x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 |
Delaware
|
|
33-0336973
|
(State or other jurisdiction of incorporation or organization)
|
|
(IRS Employer Identification No.)
|
Large accelerated filer
x
|
Accelerated filer
o
|
|
|
Non-accelerated filer
o
|
Smaller reporting company
o
|
(Do not check if a smaller reporting company)
|
|
PART I
|
FINANCIAL INFORMATION
|
|
|
|
|
ITEM 1:
|
Financial Statements:
|
|
|
|
|
|
3
|
|
|
|
|
|
4
|
|
|
|
|
|
5
|
|
|
|
|
|
6
|
|
|
|
|
|
7
|
|
|
|
|
ITEM 2:
|
23
|
|
|
|
|
|
26
|
|
|
|
|
|
29
|
|
|
|
|
|
31
|
|
|
|
|
ITEM 3:
|
40
|
|
|
|
|
ITEM 4:
|
40
|
|
|
|
|
PART II
|
OTHER INFORMATION
|
40
|
|
|
|
ITEM 1:
|
40
|
|
|
|
|
ITEM 2:
|
41
|
|
|
|
|
ITEM 3:
|
41
|
|
|
|
|
ITEM 4:
|
41
|
|
|
|
|
ITEM 5:
|
41
|
|
|
|
|
ITEM 6:
|
42
|
|
|
|
|
|
43
|
|
March 31,
2014
|
December 31,
2013
|
||||||
|
(Unaudited)
|
|
||||||
ASSETS
|
|
|
||||||
Current assets:
|
|
|
||||||
Cash and cash equivalents
|
$
|
161,778
|
$
|
159,973
|
||||
Short-term investments
|
469,515
|
496,788
|
||||||
Contracts receivable
|
9,823
|
11,102
|
||||||
Inventories
|
7,537
|
8,033
|
||||||
Investment in Regulus Therapeutics Inc.
|
63,586
|
52,096
|
||||||
Other current assets
|
9,814
|
7,518
|
||||||
Total current assets
|
722,053
|
735,510
|
||||||
Property, plant and equipment, net
|
86,641
|
86,198
|
||||||
Licenses, net
|
4,101
|
4,572
|
||||||
Patents, net
|
16,383
|
15,517
|
||||||
Deposits and other assets
|
5,438
|
5,359
|
||||||
Total assets
|
$
|
834,616
|
$
|
847,156
|
||||
|
||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
9,869
|
$
|
11,009
|
||||
Accrued compensation
|
4,328
|
12,168
|
||||||
Accrued liabilities
|
27,903
|
22,092
|
||||||
Current portion of long-term obligations
|
4,308
|
4,408
|
||||||
Current portion of deferred contract revenue
|
54,428
|
48,135
|
||||||
Total current liabilities
|
100,836
|
97,812
|
||||||
Long-term deferred contract revenue
|
130,755
|
142,790
|
||||||
2¾
percent convertible senior notes
|
152,005
|
150,334
|
||||||
Long-term obligations, less current portion
|
5,523
|
6,542
|
||||||
Long-term financing liability for leased facility
|
71,395
|
71,288
|
||||||
Total liabilities
|
460,514
|
468,766
|
||||||
Stockholders’ equity:
|
||||||||
Common stock, $0.001 par value; 200,000,000 shares authorized, 117,541,860 and 116,471,371 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively
|
118
|
116
|
||||||
Additional paid-in capital
|
1,343,874
|
1,324,804
|
||||||
Accumulated other comprehensive income
|
29,000
|
21,080
|
||||||
Accumulated deficit
|
(998,890
|
)
|
(967,610
|
)
|
||||
Total stockholders’ equity
|
374,102
|
378,390
|
||||||
Total liabilities and stockholders’ equity
|
$
|
834,616
|
$
|
847,156
|
|
Three Months Ended
March 31,
|
|||||||
|
2014
|
2013
|
||||||
Revenue:
|
|
|
||||||
Research and development revenue under collaborative agreements
|
$
|
19,550
|
$
|
41,671
|
||||
Licensing and royalty revenue
|
8,611
|
1,689
|
||||||
Total revenue
|
28,161
|
43,360
|
||||||
|
||||||||
Expenses:
|
||||||||
Research, development and patent expenses
|
53,448
|
38,312
|
||||||
General and administrative
|
4,380
|
3,423
|
||||||
Total operating expenses
|
57,828
|
41,735
|
||||||
|
||||||||
Income (loss) from operations
|
(29,667
|
)
|
1,625
|
|||||
|
||||||||
Other income (expense):
|
||||||||
Investment income
|
657
|
376
|
||||||
Interest expense
|
(4,943
|
)
|
(4,795
|
)
|
||||
Gain on investments, net
|
397
|
1,058
|
||||||
|
||||||||
Loss before income tax benefit
|
(33,556
|
)
|
(1,736
|
)
|
||||
|
||||||||
Income tax benefit
|
2,276
|
64
|
||||||
|
||||||||
Net loss
|
$
|
(31,280
|
)
|
$
|
(1,672
|
)
|
||
|
||||||||
Basic and diluted net loss per share
|
$
|
(0.27
|
)
|
$
|
(0.02
|
)
|
||
Shares used in computing basic and diluted net loss per share
|
117,128
|
101,875
|
|
Three Months Ended
March 31,
|
|||||||
|
2014
|
2013
|
||||||
|
|
|
||||||
Net loss
|
$
|
(31,280
|
)
|
$
|
(1,672
|
)
|
||
Unrealized gains on securities, net of tax
|
