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Exhibit 10.44

FINAL

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LOAN AND SECURITY AGREEMENT

between

SILICON VALLEY BANK

and

ISIS PHARMACEUTICALS, INC.

December 15, 2003

$32,000,000

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TABLE OF CONTENTS

 
   
  Page

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1.   ACCOUNTING AND OTHER TERMS   1
2.
 
LOAN AND TERMS OF PAYMENT
 
1
3.
 
CONDITIONS OF LOANS
 
2
4.
 
CREATION OF SECURITY INTEREST
 
2
5.
 
REPRESENTATIONS AND WARRANTIES
 
3
6.
 
AFFIRMATIVE COVENANTS
 
5
7.
 
NEGATIVE COVENANTS
 
6
8.
 
EVENTS OF DEFAULT
 
8
9.
 
BANK'S RIGHTS AND REMEDIES
 
9
10.
 
NOTICES
 
10
11.
 
CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
 
11
12.
 
GENERAL PROVISIONS
 
11
13.
 
DEFINITIONS
 
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        This LOAN AND SECURITY AGREEMENT dated December 15, 2003, between
SILICON VALLEY BANK ("Bank"), whose address is 3003 Tasman Drive, Santa Clara,
California 95054 and ISIS PHARMACEUTICALS, INC. ("Borrower"), whose address is
2292 Faraday Avenue, Carlsbad, CA 92008, provides the terms on which Bank will
lend to Borrower and Borrower will repay Bank. The parties agree as follows:

1.    ACCOUNTING AND OTHER TERMS.    Accounting terms not defined in this
Agreement will be construed following GAAP. Calculations and determinations must
be made following GAAP. The term "financial statements" includes the notes and
schedules. The terms "including" and "includes" always mean "including (or
includes) but not limited to," in this or any Loan Document.

2.    LOAN AND TERMS OF PAYMENT    

2.1    Credit Extensions.    

        Borrower will pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.

2.1.1    Term Loan.    

        Bank will make a Term Loan available to Borrower in one advance.

2.2    Reserved.    

2.3    Interest Rate, Payments.    

        (a)    Interest Rate.    The Term Loan accrues interest at a variable
per annum rate equal to the greater of the Prime Rate or four percent (4.0%);
provided that, on or before the Closing Date, Borrower may elect a fixed per
annum rate of interest applicable to the Term Loan equal to the greater of the
Treasury Note Rate or five and one quarter percent (5.25%); provided, further,
that at any time after the Closing Date, Borrower may elect, by written notice
to Bank received by 12:00 noon Pacific time on the day such rate is to be
effective, a fixed per annum rate of interest applicable to the Term Loan equal
to the then applicable variable rate plus one and one quarter (1.25) percentage
points. In addition, at any time Borrower may reduce the applicable rate of
interest on the Term Loan by one quarter (0.25) of a percentage point (up to a
maximum of one half (0.50) of one percentage point) for each additional
$25,000,000 in excess of the amount otherwise required hereunder that Borrower
maintains in deposit and/or investment account balances at Bank or an affiliate
of Bank. The variable rate of interest increases or decreases when the Prime
Rate changes. After the occurrence and during the continuance of an Event of
Default, Obligations accrue interest at two (2) percentage points above the rate
effective immediately before the Event of Default. Interest is computed on a
360 day year for the actual number of days elapsed.

        (b)    Payments.    Payments of principal and interest due on the Term
Loan are payable on the 10th of each month. Borrower will pay 60 equal
installments of principal and interest (the "Term Loan Payment"). Borrower's
final Term Loan Payment, due on December    , 2008, includes all outstanding
Term Loan principal and accrued interest. Bank may debit any of Borrower's
deposit accounts including Account Number 3300420522 for principal and interest
payments owing or any other amounts due and payable by Borrower to Bank
hereunder. Bank will promptly notify Borrower when it debits Borrower's
accounts. These debits are not a set-off. Payments received after 12:00 noon
Pacific time are considered received at the opening of business on the next
Business Day. When a payment is due on a day that is not a Business Day, the
payment is due the next Business Day and additional interest accrues.

        (c)    Prepayments.    Borrower may prepay the Term Loan, in whole or in
part, without penalty or premium so long as the Term Loan bears interest at a
variable rate. If the Term Loan bears interest at a fixed rate as elected by
Borrower hereunder, Borrower may prepay the Term Loan in whole only, and any
such prepayment shall be made together with a prepayment fee equal to: (i) three
percent (3%) of

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the amount prepaid if prepayment is made during the first 16 months of the term
of the Term Loan; (ii) two percent (2%) of the amount prepaid if prepayment is
made during months 17 through 32 of the term of the Term Loan; (iii) one percent
(1%) of the amount prepaid if prepayment is made during months 33 through 48 of
the term of the Term Loan; and (iv) no prepayment fee shall be payable if
prepayment is made after the fourth year of the term of the Term Loan.

2.4    Fees.    

        Borrower will pay:

        (a)    Bank Expenses.    All Bank Expenses (including reasonable
attorneys' fees and reasonable expenses) incurred through and after the date of
this Agreement, are payable when due; provided, however, that these expenses
will not exceed $15,000 so long as standard bank documents are used in this
transaction.

        (b)    Loan Fee.    On the Closing Date a loan fee equal to $75,000. The
Parties acknowledge that Borrower has already paid Bank a $20,000 deposit which
shall be applied against Bank Expenses and any balance shall be applied against
the loan fee.

3.    CONDITIONS OF LOANS    

3.1    Conditions Precedent to the Term Loan.    

        Bank's obligation to make the Term Loan is subject to the following
conditions precedent:

        (a)   Receipt by Bank of any Payment/Advance Form with respect to the
funding of the Term Loan in its entirety.

