Ionis Pharmaceuticals (IONS) 10-Q5 Nov 132013 Q3 Quarterly reportFinancial data

Company Profile

Document_and_Entity_Informatio

Document and Entity Information	9 Months Ended
Document and Entity Information	Sep. 30, 2013	Nov. 01, 2013
Document and Entity Information	'	'
Entity Registrant Name	'ISIS PHARMACEUTICALS INC	'
Entity Central Index Key	'0000874015	'
Document Type	'10-Q	'
Document Period End Date	30-Sep-13	'
Amendment Flag	'false	'
Current Fiscal Year End Date	'--12-31	'
Entity Current Reporting Status	'Yes	'
Entity Filer Category	'Large Accelerated Filer	'
Entity Common Stock, Shares Outstanding	'	116,074,372
Document Fiscal Year Focus	'2013	'
Document Fiscal Period Focus	'Q3	'

CONDENSED_CONSOLIDATED_BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Sep. 30, 2013	Dec. 31, 2012
In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Current assets:	'	'
Cash and cash equivalents	$256,408	$124,482
Short-term investments	414,490	249,964
Contracts receivable	12,645	522
Inventories	7,385	6,121
Investment in Regulus Therapeutics Inc.	65,004	33,622
Other current assets	7,372	8,727
Total current assets	763,304	423,438
Property, plant and equipment, net	87,273	91,084
Licenses, net	5,048	6,579
Patents, net	20,810	18,646
Deposits and other assets	5,481	5,939
Total assets	881,916	545,686
Current liabilities:	'	'
Accounts payable	8,781	10,239
Accrued compensation	6,653	7,878
Accrued liabilities	22,283	15,401
Accrued income taxes	4,935	'
Current portion of long-term obligations	4,649	4,879
Current portion of deferred contract revenue	55,977	35,925
Total current liabilities	103,278	74,322
Long-term deferred contract revenue	151,006	66,656
2 3/4 percent convertible senior notes	148,705	143,990
Long-term obligations, less current portion	6,384	7,402
Long-term financing liability for leased facility	71,097	70,550
Total liabilities	480,470	362,920
Stockholders' equity:	'	'
Common stock, $0.001 par value; 200,000,000 shares authorized, 115,998,221 and 101,481,134 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively	116	102
Additional paid-in capital	1,315,643	1,077,150
Accumulated other comprehensive income	29,021	12,480
Accumulated deficit	-943,334	-906,966
Total stockholders' equity	401,446	182,766
Total liabilities and stockholders' equity	$881,916	$545,686

CONDENSED_CONSOLIDATED_BALANCE1

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Sep. 30, 2013	Dec. 31, 2012
CONDENSED CONSOLIDATED BALANCE SHEETS	'	'
Common stock, par value (in dollars per share)	$0.00	$0.00
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	115,998,221	101,481,134
Common stock, shares outstanding	115,998,221	101,481,134

CONDENSED_CONSOLIDATED_STATEME

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		9 Months Ended
In Thousands, except Per Share data, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenue:	'	'	'	'
Research and development revenue under collaborative agreements	$23,383	$11,127	$102,918	$80,085
Licensing and royalty revenue	202	474	2,118	2,091
Total revenue	23,585	11,601	105,036	82,176
Expenses:	'	'	'	'
Research, development and patent expenses	45,660	36,551	126,603	115,700
General and administrative	3,430	3,096	10,241	9,281
Total operating expenses	49,090	39,647	136,844	124,981
Loss from operations	-25,505	-28,046	-31,808	-42,805
Other income (expense):	'	'	'	'
Equity in net loss of Regulus Therapeutics Inc.	'	'	'	-1,139
Investment income	434	408	1,400	1,485
Interest expense	-4,867	-5,937	-14,470	-16,335
Gain on investments, net	175	'	2,073	19
Loss on early retirement of debt	'	-4,770	'	-4,770
Loss before income tax benefit	-29,763	-38,345	-42,805	-63,545
Income tax benefit	5,193	706	6,437	704
Net loss	($24,570)	($37,639)	($36,368)	($62,841)
Basic and diluted net loss per share (in dollars per share)	($0.21)	($0.37)	($0.33)	($0.63)
Shares used in computing basic net loss per share (in shares)	115,263	100,680	108,608	100,351
Shares used in computing diluted net loss per share (in shares)	115,263	100,680	108,608	100,351

CONDENSED_CONSOLIDATED_STATEME1

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $)	3 Months Ended		9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS	'	'	'	'
Net loss	($24,570)	($37,639)	($36,368)	($62,841)
Unrealized gains (losses) on securities, net of tax	2,207	-122	17,876	1,616
Reclassification adjustment for realized gain included in net loss	-172	'	-1,335	'
Comprehensive loss	($22,535)	($37,761)	($19,827)	($61,225)

CONDENSED_CONSOLIDATED_STATEME2

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2012
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	'	'
Net cash provided by (used in) operating activities	$77,985	($34,159)
Investing activities:	'	'
Purchases of short-term investments	-303,862	-172,581
Proceeds from the sale of short-term investments	135,130	189,397
Purchases of property, plant and equipment	-1,113	-1,033
Acquisition of licenses and other assets, net	-2,721	-2,779
Purchases of strategic investments	'	-40
Proceeds from sale of strategic investments	2,110	'
Net cash (used in) provided by investing activities	-170,456	12,964
Financing activities:	'	'
Proceeds from equity awards	56,898	7,789
Proceeds from issuance of 2 3/4 percent convertible senior notes, net of issuance costs	'	194,689
Principal and premium payment on redemption of the 2 5/8 percent convertible subordinated notes	'	-163,718
Net proceeds from public common stock offering	173,292	'
Proceeds from equipment financing arrangement	2,513	9,100
Principal payments on debt and capital lease obligations	-8,306	-7,579
Net cash provided by financing activities	224,397	40,281
Net increase in cash and cash equivalents	131,926	19,086
Cash and cash equivalents at beginning of period	124,482	65,477
Cash and cash equivalents at end of period	256,408	84,563
Supplemental disclosures of cash flow information:	'	'
Interest paid	3,079	5,584
Income taxes paid	2	'
Supplemental disclosures of non-cash investing and financing activities:	'	'
Amounts accrued for capital and patent expenditures	$835	$839

Basis_of_Presentation

Basis of Presentation	9 Months Ended
Basis of Presentation	Sep. 30, 2013
Basis of Presentation	'
Basis of Presentation	'
	1. Basis of Presentation

	The unaudited interim condensed consolidated financial statements for the three and nine month periods ended September 30, 2013 and 2012 have been prepared on the same basis as the audited financial statements for the year ended December 31, 2012. The financial statements include all normal recurring adjustments, which we consider necessary for a fair presentation of our financial position at such dates and our operating results and cash flows for those periods. Results for the interim periods are not necessarily indicative of the results for the entire year. For more complete financial information, these financial statements, and notes thereto, should be read in conjunction with the audited financial statements for the year ended December 31, 2012 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”).

	The condensed consolidated financial statements include the accounts of Isis Pharmaceuticals, Inc. (“we”, “us” or “our”) and our wholly owned subsidiary, Symphony GenIsis, Inc., which is currently inactive. In addition to our wholly owned subsidiary, our condensed consolidated financial statements include our equity investment in Regulus Therapeutics Inc. In October 2012, Regulus completed an initial public offering (IPO). We now own less than 20 percent of Regulus’ common stock and we no longer have significant influence over the operating and financial policies of Regulus. As a result, in the fourth quarter of 2012, we stopped using the equity method of accounting for our equity investment in Regulus and we began accounting for our investment at fair value.

Significant_Accounting_Policie

Significant Accounting Policies	9 Months Ended
	Sep. 30, 2013
Significant Accounting Policies	'
Significant Accounting Policies	'
	2. Significant Accounting Policies

	Revenue Recognition

	We generally recognize revenue when we have satisfied all contractual obligations and are reasonably assured of collecting the resulting receivable. We are often entitled to bill our customers and receive payment from our customers in advance of recognizing the revenue. In those instances in which we have received payment from our customers in advance of recognizing revenue, we include the amounts in deferred revenue on our condensed consolidated balance sheet.

	Research and development revenue under collaborative agreements

	Our collaboration agreements typically contain multiple elements, or deliverables, including technology licenses or options to obtain technology licenses, research and development services, and in certain cases manufacturing services. Our collaborations may provide for various types of payments to us including upfront payments, funding of research and development, milestone payments, licensing fees, profit sharing and royalties on product sales. We evaluate the deliverables in our collaboration agreements to determine whether they meet the criteria to be accounted for as separate units of accounting or whether they should be combined with other deliverables and accounted for as a single unit of accounting. When the delivered items in an arrangement have “stand-alone value” to our customer, we account for the deliverables as separate units of accounting and we allocate the consideration to each unit of accounting based on the relative selling price of each deliverable. Delivered items have stand-alone value if they are sold separately by any vendor or the customer could resell the delivered items on a standalone basis. We use the following hierarchy of values to estimate the selling price of each deliverable: (i) vendor-specific objective evidence of fair value; (ii) third-party evidence of selling price; and (iii) best estimate of selling price, or BESP. The BESP reflects our best estimate of what the selling price would be if we regularly sold the deliverable on a stand-alone basis. We recognize the revenue allocated to each unit of accounting as we deliver the related goods or services. If we determine that we should treat certain deliverables as a single unit of accounting, then we recognize the revenue ratably over our estimated period of performance.

	In December 2012, we entered into a collaboration agreement with AstraZeneca to discover and develop antisense therapeutics against five cancer targets. As part of the collaboration, we received a $25 million upfront payment in December 2012 and a $6 million payment in June 2013 when AstraZeneca elected to continue the research collaboration. We are also eligible to receive milestone payments, license fees for the research program targets and royalties on any product sales of drugs resulting from this collaboration. In exchange, we granted AstraZeneca an exclusive license to develop and commercialize ISIS-STAT3Rx and ISIS-ARRx, which we previously referred to as ISIS-AZ1Rx. We also granted AstraZeneca options to license up to three cancer drugs under the separate research program. We are responsible for completing an ongoing clinical study of ISIS-STAT3Rx and IND-enabling studies for ISIS-ARRx. AstraZeneca is responsible for all other global development, regulatory and commercialization activities for ISIS-STAT3Rx and ISIS-ARRx. In addition, if AstraZeneca exercises its option for any drugs resulting from the research program, AstraZeneca will assume global development, regulatory and commercialization responsibilities for such drug. Since this agreement has multiple elements, we evaluated the deliverables in this arrangement and determined that certain deliverables, either individually or in combination, have stand-alone value. Below is a list of the four separate units of accounting under our agreement:

	· The exclusive license we granted to AstraZeneca to develop and commercialize ISIS-STAT3Rx for the treatment of cancer;
	· The development services we are performing for ISIS-STAT3Rx;
	· The exclusive license we granted to AstraZeneca to develop and commercialize ISIS-ARRx and the research services we are performing for ISIS-ARRx; and
	· The option to license up to three drugs under a research program and the research services we will perform for this program.

	We determined that the ISIS-STAT3Rx license had stand-alone value because it is an exclusive license that gives AstraZeneca the right to develop ISIS-STAT3Rx or to sublicense its rights. In addition, ISIS-STAT3Rx is currently in development and it is possible that AstraZeneca or another third party could conduct clinical trials without assistance from us. As a result, we consider the ISIS-STAT3Rx license and the development services for ISIS-STAT3Rx to be separate units of accounting. We recognized the portion of the consideration allocated to the ISIS-STAT3Rx license immediately because we delivered the license and earned the revenue. We are recognizing the amount allocated to the development services for ISIS-STAT3Rx as revenue over the period of time we perform services. The ISIS-ARRx license is also an exclusive license. Because of the early stage of research for ISIS-ARRx, we believe that our knowledge and expertise with antisense technology is essential for AstraZeneca or another third party to successfully develop ISIS-ARRx. As a result, we concluded that the ISIS-ARRx license does not have stand-alone value and we combined the ISIS-ARRx license and related research services into one unit of accounting. We are recognizing revenue for the combined unit of accounting over the period of time we perform services. We determined that the options under the research program did not have stand-alone value because AstraZeneca cannot develop or commercialize drugs resulting from the research program until AstraZeneca exercises the respective option or options. As a result, we considered the research options and the related research services as a combined unit of accounting. We are recognizing revenue for the combined unit of accounting over the period of our performance.

	We determined that the initial allocable arrangement consideration was the $25 million upfront payment because it was the only payment that was fixed and determinable when we entered into the agreement. In June 2013, we increased the allocable consideration to $31 million when we received the $6 million payment. There was considerable uncertainty at the date of the agreement as to whether we would earn the milestone payments, royalty payments, payments for manufacturing clinical trial materials or payments for finished drug product. As such, we did not include those payments in the allocable consideration.

	We allocated the allocable consideration based on the relative BESP of each unit of accounting. We engaged a third party, independent valuation expert to assist us with determining BESP. We estimated the selling price of the licenses granted for ISIS-STAT3Rx and ISIS-ARRx by using the relief from royalty method. Under this method, we estimated the amount of income, net of taxes, for each drug. We then discounted the projected income for each license to present value. The significant inputs we used to determine the projected income of the licenses included:

	· Estimated future product sales;
	· Estimated royalties on future product sales;
	· Contractual milestone payments;
	· Expenses we expect to incur;
	· Income taxes; and
	· An appropriate discount rate.

	We estimated the selling price of the research and development services by using our internal estimates of the cost to perform the specific services, marked up to include a reasonable profit margin, and estimates of expected cash outflows to third parties for services and supplies over the expected period that we will perform research and development. The significant inputs we used to determine the selling price of the research and development services included:

	· The number of internal hours we will spend performing these services;
	· The estimated number and cost of studies we will perform;
	· The estimated number and cost of studies that we will contract with third parties to perform; and
	· The estimated cost of drug product we will use in the studies.

	As a result of the allocation, we recognized $9.3 million of the $25 million upfront payment for the ISIS-STAT3Rx license in December 2012 and we recognized $2.2 million of the $6 million payment for the ISIS-STAT3Rx license in June 2013. We are recognizing the remaining $19.5 million of the $31 million over the estimated period of our performance. Assuming a constant selling price for the other elements in the arrangement, if there was an assumed ten percent increase or decrease in the estimated selling price of the ISIS-STAT3Rx license, we determined that the revenue we would have allocated to the ISIS-STAT3Rx license would change by approximately seven percent, or $750,000, from the amount we recorded.

	Typically, we must estimate our period of performance when the agreements we enter into do not clearly define such information. Our collaborative agreements typically include a research and/or development project plan that includes the activities the agreement requires each party to perform during the collaboration. We estimate the period of time over which we will complete the activities for which we are responsible and use that period of time as our period of performance for purposes of revenue recognition and amortize revenue over such period. If our collaborators ask us to continue performing work in a collaboration beyond the initial period of performance, we extend our amortization period to correspond to the new extended period of performance. The revenue we recognize could be materially different if different estimates prevail.

	From time to time, we may enter into separate agreements at or near the same time with the same customer. We evaluate such agreements to determine whether they should be accounted for individually as distinct arrangements or whether the separate agreements are, in substance, a single multiple element arrangement. We evaluate whether the negotiations are conducted jointly as part of a single negotiation, whether the deliverables are interrelated or interdependent, whether fees in one arrangement are tied to performance in another arrangement, and whether elements in one arrangement are essential to another arrangement. Our evaluation involves significant judgment to determine whether a group of agreements might be so closely related that they are, in effect, part of a single arrangement. For example, since early 2012 we have entered into four collaboration agreements with Biogen Idec:

	· In January 2012, we entered into a collaboration agreement with Biogen Idec to develop and commercialize ISIS-SMNRx for Spinal Muscular Atrophy, or SMA. As part of the collaboration, we received a $29 million upfront payment and we are responsible for global development of ISIS-SMNRx through completion of Phase 2/3 clinical trials.

	· In June 2012, we entered into a second and separate collaboration agreement with Biogen Idec to develop and commercialize a novel antisense drug targeting DMPK, or dystrophia myotonica-protein kinase. As part of the collaboration, we received a $12 million upfront payment and we are responsible for global development of the drug through the completion of a Phase 2 clinical trial.

	· In December 2012, we entered into a third and separate collaboration agreement with Biogen Idec to discover and develop antisense drugs against three targets to treat neurological or neuromuscular disorders. As part of the collaboration, we received a $30 million upfront payment and we are responsible for the discovery of a lead antisense drug for each of three targets.

	· In September 2013, we entered into a fourth and separate collaboration agreement with Biogen Idec to leverage antisense technology to advance the treatment of neurological diseases. We granted Biogen Idec exclusive rights to the use of our antisense technology to develop therapies for neurological diseases as part of this broad collaboration. We received a $100 million upfront payment and we are responsible for discovery and early development through the completion of a Phase 2 clinical trial for each antisense drug developed under this collaboration, while Biogen Idec is responsible for the creation and development of small molecule treatments and biologics.

