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Exhibit 10.4

April    , 2003

VIA HAND DELIVERY

[Employee Name]
[Title]
Isis Pharmaceuticals, Inc.
2292 Faraday Ave.
Carlsbad, CA 92008

Dear [FirstName]:

        Isis Pharmaceuticals, Inc. ("Isis") is pleased to offer you certain
severance benefits in light of your contribution to Isis. As Isis has no policy
or procedure requiring such benefits, we request that you keep the terms and
conditions of this letter agreement confidential.

        In the event that your employment is terminated without "cause" (as
defined herein) by Isis on or before December 31, 2005 (the "Severance Period"),
you will be eligible to receive a severance payment equal to a minimum of
[number (#)] months of your then current base salary, less payroll deductions
and withholdings. For purposes of this letter agreement, "cause" will be defined
as follows: (i) engaging or in any manner participating in any activity which is
competitive with or intentionally injurious to Isis or which violates any
provision of the Proprietary Information and Inventions Agreement;
(ii) commission of any fraud against Isis or use or appropriation for personal
use or benefit of any funds or properties of Isis not authorized by the Company
to be so used or appropriated; (iii) conviction of a crime involving dishonesty
or moral turpitude; (iv) conduct by you which in the good faith and reasonable
determination of the Company demonstrates gross unfitness to serve in your then
current capacity at Isis. In order to be eligible to receive the severance
payments described herein, you will be required to execute an Employee
Separation Agreement substantially in the form attached hereto as Exhibit A.

        In the event that your employment is terminated by Isis as a result of a
Change in Control (as defined herein), your severance payment shall be increased
such that you receive a total of [number (#)] months of your then current base
salary, less payroll deductions and withholdings. For purposes of this letter
agreement, Change in Control will be defined as follows: (i) a sale of all or
substantially all of the assets of Isis; (ii) a merger or consolidation in which
Isis is not the surviving corporation and in which beneficial ownership of
securities of Isis representing at least fifty percent (50%) of the combined
voting power entitled to vote in the election of Directors has changed; (iii) a
reverse merger in which Isis is the surviving corporation but the shares of
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, and in which beneficial ownership of securities of Isis
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of Directors has changed; or (iv) an acquisition by any
person, entity or group within the meaning of Section 13(d) or 14(d) of the
Exchange Act, or any comparable successor provisions (excluding any employee
benefit plan, or related trust, sponsored or maintained by Isis or subsidiary of
Isis or other entity controlled by Isis) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of Isis representing at least fifty percent (50%)
of the combined voting power entitled to vote in the election of Directors.

        Please keep in mind that this letter agreement is not intended to change
your status as an at-will employee with Isis. As with all employees at Isis, you
or Isis may terminate your employment at any time, for any reason whatsoever,
with or without cause or advance notice subject to the provisions set forth
herein.

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        If you have any questions or comments regarding the terms and conditions
of this letter, please do not hesitate to contact me.

 
 
  Very truly yours,    
 
 
  Isis Pharmaceuticals, Inc.    
 
 
   

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Patricia M. Lowenstam
Vice President, Human Resources    
 
 
  PML/jk    
 
 
  attachment    

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EXHIBIT A
SEPARATION AGREEMENT

        This SEPARATION AGREEMENT ("Agreement") is made and entered into by and
between                        ("Employee") and                         ("the
Company") as of the                        ("Effective Date").

        WHEREAS, the Company wishes to provide Employee with certain benefits in
consideration of Employee's service to the Company and the promises and
covenants of Employee as contained herein;

        NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:

        1.     SEVERANCE PAYMENTS. On                        ("Separation
Date"), Employee shall cease to be an employee or officer of the Company for all
purposes. In return for executing this Agreement, Employee will receive one
(1) month of Employee's base salary in effect on the Separation Date, subject to
standard payroll deductions and withholdings. In addition, if Employee has been
continuously employed by the Company for a minimum of three (3) years, Employee
will receive an additional two (2) weeks of base salary per year of service.

        2.     ACCRUED SALARY AND PAID TIME OFF. On or about the Separation
Date, the Company will pay Employee all accrued salary, and all accrued and
unused vacation, subject to standard payroll deductions and withholdings.
Employee is entitled to these payments regardless of whether or not Employee
signs this Agreement.

        3.     EMPLOYMENT SEARCH SUPPORT. Commencing on the Separation Date, the
Company will provide Employee offsite employment search support through Right
Management Associates as outlined in Exhibit A attached hereto.

        4.     HEALTH INSURANCE. To the extent permitted by law and by the
Company's current group health insurance policies, after the Separation Date,
Employee will be eligible to continue receiving health insurance benefits under
the federal or state COBRA law at Employee's own expense and later to convert to
an individual policy if desired. Employee will be provided with a separate
notice regarding COBRA benefits. If Employee elects continued coverage under
COBRA, the Company will reimburse Employee's COBRA premiums for one (1) month as
part of this Agreement. In addition, to the extent permitted by law and by the
Company's current vision and dental insurance policies, after the Separation
Date, the Company will reimburse Employee's vision and dental benefit premiums
for one (1) month.

