Welcome to Isis Pharmaceuticals Third Quarter Financial Results Conference Call. Leading the call today from Isis is Dr. Stan Crooke, Isis Chairman and CEO. Dr. Crooke, please begin.

Good afternoon and thanks everyone for joining us on today's call to discuss our third quarter financial results. Joining me on the call today are Lynne Parshall, COO and CFO; Beth Hougen, Vice President of Finance; and Kristina Lemonidis, Director of Corporate Communication. Kris, will you please read our forward-looking statements.

I sure will. 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 jointly-owned subsidiary; and the therapeutic and commercial potential of Isis technologies and products and development. Any statement describing Isis' 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 as human therapeutics and in the endeavor of building a business around such drugs. Isis' forward-looking statements also involve assumptions that if never materialized or proved correct could cause its results to differ materially from those expressed or implied by such forward-looking statements. Although Isis's forward-looking statements reflects 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, 2009 and its most recent quarterly report on Form 10-Q, which are on file with the SEC. Copies of these and other documents are available from the company. And with that, I'll turn the call over to Lynne to review our financial results.

Thanks, Kris. As usual I'll assume that you've read the details of the third quarter financial results in our press release. And I'll of course be happy to take questions at the end of today's call. We've continued to make excellent progress this year. We have now completed four positive Phase 3 studies of mipomersen. And we're on track to file for marketing approval in the first half of the year, to bring mipomersen to our initial patient population. These are patients at severe risk for cardiovascular events, and we hope mipomersen will be the therapeutic alternative that will help them lead longer healthier lives. This year we also established an exciting new alliance with GSK that we believe will be extremely productive for both companies. Our existing partnerships also continue to be successful and advancing antisense drugs discovered by us. Already this year, we've received more than $65 million from our partners, in up front and milestone payments, including $40 million we've received from GSK. We've finished the third quarter with pro-forma net operating loss of $23.1 million for the first nine months this 2010 and we ended the quarter with nearly $500 million in cash. Now I would like to take a few moments to compare our 2010 revenue to 2009. As you probably heard me say, our revenue consists of several different components including amortization of upfront fees we received from our partners. Our NDA revenue to support our collaborations, milestone payments, sub license fees, plus revenue we earn from other miscellaneous transactions. Already this year, we've had new revenue from almost all of these sources. Recognizing revenue from the amortization of the $35 million upfront payment we received from our new alliance with GSK. We received sub licensing revenue from Regulus new alliance with Sanofi-Aventis. And…

Thanks Lynne. Well we're, now well on the road towards the commercialization of mipomersen. That's the most important news. We've completed all the necessary studies for first regulatory submission for marketing approval in the first half of next year in the U.S. and Europe for mipomersen. The efficacy we've seen with mipomersen has been consistent across the entire mipomersen program. All four Phase 3 trials have been positive with significant reductions in all forms of bad cholesterol. Mipomersen is more than just LDL. The safety profile we have observed from mipomersen clearly supports our initial market focus and of course we're continuing to build our safety diversity database as we and Genzyme implement plans to expand the patient populations in Europe and elsewhere. So let me just spend a minute to characterize the first patient population that we're targeting. These are patients with severely high levels of bad cholesterol, despite all that medicine has offered today and there are patients who have extremely high cardio-vascular risk. These patients have two options. They can either get apheresis or they can wait for their next cardio-vascular event. In the two Phase 3 trials we conducted in these very, very sick patients, mipomersen reduced their LDL cholesterol on average more than a 100miligrams per deciliter. That reduction may translate to a greater than 50% reduction in cardio-vascular risk and of course in addition to luring LDL, mipomersen has a broad profile. It lowers all forms of atherogenic lidips as well as LDL. So these are the patients that we'll be targeting as our first submission. Now the commercial opportunity to this patient population is significant. In just U.S., Europe and Japan, Genzyme estimates that there are about 35,000 of such patients. This group alone provides a significant and clearly attainable commercial opportunity for…

(Operator Instructions). And our first question comes from the line of Salveen Richter with Collins Stewart. Please proceed.

Hi good afternoon it's Laura Ekas on behalf of Salveen. I was just wondering if you could provide any clarity on how confident you are that you'll be able to file in the severe headers I guess population next year. Have you had your meeting with FTA?

We are very confident.

Okay and then also what would happen to the filing timelines if things progress with Sanofi and Genzyme; do you have some sort of backup plan to ensure that they would be filed in the first half.

Yeah well of course no one can predict what happens in mergers, what I can tell you is that everything we know is that this gives therapy clean Genzyme and very important to Sanofi and the progress in getting the submissions ready is gratifying and we expect it to happen right on schedule.

Great thank you.

Our next question comes from the line of Ted Tenthoff with Piper Jaffray. Please proceed.

Great thank you very much for taking my question. Looking forward to seeing the therapy data. Give us the sense of when we should get that and also what kind of Phase 2s might you be exploring.

