10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended September 30, 2012

Commission File Number 000-13789

MARINA BIOTECH, INC.

(Exact name of registrant as specified in its charter)

Delaware	11-2658569
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3830 Monte Villa Parkway, Bothell, WA	98021
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (425) 892-4322

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	£  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Date	Class	Shares Outstanding
November  30, 2012	Common stock — $0.006 par value	16,366,415

MARINA BIOTECH, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS (unaudited)
Condensed Consolidated Balance Sheets as of December 31, 2011 and September 30, 2012	3
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and September 30, 2012	4
Condensed Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2012	5
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and September 30, 2012	6
Notes to Condensed Consolidated Financial Statements	7
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
ITEM 4 — CONTROLS AND PROCEDURES	30
PART II — OTHER INFORMATION
ITEM 1A — RISK FACTORS	29
ITEM 2— UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	30
ITEM 6 — EXHIBITS	30
SIGNATURES	31
EXHIBIT INDEX	32

Items 1, 3, 4 and 5 of PART II have not been included as they are not applicable.

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PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

MARINA BIOTECH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	December 31, 2011			September 30, 2012
	(In thousands, except share and per share data)
ASSETS
Current assets:
Cash	$	976		$	413
Restricted cash		1,011			692
Prepaid expenses and other current assets		589			208
Total current assets		2,576			1,313
Property and equipment, net		2,429			0
Intangible assets		6,700			6,700
Other assets		45			0
Total assets	$	11,750		$	8,013
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,536		$	1,760
Accrued payroll and employee benefits		376			249
Deferred rent, current portion		0			1,096
Other accrued liabilities		879			553
Notes payable and accrued interest, net of discount		0			1,201
Deferred revenue		848			682
Total current liabilities		4,639			5,541
Deferred rent and other liabilities, net of current portion		1,243			0
Fair value liability for price adjustable warrants and subscription investment units		3,485			2,477
Deferred tax liabilities		2,345			2,345
Total liabilities		11,712			10,363
Commitments and contingencies
Stockholders’ equity :
Preferred stock, $.01 par value; 100,000 shares authorized: no shares issued and outstanding		0			0
Common stock and additional paid-in capital, $0.006 par value; 180,000,000 shares authorized, 10,438,912 shares issued and outstanding as of December 31, 2011 and 180,000,000 shares authorized, 16,166,756 shares issued and outstanding as of September 30, 2012		320,232			323,338
Accumulated deficit		(320,194	)		(325,688	)
Total stockholders’ equity (deficit)		38			(2,350	)
Total liabilities and stockholders’ equity	$	11,750		$	8,013

See accompanying notes to condensed consolidated financial statements

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MARINA BIOTECH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2012			2011			2012
	(In thousands, except per share data)
Revenue	$	286		$	1,106		$	629		$	2,895
Operating expenses:
Research and development		2,955			753			9,077			4,506
Selling, general and administrative		1,852			598			6,503			3,306
Restructuring		1,104			1,446			1,390			1,481
Total operating expenses		5,911			2,797			16,970			9,293
Loss from operations		(5,625	)		(1,691	)		(16,341	)		(6,398	)
Other income (expense):
Interest and other expense		0			(201	)		0			(2,466	)
Change in fair value liability for price adjustable warrants and subscription investment units		1,238			50			4,704			3,278
Gain on settlement of liabilities, net		0			92			0			92
Total other income (expense), net		1,238			(59	)		4,704			904
Net loss	$	(4,387	)	$	(1,750	)	$	(11,637	)	$	(5,494	)
Net loss per common share — basic and diluted	$	(0.55	)	$	(0.12	)	$	(2.22	)	$	(0.44	)
Shares used in computing net loss per share — basic and diluted		8,041			14,309			5,248			12,417

See accompanying notes to condensed consolidated financial statements

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MARINA BIOTECH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the nine months ended September 30, 2012

(Unaudited)

