<Page>


                                                                    Exhibit 10.9


                           CERTIFICATE OF DESIGNATION
                                     OF THE
                      SERIES B CONVERTIBLE PREFERRED STOCK
                           (PAR VALUE $.001 PER SHARE)
                                       OF
                           ISIS PHARMACEUTICALS, INC.

                              --------------------

                         PURSUANT TO SECTION 151 OF THE
                GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

                              --------------------

         ISIS PHARMACEUTICALS, INC., a company organized and existing under the
General Corporation Law of the State of Delaware (the "Company"), in accordance
with the provisions of Section 103 thereof, and pursuant to Section 151 thereof,
DOES HEREBY CERTIFY:

         That the Restated Certificate of Incorporation of the Company (the
"Restated Certificate") authorizes the creation of up to 15,000,000 shares of
the Company's preferred stock, par value $.001 per share, 120,150 shares of
which have been designated Series A Preferred Stock (the "Series A Preferred
Stock") pursuant to the Certificate of Designation of the Series A Convertible
Preferred Stock filed with the Secretary of State of Delaware on April 19, 1999
(the "Series A Certificate"); and

         That pursuant to the authority conferred upon the Board of Directors
(the "Board") by the Restated Certificate, the Board on December 27, 1999,
approved the creation, issuance and the voting powers of shares of Series B
Preferred Stock to be issued in one series and adopted the following resolution
creating a series of 16,620 shares of Series B Preferred Stock designated as set
forth below:

         RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board by provisions of the Restated Certificate of the Company and
the General Corporation Law of the State of Delaware, the issuance of a series
of Preferred Stock, which shall consist of 16,620 shares of the shares of
Preferred Stock which the Company now has authority to issue, be, and the same
hereby is, authorized, and the Board hereby fixes the powers, designations,
preferences and relative participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, of the shares of such
series (in addition to the powers, designations, preferences and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, set forth in the Restated Certificate which
may be applicable to the Preferred Stock) authorized by this resolution as
follows:

         SECTION 1. DESIGNATION OF SERIES B PREFERRED STOCK. The designation of
such series of Preferred Stock authorized by this resolution shall be Series B
Convertible Preferred Stock (the "Series B Preferred Stock"). The Series B
Preferred Stock is issuable solely in whole shares that shall entitle the holder
thereof to participate in the distributions and to have the benefit of all


<Page>


other rights of holders of Series B Preferred Stock, as set forth herein and
in the Restated Certificate.

         SECTION 2. DIVIDEND RIGHTS OF SERIES B PREFERRED STOCK.

         (a)      When and if the Board shall declare a dividend or distribution
payable with respect to the then-outstanding shares of Common Stock of the
Company, other than any such dividend or distribution payable in shares of
Common Stock or other securities of the Company (which is provided for in
Sections 4(f) and (g)), the holders of the Series B Preferred Stock shall be
entitled to the amount of dividends per share that would be payable on the
largest number of whole shares of Common Stock into which a holder's aggregate
shares of Series B Preferred Stock could then be converted pursuant to Section
4(a) hereof without regard to the provisions of Section 5 (such number to be
determined as of the record date for the determination of holders of Common
Stock entitled to receive such dividend, and, if the record date is prior to
June 30, 2002, for purposes of determining the number of shares of Common Stock
into which the Series B Preferred Stock could then be converted, the Series B
Conversion Price will be calculated in accordance with Section 4(c)(i) for the
60 trading days ending two business days prior to the record date).

         (b)      In addition to Section 2(a) above, the Series B Preferred
Stock shall be entitled to a mandatory dividend equal to 5.0% per year of $1,000
per share (the "Series B Original Issue Price") (as adjusted for any
combinations, consolidations, stock distributions, stock dividends or other
recapitalizations with respect to such shares) plus accrued dividends thereon,
compounded on a semi-annual basis. Such dividend shall be payable solely by the
issuance of additional shares of Common Stock upon conversion of the Series B
Preferred Stock into Common Stock pursuant to Section 4 hereof; provided that,
in the event the Company exercises the Redemption Right (as defined in Section
5(c)), such dividend shall be payable in cash upon such redemption in accordance
with Section 5. The dividend to be paid to a holder under this Section 2(b) upon
a conversion of the Series B Preferred Stock shall be equal to that number of
shares Common Stock determined by dividing the total dividend accrued with
respect such holder's Series B Preferred Stock by the Series B Conversion Price,
determined in accordance with Section 4(c) hereof, then in effect. No dividends
shall be payable under this Section 2(b) in the event the Exchange Right is
exercised pursuant to Section 6.

