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                           ISIS PHARMACEUTICALS, INC.

                 2002 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

              ADOPTED BY THE BOARD OF DIRECTORS SEPTEMBER 11, 2001
                   APPROVED BY STOCKHOLDERS ____________, 2002
                       EFFECTIVE DATE: ___________, 2002

1.       PURPOSES.

         (a)      AMENDMENT AND RESTATEMENT. This Plan is an amendment and
restatement of the Isis Pharmaceuticals, Inc. 1992 Non-Employee Directors' Stock
Option Plan.

         (b)      ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive
Options are the Non-Employee Directors of the Company.

         (c)      AVAILABLE OPTIONS. The purpose of the Plan is to provide a
means by which Non-Employee Directors may be given an opportunity to benefit
from increases in value of the Common Stock through the granting of Nonstatutory
Stock Options.

         (d)      GENERAL PURPOSE. The Company, by means of the Plan, seeks to
retain the services of its Non-Employee Directors, to secure and retain the
services of new Non-Employee Directors and to provide incentives for such
persons to exert maximum efforts for the success of the Company and its
Affiliates.

2.       DEFINITIONS.

         (a)      "AFFILIATE" means any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f), respectively, of the Code.

         (b)      "ANNUAL GRANT" means an Option granted annually to all
Non-Employee Directors who meet the criteria specified in subsection 6(b) of the
Plan.

         (c)      "BOARD" means the Board of Directors of the Company.

         (d)      "CAPITALIZATION ADJUSTMENT" has the meaning ascribed to that
term in Section 11(a).

         (e)      "CHANGE IN CONTROL" means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of the
following events:

                  (i)      any Exchange Act Person becomes the Owner, directly
or indirectly, of securities of the Company representing more than 50% of the
combined voting power of the Company's then outstanding securities other than by
virtue of a merger, consolidation or similar transaction and other than by a
purchase of securities directly from the Company;

                                       1.
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         Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because the level of Ownership held by any Exchange Act Person
(the "Subject Person") exceeds the percentage threshold specified above of the
outstanding voting securities as a result of a repurchase or other acquisition
of voting securities by the Company reducing the number of shares outstanding,
provided that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of voting securities by the Company,
and after such share acquisition, the Subject Person becomes the Owner of any
additional voting securities (other than through a purchase directly from the
Company) that, assuming the repurchase or other acquisition had not occurred,
increases the percentage of the then outstanding voting securities Owned by the
Subject Person over the percentage threshold specified above, then a Change in
Control shall be deemed to occur.

                  (ii)     there is consummated a merger, consolidation or
similar transaction involving (directly or indirectly) the Company and,
immediately after the consummation of such merger, consolidation or similar
transaction, the stockholders of the Company immediately prior thereto do not
Own, directly or indirectly, outstanding voting securities representing more
than 50% of the combined outstanding voting power of the surviving Entity in
such merger, consolidation or similar transaction or more than 50% of the
combined outstanding voting power of the parent of the surviving Entity in such
merger, consolidation or similar transaction;

                  (iii)    the stockholders of the Company approve or the Board
approves a plan of complete dissolution or liquidation of the Company, or a
complete dissolution or liquidation of the Company shall otherwise occur;

                  (iv)     there is consummated a sale, lease, license or other
disposition of all or substantially all of the consolidated assets of the
Company and its Subsidiaries, other than a sale, lease, license or other
disposition of all or substantially all of the consolidated assets of the
Company and its Subsidiaries to an Entity, more than 50% of the combined voting
power of the voting securities of which are Owned by stockholders of the Company
in substantially the same proportions as their Ownership of the Company
immediately prior to such sale, lease, license or other disposition; or

                  (v)      individuals who, on the date this Plan is adopted by
the Board, are members of the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the members of the Board; (PROVIDED,
HOWEVER, that if the appointment or election (or nomination for election) of any
new Board member was approved or recommended by a majority vote of the members
of the Incumbent Board then still in office, such new member shall, for purposes
of this Plan, be considered as a member of the Incumbent Board).

