Isis Pharmaceuticals Inc and Eli Lilly and Company have reached a mutually beneficial renegotiation of their manufacturing relationship. Lilly has waived repayment of the $21 million manufacturing loan it provided Isis to build the Affinitak manufacturing facility. Lilly has also agreed to allow Isis to use the facility to manufacture other drugs, including drugs in Isis' pipeline and drugs arising out of research collaborations with partners, such as the broad antisense drug discovery collaboration with Lilly. In exchange, Isis has agreed to release Lilly from its obligations contained in the supply agreement for Affinitak, including the obligation to purchase additional product from Isis and the obligation to pay for the costs of maintaining an idle manufacturing suite.

Isis built a state-of-the-art, commercial scale manufacturing facility, initially dedicated to Affinitak and financed with the loan from Lilly. Isis completed this facility in February 2003. The facility is fully qualified and is capable of producing hundreds of kilograms per year of antisense drugs.

"The manufacturing facility created through our partnership with Lilly is an important strategic asset for Isis as we advance the development of our 13 antisense products and drugs from our collaborators, including Lilly," said B. Lynne Parshall, Isis' Executive Vice President and CFO. "This resolution to our manufacturing commitment enables Isis to maximize the value of the facility. The transaction demonstrates the strong partnership between the companies, which is further evidenced in the continued progress of our broad collaboration to discover antisense drugs."

"Our financial strength is enhanced by this agreement, as our long-term debt will be reduced," said Ms. Parshall. "The transaction is essentially neutral in terms of its impact on our profit-and-loss statement and cash balance."