Name

Base
Salary

Target
MBO
%

Company
Success
Factor

Individual
Success
Factor

Resulting
Bonus

Key Results
Considered when
Setting Individual
Success Factor

Stanley T. Crooke

B. Lynne Parshall

C. Frank Bennett

Richard S. Geary

/s/ B. Lynne Parshall

B. Lynne Parshall

Chief Operating Officer and Chief Financial Officer

1

Attachment A

2

Proposed Disclosure Regarding OncoGenex

3

(marked to show changes against language from previous Form 10-K)

4

5

6

OncoGenex Technologies Inc., a subsidiary of OncoGenex Pharmaceuticals Inc.

7

8

In November 2001, we established a drug development collaboration with

9

OncoGenex, a biotechnology company committed to the development of cancer

10

therapeutics for patients with drug resistant and metastatic cancers, to co-develop and

11

commercialize OGX-011, an anti-cancer antisense drug that targets clusterin. In July

12

2008, we and OncoGenex amended the co-development agreement pursuant to which

13

OncoGenex became solely responsible for the costs, development and commercialization

14

of OGX-011. In exchange, OncoGenex agreed to pay us royalties on sales of OGX-011

15

and to share consideration it receives from licensing OGX-011 to a third party, except for

16

consideration received by OncoGenex for the fair market value of equity and

17

reimbursement of research and development expenses.

18

Under the amended agreement, we assigned to OncoGenex our rights in the

19

patents claiming the composition and therapeutic methods of using OGX-011, and

20

granted OncoGenex a worldwide, nonexclusive license to our know-how and patents

21

covering our core antisense technology and manufacturing technology solely for use with

22

OGX-011. The key product related patent that we assigned to OncoGenex was U.S.

23

Patent number 6,900,187 having an expiration date of at least 2020; and the key core

24

antisense technology patents we licensed OncoGenex are U.S. Patent number 7,919,472

25

having an expiration date of 2026 and its foreign equivalents pending in Australia,

26

Canada, the European Patent Convention and Japan. In addition, we agreed that so long

27

as OncoGenex or its commercialization partner is using commercially reasonable efforts

28

to develop and commercialize OGX-011, we will not research, develop or commercialize

29

an antisense compound designed to modulate clusterin. The amended agreement will

30

continue until OncoGenex or its commercialization partner is no longer developing or

31

commercializing OGX-011 or until we terminate the agreement for an uncured failure by

32

OncoGenex to make a payment required under the agreement.

33

In December 2009, OncoGenex licensed OGX-011 to Teva for the treatment of

34

multiple cancer indicationsgranted Teva the exclusive worldwide right and license to

35

develop and commercialize any products containing OGX-011 and related compounds,

36

with OncoGenex having an option to co-promote OGX-011 in the United States and

37

Canada, for which we received $10 million of the upfront payment OncoGenex received

38

from Teva. We are also eligible to receive 30 percent of up to $370 million in milestone

39

payments OncoGenex may receive from Teva in addition to up to seven percent royalties

40

on sales of OGX-011.011 ranging between 3.88% and 7%. Under the agreement, this

41

royalty is due on a country by country basis until the later of ten years following the first

42

commercial sale of OGX-011 in the relevant country, and the expiration of the last patent

1

we assigned or licensed to OncoGenex that covers the making, using or selling of OGX-

2

011 in such country.

3

To facilitate the execution and performance of OncoGenex’s agreement with

4

Teva, we and OncoGenex amended our license agreement primarily to give Teva the

5

ability to cure any future potential breach by OncoGenex under our agreement. As part

6

of this amendment, OncoGenex agreed that if OncoGenex is the subject of a change of

7

control with a third party, where the surviving entity immediately following such change

8

of control has the right to develop and sell OGX-011, then a milestone payment of $20

9

million will be due and payable to Isis 21 days following the first commercial sale of the

10

product in the United States. Any non-royalty payments OncoGenex previously paid to

11

us are creditable towards the $20 million milestone payment, so as a result of the $10

12

million payment we received from OncoGenex related to its license to Teva, the

13

remaining amount owing in the event of a change of control as discussed above is a

14

maximum of $10 million.