	All four of these collaboration agreements give Biogen Idec the option or options to license one or more drugs resulting from the specific collaboration. If Biogen Idec exercises an option, it will pay us a license fee and will assume future development, regulatory and commercialization responsibilities for the licensed drug. We are also eligible to receive milestone payments associated with the research and/or development of the drugs prior to licensing, milestone payments if Biogen Idec achieves pre-specified regulatory milestones, and royalties on any product sales of drugs resulting from these collaborations.

	We evaluated all four of the Biogen Idec agreements to determine whether we should account for them as separate agreements. We determined that we should account for the agreements separately because we conducted the negotiations independently of one another, each agreement focuses on different drugs, there are no interrelated or interdependent variables, there are no provisions in any of these agreements that are essential to the other agreement, and the payment terms and fees under each agreement are independent of each other. We also evaluated the deliverables in each of these agreements to determine whether they met the criteria to be accounted for as separate units of accounting or whether they should be combined with other deliverables and accounted for as a single unit of accounting. For all four of these agreements, we determined that the options did not have stand-alone value because Biogen Idec cannot pursue the development or commercialization of the drugs resulting from these collaborations until it exercises the respective option or options. As such, for each agreement we considered the deliverables to be a single unit of accounting and we are recognizing the upfront payment for each of the agreements over the respective research and development term, which is the estimated period of our performance.

	Our collaborations often include contractual milestones, which typically relate to the achievement of pre-specified development, regulatory and commercialization events. These three categories of milestone events reflect the three stages of the life-cycle of our drugs, which we describe in more detail in the following paragraph.

	Prior to the first stage in the life-cycle of our drugs, we perform a significant amount of work using our proprietary antisense technology to design chemical compounds that interact with specific genes that are good targets for drug discovery. From these research efforts, we hope to identify a development candidate. The designation of a development candidate is the first stage in the life-cycle of our drugs. A development candidate is a chemical compound that has demonstrated the necessary safety and efficacy in preclinical animal studies to warrant further study in humans. During the first step of the development stage, we or our partners study our drugs in IND-enabling studies, which are animal studies intended to support an Investigational New Drug, or IND, application and/or the foreign equivalent. An approved IND allows us or our partners to study our development candidate in humans. If the regulatory agency approves the IND, we or our partners initiate Phase 1 clinical trials in which we typically enroll a small number of healthy volunteers to ensure the development candidate is safe for use in patients. If we or our partners determine that a development candidate is safe based on the Phase 1 data, we or our partners initiate Phase 2 studies that are generally larger scale studies in patients with the primary intent of determining the efficacy of the development candidate. The final step in the development stage is Phase 3 studies to gather the necessary safety and efficacy data to request marketing approval from the Food and Drug Administration, or FDA, and/or foreign equivalents. The Phase 3 studies typically involve large numbers of patients and can take up to several years to complete. If the data gathered during the trials demonstrates acceptable safety and efficacy results, we or our partner will submit an application to the FDA and/or its foreign equivalents for marketing approval. This stage of the drug’s life-cycle is the regulatory stage. If a drug achieves marketing approval, it moves into the commercialization stage, during which our partner will market and sell the drug to patients. Although our partner will ultimately be responsible for marketing and selling the drug, our efforts to discover and develop a drug that is safe, effective and reliable contributes significantly to our partner’s ability to successfully sell the drug. The FDA and its foreign equivalents have the authority to impose significant restrictions on an approved drug through the product label and on advertising, promotional and distribution activities. Therefore, our efforts designing and executing the necessary animal and human studies are critical to obtaining claims in the product label from the regulatory agencies that would allow our partner to successfully commercialize our drug. Further, the patent protection afforded our drugs as a result of our initial patent applications and related prosecution activities in the United States and foreign jurisdictions are critical to our partner’s ability to sell our drugs without competition from generic drugs. The potential sales volume of an approved drug is dependent on several factors including the size of the patient population, market penetration of the drug, and the price charged for the drug.

	Generally, the milestone events contained in our partnership agreements coincide with the progression of our drugs from development, to regulatory approval and then to commercialization. The process of successfully discovering a new development candidate, having it approved and ultimately sold for a profit is highly uncertain. As such, the milestone payments we may earn from our partners involve a significant degree of risk to achieve. Therefore, as a drug progresses through the stages of its life-cycle, the value of the drug generally increases.

	Development milestones in our partnerships may include the following types of events:

· Designation of a development candidate. Following the designation of a development candidate, IND-enabling animal studies for a new development candidate generally take 12 to 18 months to complete;
· Initiation of a Phase 1 clinical trial. Generally, Phase 1 clinical trials take one to two years to complete;
· Initiation or completion of a Phase 2 clinical trial. Generally, Phase 2 clinical trials take one to three years to complete;
· Initiation or completion of a Phase 3 clinical trial. Generally, Phase 3 clinical trials take two to four years to complete.

Regulatory milestones in our partnerships may include the following types of events:

· Filing of regulatory applications for marketing approval such as a New Drug Application, or NDA, in the United States or a Marketing Authorization Application, or MAA, in Europe. Generally, it takes six to twelve months to prepare and submit regulatory filings.
· Marketing approval in a major market, such as the United States, Europe or Japan. Generally it takes one to two years after an application is submitted to obtain approval from the applicable regulatory agency.

Commercialization milestones in our partnerships may include the following types of events:

· First commercial sale in a particular market, such as in the United States or Europe.
· Product sales in excess of a pre-specified threshold, such as annual sales exceeding $1 billion. The amount of time to achieve this type of milestone depends on several factors including but not limited to the dollar amount of the threshold, the pricing of the product and the pace at which customers begin using the product.

We assess whether a substantive milestone exists at the inception of our agreements. When a substantive milestone is achieved, we recognize revenue related to the milestone payment. For our existing licensing and collaboration agreements in which we are involved in the discovery and/or development of the related drug or provide the partner with ongoing access to new technologies we discover, we have determined that all future development, regulatory and commercialization milestones are substantive. For example, for our strategic alliance with Biogen Idec, we are using our antisense drug discovery platform to seek out and develop new drugs against targets for neurological diseases. Alternatively, we provide on-going access to our technology to Alnylam Pharmaceuticals, Inc. to develop and commercialize RNA interference, or RNAi, therapeutics. We consider milestones for both of these collaborations to be substantive. In evaluating if a milestone is substantive we consider whether:

· Substantive uncertainty exists as to the achievement of the milestone event at the inception of the arrangement;
· The achievement of the milestone involves substantive effort and can only be achieved based in whole or part on our performance or the occurrence of a specific outcome resulting from our performance;
· The amount of the milestone payment appears reasonable either in relation to the effort expended or to the enhancement of the value of the delivered items;
· There is no future performance required to earn the milestone; and
· The consideration is reasonable relative to all deliverables and payment terms in the arrangement.

If any of these conditions are not met, we do not consider the milestone to be substantive and we defer recognition of the milestone payment and recognize it as revenue over the estimated period of performance, if any. We earned $60.5 million in milestone payments in the first nine months of 2013, including a $25 million milestone payment from Genzyme we recognized in the first quarter of 2013 when the FDA approved the KYNAMRO NDA. We consider milestone payments related to progression of a drug through the development and regulatory stages of its life cycle to be substantive milestones because the level of effort and inherent risk associated with these events is high. Therefore, we recognized the entire $60.5 million in milestone payments in the first nine months of 2013. Further information about our collaborative arrangements can be found in Note 8, Collaborative Arrangements and Licensing Agreements, below and Note 7, Collaborative Arrangements and Licensing Agreements, of our audited financial statements for the year ended December 31, 2012 included in our Annual Report on Form 10-K filed with the SEC.

Licensing and royalty revenue

We often enter into agreements to license our proprietary patent rights on an exclusive or non-exclusive basis in exchange for license fees and/or royalties. We generally recognize as revenue immediately those licensing fees and royalties for which we have no significant future performance obligations and are reasonably assured of collecting the resulting receivable.

Research, development and patent expense

We expense research and development costs as we incur them. We include wages, benefits, facilities, supplies, external services, clinical trial and manufacturing costs, and other expenses that are directly related to our research and development operations in research and development expense. For the three and nine months ended September 30, 2013, research and development expenses were $45.0 million and $122.8 million, respectively, compared to $35.6 million and $113.4 million for the same periods in 2012.

We capitalize costs consisting principally of outside legal costs and filing fees related to obtaining patents. We review our capitalized patent costs regularly to ensure that they include costs for patents and patent applications that have future value. We evaluate patents and patent applications that we are not actively pursuing and write off any associated costs. We amortize patent costs over their useful lives, beginning with the date the United States Patent and Trademark Office, or foreign equivalent, issues the patent. We include non-cash charges for amortization and write-downs of capitalized patent costs, as well as legal fees for patent litigation and patent defense in patent expense. For the three and nine months ended September 30, 2013, patent expenses were $695,000 and $3.8 million, respectively, compared to $988,000 and $2.3 million for the same periods in 2012. Patent expenses include non-cash charges related to the write-down of our patent costs to their estimated net realizable values of $166,000 and $441,000 for the three and nine months ended September 30, 2013, respectively, compared to $376,000 and $664,000 for the same periods in 2012.

Cash, cash equivalents and short-term investments

We consider all liquid investments with maturities of 90 days or less when we purchase them to be cash equivalents. Our short-term investments have initial maturities of greater than 90 days from date of purchase. We classify our short-term investments as “available-for-sale” and carry them at fair market value based upon prices for identical or similar items on the last day of the fiscal period. We record unrealized gains and losses as a separate component of comprehensive income (loss) and include net realized gains and losses in gain (loss) on investments. We use the specific identification method to determine the cost of securities sold.

We have equity investments in privately- and publicly-held biotechnology companies that we have received as part of a technology license or collaboration agreement. At September 30, 2013 we held ownership interests of less than 20 percent in each of the respective companies.

We account for our equity investments in publicly-held companies at fair value and record unrealized gains and losses related to temporary increases and decreases in the stock of these publicly-held companies as a separate component of comprehensive income (loss). We account for equity investments in privately-held companies under the cost method of accounting because we own less than 20 percent and do not have significant influence over their operations. The cost method investments we hold are in early stage biotechnology companies and realization of our equity position in those companies is uncertain. In those circumstances we record a full valuation allowance. In determining if and when a decrease in market value below our cost in our equity positions is temporary or other-than-temporary, we examine historical trends in the stock price, the financial condition of the company, near term prospects of the company and our current need for cash. If we determine that a decline in value in either a public or private investment is other-than-temporary, we recognize an impairment loss in the period in which the other-than-temporary decline occurs.

Inventory valuation

We capitalize the costs of raw materials that we purchase for use in producing our drugs because until we use these raw materials they have alternative future uses. We include in inventory raw material costs for drugs that we manufacture for our partners under contractual terms and that we use primarily in our clinical development activities and drug products. We can use each of our raw materials in multiple products and, as a result, each raw material has future economic value independent of the development status of any single drug. For example, if one of our drugs failed, we could use the raw materials for that drug to manufacture our other drugs. We expense these costs when we deliver the drugs to our partners, or as we provide these drugs for our own clinical trials. We reflect our inventory on the balance sheet at the lower of cost or market value under the first-in, first-out method. We review inventory periodically and reduce the carrying value of items we consider to be slow moving or obsolete to their estimated net realizable value. We consider several factors in estimating the net realizable value, including shelf life of raw materials, alternative uses for our drugs and clinical trial materials and historical write-offs. We did not record any inventory write-offs for the first nine months of 2013 and 2012. Total inventory, which consisted of raw materials, was $7.4 million and $6.1 million as of September 30, 2013 and December 31, 2012, respectively.

Long-lived assets

We evaluate long-lived assets, which include property, plant and equipment, patent costs, and exclusive licenses acquired from third parties, for impairment on at least a quarterly basis and whenever events or changes in circumstances indicate that we may not be able to recover the carrying amount of such assets.

Equity method of accounting

We accounted for our ownership interest in Regulus using the equity method of accounting until Regulus’ IPO in October 2012. In the fourth quarter of 2012, we began accounting for our investment at fair value because we now own less than 20 percent of Regulus’ common stock and we no longer have significant influence over the operating and financial policies of Regulus. Under the equity method of accounting, we included our share of Regulus’ operating results on a separate line in our condensed consolidated statement of operations called “Equity in net loss of Regulus Therapeutics Inc.”

Use of estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Basic and diluted net loss per share

We compute basic net loss per share by dividing the net loss by the weighted-average number of common shares outstanding during the period. As we incurred a net loss for the three and nine months ended September 30, 2013 and 2012, we did not include dilutive common equivalent shares in the computation of diluted net loss per share because the effect would have been anti-dilutive. The following would have had an anti-dilutive effect on net loss per share:

· 23/4 percent convertible senior notes;
· 25/8 percent convertible subordinated notes;
· GlaxoSmithKline convertible promissory notes issued by Regulus;
· Dilutive stock options; and
· Unvested restricted stock units.

We redeemed all of our 25/8 percent notes in September 2012 and in October 2012 Regulus completed an IPO, upon which we were no longer guarantors on the two convertible notes that Regulus issued to GSK. As a result, the 25/8 percent notes and GSK convertible promissory notes are not common equivalent shares for the three and nine months ended September 30, 2013.

Public Common Stock Offering

In June 2013, we completed the sale of 9,617,869 shares of our common stock through a public offering at a price of $19.00 per share, which included 617,869 additional shares sold pursuant to an option we granted to the underwriters. We received net proceeds of approximately $173.2 million from the sale of these shares net of underwriting discounts and commissions and other estimated offering expenses of $9.5 million.

Consolidation of variable interest entities

We identify entities as variable interest entities either: (1) that do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) in which the equity investors lack an essential characteristic of a controlling financial interest. We perform ongoing qualitative assessments of our variable interest entities to determine whether we have a controlling financial interest in the variable interest entity and therefore are the primary beneficiary. As of September 30, 2013 and December 31, 2012, we had collaborative arrangements with five and six entities, respectively, that we considered to be variable interest entities. We are not the primary beneficiary for any of these entities as we do not have both the power to direct the activities that most significantly impact the economic performance of our variable interest entities and the obligation to absorb losses or the right to receive benefits from our variable interest entities that could potentially be significant to the variable interest entities. As of September 30, 2013, the total carrying value of our investments in variable interest entities was $66.8 million, and was primarily related to our investment in Regulus. Our maximum exposure to loss related to these variable interest entities is limited to the carrying value of our investments.

Accumulated other comprehensive income

Accumulated other comprehensive income is comprised of unrealized gains and losses on securities, net of taxes, and adjustments we made to reclassify realized gains and losses on securities from other accumulated comprehensive income to our condensed consolidated statement of operations. The following table summarizes changes in accumulated other comprehensive income for the three and nine months ended September 30, 2013 and 2012 (in thousands):

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2013			2012			2013			2012

Beginning balance accumulated other comprehensive income (loss)		$	26,986		$	968		$	12,480		$	(770	)
Other comprehensive income (loss) before reclassifications, net of tax (1)		2,207			(122		)	17,876			1,616
Amounts reclassified from accumulated other comprehensive income (2)		(172		)	—			(1,335		)	—
Net current period other comprehensive income (loss)		2,035			(122		)	16,541			1,616
Ending balance accumulated other comprehensive income		$	29,021		$	846		$	29,021		$	846


(1) Other comprehensive income includes income tax expense of $1.4 million and $11.4 million, respectively, for the three and nine months ended September 30, 2013 and $1.1 million for the three and nine months ended September 30, 2012.

(2) Included in gain on investments, net on our condensed consolidated statement of operations.

Convertible debt

In August 2012, we completed a $201.3 million offering of convertible senior notes, which mature in 2019 and bear interest at 2¾ percent. In September 2012, we used a substantial portion of the net proceeds from the issuance of the 2¾ percent notes to redeem our 25¤8 percent convertible subordinated notes. Consistent with how we accounted for our 25¤8 percent notes, we account for our 2¾ percent notes by separating the liability and equity components of the instrument in a manner that reflects our nonconvertible debt borrowing rate. As a result, we assigned a value to the debt component of our 2¾ percent notes equal to the estimated fair value of similar debt instruments without the conversion feature, which resulted in us recording the debt instrument at a discount. We are amortizing the debt discount over the life of these 2¾ percent notes as additional non-cash interest expense utilizing the effective interest method.

Segment information

We operate in a single segment, Drug Discovery and Development operations, because our chief decision maker reviews operating results on an aggregate basis and manages our operations as a single operating segment.