8,261
|
6,467
|
||||||
Reclassification adjustment for realized gains included in net loss
|
(341
|
)
|
(1,163
|
)
|
||||
|
||||||||
Comprehensive income (loss)
|
$
|
(23,360
|
)
|
$
|
3,632
|
|
Three Months Ended
March 31,
|
|||||||
|
2014
|
2013
|
||||||
Operating activities:
|
|
|
||||||
Net loss
|
$
|
(31,280
|
)
|
$
|
(1,672
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation
|
1,561
|
1,707
|
||||||
Amortization of patents
|
263
|
285
|
||||||
Amortization of licenses
|
471
|
569
|
||||||
Amortization of premium on investments, net
|
1,376
|
1,108
|
||||||
Amortization of debt issuance costs
|
135
|
100
|
||||||
Amortization of 2¾ percent convertible senior notes discount
|
1,671
|
1,543
|
||||||
Amortization of long-term financing liability for leased facility
|
1,652
|
1,637
|
||||||
Stock-based compensation expense
|
7,069
|
2,869
|
||||||
Gain on investments, net
|
(397
|
)
|
(1,058
|
)
|
||||
Non-cash losses related to patents, licensing and property, plant and equipment
|
108
|
94
|
||||||
Tax benefit from other unrealized gains on securities
|
(2,276
|
)
|
(64
|
)
|
||||
Changes in operating assets and liabilities:
|
||||||||
Contracts receivable
|
1,279
|
(650
|
)
|
|||||
Inventories
|
496
|
312
|
||||||
Other current and long-term assets
|
(896
|
)
|
(1,601
|
)
|
||||
Accounts payable
|
(2,646
|
)
|
(5,569
|
)
|
||||
Accrued compensation
|
(7,840
|
)
|
(4,060
|
)
|
||||
Deferred rent
|
25
|
40
|
||||||
Accrued liabilities
|
2,643
|
2,355
|
||||||
Deferred contract revenue
|
(5,742
|
)
|
(8,521
|
)
|
||||
Net cash used in operating activities
|
(32,328
|
)
|
(10,576
|
)
|
||||
|
||||||||
Investing activities:
|
||||||||
Purchases of short-term investments
|
(69,185
|
)
|
(64,552
|
)
|
||||
Proceeds from the sale of short-term investments
|
95,288
|
49,076
|
||||||
Purchases of property, plant and equipment
|
(1,403
|
)
|
(222
|
)
|
||||
Acquisition of licenses and other assets, net
|
(333
|
)
|
(702
|
)
|
||||
Proceeds from the sale of strategic investments
|
454
|
1,094
|
||||||
Net cash provided by (used in) investing activities
|
24,821
|
(15,306
|
)
|
|||||
|
||||||||
Financing activities:
|
||||||||
Proceeds from equity awards
|
12,003
|
11,823
|
||||||
Principal payments on debt and capital lease obligations
|
(2,691
|
)
|
(2,773
|
)
|
||||
Net cash provided by financing activities
|
9,312
|
9,050
|
||||||
|
||||||||
Net increase (decrease) in cash and cash equivalents
|
1,805
|
(16,832
|
)
|
|||||
Cash and cash equivalents at beginning of period
|
159,973
|
124,482
|
||||||
Cash and cash equivalents at end of period
|
$
|
161,778
|
$
|
107,650
|
||||
|
||||||||
Supplemental disclosures of cash flow information:
|
||||||||
Interest paid
|
$
|
83
|
$
|
113
|
||||
Income taxes paid
|
$
|
—
|
$
|
2
|
||||
|
||||||||
Supplemental disclosures of non-cash investing and financing activities:
|
||||||||
Amounts accrued for capital and patent expenditures
|
$
|
1,506
|
$
|
715
|
1. | Basis of Presentation |
2. | Significant Accounting Policies |
· | The exclusive license we granted to AstraZeneca to develop and commercialize ISIS-STAT3 Rx for the treatment of cancer; |
· | The development services we are performing for ISIS-STAT3 Rx ; |
· | The exclusive license we granted to AstraZeneca to develop and commercialize ISIS-AR Rx and the research services we are performing for ISIS-AR Rx ; and |
· | The option to license up to three drugs under a research program and the research services we will perform for this program. |
· | 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. |
· | 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. |
· | In January 2012, we entered into a collaboration agreement with Biogen Idec to develop and commercialize ISIS-SMN Rx for SMA. As part of the collaboration, we received a $29 million upfront payment and we are responsible for global development of ISIS-SMN Rx 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 identified during the six year term of this collaboration, while Biogen Idec is responsible for the creation and development of small molecule treatments and biologics. |
