Isis Reports Financial Results and Highlights for 2014

CARLSBAD, Calif.,Feb. 27, 2015/PRNewswire/ -- Isis Pharmaceuticals, Inc. (Nasdaq:ISIS) today announced it significantly outperformed both its pro forma net operating loss (NOL) guidance and its cash guidance ending the year in a strong financial position.  Isis' significantly improved financial results were due in large part to the more than$230 millionin payments the Company received from its partners.  Isis' pro forma NOL of$16.3 millionfor 2014 was a nearly 60% improvement over its 2013 NOL of$40.2 million. On a GAAP basis, Isis reported income from operations of$10.1 millionfor the three months endedDecember 31, 2014and a loss from operations for the year of$47.7 million, compared to a loss from operations of$19.9 millionand$51.7 millionfor the same periods in 2013. Isis also reported GAAP net income of$31.1 millionfor the fourth quarter endedDecember 31, 2014, which was a significant improvement over the same period in 2013.  Isis added more than$70 millionof cash to its balance sheet in 2014, ending the year with$728.8 million, a more than$150 millionincrease over its cash guidance of$575 million. Isis' strong financial performance in 2014 was a result of the successful execution of its business strategy, its advancing pipeline and the demonstration that antisense is an efficient and effective drug discovery technology.

"2014 was another year of significant achievements for Isis with successes in every aspect of our business.  We continued to advance our large pipeline of first-in-class or best-in-class drugs, including initiating Phase 3 programs for  ISIS-APOCIIIRxand ISIS-SMNRxand progressing the Phase 3 study of ISIS-TTRRx. Each of these drugs represents a potential near term commercial opportunity with Phase 3 data planned for the 2016/2017 timeframe. We and our partners reported clinical data from 18 studies in 2014. It is a reflection of the efficiency and effectiveness of our technology that 15 of these studies were positive. Of particular note, the clinical study results from two of our drugs, ISIS-APOCIIIRxand ISIS-FXIRx, were published in two separate papers in the New England Journal of Medicine.  These publications illustrate the significant value of antisense technology to create novel therapies that effectively act through novel mechanisms to treat disease," saidB. Lynne Parshall, chief operating officer at Isis Pharmaceuticals.  "We continued to expand the reach of our technology as illustrated by the number and diversity of  new drugs we have added to our pipeline in the last year, including generation 2.5 drugs, LICA conjugated drugs and drugs that target numerous organs and tissues beyond the liver. We added a new partnership with Janssen that expands the therapeutic application of our technology and we expanded existing partnerships."

"We took the next step in the evolution of our business strategy with the formation of our wholly owned subsidiary, Akcea Therapeutics.  One of the most important contributions the Akcea team has made to date is the addition of a second ultra-rare indication for ISIS-APOCIIIRx.  This new indication is to treat patients with partial lipodystrophy.  We believe this new indication could double the initial patient population for ISIS-APOCIIIRx.  We plan to initiate a Phase 3 study in patients with partial lipodystrophy rapidly, which should complete roughly in parallel with the Phase 3 FCS study. Both FCS and partial lipodystrophy are ultra-orphan indications with limited or no approved therapeutic options. With the Akcea team's commercial expertise, we believe we can develop a pricing and reimbursement strategy that supports the significant value ISIS-APOCIIIRxcan potentially bring to these patients. All of these successes have established a strong base upon which to build in 2015," concluded Ms. Parshall.

"Our financial performance in 2014 was a result of the successful execution of our business strategy, which ensures that we benefit from the achievements of the drugs in our pipeline and our continued innovation in developing RNA-targeted drugs.  We received more than$230 millionin payments from our partners, nearly half of which were milestone payments we earned as our partnered programs advanced.  As such, we ended the year in a very strong financial position with nearly$730 millionin cash, significantly higher than our projection of more than$575 million.   In addition, we outperformed our NOL guidance by ending the year with a pro forma NOL of$16.3 millioncompared to our pro forma NOL guidance of low$50 millionrange. We also reported net income on both a pro forma and GAAP basis for our fourth quarter primarily resulting from nearly$70 millionin milestone payments and more than$30 millionrelated to our ownership in Regulus.  Further, we took advantage of favorable market conditions and the increase in our stock price to refinance the majority of our outstanding convertible debt, obtaining a very favorable interest rate while reducing the potential dilution from the convertible notes," said Elizabeth L. Hougen, chief financial officer of Isis Pharmaceuticals.