Stock-based compensation expense

We measure stock-based compensation expense for equity-classified awards, principally related to stock options, restricted stock units, or RSUs, and stock purchase rights under our Employee Stock Purchase Plan, or ESPP, based on the estimated fair value of the award on the date of grant using an option-pricing model. We recognize the value of the portion of the award that we ultimately expect to vest as stock-based compensation expense over the requisite service period in our condensed consolidated statements of operations. We reduce stock-based compensation expense for estimated forfeitures at the time of grant and revise in subsequent periods if actual forfeitures differ from those estimates.

We use the Black-Scholes model to estimate the fair value of stock options granted and stock purchase rights under the ESPP. The expected term of stock options granted represents the period of time that we expect them to be outstanding. We estimate the expected term of options granted based on historical exercise patterns. For the nine months ended September 30, 2013 and 2012, we used the following weighted-average assumptions in our Black-Scholes calculations:

Employee Stock Options:

		Nine Months Ended
		September 30,
		2013		2012
Risk-free interest rate		1	%	1	%
Dividend yield		0	%	0	%
Volatility		51.4	%	50.7	%
Expected life		5.1 years		5.1 years

ESPP:

		Nine Months Ended
		September 30,
		2013		2012
Risk-free interest rate		0.1	%	0.2	%
Dividend yield		0	%	0	%
Volatility		62.9	%	49.6	%
Expected life		6 months		6 months

Board of Director Stock Options:

		Nine Months Ended
		September 30,
		2013		2012
Risk-free interest rate		2.2	%	1.3	%
Dividend yield		0	%	0	%
Volatility		52.7	%	51.3	%
Expected life		7.2 years		7.6 years

The fair value of RSUs is based on the market price of our common stock on the date of grant. RSUs vest annually over a four year period. The weighted-average grant date fair value of RSUs granted to employees and the Board of Directors for the nine months ended September 30, 2013 was $15.29 and $27.95, respectively. The weighted-average grant date fair value of RSUs granted to employees and the Board of Directors for the nine months ended September 30, 2012 was $7.97 and $12.94, respectively.

The following table summarizes stock-based compensation expense for the three and nine months ended September 30, 2013 and 2012 (in thousands), which was allocated as follows:

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2013			2012			2013			2012

Research and development		$	2,373		$	1,720		$	7,171		$	5,728
General and administrative		439			314			1,147			1,033
Total		$	2,812		$	2,034		$	8,318		$	6,761

As of September 30, 2013, total unrecognized estimated non-cash stock-based compensation expense related to non-vested stock options and RSUs was $10.1 million and $3.3 million, respectively. We will adjust total unrecognized compensation cost for future changes in estimated forfeitures. We expect to recognize the cost of non-cash, stock-based compensation expense related to non-vested stock options and RSUs over a weighted average amortization period of 1.2 years and 1.7 years, respectively.

Impact of recently issued accounting standards

In February 2013, the FASB issued guidance requiring enhanced disclosures related to reclassifications out of accumulated other comprehensive income (loss). Under the guidance, we must disclose the amounts we reclassified out of accumulated other comprehensive income (loss) by component. In addition, for significant amounts that we reclassified entirely from other comprehensive income (loss) to net loss, we must disclose the line item of net loss, either on the face of the statement of operations or in the notes to the financial statements. For amounts that we did not reclassify entirely to net loss, we must cross-reference to other disclosures that provide additional detail about those amounts. The guidance is effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2012 and was effective for our fiscal year beginning January 1, 2013. As this guidance relates to disclosure only, the adoption of this guidance did not have any effect on our financial statements.

Investments

Investments	9 Months Ended
	Sep. 30, 2013
Investments	'
Investments	'
	3. Investments

	As of September 30, 2013, we have primarily invested our excess cash in debt instruments of the U.S. Treasury, financial institutions, corporations, and U.S. government agencies with strong credit ratings and an investment grade rating at or above A-1, P-1 or F-1 by Moody’s, Standard & Poor’s (S&P) or Fitch, respectively. We have established guidelines relative to diversification and maturities that maintain safety and liquidity. We periodically review and modify these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity.

	The following table summarizes the contract maturity of the available-for-sale securities we held as of September 30, 2013:

	One year or less		39	%
	After one year but within two years		42	%
	After two years but within three years		19	%
	Total		100	%

	As illustrated above, we primarily invest our excess cash in short-term instruments with 81 percent of our available-for-sale securities having a maturity of less than two years.

	At September 30, 2013, we had an ownership interest of less than 20 percent in each of three private companies and three public companies with which we conduct business. The privately-held companies are Santaris Pharma A/S (formerly Pantheco A/S), Achaogen Inc., and Atlantic Pharmaceuticals Limited. The publicly-traded companies are Antisense Therapeutics Limited, iCo Therapeutics Inc., and Regulus. We account for equity investments in the privately-held companies under the cost method of accounting and we account for equity investments in the publicly-traded companies at fair value. We record unrealized gains and losses as a separate component of comprehensive income (loss) and include net realized gains and losses in gain (loss) on investments. In the first quarter of 2013, we sold all of the common stock of Sarepta Therapeutics, Inc. that we owned resulting in a realized gain of $1.1 million.

	The following is a summary of our investments (in thousands):

												Other-Than-
												Temporary
			Amortized			Unrealized						Impairment			Estimated
	September 30, 2013		Cost			Gains			Losses			Loss			Fair Value
	Available-for-sale securities:
	Corporate debt securities (1)		$	119,472		$	65		$	(44	)	$	—		$	119,493
	Debt securities issued by U.S. government agencies (1)		19,341			11			(27		)	—			19,325
	Debt securities issued by the U.S. Treasury		7,257			10			—			—			7,267
	Debt securities issued by states of the United States and political subdivisions of the states		16,110			19			(16		)	—			16,113
	Total securities with a maturity of one year or less		162,180			105			(87		)	—			162,198
	Corporate debt securities		220,494			87			(507		)	—			220,074
	Debt securities issued by U.S. government agencies		17,479			22			(6		)	—			17,495
	Debt securities issued by the U.S. Treasury		9,075			22			—			—			9,097
	Debt securities issued by states of the United States and political subdivisions of the states		7,202			25			(1		)	—			7,226
	Total securities with a maturity of more than one year		254,250			156			(514		)	—			253,892
	Total		$	416,430		$	261		$	(601	)	$	—		$	416,090

												Other-Than-
												Temporary
			Cost			Unrealized						Impairment			Estimated
	September 30, 2013		Basis			Gains			Losses			Loss			Fair Value
	Equity securities:
	Regulus Therapeutics Inc.		$	15,526		$	49,478		$	—		$	—		$	65,004
	Securities included in other current assets		1,538			1,174			—			(880		)	1,832
	Securities included in deposits and other assets		625			—			—			—			625
	Total		$	17,689		$	50,652		$	—		$	(880	)	$	67,461

												Other-Than-
												Temporary
			Amortized			Unrealized						Impairment			Estimated
	December 31, 2012		Cost			Gains			Losses			Loss			Fair Value
	Available-for-sale securities:
	Corporate debt securities (1)		$	115,249		$	81		$	(9	)	$	—		$	115,321
	Debt securities issued by U.S. government agencies (1)		12,100			2			(66		)	—			12,036
	Debt securities issued by the U.S. Treasury		1,000			1			—			—			1,001
	Debt securities issued by states of the United States and political subdivisions of the states		16,560			18			(2		)	—			16,576
	Total securities with a maturity of one year or less		144,909			102			(77		)	—			144,934
	Corporate debt securities		80,166			112			(92		)	—			80,186
	Debt securities issued by U.S. government agencies		8,034			38			—			—			8,072
	Debt securities issued by the U.S. Treasury		12,424			27			—			—			12,451
	Debt securities issued by states of the United States and political subdivisions of the states		8,306			31			(16		)	—			8,321
	Total securities with a maturity of more than one year		108,930			208			(108		)	—			109,030
	Total		$	253,839		$	310		$	(185	)	$	—		$	253,964

												Other-Than-
												Temporary
		Cost			Unrealized						Impairment			Estimated
December 31, 2012		Basis			Gains			Losses			Loss			Fair Value
Equity securities:
Regulus Therapeutics Inc.		$	15,526		$	18,096		$	—		$	—		$	33,622
Securities included in other current assets		1,579			4,175			—			(880		)	4,874
Securities included in deposits and other assets		625			—			—			—			625
Total		$	17,730		$	22,271		$	—		$	(880	)	$	39,121


(1) Includes investments classified as cash equivalents on our condensed consolidated balance sheet.

We believe that the decline in value of certain of our securities is temporary and primarily related to the change in market interest rates since purchase. We believe it is more likely than not that we will be able to hold these securities to maturity. Therefore, we anticipate full recovery of their amortized cost basis at maturity.

Investments we considered to be temporarily impaired at September 30, 2013 were as follows (in thousands):

				Less than 12 months of
				temporary impairment
		Number of		Estimated			Unrealized
		Investments		Fair Value			Losses
Corporate debt securities		137		$	218,610		$	(551	)
Debt securities issued by U.S. government agencies		4		19,976			(33		)
Debt securities issued by states of the United States and political subdivisions of the states		4		5,104			(17		)
Total temporarily impaired securities		145		$	243,690		$	(601	)

Fair_Value_Measurements

Fair Value Measurements	9 Months Ended
	Sep. 30, 2013
Fair Value Measurements	'
Fair Value Measurements	'
	4. Fair Value Measurements

	We use a three-tier fair value hierarchy to prioritize the inputs used in our fair value measurements. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets, which includes our money market funds and treasury securities classified as available-for-sale securities and an investment in equity securities in a publicly-held biotechnology company; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, which includes our fixed income securities and commercial paper classified as available-for-sale securities; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Our Level 3 investments include investments in the equity securities of publicly-held biotechnology companies for which we calculated a lack of marketability discount because there are restrictions on when we can trade the securities. The majority of our securities have been classified as Level 2. We obtain the fair value of our Level 2 investments from our custodian banks or from a professional pricing service. We validate the fair value of our Level 2 investments by understanding the pricing model used by the custodian bank or professional pricing service provider and comparing that fair value to the fair value based on observable market prices. During the three and nine months ended September 30, 2013 and 2012 there were no transfers between our Level 1 and Level 2 investments. We use the end of reporting period method for determining transfers between levels.

	We measure the following major security types at fair value on a recurring basis. We break down the inputs used to measure fair value for these assets at September 30, 2013 and December 31, 2012 as follows (in thousands):

		At September 30,			Quoted Prices in		Significant Other		Significant
		2013			Active Markets		Observable		Unobservable
					(Level 1)		Inputs		Inputs
							(Level 2)		(Level 3)
	Cash equivalents (1)	$	241,007		$	239,407	$	1,600	$	—
	Corporate debt securities (2)	337,967			—		337,967		—
	Debt securities issued by U.S. government agencies (2)	36,820			—		36,820		—
	Debt securities issued by the U.S. Treasury (2)	16,364			16,364		—		—
	Debt securities issued by states of the United States and political subdivisions of the states (2)	23,339			—		23,339		—
	Investment in Regulus Therapeutics Inc.	65,004			—		—		65,004
	Equity securities (3)	1,832			1,832		—		—
	Total	$	722,333		$	257,603	$	399,726	$	65,004

		At December 31,			Quoted Prices in		Significant Other		Significant
		2012			Active Markets		Observable		Unobservable
					(Level 1)		Inputs		Inputs
							(Level 2)		(Level 3)
	Cash equivalents (1)	$	105,496		$	101,496	$	4,000	$	—
	Corporate debt securities (2)	193,507			—		193,507		—
	Debt securities issued by U.S. government agencies (2)	18,108			—		18,108		—
	Debt securities issued by the U.S. Treasury (2)	13,452			13,452		—		—
	Debt securities issued by states of the United States and political subdivisions of the states (2)	24,897			—		24,897		—
	Investment in Regulus Therapeutics Inc.	33,622			—		—		33,622
	Equity securities (3)	4,874			4,146		—		728
	Total	$	393,956		$	119,094	$	240,512	$	34,350


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

	(2) Included in short-term investments on our condensed consolidated balance sheet.

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

	We classified the fair value measurements of our investments in the equity securities of Regulus and Sarepta Therapeutics, Inc., or Sarepta, as Level 3. We calculated a lack of marketability discount on the fair value of these investments because of trading restrictions on the securities. We consider the inputs we used to calculate the lack of marketability discount Level 3 inputs and, as a result, we categorized these investments as Level 3. We determined the lack of marketability discount by using a Black-Scholes model to value a hypothetical put option to approximate the cost of hedging the stock until the restriction ends. In the first quarter of 2013, we sold all of the common stock of Sarepta that we owned resulting in a realized gain of $1.1 million. As of September 30, 2013, our Level 3 investments consisted of our investment in Regulus, with a gross fair value of $66.5 million less a lack of marketability discount of $1.5 million for a net carrying value of $65.0 million. As of December 31, 2012, our Level 3 investments consisted of our investment in Regulus and Sarepta with a gross fair value of $44.4 million and $1.0 million, respectively, less a lack of marketability discount of $10.8 million and $296,000, respectively, for a net carrying value of $33.6 million and $728,000, respectively.

	The following is a summary of our investments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2013 and 2012 (in thousands):

		Nine Months Ended
		September 30,
		2013			2012

	Beginning balance of Level 3 investments	$	34,350		$	—
	Purchases	—			40
	Total gains and losses:
	Included in gain on investments	(1,163		)	—
	Included in accumulated other comprehensive income	33,329			337
	Cost basis of shares sold	(40		)	—
	Ending balance of Level 3 investments	$	66,476		$	377

	Other Fair Value Disclosures

	Our 2¾ percent convertible senior notes had a fair value of $480.6 million at September 30, 2013. We determine the fair value of our 2¾ percent convertible senior notes based on quoted market prices for these notes, which is a Level 2 measurement.

LongTerm_Obligations

Long-Term Obligations	9 Months Ended
Long-Term Obligations	Sep. 30, 2013
Long-Term Obligations	'
Long-Term Obligations	'
	5. Long-Term Obligations

	Equipment Financing Arrangement

	In October 2008, we entered into an equipment financing loan agreement and in September 2009 and June 2012, we amended the loan agreement to increase the aggregate maximum amount of principal we could draw under the agreement. Each draw down under the loan agreement has a term of three years, with principal and interest payable monthly. Interest on amounts we borrow under the loan agreement is based upon the three year interest rate swap at the time we make each draw down plus 3.5 or four percent, depending on the date of the draw. We are using the equipment purchased under the loan agreement as collateral. In June 2012, we drew down $9.1 million in principal under the loan agreement at an interest rate of 4.12 percent and in June 2013 we drew down $2.5 million in principal at an interest rate of 4.38 percent. As of September 30, 2013, our outstanding borrowings under this loan agreement were at a weighted average interest rate of 4.34 percent and we can borrow up to an additional $3.4 million in principal to finance the purchase of equipment until April 2014. The carrying balance under this loan agreement at September 30, 2013 and December 31, 2012 was $8.7 million and $10.0 million, respectively. We will continue to use equipment lease financing as long as the terms remain commercially attractive.

Concentration_of_Business_Risk

Concentration of Business Risk	9 Months Ended
Concentration of Business Risk	Sep. 30, 2013
Concentration of Business Risk	'
Concentration of Business Risk	'
	6. Concentration of Business Risk

	We have historically funded our operations from collaborations with corporate partners and a relatively small number of partners have accounted for a significant percentage of our revenue. Revenue from significant partners, which is defined as ten percent or more of our total revenue, was as follows:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2013		2012		2013		2012
	Partner A	48	%	18	%	22	%	7	%
	Partner B	18	%	0	%	21	%	0	%
	Partner C	25	%	21	%	16	%	7	%
	Partner D	0	%	41	%	31	%	78	%

	Contract receivables from two significant partners comprised approximately 93 percent of our contract receivables at September 30, 2013. Contract receivables from four significant partners comprised approximately 83 percent of our contract receivables at December 31, 2012.

Income_Taxes

Income Taxes	9 Months Ended
Income Taxes	Sep. 30, 2013
Income Taxes	'
Income Taxes	'
	7. Income Taxes

	Intraperiod tax allocation rules require us to allocate our provision for income taxes between continuing operations and other categories of earnings, such as other comprehensive income. In periods in which we have a year-to-date pre-tax loss from continuing operations and pre-tax income in other categories of earnings, such as other comprehensive income, we must allocate the tax provision to the other categories of earnings. We then record a related tax benefit in continuing operations. During the first nine months of 2013, we recorded unrealized gains on our investments in available-for-sale securities in other comprehensive income net of taxes. As a result, we recorded a $6.4 million tax benefit on our condensed consolidated statements of operations and an $11.4 million tax expense in other comprehensive income for the nine months ended September 30, 2013.

