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ResearchandDevelopment RevenueUnderCollaborativeAgreements
Research anddevelopment revenue under collaborative agreements for the year endedDecember 31, 2013was $144.2
million compared to$96.4million for 2012. The increase in 2013was primarily due to an increase in revenue frommilestone
paymentswe received and amortizationof upfront fees.
LicensingandRoyaltyRevenue
Our revenue from licensing activities and royalties for the year endedDecember 31, 2013was $3.1million anddecreased
compared to$5.6million for 2012. The decreasewas primarilydue to$750,000 in sublicensing revenue thatwe earned fromAlnylam
in 2013 compared to$2.7millionwe earned fromAlnylam in 2012. In January2014, Alnylam announced a collaborationwith
Genzyme, forwhichwe are eligible to receive $7.5million upon the closing ofAlnylam’s sale of stock toGenzyme under that
collaboration.
OperatingExpenses
Operating expenses for the year endedDecember 31, 2013were $199.0million compared to $171.0million for 2012. The
increase inoperating expenseswas primarilydue tohigher costs associatedwith thematuration and expansionof our pipeline. In
order to analyze and compare our results of operations toother similar companies, we believe that it is important to exclude non-cash
compensation expense related to equity awards fromour operating expenses.We believe non-cash compensation expense is not
indicative of our operating results or cash flows fromour operations. Further, we internally evaluate the performance of our operations
excluding it.
Research, Development andPatent Expenses
Our research, development andpatent expenses consist of costs for antisense drugdiscovery, antisense drugdevelopment,
manufacturing andoperations andR&D support costs.
The following table sets forth information on research, development andpatent expenses (in thousands):
YearEnded
December 31,
2013
2012
Research, development andpatent expenses ............................... $
174,360 $
151,212
Non-cash compensation expense related to equity awards ..........
9,673
7,246
Total research, development and patent expenses ................... $
184,033 $
158,458
For the year endedDecember 31, 2013, we incurred total research, development andpatent expenses of $174.4million
compared to$151.2million for 2012. Research, development andpatent expenses in2013were higher primarilydue tohigher
development costs associatedwith the progressionof numerous drugs inour pipeline into later stage clinical trials, including
advancing ISIS-APOCIII
Rx
and ISIS-SMN
Rx
to the pointwhere each is poised tobeginPhase 3 studies.We also initiatednumerous
clinical studies and addednewdrugs toour pipeline. All amounts exclude non-cash compensation expense related to equity awards.
AntisenseDrugDiscovery
We use our proprietary antisense technology togenerate information about the functionof genes and todetermine the value
of genes as drugdiscovery targets.We use this information todirect our own antisense drugdiscovery research, and that of our
antisense drugdiscoverypartners. Antisense drugdiscovery is also the functionwithin Isis that is responsible for advancing antisense
core technology.
Aswe continue to advance our antisense technology, we are investing inour drugdiscoveryprograms to expandour andour
partners’ drugpipelines.We anticipate that our existing relationships and collaborations, aswell as prospective newpartners, will
continue tohelp fundour researchprograms and contribute to the advancement of the science by funding core antisense technology
research.