"We are carrying this momentum into 2015.  We plan to continue to progress the drugs we have in pivotal Phase 3 studies, initiate additional Phase 3 studies, and advance our drugs that are in or entering early and mid-stage development. We also plan to expand our pipeline and continue to invest in advancing our technology.  Although our clinical programs are increasing in size and cost, we are projecting a pro forma NOL in the mid$50 millionrange, which is very similar to our 2014 guidance. We are able to keep our projections in line with last year's projections because of the many opportunities we have to earn significant revenue as our partnered programs continue to advance. Already this year, we have earned$27 millionin milestone payments from our partners. We are also projecting to end the year with more than$630 millionin cash, which represents net cash outflows of only$100 millionto move forward our large and growing pipeline of drugs," concluded Ms. Hougen.

Financial ResultsAll pro forma amounts referred to in this press release exclude non-cash compensation expense related to equity awards. Please refer to the reconciliation of pro forma and GAAP measures, which is provided later in this release.

RevenueRevenue for the three and twelve months endedDecember 31, 2014was$84.9 millionand$214.2 million, respectively, compared to$42.2 millionand$147.3 millionfor the same periods in 2013.  Isis' revenue fluctuates based on the nature and timing of payments under agreements with its partners, including license fees, milestone-related payments and other payments.  For example, nearly two-thirds of Isis' revenue in 2014 was from milestone payments the Company earned from the success of its drugs and partnerships. Isis' revenue from milestone payments in 2014 was primarily comprised of:

• $80 millionfrom Biogen Idec for advancing ISIS-SMNRx, including initiating two Phase 3 studies, initiating a Phase 1 study of ISIS-DMPK-2.5Rx, validating two undisclosed targets to treat neurological disorders under its neurology collaborations, and advancing a third drug into development;

• $29 millionfrom GSK for advancing the Phase 2/3 study of ISIS-TTRRxand further advancing ISIS-HBVRx, ISIS-GSK4-LRx, and ISIS-RHO-2.5Rx(formerly ISIS-GSK5-2.5Rx);

• $22 millionfrom AstraZeneca for initiating a Phase 1 clinical study of ISIS-AR-2.5Rxand advancing ISIS-STAT3-2.5Rx; and

• $4 millionfrom Achaogen when Achaogen initiated a Phase 3 study of plazomicin.

Isis' revenue in 2014 also included nearly$70 millionin revenue from the amortization of upfront fees and manufacturing services performed for its partners and$9.9 millionin revenue from its relationship with Alnylam.

Operating ExpensesAs projected, Isis' pro forma operating expenses of$66.3 millionand$230.5 millionfor the three and twelve months endedDecember 31, 2014, respectively, were higher compared to$59.0 millionand$187.5 millionfor the same periods in 2013.  The expected increase in operating expenses was primarily due to higher costs associated with its Phase 3 programs for ISIS-TTRRx, ISIS-SMNRxand ISIS-APOCIIIRx. As drugs move forward to more advanced stages of development, including into longer and larger clinical studies, the costs of development increase. In addition to the Phase 3 programs Isis is conducting, Isis initiated Phase 2 studies for several drugs in its pipeline in the second half of 2013, which were ongoing in 2014, and advanced numerous drugs into clinical development in 2014.

On a GAAP basis, Isis' operating expenses for the three and twelve months endedDecember 31, 2014were$74.8 millionand$261.9 million, respectively, compared to$62.1 millionand$199.0 millionfor the same periods in 2013.

Loss on Retirement of DebtInNovember 2014, Isis refinanced the majority of its outstanding convertible debt by issuing$500 millionof 1% convertible senior notes due 2021 (1% Notes) and used a substantial portion of the net proceeds from the issuance of these notes to repurchase$140 millionprincipal amount of the Company's 2 ¾% convertible senior notes due 2019 (2 ¾% Notes), which were trading at a significant premium due to almost a four-fold increase in the Company's stock price since the notes were issued in 2012. As a result of the early repurchase of the 2¾% Notes, Isis recognized an$8.3 millionnon-cash loss.

