3. Investments

As of December 31, 2012, we have primarily invested our excess cash in debt instruments of the U.S. Treasury, 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, 2012:

One year or less	56	%
After one year but within two years	32	%
After two years but within three years	12	%
Total	100	%

As illustrated above, we primarily invest our excess cash in short-term instruments with 88 percent of our available-for-sale securities having a maturity of less than two years.

At December 31, 2012, we had an ownership interest of less than 20 percent in each of three private companies and four public companies with which we conduct business. The privately-held companies are Santaris Pharma A/S (formerly Pantheco A/S), Achaogen Inc., and Atlantic Pharmaceuticals Limited. The publicly-traded companies are Antisense Therapeutics Limited, or ATL, iCo Therapeutics Inc., Regulus and Sarepta. We account for equity investments in the privately-held companies under the cost method of accounting and we account for equity investments in the publicly-traded companies at fair value and record unrealized gains and losses as a separate component of comprehensive loss and include net realized gains and losses in gain (loss) on investments. In October 2012, Regulus completed an IPO and we now own less than 20 percent of Regulus’ common stock. In the fourth quarter of 2012, we stopped using the equity method to account for our investment in Regulus and instead we began accounting for it at fair value. During 2011, we recognized a $4.2 million net gain on investments primarily consisting of the $4.4 million gain we recognized from our ownership interest in Excaliard Pharmaceuticals Inc. when Pfizer Inc. acquired Excaliard. During 2012, we recognized a $1.5 million net gain on investments primarily consisting of a $1.3 million gain for contingent payments we received from Pfizer, Inc. triggered by its decision to advance EXC 001 into a Phase 2 study. See further discussion about our investments in these satellite companies in Note 7, Collaborative Arrangements and Licensing Agreements.

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

								Other-Than-
								Temporary
	Amortized		Unrealized					Impairment		Estimated
December 31, 2012	Cost		Gains		Losses			Loss		Fair Value
Short-term investments:
Corporate debt securities	$	113,249	$	81	$	(9	)	$	—	$	113,321
Debt securities issued by U.S. government agencies	10,100		2		(66		)	—		10,036
Debt securities issued by the U.S. Treasury	1,000		1		—			—		1,001
Debt securities issued by states of the United States and political subdivisions of the states	16,560		18		(2		)	—		16,576
Total securities with a maturity of one year or less	140,909		102		(77		)	—		140,934
Corporate debt securities	80,166		112		(92		)	—		80,186
Debt securities issued by U.S. government agencies	8,034		38		—			—		8,072
Debt securities issued by the U.S. Treasury	12,424		27		—			—		12,451
Debt securities issued by states of the United States and political subdivisions of the states	8,306		31		(16		)	—		8,321
Total securities with a maturity of more than one year	108,930		208		(108		)	—		109,030
Subtotal	$	249,839	$	310	$	(185	)	$	—	$	249,964

								Other-Than-
								Temporary
	Cost		Unrealized					Impairment			Estimated
December 31, 2012	Basis		Gains		Losses			Loss			Fair Value
Equity securities:
Current portion (Regulus Therapeutics Inc.)	$	15,526	$	18,096	$	—		$	—		$	33,622
Current portion (included in Other current assets)		1,579		4,175		—			(880	)		4,874
Long-term portion (included in Deposits and other assets)	625		—		—			—			625
Subtotal	$	17,730	$	22,271	$	—		$	(880	)	$	39,121
	$	267,569	$	22,581	$	(185	)	$	(880	)	$	289,085

	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

								Other-Than-
								Temporary
	Cost		Unrealized					Impairment			Estimated
December 31, 2011	Basis		Gains		Losses			Loss			Fair Value
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

Investments we consider to be temporarily impaired at December 31, 2012 are as follows (in thousands):

		Less than 12 months of temporary impairment
	Number of Investments	Estimated Fair Value		Unrealized Losses
Corporate debt securities	39	$	57,997	$	(101	)
Debt securities issued by U.S. government agencies	1	5,029		(66		)
Debt securities issued by states of the United States and political subdivisions of the states	4	9,716		(18		)
Total temporarily impaired securities	44	$	72,742	$	(185	)

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.