53
TheSEC andother regulators have continued to adopt new rules and regulations andmake additional changes to existing
regulations that require our compliance. On July21, 2010, theDodd-FrankWall Street Reform andProtectionAct, or theDodd-Frank
Act, was enacted. There are significant corporate governance and executive compensation-relatedprovisions in theDodd-FrankAct
that require theSEC to adopt, orwhere theSEChas adopted, additional rules and regulations in these areas such as “sayonpay” and
proxy access. Stockholder activism, the current political environment and the current high level of government intervention and
regulatory reformmay lead to substantial new regulations anddisclosure obligations, whichmay lead to additional compliance costs
and impact themanner inwhichwe operate our business.
Negative conditions in the global creditmarkets and financial services andother industriesmayadverselyaffect our business.
The global creditmarkets, the financial services industry, theU.S. capitalmarkets, and theU.S. economy as awhole have
been experiencing a periodof substantial turmoil anduncertainty characterizedbyunprecedented intervention by theU.S. federal
government and the failure, bankruptcy, or sale of various financial andother institutions. The impact of these events onour business
and the severity of the economic crisis are uncertain. It is possible that the crisis in the global creditmarkets, theU.S. capitalmarkets,
the financial services industry and theU.S. economymay adversely affect our business, vendors andprospects aswell as our liquidity
and financial condition. More specifically, our insurance carriers and insurance policies covering all aspects of our businessmay
become financiallyunstable ormaynot be sufficient to cover anyor all of our losses andmaynot continue tobe available tous on
acceptable terms, or at all.
Item1B. UnresolvedStaffComments
Not applicable.
Item2. Properties
As of February10, 2014, we occupied three buildings inCarlsbad, California totaling approximately231,000 square feet of
laboratory,manufacturing andoffice space. Our facilities include a 176,000 square foot facility that we use for our primary research
and development activities, a 28,704 square footmanufacturing facility and a 25,792 square foot building adjacent toour
manufacturing facility. Our 28,704 square foot facility housesmanufacturing suites for our drugdevelopment business built tomeet
cGMP requirements andour 25,792 square foot facility has laboratory andoffice space that we use to support ourmanufacturing
activities. We lease all three buildings under lease agreements. The leases onour 176,000 square foot facility andour 28,704 square
footmanufacturing facility expire in2031 andhave four five-year options to extend. Under these lease agreements, we have the
option topurchase the facilities, independent of each other at the endof each year from2016 through 2020, and at the endof 2026 and
2031. The lease for our 25,792 square foot facilityhas an initial term ending in June 2021with anoption to extend the lease for up to
two five-year periods. We believe our existing facilities are adequate for our requirements in the foreseeable future and thatwe have
sufficientmanufacturing capacity tomeet our current and future obligations under existing agreementswithour partners for
commercial, research and clinical needs, including for thePhase 3 clinical trials for ISIS-TTR
Rx
,
ISIS-SMN
Rx
,andAPOCIII
Rx
.
Item3. Legal Proceedings
Santaris Litigation
InSeptember 2011, we filed a patent infringement lawsuit against Santaris PharmaA/S andSantaris PharmaA/SCorp. in the
UnitedStatesDistrict Court of theSouthernDistrict of California. Our infringement lawsuit alleges that Santaris’ activities providing
antisense drugs and antisense drug discovery services to several pharmaceutical companies infringesU.S. PatentNo. 6,326,199,
entitled “Gapped2’ModifiedOligonucleotides” andU.S. PatentNo. 6,066,500, entitled “AntisenseModulationofBetaCatenin
Expression.” In the lawsuitwe are seekingmonetarydamages and an injunction enjoiningSantaris from conductingor participating in
the infringing activities. InDecember 2011, Santaris filed an answer toour complaint, denyingour allegations, and seeking a
declaration from the court that Santaris has not, anddoes not, infringe the patentswe asserted against Santaris in the suit. In
January2012, Santaris filed amotion for summary judgment asking the court to decide as amatter of law that Santaris’ activities do
not infringe the patentswe assert in the suit. InSeptember 2012, the court deniedSantaris’motion for summary judgment andopened
limited discovery related towhether Santaris’ alleged infringing activities are permitted by the safe harbor under 35U.S.C.
Section271(e)(1). InApril 2013, we amendedour complaint related to the lawsuit to include additional claims alleging that Santaris’
activities providing antisense drugs and antisense drugdiscovery services to a pharmaceutical company infringesU.S. Patent
No. 6,440,739 entitled “AntisenseModulation ofGlioma-AssociatedOncogene-2Expression”; and that Santaris induced its actual and
prospective pharmaceutical partners to infringeU.S. Patent No. 6,326,199. InDecember 2013, Santaris filed a newmotion for
summary judgment asking the court todecide as amatter of law that Santaris’ alleged infringing activities are permitted by the safe
harbor under 35U.S.C. Section271(e)(1). OnFebruary27, 2014, the court denied thismotion, and the case is proceeding.