15

In August 2003, we and OncoGenex entered into a separate collaboration and

16

license agreement for the development of a second-generation antisense anti-cancer drug,

17

OGX-225. OncoGenex is responsible for all development costs and activities, and we

18

have no further performance obligations. OncoGenex issued to us $750,000 of

19

OncoGenex securities as payment for an upfront fee. In addition, OncoGenex will pay us

20

milestone payments totaling up to $3.5 million for the achievement of clinical and

21

regulatory milestones, and royalties on product sales. As of December 31, 2010,

22

OncoGenex had not achieved any milestone events related to OGX-225.

23

24

25

In January 2005, we entered into a further agreement with OncoGenex to allow

26

for the development of an additional second-generation antisense anti-cancer drug. Under

27

the terms of the agreement, OncoGenex is responsible for all development costs and

28

activities, and we have no further performance obligations. In April 2005, OncoGenex

29

selected OGX-427 to develop under the collaboration. OncoGenex will pay us milestone

30

payments totaling up to $4.2 million for the achievement of key clinical and regulatory

31

milestones, and royalties on future product sales of the drug. As of December 31, 2010,

32

OncoGenex had not achieved any milestone events related to OGX-427 but in January

33

2011, we earned a $750,000 milestone payment related to OncoGenex’s phase 2 trial in

34

men with metastatic prostate cancer.

Attachment B

1

Proposed Disclosure Regarding Genzyme

2

(marked to show changes against language from previous Form 10-K)

3

4

Genzyme Corporation

5

6

In January 2008, we entered into a strategic alliance with Genzyme focused on the

7

licensing and co-development of mipomersen and a research relationship. The license and

8

co-development agreement provides Genzyme with exclusive worldwide rights for all

9

therapeutic purposes to our patents and know-how related to mipomersen, including the

10

key product related patents described in the “Patent and Proprietary Rights” section under

11

“ApoB and Mipomersen” on page [XX] of this report, and their foreign equivalents

12

pending world-wide in various countries, including in the European Union via the

13

European Patent Convention, Japan, Canada, Australia, New Zealand and India. In

14

addition, we agreed that we would not develop or commercialize another oligonucleotide-

15

based compound designed to modulate apolipoprotein B-100, throughout the world.

16

The transaction, which closed in June 2008, included a $175 million licensing fee,

17

a $150 million equity investment in our stock in which we issued Genzyme five million

18

shares of our common stock at $30 per share, over $1.5 billion in potential milestone

19

payments and a share of worldwide profits on mipomersen and follow-on drugs ranging

20

from 30 percent to 50 percent of all commercial sales.

21

Under this alliance, Genzyme is responsible for the continued development and

22

commercialization of mipomersen. We agreed to supply the active pharmaceutical

23

ingredient for mipomersen for the Phase 3 clinical trials and initial commercial launch.

24

Genzyme is responsible for manufacturing the finished drug product for mipomersen,

25

including the initial commercial launch supply, and, if approved, Genzyme will be

26

responsible for the long term supply of mipomersen drug substance and finished drug

27

product. In addition, we will contribute up to the first $125 million in funding for the

28

development costs of mipomersen, which we expect to meet in 2011. Thereafter, we and

29

Genzyme will share development costs equally. Our initial development funding

30

commitment and the shared funding will end when the program is profitable. As part of

31

our alliance, Genzyme has a first right of negotiation for ISIS-SOD1Rx.

32

The license and co-development agreement for mipomersen will continue in

33

perpetuity unless earlier terminated by us or Genzyme under the following situations:

34

·

Genzyme may terminate the license and co-development agreement at any

35

time by providing written notice to Isis;

36

·

We may terminate the license and co-development agreement on a

37

country-by-county basis or in its entirety upon Genzyme’s uncured failure

38

to use commercially reasonable efforts to develop and commercialize

39

mipomersen in the United States, France, Germany, Italy, Spain, the

40

United Kingdom, Japan and Canada; and

1

·

Either we or Genzyme may terminate the license and co-development

2

agreement upon the other party’s uncured failure to perform a material

3

obligation under the agreement.