Collaborative_Arrangements_and

Collaborative Arrangements and Licensing Agreements	9 Months Ended
Collaborative Arrangements and Licensing Agreements	Sep. 30, 2013
Collaborative Arrangements and Licensing Agreements	'
Collaborative Arrangements and Licensing Agreements	'
	8. Collaborative Arrangements and Licensing Agreements

	Traditional Pharmaceutical Alliances and Licensing

	AstraZeneca

	In December 2012, we entered into a global collaboration agreement with AstraZeneca to discover and develop antisense drugs against five cancer targets. The agreement includes $31 million in upfront and near-term payments comprised of a $25 million upfront payment we received in December 2012 and a $6 million payment we received in June 2013 when AstraZeneca elected to continue the research collaboration. We are also eligible to receive milestone payments, license fees and double-digit royalties on any product sales of drugs resulting from this collaboration. As part of the agreement, we granted AstraZeneca an exclusive license to develop and commercialize ISIS-STAT3Rx and ISIS-ARRx, which we previously referred to as ISIS-AZ1Rx, for the treatment of cancer and an option to license up to three cancer drugs under a separate research program.

	Together with AstraZeneca, we are evaluating ISIS-STAT3Rx in patients with advanced cancer. AstraZeneca is conducting a Phase 1b/2a clinical study of ISIS-STAT3Rx in patients with advanced metastatic hepatocellular carcinoma, or HCC. We are concurrently completing a clinical study evaluating ISIS-STAT3Rx in patients with advanced lymphomas, including patients with diffuse large b-cell lymphoma. We are responsible for completing our clinical study in patients with advanced lymphomas and AstraZeneca is responsible for all other development activities for ISIS-STAT3Rx. In June 2013, we earned a $10 million milestone payment when AstraZeneca added a second development candidate, ISIS-ARRx, to our collaboration. ISIS-ARRx is an antisense drug designed to treat patients with prostate cancer by inhibiting the production of the androgen receptor, or AR. If AstraZeneca successfully develops drugs under all three cancer programs, we could receive substantive milestone payments of more than $970 million, including up to $315.5 million for the achievement of development milestones and up to $655 million for the achievement of regulatory milestones. We could earn the next milestone payment of up to $50 million if we meet pre-agreed efficacy and safety criteria in our ongoing ISIS-STAT3Rx study in patients with advanced cancer.

	In August 2013, we added another collaboration program with AstraZeneca to discover and develop an antisense drug against an undisclosed target. AstraZeneca has the option to license a drug resulting from this research collaboration, and if AstraZeneca exercises its option, it will be responsible for all further development and commercialization of the drug. We received a $750,000 upfront payment and are eligible to receive license fees and substantive milestone payments of nearly $153.2 million, including up to $35.2 million for the achievement of development milestones and up to $105 million for regulatory milestones. We will earn the next $3.2 million milestone payment if a development candidate is identified under this collaboration. In addition, we are eligible to receive up to double-digit royalties on sales from any product that AstraZeneca successfully commercializes under this collaboration.

	During the three and nine months ended September 30, 2013, we earned revenue of $4.2 million and $22.0 million, respectively, from our relationship with AstraZeneca, which represented 18 percent and 21 percent, respectively, of our total revenue for those periods. Our balance sheets at September 30, 2013 and December 31, 2012 included deferred revenue of $14.3 million and $15.7 million, respectively, related to our relationship with AstraZeneca.

	Biogen Idec

	We have established four strategic collaborations with Biogen Idec that broaden and expand our severe and rare disease franchise. In January 2012, we entered into a global collaboration agreement with Biogen Idec to develop and commercialize ISIS-SMNRx for the treatment of SMA. Biogen Idec has the option to license ISIS-SMNRx until completion of the first successful Phase 2/3 study or the completion of two Phase 2/3 studies. If Biogen Idec exercises its option, it will pay us a license fee and will assume global development, regulatory and commercialization responsibilities. In April 2013, we initiated a Phase 2 study of ISIS-SMNRx in infants with SMA, which began the Phase 2/3 program for ISIS-SMNRx. Under the terms of the agreement, we received an upfront payment of $29 million and over the term of the collaboration are eligible to receive up to $270 million in a license fee and substantive milestone payments. We are eligible to receive $45 million in milestone payments associated with the clinical development of ISIS-SMNRx prior to licensing, of which we have earned $5.5 million in milestone payments for advancing the Phase 2 study of ISIS-SMNRx in infants with SMA.

	To date, we have earned two of the four payments under the March 2013 amendment to the payment terms for the $18 million milestone payment we could earn for the progression of this Phase 2/3 study in infants. We will earn a $1.5 million milestone payment, the third of four payments, if we dose the eighth patient in a Phase 3 study of ISIS-SMNRx in infants. We are also eligible to receive up to $150 million in milestone payments if Biogen Idec achieves pre-specified regulatory milestones. In addition, we are eligible to receive up to double-digit royalties on any product sales of ISIS-SMNRx.

	In June 2012, we and Biogen Idec entered into a second and separate collaboration and license agreement to develop and commercialize a novel antisense drug targeting DMPK for the treatment of myotonic dystrophy type 1, or DM1. We are responsible for global development of the drug through the completion of a Phase 2 clinical trial. Biogen Idec has the option to license the drug through the completion of the Phase 2 trial. Under the terms of the agreement, we received an upfront payment of $12 million and over the term of the collaboration are eligible to receive up to $259 million in a license fee and substantive milestone payments. In October 2013, we earned a $10 million milestone payment when we initiated an IND-enabling toxicology study on a drug targeting DMPK, ISIS-DMPKRx, and we are eligible to receive up to another $49 million in milestone payments associated with the development of ISIS-DMPKRx prior to licensing. We are also eligible to receive up to $130 million in milestone payments if Biogen Idec achieves pre-specified regulatory milestones. In addition, we are eligible to receive up to double-digit royalties on any product sales of the drug. We will earn the next milestone payment of $14 million if we initiate a Phase 1 study for ISIS-DMPKRx.

	In December 2012, we and Biogen Idec entered into a third and separate collaboration to develop and commercialize novel antisense drugs to three targets to treat neurological or neuromuscular diseases. We are responsible for the development of the drugs through the completion of the initial Phase 2 clinical study. Biogen Idec has the option to license a drug from each of the three programs through the completion of Phase 2 studies. Under the terms of the agreement, we received an upfront payment of $30 million and over the term of the collaboration are eligible to receive up to $259 million in a license fee and substantive milestone payments per program. We could receive up to $59 million in development milestone payments to support research and development of each program, including amounts related to the cost of clinical trials, and up to $130 million in milestone payments if Biogen Idec achieves pre-specified regulatory milestones. In addition, we are eligible to receive double-digit royalties on any product sales of drugs resulting from each of the three programs. We will earn the next milestone payment of $10 million if we initiate an IND-enabling toxicology study for a development candidate identified under this collaboration.

	In September 2013, we and Biogen Idec entered into a fourth and separate collaboration, which is a long-term strategic relationship focused on applying antisense technology to advance the treatment of neurological diseases. As part of the collaboration, Biogen Idec will gain exclusive rights to the use of our antisense technology to develop therapies for neurological diseases and has the option to license drugs resulting from this collaboration. The exclusivity for neurological diseases will last six years, and may be extended for the specific drug development programs being pursued under the collaboration. Under the terms of the agreement, we received an upfront payment of $100 million and are eligible to receive milestone payments, license fees and royalty payments for all drugs developed through this collaboration, with the specific amounts dependent upon the modality of the molecule advanced by Biogen Idec. If we have a change of control during the first six years of the collaboration, we may be required to refund Biogen Idec a portion of the $100 million upfront payment, with the amount of the potential refund decreasing ratably as we progress through the initial six year term of the collaboration. We recorded the $100 million upfront payment as deferred revenue and will begin amortizing it over our period of performance in October 2013. Because the amortization period for the upfront payment will never be less than the initial six year term of the collaboration, the amount of revenue we recognize from the upfront payment will never exceed the amount that Biogen Idec could potentially require us to refund.

	If an antisense molecule is chosen for drug discovery and development of a neurological disease, we are eligible to receive up to approximately $260 million in a license fee and substantive milestone payments for each antisense drug developed under the collaboration. We are eligible to receive up to approximately $60 million for the achievement of development milestones, including amounts related to the cost of clinical trials, and up to $130 million for the achievement of regulatory milestones. We will usually be responsible for drug discovery and early development of antisense drugs and Biogen Idec will have the option to license antisense drugs after Phase 2 proof of concept. Biogen Idec will then be responsible for later phase development and commercialization of the licensed drug. In addition, we are eligible to receive double-digit royalties on any product sales of antisense drugs developed under this collaboration. If other modalities, such as small molecules or monoclonal antibodies are chosen, we have the opportunity to receive up to $90 million in substantive milestone payments, including up to $35 million for the achievement of development milestones and up to $55 million for the achievement of regulatory milestones. Biogen Idec will be responsible for all of the drug discovery and development activities for drugs using other modalities. In addition, we are eligible to receive single-digit royalties on any product sales of any drugs using other modalities developed under this collaboration. We could earn the next milestone payment of up to $10 million if we choose a target to advance under this collaboration.

	During the three and nine months ended September 30, 2013, we earned revenue of $5.9 million and $17.1 million, respectively, from our relationships with Biogen Idec, which represented 25 percent and 16 percent, respectively, of our total revenue for those periods. In comparison, we earned revenue of $2.4 million and $6.0 million for the same periods in 2012. Our balance sheets at September 30, 2013 and December 31, 2012 included deferred revenue of $152.5 million and $62.6 million, respectively, related to the upfront payments.

	Genzyme Corporation, a Sanofi company

	In January 2008, we entered into a strategic alliance with Genzyme focused on the licensing and co-development of KYNAMRO. The license and co-development agreement provides Genzyme with exclusive worldwide rights for all therapeutic purposes to our patents and know-how related to KYNAMRO, including the key product related patents and their foreign equivalents pending or granted in various countries outside the United States, including in the European Union via the European Patent Convention, Japan, Canada, Australia, South Africa and India. In addition, we agreed that we would not develop or commercialize another oligonucleotide-based compound designed to modulate apo-B by binding to the messenger RNA, or mRNA, encoding apo-B, throughout the world.

	The transaction included a $175 million licensing fee, a $150 million equity investment in our stock in which we issued Genzyme five million shares of our common stock, and a share of worldwide profits on KYNAMRO and follow-on drugs ranging from 30 percent to 50 percent of all commercial sales. In January 2013 we earned a $25 million milestone payment when the FDA approved the NDA for KYNAMRO. We may also receive over $1.5 billion in substantive milestone payments if Genzyme achieves pre-specified events, including up to $700 million for the achievement of regulatory milestones and up to $825 million for the achievement of commercialization milestones. The next milestone payment we could earn under our agreement with Genzyme is $25 million upon the earlier of an NDA approval for the use of KYNAMRO to treat patients who have heterozygous FH or annual net revenue equal to or greater than $250 million in a calendar year.

	Under this alliance, Genzyme is responsible for the continued development and commercialization of KYNAMRO. We agreed to supply the drug substance for KYNAMRO for the Phase 3 clinical trials and initial commercial launch. Genzyme is responsible for manufacturing the finished drug product for KYNAMRO, including the initial commercial launch supply, and Genzyme will be responsible for the long term supply of KYNAMRO drug substance and finished drug product. As part of the agreement, we contributed the first $125 million in funding for the development costs of KYNAMRO. In 2011, we satisfied our development funding obligation. As such, we and Genzyme are sharing development expenses equally until KYNAMRO is profitable.

	The license and co-development agreement for KYNAMRO will continue in perpetuity unless we or Genzyme terminate it earlier under the following situations:

	· Genzyme may terminate the license and co-development agreement at any time by providing written notice to Isis;
	· We may terminate the license and co-development agreement on a country-by-country basis or in its entirety upon Genzyme’s uncured failure to use commercially reasonable efforts to develop and commercialize KYNAMRO in the United States, France, Germany, Italy, Spain, the United Kingdom, Japan and Canada; and
	· Either we or Genzyme may terminate the license and co-development agreement upon the other party’s uncured failure to perform a material obligation under the agreement.

	Upon termination of the license and co-development agreement, the license we granted to Genzyme for KYNAMRO will terminate and Genzyme will stop selling the product. In addition, if Genzyme voluntarily terminates the agreement or we terminate the agreement in a country or countries for Genzyme’s failure to develop and commercialize KYNAMRO, then the rights to KYNAMRO will revert back to us and we may develop and commercialize KYNAMRO in the countries that are the subject of the termination, subject to a royalty payable to Genzyme.

	If we are the subject of an acquisition, then within 180 days following the acquisition, Genzyme may elect to purchase all of our rights to receive payments under the KYNAMRO license and co-development agreement for a purchase price to be mutually agreed to by us and Genzyme, or, if we cannot agree, a fair market value price determined by an independent investment banking firm.

	Genzyme has agreed to monthly limits on the number of shares it can sell of the Company’s stock that it purchased in February 2008. In addition, Genzyme has agreed that until the earlier of the 10 year anniversary of the KYNAMRO license and co-development agreement or the date Genzyme holds less than two percent of our issued and outstanding common stock, Genzyme will not acquire any additional shares of our common stock without our consent.

	The price Genzyme paid for our common stock represented a significant premium over the then fair value of our common stock. In May 2012, we finished amortizing this $100 million premium along with the $175 million licensing fee that we received in the second quarter of 2008. During the nine months ended September 30, 2013, we earned revenue of $32.5 million from our relationship with Genzyme, which represented 31 percent of our total revenue for this period. In comparison, we earned revenue of $4.7 million and $63.9 million for the same periods in 2012. Our balance sheet at December 31, 2012 included deferred revenue of $3.8 million for KYNAMRO drug substance that we shipped to Genzyme in 2013.

	GlaxoSmithKline

	In March 2010, we entered into a strategic alliance with GSK, for up to six programs, in which we use our antisense drug discovery platform to seek out and develop new drugs against targets for rare and serious diseases, including infectious diseases and some conditions causing blindness. This alliance allows us to control and facilitate rapid development of drugs while still being eligible to receive milestone payments as we advance these drugs in clinical development.

	In October 2012, we and GSK amended the original agreement to reflect an accelerated clinical development plan for ISIS-TTRRx. Under the amended terms of the agreement, we received a $2.5 million upfront payment in December 2012, and we received a $7.5 million milestone payment in February 2013 when we initiated the Phase 2/3 clinical study for ISIS-TTRRx. Most recently, we earned a $2 million milestone payment in July 2013 for advancing the ongoing Phase 2/3 study of ISIS-TTRRx. We have earned $19.5 million in milestone payments from GSK related to the development of ISIS-TTRRx and we are eligible to earn an additional $48 million in pre-licensing milestone payments associated with the ISIS-TTRRx Phase 2/3 study. In addition, GSK has increased the regulatory and commercial milestone payments we can earn should ISIS-TTRRx receive marketing approval and meet certain sales thresholds.

	Our strategic alliance currently includes five active programs including the ISIS-TTRRx program. We are eligible to receive on average up to $20 million in milestone payments up to Phase 2 proof-of-concept for each program, except the ISIS-TTRRx program, which we describe above. GSK has the option to license drugs from these programs at Phase 2 proof-of-concept, and if GSK exercises its option to a program it will be responsible for all further development and commercialization of the program. In September 2013, we designated ISIS-GSK3Rx as an additional development candidate to our collaboration with GSK. ISIS-GSK3Rx is an antisense drug designed to inhibit the production of an undisclosed target to treat a common viral infection. In September 2013, we earned $7 million in milestone payments associated with advancing the ISIS-GSK3Rx program. Under the terms of the amended agreement, if GSK successfully develops all five programs for one or more indications and achieves pre-agreed sales targets, we could receive license fees and substantive milestone payments of nearly $1.2 billion, including up to $195.5 million for the achievement of development milestones, up to $526.5 million for the achievement of regulatory milestones and up to $445 million for the achievement of commercialization milestones. We will earn the next $2 milestone payment if we further progress the Phase 2/3 clinical study for ISIS-TTRRx. In addition, we are eligible to receive up to double-digit royalties on sales from any product that GSK successfully commercializes under this alliance.

	During the three and nine months ended September 30, 2013, we earned revenue of $11.3 million and $23.5 million, respectively, from our relationship with GSK, which represented 48 percent and 22 percent, respectively, of our total revenue for those periods. In comparison, we earned revenue of $2.1 million and $6.0 million for the same periods in 2012. Our balance sheets at September 30, 2013 and December 31, 2012 included deferred revenue of $13.2 million and $19.9 million, respectively, related to our relationship with GSK.