        (b)   Receipt by Bank of evidence of repayment, or arrangement for
repayment, of Borrower's debt owing to Boehringer Ingelheim and Elan.

        (c)   Execution and delivery by Borrower of a Negative Pledge Agreement,
in form and substance attached hereto as Exhibit D, with respect to Borrower's
Intellectual Property.

        (d)   Receipt by Bank of a legal opinion of Borrower's Vice President
Legal and General Counsel in form and substance as attached hereto as Exhibit E.

        (e)   Borrower shall have established deposit and/or investment accounts
at Bank or an affiliate of Bank with aggregate balances of at least the
outstanding amount of the Term Loan.

        (f)    Satisfactory review by Bank of the subordination provisions of
the indebtedness of Borrower in connection with its Convertible Subordinated
Debt.

        (g)   The representations and warranties in Section 5 must be materially
true and no Event of Default may have occurred and be continuing, or result from
the Term Loan.

        (h)   Bank shall receive the financial projections, information,
agreements, and documents it reasonably requires.

4.    CREATION OF SECURITY INTEREST    

4.1    Grant of Security Interest.    

        Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. If this Agreement is terminated, Bank's lien and security interest
in the Collateral will continue until Borrower fully satisfies its Obligations.
At any time during the term hereof, if no Event of Default then exists, Borrower
may elect to pledge to Bank a first priority security interest in a certificate
of deposit (the "CD") in the principal amount of at least the amount of the then
outstanding

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balance under the Term Loan, and, upon such pledge, Bank agrees that it shall
immediately release its security interest in all other Collateral and will amend
this Agreement to release Borrower from the application of the covenants set
forth in clause (ii) of Section 6.2(a), Sections 6.3 - 6.6, 6.8 - 6.10,
7.2 - 7.4, and 7.6 - 7.9. The CD shall thereafter constitute the sole Collateral
for the remainder of the term of the Term Loan (including for purposes of the
surviving covenants under Sections 7.1 and 7.5)) and shall be maintained at a
balance at all times of at least the then outstanding amount of the Term Loan.

4.2    Contingent Cash Collateral.    

        In the event there is a breach by Borrower of the covenant set forth in
Section 6.8, Borrower shall immediately pledge and deliver to Bank a CD in the
principal amount of at least the amount of the then outstanding balance under
the Term Loan. Such delivery and pledge of the CD shall be deemed to have cured
the Event of Default arising from the breach of such covenant. If Borrower shall
thereafter comply with the requirement of Section 6.8 hereunder and, subject to
Borrower's option to pledge the CD under Section 4.1 hereunder in lieu of the
other Collateral, if no other Event of Default shall exist, and if Bank shall at
such time continue to hold a perfected, first priority security interest in the
Collateral, then Bank shall release the CD to Borrower.

4.3    Bank Account Collateral.    

        Bank hereby agrees that so long as no Event of Default exists, except as
provided in Section 4.1 with respect to the CD, Bank's security interest in any
deposit or investment account shall not restrict Borrower's right to access and
employ funds in such accounts. Bank further agrees that upon any exercise of its
rights and remedies hereunder upon the occurrence and during the continuance of
an Event of Default, Bank shall exercise such rights and remedies in the
following order: (i) first as to deposit and investment accounts held at Bank or
an affiliate of Bank, (ii) second as to any deposit or investment accounts held
at third party financial institutions, and (iii) third as to any other
Collateral secured under Section 4.1. In addition, Bank will not exercise its
rights under any control agreements issued pursuant to Section 6.10 unless an
Event of Default has occurred and is continuing.

5.    REPRESENTATIONS AND WARRANTIES    

        Borrower represents and warrants as follows:

5.1    Due Organization and Authorization.    

        Borrower and each Subsidiary is duly existing and in good standing in
its state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change.

        The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's certificate of
incorporation and bylaws, nor constitute an event of default under any Material
Agreement by which Borrower is bound. Borrower is not in default under any
agreement to which or by which it is bound in which the default could reasonably
be expected to cause a Material Adverse Change.

5.2    Collateral; Intellectual Property.    

        Borrower has good title to the Collateral, free of Liens except
Permitted Liens. The Accounts are bona fide, existing obligations, and the
service or property has been performed or delivered to the account debtor or its
agent for immediate shipment to and unconditional acceptance by the account
debtor. To Borrower's knowledge, all Inventory is in all material respects of
good and serviceable quality, free from material defects. Except as disclosed
pursuant to Borrower's public filings with the Securities and Exchange
Commission or as would not reasonably be expected to cause a Material

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Adverse Change, Borrower owns, possesses, licenses or has other rights to use
its Intellectual Property that is necessary for Borrower to conduct its business
existing as of the Closing Date.

5.3    Litigation.    

        Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers and legal
counsel, threatened by or against Borrower or any Subsidiary in which a likely
adverse decision could reasonably be expected to cause a Material Adverse
Change.

5.4    No Material Adverse Change in Financial Statements.    

        All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. To Borrower's knowledge, there has not been any deterioration in
Borrower's consolidated financial condition since the date of the most recent
financial statements submitted to Bank that could reasonably be expected to
cause a Material Adverse Change.

5.5    Solvency.    

        The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.

5.6    Regulatory Compliance.    

        Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally or the violation of which would not cause a Material Adverse
Change. Borrower and each Subsidiary has timely filed all required tax returns
and paid, or made adequate provision to pay, all material taxes, except those
being contested in good faith with adequate reserves under GAAP. Borrower and
each Subsidiary has obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all government
authorities that are necessary to continue its business as currently conducted,
except where the failure to do so could not reasonably be expected to cause a
Material Adverse Change.