        5.     STOCK OPTIONS. Pursuant to the Company's 199  Equity Incentive
Plan (the "Plan") and Employee's Stock Option Agreement (a copy of which is
attached hereto as Exhibit B), vesting of Employee's stock options will cease on
the Separation Date. Employee's rights to exercise Employee's option as to any
vested shares will be as set forth in the Plan and Employee's Stock Option
Agreement.

        6.     OTHER BENEFITS. Except as expressly provided herein, Employee
acknowledges that Employee will not receive (nor is entitled to receive) any
additional compensation or benefits.

        7.     RETURN OF COMPANY PROPERTY. By three (3) days after the
Separation Date, Employee will return to the Company all Company documents (and
all copies thereof) and other Company property and materials in Employee's
possession, or control, including, but not limited to, Company files, notes,
memoranda, correspondence, lists, drawings, records, plans and forecasts,
financial information, personnel information, customer and customer prospect
information, sales and marketing information, product development and pricing
information, specifications, computer-recorded information, tangible property,
equipment, credit cards, entry cards, identification badges and keys; and any
materials of any kind which contain or embody any proprietary or confidential
information of the Company (and all reproductions thereof).

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        8.     PROPRIETARY INFORMATION OBLIGATIONS. Employee acknowledges that
nothing herein shall impair the covenants and obligations set forth in
Employee's Proprietary Information and Inventions Agreement, a copy of which is
attached hereto as Exhibit C.

        9.     EMPLOYEE'S RELEASE OF CLAIMS. Except as otherwise set forth in
this Agreement, in exchange for consideration under this Agreement to which
Employee would not otherwise be entitled, Employee hereby releases, acquits and
forever discharges the Company, its parents and subsidiaries, and their
officers, directors, agents, servants, employees, attorneys, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys fees, damages, indemnities
and obligations of every kind and nature, in law, equity, or otherwise, known
and unknown, suspected and unsuspected, disclosed and undisclosed, arising out
of or in any way related to agreements, events, acts or conduct at any time
prior to and including the execution date of this Agreement, including but not
limited to: all such claims and demands directly or indirectly arising out of or
in any way connected with Employee's employment with the Company or the
termination of that employment; claims or demands related to salary, bonuses,
commissions, stock, stock options, or any other ownership interests in the
Company, vacation pay, fringe benefits, expense reimbursements, severance pay,
or any other form of compensation; claims pursuant to any federal, state or
local law, statute, or cause of action including, but not limited to, the
federal Civil Rights Act of 1964, as amended; the federal Americans with
Disabilities Act of 1990; the federal Age Discrimination in Employment Act of
1967, as amended ("ADEA"); the California Fair Employment and Housing Act, as
amended; tort law; contract law; wrongful discharge; discrimination; harassment;
fraud; defamation; emotional distress; and breach of the implied covenant of
good faith and fair dealing.

        10.   SECTION 1542 WAIVER. Employee acknowledges reading and
understanding Section 1542 of the Civil Code of the State of California:

A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.

Employee hereby expressly waives and relinquishes all rights and benefits under
that section and any law or legal principle of similar effect in any
jurisdiction with respect to the release of unknown and unsuspected claims
granted in this Agreement.

        11.   ARBITRATION. To ensure rapid and economical resolution of any and
all disputes that may arise in connection with the Agreement, the parties agree
that any and all disputes, claims, causes of action, in law or equity, arising
from or relating to this Agreement or its enforcement, performance, breach, or
interpretation, with the sole exception of those disputes that may arise from
Employee's Proprietary Information and Inventions Agreement, will be resolved by
final and binding confidential arbitration held in San Diego, California and
conducted by the American Arbitration Association ("AAA") under its
then-existing Rules and Procedures. Nothing in this paragraph is intended to
prevent either party from obtaining injunctive relief in court to prevent
irreparable harm pending the conclusion of any such arbitration.

        12.   ENTIRE AGREEMENT. This Agreement, including all exhibits,
constitutes the complete, final and exclusive embodiment of the entire agreement
between Employee and the Company with regard to the subject matter hereof. It
supersedes any and all agreements entered into by and between Employee and the
Company where such other agreement may conflict with this agreement. It is
entered into without reliance on any promise or representation, written or oral,
other than those expressly contained herein. It may not be modified except in a
writing signed by Employee and a duly authorized officer of the Company. The
parties have carefully read this Agreement, have been afforded the opportunity
to be advised of its meaning and consequences by their respective attorneys, and
signed the same of their own free will.