· | 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. |
· | 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. |
· | 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. |
· | 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 in 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. |
· | 2¾ percent convertible senior notes; |
· | Dilutive stock options; and |
· | Restricted stock units. |
|
Three Months Ended
March 31,
|
|||||||
|
2014
|
2013
|
||||||
Beginning balance accumulated other comprehensive income
|
$
|
21,080
|
$
|
12,480
|
||||
Other comprehensive income before reclassifications, net of tax (1)
|
8,261
|
6,467
|
||||||
Amounts reclassified from accumulated other comprehensive income (2)
|
(341
|
)
|
(1,163
|
)
|
||||
Net current period other comprehensive income
|
7,920
|
5,304
|
||||||
Ending balance accumulated other comprehensive income
|
$
|
29,000
|
$
|
17,784
|
(1) | Other comprehensive income includes income tax expense of $5.4 million and $3.6 million for the three months ended March 31, 2014 and 2013, respectively. |
(2) | Included in gain on investments, net on our condensed consolidated statement of operations. |
|
Three Months Ended
March 31,
|
|||||||
|
2014
|
2013
|
||||||
Risk-free interest rate
|
1.6
|
%
|
1.0
|
%
|
||||
Dividend yield
|
0.0
|
%
|
0.0
|
%
|
||||
Volatility
|
50.5
|
%
|
51.5
|
%
|
||||
Expected life
|
4.6 years
|
5.1 years
|
|
Three Months Ended
March 31,
|
|||||||
|
2014
|
2013
|
||||||
Risk-free interest rate
|
0.1
|
%
|
0.1
|
%
|
||||
Dividend yield
|
0.0
|
%
|
0.0
|
%
|
||||
Volatility
|
59.0
|
%
|
61.4
|
%
|
||||
Expected life
|
6 months
|
6 months
|
|
Three Months Ended
March 31,
|
|||
|
2014
|
|||
Risk-free interest rate
|
2.3
|
%
|
||
Dividend yield
|
0.0
|
%
|
||
Volatility
|
53.3
|
%
|
||
Expected life
|
7.1 years
|
|
Three Months Ended
March 31,
|
|||||||
|
2014
|
2013
|
||||||
Research, development and patent expenses
|
$
|
5,873
|
$
|
2,546
|
||||
General and administrative
|
1,196
|
323
|
||||||
Total
|
$
|
7,069
|
$
|
2,869
|
3. | Investments |
One year or less
|
48
|
%
|
||
After one year but within two years
|
35
|
%
|
||
After two years but within three years
|
17
|
%
|
||
Total
|
100
|
%
|
|
|
|
|
Other-Than-
|
|
|||||||||||||||
|
|
|
|
Temporary
|
|
|||||||||||||||
|
Amortized
|
Unrealized
|
Impairment
|
Estimated
|
||||||||||||||||
March 31, 2014
|
Cost
|
Gains
|
Losses
|
Loss
|
Fair Value
|
|||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|||||||||||||||
Corporate debt securities(1)
|
$
|
176,874
|
$
|
104
|
$
|
(32
|
)
|
$
|
—
|
$
|
176,946
|
|||||||||
Debt securities issued by U.S. government agencies (1)
|
18,427
|
17
|
—
|
—
|
18,444
|
|||||||||||||||
Debt securities issued by the U.S. Treasury
|
9,272
|
14
|
—
|
—
|
9,286
|
|||||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states
|
23,211
|
9
|
(29
|
)
|
—
|
23,191
|
||||||||||||||
Total securities with a maturity of one year or less
|
227,784
|
144
|
(61
|
)
|
—
|
227,867
|
||||||||||||||
Corporate debt securities
|
173,937
|
101
|
(177
|
)
|
—
|
173,861
|
||||||||||||||
Debt securities issued by U.S. government agencies
|
49,303
|
4
|
(153
|
)
|
—
|
49,154
|
||||||||||||||
Debt securities issued by the U.S. Treasury
|
5,998
|
14
|
—
|
—
|
6,012
|
|||||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states
|
21,559
|
48
|
(55
|
)
|
—
|
21,552
|
||||||||||||||
Total securities with a maturity of more than one year
|
250,797
|
167
|
(385
|
)
|
—
|
250,579
|
||||||||||||||
Total available-for-sale securities
|
$
|
478,581
|
$
|
311
|
$
|
(446
|
)
|
$
|
—
|
$
|
478,446
|
|
|
|
|
Other-Than-
|
|
|||||||||||||||
|
|
|
|
Temporary
|
|
|||||||||||||||
|
Cost
|
Unrealized
|
Impairment
|
Estimated
|
||||||||||||||||
March 31, 2014
|
Basis
|
Gains
|
Losses
|
Loss
|
Fair Value
|
|||||||||||||||
Equity securities:
|
|
|
|
|
|
|||||||||||||||
Regulus Therapeutics Inc.
