develop antisense drugs to treat autoimmune disorders in the GI tract, four strategic alliances with Biogen Idec to
discover and develop antisense drugs to treat neurologic diseases, a strategic alliance withAstraZeneca to
discover and develop antisense drugs to treat cancer and a strategic alliance with Roche to discover and develop
antisense drugs to treat Huntington’s disease. Additionally, we and our partner, GSK, are developing five drugs,
including ISIS-TTR
Rx
, which is in Phase 3 development. We have the potential to earn significant revenue from
these partnerships and our other partnered programs. Since 2007 we have received more than $1.4 billion in cash
from upfront and licensing fees, equity purchase payments, milestone payments and research and development
funding from our partnerships. We have the potential to earn over $9 billion in future milestone payments and
licensing fees from all of our partnerships. We also have the potential to share in the future commercial success
of our inventions and drugs resulting from our partnerships through earn out, profit sharing, or royalty
arrangements.
As an innovator in RNA-targeting drug discovery and development, we design and execute our patent
strategy to provide us with extensive protection for our drugs and our technology. With our ongoing research and
development, we continue to add to our substantial patent estate. Our patents not only protect our key
assets—our technology and our drugs—they also form the basis for lucrative licensing and partnering
arrangements. Through December 2014, we have generated nearly $420 million from our intellectual property
sale and licensing program that helps support our internal drug discovery and development programs.
Business Segments
Prior to 2015, we operated in a single segment, Drug Discovery and Development Operations, because our
chief decision maker reviewed operating results on an aggregate basis and managed our operations as a single
operating segment. In our Drug Discovery and Development operations we are exploiting a novel drug discovery
platformwe created to generate a broad pipeline of first-in-class or best-in-class drugs for us and our partners.
With our proprietary drug discovery platformwe can rapidly identify drugs, providing a wealth of potential
targets to treat a broad range of diseases. We focus our efforts in therapeutic areas in which our drugs will work
best, efficiently screening many targets in parallel and carefully selecting the best drugs. When we combine this
efficiency with our rational approach to selecting disease targets, we can build a large and diverse portfolio of
drugs to treat a variety of health conditions, with an emphasis on cardiovascular, metabolic, severe and rare
diseases, including neurological disorders, and cancer.
In 2015, we began operating as two segments. Our Drug Discovery and Development Operations segment
and our new segment, Akcea, which is our newly formed wholly owned subsidiary. We formedAkcea to develop
and commercialize the drugs from our lipid franchise, focusing on the clinical development of ISIS-APOCIII
Rx
,
ISIS-APO(a)
Rx
and ISIS-ANGPTL3
Rx
, as well as more potent follow on drugs from these programs.
Critical Accounting Policies
We prepare our consolidated financial statements in conformity with accounting principles generally
accepted in the United States. As such, we make certain estimates, judgments and assumptions that we believe
are reasonable, based upon the information available to us. These judgments involve making estimates about the
effect of matters that are inherently uncertain and may significantly impact our quarterly or annual results of
operations and financial condition. Each quarter, our senior management discusses the development, selection and
disclosure of such estimates with our audit committee of our board of directors. In the following paragraphs, we
describe the specific risks associated with these critical accounting policies and we caution that future events
rarely develop exactly as one may expect, and that best estimates may require adjustment.
The significant accounting policies, which we believe are the most critical to aid in fully understanding and
evaluating our reported financial results, require the following:
•
Assessing the propriety of revenue recognition and associated deferred revenue;
•
Determining the proper valuation of investments in marketable securities and other equity investments;
•
Assessing the recoverability of long-lived assets, including property and equipment, intellectual
property and licensed technology;
•
Determining the appropriate cost estimates for unbilled preclinical studies and clinical development
activities;
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