         Notwithstanding the foregoing or any other provision of this Plan, the
definition of Change in Control (or any analogous term) in an individual written
agreement between the Company or any Affiliate and the Optionholder shall
supersede the foregoing definition with respect to Options subject to such
agreement (it being understood, however, that if no definition of Change in
Control or any analogous term is set forth in such an individual written
agreement, the foregoing definition shall apply).

         (f)      "CODE" means the Internal Revenue Code of 1986, as amended.

                                       2.
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         (g)      "COMMON STOCK" means the common stock of the Company.

         (h)      "COMPANY" means Isis Pharmaceuticals, Inc., a Delaware
corporation.

         (i)      "CONSULTANT" means any person, including an advisor, (i)
engaged by the Company or an Affiliate to render consulting or advisory services
and who is compensated for such services or (ii) serving as a member of the
Board of Directors of an Affiliate and who is compensated for such services.
However, the term "Consultant" shall not include Directors who are not
compensated by the Company for their services as Directors, and the payment of a
director's fee by the Company for services as a Director shall not cause a
Director to be considered a "Consultant" for purposes of the Plan.

         (j)      "CONTINUOUS SERVICE" means that the Optionholder's service
with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. A change in the capacity in which
the Optionholder renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Optionholder
renders such service, provided that there is no interruption or termination of
the Optionholder's service with the Company or an Affiliate, shall not terminate
an Optionholder's Continuous Service. For example, a change in status from a
Non-Employee Director of the Company to a Consultant of an Affiliate or an
Employee of the Company shall not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the Company, in that
party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.

         (k)      "CORPORATE TRANSACTION" means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of the
following events:

                  (i)      a sale or other disposition of all or substantially
all, as determined by the Board in its discretion, of the consolidated assets of
the Company and its Subsidiaries;

                  (ii)     a sale or other disposition of at least 90% of the
outstanding securities of the Company;

                  (iii)    a merger, consolidation or similar transaction
following which the Company is not the surviving corporation; or

                  (iv)     a merger, consolidation or similar transaction
following which the Company is the surviving corporation but the shares of
Common Stock outstanding immediately preceding the merger, consolidation or
similar transaction are converted or exchanged by virtue of the merger,
consolidation or similar transaction into other property, whether in the form of
securities, cash or otherwise.

         (l)      "DIRECTOR" means a member of the Board of Directors of the
Company.

         (m)      "DISABILITY" means the permanent and total disability of a
person within the meaning of Section 22(e)(3) of the Code.

                                       3.
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         (n)      "EMPLOYEE" means any person employed by the Company or an
Affiliate. Service as a Director or payment of a director's fee by the Company
or an Affiliate shall not be sufficient to constitute "employment" by the
Company or an Affiliate.

         (o)      "ENTITY" means a corporation, partnership or other entity.

         (p)      "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

         (q)      "EXCHANGE ACT PERSON" means any natural person, Entity or
"group" (within the meaning of Section 13(d) or 14(d) of the Exchange Act),
except that "Exchange Act Person" shall not include (A) the Company or any
Subsidiary of the Company, (B) any employee benefit plan of the Company or
any Subsidiary of the Company or any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any Subsidiary of
the Company, (C) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (D) an Entity Owned, directly or indirectly,
by the stockholders of the Company in substantially the same proportions as
their Ownership of stock of the Company.

         (r)      "FAIR MARKET VALUE" means, as of any date, the value of the
Common Stock determined as follows:

                  (i)      If the Common Stock is listed on any established
stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap
Market, the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in the Common Stock) on the last market trading day prior to
the day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable.

                  (ii)     In the absence of such markets for the Common Stock,
the Fair Market Value shall be determined in good faith by the Board.

         (s)      "INITIAL GRANT" means an Option granted to a Non-Employee
Director who meets the criteria specified in subsection 6(a) of the Plan.

         (t)      "NON-EMPLOYEE DIRECTOR" means a Director who is not an
Employee.

         (u)      "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.

         (v)      "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

         (w)      "OPTION" means a Nonstatutory Stock Option granted pursuant to
the Plan.