	Roche

In April 2013, we formed an alliance with Hoffman-La Roche Inc. and F. Hoffmann-La Roche Ltd., collectively Roche, to develop treatments for Huntington’s disease, or HD, based on our antisense technology. Roche has the option to license the drugs from us through the completion of the first Phase 1 trial. Prior to option exercise, we are responsible for the discovery and development of an antisense drug targeting huntingtin, or HTT, protein. We will also work collaboratively with Roche on the discovery of an antisense drug utilizing Roche’s “brain shuttle” program. If Roche exercises its option, it will be responsible for global development, regulatory and commercialization activities for all drugs arising out of the collaboration. Under the terms of the agreement, we received an upfront payment of $30.0 million in April 2013 and we are eligible to receive up to $362.0 million in a license fee and substantive milestone payments including up to $67.0 million for the achievement of development milestones, up to $170.0 million for the achievement of regulatory milestones and up to $80.0 million for the achievement of commercialization milestones. In addition, we are eligible to receive up to $136.5 million in milestone payments for each additional drug successfully developed as well as up to $50.0 million in commercial milestones if a drug using Roche’s proprietary brain shuttle technology is successfully commercialized. We are also eligible to receive tiered royalties on any product sales of drugs resulting from this alliance. We will earn the next milestone payment of $22.0 million if we initiate a Phase 1 trial for a drug targeting HTT protein.

During the three and nine months ended September 30, 2013, we earned revenue of $1.9 million and $3.1 million, respectively, from our relationship with Roche. Our balance sheet at September 30, 2013 included deferred revenue of $26.9 million related to the upfront payment.

Satellite Company Collaborations

Xenon Pharmaceuticals Inc.

In November 2010, we established a collaboration with Xenon to discover and develop antisense drugs as novel treatments for anemia of chronic disorders, or ACD. We received an upfront payment in the form of a convertible promissory note from Xenon to discover and develop antisense drugs to the targets hemojuvelin and hepcidin. Because repayment of the promissory note was uncertain, we did not record any revenue from the upfront payment when we entered into the agreement. In May 2012, Xenon selected XEN701, a drug designed to inhibit the production of hepcidin, as a development candidate. In June 2013, we earned a $2 million license fee when Xenon exercised its option to an exclusive worldwide license to XEN701. In addition, in June 2013 Xenon repaid the $1.5 million convertible promissory note. We recognized the $2 million license fee and the $1.5 million upfront payment as revenue in the second quarter of 2013. Under our collaboration agreement with Xenon, we may receive up to $296 million in substantive milestone payments for the achievement of pre-specified milestone events that are met by two independent products, including up to $26 million for the achievement of development milestones, up to $150 million for the achievement of regulatory milestones and up to $120 million for the achievement of commercialization milestones. In addition, we are eligible to receive royalties on future product sales of XEN701 and a portion of sublicense revenue. We will earn the next milestone payment of $3 million if Xenon initiates a Phase 2 clinical trial for XEN701.

During the nine months ended September 30, 2013, we earned revenue of $3.5 million from our relationship with Xenon.

External Project Funding

CHDI Foundation, Inc.

Starting in November 2007, CHDI provided financial and scientific support to our HD drug discovery program through our development collaboration. In April 2013, we formed an alliance with Roche to develop treatments for HD. Under the terms of our agreement with CHDI, we will reimburse CHDI for a portion of its support of our HD program out of the payments we receive from Roche. In April 2013, we paid CHDI $1.5 million associated with the signing of the Roche agreement which we recorded as research and development expense. In October 2013, we paid CHDI an additional $1.5 million, which we recorded as research and development expense in the third quarter of 2013, because we further progressed our HD program. If we achieve certain milestones under our collaboration with Roche, we will make additional payments to CHDI. During the nine months ended September 30, 2013, we earned revenue of $414,000 from our relationship with CHDI.

Significant_Accounting_Policie1

Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2013

Significant Accounting Policies

Revenue Recognition

We generally recognize revenue when we have satisfied all contractual obligations and are reasonably assured of collecting the resulting receivable. We are often entitled to bill our customers and receive payment from our customers in advance of recognizing the revenue. In those instances in which we have received payment from our customers in advance of recognizing revenue, we include the amounts in deferred revenue on our condensed consolidated balance sheet.

Research and development revenue under collaborative agreements

Our collaboration agreements typically contain multiple elements, or deliverables, including technology licenses or options to obtain technology licenses, research and development services, and in certain cases manufacturing services. Our collaborations may provide for various types of payments to us including upfront payments, funding of research and development, milestone payments, licensing fees, profit sharing and royalties on product sales. We evaluate the deliverables in our collaboration agreements to determine whether they meet the criteria to be accounted for as separate units of accounting or whether they should be combined with other deliverables and accounted for as a single unit of accounting. When the delivered items in an arrangement have “stand-alone value” to our customer, we account for the deliverables as separate units of accounting and we allocate the consideration to each unit of accounting based on the relative selling price of each deliverable. Delivered items have stand-alone value if they are sold separately by any vendor or the customer could resell the delivered items on a standalone basis. We use the following hierarchy of values to estimate the selling price of each deliverable: (i) vendor-specific objective evidence of fair value; (ii) third-party evidence of selling price; and (iii) best estimate of selling price, or BESP. The BESP reflects our best estimate of what the selling price would be if we regularly sold the deliverable on a stand-alone basis. We recognize the revenue allocated to each unit of accounting as we deliver the related goods or services. If we determine that we should treat certain deliverables as a single unit of accounting, then we recognize the revenue ratably over our estimated period of performance.

In December 2012, we entered into a collaboration agreement with AstraZeneca to discover and develop antisense therapeutics against five cancer targets. As part of the collaboration, we received a $25 million upfront payment in December 2012 and a $6 million payment in June 2013 when AstraZeneca elected to continue the research collaboration. We are also eligible to receive milestone payments, license fees for the research program targets and royalties on any product sales of drugs resulting from this collaboration. In exchange, we granted AstraZeneca an exclusive license to develop and commercialize ISIS-STAT3Rx and ISIS-ARRx, which we previously referred to as ISIS-AZ1Rx. We also granted AstraZeneca options to license up to three cancer drugs under the separate research program. We are responsible for completing an ongoing clinical study of ISIS-STAT3Rx and IND-enabling studies for ISIS-ARRx. AstraZeneca is responsible for all other global development, regulatory and commercialization activities for ISIS-STAT3Rx and ISIS-ARRx. In addition, if AstraZeneca exercises its option for any drugs resulting from the research program, AstraZeneca will assume global development, regulatory and commercialization responsibilities for such drug. Since this agreement has multiple elements, we evaluated the deliverables in this arrangement and determined that certain deliverables, either individually or in combination, have stand-alone value. Below is a list of the four separate units of accounting under our agreement:

· The exclusive license we granted to AstraZeneca to develop and commercialize ISIS-STAT3Rx for the treatment of cancer;

· The development services we are performing for ISIS-STAT3Rx;

· The exclusive license we granted to AstraZeneca to develop and commercialize ISIS-ARRx and the research services we are performing for ISIS-ARRx; and

· The option to license up to three drugs under a research program and the research services we will perform for this program.

We determined that the ISIS-STAT3Rx license had stand-alone value because it is an exclusive license that gives AstraZeneca the right to develop ISIS-STAT3Rx or to sublicense its rights. In addition, ISIS-STAT3Rx is currently in development and it is possible that AstraZeneca or another third party could conduct clinical trials without assistance from us. As a result, we consider the ISIS-STAT3Rx license and the development services for ISIS-STAT3Rx to be separate units of accounting. We recognized the portion of the consideration allocated to the ISIS-STAT3Rx license immediately because we delivered the license and earned the revenue. We are recognizing the amount allocated to the development services for ISIS-STAT3Rx as revenue over the period of time we perform services. The ISIS-ARRx license is also an exclusive license. Because of the early stage of research for ISIS-ARRx, we believe that our knowledge and expertise with antisense technology is essential for AstraZeneca or another third party to successfully develop ISIS-ARRx. As a result, we concluded that the ISIS-ARRx license does not have stand-alone value and we combined the ISIS-ARRx license and related research services into one unit of accounting. We are recognizing revenue for the combined unit of accounting over the period of time we perform services. We determined that the options under the research program did not have stand-alone value because AstraZeneca cannot develop or commercialize drugs resulting from the research program until AstraZeneca exercises the respective option or options. As a result, we considered the research options and the related research services as a combined unit of accounting. We are recognizing revenue for the combined unit of accounting over the period of our performance.

We determined that the initial allocable arrangement consideration was the $25 million upfront payment because it was the only payment that was fixed and determinable when we entered into the agreement. In June 2013, we increased the allocable consideration to $31 million when we received the $6 million payment. There was considerable uncertainty at the date of the agreement as to whether we would earn the milestone payments, royalty payments, payments for manufacturing clinical trial materials or payments for finished drug product. As such, we did not include those payments in the allocable consideration.

We allocated the allocable consideration based on the relative BESP of each unit of accounting. We engaged a third party, independent valuation expert to assist us with determining BESP. We estimated the selling price of the licenses granted for ISIS-STAT3Rx and ISIS-ARRx by using the relief from royalty method. Under this method, we estimated the amount of income, net of taxes, for each drug. We then discounted the projected income for each license to present value. The significant inputs we used to determine the projected income of the licenses included:

· Estimated future product sales;

· Estimated royalties on future product sales;

· Contractual milestone payments;

· Expenses we expect to incur;

· Income taxes; and

· An appropriate discount rate.

We estimated the selling price of the research and development services by using our internal estimates of the cost to perform the specific services, marked up to include a reasonable profit margin, and estimates of expected cash outflows to third parties for services and supplies over the expected period that we will perform research and development. The significant inputs we used to determine the selling price of the research and development services included:

· The number of internal hours we will spend performing these services;

· The estimated number and cost of studies we will perform;

· The estimated number and cost of studies that we will contract with third parties to perform; and

· The estimated cost of drug product we will use in the studies.

As a result of the allocation, we recognized $9.3 million of the $25 million upfront payment for the ISIS-STAT3Rx license in December 2012 and we recognized $2.2 million of the $6 million payment for the ISIS-STAT3Rx license in June 2013. We are recognizing the remaining $19.5 million of the $31 million over the estimated period of our performance. Assuming a constant selling price for the other elements in the arrangement, if there was an assumed ten percent increase or decrease in the estimated selling price of the ISIS-STAT3Rx license, we determined that the revenue we would have allocated to the ISIS-STAT3Rx license would change by approximately seven percent, or $750,000, from the amount we recorded.

Typically, we must estimate our period of performance when the agreements we enter into do not clearly define such information. Our collaborative agreements typically include a research and/or development project plan that includes the activities the agreement requires each party to perform during the collaboration. We estimate the period of time over which we will complete the activities for which we are responsible and use that period of time as our period of performance for purposes of revenue recognition and amortize revenue over such period. If our collaborators ask us to continue performing work in a collaboration beyond the initial period of performance, we extend our amortization period to correspond to the new extended period of performance. The revenue we recognize could be materially different if different estimates prevail.

From time to time, we may enter into separate agreements at or near the same time with the same customer. We evaluate such agreements to determine whether they should be accounted for individually as distinct arrangements or whether the separate agreements are, in substance, a single multiple element arrangement. We evaluate whether the negotiations are conducted jointly as part of a single negotiation, whether the deliverables are interrelated or interdependent, whether fees in one arrangement are tied to performance in another arrangement, and whether elements in one arrangement are essential to another arrangement. Our evaluation involves significant judgment to determine whether a group of agreements might be so closely related that they are, in effect, part of a single arrangement. For example, since early 2012 we have entered into four collaboration agreements with Biogen Idec:

· In January 2012, we entered into a collaboration agreement with Biogen Idec to develop and commercialize ISIS-SMNRx for Spinal Muscular Atrophy, or SMA. As part of the collaboration, we received a $29 million upfront payment and we are responsible for global development of ISIS-SMNRx through completion of Phase 2/3 clinical trials.

· In June 2012, we entered into a second and separate collaboration agreement with Biogen Idec to develop and commercialize a novel antisense drug targeting DMPK, or dystrophia myotonica-protein kinase. As part of the collaboration, we received a $12 million upfront payment and we are responsible for global development of the drug through the completion of a Phase 2 clinical trial.

· In December 2012, we entered into a third and separate collaboration agreement with Biogen Idec to discover and develop antisense drugs against three targets to treat neurological or neuromuscular disorders. As part of the collaboration, we received a $30 million upfront payment and we are responsible for the discovery of a lead antisense drug for each of three targets.

· In September 2013, we entered into a fourth and separate collaboration agreement with Biogen Idec to leverage antisense technology to advance the treatment of neurological diseases. We granted Biogen Idec exclusive rights to the use of our antisense technology to develop therapies for neurological diseases as part of this broad collaboration. We received a $100 million upfront payment and we are responsible for discovery and early development through the completion of a Phase 2 clinical trial for each antisense drug developed under this collaboration, while Biogen Idec is responsible for the creation and development of small molecule treatments and biologics.

All four of these collaboration agreements give Biogen Idec the option or options to license one or more drugs resulting from the specific collaboration. If Biogen Idec exercises an option, it will pay us a license fee and will assume future development, regulatory and commercialization responsibilities for the licensed drug. We are also eligible to receive milestone payments associated with the research and/or development of the drugs prior to licensing, milestone payments if Biogen Idec achieves pre-specified regulatory milestones, and royalties on any product sales of drugs resulting from these collaborations.

We evaluated all four of the Biogen Idec agreements to determine whether we should account for them as separate agreements. We determined that we should account for the agreements separately because we conducted the negotiations independently of one another, each agreement focuses on different drugs, there are no interrelated or interdependent variables, there are no provisions in any of these agreements that are essential to the other agreement, and the payment terms and fees under each agreement are independent of each other. We also evaluated the deliverables in each of these agreements to determine whether they met the criteria to be accounted for as separate units of accounting or whether they should be combined with other deliverables and accounted for as a single unit of accounting. For all four of these agreements, we determined that the options did not have stand-alone value because Biogen Idec cannot pursue the development or commercialization of the drugs resulting from these collaborations until it exercises the respective option or options. As such, for each agreement we considered the deliverables to be a single unit of accounting and we are recognizing the upfront payment for each of the agreements over the respective research and development term, which is the estimated period of our performance.

Our collaborations often include contractual milestones, which typically relate to the achievement of pre-specified development, regulatory and commercialization events. These three categories of milestone events reflect the three stages of the life-cycle of our drugs, which we describe in more detail in the following paragraph.

Prior to the first stage in the life-cycle of our drugs, we perform a significant amount of work using our proprietary antisense technology to design chemical compounds that interact with specific genes that are good targets for drug discovery. From these research efforts, we hope to identify a development candidate. The designation of a development candidate is the first stage in the life-cycle of our drugs. A development candidate is a chemical compound that has demonstrated the necessary safety and efficacy in preclinical animal studies to warrant further study in humans. During the first step of the development stage, we or our partners study our drugs in IND-enabling studies, which are animal studies intended to support an Investigational New Drug, or IND, application and/or the foreign equivalent. An approved IND allows us or our partners to study our development candidate in humans. If the regulatory agency approves the IND, we or our partners initiate Phase 1 clinical trials in which we typically enroll a small number of healthy volunteers to ensure the development candidate is safe for use in patients. If we or our partners determine that a development candidate is safe based on the Phase 1 data, we or our partners initiate Phase 2 studies that are generally larger scale studies in patients with the primary intent of determining the efficacy of the development candidate. The final step in the development stage is Phase 3 studies to gather the necessary safety and efficacy data to request marketing approval from the Food and Drug Administration, or FDA, and/or foreign equivalents. The Phase 3 studies typically involve large numbers of patients and can take up to several years to complete. If the data gathered during the trials demonstrates acceptable safety and efficacy results, we or our partner will submit an application to the FDA and/or its foreign equivalents for marketing approval. This stage of the drug’s life-cycle is the regulatory stage. If a drug achieves marketing approval, it moves into the commercialization stage, during which our partner will market and sell the drug to patients. Although our partner will ultimately be responsible for marketing and selling the drug, our efforts to discover and develop a drug that is safe, effective and reliable contributes significantly to our partner’s ability to successfully sell the drug. The FDA and its foreign equivalents have the authority to impose significant restrictions on an approved drug through the product label and on advertising, promotional and distribution activities. Therefore, our efforts designing and executing the necessary animal and human studies are critical to obtaining claims in the product label from the regulatory agencies that would allow our partner to successfully commercialize our drug. Further, the patent protection afforded our drugs as a result of our initial patent applications and related prosecution activities in the United States and foreign jurisdictions are critical to our partner’s ability to sell our drugs without competition from generic drugs. The potential sales volume of an approved drug is dependent on several factors including the size of the patient population, market penetration of the drug, and the price charged for the drug.

Generally, the milestone events contained in our partnership agreements coincide with the progression of our drugs from development, to regulatory approval and then to commercialization. The process of successfully discovering a new development candidate, having it approved and ultimately sold for a profit is highly uncertain. As such, the milestone payments we may earn from our partners involve a significant degree of risk to achieve. Therefore, as a drug progresses through the stages of its life-cycle, the value of the drug generally increases.