5.7    Subsidiaries.    

        As of the Closing Date, Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments.

5.8    Full Disclosure.    

        No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading at the
time such statement was made. It being recognized by Bank that the projections
and forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
and forecasted results.

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6.    AFFIRMATIVE COVENANTS    

        Borrower will do all of the following:

6.1    Government Compliance.    

        Borrower will maintain its and all Subsidiaries' legal existence and
good standing in its jurisdiction of formation and maintain qualification in
each jurisdiction in which the failure to so qualify would reasonably be
expected to cause a Material Adverse Change. Borrower will comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change.

6.2    Financial Statements, Reports, Certificates.    

        (a)   Borrower will deliver to Bank: (i) within 5 Business Days of the
required filing date, copies of all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission; (ii) a prompt report of any legal
actions pending against Borrower or any Subsidiary that could result in damages
or costs to Borrower or any Subsidiary of $1,000,000 (to the extent not covered
by insurance) or more; and (iii) budgets, sales projections, operating plans or
other financial information which Borrower prepares in accordance with its past
practices and which Bank reasonably requests.

        (b)   Within 5 Business Days of the required filing dates referenced in
(a)(i) above with respect to reports on Form 10-K and 10-Q, Borrower will
deliver to Bank a Compliance Certificate signed by a Responsible Officer in the
form of Exhibit C.

6.3    Inventory.    

        Borrower will maintain its Inventory consistent with its past practices.

6.4    Taxes.    

        Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments.

6.5    Insurance.    

        Borrower will keep its business and the Collateral insured for risks and
in amounts, as reasonable and customary for a corporation of similar size and
business as Borrower. Insurance policies will be in a form, with companies, and
in amounts that are reasonable and customary for a corporation of similar size
and business as Borrower. All policies covering Collateral will have a lender's
loss payable endorsement showing Bank as an additional loss payee and all
liability policies covering Collateral will show the Bank as an additional
insured. At Bank's request, Borrower will deliver certified copies of policies
and evidence of all premium payments.

6.6    Location of Equipment.    

        Keep Borrower's and its Subsidiaries' Equipment only at the locations
identified on Schedule 6.6 and their chief executive offices only at the
locations identified on Schedule 6.6; provided, however, that Borrower may amend
Schedule 6.6 so long as such amendment occurs by written notice to Bank not less
than 30 days prior to the date on which such Equipment is moved to such new
location or such chief executive office is relocated, so long as such new
location is within the continental United States.

6.7    Primary Accounts.    

        On or before May 30, 2004, Borrower shall establish, and thereafter
maintain, its primary depository and operating accounts with Bank; provided that
prior to the funding of the Term Loan Borrower shall establish, and thereafter
maintain, investment and deposit accounts at Bank or affiliates of Bank with
aggregate balances at least equal to the outstanding amount of the Term Loan,
and

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provided further that between the Closing Date and May 30, 2004 Borrower shall
use its best efforts to establish such other accounts with Bank. Such balances
are not considered restricted.

6.8    Financial Covenants.    

        Borrower will maintain, as of the last day of each quarter, Liquidity of
at least the greater of (a) Cash Burn for such quarter multiplied by two (2), or
(b) the then outstanding balance of the Term Loan multiplied by one and one-half
(1.5). "Liquidity" is unrestricted cash on hand (and cash equivalents). "Cash
Burn" is the change in Liquidity from that as of the prior quarter end to
Liquidity calculated at such quarter end, excluding such extraordinary items as
Borrower may reasonably request and as Bank may approve in its reasonable
discretion.

6.9    Intellectual Property Rights.    

        Borrower will protect, defend and maintain the validity and
enforceability of its Intellectual Property to the extent necessary for Borrower
to conduct its business.

6.10    Control Agreements.    

        With respect to deposit accounts or investment accounts maintained at
financial institutions other than Bank (other than up to an aggregate of
$1,000,000 maintained in financial institutions located outside of the United
States), within the later of 5 Business Days of the opening of any such deposit
account or investment account or 30 days after the Closing Date, Borrower will
execute and deliver to Bank control agreements in form reasonably satisfactory
to Bank in order for Bank to perfect its security interest in Borrower's deposit
accounts or investment accounts; provided, however that with respect to any
account maintained at an affiliate of Bank, such a control agreement shall be
executed and delivered on or before the Closing Date.

6.11    Further Assurances.    

        Borrower will execute any further instruments and take further action as
Bank reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement.

7.    NEGATIVE COVENANTS    

        Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld or delayed:

7.1    Dispositions.    

        Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
the Collateral, other than (i) Transfers of Inventory in the ordinary course of
business; (ii) Transfers of worn-out or obsolete Equipment; or (iii) other
Transfers of Collateral in the ordinary course of business up to $5,000,000 per
year but in no event including the CD.

7.2    Changes in Business, Ownership, Management or Business Locations.    

        Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
or ancillary thereto or issue new equity securities in an amount greater than an
aggregate of 33% of its common stock outstanding on the Closing Date, calculated
on a fully diluted basis, in a single transaction or series of related
transactions (unless such transactions are approved by Borrower's stockholders)
or voluntarily terminate its Chief Executive Officer or Executive Vice President
and Chief Financial Officer without cause.

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7.3    Mergers or Acquisitions.    

        Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement, (ii) Borrower is the surviving entity after any such transaction has
been consummated and (iii) such transaction would not result in a decrease of
more than 25% of Borrower's Tangible Net Worth. A Subsidiary may merge or
consolidate into another Subsidiary or into Borrower. Notwithstanding the
foregoing, Borrower may Transfer all or substantially all of its business to a
Person (whether by merger, consolidation, sale of stock or sale of assets) if
(i) such Person has a market capitalization or Tangible Net Worth equal to or
greater than $500,000,000 immediately prior to the consummation of such
transaction, and (ii) such Person assumes all rights, duties and obligations of
Borrower under the Loan Documents.

7.4    Indebtedness.    

        Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.

7.5    Encumbrance.    

        Create, incur, or allow any Lien on any of the Collateral, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
here, subject to Permitted Liens.

7.6    Distributions; Investments.    

        Make any Investment in any Person, other than Permitted Investments, or
permit any of its Subsidiaries to do so. Pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital stock, except
for (i) repurchases of stock from former employees or directors of Borrower
under the terms of applicable repurchase agreements in an aggregate amount not
to exceed $5,000,000 in the aggregate in any fiscal year, (ii) redeeming,
repaying or servicing Borrower's Convertible Subordinated Debt in accordance
with the terms of such debt and (iii) redeeming or repaying the Lilly Debt in
accordance with the terms of such debt, provided that no Event of Default has
occurred, is continuing or would exist after giving effect to the repurchases.

7.7    Transactions with Affiliates.    

        Directly or indirectly enter into or permit any material transaction
with any Affiliate except transactions that are in the ordinary course of
Borrower's business, on terms less favorable to Borrower than would be obtained
in an arm's length transaction with a non-affiliated Person.

7.8    Subordinated Debt.    

        Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt that would reasonably be expected to cause a Material
Adverse Change without Bank's prior written consent.

7.9    Compliance.    

        Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act

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or violate any other law or regulation, if the violation could be expected to
cause a Material Adverse Change, or permit any of its Subsidiaries to do so.

8.    EVENTS OF DEFAULT    

        Any one of the following is an Event of Default:

8.1    Payment Default.    

        If Borrower fails to pay any of the Obligations within 5 Business Days
after their due date. During the additional period the failure to cure the
default is not an Event of Default (but no Credit Extension will be made during
the cure period);

8.2    Covenant Default.    

        Subject to Section 4.1, If Borrower does not perform any obligation in
Section 6 or violates any covenant in Section 7 or does not perform or observe
any other material term, condition or covenant in this Agreement, or any other
Loan Documents and as to any default under a term, condition or covenant that
can be cured, and has not cured the default within 30 days of the earlier of
written notice thereof from Bank or Borrower's actual knowledge thereof. During
the additional time, the failure to cure the default is not an Event of Default
(but no Credit Extensions will be made during the cure period);

8.3    Material Adverse Change.    

        If there occurs a Material Adverse Change, and if, in the determination
of Bank (in its sole discretion), such Material Adverse Change is curable,
Borrower has not cured the same within 30 days of the earlier of written notice
thereof from Bank or Borrower's actual knowledge thereof. During the additional
time, the failure to cure the default is not an Event of Default (but no Credit
Extensions will be made during the cure period);

8.4    Attachment.    

        If any material portion of Borrower's assets is attached, seized, levied
on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period);

8.5    Insolvency.    

        If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);

8.6    Other Agreements.    

        If there is a default in any agreement between Borrower and a third
party that gives the third party the right to accelerate any Indebtedness
exceeding $10,000,000 or that could cause a Material Adverse Change; provided
that if such Indebtedness is owing by Borrower to a party who has entered into a
technology collaboration or partnership agreement with Borrower, then such
default shall be an Event of Default hereunder only if (i) such party
accelerates such Indebtedness, (ii) the accelerated amount of such Indebtedness
exceeds $10,000,000, (iii) Borrower does not have the right to pay such
accelerated Indebtedness through the issuance of its capital stock, and (iv) any
cash payment of such

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Indebtedness creates an Event of Default under this Agreement by breach of a
financial or other covenant hereunder.

8.7    Judgments.    

        If a money judgment(s) in the aggregate of at least $5,000,000 (to the
extent not covered by insurance) is rendered against Borrower and is unsatisfied
and unstayed for 10 days (but no Credit Extensions will be made before the
judgment is stayed or satisfied);

8.8    Misrepresentations.    

        If Borrower or any authorized Person acting for Borrower makes any
material misrepresentation or material misstatement now or later in any warranty
or representation in this Agreement, in any Loan Document, or in any writing
delivered to Bank to induce Bank to enter this Agreement.

9.    BANK'S RIGHTS AND REMEDIES    

9.1    Rights and Remedies.    

        Subject to Section 4.3, When an Event of Default occurs and continues
Bank may, without notice or demand, do any or all of the following:

        (a)   Declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);

        (b)   Stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and Bank;

        (c)   Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;

        (d)   Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;

        (e)   Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) amount held by Bank owing to or for the credit or the account
of Borrower;

        (f)    Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's Intellectual Property solely to extent required in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
and

        (g)   Dispose of the Collateral according to the Code.

9.2    Power of Attorney.    

        Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or bill of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower's insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third

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party as the Code permits, but only to the extent of the then current
outstanding balance under the Term Loan. Bank may exercise the power of attorney
to sign Borrower's name on any documents necessary to perfect or continue the
perfection of any security interest regardless of whether an Event of Default
has occurred, but only after Bank has requested in writing such actions from
Borrower and Borrower has failed to promptly perform such action after such
notice. Bank's appointment as Borrower's attorney in fact, and all of Bank's
rights and powers, coupled with an interest, are irrevocable until all
Obligations have been fully repaid and performed and Bank's obligation to
provide Credit Extensions terminates.