         (x)      "OPTION AGREEMENT" means a written agreement between the
Company and an Optionholder evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.

                                       4.
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         (y)      "OPTIONHOLDER" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

         (z)      "OWN," "OWNED," "OWNER," "OWNERSHIP" A person or Entity shall
be deemed to "Own," to have "Owned," to be the "Owner" of, or to have acquired
"Ownership" of securities if such person or Entity, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise, has
or shares voting power, which includes the power to vote or to direct the
voting, with respect to such securities.

         (aa)     "PLAN" means this Isis Pharmaceuticals, Inc. 2002 Non-Employee
Directors' Stock Option Plan, which is an amendment and restatement of the Isis
Pharmaceuticals, Inc. 1992 Non-Employee Directors' Stock Option Plan.

         (bb)     "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange
Act or any successor to Rule 16b-3, as in effect from time to time.

         (cc)     "SECURITIES ACT" means the Securities Act of 1933, as amended.

         (dd)     "SUBSIDIARY" means, with respect to the Company, (i) any
corporation of which more than 50% of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or indirectly Owned
by the Company, and (ii) any partnership in which the Company has a direct or
indirect interest (whether in the form of voting or participation in profits or
capital contribution) of more than 50%.

3.       ADMINISTRATION.

         (a)      ADMINISTRATION BY BOARD. The Board shall administer the Plan.
The Board may not delegate administration of the Plan to a committee.

         (b)      POWERS OF BOARD. The Board shall have the power, subject to,
and within the limitations of, the express provisions of the Plan:

                  (i)      To determine the provisions of each Option to the
extent not specified in the Plan.

                  (ii)     To construe and interpret the Plan and Options
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

                  (iii)    To amend the Plan or an Option as provided in Section
12.

                  (iv)     To terminate or suspend the Plan as provided in
Section 13.

                                       5.
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                  (v)      Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote the best
interests of the Company and that are not in conflict with the provisions of the
Plan.

         (c)      EFFECT OF BOARD'S DECISION. All determinations,
interpretations and constructions made by the Board in good faith shall not be
subject to review by any person and shall be final, binding and conclusive on
all persons.

         (d)      ARBITRATION. Any dispute or claim concerning any Option
granted (or not granted) pursuant to the Plan or any disputes or claims relating
to or arising out of the Plan shall be fully, finally and exclusively resolved
by binding arbitration conducted pursuant to the Commercial Arbitration Rules of
the American Arbitration Association in San Diego, California. The Company shall
pay all arbitration fees. In addition to any other relief, the arbitrator may
award to the prevailing party recovery of its attorney's fees and costs. By
accepting an Option, Optionholders and the Company waive their respective rights
to have any such disputes or claims tried by a judge or jury.

4.       SHARES SUBJECT TO THE PLAN.

         (a)      SHARE RESERVE. Subject to the provisions of Section 11(a)
relating to Capitalization Adjustments, the Common Stock that may be issued
pursuant to Options shall not exceed in the aggregate 600,000 shares of Common
Stock.

         (b)      REVERSION OF SHARES TO THE SHARE RESERVE. If any Option shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not acquired under
such Option shall revert to and again become available for issuance under the
Plan.

         (c)      SOURCE OF SHARES. The shares of Common Stock subject to the
Plan may be unissued shares or reacquired shares, bought on the market or
otherwise.

5.       ELIGIBILITY.

         The Options as set forth in Section 6 of the Plan automatically shall
be granted under the Plan to all Non-Employee Directors.

6.       NON-DISCRETIONARY GRANTS.

         (a)      INITIAL GRANTS. Without any further action of the Board, each
person who is elected or appointed for the first time after the effective date
of this amendment and restatement of the Plan to be a Non-Employee Director
automatically shall, upon the date of his or her initial election or appointment
to be a Non-Employee Director by the Board or stockholders of the Company, as
applicable, be granted an Initial Grant to purchase 20,000 shares of Common
Stock on the terms and conditions set forth herein.