         SECTION 3. SENIORITY; LIQUIDATION PREFERENCE.

         (a)      The Series B Preferred Stock shall rank PARI PASSU to the
Company's currently outstanding Series A Preferred Stock and senior to or PARI
PASSU with any future class or series of Preferred Stock issued by the Company
and senior to the Company's Common Stock.

         (b)      In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, other than a Significant Transaction
(as defined below) (collectively, a "Liquidation"), the holders of Series B
Preferred Stock and Series A Preferred Stock then outstanding shall be entitled
to be paid, pro rata per share, out of the assets of the Company legally
available for distribution to its stockholders, whether from capital, surplus or
earnings, before any payment shall be made in respect of any other class or
series of stock ranking junior to the Series B Preferred Stock and Series A
Preferred Stock, an amount equal to the sum of (i)


                                       2.
<Page>


the Series A Original Issue Price (as defined in the Series A Certificate), plus
any accrued but unpaid dividends, including without limitation any dividends
payable upon conversion of the Series A Preferred Stock pursuant to the Series A
Certificate (the "Series A Preferred Stock Liquidation Preference") and (ii) the
Series B Original Issue Price (each as adjusted for any combinations,
consolidations, stock distributions, stock dividends or other recapitalizations
with respect to such shares), plus any accrued but unpaid dividends, including
without limitation any dividends payable upon conversion of the Series B
Preferred Stock pursuant to Section 2(b) (the "Series B Preferred Stock
Liquidation Preference" and, together with the Series A Preferred Stock
Liquidation Preference, the "Aggregate Preferred Liquidation Preference"),. If,
upon a Liquidation, the assets of the Company available for distribution to its
stockholders shall be insufficient to pay the holders of the Series B Preferred
Stock and the Series A Preferred Stock the Aggregate Preferred Liquidation
Preference, then the entire assets of the Company legally available for
distribution shall be distributed pro rata among the holders of the Series B
Preferred Stock and the Series A Preferred Stock in proportion to the percentage
of the Aggregate Preferred Liquidation Preference each such holder would
otherwise be entitled to receive. After setting apart or paying in full the
Aggregate Preferred Liquidation Preference, the holders of the Series B
Preferred Stock and the Series A Preferred Stock will not be entitled to any
further participation in any distribution of the assets of the Company, and the
entire remaining assets of the Company legally available for distribution, if
any, shall be distributed among the holders of all securities of the Company
ranking junior in liquidation to the Series A Preferred Stock and the Series B
Preferred Stock (including, without limitation, the Common Stock), in proportion
to the shares of such junior securities then held by them.

         SECTION 4. CONVERSION PRIVILEGES.

         (a)      RIGHTS OF CONVERSION. Subject to the other provisions of this
Certificate of Designation, each share of Series B Preferred Stock shall be
convertible, without payment of any additional consideration by the holder
thereof and at the option of such holder, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Series B
Original Issue Price, plus accrued but unpaid cash dividends under Section 2(a)
and accrued dividends under Section 2(b), by the Series B Conversion Price (as
defined below) in effect at the time of conversion, at any time and from time to
time after June 30, 2002, at the office of the Company or any transfer agent for
such stock.

         (b)      AUTOMATIC CONVERSION.

         (i)      In the event that a Significant Transaction (as defined below)
occurs, then, in such event, without giving effect to any Preferred Liquidation
Preference, the Series B Preferred Stock shall automatically, and without the
requirement of further action by the Company or the holders, be converted into
such number of fully paid and nonassessable shares of Common Stock determined by
dividing the Series B Original Issue Price, plus accrued but unpaid dividends
under Section 2(a) and accrued dividends under Section 2(b), by the Series B
Conversion Price then in effect. For purposes of this Certificate of
Designation, "Significant Transaction" shall mean (A) a reorganization, merger
or consolidation in which immediately after (by virtue of securities issued as
consideration for such transaction) the former shareholders of the Company do
not hold at least 50% of the voting power of the surviving or acquiring entity,
(B) an acquisition of all outstanding capital stock of the Company, (C) a
liquidation of the Company or


                                       3.
<Page>


a winding down of its business, or (D) a sale or other transfer of all or
substantially all of the Company's assets, but shall not include (1) a
commencement of any bankruptcy or insolvency proceedings, whether voluntary or
involuntary, (2) a filing for reorganization or relief under bankruptcy law, (3)
a consent to the appointment of a receiver, liquidator or trustee for the
Company or its assets, (4) a making of a general assignment by the Company for
the benefit of its creditors or (5) any other similar corporate action.