9.3    Accounts Collection.    

        Subject to Section 4.3, when an Event of Default occurs and continues,
Bank may notify any Person owing Borrower money of Bank's security interest in
the funds and verify the amount of the Account. Borrower must collect all
payments in trust for Bank and, if requested by Bank, immediately deliver the
payments to Bank in the form received from the account debtor, with proper
endorsements for deposit.

9.4    Bank Expenses.    

        If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank's waiver of any Event of Default.

9.5    Bank's Liability for Collateral.    

        If Bank complies with reasonable banking practices and Section 9-207 of
the Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any
loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or
other person. Borrower bears all risk of loss, damage or destruction of the
Collateral.

9.6    Remedies Cumulative.    

        Bank's rights and remedies under this Agreement and the other Loan
Documents are cumulative. Bank has all rights and remedies provided under the
Code, by law, or in equity. Bank's exercise of one right or remedy is not an
election, and Bank's waiver of any Event of Default is not a continuing waiver.
Bank's delay is not a waiver, election, or acquiescence. No waiver is effective
unless signed by Bank and then is only effective for the specific instance and
purpose for which it was given. In all cases Bank's recourse under this
Agreement is limited to the extent of the Obligations.

9.7    Demand Waiver.    

        Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.

10.    NOTICES    

        All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. A party may change its notice address by giving the other party
written notice.

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11.    CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER    

        California law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Santa Clara County, California.

BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

12.    GENERAL PROVISIONS    

12.1    Successors and Assigns.    

        This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Unless pursuant to a transaction permitted
under Section 7.3, Borrower may not assign this Agreement or any rights under it
without Bank's prior written consent which may be granted or withheld in Bank's
discretion. Bank has the right, without the consent of or notice to Borrower, to
sell, transfer, negotiate, or grant participation in all or any part of, or any
interest in, Bank's obligations, rights and benefits under this Agreement;
provided, however, that if no Event of Default has occurred and is continuing,
Bank will not sell, Transfer, negotiate or grant participation in all or any
part of, or any interest in, Bank's obligations, rights and benefits under this
Agreement to any of Borrower's competitors.

12.2    Indemnification.    

        Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or reasonable Bank
Expenses incurred, or paid by Bank from, following, or consequential to
transactions between Bank and Borrower (including reasonable attorneys fees and
expenses), except for losses caused by Bank's gross negligence or willful
misconduct.

12.3    Time of Essence.    

        Time is of the essence for the performance of all obligations in this
Agreement.

12.4    Severability of Provision.    

        Each provision of this Agreement is severable from every other provision
in determining the enforceability of any provision.

12.5    Amendments in Writing, Integration.    

        All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter. All prior agreements, understandings, representations,
warranties, and negotiations between the parties about the subject matter of
this Agreement merge into and are superceded by this Agreement and the Loan
Documents.

12.6    Counterparts.    

        This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.

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12.7    Survival.    

        Subject to Section 4.1, all covenants, representations and warranties
made in this Agreement continue in full force while any Obligations remain
outstanding. The obligations of Borrower in Section 12.2 to indemnify Bank will
survive until all statutes of limitations for actions that may be brought
against Bank have run.

12.8    Confidentiality.    

        In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or Affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans, but only pursuant to a
confidentiality agreement, (iii) as required by law, regulation, subpoena, or
other order, and (iv) as required in connection with Bank's examination or
audit, but only pursuant to a confidentiality agreement. Confidential
information does not include information that either: (a) is in the public
domain or in Bank's possession when disclosed to Bank if not the result of Banks
breach of this Agreement, or becomes part of the public domain after disclosure
to Bank; or (b) is disclosed to Bank by a third party, if Bank does not know,
after due inquiry, that the third party is prohibited from disclosing the
information.

12.9    Attorneys' Fees, Costs and Expenses.    

        In any action or proceeding between Borrower and Bank arising out of the
Loan Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.

13.    DEFINITIONS    

13.1    Definitions.    

        In this Agreement:

        "Accounts" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.

        "Affiliate" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.

        "Bank Expenses" are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings and as limited by Section 12.9).

        "Borrower's Books" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.

        "Business Day" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.

        "Cash Burn" is defined in Section 6.8.

        "Closing Date" is the date of this Agreement.

        "Code" is the California Uniform Commercial Code.

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        "Collateral" is the property described on Exhibit A (unless modified
pursuant to Section 4.1).

        "Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.

        "Copyrights" are all copyright rights, applications or registrations and
like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.

        "Convertible Subordinated Debt" means Borrower's 51/2% Convertible
Subordinated Notes due 2009.

        "Credit Extension" is the Term Loan and any other extension of credit by
Bank for Borrower's benefit.

        "Equipment" is all present and future machinery, equipment, furniture,
vehicles, tools and parts in which Borrower has any interest.

        "ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.

        "GAAP" is United States generally accepted accounting principles.

        "Indebtedness" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and
(d) Contingent Obligations.

        "Insolvency Proceeding" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

        "Intellectual Property" is:

        (a)   Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use and
all license fees and royalties from the use;

        (b)   Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created, acquired
or held;

        (c)   All design rights which may be available to Borrower now or later
created, acquired or held;

        (d)   Any claims for damages (past, present or future) for infringement
of any of the rights above, with the right, but not the obligation, to sue and
collect damages for use or infringement of the intellectual property rights
above; and

        (e)   All proceeds and products of the foregoing, including all
insurance, indemnity or warranty payments.

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        "Inventory" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.

        "Investment" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.

        "Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

        "Liquidity" is defined in Section 6.8.

