Welcome to the Isis Pharmaceuticals year-end financial results conference call. My name is Erik. I'll be your audio coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session at the end of the presentation. (Operator Instructions) As a reminder, the conference is being recorded for replay purposes. Leading the call today from Isis is Dr. Stan Crooke, Isis Chairman and CEO. Dr. Crooke, Please begin.

Good morning. Thanks everyone for joining us on today’s conference call to discuss our year-end financial results. Joining me on the call today is Lynne Parshall, COO and CFO and then to be available for questions, Richard Geary, Senior Vice President Head of Development and Beth Hougen, Vice President of Finance and of course, Kristina Lemonidis, Director of Corporate Communication is joining us as well. Kris, will you lead the forward-looking statement?

Sure. Thanks, Stan. Good morning, everyone. A reminder to everyone, this webcast includes forward-looking statements regarding Isis' business, the financial outlook for Isis as well as Regulus, a majority-owned subsidiary and the therapeutic and commercial potential of Isis technology and products in development. Any statement describing Isis' goals, expectations financials or other projections intentions or beliefs is a forward-looking statement and should be considered an at-risk statement including the statements that are described as Isis' goals. 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 as human therapeutics and in the endeavor of building a business around such products. Isis' forward-looking statements also involve 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 forward-looking statements reflect the good faith 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 programs are described in additional detail in Isis' annual report on form 10-K for the year ended December 31, 2008 and its most recent quarterly report on Form 10-Q which are available -- which are on file with the SEC. A copy of these and other documents are available from the company. Stan, back to you.

Thanks, Kris. The purpose of the call is to report our financial performance for 2009 and to lay out our agenda for 2010. 2009 was a great year for Isis. Obviously, mipomersen was the focal point and will continue to be in 2010 as we prepare for the U.S. and EU filings in the first part of 2011. We've just completed two Phase 3 studies that we believe show that mipomersen is the most exciting lipid-lowering drug to come along in a very long while. Later in the call, I will discuss mipomersen and hopefully clarify some of the points that have not been as well understood as we would like and help you understand why we are so pleased with this performance in the heterozygous FH trial. For now, I'll take a brief moment to review some of our other accomplishments of 2009. We've recorded progress across the board on our pipeline and our cancer program was greatly strengthened by the performance of OGX-011 in Phase 2 studies, it's licensing to Teva and the plan for Phase 3 studies to begin early this year. We also reacquired our eIF-4E inhibitor from Lilly and we plan to start a broad Phase II program this year for that important drug. We're planning to add a fifth anti-cancer drug to our pipeline this year further strengthening that franchise. Our efforts in metabolics resulted in exciting Phase 2 data on our PTP-1B inhibitor and positive Phase 1 data from our glucagon receptor program. Overall, in 2009, we advanced two drugs in Phase 2 trial and four into Phase 1 trials, plus we added four new drugs to our pipeline and we will be adding three to five new drugs to our pipeline this year as well. We've continued to execute on our unique business strategy. With the most important element in 2009 being the sale of IBIS to Abbott, we've also reported great progress with our satellite company, the success of OncoGenex, Regulus, Altair, Excaliard and Achaogen sets up 2010 as a very exciting year in terms of development activities, data and the potential for new revenue. A good example of this is the recently announced expansion of the GSK Regulus relationship to include anti-miR-122, an exciting micro RNA drug. Another good example is the announcement by OncoGenex that the EMA had agreed with their Phase 3 development plan for OGX-011, so lots of news. With that I'll turn the call over to Lynne to review our financial results.