	Common Stock and Additional Paid-In Capital					Accumulated			Total Stockholders’
	Shares			Amount		Deficit			Equity (Deficit)
	(In thousands, except share data)
Balance December 31, 2011		10,438,912		$	320,232	$	(320,194	)	$	38
Proceeds from the issuance of common shares and warrants, net		1,600,002			1,111		0			1,111
Shares issued in connection with license agreement		340,906			233		0			233
Fractional shares redeemed		(104	)		0		0			0
Proceeds from employee stock purchase plan purchases		3,908			2		0			2
Reclassification of fair value liability for price adjustable warrants exercised		187,006			291		0			291
Shares issued in connection with settlement of liabilities		3,596,126			1,124		0			1,124
Compensation related to stock options and employee stock purchase plan, net of forfeitures		0			345		0			345
Net loss		0			0		(5,494	)		(5,494	)
Balance September 30, 2012		16,166,756		$	323,338	$	(325,688	)	$	(2,350	)

See accompanying notes to condensed consolidated financial statements

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MARINA BIOTECH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2011			2012
	(In thousands)
Operating activities:
Net loss	$	(11,637	)	$	(5,494	)
Adjustments to reconcile net loss to net cash used in operating activities:
Compensation related to restricted stock, stock options and employee stock purchase plan		688			345
Depreciation and amortization		1,005			555
Non-cash research and development expense		30			0
Non-cash amortization of discount on notes payable		0			2,324
Non-cash restructuring expense		1,298			1,481
Accretion of restructuring liability		92			0
Change in fair value of price adjustable warrants and subscription investment units		(4,704	)		(3,278	)
Gain on settlement of liabilities, net		0			(92	)
Loss on retirement of assets		0			17
Changes in assets and liabilities:
Restricted cash		0			319
Accounts receivable		49			0
Prepaid expenses and other assets		372			456
Accounts payable		(1,012	)		440
Deferred revenue		480			(166	)
Accrued expenses and deferred rent and other liabilities		(488	)		(314	)
Accrued restructuring		(368	)		0
Net cash used in operating activities		(14,195	)		(3,407	)
Investing activities:
Change in restricted cash		(140	)		0
Proceeds from sales of property and equipment		0			371
Net cash provided by (used in) investing activities		(140	)		371
Financing activities:
Proceeds from sales of common shares and warrants, net		10,726			1,111
Proceeds from issuance of notes payable and warrants		0			1,500
Payments on notes payable		0			(140	)
Proceeds from exercise of warrants, subscription investment units, stock options and employee stock purchase plan purchases		3,587			2
Net cash provided by financing activities		14,313			2,473
Net decrease in cash		(22	)		(563	)
Cash — beginning of year		1,066			976
Cash — end of period	$	1,044		$	413
Non-cash financing activities:
Issuance of common stock to settle liabilities	$	1,562		$	1,124
Issuance of common stock in connection with license agreement		0			233
Supplemental disclosure:
Cash paid for interest	$	0		$	62

See accompanying notes to condensed consolidated financial statements

6

MARINA BIOTECH, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended September 30, 2012 and 2011 (Unaudited)

Note 1 — Business, Reduction of Operations, Going Concern, Recent Financing Activities, and Basis of Preparation and Summary of Significant Accounting Policies

Business

We are a biotechnology company focused on the discovery, development and commercialization of nucleic acid-based therapies utilizing gene silencing approaches such as RNA interference (“RNAi”) and blocking messenger RNA (“mRNA”) translation. Our goal is to improve human health through the development, either through our own efforts or those of our collaboration partners and licensees, of these nucleic acid-based therapeutics as well as the delivery technologies that together provide superior treatment options for patients. We have multiple proprietary technologies integrated into a broad nucleic acid-based drug discovery platform, with the capability to deliver novel nucleic acid-based therapeutics via systemic, local and oral administration to target a wide range of human diseases, based on the unique characteristics of the cells and organs involved in each disease.

Our pipeline includes a clinical program in Familial Adenomatous Polyposis (“FAP”) and preclinical programs in bladder cancer and myotonic dystrophy. During the past year we have entered into the following agreements regarding our technology:

· In December 2011, we entered into an exclusive license agreement with Mirna Therapeutics, Inc., a privately-held biotechnology company pioneering microRNA replacement therapy for cancer, regarding the development and commercialization of microRNA-based therapeutics utilizing Mirna’s proprietary microRNAs and our novel SMARTICLES®-based liposomal delivery technology.

· In March 2012, we entered into an exclusive license agreement with ProNAi Therapeutics, Inc., a privately-held biotechnology company pioneering DNA interference (DNAi) therapies for cancer, regarding the development and commercialization of DNAi-based therapeutics utilizing our novel SMARTICLES®-based liposomal delivery technology.

