Welcome to Isis Pharmaceuticals 2009 second quarter financial results conference call. Leading the call today from Isis is Dr. Stan Crooke, Isis Chairman and CEO. Dr. Crooke, please begin.

Thank you. Good morning and thanks everyone for joining us on today’s conference call to discuss our second quarter financial results. Joining us today on the call are Lynne Parshall, COO and CFO; and Beth Hougen, Vice President of Finance; and Kristina Lemonidis, Director of Corporate Communications.

Sure, thanks Stan. Good morning everyone. A reminder to everyone that this webcast includes forward-looking statements regarding Isis’s business, the financial outlook for Isis, as well as Regulus, its majority owned subsidiary, and the therapeutic and commercial potential of Isis’s technology and products and development. Any statement describing Isis’s goals, expectations, financial or other projections, intentions or beliefs is a forward-looking statement and should be considered an at risk statement. Such statements are subject to certain risks and uncertainties, particularly those inherent in the process of discovering, developing and commercializing drugs that are safe and effective for use of human therapeutics and in the endeavor of building a business around such products. Isis’ forward-looking statements also involves assumptions that if they never materialize or prove correct, could cause its results to differ materially from those expressed or implied by such forward-looking statements. Although Isis’s forward-looking statements reflect the good faith and judgment of its management, these statements are based only on facts and factors currently known by Isis. As a result, you are cautioned not to rely on these forward-looking statements. These and other risks concerning Isis’s programs are described in additional detail in Isis’s Annual Report on Form 10-K for the year ended December 31, 2008, which is on file with the SEC. Copies of these and other documents are available from the company. I would now like to turn the call over to Lynne.

Thanks Kris and good morning everyone and thanks for joining us today. I would like to provide a brief discussion of the financial highlights of this quarter. I’m assuming you’ve all read our release, so I’m not going to go through all of the details and I’ll be happy to take questions at the end of today’s call. Clearly one of the highlights for our second quarter is that we ended the quarter in a very strong financial position with over $635 million in cash, and we’re on track to meet our guidance, which is to end this year with more than $550 million in cash. Already this year we reported two quarters of pro forma net income and we had $174 million in pro forma net income in the first half of 2009. We expect to be profitable for the year with pro forma net income of more than $145 million. This will result in the second year in a row of profitability and increases in cash. We also remain on track to meet our year end guidance of the pro forma net operating loss in the low-to-mid $20 million range. In the second half of 2009, we expect that our operating expenses will increase modestly as we continue to broad base free development of mipomersen, continue to expand our drug discovery activities into new and therapeutic areas, and continue to grow the Regulus business. I think it’s important to remind you that our revenue fluctuates from period-to-period based on the nature and timing of payments from our partners such as license fee and milestone payments. For example in the second quarter, we earned two milestone payment, sold drug to one of our partners, and entered into a new collaboration with Alnylam. Assuming we have no new transactions our…

Thanks Lynne. In today’s call I’m going to focus strictly on the progress that we’re making with Mipomersen. Of course with the pipeline as large as ours, there are lots of other exciting things going on, but I will deal with those items in the Q-and-A. This quarter, together with our partners at Genzyme, we reported significant progress on mipomersen. This progress is crucial in supporting our efforts to move mipomersen towards the market and making the drug available to patients’ in-need. First, we reported very positive results with our first Phase III trial, the trial in which we treated patients with homozygous FH. Second, we more precisely defined the regulatory path for mipomersen in both the U.S. and EU, based on informal conversations with regulators. Additionally, we continue to make excellent progress in the other clinical trials planned to be available for the first registration of mipomersen. So, now let me focus on the results of the Phase III trial. As you know, we completed this trial on schedule and issued a press release. In the press release, we only reported top-line results to preserve the opportunity to present the data at the scientific meeting. Unfortunately, because of the limited amount of information that we could provide, I think there has been some confusion about the results of the trial. So without providing additional data, I am going to take some time to clarify why we are thrilled with the study results, why Genzyme is thrilled, and why key opinion leaders with whom we have shared the detailed data are thrilled. We reported that mipomersen produced a highly statistically significant reduction in LDL cholesterol of 25%, and highly significant reductions in all of the secondary endpoints. In fact, since patients entered the trial with LDL levels greater than 400…

(Operator Instructions) Your first question comes from Mark Monane with Needham; please proceed.