        13.   MISCELLANEOUS. This Agreement shall bind the heirs, personal
representatives, successors, assigns, executors and administrators of each
party, and inure to the benefit of each party, its heirs,

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successors and assigns. This Agreement shall be deemed to have been entered into
and shall be construed and enforced in accordance with the laws of the State of
California as applied to contracts made and to be performed entirely within
California. If an arbitrator or court of competent jurisdiction determines that
any term or provision of this Agreement is invalid or unenforceable, in whole or
in part, then the remaining terms and provisions hereof shall be unimpaired, the
invalid or unenforceable term or provision shall be modified or replaced so as
to render it valid and enforceable in a manner which represents the parties'
intention with respect to the invalid or unenforceable term or provision insofar
as possible. This Agreement may be executed in two counterparts, each of which
shall be deemed an original, all of which together shall constitute one and the
same instrument.

        IN WITNESS WHEREOF, the parties have duly authorized and caused this
Agreement to be executed as follows:

 
 
 
  EMPLOYEE    

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  By:  

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EXHIBIT A
SEPARATION AGREEMENT

[Employee Over 40 Years Of Age—Exempt]

        This SEPARATION AGREEMENT ("Agreement") is made and entered into by and
between                        ("Employee") and                        ("the
Company") as of the Effective Date of this Agreement, as defined in paragraph 10
below.

        WHEREAS, the Company wishes to provide Employee with certain benefits in
consideration of Employee's service to the Company and the promises and
covenants of Employee as contained herein;

        NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:

        1.     SEVERANCE PAYMENTS. On                        ("Separation
Date"), Employee shall cease to be an employee or officer of the Company for all
purposes. In return for executing this Agreement, Employee will receive one
(1) month of Employee's base salary in effect on the Separation Date, subject to
standard payroll deductions and withholdings. In addition, if Employee has been
continuously employed by the Company for a minimum of three (3) years, Employee
will receive an additional two (2) weeks of base salary per year of service.

        2.     ACCRUED SALARY AND PAID TIME OFF. On or about the Separation
Date, the Company will pay Employee all accrued salary, and all accrued and
unused vacation, subject to standard payroll deductions and withholdings.
Employee is entitled to these payments regardless of whether or not Employee
signs this Agreement.

        3.     EMPLOYMENT SEARCH SUPPORT. Commencing on the Separation Date, the
Company will provide Employee offsite employment search support through Right
Management Associates as outlined in Exhibit A attached hereto.

        4.     HEALTH INSURANCE. To the extent permitted by law and by the
Company's current group health insurance policies, after the Separation Date,
Employee will be eligible to continue receiving health insurance benefits under
the federal or state COBRA law at Employee's own expense and later to convert to
an individual policy if desired. Employee will be provided with a separate
notice regarding COBRA benefits. If Employee elects continued coverage under
COBRA, the Company will reimburse Employee's COBRA premiums for one (1) month as
part of this Agreement. In addition, to the extent permitted by law and by the
Company's current vision and dental insurance policies, after the Separation
Date, the Company will reimburse Employee's vision and dental benefit premiums
for one (1) month.

        5.     STOCK OPTIONS. Pursuant to the Company's 199  Equity Incentive
Plan (the "Plan") and Employee's Stock Option Agreement (a copy of which is
attached hereto as Exhibit B), vesting of Employee's stock options will cease on
the Separation Date. Employee's rights to exercise Employee's option as to any
vested shares will be as set forth in the Plan and Employee's Stock Option
Agreement.

        6.     OTHER BENEFITS. Except as expressly provided herein, Employee
acknowledges that Employee will not receive (nor is entitled to receive) any
additional compensation or benefits.

        7.     RETURN OF COMPANY PROPERTY. By three (3) days after the
Separation Date, Employee will return to the Company all Company documents (and
all copies thereof) and other Company property and materials in Employee's
possession, or control, including, but not limited to, Company files, notes,
memoranda, correspondence, lists, drawings, records, plans and forecasts,
financial information, personnel information, customer and customer prospect
information, sales and marketing information, product development and pricing
information, specifications, computer-recorded information, tangible property,
equipment, credit cards, entry cards, identification badges and keys; and any
materials of any kind which contain or embody any proprietary or confidential
information of the Company (and all reproductions thereof).

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        8.     PROPRIETARY INFORMATION OBLIGATIONS. Employee acknowledges that
nothing herein shall impair the covenants and obligations set forth in
Employee's Proprietary Information and Inventions Agreement, a copy of which is
attached hereto as Exhibit C.