Gain on Investment in Regulus Therapeutics Inc.InNovember 2014, Regulus Therapeutics, Inc., a company Isis co-founded, completed a public offering in which the Company participated as a selling shareholder.  As a result of the shares Isis sold in the offering and other shares it sold throughout the year, Isis received nearly$23 millionof cash and recorded a$19.9 milliongain. Isis now owns approximately 5.5 million shares, or approximately 11%, of Regulus' common stock.

Isis' total proceeds from sales of stock in its satellite companies were more than$25 millionduring 2014, including sales of its shares in Regulus.

Income Tax BenefitIsis recognized a net tax benefit of$15.4 millionfor the year endedDecember 31, 2014compared to a tax benefit of$5.9 millionin 2013.  Isis' tax benefit increased in 2014 compared to 2013 primarily because of the substantial increase in the value of Isis' investment in Regulus and the resulting unrealized gain.

Net Income (Loss)Isis reported net income of$31.1 millionand a net loss of$39.0 millionfor the three and twelve months endedDecember 31, 2014, respectively, compared to a net loss of$24.3 millionand$60.6 millionfor the same periods in 2013.  Basic and diluted net income per share for the three months endedDecember 31, 2014was$0.26per share and$0.25per share, respectively, while basic and diluted net loss per share was$0.33per share for the year endedDecember 31, 2014. In comparison, basic and diluted net loss per share for the three and twelve months endedDecember 31, 2013was$0.21per share and$0.55per share, respectively. Isis' net loss for the year endedDecember 31, 2014decreased significantly compared to 2013 primarily due to a decrease in Isis' net operating loss, the gain from its investment in Regulus, and the tax benefit the company recorded in 2014 offset, in part, by the non-cash loss on Isis' early retirement of a large portion of its 2 ¾% Notes.

Balance SheetAs ofDecember 31, 2014, Isis had cash, cash equivalents and short-term investments of$728.8 millioncompared to$656.8 millionatDecember 31, 2013and working capital of$721.3 millionatDecember 31, 2014compared to$637.7 millionatDecember 31, 2013.  . Isis' working capital increased significantly in 2014 primarily due to the more than$230 millionin cash Isis received from its partners, demonstrating Isis' successful execution of its business strategy. Isis' working capital also increased due to the increase in the carrying value of Isis' investment in Regulus.

InNovember 2014, Isis successfully refinanced a majority of its 2¾% Notes.  In the refinancing, Isis reduced the interest rate to 1%, reduced the potential dilution from its convertible notes and extended the maturity to November 2021.  Consistent with accounting rules, Isis' balance sheet atDecember 31, 2014included$327.5 millionof the$500 millionprincipal amount of the notes in the liabilities section and the remainder in stockholders' equity.

• Isis and its partners reported data from 20 clinical studies of which 17 were positive, including:A retrospective analysis from a Phase 3 long-term extension study in which patients with familial hypercholesterolemia treated with KYNAMRO (mipomersen sodium) injection for a mean of one or two years had a significant reduction in major adverse cardiovascular events (MACE) compared to two years prior to therapy.Four data presentations from Phase 2 studies in which patients with high to extremely high triglyceride levels treated with ISIS-APOCIIIRxexperienced significant reductions in triglycerides, and patients with elevated triglycerides and type 2 diabetes treated with ISIS-APOCIIIRxexperienced significant reductions in both triglycerides and HbA1c.Phase 2 data from two open-label studies in which infants and children with SMA treated with ISIS-SMNRxexperienced time- and dose-dependent increases in muscle function.  In addition, the median event-free age of ISIS-SMNRx-treated infants with SMA compared favorably to that of infants with SMA in a PNCR natural history study.Phase 2 data in which ISIS-FXIRx-treated patients undergoing total knee replacement surgery experienced a seven-fold lower incidence of venous thromboembolism and numerically fewer bleeding events compared to patients treated with enoxaparin.Phase 2 data in which ISIS-GCGRRx-treated patients with type 2 diabetes uncontrolled on stable metformin therapy experienced up to a 2.25 percentage point mean reduction in HbA1c levels after 13 weeks of treatment with ISIS-GCGRRx.Phase 2 top line data in which ISIS-PTP1BRx­-treated patients with type 2 diabetes who were uncontrolled on metformin with or without sulfonylurea experienced statistically significant mean reductions in body weight and HbA1c (0.7 percentage point) at 36 weeks.Phase 1/2 data in which ISIS-STAT3-2.5Rx–treated patients with cancer experienced preliminary evidence of antitumor activity.Phase 1 data in which ISIS-APO(a)Rxtreatment produced dose-dependent and significant reductions in Lp(a) levels in normal volunteers.Phase 2 data in which ISIS-PKKRxtreatment produced significant, dose-dependent reductions of prekallikrein, or PKK, of up to 95 percent in healthy volunteers.