Good morning everybody and thanks for reviewing your progress with us. A couple of questions here; you presented some nice data on the efficacy of mipomersen, can you please update us on the safety profile in animals? I know you’re doing the mouse and the rat studies. What’s the status of those projects?

You are referring to the carcinogenicity studies, Mark?

Yes, please.

Yes, well you know, we finished the entire toxicology package, except for the carcinogenicity studies and we are confident that the preclinical data support the registration. The news from the CARC studies is equally great news. We have completed the mouse CARC study, and I’m pleased to tell you that the drug performed great and there are no significant findings. So that’s great news. The rat study, the dosing continues and again, it’s going to be a satisfactory study that is, that animals are surviving adequately. So the drug looks great past that mouse, and we believe the rat looks every bit as good.

That was helpful, and then going back to people, can you describe for us, in 2010 what data will be available for that package that you brought up earlier, in which the population will be 25,000 to 35,000? Can you review that for us?

Yes, we will have the homozygous FH trial, which is about 120 plus patients. As I say, the enrollment is complete and that study is progressing nicely. We will have the severe hypercholesterolemia patient study, people who look a lot like homozygous FH patients but aren’t genetically diagnosed, homozygous FH patients. That will be in the range of probably somewhere around 50 patients. We’ll have the high cholesterol, high cardiovascular risk study, that will be in about 180 patients and then we’ll have the statin-intolerant study, which is about 30 patients. In addition, we will have significant information from some larger safety studies that we’re doing, and finally, we will have quite a significant number of patients who will have been followed for a year and two years in the open label rollover studies, to which all of these patients and all of these trials are being admitted for long term follow up. So for this indication, I think somewhere between 700 or so total patients exposed and we’ll have a significant fraction of patients who will have been treated longer than a year, and some out two plus years.

You said that there will be heterozygous patients in this core too, but the label for heterozygous is something in Europe for 2012, is that correct?

We want to get there first. There will be heterozygous and there will be routine high cholesterol, we’ll have all of these data available. So I don’t think there is any question about efficacy. I think the reason that we’re accumulating all of these patients is safety and so what we want to do is to bring the drug to the market for the most severely needy patients, gain experience there and add to the safety database before we expand to the heterozygous FH patients as a specific indication, and then likewise, gain experience there before we expand to the routine high cholesterol, high risk patients. So this has been the development path that we have been describing since we began mipomersen. I think it’s a prudent, cautious way to develop the drug that gives us a great deal of safety information as we progress down that pyramid from highest unmet medical need to somewhat less needy people.

Very good, and one pipeline question; Inflammation still continues to be in the forefront of people thoughts concerning cardiovascular disease, so maybe you can update us on the CRP 353512 project.

It’s in the medical dose part of the Phase I trial and progressing well. We expect to finish the Phase I trial later this year and we hope to be able to begin Phase II trials after that.

Thanks very much for the added information and congrats on your progress.

Thanks very much.

Your next question comes from the line of Ted Tenthoff of Piper Jaffray. Please proceed. Ted Tenthoff – Piper Jaffray: Great, thank you very much. Thanks for the update. One quick question just sort of following up on Mark, when it comes to pricing thought in that initial target population, clearly we’re still below orphan numbers. Do you think this would be considered orphan drug pricing? Do you intend to go after that for these ultra high cholesterol indications?