· In May 2012, we entered into a worldwide exclusive license agreement with Monsanto Company, a global leader in agriculture and crop sciences, regarding the agricultural applications for our delivery and chemistry technologies.

· In May 2012, we entered into a strategic alliance with Girindus Group, a recognized leader in process development, analytical method development and cGMP manufacture of oligonucleotide therapeutics, regarding the development, supply and commercialization of certain oligonucleotide constructs using our conformationally restricted nucleotide (“CRN”) technology.

· In August 2012, we entered into a worldwide, non-exclusive license agreement with Novartis Institutes for Biomedical Research, Inc., a global leader in the development of human therapeutics, regarding the development of oligonucleotide therapeutics utilizing our CRN technology.

· In November 2012, we entered into a worldwide, non-exclusive license agreement with Protiva Biotherapeutics Inc., a wholly owned subsidiary of Tekmira Pharmaceuticals Corporation (“Tekmira"), a leading oligonucleotide-based drug discovery and development company, regarding the development of oligonucleotide therapeutics using our Unlocked Nucleobase Analog (UNA) technology.

In addition to our own, internally developed technologies, we have strategically in-licensed and further developed nucleic acid- and delivery-related technologies, forming an integrated drug discovery platform. We are employing our platform, through our own efforts and those of our partners, for the discovery of multiple nucleic acid-based therapeutics including siRNA, microRNA and single stranded oligonucleotide-based drugs.

Reduction of Operations

On June 1, 2012, we announced that, due to our financial condition, we had implemented a furlough of approximately 90% of our employees and ceased substantially all day-to-day operations. Since that time substantially all of the furloughed employees have been terminated. As of November 30, 2012, we had approximately 10 remaining employees, including all of our executive officers, all of whom are either furloughed or working on reduced salary. We have also sold substantially all of our equipment, and have ceased operations at our facility located at 3830 Monte Villa Parkway in Bothell, WA. As a result, since June 1, 2012 our internal research and development (“R&D”) efforts have been, and as of the date of the filing of this report they continue to be, minimal, pending receipt of adequate funding.

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Going Concern

The accompanying condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As of September 30, 2012, we had an accumulated deficit of approximately $325.7 million, have incurred, and may in the future continue to incur, losses as we continue our planned business operations and have had recurring negative cash flows from operations. We expect that our operating expenses will consume the majority of our limited cash resources during the remainder of 2012, and will require ongoing funding. We have funded our losses primarily through the sale of common stock and warrants in the public markets and private placements, revenue provided by our collaboration partners and secured loans.

We plan to continue to work with large pharmaceutical companies regarding R&D collaboration agreements or investments, and to pursue public and private sources of financing to raise cash. However, there can be no assurance that we will be successful in such endeavors.

The market value and the volatility of our stock price, as well as general market conditions and our current financial condition, could make it difficult for us to complete a financing or collaboration transaction on favorable terms, or at all. Any financing we obtain may further dilute the ownership interest of our current stockholders, which dilution could be substantial, or provide new stockholders with superior rights than those possessed by our current stockholders. If we are unable to obtain additional capital when required, and in the amounts required, we may be forced to modify, delay or abandon some or all of our programs, or to discontinue operations altogether. Additionally, any collaboration may require us to relinquish rights to our technologies. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty. The Report of Independent Registered Public Accounting Firm included in our Annual Report on Form 10-K for the year ended December 31, 2011 states that we have ceased substantially all day-to-day operations, including most research and development activities, have incurred recurring losses, have a working capital and accumulated deficit, and have had recurring negative cash flows from operations, that raise substantial doubt about our ability to continue as a going concern.

At September 30, 2012, we had a working capital deficit (current assets less current liabilities) of approximately $4.2 million and approximately $1.1 million in cash, including approximately $0.7 million in restricted cash.

We believe that our resources as of the date of the filing of this report will be sufficient to fund our planned limited operations until the end of 2012.

