72
General andAdministrativeExpenses
The following table sets forth information ongeneral and administrative expenses (in thousands):
YearEnded
December 31,
2012
2011
General and administrative expenses ............................................ $
11,190 $
11,471
Non-cash compensation expense related to equity awards ...........
1,325
1,318
Total general and administrative .............................................. $
12,515 $
12,789
General and administrative expenses for the year endedDecember 31, 2012were $11.2million anddecreased slightly
compared to$11.5million for 2011. All amounts exclude non-cash compensation expense related to equity awards.
Equity inNet Loss of Regulus Therapeutics Inc.
Our equity in net loss of Regulus for theyear endedDecember 31, 2012was $1.4million compared to$3.6million for 2011.
Our equity in net loss of Regulus decreasedbecause in2012we suspended recognizing losses inour share ofRegulus’ net loss. Until
the completionof Regulus’ IPO inOctober 2012, we andAlnylamwere guarantors of bothof the convertible notes that Regulus
issued toGSK. Therefore, we continued to recognize losses in excess of our net investment inRegulus up to the principal plus accrued
interest we guaranteed. In the secondquarter of 2012, we suspended recordingour portion of Regulus’ net loss because our share of
Regulus’ net loss exceeded the amountwe hadguaranteed.
In the fourthquarter of 2012, we recorded an$18.4million gainbecause of the increase inRegulus’ valuation resulting from
its IPO. We have reflected this gain in a separate line onourConsolidatedStatements ofOperations called “Gainon investment in
Regulus Therapeutics Inc.” Also, in the fourthquarter of 2012we stoppedusing the equitymethod of accounting for our equity
investment inRegulus and insteadwe began accounting for our investment at fair value.
Investment Income
Investment income for the year endedDecember 31, 2012 totaled $1.8million compared to$2.4million for 2011. The
decrease in investment incomewas primarily due to lower average cashbalance and currentmarket conditions. Our average cash
balancewas lower in2012 than in 2011, even thoughwe ended 2012withmore cash thanwe had at the end of 2011, because of a
significant inflowof cash in the fourthquarter of 2012.
Interest Expense
Interest expense for the year endedDecember 31, 2012 totaled$21.2million compared to$16.7million for 2011. The
increase in interest expense in2012 is primarily a result of additional non-cash interest expensewe recorded for the long-term liability
associatedwith our primary research anddevelopment facility. The increase is alsodue tohigher interest expense for our convertible
notes because in2012we used the proceeds fromour 2
3
4
convertible notes to redeem the entire outstanding amount of our 2
5
8
percent
convertible notes. SeeNote 4,
Long-TermObligations andCommitments
, in theNotes to theConsolidatedFinancial Statements for
additional information about our convertible notes and long-term liability for our primary research anddevelopment facility.
Gainon Investments, Net
Net gainon investments for the year endedDecember 31, 2012was $1.5million compared to $4.2million for 2011. The net
gainon investments in2012 consistedprimarily of a $1.3million gainwe recorded for contingent paymentswe received fromPfizer
Inc. triggeredby its decision to advanceEXC001 into a Phase 2 study. The net gainon investments in2011 consistedprimarilyof the
$4.4millionwe received for our ownership interest inExcaliardwhenPfizer Inc. acquiredExcaliard. See further discussion about our
investments inExcaliard inNote 7,
CollaborativeArrangements andLicensingAgreements
, in theNotes to theConsolidated
Financial Statements.