         (ii)     Subject to the provisions of Sections 5 and 6, upon January
14, 2006, the Series A Preferred Stock shall automatically, and without the
requirement of further action by the Company or the holders, be converted into
such number of fully paid and nonassessable shares of Common Stock determined by
dividing the Series B Original Issue Price, plus accrued but unpaid dividends
under Section 2(a) and accrued dividends under Section 2(b), by the Series B
Conversion Price then in effect. Any shares of Series B Preferred Stock that are
not automatically converted into shares of the Company's Common Stock as a
result of the provisions of Section 5 shall remain issued and outstanding unless
converted pursuant to the provisions of Section 4(a) or redeemed pursuant to the
provisions of Section 5.

         (c)      SERIES B CONVERSION PRICE. The price at which shares of Common
Stock shall be deliverable upon conversion of Series B Preferred Stock (the
"Series B Conversion Price") (i) for purposes of Sections 4(a) and 4(b)(ii)
shall be equal to 125% of the average closing price of the Company's Common
Stock on the Nasdaq National Market (or any other national securities exchange
on which the Common Stock is then traded) per share for the 60 trading days
ending two business days prior to June 30, 2002, subject to adjustment as set
forth below, and (ii) for purposes of Section 4(b)(i) shall be equal to (A) if
prior to June 30, 2002, 120% of the average closing price of the Company's
Common Stock on the Nasdaq National Market (or any other national securities
exchange on which the Common Stock is then traded) per share for the 60 trading
days ending two business days prior to the date of first public announcement of
the Significant Transaction, or (B) if on or after June 30, 2002, 125% of the
average closing price of the Company's Common Stock on the Nasdaq National
Market (or any other national securities exchange on which the Common Stock is
then traded) per share for the 60 trading days ending two business days prior to
the date of first public announcement of the Significant Transaction.

         (d)      MECHANICS OF CONVERSION. Before any holder of Series B
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates thereof, duly
endorsed, at the office of the Company or of any transfer agent for such stock,
and shall give written notice to the Company at such office that such holder
elects to convert the same and shall state therein the name or names in which
such holder wishes the certificate or certificates for shares of Common Stock to
be issued. The Company shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series B Preferred Stock or its nominee
or nominees, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid, together with cash in
lieu of any fractional shares. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of surrender of the
shares of Series B Preferred Stock to be converted. The person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date.


                                       4.
<Page>


         (e)      ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company
shall at any time or from time to time after the date that the first share of
Series B Preferred Stock is issued (the "Original Issue Date") effect a
subdivision of the outstanding Common Stock without a corresponding subdivision
of the Series B Preferred Stock, the Series B Conversion Price in effect
immediately before that subdivision shall be proportionately decreased.
Conversely, if the Company shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock into a
smaller number of shares without a corresponding combination of the Series B
Preferred Stock, the Series B Conversion Price in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
Section 4(e) shall become effective at the close of business on the date the
subdivision or combination becomes effective.

         (f)      ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If
the Company at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series B Conversion Price that is
then in effect shall be decreased as of the time of such issuance or, in the
event such record date is fixed, as of the close of business on such record
date, by multiplying the Series B Conversion Price then in effect by a fraction
(i) the numerator of which is the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series B Conversion Price shall be recomputed accordingly as
of the close of business on such record date and thereafter the Series B
Conversion Price shall be adjusted pursuant to this Section 4(f) to reflect the
actual payment of such dividend or distribution.

         (g)      ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time after the Original Issue Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the Company
other than shares of Common Stock, in each such event provision shall be made so
that the holders of the Series B Preferred Stock shall receive upon conversion
thereof, in addition to the number of shares of Common Stock receivable
thereupon, the amount of other securities of the Company which they would have
received had their Series B Preferred Stock been converted into Common Stock on
the date of such event and had they thereafter, during the period from the date
of such event to and including the conversion date, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 4 with respect to
the rights of the holders of the Series B Preferred Stock or with respect to
such other securities by their terms.

