874015--3/16/2006--ISIS_PHARMACEUTICALS

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Affinitak is a trademark of Eli Lilly and Company. Gemzar is a registered trademark of Eli Lilly and Company. Macugen is a registered trademark of Eyetech Pharmaceuticals, Inc. Vitravene is a registered trademark of Novartis AG. Approved Product and ProductsDrugs In Development Isis Approved Product and Drugs in Development split between Crohn s disease and ulcerative colitis, or UC. According to the European Federation of Crohn s and UC Associations, inflammatory bowel disease affects a similar number of people in Europe. Isis Partnered Drugs in Development How the TIGER Biosensor System Works Collaborative Arrangements and Licensing Agreements 2005 and Recent Collaboration and Licensing Highlights Out-Licensing Arrangements; Royalty Factoring Agreements 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. If we fail to obtain timely funding, we may need to curtail or abandon some of our programs. If any of our collaborative partners fail to fund our collaborative programs or develop or sell any of our products under development, or if we cannot obtain additional partners, we may have to delay or stop progress on our product development programs. If we cannot protect our patents or our proprietary rights, others may compete more directly against us. Intellectual property litigation could be expensive and prevent us from pursuing 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. 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 TIGER biosensor system. Provisions in our certificate of incorporation, other agreements and Delaware law may prevent stockholders from receiving a premium for their shares. If registration rights that we have previously granted are exercised, then the price of our securities may be negatively affected. Our business is subject to changing regulations for corporate governance and public disclosure that has increased both our costs and the risk of noncompliance. Risks Associated with our Drug Discovery and Development Business If we or our partners fail to obtain regulatory approval for our drug candidates, 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, or if additional testing is required to demonstrate suitability, we may need to abandon one or more of our drug development programs. 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. We depend on third parties in the conduct of our clinical trials for our product candidates and any failure of those parties to fulfill their obligations could adversely affect our development and commercialization plans. Risks Associated with our Ibis Division We may not successfully develop or derive revenues from our business based on our TIGER biosensor system. If we fail to secure commercial partners for our TIGER biosensor system, our commercialization efforts for our TIGER biosensor may be harmed or delayed. We depend on government contracts for most of our 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 and our ability to fund our growth. 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 TIGER 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 TIGER biosensor system, it could delay our commercialization efforts and lengthen our sales cycle. If our TIGER business fails to compete effectively, it may not succeed or contribute significant revenues. Improvements in preventing major diseases could reduce the need for our TIGER biosensor instruments and ID kits, which in turn could reduce our revenues. 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 TIGER biosensors systems are lengthy, and we may expend substantial funds and management effort with no assurance of successfully selling our TIGER biosensors systems or services. If we or our partners are required to obtain regulatory approval for our TIGER biosensor system applications, we may not successfully obtain approval.

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874015--3/16/2006--ISIS_PHARMACEUTICALS_INC