         (b)      ANNUAL GRANTS. Without any further action of the Board, after
the effective date of this amendment and restatement of the Plan, a Non-Employee
Director shall be granted an Annual Grant as follows: On July 1 of each year,
beginning on July 1, 2002, each person who is

                                       6.
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then a Non-Employee Director automatically shall be granted an Annual Grant to
purchase 10,000 shares of Common Stock on the terms and conditions set forth
herein. Should the date of grant set forth above be a legal holiday, then such
grant shall be made on the next business day.

7.       OPTION PROVISIONS.

         Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. Each Option shall include
(through incorporation of provisions hereof by reference in the Option or
otherwise) the substance of each of the following provisions:

         (a)      TERM. No Option shall be exercisable after the expiration of
10 years from the date it was granted.

         (b)      EXERCISE PRICE. The exercise price of each Option shall be
100% of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.

         (c)      CONSIDERATION. The purchase price of Common Stock acquired
pursuant to an Option shall be paid in cash at the time the Option is exercised.

         (d)      TRANSFERABILITY. An Option will not be transferable except as
determined by the Board.

         (e)      EXERCISE SCHEDULE. The Option shall be exercisable as the
shares of Common Stock subject to the Option vest.

         (f)      VESTING SCHEDULE. The Option shall vest and become exercisable
as follows:

                  (i)      Initial Grants: one-fourth of the shares subject to
the Option shall vest on each annual anniversary of the date of grant provided
that the Optionholder has, during the entire year prior to such vesting date,
continuously served as a Non-Employee Director or as an Employee of or
Consultant to the Company or any Affiliate, whereupon such option shall become
fully exercisable in accordance with its terms with respect to that portion of
the shares represented by that installment.

                  (ii)     Annual Grants: one-fourth of the shares subject to
the Option shall vest on each annual anniversary of the date of grant provided
that the Optionholder has, during the entire year prior to such vesting date,
continuously served as a Non-Employee Director or as an Employee of or
Consultant to the Company or any Affiliate, whereupon such option shall become
fully exercisable in accordance with its terms with respect to that portion of
the shares represented by that installment.

         (g)      TERMINATION OF CONTINUOUS SERVICE. In the event that an
Optionholder's Continuous Service terminates (other than upon the Optionholder's
death or Disability), the

                                       7.
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Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination) but only
within such period of time ending on the earlier of (i) the date 3 months
following the termination of the Optionholder's Continuous Service (or such
longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.

         (h)      EXTENSION OF TERMINATION DATE. An Optionholder's Option
Agreement may also provide that if the exercise of the Option following the
termination of the Optionholder's Continuous Service (other than upon the
Optionholder's death or Disability) would be prohibited at any time solely
because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in subsection
7(a) or (ii) the expiration of a period of 3 months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.

         (i)      DISABILITY OF OPTIONHOLDER. In the event that an
Optionholder's Continuous Service terminates as a result of the Optionholder's
Disability, the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination), but only within such period of time ending on the earlier of (i)
the date 12 months following such termination (or such longer or shorter period
specified in the Option Agreement) or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.

         (j)      DEATH OF OPTIONHOLDER. In the event that (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
Option upon the Optionholder's death pursuant to subsection 7(d), but only
within the period ending on the earlier of (1) the date 18 months following the
date of death (or such longer or shorter period specified in the Option
Agreement) or (2) the expiration of the term of such Option as set forth in the
Option Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.

8.       COVENANTS OF THE COMPANY.

         (a)      AVAILABILITY OF SHARES. During the terms of the Options, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Options.

         (b)      SECURITIES LAW COMPLIANCE. The Company shall seek to obtain
from each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Options and to issue and sell shares of
Common Stock upon exercise of the

                                       8.

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Options; provided, however, that this undertaking shall not require the Company
to register under the Securities Act the Plan, any Option or any Common Stock
issued or issuable pursuant to any such Option. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for the lawful
issuance and sale of Common Stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell Common Stock upon exercise of
such Options unless and until such authority is obtained.

9.       USE OF PROCEEDS FROM STOCK.

         Proceeds from the sale of Common Stock pursuant to Options shall
constitute general funds of the Company.