Thanks, Stan. As you heard from Stan, 2009 was another successful year for us across all areas of our business including our most advanced drug, mipomersen. We also had a very successful year financially and I'm pleased to say we exceeded all aspects of our 2009 financial guidance. As usual, I'm assuming you've read the details of the year-end financial results in our press release so I will just cover the highlights. 2009 was our second consecutive profitable year largely due to the sale of our Ibis subsidiary to Abbott in January. We ended the year with a pro forma profit of $167 million, significantly higher than our guidance of $145 million. Both of these, I announced, include $20 million of tax expense, primarily related to the gains we recognized on the sale of Ibis and upfront payment we received from Genzyme in 2008. We exceeded our guidance principally due to the expansion of our collaboration with Alnylam and OncoGenex license of OGX-011 to Teva. Our pro forma net operating loss of $14 million was also significantly better than our guidance with pro forma NOL [ph] in low to mid $20 million range. And finally, we ended 2009 with almost $575 million in cash, exceeding our guidance by nearly $25 million. 2009 was the fourth consecutive year in which we ended the year with more cash than that with which we began. As many of you know, we've followed who have followed us over the years, we tend to be conservative in the guidance we provide. We've never missed a target. The breadth and depth of our technology platform in our relationship result in a fairly steady stream of opportunities for financial benefit as we had with Alnylam and OncoGenex last year. This is the value of our unique asset…

Thanks, Lynne. As Lynne outlined, we have a busy year to look forward to in 2010. Over the past three years, we have built a strong financial position and as a result, we can invest more in our earlier stage assets rather than partnering. This enabled us to move the drugs quickly to Phase 2 proof-of-concept before licensing them and to achieve better licensing terms. We are pleased today to report positive Phase 1 data from our glucagon receptor drug. In this study, normal volunteers were administered a glucagon infusion which of course caused an increase in blood glucose level and at a dose of 400 milligrams a week after six weeks of dosing, our glucagon receptor antisense drug decreased blood glucose following a challenge in a highly statistically significant fashion and that’s a P 0001 [ph]. This exciting result confirms that the activity we saw in animals is likely to be replicated in patients with diabetes. We're also pleased that the drug was well tolerated at all doses. This study validates the potential of a glucagon receptor antisense drug to be a novel treatment for Type 2 Diabetes. Remember in animals, inhibition of glucagon receptor displayed robust activity reducing glucose production in the liver and increasing glucagon thus having a potential to be a disease modifying drug. Ortho-McNeil, however, wanted a more potent drug as a result, we performed additional screening and identified several inhibitors that are significantly more potent than the drug we have in the clinic today. As a consequence, we have a better drug and with a better therapeutic profile and better commercial potential. For us, this was an important exercise because it demonstrated that by doing even deeper screening than we typically do, we can find even more potent drugs. So we will be moving…

Thank you very much. (Operator Instructions) The first question comes from the line of Mark Monane with Needham. Please proceed. Mark Monane – Needham: Good morning from New York City. Thanks for the comprehensive review. It was a really good foundation for understanding mipomersen going forward. The question that I have to deal with is additive efficacy and additive safety or concern or any safety concerns. Sometimes when you add a drug, you get a beneficial effect, sometimes you don't get as much as beneficial effect as you did in the single agent, there might be some antagonism, sometimes you get synergy. How are you thinking about mipomersen's added efficacy, let me start with that in terms of in addition to the other agents that are being there. Is it simply looking at the numbers or is it a potential dose reduction for the other drugs that may be associated with side effects? How are you thinking about that?

Well, I think we've shown that the efficacy of mipomersen is the same as a single agent or in combination with moderate or high dose lipid-lowering drugs. So we know that we get the same efficacy in any setting that we've looked at including normal volunteers to people who are severely ill. And we are adding it to patients who have already, who are already on maximum lipid-lowering therapy and are no where close to their target. So, we believe that the safety that we've seen today supports the notion of adding mipomersen at its Phase 3 dose, 200 milligrams a week, to full doses of other drugs to help these patients get closer to their LDL targets. In the heterozygous FH trial, we had 45% of the patients get to an LDL of 100, which as you know, is a target that everyone would like to get to if they've had a cardiovascular event and in the homozygous trial, we had people drop by more than 100 milligrams per deciliter. So the drug is to be added to full doses of the other drugs and we think the safety profile that we've seen supports that. The only exception to that is in patients who are unable to take statins. And as you know Mark, there are quite a large number of people who can't take statins because of principally the worry of the severe muscle toxicity that statins have. So that would be the only exception. What's also important about mipomersen to realize is that we've seen no significant toxicities. With mipomersen, we have no drug-drug interactions, we have no central nervous system toxicity that we've identified, no cardiovascular toxicity and no muscle toxicity. So in that sense, mipomersen is an ideal drug to be added to patients who are typically taking 10 to 15 drugs on top of mipomersen. Mark Monane – Needham: Now, the label dose, sticking with efficacy and I'll move to safety in a minute. In terms of efficacy, 200 milligrams would be the label dose. Does your market research indicate that some physicians may use the 300 dose which we know we have data on that is increased efficacy there or alternatively use the 100 dose, which again we know there is information on decrease in cholesterol in that population.