Recent Financing Activities

In February 2012, we received net proceeds of approximately $1.5 million by issuance of secured promissory notes and warrants to purchase up to 3,690,944 shares of our common stock. Through a series of amendments to the purchase agreement and the notes issued pursuant thereto, we have extended the maturity date of the notes to December 31, 2012, and in connection with such extensions have issued to the secured parties additional warrants to purchase up to 3,199,848 shares of our common stock. The warrants are exercisable at $0.28 per share, which is subject to adjustment (including as a result of subsequent financings), and are exercisable for a period of five years beginning six months and one day following the issuance of the warrants. The notes are secured by the assets of our company and our wholly-owned subsidiaries, Cequent Pharmaceuticals, Inc. and MDRNA Research, Inc. The security agreement that we entered into in connection with this transaction provides a security interest in, but not limited to, all of the property, equipment and fixtures, accounts, negotiable collateral, cash, and cash equivalents of our company and our wholly-owned subsidiaries, Cequent and MDRNA Research, subject to certain exceptions. The security interest created in the collateral is first priority, subject to the permitted encumbrances provided in the security agreement, and is perfected to the extent such security interest can be perfected by the filing of a financing statement and filings with the U.S. Patent and Trademark Office. The security interest created in the collateral will be removed at such time as the notes are paid in full.

As a result of amendments to the purchase agreement and the notes issued pursuant thereto, we and the holders of the notes agreed that if we, at any time prior to December 31, 2012, effect any merger or consolidation of our company whereby the holders of the issued and outstanding shares of our common stock immediately prior to the consummation of such transaction hold less than fifty percent (50%) of the issued and outstanding shares of the voting securities of the surviving corporation immediately following the consummation of such transaction, we will have fully satisfied the obligation to repay the entire unpaid principal balance under the notes and all accrued and unpaid interest thereon through the issuance to the noteholders of an aggregate number of shares of common stock calculated by converting the then total outstanding principal and interest under the notes at a value of $0.28 per share of common stock.

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In March 2012, we received net proceeds of approximately $1.1 million by issuance of 1,600,002 shares of our common stock and warrants to purchase up to 800,001 shares of our common stock. The warrants have an exercise price of $0.75 per share, are immediately exercisable (subject to registration or the availability of an exemption under federal and state securities laws), and will be exercisable for a period of five years from the date of issuance. The exercise price and the number of shares issuable upon exercise of the warrants are subject to adjustment in the event of stock splits or dividends, business combinations, sale of assets or other similar transactions, but not as a result of future securities offerings at lower prices.

In May and July, 2012, we received an aggregate of $1.5 million as an upfront payment in connection with the Intellectual Property License Agreement that we entered into with Monsanto Company. At the same time that we entered into the Intellectual Property License Agreement, we and Monsanto also entered into a Security Agreement pursuant to which we granted to Monsanto a security interest in that portion of our intellectual property that is the subject of the license agreement in order to secure the performance of our obligations under the license agreement.

In August 2012 we received $1 million in a one-time upfront payment in connection with the License Agreement that we entered into with Novartis Institutes for Biomedical Research, Inc. Between September and November 2012, we received additional funds as a result of the sale of certain equipment at our corporate headquarters, the receipt of the upfront payment in connection with the license agreement that we entered into with ProNAi Therapeutics, and the receipt of an accelerated milestone payment in connection with the license agreement that we entered into with Mirna Therapeutics. In addition, on November 28, 2012, we entered into a license agreement with Tekmira, in connection with which we received an upfront payment in the amount of $300,000.

Basis of Preparation and Summary of Significant Accounting Policies

Basis of Preparation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by U.S. generally accepted accounting principles for complete financial statements. The accompanying unaudited financial information should be read in conjunction with the audited consolidated financial statements, including the notes thereto, as of and for the year ended December 31, 2011, included in our 2011 Annual Report on Form 10-K filed with the SEC. The information furnished in this report reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for each period presented. The results of operations for the interim period ended September 30, 2012 are not necessarily indicative of the results for the year ending December 31, 2012 or for any future period.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting periods. Estimates having relatively higher significance include revenue recognition, research and development costs, stock-based compensation, valuation of warrants and subscription investment units, valuation and estimated lives of identifiable intangible assets, impairment of long-lived assets, estimated accrued restructuring charges and income taxes. Actual results could differ from those estimates.

Restricted Cash — Amounts pledged as collateral underlying letters of credit for facility lease deposits are classified as restricted cash.

Fair Value of Financial Instruments — We consider the fair value of cash, restricted cash, accounts payable and accrued liabilities to not be materially different from their carrying value. These financial instruments have short-term maturities.