         10.      MISCELLANEOUS.

         (a)      ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall
have the power to accelerate the time at which an Option may first be exercised
or the time during which an Option or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Option stating the time at
which it may first be exercised or the time during which it will vest.

         (b)      STOCKHOLDER RIGHTS. No Optionholder shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
of Common Stock subject to such Option unless and until such Optionholder has
satisfied all requirements for exercise of the Option pursuant to its terms.

         (c)      NO SERVICE RIGHTS. Nothing in the Plan or any instrument
executed or Option granted pursuant thereto shall confer upon any Optionholder
any right to continue to serve the Company as a Non-Employee Director or shall
affect the right of the Company or an Affiliate to terminate (i) the employment
of an Employee with or without notice and with or without cause, (ii) the
service of a Consultant pursuant to the terms of such Consultant's agreement
with the Company or an Affiliate or (iii) the service of a Director pursuant to
the Bylaws of the Company or an Affiliate, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.

         (d)      INVESTMENT ASSURANCES. The Company may require an
Optionholder, as a condition of exercising or acquiring Common Stock under any
Option, (i) to give written assurances satisfactory to the Company as to the
Optionholder's knowledge and experience in financial and business matters and/or
to employ a purchaser representative reasonably satisfactory to the Company who
is knowledgeable and experienced in financial and business matters and that he
or she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Option; and (ii) to give
written assurances satisfactory to the Company stating that the Optionholder is
acquiring the Common Stock subject to the Option for the Optionholder's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Option
has been registered under a then currently effective registration statement
under the Securities Act or (2)

                                       9.

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as to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the Common Stock.

         (e)      WITHHOLDING OBLIGATIONS. To the extent provided by the terms
of an Option Agreement, the Optionholder may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under an Option by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Optionholder by
the Company) or by a combination of such means: (i) tendering a cash payment;
(ii) authorizing the Company to withhold shares of Common Stock from the shares
of Common Stock otherwise issuable to the Optionholder as a result of the
exercise or acquisition of Common Stock under the Option, provided, however,
that no shares of Common Stock are withheld with a value exceeding the minimum
amount of tax required to be withheld by law (or such lower amount as may be
necessary to avoid variable award accounting); or (iii) delivering to the
Company owned and unencumbered shares of Common Stock.

11.      ADJUSTMENTS UPON CHANGES IN STOCK.

         (a)      CAPITALIZATION ADJUSTMENTS. If any change is made in, or other
event occurs with respect to, the Common Stock subject to the Plan, or subject
to any Option, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company) (each, a "Capitalization Adjustment"), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject both to the
Plan pursuant to subsection 4(a) and to the nondiscretionary Options specified
in Section 6, and the outstanding Options will be appropriately adjusted in the
class(es) and number of securities and price per share of Common Stock subject
to such outstanding Options. The Board shall make such adjustments, and its
determination shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)

         (b)      DISSOLUTION OR LIQUIDATION. In the event of a dissolution or
liquidation of the Company, then all outstanding Options shall terminate
immediately prior to the completion of such dissolution or liquidation.

         (c)      CORPORATE TRANSACTION. In the event of a Corporate
Transaction, any surviving corporation or acquiring corporation may assume any
or all Options outstanding under the Plan or may substitute similar options for
Options outstanding under the Plan (it being understood that similar options
include, but are not limited to, options to acquire the same consideration paid
to the stockholders or the Company, as the case may be, pursuant to the
Corporate Transaction). In the event that any surviving corporation or acquiring
corporation does not assume any or all such outstanding Options or substitute
similar options for such outstanding Options, then with respect

                                      10.

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to Options that have been neither assumed nor substituted and that are held by
Optionholders whose Continuous Service has not terminated prior to the effective
time of the Corporate Transaction, the vesting of such Options (and, if
applicable, the time at which such Options may be exercised) shall (contingent
upon the effectiveness of the Corporate Transaction) be accelerated in full to a
date prior to the effective time of such Corporate Transaction as the Board
shall determine (or, if the Board shall not determine such a date, to the date
that is 5 days prior to the effective time of the Corporate Transaction), and
the Options shall terminate if not exercised at or prior to such effective time.
With respect to Options outstanding under the Plan that have been neither
assumed nor substituted and that are held by Optionholders whose Continuous
Service has terminated prior to the effective time of the Corporate Transaction,
the vesting of such Options (and, if applicable, the time at which such Option
may be exercised) shall not be accelerated unless otherwise provided in a
written agreement between the Company or any Affiliate and the holder of such
Option, and such Options shall terminate if not exercised prior to the effective
time of the Corporate Transaction.

