in the Notes to the Consolidated Financial Statements. During 2013, we realized a $2.4 million net gain on
investments related to the sale of stock in several of our satellite companies. During 2012, we realized a net gain
on investments of $19.8 million primarily because of the increase in Regulus’ valuation resulting from its IPO.
Valuation of 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. During this
process, we review our property and equipment listings, pending domestic and international patent applications,
domestic and international issued patents, and licenses we have acquired from other parties to determine if any
impairment is present. We consider the following factors:
•
Evidence of decreases in market value;
•
Changes in the extent or manner in which we use an asset;
•
Adverse changes in legal factors or in the business climate that would affect the value of an asset;
•
An adverse action or assessment by a regulator;
•
An accumulation of costs significantly in excess of amounts originally expected to acquire or construct
an asset;
•
Current period operating or cash flow loss combined with a history of operating or cash flow losses
associated with an asset used for the purpose of producing revenue; and
•
Challenges or potential challenges to our existing patents, the likelihood that the United States Patent
and Trademark Office, or foreign equivalent, will issue an application and the scope of our issued
patents.
We recorded a charge of $1.3 million, $6.4 million and $0.8 million for the years ended December 31,
2014, 2013 and 2012, respectively, primarily related to the write-down of intangible assets to their estimated net
realizable values. In 2013, we conducted a careful restructuring of our patent portfolio to focus our resources on
patents and new patent applications that drive value for our company. As a result, our write-downs in 2013 were
more significant than other years. We expect write-downs in future years to be similar to amounts recorded in
2012 and 2014.
Estimated Liability for Clinical Development Costs
We record accrued liabilities related to expenses for which service providers have not yet billed us. These
liabilities are for products or services that we have received, specifically related to ongoing preclinical studies
and clinical trials. These costs primarily relate to third-party clinical management costs, laboratory and analysis
costs, toxicology studies and investigator grants. We have numerous drugs in concurrent preclinical studies and
clinical trials at several clinical sites throughout the world. In order to ensure that we have adequately provided
for ongoing preclinical and clinical development costs during the period in which we incur such costs, we
maintain an accrual to cover these costs. We update our estimate for this accrual on at least a quarterly basis.
The assessment of these costs is a subjective process that requires judgment. Upon settlement, these costs may
differ materially from the amounts accrued in our consolidated financial statements. Our historical accrual
estimates have not been materially different from our actual amounts.
ValuationAllowance for Net Deferred Tax Assets
We record a valuation allowance to offset any net deferred tax assets if, based upon the available evidence,
it is more likely than not that we will not recognize some or all of the deferred tax assets. Except for 2009, we
have had net losses since inception, and as a result, we have established a 100 percent valuation allowance for
our net deferred tax asset. If we determine that we are able to realize a portion or all of these deferred tax assets
in the future, we will record an adjustment to the valuation allowance.
Convertible Debt
We account for our convertible debt instruments, including our 1 percent and 2¾ percent convertible notes,
that may be settled in cash upon conversion (including partial cash settlement) by separating the liability and
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