Well, pricing is Genzyme’s province, and no pricing decisions have been made yet, and they shouldn’t be until we get closer into the market. What I can say to you is that a two millimole drop in LDL at the very worst, and in a profile that is in my view perfect for a drug that lowers LDL, every attribute that you would want in a drug that lowers LDL, if you were a cardiologist or a patient in need, I think this drug is going to give you. So we bring incredible benefit, two millimoles of reduction with LDL and we will do better than that, means of course a dramatic reduction in risk of heart attack, stroke, other events. So if you think through the kind of value this drug is bringing to these patients who are in desperate need, I think we’re very confident that it will support pharmaco economically, a very high value pricing proposition. That’s about as much detail as I feel confident to provide Ted.

That’s helpful. I appreciate it. I guess switching gearing a little bit to 715 diabetes drug, we’re still on track to receive that data this quarter, is that correct?

Yes. The study is finished, patients who are in follow up we’re collecting the data. There is an awful lot of data, all kinds of measurements and these patients were dosed in mostly Eastern Europe. So it’s taking a little while to gather all the data, but it’s on track to be analyzed in just a little bit.

Okay, and can you put in perspective what you think we should be looking from that study? I know it’s a three month end point. How comfortable are you with the centers that are included in the study?

How comfortable I am in what?

I’m sorry?

I didn’t hear the last part Ted.

How comfortable are you with the centers being over in Eastern Europe?

To answer that part of the question; first, I think we’re very comfortable. Most of the centers that we’re using, worked in the initial Phase II experience with mipomer with 715 and we’ve seen pretty good performance in the trials. The central problem that we worry about in these trials is just the tender loving care placebo effects. These people come in and get real diet control and real good care for their diabetes and so we continue to expect a significant placebo response from all that. So the thing that we are looking for, what we have to do is to decide whether this drug or this target merits additional investment and what we want to see is a profile. We want to be confident that it lowers glucose in a meaningful way. We want to reproduce that it lowers LDL; that’s a crucial element of the profile of this drug. That would be just a tremendous benefit if it is an insulin sensitizer that actually reduces LDL instead of as some do, increase it. We want to be sure that it’s weight neutral and continues to show the potential to be a weight loss drug. If we get that profile; good reductions in glucose, good reductions in LDL and weight neutrality, suggestive of the ability of the drug to reduce weight, I think we’ll be very happy proceeding forward. So that’s what we’re looking for. Remember, it’s only 13 weeks and so measuring the difference in the hemoglobin A1c is not our most important concern. Our most important concern is the profile.

Great, thank you very much.

Okay.

Your next question comes from the line of Aaron Reames with Wells Fargo Securities; please proceed.

Thanks for taking my question and thanks for the update as well. I was wondering, if there’s any conclusions or comfort that can be made from the recent approval of Pitavastatin. I know that the drug was originally developed by Novartis. It was dropped due to an association with elevated liver enzymes. So I didn’t know if you had any background information on the profile of that agent and/or the clinical program that supported its professional that could provide us with maybe the way the agency is thinking currently.

I don’t know enough about the summary basis of approval and all of that to comment specifically about that drug. I’m just getting the information to look at now, Aaron. Here’s the message that’s we have gotten and I think it’s been very consistent. That is, as Doctor Maddrey says, the price of admission for changing lipids is ALT elevations. So it is just simply fact that statins of all sorts cause significant increases in ALTs, and that increase in ALT is absolutely dose dependent. So I think the FDA is well aware of that and it’s approved all of these drugs. What has been made absolutely clear to us is that the FDA is principally concerned, as is the European Regulatory Agency, with the potential for the drug to produce severe liver toxicity, and the consensus of the scientific community is that the best measures of the potential to do that are whether the drug produces any patients with Hy’s Law, that is a concomitant increase in ALT and bilirubin. Whether the drug produces any suggestions of liver toxicity, real liver toxicity, such as reductions in albumin or a change in clotting factors or an increase in bilirubin, and whether the drug results in any ALT elevations that are in the 10x or thereabouts range, that has been the consistent position of the FDA in a very dynamically changing world, since we’ve been developing this drug, and we have seen in all of the subjects treated with mipomersen, not a single incidence of Hy’s Law, we’ve seen not a single incidence of evidence of liver toxicity. We have never gotten to 10x upper limit of normal at any dose with this drug, in patient that has been treated, including these patients who are very, very sick and on having on-drugs that produce increases in ALTs. An 80 milligram dose of tolerated statin will give you a significant increase in ALT’s in a significant fraction of patients. So I take the fact that they approved this drug, as simply being consistent with their stated positions, and their positions in the given guidelines.

