Investments

6 Months Ended

Jun. 30, 2011

Investments

Investments

3. Investments

As of June 30, 2011, our excess cash was primarily invested in commercial paper and debt instruments with strong credit ratings of financial institutions, corporations, U.S. government agencies and the U.S. Treasury with an investment grade rating at or above A-1, P-1 or F-1 by Moody’s, Standard & Poor’s (S&P) or Fitch, respectively.  We have established guidelines relative to diversification and maturities that maintain safety and liquidity. We periodically review and modify these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity.

The following table summarizes the contract maturity of the available-for-sale securities we held as of June 30, 2011:

One year or less	76	%
After one year but within two years	20	%
After two years but within three years	4	%
Total	100	%

In April 2011, S&P affirmed the ‘AAA/A-1+’ rating on the sovereign credit rating of the United States.  At the same time, however, S&P lowered the outlook of the long-term rating to ‘Negative’ from ‘Stable.’  In July 2011 Moody’s placed the AAA bond rating for the United States on review for a possible downgrade.  The actions taken by S&P and Moody’s pertain primarily to the long-term challenges associated with the United States’ budget deficits and rising indebtedness.  As illustrated above, our excess cash is invested primarily in short-term instruments with 96 percent of our available-for-sale securities having a maturity of less than two years.  Therefore, we do not believe the action taken by S&P and Moody’s impact the carrying value of our available-for-sale securities at June 30, 2011.

At June 30, 2011, we had an ownership interest of less than 20 percent in each of five private companies and two public companies with which we conduct business.  The companies are Santaris Pharma A/S (formerly Pantheco A/S), Achaogen, Inc., Atlantic Pharmaceuticals Limited, Altair Therapeutics Inc. and Excaliard Pharmaceuticals, Inc., which are privately-held and Antisense Therapeutics Limited, or ATL, and iCo Therapeutics Inc., which are publicly-traded.  We account for securities in the privately-held companies under the cost method of accounting and we classify the securities in the publicly-traded companies as available-for-sale.  In the first half of 2011, we recognized a $285,000 loss on investments primarily consisting of a $359,000 valuation allowance we recorded related to our investment in Excaliard.  Because realization of our Excaliard investment is uncertain we recorded a full valuation allowance.

The following is a summary of our investments (in thousands):

	Amortized		Unrealized					Other-Than- Temporary Impairment			Estimated
June 30, 2011	Cost		Gains		Losses			Loss			Fair Value
Short-term investments:
Corporate debt securities	$	167,417	$	196	$	(51	)	$	—		$	167,562
Debt securities issued by U.S. government agencies	57,128		25		(8		)	—			57,145
Debt securities issued by the U.S. Treasury	6,513		10		—			—			6,523
Debt securities issued by states of the United States and political subdivisions of the states	7,401		—		—			—			7,401
Total securities with a maturity of one year or less	238,459		231		(59		)	—			238,631
Corporate debt securities	57,591		140		(57		)	—			57,674
Debt securities issued by U.S. government agencies	10,117		13		—			—			10,130
Debt securities issued by states of the United States and political subdivisions of the states	3,730		—		(3		)	—			3,727
Total securities with a maturity of more than one year	71,438		153		(60		)	—			71,531
Subtotal	$	309,897	$	384	$	(119	)	$	—		$	310,162
Equity securities:
Current portion (included in Other current assets)	$	1,538	$	939	$	—		$	(880	)	$	1,597
Long-term portion (included in Deposits and other assets)	625		—		—			—			625
Subtotal	$	2,163	$	939	$	—		$	(880	)	$	2,222
	$	312,060	$	1,323	$	(119	)	$	(880	)	$	312,384

	Amortized		Unrealized					Other-Than- Temporary Impairment			Estimated
December 31, 2010	Cost		Gains		Losses			Loss			Fair Value
Short-term investments:
Corporate debt securities	$	196,010	$	294	$	(41	)	$	—		$	196,263
Debt securities issued by U.S. government agencies	119,890		53		(34		)	—			119,909
Debt securities issued by the U.S. Treasury	24,030		10		—			—			24,040
Debt securities issued by states of the United States and political subdivisions of the states	6,989		3		—			—			6,992
Total securities with a maturity of one year or less	346,919		360		(75		)	—			347,204
Corporate debt securities	47,842		167		(44		)	—			47,965
Debt securities issued by U.S. government agencies	7,139		4		(11		)	—			7,132
Total securities with a maturity of more than one year	54,981		171		(55		)	—			55,097
Subtotal	$	401,900	$	531	$	(130	)	$	—		$	402,301
Equity securities:
Current portion (included in Other current assets)	$	1,538	$	1,353	$	—		$	(880	)	$	2,011
Long-term portion (included in Deposits and other assets)	625		—		—			—			625
Subtotal	$	2,163	$	1,353	$	—		$	(880	)	$	2,636
	$	404,063	$	1,884	$	(130	)	$	(880	)	$	404,937

Investments we consider to be temporarily impaired at June 30, 2011 are as follows (in thousands):

		Less than 12 months of temporary impairment
	Number of Investments	Estimated Fair Value		Unrealized Losses
Corporate debt securities	45	$	97,370	$	(108	)
Debt securities issued by U.S. government agencies	4	11,541		(8		)
Debt securities issued by states of the United States and political subdivisions of the states	3	3,733		(3		)
Total temporarily impaired securities	52	$	112,644	$	(119	)

We believe that the decline in value of these securities is temporary and primarily related to the change in market interest rates since purchase.  We believe it is more likely than not that we will be able to hold these securities to maturity.  Therefore we anticipate full recovery of their amortized cost basis at maturity.