4

Upon termination of the license and co-development agreement, the license we

5

granted to Genzyme for mipomersen will terminate and Genzyme will stop selling the

6

product. In addition, if Genzyme voluntarily terminates the agreement or we terminate

7

the agreement in a country or countries for Genzyme’s failure to develop and

8

commercialize mipomersen, then the rights to mipomersen will revert back to us and we

9

may develop and commercialize mipomersen in the countries that are the subject of the

10

termination, subject to a royalty payable to Genzyme.

11

If we are the subject of an acquisition, then within 180 days following the

12

acquisition, Genzyme may elect to purchase all of our rights to receive payments under

13

the mipomersen license and co-development agreement for a purchase price to be

14

mutually agreed to by us and Genzyme, or, if we cannot agree, a fair market value price

15

determined by an independent investment banking firm.

16

Genzyme has agreed that it will not sell the Isis stock that it purchased in

17

February 2008 until the earlier of four years from the date of our mipomersen License

18

and Co-Development Agreementlicense and co-development agreement, the first

19

commercial sale of mipomersen or the termination of our mipomersen Licenselicense and

20

Co-Developmentco-development Agreement. Thereafter, Genzyme will be subject to

21

monthly limits on the number of shares it can sell. In addition, Genzyme has agreed that

22

until the earlier of the 10 year anniversary of the mipomersen License and Co-

23

Development Agreementlicense and co-development agreement or the date Genzyme

24

holds less than two percent of our issued and outstanding common stock, Genzyme will

25

not acquire any additional shares of our common stock without our consent.

26

During 2010, 2009 and 2008, we recognized revenue of $66.9 million, $66.4

27

million and $48.2 million, respectively, primarily related to the amortization of the

28

upfront payments we received from Genzyme, which represented 62 percent, 55 percent

29

and 45 percent, respectively, of our total revenue for those years.

Attachment C

1

Proposed Disclosure in Significant Accounting Policies

2

(marked to show changes against language from second quarter 2011 Form 10-Q)

3

4

Revenue Recognition

5

6

We generally recognize revenue when we have satisfied all contractual

7

obligations and are reasonably assured of collecting the resulting receivable. We are often

8

entitled to bill our customers and receive payment from our customers in advance of

9

recognizing the revenue under current accounting rules. In those instances in which we

10

have received payment from our customers in advance of recognizing revenue, we

11

include the amounts in deferred revenue on our condensed consolidated balance sheet.

12

13

Research and development revenue under collaborative agreements

14

15

On January 1, 2011, we adopted an accounting standard, which amended the

16

criteria to identify separate units of accounting for revenue arrangements with multiple

17

deliverables. The new guidance replaces the concept of allocating revenue among

18

deliverables in a multiple-element revenue arrangement according to fair value with an

19

allocation based on selling price. The new standard is applicable on a prospective basis to

20

agreements we entered into or materially modified after January 1, 2011. The adoption of

21

the standard did not impact our financial position or results of operations as of and for the

22

six month period ended June 30, 2011 as we did not enter into or materially modify any

23

multiple-element arrangements during that period. However, the adoption of this standard

24

may result in revenue recognition for future agreements that is different from our existing

25

multiple-element arrangements.

26

27

For agreements that we entered into or materially modified prior to the adoption

28

of the revised multiple element guidance, we recognize revenue from arrangements that

29

contain multiple deliverables from each element of the arrangement as long as we can

30

determine a standalone value for the delivered element and fair value for the undelivered

31

elements, we have completed our obligation to deliver or perform on that element and we

32

are reasonably assured of collecting the resulting receivable.

33

34

We often enter into collaborations with multiple deliverables under which we

35

receive non-refundable upfront payments. For collaborations where we determine that

36

there is a single unit of accounting, we recognize revenue related to upfront payments

37

ratably over our estimated period of performance relating to the term of the contractual

38

arrangements. Occasionally, we must estimate our period of performance when the

39

agreements we entered into do not clearly define such information. Our collaborative

40

agreements typically include a research and/or development project plan that includes the

41

activities the agreement requires each party to perform during the collaboration and the

42

party responsible for performing them. We estimate the period of time over which we

43

will complete the activities for which we are responsible and use that period of time as

44

our period of performance for purposes of revenue recognition and amortize revenue over

45

such period. If our collaborators ask us to continue performing work in a collaboration