We'll be submitting 200 and the drug will be approved for a 200-milligram a week dose for the initial indication. We look at this sort of like the historic approach to statins where the first doses of statins were defined and then over time, the dose range was expanded with additional data and we would expect similar sorts of behaviors. After all, each patient is different and each patient requires different kinds of interventions. But our per submission will be 200 milligrams, we believe that's a prudent dose. It's half the maximum dose that we've given. We know that in Phase 2 studies at 400 milligrams, we were able to ablate apoB that is to take it to undetectable levels in patients. So we know there's plenty more efficacy that could be gotten from the drug as if physicians prudently tried to adjust the dose upward and similarly we could adjust the dose downward in patients who are unusually sensitive. We've not allowed any of that in Phase 3 trials because we wanted all of our data to be in 200 milligrams and we wanted a safety database, which will be very large for an indication like we're talking about, to be specifically at the dose we're talking about. Mark Monane – Needham: Fair enough. And speaking of dose, we know from experience from another chronic medication, anti-hypertensives that if you give a bigger dose you get a lower blood pressure, but you also get more side effects and the question here is did the patients who had the greatest LDL reduction, did they have the most or higher frequency of ALT alterations? So, was any changes in the liver pattern related to efficacy?

Well, what we believe today and I think the data that will show with the heterozygous trial are consistent with the other trials is that the patients who have the highest level ALTs, again even there no liver toxicity we can identify, are the patients who have the most rapid and profound reductions in apoB. That as you would expect because as we think this is just pharmacology and it certainly does suggest that one could watch apoB as one is treating a patient and if one sees a 60% or 70% drop in apoB, temporarily lower the dose. But as you know, these are Phase 3 trials that are blinded and rigidly controlled so none of that has been allowed. Richard, do you want to add anything to that?

No. That's very complete, thanks. Mark Monane – Needham: That was helpful and then lastly, when I went to medical school and you went to medical school, chronic therapies were thought to all be oral and since that time, we've seen a number of drugs that have come out that have been very successful that are subcutaneous including Epogen, Enbrel, Boniva. Can you talk about the experience of dropouts that you saw in your trial and relate them to other experiences that we see in using subcutaneous medicine, especially when this is a first subcutaneous medicine in the market for that indication?

We projected in our -- thanks Mark, we projected a dropout rate of 20% to 25% in our trials and that was based on experience from other subcutaneous drugs in six-month trials. And we actually expected more dropouts than something like in Enbrel, because this was the first time most of these lipidologists and patients had been exposed to a subcutaneous drug and the patients don't have pain to motivate them to continue taking drug. I think one of the things most important to remember is that pain is a tremendous motivator for many of those drugs and Epogen and so on you have life threatening infections as a big motivator. So today, we've been surprised at the dropout rate as being as what it has been, 16% or 17% in the homozygous trial and 12% in this trial. So we are confident based on the total experience of other drugs that have administered subcutaneously that these dropout rates are consistent with a very successful product. We're not satisfied with that and we know we can do better and we're starting to do better. We're providing better information to patients and physicians and that helps. We're being more flexible and letting patients in these long term open label studies dose themselves and pick the site that they want. We're working on the product presentation as we should. We certainly hope that we have a prefilled syringe and eventually we will look at -- we may move to a needleless injector and we want to offer patients the options of daily dosing versus weekly dosing. Again, we think some patients may like giving themselves a small daily dose every day. Others may like giving themselves a larger dose on Sunday. All of these things are designed to optimize the drug once commercialized for larger and larger number of patients and to keep patients on treatment longer and I think I look at it as just another extraordinary benefit of this stage parameter development plan that we've been talking about for the last five years. We have the opportunity to get to the neediest patients first and then over time work our way to the next neediest and next neediest in the same – in that very same time frame, the process allows us to improve the presentation and performance of the drug as a commercial entity. It just seems like the ultimately sensible way to develop a drug like this. I hope I've helped that Mark and maybe we should move on now. Mark Monane – Needham: Yes. Thank you. Look forward to the Summer.