         (h)      ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If
at any time or from time to time after the Original Issue Date, the Common Stock
issuable upon the conversion of the Series B Preferred Stock is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (other than a


                                       5.
<Page>


subdivision or combination of shares or stock dividend or a reorganization,
merger, consolidation or sale of assets provided for elsewhere in this Section
4), in any such event each holder of Series B Preferred Stock shall have the
right thereafter to convert such stock into the kind and amount of stock and
other securities and property receivable upon such recapitalization,
reclassification or other change by holders of the maximum number of shares of
Common Stock into which such shares of Series B Preferred Stock could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.

         (i)      REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS.
If at any time or from time to time after the Original Issue Date, there is a
capital reorganization of the Common Stock (other than a Signification
Transaction or a subdivision or combination of shares or stock dividend or a
reorganization, merger, consolidation or sale of assets provided for elsewhere
in this Section 4), as a part of such capital reorganization, provision shall be
made so that the holders of the Series B Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series B Preferred Stock the number
of shares of stock or other securities or property of the Company to which a
holder of the number of shares of Common Stock deliverable upon conversion would
have been entitled on such capital reorganization, subject to adjustment in
respect of such stock or securities by the terms thereof. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 4 with respect to the rights of the holders of Series B Preferred
Stock after the capital reorganization to the end that the provisions of this
Section 4 (including adjustment of the Series B Conversion Price then in effect
and the number of shares issuable upon conversion of the Series A Preferred
Stock) shall be applicable after that event and be as nearly equivalent as
practicable.

         (j)      CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the number of shares of Common Stock issuable upon
conversion of a share of Series B Preferred Stock pursuant to this Section 4,
the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series B Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon the written request at any time
of any holder of Series B Preferred Stock, furnish or cause to be furnished to
such holder a like certificate prepared by the Company setting forth (i) such
adjustments and readjustments, (ii) the Series B Conversion Price at the time in
effect, and (iii) the number of shares of Common Stock and the amount, if any,
of other property which at the time would be received upon the conversion of the
Series B Preferred Stock.

         (k)      NOTICES OF RECORD DATE. In the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any security or right convertible
into or entitling the holder thereof to receive additional shares of Common
Stock, or any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to receive any
other right, the Company shall mail to each holder of Series B Preferred Stock
at least 10 days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of


                                       6.
<Page>


such dividend, distribution, security or right, and the amount and character of
such dividend, distribution, security or right.

         (l)      ISSUE TAXES. The holders of Series B Preferred Stock shall pay
any and all issue, transfer and other taxes that may be payable in respect of
any issue or delivery of shares of Common Stock on conversion of shares of
Series B Preferred Stock pursuant hereto.

         (m)      RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series B Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series B Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series B
Preferred Stock, the Company will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to the Restated
Certificate. All shares of Common Stock which are issuable upon such conversion
shall, when issued, be duly and legally issued, fully paid and nonassessable and
free of all taxes, liens and charges.

         (n)      FRACTIONAL SHARES. No fractional share shall be issued upon
the conversion of any share or shares of Series B Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series B Preferred Stock by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of Common
Stock, the Company shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to such fraction
multiplied by the closing price of the Company's Common Stock on the Nasdaq
National Market (or any other national securities exchange on which the Common
Stock is then traded) on the day immediately preceding the conversion.

         (o)      NOTICES. Any notice required by the provisions of this Section
4 shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when telephonically confirmed if sent
by telex or facsimile, (iii) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All notices shall be addressed
to each holder of record at the address of such holder appearing on the books of
the Company.

         SECTION 5. LIMITATION ON ISSUANCE OF SHARES UPON CONVERSION;
                    REDEMPTION.

         (a)      The following definitions shall apply to this Certificate of
Designation:

         (i)      "Maximum Share Amount" shall mean the number of shares of the
Company's Common Stock equal to 19.99% of the Company's Common Stock then
outstanding;


                                       7.
<Page>


         (ii)     "Excess Shares" shall mean Common Stock of the Company which,
upon issuance, results in the beneficial ownership (as defined in Rule 13(d)-3
of the Securities Exchange Act of 1934) by a holder of shares of Common Stock in
excess of the Maximum Share Amount;

         (iii)    "Exchange Rules" shall mean the rules or regulations of Nasdaq
or any other principal securities market upon which the Common Stock of the
Company is or becomes traded.