        "Lilly Debt" means the debt of the Borrower under that certain Loan
Agreement dated August 17, 2001 between Borrower and Eli Lilly and Company.

        "Loan Documents" are, collectively, this Agreement, any note, or notes
or guaranties executed by Borrower, and any other present or future agreement
between Borrower and/or for the benefit of Bank in connection with this
Agreement, all as amended, extended or restated.

        "Mask Works" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.

        "Material Adverse Change" means (i) a material adverse change in the
business, operations, or financial condition of the Borrower; or (ii) a material
impairment of the Borrower's ability to satisfy the Obligations; or (iii) a
material impairment of the value or priority of Bank's security interests in the
Collateral.

        "Material Agreement" means an agreement to which Borrower is a Party
that (i) Borrower has filed (including by incorporation by reference) as an
exhibit to its annual report on Form 10-K or any of its quarterly reports on
Form 10-Q during the fiscal year ending December 31, 2003 or (ii) Borrower
entered into with Comerica Bank (including as successor to Comerica
Bank-California and/or Imperial Bank) with respect to Borrower's real property.

        "Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later under the Loan Documents, including cash
management services, letters of credit and foreign exchange contracts, if any
and including interest accruing after Insolvency Proceedings begin.

        "Patents" are patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues, extensions
and continuations-in-part of the same.

        "Permitted Indebtedness" is:

(a)Borrower's indebtedness to Bank under this Agreement or any other Loan
Document;

        (b)   Indebtedness existing on the Closing Date and shown on the
Schedule;

        (c)   Subordinated Debt;

        (d)   Indebtedness to trade creditors incurred in the ordinary course of
business;

        (e)   Indebtedness secured by Permitted Liens; and

        (f)    Indebtedness other than Indebtedness described in clauses
(a) through (e) of this definition of Permitted Indebtedness, provided such
Indebtedness shall not exceed $5,000,000 in the aggregate at any given time; and

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        (g)   extensions, refinancings and renewals of any items of Permitted
Indebtedness.

        "Permitted Investments" are:

        (a)   Investments shown on the Schedule and existing on the Closing
Date;

        (b)   Investments in Borrower's Subsidiaries existing on the date
hereof;

        (c)   Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions to, customers and suppliers who are not
Affiliates, in the ordinary course of business;

        (d)   Investments, including newly formed or acquired Subsidiaries, not
otherwise permitted under Section 7.6 which do not exceed $5,000,000 in the
aggregate during the term of this Agreement;

        (e)   Acquisitions permitted under Section 7.3; and

        (f)    Investments in compliance with Borrower's Investment Policy,
approved by the Audit Committee of Borrower's board of directors on
September 21, 2000, or as otherwise approved by Borrower's board of directors.

        "Permitted Liens" are:

        (a)   Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;

        (b)   Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's security interests;

        (c)   Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;

        (d)   Licenses or sublicenses granted in the ordinary course of
Borrower's business or approved by Borrower's board of directors;

        (e)   Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;

        (f)    Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.4 or
Section 8.7;

        (g)   Deposits in the ordinary course of business under worker's
compensation, unemployment insurance, social security and other similar laws, or
to secure the performance of bids, tenders or contracts (other than for the
repayment of borrowed money) or to secure indemnity, performance or other
similar bonds for the performance of bids, tenders or contracts (other than for
the repayment of borrowed money) or to secure statutory obligations (other than
liens arising under ERISA or environmental liens) or surety or appeal bonds, or
to secure indemnity, performance or other similar bonds;

        (h)   Liens in favor of customs and revenue authorities arising as a
matter of law to secure payments of custom duties in connection with the
importation of goods;

        (i)    Liens of materialmen, mechanics, warehousemen, carriers,
artisan's or other similar Liens arising in the ordinary course of Borrower's
business or by operation of law, which are not past due or which are being
contested in good faith by appropriate proceedings and for which reserves have
been established in accordance with GAAP; and

        (j)    Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (i), but any extension,
renewal or replacement Lien must be limited to the

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property encumbered by the existing Lien and the principal amount of the
indebtedness may not increase; provided that Borrower may extend or refinance
its existing the indebtedness secured by Borrower's real property as of the
Closing Date up to the appraised value of such real property.

        "Person" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.

        "Prime Rate" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.

        "Responsible Officer" is each of the Chief Executive Officer, the
President, Executive Vice President, Chief Financial Officer and Vice President
Finance.

        "Schedule" is any attached schedule of exceptions.

        "Subordinated Debt" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank on terms reasonably satisfactory to Bank.

        "Subsidiary" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.

        "Tangible Net Worth" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, without duplication, (i) any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, Patents, trade and service marks and names, Copyrights and
research and development expenses except prepaid expenses, and (c) reserves not
already deducted from assets, and minus (ii) Total Liabilities.

        "Term Loan" is a loan of $32,000,000.

        "Term Loan Maturity Date" is December 11, 2008.

        "Total Liabilities" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.

        "Trademarks" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.

        "Treasury Note Rate" is, as of the Closing Date, the per annum rate of
interest (based on a year of 360 days) equal to the sum of (a) the U.S. Treasury
note yield to maturity for a term equal to 60 months as quoted in The Wall
Street Journal, plus (b) 1.96 percentage points.

BORROWER:    
ISIS PHARMACEUTICALS, INC.
 