         (d)      CHANGE IN CONTROL. Notwithstanding any other provisions of the
Plan to the contrary, if a Change in Control occurs and the Optionholder's
Continuous Service has not terminated prior to the effective date of such Change
in Control, then the vesting and exercisability of the shares of Common Stock
subject to the Optionholder's Options shall be accelerated in full as of the
effective date of the Change in Control. Following such Change in Control (other
than a Change in Control resulting from a plan of complete dissolution or
liquidation of the Company) and notwithstanding any other provision of the Plan
to the contrary and provided that the Optionholder's Continuous Service has not
terminated prior to the effective date of the Change in Control, then the
Optionholder's Options shall expire on the earliest of (i) 12 months following
the effective date of such Change in Control or (ii) the Expiration Date
indicated in the Optionholder's Grant Notice.

         (e)      PARACHUTE PAYMENTS. If any payment or benefit the Optionholder
would receive pursuant to a Change in Control from the Company or otherwise
("Payment") would (i) constitute a "parachute payment" within the meaning of
Section 280G of the Code, and (ii) but for this sentence, be subject to the
excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then such
Payment shall be reduced to the Reduced Amount. The "Reduced Amount" shall be
either (x) the largest portion of the Payment that would result in no portion of
the Payment being subject to the Excise Tax or (y) the largest portion, up to
and including the total, of the Payment, whichever amount, after taking into
account all applicable federal, state and local employment taxes, income taxes,
and the Excise Tax (all computed at the highest applicable marginal rate),
results in the Optionholder's receipt, on an after-tax basis, of the greater
amount of the Payment notwithstanding that all or some portion of the Payment
may be subject to the Excise Tax. If a reduction in payments or benefits
constituting "parachute payments" is necessary so that the Payment equals the
Reduced Amount, reduction shall occur in the following order unless the
Optionholder elects in writing a different order (PROVIDED, HOWEVER, that such
election shall be subject to Company approval if made on or after the effective
date of the event that triggers the Payment): reduction of cash payments;
cancellation of accelerated vesting of Options or other equity-based awards;
reduction of employee benefits. In the event that acceleration of vesting of
Options or other equity-based compensation is to be reduced, such acceleration
of vesting shall be cancelled in the reverse order of the date of grant

                                      11.

<Page>

of the Optionholder's Options or other equity-based awards unless the
Optionholder elects in writing a different order for cancellation.

         The accounting firm engaged by the Company for general audit purposes
as of the day prior to the effective date of the Change in Control shall perform
the foregoing calculations. If the accounting firm so engaged by the Company is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company shall
bear all expenses with respect to the determinations by such accounting firm
required to be made hereunder.

         The accounting firm engaged to make the determinations hereunder shall
provide its calculations, together with detailed supporting documentation, to
the Optionholder and the Company within 15 calendar days after the date on which
the Optionholder's right to a Payment is triggered (if requested at that time by
the Optionholder or the Company) or such other time as requested by the
Optionholder or the Company. If the accounting firm determines that no Excise
Tax is payable with respect to a Payment, either before or after the application
of the Reduced Amount, it shall furnish the Company and the Optionholder with an
opinion reasonably acceptable to the Optionholder that no Excise Tax will be
imposed with respect to such Payment. Any good faith determinations of the
accounting firm made hereunder shall be final, binding and conclusive upon the
Optionholder and the Company.

12.      AMENDMENT OF THE PLAN AND OPTIONS.

         (a)      AMENDMENT OF PLAN. The Board at any time, and from time to
time, may amend the Plan. However, except as provided in Section 11(a) relating
to Capitalization Adjustments, no amendment shall be effective unless approved
by the stockholders of the Company to the extent stockholder approval is
necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or securities
exchange listing requirements.