        9.     EMPLOYEE'S RELEASE OF CLAIMS. Except as otherwise set forth in
this Agreement, in exchange for consideration under this Agreement to which
Employee would not otherwise be entitled, Employee hereby releases, acquits and
forever discharges the Company, its parents and subsidiaries, and their
officers, directors, agents, servants, employees, attorneys, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys fees, damages, indemnities
and obligations of every kind and nature, in law, equity, or otherwise, known
and unknown, suspected and unsuspected, disclosed and undisclosed, arising out
of or in any way related to agreements, events, acts or conduct at any time
prior to and including the execution date of this Agreement, including but not
limited to: all such claims and demands directly or indirectly arising out of or
in any way connected with Employee's employment with the Company or the
termination of that employment; claims or demands related to salary, bonuses,
commissions, stock, stock options, or any other ownership interests in the
Company, vacation pay, fringe benefits, expense reimbursements, severance pay,
or any other form of compensation; claims pursuant to any federal, state or
local law, statute, or cause of action including, but not limited to, the
federal Civil Rights Act of 1964, as amended; the federal Americans with
Disabilities Act of 1990; the federal Age Discrimination in Employment Act of
1967, as amended ("ADEA"); the California Fair Employment and Housing Act, as
amended; tort law; contract law; wrongful discharge; discrimination; harassment;
fraud; defamation; emotional distress; and breach of the implied covenant of
good faith and fair dealing.

        10.   ADEA WAIVER. Employee acknowledges that Employee knowingly and
voluntarily waives and releases any rights Employee may have under the ADEA, as
amended. Employee also acknowledges that the consideration given for the waiver
and release in the preceding paragraph hereof is in addition to anything of
value to which Employee was already entitled. Employee further acknowledges that
Employee has been advised by this writing, as required by the ADEA, that:
(a) Employee's waiver and release do not apply to any rights or claims that may
arise after the execution date of this Agreement; (b) Employee has the right to
consult with an attorney prior to executing this Agreement; (c) Employee has
forty-five (45) days to consider this Agreement (although Employee may choose to
voluntarily execute this Agreement earlier); (d) Employee has seven (7) days
following the execution of this Agreement by the parties to revoke the
Agreement; and (e) this Agreement shall not be effective until the date upon
which the revocation period has expired, which shall be the eighth day after
this Agreement is executed by Employee, provided that the Company has also
executed this Agreement by that date ("Effective Date").

        11.   SECTION 1542 WAIVER. Employee acknowledges reading and
understanding Section 1542 of the Civil Code of the State of California:

A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.

Employee hereby expressly waives and relinquishes all rights and benefits under
that section and any law or legal principle of similar effect in any
jurisdiction with respect to the release of unknown and unsuspected claims
granted in this Agreement.

        12.   ARBITRATION. To ensure rapid and economical resolution of any and
all disputes that may arise in connection with the Agreement, the parties agree
that any and all disputes, claims, causes of action, in law or equity, arising
from or relating to this Agreement or its enforcement, performance, breach, or
interpretation, with the sole exception of those disputes that may arise from
Employee's Proprietary Information and Inventions Agreement, will be resolved by
final and binding confidential arbitration held in San Diego, California and
conducted by the American Arbitration Association ("AAA") under its
then-existing Rules and Procedures. Nothing in this paragraph is intended to
prevent

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either party from obtaining injunctive relief in court to prevent irreparable
harm pending the conclusion of any such arbitration.

        13.   ENTIRE AGREEMENT. This Agreement, including all exhibits,
constitutes the complete, final and exclusive embodiment of the entire agreement
between Employee and the Company with regard to the subject matter hereof. It
supersedes any and all agreements entered into by and between Employee and the
Company where such other agreement may conflict with this agreement. It is
entered into without reliance on any promise or representation, written or oral,
other than those expressly contained herein. It may not be modified except in a
writing signed by Employee and a duly authorized officer of the Company. The
parties have carefully read this Agreement, have been afforded the opportunity
to be advised of its meaning and consequences by their respective attorneys, and
signed the same of their own free will.

        14.   MISCELLANEOUS. This Agreement shall bind the heirs, personal
representatives, successors, assigns, executors and administrators of each
party, and inure to the benefit of each party, its heirs, successors and
assigns. This Agreement shall be deemed to have been entered into and shall be
construed and enforced in accordance with the laws of the State of California as
applied to contracts made and to be performed entirely within California. If an
arbitrator or court of competent jurisdiction determines that any term or
provision of this Agreement is invalid or unenforceable, in whole or in part,
then the remaining terms and provisions hereof shall be unimpaired, the invalid
or unenforceable term or provision shall be modified or replaced so as to render
it valid and enforceable in a manner which represents the parties' intention
with respect to the invalid or unenforceable term or provision insofar as
possible. This Agreement may be executed in two counterparts, each of which
shall be deemed an original, all of which together shall constitute one and the
same instrument.

        IN WITNESS WHEREOF, the parties have duly authorized and caused this
Agreement to be executed as follows:

 
 
 
  EMPLOYEE    

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  By:  

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Exhibit 10.4