         (b)      Except as provided in Section 5(c) hereof, the Company shall
not be obligated to issue upon conversion of the Series B Preferred Stock, in
the aggregate, Excess Shares if such issuance in excess of the Maximum Shares
Amount would constitute a breach or violation of the Company's obligations under
the Exchange Rules.

         (c)      To the extent the Company will be required, or it appears
likely to the Board of Directors of the Company that the Company will be
required, to issue any Excess Shares, the Company shall promptly use its best
efforts to obtain stockholder approval in accordance with Delaware law, the
applicable rules of the Securities and Exchange Commission and the Exchange
Rules. In the event the Company does not obtain stockholder approval, the
Company shall have the right, at its option (the "Redemption Right"), to redeem,
out of funds legally available therefor, all or any part of the Excess Shares at
a redemption price, payable in cash, equal to the Series B Original Issue Price
per share together with accrued dividends on any such shares that are redeemed
(the "Redemption Price"). The Company may exercise the Redemption Right by
providing notice by mail, first class postage prepaid, to each holder of Series
B Preferred Stock of record (at the close of business on the business day
preceding the day on which notice is given) of the Series B Preferred Stock to
be redeemed, at the address last shown on the records of the Company for such
holder, notifying such holder of the redemption to be effected, specifying the
number of shares to be redeemed from such holder, the date that the redemption
is to occur (the "Redemption Date"), the place at which payment may be obtained
and calling upon such holder to surrender to the Company, in the manner and at
the place designated, such holder's certificate or certificates representing the
shares to be redeemed (the "Redemption Notice"). On or after the Redemption
Date, each holder of Series B Preferred Stock to be redeemed shall surrender to
the Company the certificate or certificates representing such shares in the
manner and at the place designated in the Redemption Notice, and thereupon the
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be cancelled. In the event less than all of
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares. From and after the
Redemption Date, unless there shall have been a default in payment of the
Redemption Price, all rights of the holders of shares of Series B Preferred
Stock designated for redemption in the Redemption Notice as holders of Series B
Preferred Stock (except the right to receive the Redemption Price without
interest upon surrender of their certificate or certificates and except as
provided in Section 6(c)) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the Company or be
deemed to be outstanding for any purpose whatsoever.


                                       8.
<Page>


         SECTION 6. EXCHANGE RIGHT.

         (a)      At any time beginning on the date hereof, provided that no
shares of Series B Preferred Stock representing the shares initially issued and
sold by the Company to Elan International Services, Ltd., a Bermuda corporation
("EIS") and its affiliates, together with those issued or issuable in respect of
dividends provided for in Section 1 above, have been converted as provided in
Section 4(a) or (b)(ii) above, the holders of the Series B Preferred Stock (by
act of the holders of a majority of the Series B Preferred Stock) shall have the
right to exchange their shares of Series B Preferred Stock (the "Exchange
Right") with the Company for non-voting convertible preferred shares of
HepaSense Ltd., a Bermuda corporation ("Newco"), held by the Company, together
with all dividends or distributions made thereon (or, if the Company has
converted its non-voting convertible preferred shares of Newco into common
shares of Newco, the Exchange Right shall apply to the common shares of Newco
received by the Company upon such conversion, together with all dividends or
distributions made thereon), representing, on a fully-diluted basis, 30.097% of
the aggregate issued and outstanding capital stock of Newco, so that, after
giving effect to the exercise of the Exchange Right, such holders will own
49.995% of such issued and outstanding capital stock of Newco on a fully-diluted
basis.

         (b)      In order to exercise the Exchange Right, the holders shall
provide written notice thereof to the Company, setting forth (i) the fact that
such holders intend to exercise the Exchange Right, and (ii) the proposed date
for such exercise (the "Exercise Date"), which shall be between 10 and 30 days
after the date of such notice. Such notice shall be irrevocable. On the Exercise
Date, (y) the holders shall tender their shares of Series B Preferred Stock to
the Company for cancellation, and (z) the Company shall cause to be delivered to
EIS, acting on behalf of such holders, such shares of Newco. The holders and the
Company shall take all other necessary or appropriate actions in connection with
or to effect such closing.