Okay, thank you. Then you’ve got a number of agents in the pipeline, and from an investors standpoint, can you point us to the one or two agents that may represent either the greatest advancement either in antisense technology itself, where positive results emerge or the greatest advancement, potential disease management as we start to evaluate the prospects of some of the other assets during development?

Let me answer the question in two parts. What are the compounds that are closest to commercial opportunities that look the most interesting to me today? OGX-011, obviously it’s a Phase II result in cancer, but I think the Phase II results are quite encouraging. I think it merits Phase III work and we’re looking forward to OGX-11 getting a partner and really beginning robust Phase III studies. 715, even when we finish this study, we’ll probably not be ready for Phase III. We’ve got other work we need to do before we decide on the right Phase III program. Six month studies in metformin and Sulfonylurea patients for example, but 715 continues to be very encouraging to us. In terms of advancing the technology, there I look at new roots as quite important, and so the performance of our IL-4 receptor alpha drug in the hands of Altair, one of our satellite companies in Phase I was very encouraging and they’re progressing along in Phase II. So, assuming that continues to be as positive as we’ve seen, that will expand the use of the drug into aerosol and then opens up a whole new root of delivery for antisense. In SGLT2, because this is the first drug that we are developing in man, with the target that’s in the kidney and really only the kidney, so that will help us understand how working in that organ in human beings is going to be. Those are sort of at the top of my mind today.

Okay great. Thanks for that update and for taking the questions.

You bet.

Your next question comes from the line of Salveen Kochnover with Collins Stewart; please proceed.

Thanks for taking my questions. Just Stan, given your recent discussions with the FDA, can you maybe comment on how they are defining severe high cholesterol?

I can’t really amplify it or clarify it anymore than to say that they are the standard definitions of high risk, which boils down to a point system, depending on whether you’ve had previous cardiovascular venture cholesterol levels, and then other risk factors. Their definition is straight from as far as I know, from the definitions that the cardiovascular community has made.

Are there any plans to start new mipomersen trials prior to filing in the second half 2010?

Yes. We will continue to have a very active program, and don’t forget that the long term safety and short term safety studies will be progressing, and we will begin to get, at some point, we don’t have the date yet, the outcome study under way. Over the next year, all of the data from the existing trials will be emerging. So it’s a little difficult to know exactly which one will come. Well, I mean heterozygous will be first, but it’s a little difficult to know how the others will finish and exactly how we’ll present the data, because we will be trying to get them into scientific meeting. But all the studies that I described, including the added safety information is all planned to be available for that first filing in the second half of 2010, so all of that information will roll out over the next year.

Are we still on track to see the full data from the Phase III homozygous study at the end of this year or by the end of this year?

Yes. We hope sooner than that. We’re just submitting it to meetings, and trying to get into the best meeting that we can, but one way or another you’re going to see all of the data and hopefully you will be as excited as we are.

Great and then just one last question, in terms of the Ibis acquisition by Abbot, can you maybe comment on how that partnership I guess is progressing?

Yes, I think it’s going remarkably well. I think bottom-line, it was exactly the right thing to do, at exactly the right moment. It’s very obvious; it’s more obvious now than it was when it was ours, that we would not have had the muscle to do the marketing around the world for the Ibis technology that Abbott is. So my sense of it is, first, that sales of the Ibis Instrument and the platform are going nicely, that the T-6000, which is the new instrument is progressing toward commercialization and again, I’m giving you this at very distant levels, but my sense is its going very well and there are significant orders for the system. An important thing to me is that of course I still see the Ibis people a lot, and I think they all seem very happy with their move, and Abbott is building to house the Ibis people just down the street from us, and I drive by that building every morning and it looks like they’re making progress there. So all-in-all, I think it’s going well and we think that 5% earn outs would be a lot of money for our shareholders over the years.

