Investment in Regulus Therapeutics Inc.

12 Months Ended

Dec. 31, 2013

Investment in Regulus Therapeutics Inc.

Investment in Regulus Therapeutics Inc.

2. Investment in Regulus Therapeutics Inc.

In September 2007, we and Alnylam established Regulus as a company focused on the discovery, development and commercialization of microRNA-targeting therapeutics.  Regulus combines our and Alnylam’s technologies, know-how, and intellectual property relating to microRNA-targeting therapeutics.  We and Alnylam each granted Regulus exclusive licenses to our respective intellectual property for microRNA therapeutic applications, and certain early fundamental patents in the microRNA field.

In October 2012, Regulus completed an IPO of approximately 12.7 million shares of its common stock at $4.00 per share.  As part of the offering, we purchased $3.0 million of Regulus’ common stock at the offering price.  We began accounting for our investment in Regulus at fair value in the fourth quarter of 2012 when our ownership in Regulus dropped below 20 percent and we no longer had significant influence over Regulus’ operating and financial policies. We also recorded an $18.4 million gain in the fourth quarter of 2012 because of the increase in Regulus’ valuation resulting from its IPO.  We have reflected this gain in a separate line on our consolidated statement of operations called “Gain on investment in Regulus Therapeutics Inc.”