|
$
|
15,526
|
$
|
48,060
|
$
|
—
|
$
|
—
|
$
|
63,586
|
||||||||||
Securities included in other current assets
|
1,426
|
2,357
|
—
|
(880
|
)
|
2,903
|
||||||||||||||
Securities included in deposits and other assets
|
625
|
—
|
—
|
—
|
625
|
|||||||||||||||
Total equity securities
|
$
|
17,577
|
$
|
50,417
|
$
|
—
|
$
|
(880
|
)
|
$
|
67,114
|
|||||||||
Total available-for-sale and equity securities
|
$
|
496,158
|
$
|
50,728
|
$
|
(446
|
)
|
$
|
(880
|
)
|
$
|
545,560
|
|
|
|
|
Other-Than-
|
|
|||||||||||||||
|
|
|
|
Temporary
|
|
|||||||||||||||
|
Amortized
|
Unrealized
|
Impairment
|
Estimated
|
||||||||||||||||
December 31, 2013
|
Cost
|
Gains
|
Losses
|
Loss
|
Fair Value
|
|||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|||||||||||||||
Corporate debt securities(1)
|
$
|
142,096
|
$
|
75
|
$
|
(27
|
)
|
$
|
—
|
$
|
142,144
|
|||||||||
Debt securities issued by U.S. government agencies (1)
|
23,242
|
22
|
(16
|
)
|
—
|
23,248
|
||||||||||||||
Debt securities issued by the U.S. Treasury
|
6,239
|
6
|
—
|
—
|
6,245
|
|||||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states
|
8,082
|
6
|
(28
|
)
|
—
|
8,060
|
||||||||||||||
Total securities with a maturity of one year or less
|
179,659
|
109
|
(71
|
)
|
—
|
179,697
|
||||||||||||||
Corporate debt securities
|
265,969
|
177
|
(393
|
)
|
—
|
265,753
|
||||||||||||||
Debt securities issued by U.S. government agencies
|
41,308
|
3
|
(127
|
)
|
—
|
41,184
|
||||||||||||||
Debt securities issued by the U.S. Treasury
|
9,062
|
21
|
—
|
—
|
9,083
|
|||||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states
|
14,186
|
37
|
(28
|
)
|
—
|
14,195
|
||||||||||||||
Total securities with a maturity of more than one year
|
330,525
|
238
|
(548
|
)
|
—
|
330,215
|
||||||||||||||
Total available-for-sale securities
|
$
|
510,184
|
$
|
347
|
$
|
(619
|
)
|
$
|
—
|
$
|
509,912
|
|
|
|
|
Other-Than-
|
|
|||||||||||||||
|
|
|
|
Temporary
|
|
|||||||||||||||
|
Cost
|
Unrealized
|
Impairment
|
Estimated
|
||||||||||||||||
December 31, 2013
|
Basis
|
Gains
|
Losses
|
Loss
|
Fair Value
|
|||||||||||||||
Equity securities:
|
|
|
|
|
|
|||||||||||||||
Regulus Therapeutics Inc.