 
By:
 
 

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  Title:    

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BANK:
 
 
SILICON VALLEY BANK
 
 
By:
 
 

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  Title:    

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EXHIBIT A

        The Collateral consists of all of Borrower's right, title and interest
in and to the following:

        All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;

        All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is held for sale or lease, or to be furnished under a contract of
service or is temporarily out of Borrower's custody or possession or in transit
and including any returns or repossession upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any of
the foregoing and any documents of title representing any of the above;

        All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, leases, license agreements,
franchise agreements, blueprints, drawings, purchase orders, customer lists,
route lists, infringements, claims, computer programs, computer discs, computer
tapes, literature, reports, catalogs, design rights, income tax refunds,
payments of insurance, payment intangibles, and rights to payment of any kind;

        All now existing and hereafter arising accounts (including health-care
insurance receivables), contract rights, royalties, license rights and all other
forms of obligations owing to Borrower arising out of the sale or lease of
goods, the licensing of technology or the rendering of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower;

        All documents (including negotiable documents), cash, deposit accounts,
securities, securities entitlements, securities accounts, investment property,
financial assets, letters of credit, letter of credit rights, money,
certificates of deposit, instruments (including promissory notes) and chattel
paper (including tangible and electronic chattel paper) now owned or hereafter
acquired and Borrower's Books relating to the foregoing;

        All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all claims for damages by way of any past,
present and future infringement of any of the foregoing; and

        All Borrower's Books relating to the foregoing, and the computers and
equipment containing said books and records, and any and all claims, rights and
interests in any of the above and all substitutions for, additions and
accessions to and proceeds thereof.

        Notwithstanding the foregoing, the Collateral shall not be deemed to
include any: (a) such property that (1) is nonassignable by its terms without
the consent of the licensor thereof or another party (but only to the extent
such prohibition on transfer is enforceable under applicable law, including,
without limitation, Sections 9406 and 9408 of the Code), or (2) the granting of
a security interest therein is contrary to applicable law, provided that upon
the cessation of any such restriction or prohibition, such property shall
automatically become part of the Collateral; (b) copyrights, copyright
applications, copyright registration and like protection in each work of
authorship and derivative work thereof, whether published or unpublished, now
owned or hereafter acquired; any patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same,
trademarks, servicemarks and

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applications therefor, whether registered or not, and the goodwill of the
business of Borrower connected with and symbolized by such trademarks, any trade
secret rights, including any rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; or any claims for damage by way of any past,
present and future infringement of any of the foregoing (collectively, the
"Intellectual Property"), except that the Collateral shall include the proceeds
of all the Intellectual Property that are accounts, (i.e. accounts receivable)
of Borrower, or general intangibles consisting of rights to payment, if a
judicial authority (including a U.S. Bankruptcy Court) holds that a security
interest in the underlying Intellectual Property is necessary to have a security
interest in such accounts and general intangibles of Borrower that are proceeds
of the Intellectual Property, then the Collateral shall automatically, and
effective as of the Closing Date, include the Intellectual Property to the
extent necessary to permit perfection of Bank's security interest in such
accounts and general intangibles of Borrower that are proceeds of the
Intellectual Property; (c) interest in real property (including and any fixtures
thereon, accessions thereto, and rents, issues and profits thereof); (d) any
leased equipment or equipment owned by the United States government; or (e) any
equity investment interest in subsidiaries, Orasense Ltd, Hepasense Ltd,
Hybridon Inc., Antisense Therapeutics Limited (ATL), Ercole Biotech, Santaris
Pharma A/S and Ocongenex Technologies Inc.

18

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EXHIBIT B

LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS 12:00 NOON., P.S.T.

TO:   CENTRAL CLIENT SERVICE DIVISION   DATE:    

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FAX #:
 
(408) 496-2426
 
TIME:
 
 

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      FROM:   ISIS PHARMACEUTICALS, INC.

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    CLIENT NAME (BORROWER)

REQUESTED BY:    

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AUTHORIZED SIGNER'S NAME

AUTHORIZED SIGNATURE:    

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PHONE NUMBER:    

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FROM ACCOUNT #    

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  TO ACCOUNT #    

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REQUESTED TRANSACTION TYPE

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  REQUESTED DOLLAR AMOUNT

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PRINCIPAL INCREASE (ADVANCE)   $              PRINCIPAL PAYMENT (ONLY)   $
             INTEREST PAYMENT (ONLY)   $              PRINCIPAL AND INTEREST
(PAYMENT)   $             

OTHER INSTRUCTIONS:    

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        All Borrower's representations and warranties in the Loan and Security
Agreement are true, correct and complete in all material respects on the date of
the telephone request for the Term Loan confirmed by this Borrowing Certificate;
but those representations and warranties expressly referring to another date
shall be true, correct and complete in all material respects as of that date.

BANK USE ONLY

TELEPHONE REQUEST:

        The following person is authorized to request the loan payment
transfer/loan advance on the advance designated account and is known to me.

 

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Authorized Requester    

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Phone #  

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Received By (Bank)    

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Phone #          

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Authorized Signature (Bank)        

19

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EXHIBIT C
COMPLIANCE CERTIFICATE

TO:   SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, CA 95054
FROM:
 
ISIS PHARMACEUTICALS, INC.

        The undersigned authorized officer of ISIS PHARMACEUTICALS, INC.
("Borrower"), certifies that under the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in compliance for the period ending                        with all required
covenants except as noted below and (ii) all representations and warranties in
the Agreement are true and correct in all material respects on this date (except
for those representations and warranties that expressly speak as of an earlier
date, which continue to be true and correct in all material respects, in each
case as of such earlier date). Attached are the required documents supporting
the certification. The Officer certifies that these are prepared in accordance
with U.S. Generally Accepted Accounting Principles (GAAP) consistently applied
from one period to the next except as explained in an accompanying letter or
footnotes. The Officer acknowledges that no borrowings may be requested at any
time or date of determination that Borrower is not in compliance with any of the
terms of the Agreement, and that compliance is determined not just at the date
this certificate is delivered.

