Investments

12 Months Ended

Dec. 31, 2011

Investments

Investments

4. Investments

As of December 31, 2011, we have primarily invested our excess cash in commercial paper and debt instruments of the U.S. Treasury and financial institutions, corporations, and U.S. government agencies with strong credit ratings and 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 December 31, 2011:

One year or less	65	%
After one year but within two years	29	%
After two years but within three years	6	%
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, we primarily invest our excess cash in short-term instruments with 94 percent of our available-for-sale securities having a maturity of less than two years.  Therefore, the action taken by S&P and Moody’s did not impact the carrying value of our available-for-sale securities at December 31, 2011.

At December 31, 2011, we had an ownership interest of less than 20 percent in each of three private companies and two public companies with which we conduct business.  The companies are Santaris Pharma A/S (formerly Pantheco A/S), Achaogen Inc., and Atlantic Pharmaceuticals Limited, 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.  During 2011, we recognized a $4.2 million net gain on investments primarily consisting of a $4.4 million gain we recorded in the fourth quarter of 2011 from our ownership interest in Excaliard when they were acquired by Pfizer Inc. See further discussion about our investments in these satellite companies in Note 8, Collaborative Arrangements and Licensing Agreements.

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

								Other-Than-
								Temporary
	Amortized		Unrealized					Impairment			Estimated
December 31, 2011	Cost		Gains		Losses			Loss			Fair Value
Short-term investments:
Corporate debt securities	$	109,842	$	13	$	(255	)	$	—		$	109,600
Debt securities issued by U.S. government agencies	53,723		35		(5		)	—			53,753
Debt securities issued by the U.S. Treasury	2,353		3		—			—			2,356
Debt securities issued by states of the United States and political subdivisions of the states	16,141		4		(3		)	—			16,142
Total securities with a maturity of one year or less	182,059		55		(263		)	—			181,851
Corporate debt securities	57,632		21		(331		)	—			57,322
Debt securities issued by U.S. government agencies	26,754		—		(67		)	—			26,687
Debt securities issued by states of the United States and political subdivisions of the states	12,331		19		(23		)	—			12,327
Total securities with a maturity of more than one year	96,717		40		(421		)	—			96,336
Subtotal	$	278,776	$	95	$	(684	)	$	—		$	278,187
Equity securities:
Current portion (included in Other current assets)	$	1,538	$	624	$	—		$	(880	)	$	1,282
Long-term portion (included in Deposits and other assets)	625		—		—			—			625
Subtotal	$	2,163	$	624	$	—		$	(880	)	$	1,907
	$	280,939	$	719	$	(684	)	$	(880	)	$	280,094

								Other-Than-
								Temporary
	Amortized		Unrealized					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 December 31, 2011 are as follows (in thousands):

		Less than 12 months of temporary impairment
	Number of Investments	Estimated Fair Value		Unrealized Losses
Corporate debt securities	59	$	118,695	$	(586	)
Debt securities issued by U.S. government agencies	10	33,685		(72		)
Debt securities issued by states of the United States and political subdivisions of the states	5	9,685		(26		)
Total temporarily impaired securities	74	$	162,065	$	(684	)

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.