14,
2005, relating to the Company’s Form 10-K for the fiscal year ended December 31, 2004.

     In this letter, we have recited the comments from the Staff in italicized, bold type and have
followed each comment with the Company’s response. Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Company’s Form 10-K.

Item 8. Consolidated Financial Statements and Supplementary Data, page 38

Notes to Consolidated Financial Statements, page 44

1. Organization and Summary of Significant Accounting Policies, page 44

Revenue Recognition, page 44

    1.

    Please tell us why it is appropriate to recognize non-refundable upfront license fees and
other payments under collaborative agreements “based upon when the underlying development
expenses are incurred”. In addition, as this appears to be an input-based approach, please
tell us how the input measure, the expenses, is a reasonable surrogate for output measures.
Finally, as you apparently changed to this recognition method, in your Form 10-K for 2003,
from the ratable recognition disclosed in your Form 10-K for 2002, please tell us whether this
is a change in accounting principle, if so, how you have complied with APB 20 and Item
601(b)(18) of Regulation S-K.

Securities and Exchange Commission

Cell Genesys, Inc.

December 15, 2005

Page 2

     Response:

     During the three year period ended December 31, 2004, the Company received only one
non-refundable upfront payment, which was a $10.0 million payment in July 2003 from Novartis AG for
the development of several therapeutic cancer products under a global strategic alliance between
the two companies. Under the alliance the Company was required to utilize the upfront payment to
conduct research and development activities on certain therapeutic cancer products using its “best
efforts” until the $10.0 million was fully expended. The Novartis agreement did not require the
Company to achieve any specific milestone, reach any goal or achieve any results, provisions that
are uncommon in the biotechnology industry.

     Footnote 28 to SAB 101 provides that the Company should recognize non-refundable upfront
payments to revenue using a systematic or ratable method, unless evidence suggests that revenue is
earned or obligations are fulfilled in a different pattern, in which case that pattern should be
followed. Based upon the facts and circumstances of the Novartis agreement, the Company determined
that the best measure of the revenues earned under this alliance was the output-based underlying
research and development expenses it incurred rather than a systematic or ratable method.

     In following the guidance provided in footnote 28 to SAB 101 for the Novartis agreement, the
Company did not change its accounting method related to the recognition of non-refundable upfront
fees. The Company’s policy was and is to use straight-line or ratable recognition to amortize
non-refundable upfront payments unless a more appropriate methodology is applicable. Therefore,
the Company believed that it was not necessary to obtain the type of preferability letter
envisioned in Item 601(b)(18) of Regulation S-K.

     Since the Novartis agreement was the only active agreement to which this policy applied at the
time, this was the method that was utilized and disclosed. At this time the Company does not have
any remaining upfront payments that have not been recognized to revenue. If the Company were to
receive any non-refundable upfront payments in the future, the Company will continue to follow the
guidance in SAB 101 and ensure that its related financial statement disclosures clearly state the
basis on which those payments will be recognized to revenue.

10. Income Taxes, page 54

    2.

    Please tell us why it is appropriate for your accounting for income taxes to result in you
establishing accruals for certain tax contingencies when you apparently believe that certain
positions may be challenged and your positions may not be fully sustained. In so doing,
please tell us whether you have recognized any tax benefits for deductions that are not
probable of being sustained and, if so, why that is appropriate under GAAP. Please cite the
authoritative literature supporting this accounting.

     Response:

     The Company accounts for potential liabilities for income taxes in circumstances involving
uncertainties in accordance with Statement of Financial Accounting Standards No. 109, “Accounting
for Income Taxes” (“SFAS 109”) and Statement of Financial Accounting Standards No. 5, “Accounting
for

Securities and Exchange Commission

Cell Genesys, Inc.

December 15, 2005

Page 3

Contingencies” (“SFAS 5”). The Company establishes and subsequently adjusts its tax
contingency accruals in light of changing facts and circumstances, such as the progress of tax
audits, case law and emerging legislation.

     As of December 31, 2004 and December 31, 2003, the Company carried an accrued income tax
liability related to potential exposure pertaining to an ongoing examination by the Internal
Revenue Service (“IRS”) of the Company’s 2000 federal income tax return. The accrued income tax
liability represents the Company’s best estimate of the tax effect of the possible disallowance of
net operating loss carry forwards previously used if the methodology it used to determine the net
operating loss carry forwards available in 2000 was not upheld.

     When the Company prepared its 2000 federal income tax return it was required to determine if
its available net operating loss carry forwards would be subject to limitations under the Section
382 ownership change provisions of the Internal Revenue Code of 1986. In order to calculate the
Section 382 limitation, it was necessary to determine the fair market value of the Company. The
Company considered various methodologies to calculate fair market value and found the Internal
Revenue Code to be ambiguous with respect to requiring a particular methodology. Based upon the
Company’s research and the prevailing market conditions, the Company believed that an income-based
valuation approach to determine the fair market value of the Company was most appropriate.

     In 2002 the IRS initiated its audit of the Company’s 2000 federal tax return and throughout
the audit the IRS has asserted their view that market capitalization is the preferred methodology
to determine fair market value. Based upon the difference in the fair market values of the Company
determined under each approach and the possibility that the ambiguous governing language could be
interpreted contrary to the Company’s position, the Company determined that a liability related to
the IRS audit was probable and estimable.

     In July 2005, the IRS issued a Notice of Proposed Adjustment (“NOPA”) to the Company seeking
to disallow $48.7 million of net operating losses that the Company deducted for the 2000 fiscal
year and asserting a $3.4 million penalty for substantial underpayment of tax in fiscal 2000. The
Company responded to the NOPA in September 2005, disagreeing with the conclusions reached by the
IRS in the NOPA and seeking to resolve this matter at the Appeals level. The Company disclosed
these facts and circumstances in its Form 10-Q for the quarter ended September 30, 2005 which was
filed with the SEC on November 9, 2005.

     In accordance with SFAS 109, the Company has not recognized any tax benefits for deductions or
utilization of net operating losses or carry forwards related to the IRS examination of the 2000
tax year or any other period that are not probable of being sustained.

Securities and Exchange Commission

Cell Genesys, Inc.

December 15, 2005

Page 4

Please direct any comments or questions regarding the Company’s responses to the attention of the
undersigned at (650) 320-4601.

    Sincerely,

WILSON SONSINI GOODRICH & ROSATI

Professional Corporation

    /s/ Herbert P. Fockler

    Herbert P. Fockler, Esq.

    cc:

    Ms. Sharon E. Tetlow/Cell Genesys, Inc.