We follow authoritative guidance with respect to fair value reporting issued by the Financial Accounting Standards Board (“FASB”) for financial assets and liabilities, which defines fair value, provides guidance for measuring fair value and requires certain disclosures. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

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We currently measure and report at fair value our liability for price adjustable warrants and subscription investment units using the Black-Scholes-Merton valuation model using Level 3 inputs. The following tables summarize our liabilities measured at fair value on a recurring basis as of September 30, 2012 (in thousands):

	Balance at September 30, 2012		Level 1 Quoted prices in active markets for identical assets		Level 2 Significant other observable inputs		Level 3 Significant unobservable inputs
Liabilities:
Fair value liability for price adjustable warrants and subscription investment units	$	2,477		—		—	$	2,477
Total liabilities at fair value	$	2,477		—		—	$	2,477

The following presents activity of the fair value liability of price adjustable warrants and subscription investment units determined by Level 3 inputs (in thousands, except per share data):

				Weighted average as of each measurement date
	Fair value liability for price adjustable warrants and subscription investment units (in thousands)			Exercise Price		Stock Price		Volatility			Contractual life in years		Risk free rate
Balance at December 31, 2011	$	3,485		$	0.76	$	0.89		124	%		5.4		0.9	%
Fair value of warrants issued		2,561			0.28		0.49		127	%		5.5		0.8	%
Reclassification to equity upon exercise of warrants		(291	)		0.51		0.74		135	%		5.0		0.7	%
Change in fair value included in statement of operations		(3,278	)
Balance at September 30, 2012	$	2,447		$	0.25	$	0.28		143	%		4.7		0.9	%

Property and equipment — Long-lived assets include property and equipment. These assets are recorded at our original cost and are increased by the cost of any significant improvements after purchase. Property and equipment assets are depreciated evenly over the estimated useful life of the individual assets. Depreciation begins when the asset is ready for its intended use. For tax purposes, accelerated depreciation methods are used as allowed by tax laws.

Identifiable intangible assets — Intangible assets associated with in-process research and development (“IPR&D”) projects acquired in business combinations are not amortized until approval is obtained in a major market, typically either the U.S. or the European Union, or in a series of other countries, subject to certain specified conditions and management judgment. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated.

Impairment of long-lived assets — We review all of our long-lived assets for impairment indicators throughout the year and we perform detailed testing whenever impairment indicators are present. In addition, we perform detailed impairment testing for indefinite-lived intangible assets at least annually. When necessary, we record charges for impairments. Specifically:

· For finite-lived intangible assets, such as developed technology rights, and for other long-lived assets, such as property and equipment, we calculate the undiscounted amount of the projected cash flows associated with the asset, or asset group, and compare this estimated amount to the carrying amount. If the carrying amount is found to be greater, we record an impairment loss for the excess of book value over fair value. In addition, in all cases of an impairment review, we re-evaluate the remaining useful lives of the assets and modify them, as appropriate.

· For indefinite-lived intangible assets, such as IPR&D assets, each year and whenever impairment indicators are present, we determine the fair value of the asset and record an impairment loss for the excess of book value over fair value, if any.

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Net Loss Per Common Share — Basic and diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share excludes the effect of common stock equivalents (stock options, unvested restricted stock, warrants and subscription investment units) since such inclusion in the computation would be anti-dilutive. The following numbers of shares have been excluded for periods ended September 30:

	2011		2012
Stock options outstanding		611,657		358,373
Warrants		4,956,005		11,251,086
Subscription investment units		25,000		0
Total		5,592,662		11,609,459

Note 2 — Concentration of Credit Risk and Significant Customers

We operate in an industry that is highly regulated, competitive and rapidly changing and involves numerous risks and uncertainties. Significant technological and/or regulatory changes, the emergence of competitive products and other factors could negatively impact our consolidated financial position or results of operations.