|
$
|
15,526
|
$
|
36,570
|
$
|
—
|
$
|
—
|
$
|
52,096
|
||||||||||
Securities included in other current assets
|
1,538
|
618
|
—
|
(880
|
)
|
1,276
|
||||||||||||||
Securities included in deposits and other assets
|
625
|
—
|
—
|
—
|
625
|
|||||||||||||||
Total equity securities
|
$
|
17,689
|
$
|
37,188
|
$
|
—
|
$
|
(880
|
)
|
$
|
53,997
|
|||||||||
Total available-for-sale and equity securities
|
$
|
527,873
|
$
|
37,535
|
$
|
(619
|
)
|
$
|
(880
|
)
|
$
|
563,909
|
|
|
Less than 12 months of
temporary impairment
|
More than 12 months of
temporary impairment
|
Total temporary
impairment
|
||||||||||||||||||||||||
|
Number of
Investments
|
Estimated
Fair Value
|
Unrealized
Losses
|
Estimated
Fair Value
|
Unrealized
Losses
|
Estimated
Fair Value
|
Unrealized
Losses
|
|||||||||||||||||||||
Corporate debt securities
|
124
|
$
|
144,662
|
$
|
(207
|
)
|
$
|
6,057
|
$
|
(2
|
)
|
$
|
150,719
|
$
|
(209
|
)
|
||||||||||||
Debt securities issued by U.S. government agencies
|
7
|
47,622
|
(153
|
)
|
—
|
—
|
47,622
|
(153
|
)
|
|||||||||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states
|
19
|
14,860
|
(84
|
)
|
—
|
—
|
14,860
|
(84
|
)
|
|||||||||||||||||||
Total temporarily impaired securities
|
150
|
$
|
207,144
|
$
|
(444
|
)
|
$
|
6,057
|
$
|
(2
|
)
|
$
|
213,201
|
$
|
(446
|
)
|
4. | Fair Value Measurements |
|
At March 31,
2014
|
Quoted Prices in
Active Markets
(Level 1)
|
Significant Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||||||
Cash equivalents (1)
|
$
|
149,945
|
$
|
141,013
|
$
|
8,932
|
$
|
—
|
||||||||
Corporate debt securities (2)
|
344,930
|
—
|
344,930
|
—
|
||||||||||||
Debt securities issued by U.S. government agencies (2)
|
67,598
|
—
|
67,598
|
—
|
||||||||||||
Debt securities issued by the U.S. Treasury (2)
|
15,298
|
15,298
|
—
|
—
|
||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states (2)
|
41,689
|
—
|
41,689
|
—
|
||||||||||||
Investment in Regulus Therapeutics Inc.
|
63,586
|
63,586
|
—
|
—
|
||||||||||||
Equity securities (3)
|
2,903
|
985
|
—
|
1,918
|
||||||||||||
Total
|
$
|
685,949
|
$
|
220,882
|
$
|
463,149
|
$
|
1,918
|
|
At December 31,
2013
|
Quoted Prices in
Active Markets
(Level 1)
|
Significant Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||||||
Cash equivalents (1)
|
$
|
146,357
|
$
|
133,233
|
$
|
13,124
|
$
|
—
|
||||||||
Corporate debt securities (2)
|
394,773
|
—
|
394,773
|
—
|
||||||||||||
Debt securities issued by U.S. government agencies (2)
|
64,432
|
—
|
64,432
|
—
|
||||||||||||
Debt securities issued by the U.S. Treasury (2)
|
15,328
|
15,328
|
—
|
—
|
||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states (2)
|
22,255
|
—
|
22,255
|
—
|
||||||||||||
Investment in Regulus Therapeutics Inc.
|
52,096
|
52,096
|
—
|
—
|
||||||||||||
Equity securities (3)
|
1,276
|
1,276
|
—
|
—
|
||||||||||||
Total
|
$
|
696,517
|
$
|
201,933
|
$
|
494,584
|
$
|
—
|
(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. |
|
Three Months Ended
March 31,
|
|||||||
|
2014
|
2013
|
||||||
|
|
|
||||||
Beginning balance of Level 3 investments
|
$
|
—
|
$
|
34,350
|
||||
Total gains and losses:
|
||||||||
Included in gain on investments
|
—
|
(1,163
|
)
|
|||||
Included in accumulated other comprehensive income (loss)
|
1,918
|
11,716
|
||||||
Cost basis of shares sold
|
—
|
(40
|
)
|
|||||
Ending balance of Level 3 investments
|
$
|
1,918
|
$
|
44,863
|
5. | Concentration of Business Risk |
|
Three Months Ended
March 31,
|
|||||||
|
2014
|
2013
|
||||||
Partner A
|
36
|
%
|
9
|
%
|
||||
Partner B
|
27
|
%
|
1
|
%
|
||||
Partner C
|
12
|
%
|
23
|
%
|
||||
Partner D
|
12
|
%
|
6
|
%
|
||||
Partner E
|
0
|
%
|
58
|
%
|
6. | Income Taxes |
7. | Collaborative Arrangements and Licensing Agreements |
· | $1.8 million related to a Phase 2 study in children with SMA through June 2014; |
· | $2.0 million related to a Phase 2 study in infants with SMA through July 2014; and |
· | $5.5 million related to an open-label extension study in children with SMA through December 2014. |
· | We reported positive Phase 2 data on ISIS-APOCIII Rx in patients with high to extremely high triglyceride levels and as a single agent as well as in combination with fibrates. |
o | We presented final Phase 2 data on ISIS-APOCIII Rx in combination with fibrates in patients with high triglycerides. In this study, patients achieved statistically significant reductions in triglycerides, apoC-III protein and statistically significant increases in HDL-C on top of improvements achieved with each patient’s existing therapeutic regimen of triglyceride lowering drugs. These data were presented at the American College of Cardiology meeting. |
o | We presented final Phase 2 data on ISIS-APOCIII Rx in patients with type 2 diabetes and high triglycerides. In this study, patients with diabetes experienced statistically significant improvements in glucose control with trends toward enhanced insulin sensitivity. These data were presented at the Arteriosclerosis, Thrombosis and Vascular Biology meeting. |