Development milestones in our partnerships may include the following types of events:

· Designation of a development candidate. Following the designation of a development candidate, IND-enabling animal studies for a new development candidate generally take 12 to 18 months to complete;

· Initiation of a Phase 1 clinical trial. Generally, Phase 1 clinical trials take one to two years to complete;

· Initiation or completion of a Phase 2 clinical trial. Generally, Phase 2 clinical trials take one to three years to complete;

· Initiation or completion of a Phase 3 clinical trial. Generally, Phase 3 clinical trials take two to four years to complete.

Regulatory milestones in our partnerships may include the following types of events:

· Filing of regulatory applications for marketing approval such as a New Drug Application, or NDA, in the United States or a Marketing Authorization Application, or MAA, in Europe. Generally, it takes six to twelve months to prepare and submit regulatory filings.

· Marketing approval in a major market, such as the United States, Europe or Japan. Generally it takes one to two years after an application is submitted to obtain approval from the applicable regulatory agency.

Commercialization milestones in our partnerships may include the following types of events:

· First commercial sale in a particular market, such as in the United States or Europe.

· Product sales in excess of a pre-specified threshold, such as annual sales exceeding $1 billion. The amount of time to achieve this type of milestone depends on several factors including but not limited to the dollar amount of the threshold, the pricing of the product and the pace at which customers begin using the product.

We assess whether a substantive milestone exists at the inception of our agreements. When a substantive milestone is achieved, we recognize revenue related to the milestone payment. For our existing licensing and collaboration agreements in which we are involved in the discovery and/or development of the related drug or provide the partner with ongoing access to new technologies we discover, we have determined that all future development, regulatory and commercialization milestones are substantive. For example, for our strategic alliance with Biogen Idec, we are using our antisense drug discovery platform to seek out and develop new drugs against targets for neurological diseases. Alternatively, we provide on-going access to our technology to Alnylam Pharmaceuticals, Inc. to develop and commercialize RNA interference, or RNAi, therapeutics. We consider milestones for both of these collaborations to be substantive. In evaluating if a milestone is substantive we consider whether:

· Substantive uncertainty exists as to the achievement of the milestone event at the inception of the arrangement;

· The achievement of the milestone involves substantive effort and can only be achieved based in whole or part on our performance or the occurrence of a specific outcome resulting from our performance;

· The amount of the milestone payment appears reasonable either in relation to the effort expended or to the enhancement of the value of the delivered items;

· There is no future performance required to earn the milestone; and

· The consideration is reasonable relative to all deliverables and payment terms in the arrangement.

If any of these conditions are not met, we do not consider the milestone to be substantive and we defer recognition of the milestone payment and recognize it as revenue over the estimated period of performance, if any. We earned $60.5 million in milestone payments in the first nine months of 2013, including a $25 million milestone payment from Genzyme we recognized in the first quarter of 2013 when the FDA approved the KYNAMRO NDA. We consider milestone payments related to progression of a drug through the development and regulatory stages of its life cycle to be substantive milestones because the level of effort and inherent risk associated with these events is high. Therefore, we recognized the entire $60.5 million in milestone payments in the first nine months of 2013. Further information about our collaborative arrangements can be found in Note 8, Collaborative Arrangements and Licensing Agreements, below and Note 7, Collaborative Arrangements and Licensing Agreements, of our audited financial statements for the year ended December 31, 2012 included in our Annual Report on Form 10-K filed with the SEC.

Licensing and royalty revenue

We often enter into agreements to license our proprietary patent rights on an exclusive or non-exclusive basis in exchange for license fees and/or royalties. We generally recognize as revenue immediately those licensing fees and royalties for which we have no significant future performance obligations and are reasonably assured of collecting the resulting receivable.

Research, development and patent expense

We expense research and development costs as we incur them. We include wages, benefits, facilities, supplies, external services, clinical trial and manufacturing costs, and other expenses that are directly related to our research and development operations in research and development expense. For the three and nine months ended September 30, 2013 and 2012, research and development expenses were $45.0 million and $122.8 million, respectively, compared to $35.6 million and $113.4 million for the same periods in 2012.

We capitalize costs consisting principally of outside legal costs and filing fees related to obtaining patents. We review our capitalized patent costs regularly to ensure that they include costs for patents and patent applications that have future value. We evaluate patents and patent applications that we are not actively pursuing and write off any associated costs. We amortize patent costs over their useful lives, beginning with the date the United States Patent and Trademark Office, or foreign equivalent, issues the patent. We include non-cash charges for amortization and write-downs of capitalized patent costs, as well as legal fees for patent litigation and patent defense in patent expense. For the three and nine months ended September 30, 2013, patent expenses were $695,000 and $3.8 million, respectively, compared to $988,000 and $2.3 million for the same periods in 2012. Patent expenses include non-cash charges related to the write-down of our patent costs to their estimated net realizable values of $166,000 and $441,000 for the three and nine months ended September 30, 2013, respectively, compared to $376,000 and $664,000 for the same periods in 2012.

Cash, cash equivalents and short-term investments

We consider all liquid investments with maturities of 90 days or less when we purchase them to be cash equivalents. Our short-term investments have initial maturities of greater than 90 days from date of purchase. We classify our short-term investments as “available-for-sale” and carry them at fair market value based upon prices for identical or similar items on the last day of the fiscal period. We record unrealized gains and losses as a separate component of comprehensive income (loss) and include net realized gains and losses in gain (loss) on investments. We use the specific identification method to determine the cost of securities sold.

We have equity investments in privately- and publicly-held biotechnology companies that we have received as part of a technology license or collaboration agreement. At September 30, 2013 we held ownership interests of less than 20 percent in each of the respective companies.

We account for our equity investments in publicly-held companies at fair value and record unrealized gains and losses related to temporary increases and decreases in the stock of these publicly-held companies as a separate component of comprehensive income (loss). We account for equity investments in privately-held companies under the cost method of accounting because we own less than 20 percent and do not have significant influence over their operations. The cost method investments we hold are in early stage biotechnology companies and realization of our equity position in those companies is uncertain. In those circumstances we record a full valuation allowance. In determining if and when a decrease in market value below our cost in our equity positions is temporary or other-than-temporary, we examine historical trends in the stock price, the financial condition of the company, near term prospects of the company and our current need for cash. If we determine that a decline in value in either a public or private investment is other-than-temporary, we recognize an impairment loss in the period in which the other-than-temporary decline occurs.

Inventory valuation

We capitalize the costs of raw materials that we purchase for use in producing our drugs because until we use these raw materials they have alternative future uses. We include in inventory raw material costs for drugs that we manufacture for our partners under contractual terms and that we use primarily in our clinical development activities and drug products. We can use each of our raw materials in multiple products and, as a result, each raw material has future economic value independent of the development status of any single drug. For example, if one of our drugs failed, we could use the raw materials for that drug to manufacture our other drugs. We expense these costs when we deliver the drugs to our partners, or as we provide these drugs for our own clinical trials. We reflect our inventory on the balance sheet at the lower of cost or market value under the first-in, first-out method. We review inventory periodically and reduce the carrying value of items we consider to be slow moving or obsolete to their estimated net realizable value. We consider several factors in estimating the net realizable value, including shelf life of raw materials, alternative uses for our drugs and clinical trial materials and historical write-offs. We did not record any inventory write-offs for the first nine months of 2013 and 2012. Total inventory, which consisted of raw materials, was $7.4 million and $6.1 million as of September 30, 2013 and December 31, 2012, respectively.

Long-lived assets

We evaluate long-lived assets, which include property, plant and equipment, patent costs, and exclusive licenses acquired from third parties, for impairment on at least a quarterly basis and whenever events or changes in circumstances indicate that we may not be able to recover the carrying amount of such assets.

Equity method of accounting

We accounted for our ownership interest in Regulus using the equity method of accounting until Regulus’ IPO in October 2012. In the fourth quarter of 2012, we began accounting for our investment at fair value because we now own less than 20 percent of Regulus’ common stock and we no longer have significant influence over the operating and financial policies of Regulus. Under the equity method of accounting, we included our share of Regulus’ operating results on a separate line in our condensed consolidated statement of operations called “Equity in net loss of Regulus Therapeutics Inc.”

Use of estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Basic and diluted net loss per share

We compute basic net loss per share by dividing the net loss by the weighted-average number of common shares outstanding during the period. As we incurred a net loss for the three and nine months ended September 30, 2013 and 2012, we did not include dilutive common equivalent shares in the computation of diluted net loss per share because the effect would have been anti-dilutive. The following would have had an anti-dilutive effect on net loss per share:

· 23/4 percent convertible senior notes;

· 25/8 percent convertible subordinated notes;

· GlaxoSmithKline convertible promissory notes issued by Regulus;

· Dilutive stock options; and

· Unvested restricted stock units.

We redeemed all of our 25/8 percent notes in September 2012 and in October 2012 Regulus completed an IPO, upon which we were no longer guarantors on the two convertible notes that Regulus issued to GSK. As a result, the 25/8 percent notes and GSK convertible promissory notes are not common equivalent shares for the three and nine months ended September 30, 2013.

Public Common Stock Offering

In June 2013, we completed the sale of 9,617,869 shares of our common stock through a public offering at a price of $19.00 per share, which included 617,869 additional shares sold pursuant to an option we granted to the underwriters. We received net proceeds of approximately $173.2 million from the sale of these shares net of underwriting discounts and commissions and other estimated offering expenses of $9.5 million.

Consolidation of variable interest entities

We identify entities as variable interest entities either: (1) that do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) in which the equity investors lack an essential characteristic of a controlling financial interest. We perform ongoing qualitative assessments of our variable interest entities to determine whether we have a controlling financial interest in the variable interest entity and therefore are the primary beneficiary. As of September 30, 2013 and December 31, 2012, we had collaborative arrangements with five and six entities, respectively, that we considered to be variable interest entities. We are not the primary beneficiary for any of these entities as we do not have both the power to direct the activities that most significantly impact the economic performance of our variable interest entities and the obligation to absorb losses or the right to receive benefits from our variable interest entities that could potentially be significant to the variable interest entities. As of September 30, 2013, the total carrying value of our investments in variable interest entities was $66.8 million, and was primarily related to our investment in Regulus. Our maximum exposure to loss related to these variable interest entities is limited to the carrying value of our investments.

Accumulated other comprehensive income

Accumulated other comprehensive income is comprised of unrealized gains and losses on securities, net of taxes, and adjustments we made to reclassify realized gains and losses on securities from other accumulated comprehensive income to our condensed consolidated statement of operations. The following table summarizes changes in accumulated other comprehensive income for the three and nine months ended September 30, 2013 and 2012 (in thousands):

Three Months Ended

Nine Months Ended

September 30,

2013

2012

2013

2012

Beginning balance accumulated other comprehensive income (loss)

26,986

968

12,480

(770

)

Other comprehensive income (loss) before reclassifications, net of tax (1)

2,207

(122

)

17,876

1,616

Amounts reclassified from accumulated other comprehensive income (2)

(172

)

—

(1,335

)

—

Net current period other comprehensive income (loss)

2,035

(122

)

16,541

1,616

Ending balance accumulated other comprehensive income

29,021

846

29,021

846

(1) Other comprehensive income includes income tax expense of $1.4 million and $11.4 million, respectively, for the three and nine months ended September 30, 2013 and $1.1 million for the three and nine months ended September 30, 2012.

(2) Included in gain on investments, net on our condensed consolidated statement of operations.

Convertible debt

In August 2012, we completed a $201.3 million offering of convertible senior notes, which mature in 2019 and bear interest at 2¾ percent. In September 2012, we used a substantial portion of the net proceeds from the issuance of the 2¾ percent notes to redeem our 25¤8 percent convertible subordinated notes. Consistent with how we accounted for our 25¤8 percent notes, we account for our 2¾ percent notes by separating the liability and equity components of the instrument in a manner that reflects our nonconvertible debt borrowing rate. As a result, we assigned a value to the debt component of our 2¾ percent notes equal to the estimated fair value of similar debt instruments without the conversion feature, which resulted in us recording the debt instrument at a discount. We are amortizing the debt discount over the life of these 2¾ percent notes as additional non-cash interest expense utilizing the effective interest method.

Segment information

We operate in a single segment, Drug Discovery and Development operations, because our chief decision maker reviews operating results on an aggregate basis and manages our operations as a single operating segment.

Stock-based compensation expense

We measure stock-based compensation expense for equity-classified awards, principally related to stock options, restricted stock units, or RSUs, and stock purchase rights under our Employee Stock Purchase Plan, or ESPP, based on the estimated fair value of the award on the date of grant using an option-pricing model. We recognize the value of the portion of the award that we ultimately expect to vest as stock-based compensation expense over the requisite service period in our condensed consolidated statements of operations. We reduce stock-based compensation expense for estimated forfeitures at the time of grant and revise in subsequent periods if actual forfeitures differ from those estimates.

We use the Black-Scholes model to estimate the fair value of stock options granted and stock purchase rights under the ESPP. The expected term of stock options granted represents the period of time that we expect them to be outstanding. We estimate the expected term of options granted based on historical exercise patterns. For the nine months ended September 30, 2013 and 2012, we used the following weighted-average assumptions in our Black-Scholes calculations:

Employee Stock Options:

Nine Months Ended

September 30,

2013

2012

Risk-free interest rate

Dividend yield

Volatility

51.4

50.7

Expected life

5.1 years

ESPP:

Nine Months Ended

September 30,

2013

2012

Risk-free interest rate

0.1

0.2

Dividend yield

Volatility

62.9

49.6

Expected life

6 months

Board of Director Stock Options:

Nine Months Ended

September 30,

2013

2012

Risk-free interest rate

2.2

1.3

Dividend yield

Volatility

52.7

51.3

Expected life

7.2 years

7.6 years

The fair value of RSUs is based on the market price of our common stock on the date of grant. RSUs vest annually over a four year period. The weighted-average grant date fair value of RSUs granted to employees and the Board of Directors for the nine months ended September 30, 2013 was $15.29 and $27.95, respectively. The weighted-average grant date fair value of RSUs granted to employees and the Board of Directors for the nine months ended September 30, 2012 was $7.97 and $12.94, respectively.

The following table summarizes stock-based compensation expense for the three and nine months ended September 30, 2013 and 2012 (in thousands), which was allocated as follows:

Three Months Ended

Nine Months Ended

September 30,

2013

2012

2013

2012

Research and development

2,373

1,720

7,171

5,728

General and administrative

439

314

1,147

1,033

Total

2,812

2,034

8,318

6,761

As of September 30, 2013, total unrecognized estimated non-cash stock-based compensation expense related to non-vested stock options and RSUs was $10.1 million and $3.3 million, respectively. We will adjust total unrecognized compensation cost for future changes in estimated forfeitures. We expect to recognize the cost of non-cash, stock-based compensation expense related to non-vested stock options and RSUs over a weighted average amortization period of 1.2 years and 1.7 years, respectively.

Significant_Accounting_Policie2

Significant Accounting Policies (Tables)	9 Months Ended
Significant Accounting Policies (Tables)	Sep. 30, 2013
Significant Accounting Policies	'
Summarizes changes in other accumulated other comprehensive income related to unrealized gains and losses on securities	'
	The following table summarizes changes in accumulated other comprehensive income for the three and nine months ended September 30, 2013 and 2012 (in thousands):

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2013			2012			2013			2012

	Beginning balance accumulated other comprehensive income (loss)	$	26,986		$	968		$	12,480		$	(770	)
	Other comprehensive income (loss) before reclassifications, net of tax (1)	2,207			(122		)	17,876			1,616
	Amounts reclassified from accumulated other comprehensive income (2)	(172		)	—			(1,335		)	—
	Net current period other comprehensive income (loss)	2,035			(122		)	16,541			1,616
	Ending balance accumulated other comprehensive income	$	29,021		$	846		$	29,021		$	846


	(1) Other comprehensive income includes income tax expense of $1.4 million and $11.4 million, respectively, for the three and nine months ended September 30, 2013 and $1.1 million for the three and nine months ended September 30, 2012.