We have been dependent on our collaborative agreements with a limited number of third parties for a substantial portion of our revenue, and our discovery and development activities may be delayed or reduced if we do not maintain successful collaborative arrangements. We had revenue from customers, as a percentage of total revenue, as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2012			2011			2012
Novartis		—			95	%		—			36	%
Monsanto		—			5	%					54	%
Mirna		—			—			—			4	%
Debiopharm		91	%		—			63	%		1	%
Astra Zeneca		—			—			9	%		—
Undisclosed Partner #1		—			—			8	%		—
Other		9	%		—			20	%		5	%
Total		100	%		100	%		100	%		100	%

Note 3 — Notes Payable

In February 2012, we received net proceeds of approximately $1.5 million by issuance of secured promissory notes and warrants to purchase up to 3,690,944 shares of our common stock. The warrants had an initial exercise price of $0.508 per share, which was subject to adjustment (including in connection with subsequent financings), and are exercisable for a period of five years beginning six months and one day following the issuance of the warrants. Through a series of amendments to the purchase agreement and the notes issued pursuant thereto, we have extended the maturity date of the notes to December 31, 2012, have reduced the exercise price of all of the warrants that we issued to the noteholders to $0.28 per share and have removed the obligation to pay to the noteholders the sums received by us from the sale of our surplus equipment. In connection with such amendments, we have issued to the secured parties additional warrants to purchase up to 3,199,848 shares of our common stock as follows: (i) in April 2012 we issued 489,033 warrants at an initial exercise price of $0.56 per share; (ii) in May 2012 we issued 425,100 warrants at an initial exercise price of $0.64 per share; (iii) in August 2012 we issued 1,250,000 warrants at an initial exercise price of $0.28 per share and adjusted the exercise price of all of the outstanding warrants issued to the noteholders to $0.28; and (iv) in October 2012 we issued 1,035,715 warrants at an initial exercise price of $0.28 per share.

The notes are secured by the assets of our company and our wholly-owned subsidiaries, Cequent Pharmaceuticals, Inc. and MDRNA Research, Inc. The security agreement that we entered into in connection with this transaction provides a security interest in, but not limited to, all of the property, equipment and fixtures, accounts, negotiable collateral, cash, and cash equivalents of our company and our wholly-owned subsidiaries, Cequent and MDRNA Research, subject to certain exceptions. The security interest created in the collateral is first priority, subject to the permitted encumbrances provided in the security agreement, and is perfected to the extent such security interest can be perfected by the filing of a financing statement and filings with the U.S. Patent and Trademark Office. The security interest created in the collateral will be removed at such time as the notes are paid in full.

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As a result of amendments to the purchase agreement and the notes issued pursuant thereto, we and the holders of the notes agreed that if we, at any time prior to December 31, 2012, effect any merger or consolidation of our company whereby the holders of the issued and outstanding shares of our common stock immediately prior to the consummation of such transaction hold less than fifty percent (50%) of the issued and outstanding shares of the voting securities of the surviving corporation immediately following the consummation of such transaction, we will have fully satisfied the obligation to repay the entire unpaid principal balance under the notes and all accrued and unpaid interest thereon through the issuance to the noteholders of an aggregate number of shares of common stock calculated by converting the then total outstanding principal and interest under the notes at a value of $0.28 per share of common stock.

In connection with the issuance of the secured promissory notes and warrants, we recorded a discount on notes payable representing the fair value of the warrants issued to the secured parties, as determined utilizing the Black-Scholes-Merton valuation model. The discount on notes payable was reported net of related notes payable and amortized as interest expense over the original term of the notes. The estimated fair value of the warrants was recorded as an increase in the fair value liability for price adjustable warrants. In connection with amendments to the purchase agreement and notes payable, we issued additional warrants to the secured parties and recorded the fair value of the warrants issued as additional discount on notes payable, as determined utilizing the Black-Scholes-Merton valuation model. The additional discount on notes payable was reported net of related notes payable and amortized as interest expense over the amended term of the notes. The estimated fair value of the warrants was recorded as an increase in the fair value liability for price adjustable warrants.

The following table presents the activity in notes payable and accrued interest and related discount for the nine months ended September 30, 2012 (in thousands):

	Notes Payable and accrued interest			Discount			Notes Payable and accrued interest, net
Balance at January 1, 2012	$	—		$	—		$	—
Issuances of notes payable and warrants		1,500			(1,651	)		(151	)
Issuances of warrants upon amendments		—			(910	)		(910	)
Accrued interest		138						138
Payments		(200	)		—			(200	)
Amortization of discount to interest expense		—			2,324			2,324
Balance at September 30, 2012	$	1,438		$	(237	)	$	1,201

Note 4 — Stockholders’ Equity

Preferred Stock — Our board of directors has the authority, without action by the stockholders, to designate and issue up to 100,000 shares of preferred stock in one or more series and to designate the rights, preferences and privileges of each series, any or all of which may be greater than the rights of our common stock. We have designated 1,000 shares of preferred stock as Series B Preferred Stock and 90,000 shares of preferred stock as Series A Junior Participating Preferred Stock. No shares of Series B Preferred Stock or Series A Junior Participating Preferred Stock are outstanding.

