Licenses
We obtain licenses from third parties and capitalize the costs related to exclusive licenses. We amortize
capitalized licenses over their estimated useful life or term of the agreement, which for current licenses is
between approximately five years and 15 years. The cost of our licenses at December 31, 2014 and 2013 was
$36.1 million and $36.2 million, respectively. Accumulated amortization related to licenses was $33.4 million and
$31.6 million at December 31, 2014 and 2013, respectively. Based on existing licenses, estimated amortization
expense related to licenses is as follows:
Years Ending December 31,
Amortization
(inmillions)
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1.9
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$0.8
Fair value of financial instruments
We have estimated the fair value of our financial instruments. The amounts reported for cash, accounts
receivable, accounts payable and accrued expenses approximate the fair value because of their short maturities.
We report our investment securities at their estimated fair value based on quoted market prices for identical or
similar instruments.
Long-lived assets
We evaluate long-lived assets, which include property, plant and equipment, patent costs, and exclusive
licenses acquired from third parties, for impairment on at least a quarterly basis and whenever events or changes
in circumstances indicate that we may not be able to recover the carrying amount of such assets. We recorded
charges of $1.3 million, $6.4 million and $0.8 million for the years ended December 31, 2014, 2013 and 2012,
respectively, related primarily to the write-down of intangible assets.
Equitymethod of accounting
We accounted for our ownership interest in Regulus using the equity method of accounting until Regulus’
IPO in October 2012. We began accounting for our investment in Regulus at fair value in the fourth quarter of
2012 when our ownership in Regulus dropped below 20 percent and we no longer had significant influence over
Regulus’ operating and financial policies. See Note 3,
Investments,
for additional information regarding our fair
value accounting for our investment in Regulus. Under the equity method of accounting, we included our share
of Regulus’ operating results on a separate line in our consolidated statement of operations called ‘‘Equity in net
loss of Regulus Therapeutics Inc.’’
Use of estimates
The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual results could differ from those
estimates.
Consolidation of variable interest entities
We identify entities as variable interest entities either: (1) that do not have sufficient equity investment at
risk to permit the entity to finance its activities without additional subordinated financial support, or (2) in which
the equity investors lack an essential characteristic of a controlling financial interest. We perform ongoing
qualitative assessments of our variable interest entities to determine whether we have a controlling financial
interest in the variable interest entity and therefore are the primary beneficiary. As of December 31, 2014 and
2013, we had collaborative arrangements with two and five entities, respectively, that we considered to be
variable interest entities. We are not the primary beneficiary for any of these entities as we do not have the
power to direct the activities that most significantly impact the economic performance of our variable interest
entities, the obligation to absorb losses, or the right to receive benefits from our variable interest entities that
could potentially be significant to the variable interest entities. As of December 31, 2014, the total carrying value
of our investments in variable interest entities was $81.9 million, and was related to our investment in Regulus.
Our maximum exposure to loss related to our collaborative arrangement variable interest entities is limited to the
carrying value of our investments.
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