• ISIS-DMPK-2.5Rxwas granted orphan drug status for the treatment of myotonic dystrophy type 1 by the U.S. Food and Drug Administration.

• Isis, together with its partners, continued to advance its pipeline of drugs, initiating 12 clinical studies, including four Phase 3 studies and four Phase 2 studies.

• Isis added 12 drugs to its pipeline.

• A retrospective analysis from a Phase 3 long-term extension study in which patients with familial hypercholesterolemia treated with KYNAMRO (mipomersen sodium) injection for a mean of one or two years had a significant reduction in major adverse cardiovascular events (MACE) compared to two years prior to therapy.

• Four data presentations from Phase 2 studies in which patients with high to extremely high triglyceride levels treated with ISIS-APOCIIIRxexperienced significant reductions in triglycerides, and patients with elevated triglycerides and type 2 diabetes treated with ISIS-APOCIIIRxexperienced significant reductions in both triglycerides and HbA1c.

• Phase 2 data from two open-label studies in which infants and children with SMA treated with ISIS-SMNRxexperienced time- and dose-dependent increases in muscle function.  In addition, the median event-free age of ISIS-SMNRx-treated infants with SMA compared favorably to that of infants with SMA in a PNCR natural history study.

• Phase 2 data in which ISIS-FXIRx-treated patients undergoing total knee replacement surgery experienced a seven-fold lower incidence of venous thromboembolism and numerically fewer bleeding events compared to patients treated with enoxaparin.

• Phase 2 data in which ISIS-GCGRRx-treated patients with type 2 diabetes uncontrolled on stable metformin therapy experienced up to a 2.25 percentage point mean reduction in HbA1c levels after 13 weeks of treatment with ISIS-GCGRRx.

• Phase 2 top line data in which ISIS-PTP1BRx­-treated patients with type 2 diabetes who were uncontrolled on metformin with or without sulfonylurea experienced statistically significant mean reductions in body weight and HbA1c (0.7 percentage point) at 36 weeks.

• Phase 1/2 data in which ISIS-STAT3-2.5Rx–treated patients with cancer experienced preliminary evidence of antitumor activity.

• Phase 1 data in which ISIS-APO(a)Rxtreatment produced dose-dependent and significant reductions in Lp(a) levels in normal volunteers.

• Phase 2 data in which ISIS-PKKRxtreatment produced significant, dose-dependent reductions of prekallikrein, or PKK, of up to 95 percent in healthy volunteers.

• Isis formed a wholly owned subsidiary, Akcea Therapeutics Inc., to develop and commercialize its lipid drugs, ISIS-APOCIIIRx, ISIS-APO(a)Rx, ISIS-ANGPTL3Rxand any follow-on drugs for these programs.

• Isis formed an alliance with Janssen to discover and develop antisense drugs to treat autoimmune disorders of the gastrointestinal tract.

• Isis formed an alliance with AstraZeneca to discover and develop novel delivery methods for antisense oligonucleotides.

• Isis and Alnylam formed a new agreement that included a cross-license of intellectual property on four disease targets, providing each company with exclusive RNA therapeutic license rights for two programs.