	(2) Included in gain on investments, net on our condensed consolidated statement of operations.
Stock-based compensation expense	'
Schedule of weighted-average assumptions used for valuation of ESPP	'


		Nine Months Ended
		September 30,
		2013		2012
	Risk-free interest rate	0.1	%	0.2	%
	Dividend yield	0	%	0	%
	Volatility	62.9	%	49.6	%
	Expected life	6 months		6 months
Schedule of stock-based compensation expense	'
	The following table summarizes stock-based compensation expense for the three and nine months ended September 30, 2013 and 2012 (in thousands), which was allocated as follows:

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2013			2012			2013			2012

	Research and development	$	2,373		$	1,720		$	7,171		$	5,728
	General and administrative	439			314			1,147			1,033
	Total	$	2,812		$	2,034		$	8,318		$	6,761
Employee Stock Options:	'
Stock-based compensation expense	'
Schedule of weighted-average assumptions used for valuation of stock options	'


		Nine Months Ended
		September 30,
		2013		2012
	Risk-free interest rate	1	%	1	%
	Dividend yield	0	%	0	%
	Volatility	51.4	%	50.7	%
	Expected life	5.1 years		5.1 years
Board of Director Stock Options:	'
Stock-based compensation expense	'
Schedule of weighted-average assumptions used for valuation of stock options	'


		Nine Months Ended
		September 30,
		2013		2012
	Risk-free interest rate	2.2	%	1.3	%
	Dividend yield	0	%	0	%
	Volatility	52.7	%	51.3	%
	Expected life	7.2 years		7.6 years

Investments_Tables

Investments (Tables)	9 Months Ended
Investments (Tables)	Sep. 30, 2013
Investments	'
Summary of contract maturity of available-for-sale securities	'


	One year or less	39	%
	After one year but within two years	42	%
	After two years but within three years	19	%
	Total	100	%
Summary of investments	'
	The following is a summary of our investments (in thousands):

											Other-Than-
											Temporary
		Amortized			Unrealized						Impairment			Estimated
	September 30, 2013	Cost			Gains			Losses			Loss			Fair Value
	Available-for-sale securities:
	Corporate debt securities (1)	$	119,472		$	65		$	(44	)	$	—		$	119,493
	Debt securities issued by U.S. government agencies (1)	19,341			11			(27		)	—			19,325
	Debt securities issued by the U.S. Treasury	7,257			10			—			—			7,267
	Debt securities issued by states of the United States and political subdivisions of the states	16,110			19			(16		)	—			16,113
	Total securities with a maturity of one year or less	162,180			105			(87		)	—			162,198
	Corporate debt securities	220,494			87			(507		)	—			220,074
	Debt securities issued by U.S. government agencies	17,479			22			(6		)	—			17,495
	Debt securities issued by the U.S. Treasury	9,075			22			—			—			9,097
	Debt securities issued by states of the United States and political subdivisions of the states	7,202			25			(1		)	—			7,226
	Total securities with a maturity of more than one year	254,250			156			(514		)	—			253,892
	Total	$	416,430		$	261		$	(601	)	$	—		$	416,090

											Other-Than-
											Temporary
		Cost			Unrealized						Impairment			Estimated
	September 30, 2013	Basis			Gains			Losses			Loss			Fair Value
	Equity securities:
	Regulus Therapeutics Inc.	$	15,526		$	49,478		$	—		$	—		$	65,004
	Securities included in other current assets	1,538			1,174			—			(880		)	1,832
	Securities included in deposits and other assets	625			—			—			—			625
	Total	$	17,689		$	50,652		$	—		$	(880	)	$	67,461

											Other-Than-
											Temporary
		Amortized			Unrealized						Impairment			Estimated
	December 31, 2012	Cost			Gains			Losses			Loss			Fair Value
	Available-for-sale securities:
	Corporate debt securities (1)	$	115,249		$	81		$	(9	)	$	—		$	115,321
	Debt securities issued by U.S. government agencies (1)	12,100			2			(66		)	—			12,036
	Debt securities issued by the U.S. Treasury	1,000			1			—			—			1,001
	Debt securities issued by states of the United States and political subdivisions of the states	16,560			18			(2		)	—			16,576
	Total securities with a maturity of one year or less	144,909			102			(77		)	—			144,934
	Corporate debt securities	80,166			112			(92		)	—			80,186
	Debt securities issued by U.S. government agencies	8,034			38			—			—			8,072
	Debt securities issued by the U.S. Treasury	12,424			27			—			—			12,451
	Debt securities issued by states of the United States and political subdivisions of the states	8,306			31			(16		)	—			8,321
	Total securities with a maturity of more than one year	108,930			208			(108		)	—			109,030
	Total	$	253,839		$	310		$	(185	)	$	—		$	253,964

											Other-Than-
											Temporary
		Cost			Unrealized						Impairment			Estimated
	December 31, 2012	Basis			Gains			Losses			Loss			Fair Value
	Equity securities:
	Regulus Therapeutics Inc.	$	15,526		$	18,096		$	—		$	—		$	33,622
	Securities included in other current assets	1,579			4,175			—			(880		)	4,874
	Securities included in deposits and other assets	625			—			—			—			625
	Total	$	17,730		$	22,271		$	—		$	(880	)	$	39,121


	(1) Includes investments classified as cash equivalents on our condensed consolidated balance sheet.
Schedule of investments temporarily impaired	'
	Investments we considered to be temporarily impaired at September 30, 2013 were as follows (in thousands):

				Less than 12 months of
				temporary impairment
		Number of		Estimated			Unrealized
		Investments		Fair Value			Losses
	Corporate debt securities	137		$	218,610		$	(551	)
	Debt securities issued by U.S. government agencies	4		19,976			(33		)
	Debt securities issued by states of the United States and political subdivisions of the states	4		5,104			(17		)
	Total temporarily impaired securities	145		$	243,690		$	(601	)

Fair_Value_Measurements_Tables

Fair Value Measurements (Tables)	9 Months Ended
	Sep. 30, 2013
Fair Value Measurements	'
Schedule of assets measured at fair value on a recurring basis	'
	We break down the inputs used to measure fair value for these assets at September 30, 2013 and December 31, 2012 as follows (in thousands):

		At September 30,			Quoted Prices in		Significant Other		Significant
		2013			Active Markets		Observable		Unobservable
					(Level 1)		Inputs		Inputs
							(Level 2)		(Level 3)
	Cash equivalents (1)	$	241,007		$	239,407	$	1,600	$	—
	Corporate debt securities (2)	337,967			—		337,967		—
	Debt securities issued by U.S. government agencies (2)	36,820			—		36,820		—
	Debt securities issued by the U.S. Treasury (2)	16,364			16,364		—		—
	Debt securities issued by states of the United States and political subdivisions of the states (2)	23,339			—		23,339		—
	Investment in Regulus Therapeutics Inc.	65,004			—		—		65,004
	Equity securities (3)	1,832			1,832		—		—
	Total	$	722,333		$	257,603	$	399,726	$	65,004

		At December 31,			Quoted Prices in		Significant Other		Significant
		2012			Active Markets		Observable		Unobservable
					(Level 1)		Inputs		Inputs
							(Level 2)		(Level 3)
	Cash equivalents (1)	$	105,496		$	101,496	$	4,000	$	—
	Corporate debt securities (2)	193,507			—		193,507		—
	Debt securities issued by U.S. government agencies (2)	18,108			—		18,108		—
	Debt securities issued by the U.S. Treasury (2)	13,452			13,452		—		—
	Debt securities issued by states of the United States and political subdivisions of the states (2)	24,897			—		24,897		—
	Investment in Regulus Therapeutics Inc.	33,622			—		—		33,622
	Equity securities (3)	4,874			4,146		—		728
	Total	$	393,956		$	119,094	$	240,512	$	34,350


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

	(2) Included in short-term investments on our condensed consolidated balance sheet.

	(3) Included in other current assets on our condensed consolidated balance sheet.
Summary of investments measured at fair value on a recurring basis using significant unobservable inputs (Level 3)	'
	The following is a summary of our investments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2013 and 2012 (in thousands):

		Nine Months Ended
		September 30,
		2013			2012

	Beginning balance of Level 3 investments	$	34,350		$	—
	Purchases	—			40
	Total gains and losses:
	Included in gain on investments	(1,163		)	—
	Included in accumulated other comprehensive income	33,329			337
	Cost basis of shares sold	(40		)	—
	Ending balance of Level 3 investments	$	66,476		$	377

Concentration_of_Business_Risk1

Concentration of Business Risk (Tables)	9 Months Ended
Concentration of Business Risk (Tables)	Sep. 30, 2013
Concentration of Business Risk	'
Schedule of revenue from significant partners	'


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2013		2012		2013		2012
	Partner A	48	%	18	%	22	%	7	%
	Partner B	18	%	0	%	21	%	0	%
	Partner C	25	%	21	%	16	%	7	%
	Partner D	0	%	41	%	31	%	78	%

Significant_Accounting_Policie3

Significant Accounting Policies (Details) (USD $)

9 Months Ended

10 Months Ended

9 Months Ended

1 Months Ended

10 Months Ended

1 Months Ended

7 Months Ended

9 Months Ended

1 Months Ended

0 Months Ended

1 Months Ended

3 Months Ended

Sep. 30, 2013

Jun. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Jun. 30, 2013

Dec. 31, 2012

Jun. 30, 2013

Sep. 30, 2013

Jan. 31, 2012

Oct. 31, 2013

Jun. 30, 2012

Dec. 31, 2012

Sep. 30, 2013

Oct. 31, 2012

Jan. 31, 2013

Jan. 31, 2008

Mar. 31, 2013

Collaborations and Licensing Agreements

AstraZeneca

Biogen Idec

GSK

Genzyme Corporation

item

Development milestones - new development candidate

Development milestones - Phase 1

Development milestones - Phase 2

Development milestones - Phase 3

Regulatory milestones

Commercialization milestones

Collaborations and Licensing Agreements

Agreement entered into in December 2012

Collaborations and Licensing Agreements

Agreement entered into in January 2012

Agreement entered into in June 2012

Agreement entered into in December 2012

Agreement entered into in September 2013

Convertible notes guarantee obligation

Collaborations and Licensing Agreements

Minimum

Maximum

Minimum

Maximum

Minimum

Maximum

Minimum

Maximum

Minimum

Maximum

item

ISIS-AR

ISIS-STAT3 License

target

agreement

target

Regulus

item

drug

security

Research and development revenue under collaborative agreements

Number of targets

Upfront fee received

$6,000,000

$25,000,000

$31,000,000

$29,000,000

$12,000,000

$30,000,000

$100,000,000

$175,000,000

Number of drugs collaborative partner may license under the separate research program

Number of units of accounting

Upfront fee recognized

2,200,000

9,300,000

Upfront fee deferred

19,500,000

Assumed change in estimated selling price (as a percent)

10.00%

Percentage by which earned revenue would change based on assumed change in estimated selling price

7.00%

Amount by which earned revenue would change based on assumed change in estimated selling price

750,000

Number of collaborative agreements

Number of convertible notes no longer guaranteed

Number of categories of milestone events

Number of stages of life-cycle of drugs

Completion period

'12 months

'18 months

'1 year

'2 years

'1 year

'3 years

'2 years

'4 years

Time to prepare and submit regulatory filings

'6 months

'12 months

Time to obtain approval

'1 year

'2 years

Example of sales threshold as milestone event

1,000,000,000

Milestone payment recognized

$60,500,000

$10,000,000

$25,000,000

Significant_Accounting_Policie4

Significant Accounting Policies (Details 2) (USD $)	3 Months Ended		9 Months Ended
Significant Accounting Policies (Details 2) (USD $)	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Research, development and patent expense	'	'	'	'	'
Research and development expenses	$45,000,000	$35,600,000	$122,800,000	$113,400,000	'
Patent expenses	695,000	988,000	3,800,000	2,300,000	'
Non cash charges related to write-down of patent costs	166,000	376,000	441,000	664,000	'
Inventory valuation	'	'	'	'	'
Raw materials	$7,385,000	'	$7,385,000	'	$6,121,000
Maximum	'	'	'	'	'
Cash, cash equivalents and short-term investments	'	'	'	'	'
Ownership percentage in equity investments	'	'	20.00%	'	'

Significant_Accounting_Policie5

Significant Accounting Policies (Details 3) (USD $)	1 Months Ended	9 Months Ended	12 Months Ended
	Jun. 30, 2013	Sep. 30, 2013	Dec. 31, 2012
	Jun. 30, 2013	entity	entity
Public Offering	'	'	'
Shares sold	9,617,869	'	'
Issuance price per share (in dollars per share)	$19	'	'
Additional shares sold pursuant to option granted to the underwriters	617,869	'	'
Proceeds from issuance of common stock	$173,200,000	$173,292,000	'
Underwriting discounts and commissions and other estimated offering expenses	9,500,000	'	'
Consolidation of variable interest entities	'	'	'
Number of variable interest entities in which the entity is not primary beneficiary	'	5	6
Carrying value of investments in variable interest entities	'	$66,800,000	'
Maximum	'	'	'
Equity method of accounting	'	'	'
Ownership percentage	'	20.00%	'
Regulus Therapeutics Inc. \| Maximum	'	'	'
Equity method of accounting	'	'	'
Ownership percentage	'	20.00%	'

Significant_Accounting_Policie6

Significant Accounting Policies (Details 4) (USD $)	3 Months Ended		9 Months Ended
Significant Accounting Policies (Details 4) (USD $)	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Summary of changes in accumulated other comprehensive income	'	'	'	'
Beginning balance accumulated other comprehensive income (loss)	$26,986,000	$968,000	$12,480,000	($770,000)
Other comprehensive income (loss) before reclassifications, net of tax	2,207,000	-122,000	17,876,000	1,616,000
Amounts reclassified from accumulated other comprehensive income	-172,000	'	-1,335,000	'
Net current period other comprehensive income (loss)	2,035,000	-122,000	16,541,000	1,616,000
Ending balance accumulated other comprehensive income (loss)	29,021,000	846,000	29,021,000	846,000
Income tax expense included in other comprehensive income	$1,400,000	$1,100,000	$11,400,000	$1,100,000

Significant_Accounting_Policie7

Significant Accounting Policies (Details 5) (USD $)	Sep. 30, 2013	Aug. 31, 2012	Sep. 30, 2012
In Millions, unless otherwise specified	2 3/4 percent convertible senior notes	2 3/4 percent convertible senior notes	2 5/8 percent convertible subordinated notes
Long-term obligations	'	'	'
Interest rate on convertible debt (as a percent)	2.75%	'	2.63%
Debt issued	'	$201.30	'

Significant_Accounting_Policie8

Significant Accounting Policies (Details 6) (USD $)	9 Months Ended
Significant Accounting Policies (Details 6) (USD $)	Sep. 30, 2013	Sep. 30, 2012
Employee Stock Options:	'	'
Weighted-average assumptions	'	'
Risk-free interest rate (as a percent)	1.00%	1.00%
Dividend yield (as a percent)	0.00%	0.00%
Volatility (as a percent)	51.40%	50.70%
Expected life	'5 years 1 month 6 days	'5 years 1 month 6 days
ESPP:	'	'
Weighted-average assumptions	'	'
Risk-free interest rate (as a percent)	1.00%	0.20%
Dividend yield (as a percent)	0.00%	0.00%
Volatility (as a percent)	62.90%	49.60%
Expected life	'6 months	'6 months
RSUs	'	'
Weighted-average assumptions	'	'
Vesting period	'4 years	'
RSUs \| Employees	'	'
Weighted-average assumptions	'	'
Weighted-average grant date fair value (in dollars per share)	15.29	7.97
RSUs \| Board of Directors	'	'
Weighted-average assumptions	'	'
Weighted-average grant date fair value (in dollars per share)	27.95	12.94
Board of Director Stock Options:	'	'
Weighted-average assumptions	'	'
Risk-free interest rate (as a percent)	2.20%	1.30%
Dividend yield (as a percent)	0.00%	0.00%
Volatility (as a percent)	52.70%	51.30%
Expected life	'7 years 2 months 12 days	'7 years 7 months 6 days

Significant_Accounting_Policie9

Significant Accounting Policies (Details 7) (USD $)	3 Months Ended		9 Months Ended
Significant Accounting Policies (Details 7) (USD $)	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Allocation of stock-based compensation expense	'	'	'	'
Stock-based compensation expense	$2,812,000	$2,034,000	$8,318,000	$6,761,000
Non-vested stock option	'	'	'	'
Allocation of stock-based compensation expense	'	'	'	'
Unrecognized estimated non-cash stock-based compensation expense	10,100,000	'	10,100,000	'
Weighted average period over which cost is expected to be recognized	'	'	'1 year 2 months 12 days	'
RSUs	'	'	'	'
Allocation of stock-based compensation expense	'	'	'	'
Unrecognized estimated non-cash stock-based compensation expense	3,300,000	'	3,300,000	'
Weighted average period over which cost is expected to be recognized	'	'	'1 year 8 months 12 days	'
Research and development	'	'	'	'
Allocation of stock-based compensation expense	'	'	'	'
Stock-based compensation expense	2,373,000	1,720,000	7,171,000	5,728,000
General and administrative	'	'	'	'
Allocation of stock-based compensation expense	'	'	'	'
Stock-based compensation expense	$439,000	$314,000	$1,147,000	$1,033,000