         (b)      STOCKHOLDER APPROVAL. The Board, in its sole discretion, may
submit any other amendment to the Plan for stockholder approval.

         (c)      NO IMPAIRMENT OF RIGHTS. Rights under any Option granted
before amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.

         (d)      AMENDMENT OF OPTIONS. The Board at any time, and from time to
time, may amend the terms of any one or more Options; provided, however, that
the rights under any Option shall not be impaired by any such amendment unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.

13.      TERMINATION OR SUSPENSION OF THE PLAN.

         (a)      PLAN TERM. The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate on the day before the
tenth anniversary of the date the Plan is approved by the stockholders of the
Company. No Options may be granted under the Plan while the Plan is suspended or
after it is terminated.

                                      12.

<Page>

         (b)      NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Option granted while the Plan
is in effect except with the written consent of the Optionholder.

14.      EFFECTIVE DATE OF PLAN.

         The Plan shall become effective as determined by the Board, but no
Option shall be exercised unless and until the Plan has been approved by the
stockholders of the Company, which approval shall be within 12 months before or
after the date the Plan is adopted by the Board.

15.      CHOICE OF LAW.

         The law of the State of California shall govern all questions
concerning the construction, validity and interpretation of this Plan without
regard to such state's conflict of laws rules.

                                      13.<Page>

                                                                  Exhibit 10.42

                 2002 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
                                  GRANT NOTICE

Optionee:                               Date:
         -------------------------------     -----------------------------------

                           ISIS PHARMACEUTICALS, INC.
                      NON-STATUTORY STOCK OPTION AGREEMENT

ISIS PHARMACEUTICALS, INC. (the "Company"), pursuant to its 2002 Non-Employee
Directors' Stock Option Plan (the "Plan"), hereby grants to Optionholder an
option to purchase the number of shares of the Company's Common Stock set forth
below. This option is subject to all of the terms and conditions as set forth
herein and in the Stock Option Agreement (Attachment I hereto), the Plan and the
Notice of Exercise, all of which are attached hereto and incorporated herein in
their entirety.

                                 Number of Shares Subject to Option:
                                                                    ------------

VESTING SCHEDULE:
         NUMBER OF SHARES (INSTALLMENT)      DATE OF EARLIEST EXERCISE (VESTING)
         ------------------------------      -----------------------------------

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

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

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

Exercise Price Per Share:           1        Expiration Date:                  2
                          ----------                         ------------------

Isis Pharmaceuticals, Inc.

By:                                          Optionee:
   -------------------------------------              --------------------------
Duly authorized on behalf of
  the Board of Directors                             Address:

OPTIONEE:

ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionholder acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan. Optionholder further acknowledges that as of the Date of
Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the
entire understanding between Optionholder and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted
and delivered to Optionholder under the Plan, and (ii) the following agreements
only:

         OTHER AGREEMENTS:
                          ------------------------------------------------------

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

<Page>

1 Not less than 100% of the fair market value of the Common Stock on the date of
grant of this option.
2 Less than 10 years from the date of grant of this option.

<Page>

                           ISIS PHARMACEUTICALS, INC.
                 2002 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

                             STOCK OPTION AGREEMENT
                           (NONSTATUTORY STOCK OPTION)

         Pursuant to your Stock Option Grant Notice ("Grant Notice") and this
Stock Option Agreement, Isis Pharmaceuticals, Inc. (the "Company") has granted
you an option under its 2002 Non-Employee Directors' Stock Option Plan (the
"Plan") to purchase the number of shares of the Company's Common Stock indicated
in your Grant Notice at the exercise price indicated in your Grant Notice.
Defined terms not explicitly defined in this Stock Option Agreement but defined
in the Plan shall have the same definitions as in the Plan.

         The details of your option are as follows:

1.       VESTING. Subject to the limitations contained herein, your option will
vest as provided in your Grant Notice, provided that vesting will cease upon the
termination of your Continuous Service.