• Isis generated more than$250 millionin payments from its partners and received proceeds of more than$25 millionthrough the sale of stock it owned in its satellite company partners.

• Isis and its partners were recognized by the drug development community for their innovative and collaborative alliances and their commitment to developing drugs to treat patients with serious, unmet medical needs.Isis and Genzyme received the 2014 Partners in Progress Corporate Award from the National Organization for Rare Disorders for the development and approval of KYNAMRO.Isis' innovative collaboration with Biogen Idec was voted breakthrough alliance of 2014 by Thomson Reuters Recap.

• Isis' senior vice president of research,Frank Bennett, Ph.D., was awarded the Commitment to a Cure Award by the ALS Association for his research and commitment to develop a treatment for amyotrophic lateral sclerosis.

• Isis' founder, CEO and chairman of the board of directors,Stanley T. Crooke, M.D., Ph.D., was recognized with several awards.The prestigious SCRIP Lifetime Achievement Award.The SMA Breakthrough Award by CURE SMA.

• Isis and Genzyme received the 2014 Partners in Progress Corporate Award from the National Organization for Rare Disorders for the development and approval of KYNAMRO.

• Isis' innovative collaboration with Biogen Idec was voted breakthrough alliance of 2014 by Thomson Reuters Recap.

• The prestigious SCRIP Lifetime Achievement Award.

• The SMA Breakthrough Award by CURE SMA.

In 2015, Isis plans to achieve the following goals itself and with its partners:

• Advance the pipeline:Report clinical data on eight or more drugs, including:An update on the Phase 2 open-label study for ISIS-SMNRxin infants with SMAPhase 2 data for ISIS-PTP1BRxand ISIS-GCCRRxin patients with type 2 diabetesPhase 2 data for ISIS-STAT3-2.5Rx(AZD9150) in patients with lymphomaPhase 1/2 data for ISIS-AR-2.5Rx(AZD5312) in patients with androgen receptor tumors, such as prostate cancerPhase 3 FOCUS FH study data for KYNAMROPhase 2 data on ISIS-APO(a)Rxin patients with high Lp(a)Phase 2 data on ISIS-DMPK-2.5Rxin patients with myotonic dystrophy type 1A number of Phase 1 data readoutsInitiate up to 13 clinical studies, including a Phase 3 study on ISIS-APOCIIIRxin patients with partial lipodystrophy and numerous Phase 2 studies, including:ISIS-FGFR4Rxin obese patientsISIS-FXIRxin patients with renal diseaseISIS-GCGRRxin patients with type 2 diabetes (dose optimization)ISIS-HBVRxin patients with hepatitis B viral infectionISIS-HTTRxin patients with Huntington's DiseaseISIS-PKKRxin patients with hereditary angioedema

• Broaden the pipeline by adding up to five new drugs in both partnered and unpartnered programs.

• Continue to successfully execute the business strategy to generate revenue and cash.

• Report clinical data on eight or more drugs, including:An update on the Phase 2 open-label study for ISIS-SMNRxin infants with SMAPhase 2 data for ISIS-PTP1BRxand ISIS-GCCRRxin patients with type 2 diabetesPhase 2 data for ISIS-STAT3-2.5Rx(AZD9150) in patients with lymphomaPhase 1/2 data for ISIS-AR-2.5Rx(AZD5312) in patients with androgen receptor tumors, such as prostate cancerPhase 3 FOCUS FH study data for KYNAMROPhase 2 data on ISIS-APO(a)Rxin patients with high Lp(a)Phase 2 data on ISIS-DMPK-2.5Rxin patients with myotonic dystrophy type 1A number of Phase 1 data readouts

• Initiate up to 13 clinical studies, including a Phase 3 study on ISIS-APOCIIIRxin patients with partial lipodystrophy and numerous Phase 2 studies, including:ISIS-FGFR4Rxin obese patientsISIS-FXIRxin patients with renal diseaseISIS-GCGRRxin patients with type 2 diabetes (dose optimization)ISIS-HBVRxin patients with hepatitis B viral infectionISIS-HTTRxin patients with Huntington's DiseaseISIS-PKKRxin patients with hereditary angioedema