o | We presented final Phase 2 data on ISIS-APOCIII Rx in patients with familial chylomicronemia. In this study, patients with extremely high triglycerides experienced substantial reductions of triglycerides that correlated with substantial reductions in triglyceride-rich chylomicrons. These data were presented at the National Lipid Association meeting. |
o | We received European Orphan Drug Designation for ISIS-APOCIII Rx for the treatment of patients with familial chylomicronemia syndrome. |
· | We reported positive clinical results for ISIS-SMN Rx in children and infants with SMA. These data were presented at the American Academy of Neurology meeting. |
o | We presented results from both of the ongoing multiple-dose Phase 2 studies of ISIS-SMN Rx in infants and children with SMA, which were consistent with earlier reported data. In the ongoing studies, we reported increases in muscle function scores in infants and children treated with multiple-doses of ISIS-SMN Rx . |
o | We reported results from an assay that measures SMN protein levels in the cerebral spinal fluid. We observed dose-dependent increases in SMN protein levels which were more than two fold greater than baseline levels at the highest dose in children treated with ISIS-SMN Rx from both the single- and multiple-dose studies. |
· | Our collaborators presented preclinical data on an antisense drug targeting hepatitis B virus, or HBV, demonstrating that antisense targeting of HBV produced dose-dependent reductions in HBV. We initiated a Phase 1 clinical trial on ISIS-HBV Rx , an antisense drug to treat patients with HBV. |
· | We initiated a Phase 1 study of ISIS-ANGPTL3 Rx , an antisense drug to treat patients with hyperlipidemia. |
· | We added a new drug, ISIS-HTT Rx , to our pipeline. ISIS-HTT Rx is part of our alliance with Roche and is in development to treat patients with Huntington’s Disease. |
· | We received a positive opinion on European Orphan Drug Designation in the EU for ISIS-TTR Rx to treat patients with TTR amyloidosis. |
· | In 2014 to date, we have received more than $31 million in payments from our partners, including $11.9 million from Biogen Idec related to the development of ISIS-SMN Rx , $7.7 million from Alnylam related to Alnylam’s alliance with Genzyme and $9 million from GSK related to the development of ISIS-TTR Rx and ISIS-HBV Rx . |
· | We added Joseph Loscalzo, M.D., Ph.D. to our Board of Directors. |
· | Assessing the propriety of revenue recognition and associated deferred revenue; |
· | Determining the proper valuation of investments in marketable securities and other equity investments; |
· | Assessing the recoverability of long-lived assets, including property and equipment, intellectual property and licensed technology; |
· | Determining the appropriate cost estimates for unbilled preclinical studies and clinical development activities; |
· | Estimating our net deferred income tax asset valuation allowance; |
· | Determining the fair value of convertible debt without the conversion feature; |
|
Three Months Ended
March 31,
|
|||||||
|
2014
|
2013
|
||||||
Research, development and patent expenses
|
$
|
47,575
|
$
|
35,766
|
||||
Non-cash compensation expense related to equity awards
|
5,873
|
2,546
|
||||||
Total research, development and patent expenses
|
$
|
53,448
|
$
|
38,312
|
|
Three Months Ended
March 31,
|
|||||||
|
2014
|
2013
|
||||||
Antisense drug discovery expenses
|
$
|
9,097
|
$
|
9,397
|
||||
Non-cash compensation expense related to equity awards
|
1,685
|
769
|
||||||
Total antisense drug discovery
|
$
|
10,782
|
$
|
10,166
|
|
Three Months Ended
|
|||||||
|
March 31,
|
|||||||
|
2014
|
2013
|
||||||
KYNAMRO
|
$
|
1,827
|
$
|
1,943
|
||||
ISIS-TTR
Rx
|
2,710
|
767
|
||||||
Other antisense development products
|
18,121
|
9,878
|
||||||
Development overhead costs
|
3,740
|
1,816
|
||||||
Non-cash compensation expense related to equity awards
|
2,078
|
856
|
||||||
Total antisense drug development
|
$
|
28,476
|
$
|
15,260
|
|
Three Months Ended
March 31,
|
|||||||
|
2014
|
2013
|
||||||
Manufacturing and operations
|
$
|
5,766
|
$
|
4,220
|
||||
Non-cash compensation expense related to equity awards
|
699
|
354
|
||||||
Total manufacturing and operations
|
$
|
6,465
|
$
|
4,574
|
|
Three Months Ended
March 31,
|
|||||||
|
2014
|
2013
|
||||||
Personnel costs
|
$
|
2,562
|
$
|
2,340
|
||||
Occupancy
|
1,735
|
1,646
|
||||||
Patent expenses
|
374
|
1,978
|
||||||
Depreciation and amortization
|
571
|
702
|
||||||
Insurance
|
294
|
287
|
||||||
Other
|
778
|
792
|
||||||
Non-cash compensation expense related to equity awards
|
1,411
|
567
|
||||||
Total R&D support costs
|
$
|
7,725
|
$
|
8,312
|
|
Three Months Ended
March 31,
|
|||||||
|
2014
|
2013
|
||||||
General and administrative expenses
