874015--3/13/2008--ISIS_PHARMACEUTICALS

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{product, candidate, development}

{stock, price, share}

{property, intellectual, protect}

{investment, property, distribution}

{cost, contract, operation}

{regulation, change, law}

{product, liability, claim}

{cost, regulation, environmental}

{control, financial, internal}

{regulation, government, change}

{personnel, key, retain}

{provision, law, control}

Risks Associated with our Businesses as a Whole We have incurred losses, and our business will suffer if we fail to achieve profitability in the future. Since corporate partnering is a key part of our strategy to fund the development and commercialization of our development programs, if any of our collaborative partners fail to fund our collaborative programs, or if we cannot obtain additional partners, we may have to delay or stop progress on our product development programs. Even with funding from corporate partners, if our partners do not effectively perform their obligations under our agreements with them, it would delay or stop the progress of our product development programs. If we cannot protect our patents or our other proprietary rights, others may compete more effectively against us. Intellectual property litigation could be expensive and prevent us from pursuing our programs. If we fail to obtain timely funding, we may need to curtail or abandon some of our programs. If we do not progress in our programs as anticipated, the price of our securities could decrease. The loss of key personnel, or the inability to attract and retain highly skilled personnel, could make it more difficult to run our business and reduce our likelihood of success. If the price of our securities continues to be highly volatile, this could make it harder for you to liquidate your investment and could increase your risk of suffering a loss. Because we use biological materials, hazardous materials, chemicals and radioactive compounds, if we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected. If a natural or man-made disaster strikes our research and development facilities, it could delay our progress developing and commercializing our drugs or our Ibis T5000 Biosensor System. Provisions in our certificate of incorporation, other agreements and Delaware law may prevent stockholders from receiving a premium for their shares. Future sales of our common stock in the public market could adversely affect the trading price of our securities. Our business is subject to changing regulations for corporate governance and public disclosure that has increased both our costs and the risk of noncompliance. The accounting method for our convertible debt securities may be subject to change. Risks Associated with our Drug Discovery and Development Business If we or our partners fail to obtain regulatory approval for our drugs, we will not be able to sell them. If the results of clinical testing indicate that any of our drugs under development are not suitable for commercial use we may need to abandon one or more of our drug development programs. Even if our drugs are successful in preclinical and early human clinical studies, these results do not guarantee the drugs will be successful in late-stage clinical trials. If the market does not accept our products, we are not likely to generate revenues or become profitable. If we cannot manufacture our drug products or contract with a third party to manufacture our drug products at costs that allow us to charge competitive prices to buyers, we will not be able to market products profitably. If our drug discovery and development business fails to compete effectively, our drugs will not contribute significant revenues. Disagreements between Alnylam and us regarding the development of our microRNA technology may cause significant delays and other impediments in the development of this technology, which could negatively affect the value of the technology and our investment in Regulus. We depend on third parties in the conduct of our clinical trials for our drugs and any failure of those parties to fulfill their obligations could adversely affect our development and commercialization plans. Risks Associated With Our Ibis Biosciences Business We may not successfully develop or derive revenues from our business based on our Ibis T5000 Biosensor System. If we fail to sell the Ibis T5000 Biosensor System to a minimum customer base, our ability to generate revenues from sales of assay kits will be negatively affected. We will depend on Bruker Daltonics to manufacture the Ibis T5000 Biosensor System and any failure of Bruker Daltonics to fulfill its obligations could harm or delay our commercialization efforts. Ibis' strategic alliance with Abbott may restrict the way Ibis conducts its business and may not result in the ultimate sale of Ibis to Abbott. We depend on government contracts for most of Ibis' revenues and the loss of government contracts or a decline in funding of existing or future government contracts could adversely affect our revenues and cash flows. We may be liable for penalties under a variety of procurement rules and regulations, and changes in government regulations could adversely impact our revenues, operating expenses and operating margins. If our Ibis T5000 Biosensor System's reliability does not meet market expectations, we may be unable to retain our existing customers and attract new customers. If we had to replace a supplier of one of the major hardware components of our Ibis T5000 Biosensor System, it could delay our commercialization efforts and lengthen our sales cycle. If Ibis fails to compete effectively, it may not succeed or contribute significant revenues. Improvements in preventing major diseases could reduce the need for our Ibis T5000 Biosensor System and related assay kits, which in turn could reduce our revenues. Our plans to commercialize the Ibis T5000 Biosensor System internationally are subject to additional risks that could negatively affect our operating results. If we cannot access or license rights to particular nucleic acid sequences for targeted diseases in the future, we may be limited in our ability to develop new products and access new markets. The sales cycles for our Ibis T5000 Biosensor Systems are lengthy, and we may expend substantial funds and management effort with no assurance of successfully selling our Ibis T5000 Biosensor Systems or services. If we or our partners are required to obtain regulatory approval for our Ibis T5000 Biosensor System, we may not successfully obtain approval. If we become subject to product liability claims relating to Ibis, we may be required to pay damages that exceed our insurance coverage.

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874015--3/13/2008--ISIS_PHARMACEUTICALS_INC