Investments_Details

Investments (Details) (USD $)	3 Months Ended	9 Months Ended			3 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Mar. 31, 2013
	entity	entity	Sep. 30, 2012	Maximum	Sarepta Therapeutics, Inc.
Contract maturity of available-for-sale securities	'	'	'	'	'
One year or less (as a percent)	39.00%	39.00%	'	'	'
After one year but within two years (as a percent)	42.00%	42.00%	'	'	'
After two years but within three years (as a percent)	19.00%	19.00%	'	'	'
Total (as a percent)	100.00%	100.00%	'	'	'
Percentage of available-for-sale securities with a maturity of less than two years	81.00%	81.00%	'	'	'
Ownership interests in private and public companies	'	'	'	'	'
Equity investments not classified as equity method, ownership percentage	'	'	'	20.00%	'
Number of privately-held companies in which the entity has an equity ownership interest of less than 20%	3	3	'	'	'
Number of publicly-held companies in which the entity has an equity ownership interest of less than 20%	3	3	'	'	'
Realized gain on sale of common stock	$175	$2,073	$19	'	$1,100

Investments_Details_2

Investments (Details 2) (USD $)	Sep. 30, 2013	Dec. 31, 2012
In Thousands, unless otherwise specified	security	Dec. 31, 2012
Investments	'	'
Cost Basis, Securities included in deposits and other assets	$625	$625
Estimated Fair Value, Securities included in deposits and other assets	625	625
Temporarily impaired investments	'	'
Temporarily impaired securities, Number of Investments	145	'
Temporarily impaired securities, Less than 12 months of temporary impairment, Estimated Fair Value	243,690	'
Less than 12 months of temporary impairment, Unrealized Losses	-601	'
Available-for-sale securities:	'	'
Investments	'	'
Amortized Cost	416,430	253,839
Unrealized Gains	261	310
Unrealized Losses	-601	-185
Estimated Fair Value	416,090	253,964
Available-for-sale securities: \| Debt maturities of one year or less	'	'
Investments	'	'
Amortized Cost	162,180	144,909
Unrealized Gains	105	102
Unrealized Losses	-87	-77
Estimated Fair Value	162,198	144,934
Available-for-sale securities: \| Debt maturities of more than one year	'	'
Investments	'	'
Amortized Cost	254,250	108,930
Unrealized Gains	156	208
Unrealized Losses	-514	-108
Estimated Fair Value	253,892	109,030
Corporate debt securities	'	'
Temporarily impaired investments	'	'
Temporarily impaired securities, Number of Investments	137	'
Temporarily impaired securities, Less than 12 months of temporary impairment, Estimated Fair Value	218,610	'
Less than 12 months of temporary impairment, Unrealized Losses	-551	'
Corporate debt securities \| Debt maturities of one year or less	'	'
Investments	'	'
Amortized Cost	119,472	115,249
Unrealized Gains	65	81
Unrealized Losses	-44	-9
Estimated Fair Value	119,493	115,321
Corporate debt securities \| Debt maturities of more than one year	'	'
Investments	'	'
Amortized Cost	220,494	80,166
Unrealized Gains	87	112
Unrealized Losses	-507	-92
Estimated Fair Value	220,074	80,186
Debt securities issued by U.S. government agencies	'	'
Temporarily impaired investments	'	'
Temporarily impaired securities, Number of Investments	4	'
Temporarily impaired securities, Less than 12 months of temporary impairment, Estimated Fair Value	19,976	'
Less than 12 months of temporary impairment, Unrealized Losses	-33	'
Debt securities issued by U.S. government agencies \| Debt maturities of one year or less	'	'
Investments	'	'
Amortized Cost	19,341	12,100
Unrealized Gains	11	2
Unrealized Losses	-27	-66
Estimated Fair Value	19,325	12,036
Debt securities issued by U.S. government agencies \| Debt maturities of more than one year	'	'
Investments	'	'
Amortized Cost	17,479	8,034
Unrealized Gains	22	38
Unrealized Losses	-6	'
Estimated Fair Value	17,495	8,072
Debt securities issued by the U.S. Treasury \| Debt maturities of one year or less	'	'
Investments	'	'
Amortized Cost	7,257	1,000
Unrealized Gains	10	1
Estimated Fair Value	7,267	1,001
Debt securities issued by the U.S. Treasury \| Debt maturities of more than one year	'	'
Investments	'	'
Amortized Cost	9,075	12,424
Unrealized Gains	22	27
Estimated Fair Value	9,097	12,451
Debt securities issued by states of the United States and political subdivisions of the states	'	'
Temporarily impaired investments	'	'
Temporarily impaired securities, Number of Investments	4	'
Temporarily impaired securities, Less than 12 months of temporary impairment, Estimated Fair Value	5,104	'
Less than 12 months of temporary impairment, Unrealized Losses	-17	'
Debt securities issued by states of the United States and political subdivisions of the states \| Debt maturities of one year or less	'	'
Investments	'	'
Amortized Cost	16,110	16,560
Unrealized Gains	19	18
Unrealized Losses	-16	-2
Estimated Fair Value	16,113	16,576
Debt securities issued by states of the United States and political subdivisions of the states \| Debt maturities of more than one year	'	'
Investments	'	'
Amortized Cost	7,202	8,306
Unrealized Gains	25	31
Unrealized Losses	-1	-16
Estimated Fair Value	7,226	8,321
Equity securities	'	'
Investments	'	'
Cost Basis	17,689	17,730
Unrealized Gains	50,652	22,271
Other-Than-Temporary Impairment Loss	-880	-880
Estimated Fair Value	67,461	39,121
Equity securities \| Securities included in other current assets	'	'
Investments	'	'
Cost Basis	1,538	1,579
Unrealized Gains	1,174	4,175
Other-Than-Temporary Impairment Loss	-880	-880
Estimated Fair Value	1,832	4,874
Equity securities \| Regulus Therapeutics Inc.	'	'
Investments	'	'
Cost Basis	15,526	15,526
Unrealized Gains	49,478	18,096
Estimated Fair Value	$65,004	$33,622

Fair_Value_Measurements_Detail

Fair Value Measurements (Details) (USD $)

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2012

Mar. 31, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Dec. 31, 2012

Sarepta Therapeutics, Inc.

Regulus Therapeutics Inc.

2 3/4 percent convertible senior notes

Significant Other Observable Inputs (Level 2)

Recurring basis

2 3/4 percent convertible senior notes

Total

Quoted Prices in Active Markets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

Corporate debt securities

Debt securities issued by U.S. government agencies

Debt securities issued by the U.S. Treasury

Debt securities issued by states of the United States and political subdivisions of the states

Equity securities

Debt securities issued by the U.S. Treasury

Equity securities

Corporate debt securities

Debt securities issued by U.S. government agencies

Debt securities issued by states of the United States and political subdivisions of the states

Equity securities

Fair Value Measurements

Amount of transfer between Level 1 and Level 2 investments

Assets measured at fair value on a recurring basis

Cash equivalents

241,007,000

105,496,000

239,407,000

101,496,000

1,600,000

4,000,000

Available-for-sale securities

337,967,000

193,507,000

36,820,000

18,108,000

16,364,000

13,452,000

23,339,000

24,897,000

1,832,000

4,874,000

16,364,000

13,452,000

1,832,000

4,146,000

337,967,000

193,507,000

36,820,000

18,108,000

23,339,000

24,897,000

728,000

Net carrying value of investment

65,004,000

33,622,000

728,000

65,000,000

33,600,000

65,004,000

33,622,000

65,004,000

33,622,000

Total assets

722,333,000

393,956,000

257,603,000

119,094,000

399,726,000

240,512,000

65,004,000

34,350,000

Realized gain on sale of common stock

1,100,000

Gross fair value of investment

1,000,000

66,500,000

44,400,000

Lack of marketability discount

296,000

1,500,000

10,800,000

Fair value of convertible notes

$480,600,000

Interest rate on convertible debt (as a percent)

2.75%

Fair_Value_Measurements_Detail1

Fair Value Measurements (Details 2) (Investments Valued Using Level 3 Inputs, USD $)	9 Months Ended
In Thousands, unless otherwise specified	Sep. 30, 2013	Sep. 30, 2012
Investments Valued Using Level 3 Inputs	'	'
Investments measured at fair value on a recurring basis using significant unobservable inputs (Level 3)	'	'
Balance at the beginning of the period	$34,350	'
Purchases	'	40
Total gains and losses included in gain on investments	-1,163	'
Total gains and losses included in accumulated other comprehensive income	33,329	337
Cost basis of shares sold	-40	'
Balance at the end of the period	$66,476	$377

LongTerm_Obligations_Details

Long-Term Obligations (Details) (Equipment Financing Arrangement, USD $)	1 Months Ended		9 Months Ended
In Millions, unless otherwise specified	Jun. 30, 2013	Jun. 30, 2012	Sep. 30, 2013	Dec. 31, 2012
Long-term obligations	'	'	'	'
Draw down period	'	'	'3 years	'
Interest rate swap period, used to calculate interest	'	'	'3 years	'
Basis for variable interest rate	'	'	'three year interest rate swap	'
Additional principal amount drawn during the period	$2.50	$9.10	'	'
Interest rate on new draw down (as a percent)	4.38%	4.12%	'	'
Weighted average interest rate (as a percent)	'	'	4.34%	'
Maximum borrowing capacity for equipment purchases	'	'	3.4	'
Total	'	'	$8.70	$10
Minimum	'	'	'	'
Long-term obligations	'	'	'	'
Percentage added to variable rate basis	'	'	3.50%	'
Maximum	'	'	'	'
Long-term obligations	'	'	'	'
Percentage added to variable rate basis	'	'	4.00%	'

Concentration_of_Business_Risk2

Concentration of Business Risk (Details)

3 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

12 Months Ended

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Dec. 31, 2012

Revenue

Contract receivables

Partner A

Partner B

Partner C

Partner D

Significant Partners

entity

Concentration of business risk

Concentration percentage

48.00%

18.00%

22.00%

7.00%

18.00%

0.00%

21.00%

0.00%

25.00%

21.00%

16.00%

7.00%

0.00%

41.00%

31.00%

78.00%

93.00%

83.00%

Number of significant partners

Income_Taxes_Details

Income Taxes (Details) (USD $)	3 Months Ended		9 Months Ended
Income Taxes (Details) (USD $)	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Income Taxes	'	'	'	'
Income tax benefit	$5,193,000	$706,000	$6,437,000	$704,000
Unrealized gains on available-for-sale securities, amount of tax recorded in other comprehensive income	'	'	$11,400,000	'

Collaborative_Arrangements_and1

Collaborative Arrangements and Licensing Agreements (Details) (USD $)

1 Months Ended

3 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

1 Months Ended

7 Months Ended

9 Months Ended

1 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

1 Months Ended

9 Months Ended

10 Months Ended

1 Months Ended

9 Months Ended

1 Months Ended

9 Months Ended

1 Months Ended

3 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

1 Months Ended

9 Months Ended

1 Months Ended

9 Months Ended

1 Months Ended

3 Months Ended

9 Months Ended

1 Months Ended

3 Months Ended

9 Months Ended

1 Months Ended

9 Months Ended

Jun. 30, 2013

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Dec. 31, 2012

Jun. 30, 2013

Dec. 31, 2012

Jun. 30, 2013

Sep. 30, 2013

Aug. 31, 2013

Sep. 30, 2013

Jun. 30, 2013

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Dec. 31, 2012

Mar. 31, 2013

Jan. 31, 2012

Sep. 30, 2013

Oct. 31, 2013

Sep. 30, 2013

Oct. 31, 2013

Jun. 30, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Jan. 31, 2013

31-May-12

Jan. 31, 2008

Mar. 31, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Dec. 31, 2012

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Dec. 31, 2012

Mar. 31, 2010

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Jul. 31, 2013

Feb. 28, 2013

Sep. 30, 2013

Apr. 30, 2013

Sep. 30, 2013

Jun. 30, 2013

Sep. 30, 2013

Oct. 31, 2013

Apr. 30, 2013

Sep. 30, 2013

AstraZeneca

Biogen Idec

Genzyme Corporation

Glaxo Smith Kline

Roche

Xenon Pharmaceuticals Inc.

CHDI Foundation, Inc.

Collaborations and Licensing Agreements

Agreement entered into in December 2012

Agreement entered into in August 2013

Collaborations and Licensing Agreements

Agreement entered into in January 2012

Agreement entered into in June 2012

Agreement entered into in December 2012

Agreement entered into in September 2013

Collaborations and Licensing Agreements

Agreement entered into in November 2010

Collaborations and Licensing Agreements

target

Pre-specified events

Development milestones

Regulatory milestones

Pre-specified events

Development milestones

Regulatory milestones

agreement

payment

Development milestones

Regulatory milestones

License fee and substantive milestones

Development milestones

Regulatory milestones

License fee and substantive milestones

target

Development milestones

Development milestones - new development candidate

Regulatory milestones

License fee and substantive milestones

Maximum

Antisense drug for neurological disease

Other modalities

Minimum

Maximum

Pre-specified events

Regulatory milestones

Commercialization milestones

Maximum

Pre-specified events

Development milestones

Development milestones up to Phase 2 proof-of-concept

Regulatory milestones

Commercialization milestones

ISIS-TTR

ISIS-GSK3

Drug targeting HTT protein

Additional drugs

Drug using Roche's proprietary brain shuttle technology

Pre-specified events

Development milestones

Regulatory milestones

Commercialization milestones

program

Pre-specified events

Development milestones

Regulatory milestones

Pre-specified events

Development milestones

Regulatory milestones

program

Development milestones

Pre-specified events

Development milestones

Regulatory milestones

Commercialization milestones

Development milestones

Commercialization milestones

drug

Collaborative Arrangements and Licensing Agreements

Number of targets

Upfront and near-term payments

$31,000,000

Upfront fee received

6,000,000

25,000,000

31,000,000

750,000

29,000,000

12,000,000

30,000,000

100,000,000

175,000,000

2,500,000

30,000,000

Number of drugs the collaborative partner may license under a separate research program

Number of collaborations

Period of exclusive rights to use antisense technology

'6 years

Period during which a change in control could result in requirement to refund upfront payment

'6 years

Equity investment in entity

173,200,000

173,292,000

150,000,000

Equity investment in entity (in shares)

9,617,869

5,000,000

Profit share as percentage of commercial sales

30.00%

50.00%

Milestone payment earned

60,500,000

10,000,000

25,000,000

2,000,000

7,500,000

7,000,000

Cumulative milestone payments earned under collaborative arrangement at period end

10,000,000

5,500,000

19,500,000

Number of milestone payments earned

Number of programs under which drugs are to be developed

Average maximum milestone payments receivable per program

20,000,000

Maximum amount of payments receivable

970,000,000

315,500,000

655,000,000

153,200,000

35,200,000

105,000,000

45,000,000

150,000,000

270,000,000

49,000,000

130,000,000

259,000,000

59,000,000

260,000,000

60,000,000

130,000,000

90,000,000

35,000,000

55,000,000

1,500,000,000

700,000,000

825,000,000

1,200,000,000

195,500,000

526,500,000

445,000,000

48,000,000

362,000,000

67,000,000

170,000,000

80,000,000

50,000,000

296,000,000

26,000,000

150,000,000

120,000,000

Number of milestone payments

Next prospective milestone payment before amendment

18,000,000

Next prospective milestone

50,000,000

3,200,000

1,500,000

14,000,000

10,000,000

25,000,000

2,000,000

22,000,000

3,000,000

Maximum amount of payments receivable per drug under strategic alliance

10,000,000

130,000,000

136,500,000

Maximum amount of payments receivable per program

259,000,000

Minimum annual net revenues to earn next milestone payment

250,000,000

Number of independent products required to achieve pre-specified milestone events

Initial development cost contributed

125,000,000

Period following an acquisition within which collaborator may purchase rights to receive payments

'180 days

Period for which additional shares of Isis common stock will not be purchased without consent

'10 years

Ownership percentage of Isis stock below which strategic partner may acquire additional shares without prior consent

2.00%

Premium for which amortization was completed during the period

100,000,000

License fee for which amortization was completed during the period

175,000,000

Research and development revenue recognized

23,383,000

11,127,000

102,918,000

80,085,000

1,500,000

License fee recognized

202,000

474,000

2,118,000

2,091,000

2,000,000

Convertible promissory note repaid by Xenon

1,500,000

Revenue earned

23,585,000

11,601,000

105,036,000

82,176,000

4,200,000

22,000,000

5,900,000

2,400,000

17,100,000

6,000,000

4,700,000

32,500,000

63,900,000

11,300,000

2,100,000

23,500,000

6,000,000

1,900,000

3,100,000

3,500,000

414,000

Percent of total revenue

18.00%

21.00%

25.00%

16.00%

31.00%

48.00%

22.00%

Deferred revenue

14,300,000

15,700,000

152,500,000

62,600,000

3,800,000

13,200,000

19,900,000

26,900,000

Expense reimbursement paid

$1,500,000