46

beyond the initial period of performance, we extend our amortization period to

1

correspond to the new extended period of performance. The revenue we recognize could

2

be materially different if different estimates prevail. We have made estimates of our

3

continuing obligations on several agreements. Adjustments to performance periods and

4

related adjustments to revenue amortization periods have had a material impact on our

5

revenue on only one occasion. When Alnylam Pharmaceuticals, Inc. terminated the

6

companies’ single-stranded RNAi, or ssRNAi, research program in November 2010, we

7

recognized as revenue $4.9 million, which was the remaining deferred revenue from the

8

upfront fee that we were amortizing into revenue over the research term.

9

10

Our collaborations often include contractual milestones, which typically relate to

11

the achievement of pre-specified development, regulatory and commercialization events.

12

When we achieve these milestones, we are entitled to payment, according to the

13

underlying agreements. These three categories of milestone events reflect the three

14

stages of the life-cycle of our drugs, which we describe in more detail in the following

15

paragraph.

16

17

Prior to the first stage in the life-cycle of our drugs, we perform a significant

18

amount of work using our proprietary antisense technology to design chemical

19

compounds which interact with specific genes that are good targets for drug discovery.

20

From these research efforts, we hope to identify a development candidate. The

21

designation of a development candidate is the first stage in the life-cycle of our drugs. A

22

development candidate is a chemical compound that has demonstrated the necessary

23

safety and efficacy in preclinical animal studies to warrant further study in humans.

24

During the first step of the development stage, we or our partners study our drugs in IND-

25

enabling studies, which are animal studies intended to support an Investigational New

26

Drug (IND) application and/or the foreign equivalent. An approved IND allows us or our

27

partners to study our development candidate in humans. If the regulatory agency

28

approves the IND, we or our partners initiate Phase 1 clinical trials in which we typically

29

enroll a small number of healthy volunteers to ensure the development candidate is safe

30

for use in patients. If we or our partners determine that a development candidate is safe

31

based on the Phase 1 data, we or our partners initiate Phase 2 studies that are generally

32

larger scale studies in patients with the primary intent of determining the efficacy of the

33

development candidate. The final step in the development stage is Phase 3 studies to

34

gather the necessary safety and efficacy data to request marketing approval from the

35

Food and Drug Administration (FDA) and/or foreign equivalents. The Phase 3 studies

36

typically involve large numbers of patients and can take up to several years to complete.

37

If the data gathered during the trials demonstrates acceptable safety and efficacy results,

38

we or our partner will submit an application to the FDA or its foreign equivalents for

39

marketing approval. This stage of the drug’s life-cycle is the regulatory stage. If a drug

40

achieves marketing approval, it moves into the commercialization stage, during which

41

our partner will market and sell the drug to patients. Although our partner will ultimately

42

be responsible for marketing and selling the drug, our efforts to discover and develop a

43

drug that is safe, effective and reliable contributes significantly to our partner’s ability to

44

successfully sell the drug. The FDA and its foreign equivalents have the authority to

45

impose significant restrictions on an approved drug through the product label and on

46

advertising, promotional and distribution activities. Therefore, our efforts designing and

1

executing the necessary animal and human studies are critical to obtaining claims in the

2

product label from the regulatory agencies that allow our partner to successfully

3

commercialize our drug. Further, the patent protection afforded our drugs as a result of

4

our initial patent applications and related prosecution activities in the United States and

5

foreign jurisdictions are critical to our partner’s ability to sell our drugs without

6

competition from generic drugs. The potential sales volume of an approved drug is

7

dependent on several factors including the size of the patient population, market

8

penetration of the drug, and the price charged for the drug.

9

10

Generally, the milestone events contained in our partnership agreements coincide

11

with the progression of our drugs from development, to regulatory approval and then to

12

commercialization. The process of successfully discovering a new development

13

candidate, having it approved and ultimately sold for a profit is highly uncertain. As

14

such, the milestone payments we may earn from our partners involve a significant degree

15

of risk to achieve. Therefore, as a drug progresses through the stages of its life-cycle, the

16

value of the drug generally increases.