         (c)      If any shares of Series B Preferred Stock are converted into
shares of Common Stock pursuant to Section 4(a) or (b)(ii), the Exchange Right
shall be terminated and be of no further force and effect with respect to such
shares or with respect to those shares of Series B Preferred Stock issued as
dividends pursuant to Section 2(b). If all or any shares of the Series B
Preferred Stock are converted to shares of Common Stock pursuant to Section
4(b)(i) upon the occurrence of a Significant Transaction, the Exchange Right
shall be preserved for its full term as provided in Section 6(a), except that,
to exercise the Exchange Right, EIS shall be obligated to tender the
consideration received by EIS upon the automatic conversion of the Series B
Preferred Stock in connection with such Significant Transaction. If the Company
exercises the Redemption Right with respect to any shares of Series B Preferred
Stock, the Exchange Right shall be preserved for its full six-year term, except
that, to exercise the Exchange Right, EIS shall be obligated to tender the
consideration received by EIS upon the redemption of any Excess Shares in
connection with the Company's exercise of its Redemption Right.

         SECTION 7. VOTING RIGHTS. Holders of Series B Preferred Stock shall not
be entitled to vote together with holders of Common Stock, including with
respect to the election of directors of the Company, or as a separate class,
except as otherwise provided by the General Corporation Law of the State of
Delaware ("DGCL") and in this Section 7. To the extent that, under the DGCL, the
vote of the holders of the Series B Preferred Stock, voting separately as a
class or series as applicable, is required to authorize a given action of the
Company, the affirmative vote or


                                       9.
<Page>


consent of the holders of at least a majority of the shares of the Series B
Preferred Stock represented at a duly held meeting at which a quorum is present
or by written consent of a majority of the shares of Series B Preferred Stock
(except as otherwise may be required under the DGCL) shall constitute the
approval of such action by the class. Holders of the Series B Preferred Stock
shall be entitled to notice of all shareholder meetings or written consents (and
copies of proxy materials and other information sent to shareholders) with
respect to which they would be entitled as of right under the DGCL which notice
would be provided pursuant to the Company's Bylaws and the DGCL.

         SECTION 8. PROTECTIVE PROVISIONS. So long as any shares of Series B
Preferred Stock are outstanding, the Company shall not, without first obtaining
the approval (by vote or written consent, as provided by law) of the holders of
at least a majority of the then outstanding shares of Series B Preferred Stock,
voting as a separate class, amend its Certificate of Incorporation so as to
adversely affect the rights, preferences or privileges of the Series B Preferred
Stock or any holder thereof, including, without limitation, by creating any
series of Preferred Stock (or issuing shares under any such series) that is
senior in right payment upon liquidation, in respect of dividends or otherwise
to the Series B Preferred Stock, or change the rights of the holders of the
Series B Preferred Stock in any other respect; provided, however, that the
creation of any series of Preferred Stock (or issuance of shares under any such
series) that is PARI PASSU in right payment upon liquidation, in respect of
dividends or otherwise with the Series B Preferred Stock shall not be deemed to
adversely affect the rights, preferences or privileges of the Series B Preferred
Stock or any holder thereof or change the rights of the holders of the Series B
Preferred Stock in any other respect.

         SECTION 9. STATUS OF CONVERTED, REDEEMED OR EXCHANGED STOCK. In the
event any shares of Series B Preferred Stock shall be converted pursuant to
Section 4 hereof, redeemed pursuant to Section 5 hereof or exchanged pursuant to
Section 6 hereof, the shares so converted, redeemed or exchanged shall be
cancelled and shall not be reissuable by the Company.


                                      10.
<Page>


         IN WITNESS WHEREOF, Isis Pharmaceuticals, Inc. has caused this
Certificate of Designation to be signed by its Chief Executive Officer and
attested by its Secretary this ____ day of January, 2000.

                                         ISIS PHARMACEUTICALS, INC.



                                         By:
                                            ------------------------------------
                                                  Stanley T. Crooke, M.D., Ph.D.
                                                  Chief Executive Officer


Attest:



------------------------------
B. Lynne Parshall
Secretary


                                      11.