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complement our own development efforts. We benefit from this strategybecause it allows us to expand and broadenour drug
discovery efforts tonewdisease targets. For example, throughour broad strategic partnershipwithBiogen Idec, we are capitalizing
onBiogen Idec’s extensive resources and expertise in neurological diseases to create a franchise of novel treatments for neurological
disorders. Similar toour other partnerships, withour preferredpartner transactionswe benefit financially fromupfront payments,
milestone payments, licensing fees and royalties.
We alsoworkwith a consortiumof smaller companies that can exploit our drugs and technology. We call these smaller
companies our satellite companies. We benefit from the disease-specific expertise of our satellite companypartners, who are
advancingdrugs inour pipeline in areas that are outside of our core focus.We alsomaintain our broadRNA technology leadership
through collaborationswith satellite companies. All of these different types of relationships are part of our partnership strategy, which
allowus tomaximize the value of our assets,minimize the development risks of a broadpipeline of novel newdrugs, andprovide us
with significant reliable near-term revenue.
The broad applicability of our drugdiscovery technology and the clinical successes of the drugs in our pipeline continue to
create newpartneringopportunities. Since January2012, we have initiated sixnew partnerships that involve antisense drugs for the
treatment of neurological diseases or cancer, including four strategic allianceswithBiogen Idec todiscover anddevelop antisense
drugs for the treatment of neurologic diseases, a strategic alliancewithAstraZeneca todiscover anddevelop antisense drugs to treat
cancer and a strategic alliancewithRoche todiscover anddevelop antisense drugs to treatHuntington’s disease. We have received
more than$230million inupfront payments andhave the potential to earnnearly$6billion in futuremilestone payments and
licensing fees from these partnerships. In addition, we have the potential to earnnearly$3billion in futuremilestone payments and
licensing fees fromour other partneredprograms.We alsohave the potential to share in the future commercial success of our
inventions anddrugs resulting fromour partnerships through earnout, profit sharing, or royalty arrangements. Since 2007, our
partnerships have generated an aggregate ofmore than$1.1billion inpayments fromupfront and licensing fees, equitypurchase
payments, milestone payments and research anddevelopment funding.
As an innovator inRNA-targetingdrugdiscovery anddevelopment, we design and execute our patent strategy toprovide us
with extensive protection for our drugs andour technology. Withour ongoing research anddevelopment, we continue to add toour
substantial patent estate. Our patents not onlyprotect our key assets—our technology and our drugs—they also form the basis for
lucrative licensing andpartnering arrangements. Todate,we have generated $410million fromour intellectual property sale and
licensingprogram that helps support our internal drugdiscovery anddevelopment programs.
Business Segments
We operate in a single segment, DrugDiscovery andDevelopment operations, because our chief decisionmaker reviews
operating results on an aggregate basis andmanages our operations as a single operating segment. InourDrugDiscovery and
Development operationswe are exploiting a novel drugdiscoveryplatformwe created togenerate a broad pipeline of first-in-class
drugs for us andour partners.Withour proprietarydrugdiscoveryplatformwe can rapidly identifydrugs, providing awealthof
potential targets to treat a broad range of diseases.We focus our efforts in therapeutic areaswhere our drugswillworkbest, efficiently
screeningmany targets in parallel and carefully selecting the best drugs.Whenwe combine this efficiencywithour rational approach
to selectingdisease targetswe canbuild a large anddiverse portfolioof drugs to treat a varietyof health conditions, including
cardiovascular, severe and rare, neurologic andmetabolic diseases and cancer.
Critical AccountingPolicies
We prepare our consolidated financial statements in conformitywith accountingprinciples generally accepted in theUnited
States. As such, wemake certain estimates, judgments and assumptions thatwe believe are reasonable, basedupon the information
available tous. These judgments involvemaking estimates about the effect ofmatters that are inherentlyuncertain andmay
significantly impact our quarterlyor annual results of operations and financial condition. Eachquarter, our seniormanagement
discusses the development, selection anddisclosure of such estimateswith our audit committee of our boardof directors. In the
followingparagraphs, we describe the specific risks associatedwith these critical accountingpolicies andwe caution that future events
rarely develop exactly as onemay expect, and that best estimatesmay require adjustment.
The significant accountingpolicies, whichwe believe are themost critical to aid in fullyunderstanding and evaluatingour
reported financial results, require the following:
Assessing the proprietyof revenue recognition and associated deferred revenue;
Determining the proper valuationof investments inmarketable securities and other equity investments;