17

18

Development milestones in our partnerships may include the following types of events:

19

·

Designation of a development candidate. Following the designation of a

20

development candidate, generally, IND-enabling animal studies for a new

21

development candidate take 12 to 18 months to complete;

22

·

Initiation of a Phase 1 clinical trial. Generally, Phase 1 clinical trials take one to

23

two years to complete;

24

·

Initiation or completion of a Phase 2 clinical trial. Generally, Phase 2 clinical

25

trials take one to three years to complete;

26

·

Initiation or completion of a Phase 3 clinical trial. Generally, Phase 3 clinical

27

trials take two to four years to complete.

28

Regulatory milestones in our partnerships may include the following types of events:

29

·

Filing of regulatory applications for marketing approval such as a New Drug

30

Application in the United States or Marketing Authorization Application in

31

Europe. Generally, it takes six to twelve months to prepare and submit regulatory

32

filings.

33

·

Marketing approval in a major market, such as the United States, Europe or Japan.

34

Generally it takes one to two years after an application is submitted to obtain

35

approval from the applicable regulatory agency.

36

Commercialization milestones in our partnerships may include the following types of

37

events:

38

·

First commercial sale in a particular market, such as in the United States or

39

Europe.

40

·

Product sales in excess of a pre-specified threshold, such as annual sales

41

exceeding $1 billion. The amount of time to achieve this type of milestone

1

depends on several factors including but not limited to the dollar amount of the

2

threshold, the pricing of the product and the pace at which customers begin using

3

the product.

4

We assess whether a substantive milestone exists at the inception of our

5

agreements. When a substantive milestone is achieved, we recognize revenue related to

6

the milestone payment. In evaluating if a milestone is substantive we consider whether:

7

·

Substantive uncertainty exists as to the achievement of the milestone event at the

8

inception of the arrangement;

9

·

Substantive effort is involved to achieve the milestone event.  The achievement of the milestone involves substantive effort and can only be

10

achieved based in whole or part on our performance or the occurrence of a

11

specific outcome resulting from our performance;

12

·

The amount of the milestone payment appears reasonable either in relation to the

13

effort expended or to the enhancement of the value of the delivered items;

14

·

There is no future performance required to earn the milestone; and

15

·

The consideration is reasonable relative to all deliverables and payment terms in

16

the arrangement.

17

If any of these conditions are not met, we will defer recognition of the milestone

18

payment and recognize it as revenue over the estimated period of performance, if any. In

19

May 2011, we initiated a Phase 1 clinical study on ISIS-TTRRX , the first drug selected as

20

part of our collaboration with GSK and in January 2011 OncoGenex Pharmaceuticals

21

Inc., initiated a Phase 2 trial of OGX-427 in men with metastatic prostate cancer. We

22

considered the initiation of Phase 1 and Phase 2 clinical trials to be substantive

23

milestones because the level of effort and inherent risk associated with successfully

24

moving a drug into Phase 1 and Phase 2 clinical development is high. Therefore, we

25

recognized the entire $5 million milestone payment from GSK in the second quarter of

26

2011 and the entire $750,000 milestone payment from OncoGenex in the first quarter of

27

2011. Further information about our collaborative arrangements can be found in Note 6,

28

Collaborative Arrangements and Licensing Agreements, below and Note 8 of our audited

29

financial statements for the year ended December 31, 2010 included in our Annual

30

Report on Form 10-K filed with the SEC.

31

32

As part of our Genzyme, a Sanofi company, strategic alliance, in February 2008

33

Genzyme made a $150 million equity investment in us by purchasing five million shares

34

of our common stock at $30 per share. The price Genzyme paid for our common stock

35

represented a significant premium over the fair value of our stock. We accounted for this

36

premium as deferred revenue and are amortizing it along with the $175 million licensing

37

fee that we received in June 2008 ratably into revenue until June 2012, which represents

38

the end of our performance obligation based on the current research and development

39

plan.

1

2

Licensing and royalty revenue

3

4

We often enter into agreements to license our proprietary patent rights on an

5

exclusive or non-exclusive basis in exchange for license fees and/or royalties. We

6

generally recognize as revenue immediately those licensing fees and royalties for which

7

we have no significant future performance obligations and are reasonably assured of

8

collecting the resulting receivable.