I'm sorry Ted could you repeat the last part.

Yeah what kind of indications would you expect to evaluate on Phase 2.

The CRP data from Phase 1 are that we've gone up to 600 milligrams a week dose and the drug was extra ordinarily well tolerated. So it's sort of classic Phase 1, really looks good. The Phase 2 program, the first two studies, will be in patients with rheumatoid arthritis, who have elevated CRP. And people with multiple myeloma where elevated CRP's are associated with a very significant poor outcome. We'll also be looking at CRP; reducing CRP in subjects who get autologous bone marrow transplants. Once we get those, as we gain experience there, then we'll begin to move to some of the other diseases that are of interest to us that include end stage renal disease and a variety of other circumstances in which CRP is elevated acutely, like apheresis and as I said in the -- in the prepared remarks; all of that -- we expect to get the first of those studies, the rheumatoid arthritis and multiple myeloma started in the very near future and as we go along and gain more experience in those dosing and safety, then we'll migrate toward the cardio-vascular indications that are of interest and for which we feel we'd like to have some substantial clinical experience before we move into those; very sick patients.

That was very helpful. Thank you.

Our next question comes from the line of Mark Monane with Needham. Please proceed. Mr. Monane your line is open. You may ask your question at this time. Please check the mute feature on your phone.

Hello, it's Mark Monane. Can you hear me?

Yes

Thanks very much. Good afternoon. Thanks for taking my question. Thanks for the comprehensive review. I know that you had previously mentioned that there might be some alternative dosing schedules that might be available for mipomersen going forward. Have any of those trials started and are you able to talk about any plans going forward?

Well, we completed the initial study and I think we've discussed it. That was the study in which we looked at 30 milligrams daily, 70 milligrams three times a week and compared that to 200 milligrams and that study went wonderfully. We got exactly what we expected in terms of efficacy and tolerance and so that set the stage then for additional studies that we'll be doing looking at those alternative regimens. I want to reiterate, our commitment is for the 200 milligram a week dose. It is extremely effective and certainly well tolerated sufficiently for the indications that we're contemplating. Our belief is that what we want to do long term is to provide patients options. We think there may be some patients who prefer taking low doses daily and others that might prefer taking 200 milligrams on Sunday night and our objective is to -- just provide those options over time and we're moving along nicely on track toward being able to provide those options to patients.

That was very helpful. And then I have a big picture business model question. I know you've been thinking about antisense therapeutics for a while but, and we like your model of bringing things to late stage and then having a partner bring it to the commercialization stage and that's rather straight forward cholesterol maybe and even for CRP and the readouts are pretty quick and one can evaluate that efficacy early in the clinical development process. But with cancers down, do you agree that it might be a little more challenging for this model? The readout in the Phase 2 are often not that helpful unless you're able to do a very good randomized control trial and just I was hoping to get your thoughts about how the business model works with these; with cancer which I think is a little bit different than the other programs you have in

Well, I think every indication varies a bit and in cardiovascular medicine and metabolic, you have very precise readouts that are in fact the end point for registration. In other diseases, inflammatory diseases in cancer, to name two neurodegenerative diseases to name a third, the end points are less clear cut. I think our plans for cancer are very straight forward and they're designed to generate sufficient data to convince ourselves and partners that the drug has the opportunity, has a meaningful potential to work in Phase 3. And so the studies that we would be doing are very much like the OncoGenex studies, where they did randomized comparative trial and looked to survival in patients with prostate cancer, compared the two drugs. That's what that ought to, is that the studies may be slightly larger than you might see in a cardiovascular study, where you have a very crisp end point. But the models works pretty much the same. I think there hardware store been a lot of progress in cancer clinical trial thinking and Phase 2 evaluation that works in our favor. And I think that progress is epitomized by the information that OncoGenex generated in Phase 2. Each one of these trials is different and the analysis of each trial of course is complicated and the objective of each of those trials is to generate enough information to support an effective partnership. In cancer your key problem is determining whether you have sufficient efficacy and in cardiovascular metabolic disease, it's more on the safety side, so all of these things have lots of tradeoffs. But yes I think the model works eminently well in all of the disease areas that we're working, including cancer.

Thanks for the added information.

Your next question comes from the line of Shiv Kapoor with Morgan Joseph. Please proceed.

Thanks for taking my question. I want to know what kind of learning from the mipomersen program, you're going to use in designing your Phase 2 CRP program. What kind of things have you learnt and what—how will you be running this program differently or with any additional precautions.