Very helpful questions. Thank you.

Your next question comes from the line of Salveen Kochnover with Collins Stewart. Please proceed. Salveen Kochnover – Collins Stewart: Good morning. Thanks for taking my questions. I guess, Stan, maybe in the homozygous and heterozygous trials, can you just let us know if the patients who had ALT elevations above five times the upper limit of normal. Did they have significant rapid and large decreases in apoB versus the other patients in the trials?

Absolutely. I'll say it again just as clearly as I can possibly say it. We now have data that confirms that the folks who get the largest increases in ALT typically are people who have most profound and rapid reductions in apoB. There's a lot that goes on in these trials and you'll see, despite the fact that the protocol doesn't allow it we've had patients that stop-and-start their statins and do other things. So you get a lot of other shenanigans going on that you have to sort out, but we're confident that the mipomersen related increases in ALTs that seem to be the larger and matter are tied to this profound pharmacology that we produce. That's really great news. Salveen Kochnover – Collins Stewart: Okay. And when will we see the next data read out on the MRI measurements evaluating liver?

We don't know yet and the analysis is really complicated because there are multiple MRI's and multiple centers and they have to be normalized and a whole bunch of work that has to go into making sense of them. So it will be a while and I can't give you a date and frankly, I think we’re not for the unnecessary and almost hysterical speculation, we wouldn't be talking about them at all. What I want to say about liver fat is that we've done two effective studies, the first published clearly didn't demonstrate anything significant and second it's still in progress, but has caused us knowing the idea about the change in liver fat. On the other hand, this drug lowers LDL. We certainly wouldn't be surprised if we see people have some mild increase in liver fat. If we ran into someone, for example, who couldn't oxidize his fat, someone who had a lipid deficiency and the deficiencies in enzymes that metabolize fat and liver, that person would be more sensitive to mipomersen. That's not a big issue and I think our clinical data are consistent with our observations in animals and certainly consistent with the predictions that our animals gave us that we would see no -- we would not see anything that look like an MTP style liver fat increase and we're not. And as much as I'd like to go into more detail, I really can't. That as much as I can give you on this. Salveen Kochnover – Collins Stewart: Sure, if I could just ask a regulatory question. So when do you tend to have the Phase 3 meeting with the FDA about mipomersen and at what point are you going to determine whether you can file for severe or apheresis eligible patients?

I'll let Lynne handle that.

We're going to -- Genzyme of course is in charge of all of the regulatory activities for Mipomersen, but the plan as you would expect is to get the remainder of the Phase 3 data and then talk to the FDA about our filing strategy.

And remember, we'll have the other Phase 3 trials done here in the middle of the year. Salveen Kochnover – Collins Stewart: Okay. Thank you.

We have time for I think just one or two more questions.

Your next question comes from the line of Ted Tenthoff with Piper Jaffray. Please proceed. Ted Tenthoff – Piper Jaffray: Great. Thank you very much. It was helpful to go through mipomersen in such detail. On the J&J compounds, can you just go back through that. So they've elected to return them to you. Do you have an ongoing relationship with J&J then and what are your plans for developing those. How do they, kind of, fit in the overall priorities?

