31
Regulus is addressing therapeutic opportunities that arise from alterations inmicroRNA expression. SincemicroRNAsmay
act asmaster regulators of the genome, affecting the expressionofmultiple genes in a disease pathway,microRNA therapeutics define
a newplatform for drugdiscovery anddevelopment andmicroRNAsmay alsoprove tobe an attractive newbiomarker tool for
characterizingdiseases. Regulus focuses its drugdiscovery anddevelopment efforts innumerous therapeutic areas, including cancer,
fibrosis, atherosclerosis andviral infections, such asHepatitisCvirus, and currentlyhas twodrugs in clinical development. Regulus
is developingRG-101, an anti-miR that targetsmicroRNA-122, for the treatment ofHCV infection, andplans to initiate a Phase1
study for RG-101 in2014. Regulus is alsodevelopingRG-012, an anti-miR that targetsmicroRNA-21, for the treatment ofAlport
Syndrome. Regulus currentlyplans todevelopRG-012 toproof-of-concept. At that stage of development, Regulus’ partner, Sanofi,
has an exclusive option to license. We are eligible to receive a portion of allmilestone paymentsRegulus receives fromSanofi if
Sanofi chooses to exercise its option to licenseRG-012 fromRegulus andRG-012 advances indevelopment. We are also eligible to
receive royalties on any future product sales of bothof these drugs.
InOctober 2012, Regulus completed an IPO, inwhichwe participatedbypurchasing$3millionof Regulus’ common stock
at the offeringprice.We remain a significant shareholderwith approximately sevenmillion shares. We began accounting for our
investment inRegulus at fair value in the fourthquarter of 2012whenour ownership inRegulus droppedbelow20percent andwe no
longer had significant influence overRegulus’ operating and financial policies. In the fourthquarter of 2012, we recorded an$18.4
million gainbecause of the increase inRegulus’ valuation resulting from its IPO.
Regulus exclusively controlsmanyof the early fundamental patent portfolios in themicroRNA-targeting therapeutics field,
including the “Tuschl III”, “Sarnow” and “Esau” patent series. Our “Crooke” patent estate providesRegulus exclusive rights to
product compositions andmethods of treatment in the fieldofmicroRNA-targeting therapeutics. TheRegulus patent estate also
includes claims to specificmicroRNA compositions that are optimized for therapeutic use, aswell as therapeutic uses of these
microRNA compositions, and exclusive rights to Isis’ andAlnylam’s chemicalmodification intellectual property estates for
microRNA applications. In total, Regulus’ intellectual propertyportfolio includes over 1,000patents andpatent applications
pertaining tomicroRNAdrugproducts, therapeuticmodulationofmicroRNA, and chemicalmodifications of oligonucleotides for
microRNA therapeutics.
Regulus has successfully developed strategic partnershipswith partners such as Sanofi, GSK, Biogen Idec andAstraZeneca.
We benefit fromRegulus’ strategic partnerships becausewe have the potential to receive a portion of upfront payments, future
milestone payments, and royaltypayments. For example, under Regulus’ strategic partnershipwithSanofi, and as a result of our
agreement withRegulus, we andAlnylam each received7.5percent, or $1.9million, of the $25million upfront payment and are
eligible to receive 7.5percent of all futuremilestone payments, in addition to royalties on anyproduct sales. During2013, 2012 and
2011, we didnot earn any revenue fromour relationshipwithRegulus.
XenonPharmaceuticals Inc.
InNovember 2010, we established a collaborationwithXenon todiscover anddevelop antisense drugs as novel treatments
for anemia of chronic disorders, orACD. We received anupfront payment in the formof a convertible promissory note fromXenon
to discover and develop antisense drugs to the targets hemojuvelin andhepcidin. Because repayment of the promissory notewas
uncertain, we did not record any revenue from the upfront paymentwhenwe entered into the agreement. InMay2012, Xenon
selectedXEN701, a drugdesigned to inhibit the productionof hepcidin, as a development candidate. In June 2013, we earned a$2
million license feewhenXenon exercised its option to an exclusiveworldwide license toXEN701. In addition, in June 2013Xenon
repaid the $1.5million convertible promissorynote. We recognized the $2million license fee and the $1.5millionupfront payment as
revenue in the secondquarter of 2013. In the first quarter of 2014, Xenondecided todiscontinue development ofXEN701. As a
result, wewill regain the rights todiscover anddevelop antisense drugs to target hemojuvelin andhepcidin. During2013, 2012 and
2011, we earned revenue of $3.5million, $84,000 and$80,000, respectively, fromour relationshipwithXenon.
External Project Funding
We are pursuingdiscovery anddevelopment projects that provide uswithnew therapeutic applications for antisense drugs
through, for example, direct delivery to theCNS. These programs represent opportunities for us andour technology. In some cases,
we have funded these studies through support fromour partners or disease advocacygroups and foundations. For example, we
received external funding support for ourALS andHuntington’s disease programs.