Great, thank you.

Your next question comes from Shiv Kapoor with Morgan Joseph; please proceed.

Thanks for taking my questions. I’ve got a couple; I’ll start with the easier one. Beyond Michael Merson, what do you consider to be your two or three next key drivers, as far as the next key products are concerned?

Well, I could just reiterate the answer I gave earlier. I look at OGX-011 surviving DLA for 715, as sort of immediate and then behind them CRP, IL-4 and SGLT2 and glucagon. Glucocorticoid is not yet in the clinic, so I can’t comment on that. So the reason for OGX-011 and VLA-4 and survivin being on the list at the top, we think each of those is either ready or getting ready to be in Phase III. I haven’t mentioned the work going on with wound healing by one of our partner companies Excaliard, which is another interesting addition to antisense, because that will be the first time that we use an antisense drug topically. It’s a drug designed to enhance healing and reduce scarring. So again, I think we’ll be learning about how antisense drugs behave as topical administered drugs for that kind of indication as well this year.

Thanks. A couple of questions on your clinical and regulatory strategy on mipomersen; based on the ongoing data that you have from the ongoing trials and the homozygous Phase III trial, what kind of refinements or changes have you made to your clinical and regulatory strategy over the past three to six months?

The drug is performing as we hoped and the conversations with the agencies have clarified the path and I went through those on the call. So I think the most important thing that’s happened is that working with Genzyme, I think we’ve gotten a lot greater clarity about the regulatory paths. We’re now confident that we will meet the safety requirements, and that we’ll have a contemporaneous filing in the EU for that first indication. We’re now confident that we can file for heterozygous FH, given the safety package we have in the EU in 2012 and we are planning our outcome study, inline with everything that we’re learning. So I think the regulatory situation has clarified dramatically. That’s great progress, particularly when you consider the kind of issues that we were grappling with just a year ago with the FX at the FDA about all drugs in the cardiovascular space, and trying to figure out what they really wanted. So I think that the most important thing is we now are very clear that we have clear paths to significant commercial opportunities in both the U.S. and Europe. On the clinical trial side, we’re just gaining a lot more experience. The more experience we gain, the more comfort we have that the drug is well tolerated and we’re building longer term experience into our database. I don’t think there’s ever really been much of a question about whether mipomersen works. It’s only a question of how it was going to behave with longer term treatment and so far, so good. I guess the final thing that I mentioned in an answer to a question that Mark asked, is that one other element of risk is gone, and that is, we finished the mouse CARC study, and those results look great. So, I look at it and what I say is the risk of not having a successful homozygous FH trial has gone; it’s positive and it sets us up with great confidence that the other trials are going to be good. The regulatory risk has declined dramatically. We now know what we need to do and we have a clear path and the animal toxicology risk is obviously to a large extent behind us as well.

Thanks. Well, one last tactical question on regulatory tactics; when discussions are being held with the FDA or data is sent to them or data is received from the FDA, is that interaction happening just with Genzyme or are some people from Isis also involved in that in that action?

Genzyme’s in the lead, we are in all the meetings or most of the meetings. The meetings that are relevant.

Okay, thanks a lot.

The other thing to remember is that the CMC manufacturing, all that stuff is solid. The building has been remodeled, it’s making drugs, so all of the backroom stuff that you have to get done with the drug is in hand. This drug is ready to be commercialized and so far, cooperating with us in a very nice way.

Great. Thanks a lot.

Your next question comes from the line of Craig Gordon with Cowen.

A couple of questions; the remaining trials for Heterozygous Familial Hypercholesterolemia patients that are slated to finish enrollment, when do you think those will complete enrollment?

The Heterozygous trial has finished enrollment.

Well, the two remaining Phase III trials that are ongoing in high risk population. I’m sorry.

Well, I can’t predict exactly when they will complete enrollment. What I have said and I can just reiterate it, is all of these trials that are in progress will be done in time for our filing next year.