2.       NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.

3.       METHOD OF PAYMENT. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may make payment of the exercise
price in cash or by check.

4.       WHOLE SHARES. You may exercise your option only for whole shares of
Common Stock.

5.       SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also comply
with other applicable laws and regulations governing your option, and you may
not exercise your option if the Company determines that such exercise would not
be in material compliance with such laws and regulations.

6.       TERM. You may not exercise your option before the commencement of its
term or after its term expires. Unless otherwise provided in Section 11(d) of
the Plan, the term of your option commences on the Date of Grant and expires
upon the EARLIEST of the following:

(a)  3 months after the termination of your Continuous Service for any reason
     other than your Disability or death, provided that if during any part of
     such 3 month period your option is not exercisable solely because of the
     condition set forth in the preceding paragraph relating to "Securities Law
     Compliance," your option shall not expire until the earlier of the
     Expiration

                                       1

<Page>

     Date or until it shall have been exercisable for an aggregate
     period of 3 months after the termination of your Continuous Service;

(b)  12 months after the termination of your Continuous Service due to your
     Disability;

(c)  18 months after your death if you die either during your Continuous Service
     or within 3 months after your Continuous Service terminates; or

(d)  the day before the 10th anniversary of the Date of Grant.

7.       EXERCISE.

(a)  You may exercise the vested portion of your option during its term by
     delivering a Notice of Exercise (in a form designated by the Company)
     together with the exercise price to the Secretary of the Company, or to
     such other person as the Company may designate, during regular business
     hours, together with such additional documents as the Company may then
     require.

(b)  The minimum number of shares with respect to which this option may be
     exercised at any one time is 1,000, unless the number of shares available
     for exercise (that is, the remaining vested shares equals less than 1,000
     shares, in which case the minimum number of shares exercised must equal the
     number of shares then vested.

(c)  By exercising your option you agree that, as a condition to any exercise of
     your option, the Company may require you to enter into an arrangement
     providing for the payment by you to the Company of any tax withholding
     obligation of the Company arising by reason of (1) the exercise of your
     option, (2) the lapse of any substantial risk of forfeiture to which the
     shares of Common Stock are subject at the time of exercise, or (3) the
     disposition of shares of Common Stock acquired upon such exercise.

8.       TRANSFERABILITY. This option is not transferable except by will or by
the laws of descent and distribution, and is exercisable during your lifetime
only by you; notwithstanding the foregoing, you may transfer part or all of this
option to any of the following:

                  (i)      your spouse, children (by birth or adoption),
stepchildren, grandchildren, or parents;

                  (ii)     a trust or other entity established solely for your
benefit or the benefit of your spouse, children (by birth or adoption),
stepchildren, grandchildren, or parents for estate planning purposes; or,

                  (iii)    an organization which is exempt from taxation under
Section 501(c)(3) of the Code or to which tax-deductible charitable
contributions may be made under Section 170 of the Code.

         Furthermore, you may, by delivering written notice to the Company, in a
form satisfactory to the Company, designate a third party who, in the event of
your death, will thereafter be entitled to exercise the option.

                                       2
<Page>

9.       RIGHT OF REPURCHASE. To the extent provided in the Company's bylaws as
amended from time to time, the Company shall have the right to repurchase all or
any part of the shares of Common Stock you acquire pursuant to the exercise of
your option.

10.      OPTION NOT A SERVICE CONTRACT. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective stockholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.

11.      WITHHOLDING OBLIGATIONS. You may not exercise your option unless the
tax withholding obligations of the Company and/or any Affiliate are satisfied.
Accordingly, you may not be able to exercise your option when desired even
though your option is vested, and the Company shall have no obligation to issue
a certificate for such shares of Common Stock or release such shares of Common
Stock from any escrow provided for herein.

12.      NOTICES. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by mail by the Company to you, 5 days after deposit in
the United States mail, postage prepaid, addressed to you at the last address
you provided to the Company.

13.      GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option, and
is further subject to all interpretations, amendments, rules and regulations
which may from time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option and those of the
Plan, the provisions of the Plan shall control.

                                       3

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