The J&J collaboration ended on schedule and we were very pleased with the fact that the data we have in the clinic suggests that the glucagon receptor is a great target. And we expect that if we took that particular drug into long-term trials in diabetics, we would see efficacy at around 100 milligrams to 150 milligrams per week. J& J wanted -- wasn't willing to make that projection and wanted a slightly more potent drug. We've got one, we've got several and so we're highly committed to both programs and very excited about it and glad to be back in control of the situation. Remember, our strategy in general is to keep our drugs through Phase 2 now. So getting drugs back is not a bad thing for us. Ted Tenthoff – Piper Jaffray: So, is there any ongoing relationship?

No, no, the collaboration ended. It was a two-year collaboration and has completed. Ted Tenthoff – Piper Jaffray: Great. Thank you very much.

Yes.

Your next question comes from the line of Eric Schmidt with Cowen & Company. Please proceed. Craig Gordon – Cowen and Company: Yes. Thank you for taking my question. This is actually Craig Gordon filling in for Eric Schmidt. So just so we were clear on the 2010 financial guidance, while you projected pro forma net operating loss of $50 million. You expect to burn about $150 million in cash as of now. What is the composite of most of that? Is that mipomersen? Is that mipomersen plus the cancer program? Can you just give us an idea of where that increase, where that cash burn is supposed to go into? Thanks a lot.

Most of it is going to clinical development and about half of our clinical development expenses roughly are mipomersen. We're starting three Phase 2 programs this year for eIF-4E, the CRP inhibitor and SGLT2, plus we have the four new drugs, the three of the four new drugs that enter the pipeline last year that are all in tox studies and moving towards the clinic and will put one or two of those into the clinic, our plan is by the end of the year. So it is a small increase in research expenses, but principally reflecting increases in our clinical development expenses.

And remember, as Lynne said, we in those projections have no new transactions and as Lynne said any transactions that we did will change our projections. Craig Gordon – Cowen and Company: Thank you very much.

May I also just say when you take out the Regulus cash, actually the difference is less than $150 million. Craig Gordon – Cowen and Company: Great. Thanks.

We have time for one more question and then we are going to have to go.

Your last question comes from the line of Eun Yang with Jefferies. Kim Smith – Jefferies: Hi. Thanks for taking my question. This is actually Kim Smith [ph] filling in for Eun Yang. A question on the alternate dosing study and the statin intolerant study, can you comment on how enrollment is going and when results might be expected?

The statin intolerant study is moving along well. Richard, I don't know exactly, it will be finished this year.

We just haven't given formal guidance on when we're going to…

So I'm not giving you formal guidance, but it's moving along well. And the low dose, the daily dose 30 or 210 milligrams a week studies are Phase 1 study initially looking just getting the experience with daily dosing and they're getting under way. Okay. I think we're at the hour and I think we have time for one more question.

Your next question comes from the line of Carol Werther with Summer Street. Please proceed. Carol Werther – Summer Street: Thanks for taking my question. Stan, you said the changes in liver fat were not clinically significant. What kind of change is clinically significant?

Well, with MRS, I would say -- an increase in liver fat to greater than 6%, Richard?

Yeah. That's upper limit of normal. I think clinical significance is probably more like 20%.

So, as Richard said, with MRS, you can be considered to have slightly abnormal liver fat at above 6% or thereabouts. And you get clinically significant liver fat at say 20% or so. I don't want to talk like I'm an expert about this, but that's what I'm told. And MRIs… Carol Werther – Summer Street: That's helpful.

MRI's are a little more complicated and I want to wait and talk about how to read such things until we talk about the MRI's in more detail and we understand them a little better. Carol Werther – Summer Street: Okay. Thank you.

If you look at, for example, the MTP inhibitor data, where at any effective dose, any dose where they get lipid lowering of any substance, they typically will have people with 25% or 30% liver fat. That's, if you had that in a lot of patients that would be worrisome in my view. Carol Werther – Summer Street: Thank you.

Okay. And with that, I think we're going to bring the call to a close. Thank you everyone for participating and look forward to chatting with you as the year progresses.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes our presentation. You may now disconnect and have a good day.