Great, and in terms of the outcomes, I know that no start date has been said. Do you still anticipate that could be mid year 2010 event?

It could be. I think what we have to do is to be sure that we know enough to do a good study. We are anxious to get that study underway, but we’re more anxious to learn what we need to learn from the trials that are ongoing. How to be sure that we minimize dropouts, for example; how do you do an outcome study with a subcu drug, never been done before. These are all things that we are learning a lot about and dealing with a lot of consultants, and then eventually, we have to sit down with the design and go over that with the FDA. We want this study to be right. As long as the study is well designed, I’m confident we will get a good outcome. Remember that in animals, we are able to basically wipe out atherosclerosis, and so there is no reason that we should get anything, but a positive outcome, unless we design a bad study.

That sounds great, and one last question; as manufacturing has become a bigger issue, recently for several companies, have you guys made any manufacturing changes to the production of the drug, between Phase II and Phase III or as the Phase III’s have been ongoing?

No. The troubles that people are having are in fermentation and purification and management of natural products. These are chemically synthesized drugs. This is a process that we’ve developed over 20 years. The processes are well understood. The chemistry is clear-cut. The purity and CNC and all of that has been worked out extremely well. This is not the kind of manufacturing issues that companies are dealing with as they try to make monoclonal antibodies or proteins and try to purify them and deal with all of the problems that are associated with that. This is straight-forward.

Okay, great. Thank you very much and congratulations.

You bet, thanks. I’m going to take one more question because it is almost an hour.

Your next question comes from the line of Lucy Lu with Citi. Please proceed.

Great, thank you Stan. Can you just give us an update on the CRP program, the antisense drug, just the Phase I by our estimation, it should be almost done. Just wanting to see what you observed. Do you have the ideal peaked profile that you were hoping for and also when you would start Phase II, I’m what are the indications? Thank you.

The study is taking a little longer, because we have been trying to recruit patients with high CRP. I think that’s been a real problem for us. We thought that there would be people with high CRP that we would be able to get in pretty easily, hasn’t proven to be the case and so we’re finishing the multiple dose arm of the study today and we expect Phase II trials to begin this year and we’ve been planting our Phase II. I think I mentioned in one other call that our Phase II program will be broad and we will focus on indications other than cardiovascular initially, because we think there are indications that are going to be easier to get than acute coronary syndrome, and we want additional safety. So the places that we are thinking of in Phase II range from myeloma, where CRP elevations are clearly associated with a very poor outcome, to Crohn’s, to rheumatoid arthritis, and Kikexia. So the way you should think about this is the Phase II program will be more of a scan, to help us identify indications where we believe it will be relatively straight-forward to get an indication for CRP lowering in patients, and then overtime we’ll work our way into the acute coronary syndrome patients, but we want a lot of experience with the drug before we go to that patient group.

Then, why is it difficult to recruit high CRP level patients? Is it because you want healthy volunteers?

Yes, they’re normal volunteers and there was a lot of information that suggested that a lot of healthy volunteers walk around with CRP levels that are in the three to five and higher range. In the centers that we’re working with, that hasn’t turned out to be the case and I can’t explain why. It just hasn’t turned out to be the case.

Thank you.

I think that’s going to be the last question for the day. I do want to just quickly summarize the key takeaways that I think are important. First, we’re in great financial shape. We didn’t spend any time in the formal remarks talking about the pipeline, but I think the Q-and-A allowed me to show you that the pipeline is rich, advancing and going very well. The Phase III trial for mipomersen in homozygous FH was extraordinarily successful, and the profile of the drug that we’re seeing is everything that you could hope for. We have an absolutely clear path, both in the US and Europe to commercial opportunities. We think that commercial opportunity is significantly larger than just U.S. and Europe. We think that the rest of the world, that Genzyme is beginning to plan toward and we think there are great opportunities there as well. So stay tuned, we’ve had a great half a year and I think we are going to continue to do that. Thank you very much.

Thank you for your participation on today’s conference. This concludes the presentation. You may now disconnect. Have a great day.