|
$
|
3,184
|
$
|
3,100
|
||||
Non-cash compensation expense related to equity awards
|
1,196
|
323
|
||||||
Total general and administrative expenses
|
$
|
4,380
|
$
|
3,423
|
|
Payments Due by Period (in millions)
|
|||||||||||||||||||
Contractual Obligations
(selected balances described below)
|
Total
|
Less than
1 year
|
1-3 years
|
3-5 years
|
After
5 years
|
|||||||||||||||
2¾ percent Convertible Senior Notes (principal and interest payable)
|
$
|
234.5
|
$
|
5.5
|
$
|
11.1
|
$
|
11.1
|
$
|
206.8
|
||||||||||
Facility Rent Payments
|
$
|
136.4
|
$
|
6.2
|
$
|
12.8
|
$
|
13.6
|
$
|
103.8
|
||||||||||
Equipment Financing Arrangements (principal and interest payable)
|
$
|
6.6
|
$
|
4.3
|
$
|
2.3
|
$
|
—
|
$
|
—
|
||||||||||
Other Obligations (principal and interest payable)
|
$
|
1.3
|
$
|
0.1
|
$
|
0.1
|
$
|
0.1
|
$
|
1.0
|
||||||||||
Capital Lease
|
$
|
0.3
|
$
|
0.2
|
$
|
0.1
|
$
|
—
|
$
|
—
|
||||||||||
Operating Leases
|
$
|
26.2
|
$
|
1.5
|
$
|
3.1
|
$
|
2.9
|
$
|
18.7
|
||||||||||
Total
|
$
|
405.3
|
$
|
17.8
|
$
|
29.5
|
$
|
27.7
|
$
|
330.3
|
· | receipt and scope of regulatory approvals; |
· | establishment and demonstration in the medical and patient community of the efficacy and safety of our drugs and their potential advantages over competing products; |
· | cost and effectiveness of our drugs compared to other available therapies; |
· | patient convenience of the dosing regimen for our drugs; and |
· | reimbursement policies of government and third-party payors. |
· | priced lower than our drugs; |
· | safer than our drugs; |
· | more effective than our drugs; or |
· | more convenient to use than our drugs. |
· | KYNAMRO is approved in the United States as an adjunct to lipid-lowering medications and diet to reduce low density lipoprotein-cholesterol, apolipoprotein B, total cholesterol, and non-high density lipoprotein-cholesterol in patients with HoFH; |
· | the KYNAMRO label contains a Boxed Warning citing a risk of hepatic toxicity; and |
· | KYNAMRO is available only through a Risk Evaluation and Mitigation Strategy called the KYNAMRO REMS. |
· | fund some of our development activities for KYNAMRO; |
· | seek and obtain regulatory approvals for KYNAMRO; and |
· | successfully commercialize KYNAMRO. |
· | the clinical study may produce negative or inconclusive results; |
· | regulators may require that we hold, suspend or terminate clinical research for noncompliance with regulatory requirements; |
· | we, our partners, the FDA or foreign regulatory authorities could suspend or terminate a clinical study due to adverse side effects of a drug on subjects in the trial; |
· | we may decide, or regulators may require us, to conduct additional preclinical testing or clinical studies; |
· | enrollment in our clinical studies may be slower than we anticipate; |
· | the cost of our clinical studies may be greater than we anticipate; and |
· | the supply or quality of our drugs or other materials necessary to conduct our clinical studies may be insufficient, inadequate or delayed. |
· | conduct clinical studies; |
· | seek and obtain regulatory approvals; and |
· | manufacture, market and sell our drugs. |
· | pursue alternative technologies or develop alternative products that may be competitive with the drug that is part of the collaboration with us; |
· | pursue higher-priority programs or change the focus of its own development programs; or |
· | choose to devote fewer resources to our drugs than it does for its own drugs. |
· | additional marketing approvals and successful commercial launch of KYNAMRO; |
· | changes in existing collaborative relationships and our ability to establish and maintain additional collaborative arrangements; |
· | continued scientific progress in our research, drug discovery and development programs; |
· | the size of our programs and progress with preclinical and clinical studies; |
· | the time and costs involved in obtaining regulatory approvals; |
· | competing technological and market developments, including the introduction by others of new therapies that address our markets; and |
· | the profile and launch timing of our drugs, including ISIS-APOCIII Rx , ISIS-SMN Rx and ISIS-TTR Rx . |
· | interruption of our research, development and manufacturing efforts; |
· | injury to our employees and others; |
· | environmental damage resulting in costly clean up; and |
· | liabilities under federal, state and local laws and regulations governing health and human safety, as well as the use, storage, handling and disposal of these materials and resultant waste products. |
Exhibit
Number
|
|
Description of Document
|
|
Letter Agreement Amendment between the Registrant and Biogen Idec International Holding Ltd dated January 27, 2014. Portions of this exhibit have been omitted and separately filed with the SEC with a request for confidential treatment.