        Please indicate compliance status by circling Yes/No under "Complies"
column.

Reporting Covenant

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  Required

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  Complies

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10-Q, 10-K and 8-K   Within 5 days after required SEC filing date   Yes   No

Financial Covenant

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  Required

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  Actual

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  Complies

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Maintain on a Quarterly Basis:                   Minimum Liquidity  
$                  *   $                     Yes   No

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*Greater of 2 × Quarter's Cash Burn or 1.5 × Term Loan balance

Comments Regarding Exceptions: See Attached.   BANK USE ONLY    
Sincerely,
 
Received by:
 
 

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AUTHORIZED SIGNER
Isis Pharmaceuticals, Inc.
 
 
 
   

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SIGNATURE   Date:    

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    Verified:    

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AUTHORIZED SIGNER  

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TITLE   Date:    

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DATE   Compliance Status:   Yes    No

20

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CORPORATE BORROWING RESOLUTION

Borrower:   Isis Pharmaceuticals, Inc.
2292 Faraday Avenue
Carlsbad, CA 92008   Bank:   Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054-1191

        I, the Secretary or Assistant Secretary of ISIS PHARMACEUTICALS, INC.
("Borrower"), CERTIFY that Borrower is a corporation existing under the laws of
the State of Delaware.

        I certify that at a meeting of Borrower's Directors (or by other
authorized corporate action) duly held the following resolutions were adopted.

        It is resolved that any one of the following officers of Borrower, whose
name, title and signature is below:

NAMES

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  POSITIONS

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  ACTUAL SIGNATURES

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may act for Borrower and:

        Borrow Money.    Borrow money from Silicon Valley Bank ("Bank").

        Execute Loan Documents.    Execute any loan documents Bank requires.

        Grant Security.    Grant Bank a security interest in any of Borrower's
assets.

        Negotiate Items.    Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.

        Further Acts.    Designate other individuals to request advances, pay
fees and costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they think necessary to
effectuate these Resolutions.

        Further resolved that all acts authorized by these Resolutions and
performed before they were adopted are ratified. These Resolutions remain in
effect and Bank may rely on them until Bank receives written notice of their
revocation.

        I certify that the persons listed above are Borrower's officers with the
titles and signatures shown following their names and that these resolutions
have not been modified and are currently effective.

CERTIFIED TO AND ATTESTED BY:    
X
 
 

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*Secretary or Assistant Secretary
 
 
X
 
 

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*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.

21

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EXHIBIT D

NEGATIVE PLEDGE AGREEMENT

NEGATIVE PLEDGE AGREEMENT

        This Negative Pledge Agreement is made as of December 15, 2003, by and
between Isis Pharmaceuticals, Inc. ("Borrower"), and Silicon Valley Bank
("Bank").

        In connection with, among other documents, the Loan and Security
Agreement (the "Loan Documents") being concurrently executed herewith between
Borrower and Bank, Borrower agrees as follows:

        ARTICLE I    Except as otherwise permitted under the Loan Documents and
except for (i) licenses or Transfers of Intellectual Property in the ordinary
course of business and/or (ii) other licenses or Transfers of Intellectual
Property that are approved by Borrower's board of directors, Borrower shall not
sell, transfer, assign, mortgage, pledge, lease, grant a security interest in,
or encumber any of Borrower's intellectual property, including, without
limitation, the following:

1.1Any and all copyright rights, copyright applications, copyright registrations
and like protections in each work or authorship and derivative work thereof,
whether published or unpublished and whether or not the same also constitutes a
trade secret, now or hereafter existing, created, acquired or held;

1.2All mask works or similar rights available for the protection of
semiconductor chips, now owned or hereafter acquired;

1.3Any and all trade secrets, and any and all intellectual property rights in
computer software and computer software products now or hereafter existing,
created, acquired or held;

1.4Any and all design rights which may be available to Borrower now or hereafter
existing, created, acquired or held;

1.5All patents, patent applications and like protections including, without
limitation, improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same, including without limitation
the patents and patent applications;

1.6Any trademark and servicemark rights, whether registered or not, applications
to register and registrations of the same and like protections, and the entire
goodwill of the business of Borrower connected with and symbolized by such
trademarks, including without limitation;

1.7Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;

1.8All licenses or other rights to use any of the Copyrights, Patents,
Trademarks or Mask Works, and all license fees and royalties arising from such
use to the extent permitted by such license or rights; and

1.9All amendments, extensions, renewals and extensions of any of the Copyrights,
Trademarks, Patents, or Mask Works.

        ARTICLE II    It shall be an event of default under the Loan Documents
between Borrower and Bank if there is a breach of any term of this Negative
Pledge Agreement.

22

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        ARTICLE III    Capitalized terms used but not otherwise defined herein
shall have the same meaning as in the Loan Documents.

BORROWER:    
ISIS PHARMACEUTICALS, INC.
 
 
By:
 
/s/  B. LYNNE PARSHALL      

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  Name:   B. Lynne Parshall

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    Title:   EVP and CFO

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BANK:
 
 
SILICON VALLEY BANK
 
 
By:
 
/s/  LINDA LE BEAU      

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  Name:   Linda Le Beau

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    Title:   SVP

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23

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EXHIBIT E

OPINION OF COUNSEL

24

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QuickLinks

LOAN AND SECURITY AGREEMENT between SILICON VALLEY BANK and ISIS
PHARMACEUTICALS, INC. December 15, 2003 $32,000,000
EXHIBIT D NEGATIVE PLEDGE AGREEMENT NEGATIVE PLEDGE AGREEMENT