• An update on the Phase 2 open-label study for ISIS-SMNRxin infants with SMA

• Phase 2 data for ISIS-PTP1BRxand ISIS-GCCRRxin patients with type 2 diabetes

• Phase 2 data for ISIS-STAT3-2.5Rx(AZD9150) in patients with lymphoma

• Phase 1/2 data for ISIS-AR-2.5Rx(AZD5312) in patients with androgen receptor tumors, such as prostate cancer

• Phase 3 FOCUS FH study data for KYNAMRO

• Phase 2 data on ISIS-APO(a)Rxin patients with high Lp(a)

• Phase 2 data on ISIS-DMPK-2.5Rxin patients with myotonic dystrophy type 1

• A number of Phase 1 data readouts

• ISIS-FGFR4Rxin obese patients

• ISIS-FXIRxin patients with renal disease

• ISIS-GCGRRxin patients with type 2 diabetes (dose optimization)

• ISIS-HBVRxin patients with hepatitis B viral infection

• ISIS-HTTRxin patients with Huntington's Disease

• ISIS-PKKRxin patients with hereditary angioedema

Conference CallAt10:30 a.m. Eastern Timetoday,February 27, 2015, Isis will conduct a live webcast conference call to discuss this earnings release and related activities.  Interested parties may listen to the call by dialing 877-443-5662, or access the webcast atwww.isispharm.com.  A webcast replay will be available for a limited time at the same address.

ABOUT ISIS PHARMACEUTICALS, INC.Isis is exploiting its leadership position in RNA-targeted technology to discover and develop novel drugs for its product pipeline and for its partners.  Isis' broad pipeline consists of 38 drugs to treat a wide variety of diseases with an emphasis on cardiovascular, metabolic, severe and rare diseases, including neurological disorders, and cancer.  Isis' partner, Genzyme, is commercializing Isis' lead product, KYNAMRO®, inthe United Statesand other countries for the treatment of patients with homozygous FH.  Isis has numerous drugs in Phase 3 development in severe/rare diseases and cardiovascular diseases.  These include ISIS-APOCIIIRx, a drug Isis is developing through its wholly owned subsidiary, Akcea Therapeutics, to treat patients with severely high triglycerides, such as patients with familial chylomicronemia syndrome; ISIS-TTRRx, a drug Isis is developing with GSK to treat patients with the polyneuropathy form of TTR amyloidosis; and, ISIS-SMNRx, a drug Isis is developing with Biogen Idec to treat infants and children with spinal muscular atrophy, a severe and rare neuromuscular disease.  Isis' patents provide strong and extensive protection for its drugs and technology.  Additional information about Isis is available atwww.isispharm.com.

FORWARD-LOOKING STATEMENTThis press release includes forward-looking statements regarding Isis Pharmaceuticals' financial position and outlook, Isis' business, and the therapeutic and commercial potential of Isis' technologies and products, including KYNAMRO, ISIS-APOCIIIRx, ISIS-SMNRxand ISIS-TTRRx, in development.  Any statement describing Isis' goals, expectations, financial or other projections, intentions or beliefs is a forward-looking statement and should be considered an at-risk statement.  Such statements are subject to certain risks and uncertainties, particularly those inherent in the process of discovering, developing and commercializing drugs that are safe and effective for use as human therapeutics, and in the endeavor of building a business around such drugs.  Isis' forward-looking statements also involve assumptions that, if they never materialize or prove correct, could cause its results to differ materially from those expressed or implied by such forward-looking statements.  Although Isis' forward-looking statements reflect the good faith judgment of its management, these statements are based only on facts and factors currently known by Isis.  As a result, you are cautioned not to rely on these forward-looking statements.  These and other risks concerning Isis' programs are described in additional detail in Isis' annual report on Form 10-K for the year endedDecember 31, 2013, and its most recent quarterly report on Form 10-Q, which are on file with the SEC.  Copies of these and other documents are available from the Company.

In this press release, unless the context requires otherwise, "Isis," "Company," "we," "our," and "us" refers to Isis Pharmaceuticals and its subsidiaries.