I don't think we have any additional precautions, I think the mipomersen program worked wonderfully and I think mipomersen is working wonderfully and the experts I talked to tell me they can't wait to get their hands on mipomersen to use it on their patients. So I don't prescribe to the view on Wall Street, I subscribe to the view of the experts I talk to that mipomersen is going to be a great drug. I think the single most important thing for me; out of the development plan for mipomersen is the success of building a stage development program. I think that is an optimal way to develop new drugs, where you seek an earlier indication in the most needy patients and then as you gain experience, expand the use of the drug. So I think that one of things that you will see, reiterated in multiple of our programs, is the stage development process. A great example will be APOCIII, where I think our initial indication might be patients who have triglycerides in excess of 500 and therefore are at risk for pancreatitis. And then we will advance to patients who have lower but still elevated triglycerides and then we'll move to patients who have diabetes and so on. Similarly, with CRP we're looking at diseases initially where the evidence that CRP worsens outcome is extremely compelling -- rheumatoid arthritis is a perfect example-- and where we believe that we can demonstrate a solid efficacy if its there and good safety and as we gain experience with the rheumatoid arthritises and the multiple myelomas where you don't have people who are acutely, desperately ill like somebody who has just had atrial fibrillation or an in part. As we gain that information, then we'll march to those new indications. So I don't know if that answers your questions Shiv, but I think the most important lesson I got out of the mipomersen development program is the value of the staged development program that focuses the drug initially on the patients who need it most and allows you to gain experience on the market and in further development before you seek approval for patients who have a less obvious need.

Well that's fair enough. And can you tell us what's the dosing regimen currently of the CRP program and what it will likely be in the Phase 2 program?

Well it is true that CRP drug looks a little more potent than mipomersen. But I don't think -- I think you would perfectly within range to assume that the dosing will be in the range of couple of hundred milligrams a week. All these drugs have basically the same properties.

But its weekly; not necessarily monthly, is what I was thinking?

No, no. Weekly is our dose schedule. We can and in particular with some of the diseases where CRP is an issue we may and people who are already having elective cardiac surgery for example, we pre dose, we pre treat. And as we progress with any one of these drugs, we will begin to explore alternative dose regimens just like we are with mipomersen and those regimens could be daily, they could be weekly or the drug support monthly dosing at higher doses. So, all of those are options. But our basic program for all of our drugs rolls down to weekly dosing as our base effort.

Okay, great. Thanks a lot.

You bet.

(Operator Instructions). And our next question comes from the line of Charles Polsky with William Harris Investors. Please proceed.

Hi Stan, thanks for the update and congratulations. Good progress. You mentioned in your prepared comments, just a word on the advent of Generation 2.5 and speaking more generally, how far off are we in terms of ISIS bringing in oral candidates. It seems as potency goes up, it's just a matter of time. I just wonder where it is on your internal.

We expect 2.5 to be orally active at a commercially reasonable dose in a commercially reasonable price and commercially reasonable presentation. The major reasons that we are moving to 2, 5 is to enable a commercially attractive oral administration of anti sense drugs.

And jus to walk us through the timing, so without putting too fine a point on it, let's say that you are now coming up with some chemistry that you are calling 2,5 and its somewhere between 12 and 18 months on the aggressive side to get that an IND file.

That's pretty good. What we're doing right now, is we're finalizing the data package that we have and we've been working on this for quite a number of years, but in the last 18 months we've invested tremendously in understanding the new chemistry. And we're starting to put the 2, 5's into programs now. Our initial focus, since this is new chemistry, will be in diseases where safety is—where the need is great. So the first programs that you should expect to see 2, 5 will be things like cancer and some of the rare diseases; we'll gain experience there and then as we gain experience, you'll begin to see 2,5 make its way into our metabolic and cardiovascular programs. And I certainly think that the time frame that you laid out is a reasonable time frame, probably leaning more toward the 18 month than the 12 month.

And just for the sake of argument, were ISIS to come up with a mipomersen 2.5, does Genzyme have some call on that or if it's a new chemical entity, is that all open for negotiation.

No it belongs to Genzyme. We partner around targets and programs and we don't think it's ever a good idea to separate follow on and back up products, form that partnership. So Genzyme would have access to 2, 5 just as they had access to the backup molecules that we have today, that are about three times more potent than mipomersen. We have molecules that aren't generation 2, 5 but just better screened and identified. Those are from 3 -5 times more potent than mipomersen right now.

Ok thank you very much.

You bet.

And that concludes our Q&A session. I will now turn the call back to Dr. Stan Crooke for closing remarks.

Thanks very much and thanks so much for being on the call. I know this is a busy earnings afternoon. In summary, I think the most important things we said today is that we are on track for our initial filing for marketing approval of mipomersen in our initial patient populations and we are very confident that its risk, benefit profile and that patient group is compelling. These are patients with severe, high cholesterol and extremely high cardiovascular risk; we look forward to bringing mipomersen to these patients, who are clearly in need of additional therapies to reduce their cardiovascular risk. And added to that I think our pipeline continues to progress extremely well and I think this call demonstrates the value of the satellite company's strategy in ways that we haven't shown before. Or we have very positive outcomes that are going to generate real value for shareholders in ISIS over time, I believe and a disappointment that cost ISIS shareholders very, very little.

Dr. Crooke, do you have any additional remarks or?

I'm finished. Thank you.