|
|
|
|
|
|
Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
Certification by Chief Financial Offic5er Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
101
|
|
The following financial statements from the Isis Pharmaceuticals, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, formatted in Extensive Business Reporting Language (XBRL): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of operations, (iii) condensed consolidated statements of comprehensive loss, (iv) condensed consolidated statements of cash flows and (v) notes to condensed consolidated financial statements (detail tagged).
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Stanley T. Crooke
|
|
Chairman of the Board, President, and Chief Executive Officer
(Principal executive officer)
|
|
May 6, 2014
|
Stanley T. Crooke, M.D., Ph.D.
|
||||
|
|
|
|
|
/s/ Elizabeth L. Hougen
|
|
Senior Vice President, Finance and Chief Financial Officer
(Principal financial and accounting officer)
|
|
May 6, 2014
|
Elizabeth L. Hougen
|
1. | CS2 Study . A new 12mg cohort of [***] patients is added. A new milestone payment of $[***] is added to cover the costs for such new cohort and will be payable to Isis upon [***]. |
CS2 Study Variable
|
As of March 13, 2013
|
As Amended Herein
|
|
3mg cohort/[***] patients
|
3mg cohort/[***] patients
|
Cohort/Number of
|
6mg cohort/[***] patients
|
6mg cohort/[***] patients
|
Patients
|
9mg cohort/[***] patients
|
9mg cohort/[***] patients
|
|
n/a
|
12mg cohort/[***] patients
|
2. | CS3A Study . The CS3A Study is expanded from [***] patients to up to [***] patients and extended from 3 doses to [***] doses per patient. A new milestone payment of $[***] is added to cover the costs for [***] patients to receive [***] doses and will be payable to Isis upon the earlier of (i) [***], or (ii) [***]. In the event that more than [***] patients are enrolled in the CS3A Study, Biogen Idec will pay Isis a milestone payment of $[***] upon [***] and $[***] upon [***]. |
CS3A Study Variable
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As of March 13, 2013
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As Amended Herein
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Cohort/Number of
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6mg cohort/[***] patients
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6mg cohort/[***] patients
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Patients
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9mg cohort/[***] patients
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12mg cohort/[***] patients
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Number of Doses
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3 doses each patient
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[***] doses each patient
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3. | CS3B Study . To reflect the addition of [***] patients and [***] sites to the CS3B Study, the CS3B Study milestone payment structure is revised to (i) [***] milestone payment set forth in the letter agreement between the Parties dated March 13, 2013, due upon [***], to $[***]; and (ii) to provide an additional milestone payments of $[***] due upon [***], $[***], due upon [***], and $[***] upon [***] in the CS3B Study. |
CS3B Study Variable
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As of March 13, 2013
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As Amended Herein
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Number of Patients
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[***]
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[***]
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Number of Sites
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[***]
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[***]
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4. | CS12 Study . A new open label extension study and related milestone payment of $[***] is added. This new CS12 Study will provide for an additional single 12mg dose for the [***] patients in the CS2 Study and CS10 Study who are expected to roll over to the CS12 Study. The CS12 Study milestone payment of $[***] will be due upon [***]. |
BIOGEN IDEC INTERNATIONAL HOLDING LTD
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/s/ M. Tonesan N. Amissah
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M. Tonesan N. Amissah
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Director, Biogen Idec International Holding Ltd.
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ISIS PHARMACEUTICALS, INC.
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/s/ B. Lynne Parshall
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B. Lynne Parshall
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Chief Operating Officer
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Dated: May 6, 2014
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/s/ Stanley T. Crooke
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Stanley T. Crooke, M.D., Ph.D.
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Chief Executive Officer
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Dated: May 6, 2014
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/s/ Elizabeth L. Hougen
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Elizabeth L. Hougen
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Chief Financial Officer
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1. | The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2014, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Periodic Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Periodic Report and the results of operations of the Company for the period covered by the Periodic Report. |
Dated: May 6, 2014
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/s/ Stanley T. Crooke
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/s/ Elizabeth L. Hougen
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Stanley T. Crooke, M.D., Ph.D.
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Elizabeth L. Hougen
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Chief Executive Officer
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Chief Financial Officer
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