Isis Pharmaceuticals®is a registered trademark of Isis Pharmaceuticals, Inc.  Akcea Therapeutics™ is a trademark of Isis Pharmaceuticals, Inc.  Regulus Therapeutics™ is a trademark of Regulus Therapeutics Inc.  KYNAMRO®is a registered trademark of Genzyme Corporation.

Three months ended,

Years ended,

December 31,

December 31,

2014

2013

2014

2013

Revenue:

(unaudited)

Research and development revenue under collaborative agreements

$82,539

$41,275

$202,514

$144,194

Licensing and royalty revenue

2,322

973

11,647

3,091

Total revenue

84,861

42,248

214,161

147,285

Expenses:

Research, development and patent expenses

67,953

57,430

241,751

184,033

General and administrative

6,828

4,676

20,140

14,918

Total operating expenses

74,781

62,106

261,891

198,951

Income (loss) from operations

10,080

(19,858)

(47,730)

(51,666)

Other income (expense):

Investment income

679

686

2,682

2,085

Interest expense

(7,305)

(4,885)

(22,209)

(19,355)

Gain on investments, net

1,116

305

1,256

2,378

Gain on investment in Regulus Therapeutics, Inc.

19,366

-

19,902

-

Loss on early retirement of debt

(8,292)

-

(8,292)

-

Income (loss) before income tax benefit

15,644

(23,752)

(54,391)

(66,558)

Income tax benefit

15,409

(524)

15,407

5,914

Net income (loss)

$31,053

$(24,276)

(38,984)

$(60,644)

Basic net income (loss) per share

$0.26

$(0.21)

$(0.33)

$(0.55)

Diluted net income (loss) per share

$0.25

$(0.21)

$(0.33)

$(0.55)

Shares used in computing basic net income (loss) per share

118,223

116,122

117,691

110,502

Shares used in computing diluted net income (loss) per share

122,839

116,122

117,691

110,502

Three months ended,

December 31,

Years ended,

December 31,

2014

2013

2014

2013

(unaudited)

(unaudited)

$74,781

$62,106

$261,891

$198,951

Excluding compensation expense related to equity awards

(8,488)

(3,101)

(31,383)

(11,418)

$66,293

$59,005

$230,508

$187,533

$10,080

$(19,858)

$(47,730)

$(51,666)

Excluding compensation expense related to equity awards

(8,488)

(3,101)

(31,383)

(11,418)

$18,568

$(16,757)

$(16,347)

$(40,248)

$31,053

$(24,276)

$(38,984)

$(60,644)

Excluding compensation expense related to equity awards

(8,488)

(3,101)

(31,383)

(11,418)

$39,541

$(21,175)

$(7,601)

$(49,226)

As illustrated in the Selected Financial Information in this press release, pro forma operating expenses, pro forma loss from operations, and pro forma net income (loss) were adjusted from GAAP to exclude compensation expense related to equity awards, which are non-cash.  Isis has regularly reported non-GAAP measures for operating results as pro forma results.  These measures are provided as supplementary information and are not a substitute for financial measures calculated in accordance with GAAP.  Isis reports these pro forma results to better enable financial statement users to assess and compare its historical performance and project its future operating results and cash flows.  Further, the presentation of Isis' pro forma results is consistent with how Isis' management internally evaluates the performance of its operations.

Assets:

Cash, cash equivalents and short-term investments

$728,832

$656,761

Investment in Regulus Therapeutics Inc.

81,881

52,096

Other current assets

25,884

26,653

Property, plant and equipment, net

88,958

86,198

Other assets

30,254

25,448

Total assets

$955,809

$847,156

Liabilities and stockholders' equity:

Other current liabilities

$60,737

$49,677

Current portion of deferred contract revenue

54,595

48,135

1% convertible senior notes

327,486

-

2 ¾% convertible senior notes

48,014

150,334

Long-term obligations, less current portion

79,400

77,830

Long-term deferred contract revenue

127,797

142,790

Stockholders' equity

257,780

378,390

Total liabilities and stockholders' equity

$955,809

$847,156