Series B Preferred Stock/Socius Purchase Agreement — On December 22, 2011, we entered into a Securities Purchase Agreement with Socius CG II, Ltd., or Socius, pursuant to and subject to the conditions of which, we had the right, in our sole discretion, over a term of two years, to demand through the delivery of separate tranche notices that Socius purchase up to a total of $5 million of Series B Preferred Stock. The delivery of a tranche notice by us to Socius would have triggered the automatic vesting and automatic exercise of both the additional investment right to purchase shares of our common stock that we granted to Socius in the purchase agreement, and the warrant to purchase shares of our common stock that we issued to Socius on December 29, 2011 upon the closing of the purchase agreement. On March 20, 2012, we notified Socius that we were terminating the purchase agreement, effective thirty (30) days from the date of such notice. We did not deliver any tranche notices to Socius during the term of the facility created by the purchase agreement, and as a result we did not issue, and are under no obligation to issue, any shares of Series B Preferred Stock, or any shares of our common stock issuable upon the automatic exercise of the additional investment right and the warrant, to Socius.

Upon the closing of the purchase agreement, on December 29, 2011 we delivered to Socius an unvested and therefore unexercisable warrant to purchase up to 1,305,970 shares of our common stock at an initial exercise price of $1.34 per share. The exercise price of the warrant and the number of shares of common stock issuable upon exercise thereof were subject to adjustment from time to time. In connection with each tranche notice delivered to Socius under the purchase agreement, a portion of the warrant equal to a number of shares calculated by dividing (1) 37% of the dollar amount of the tranche of Series B Preferred Stock by (2) the closing bid price of the common stock for the most recently completed trading day prior to the delivery or deemed delivery of the tranche notice would vest and be automatically exercised. At each time of delivery or deemed delivery of a tranche notice, the number of shares of common stock underlying the warrant would also be adjusted immediately prior to the automatic exercise such that after such adjustment the aggregate exercise price for the adjusted number of shares would be equal to the aggregate exercise price in effect immediately prior to such adjustment. The warrant expired unexercisable in April 2012 as a result of our termination of the facility created by the purchase agreement.

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Stockholder Rights Plan — In 2000, our board of directors adopted a stockholder rights plan and declared a dividend of one preferred stock purchase right for each outstanding share of common stock. Each right entitles the holder, once the right becomes exercisable, to purchase from us one one-thousandth of a share of our Series A Junior Participating Preferred Stock, par value $.01 per share. We issued these rights in March 2000 to each stockholder of record on such date, and these rights attach to shares of common stock subsequently issued. The rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our board of directors and could, therefore, have the effect of delaying or preventing someone from taking control of us, even if a change of control were in the best interest of our stockholders.

Holders of our preferred share purchase rights are generally entitled to purchase from us one one-thousandth of a share of Series A preferred stock at a price of $50.00, subject to adjustment as provided in the Stockholder Rights Agreement. These preferred share purchase rights will generally be exercisable only if a person or group becomes the beneficial owner of 15 percent or more of our outstanding common stock or announces a tender offer for 15 percent or more of our outstanding common stock. Each holder of a preferred share purchase right, excluding an acquiring entity or any of its affiliates, will have the right to receive, upon exercise, shares of our common stock, or shares of stock of the acquiring entity, having a market value equal to two times the purchase price paid for one one-thousandth of a share of Series A preferred stock. The preferred share purchase rights expire on March 17, 2013. We have designated 90,000 shares of preferred stock as Series A Junior Participating Preferred stock.

Common Stock — Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the holders of our common stock. Subject to the rights of the holders of any class of our capital stock having any preference or priority over our common stock, the holders of shares of our common stock are entitled to receive dividends that are declared by our board of directors out of legally available funds. In the event of our liquidation, dissolution or winding-up, the holders of common stock are entitled to share ratably in our net assets remaining after payment of liabilities, subject to prior rights of preferred stock, if any, then outstanding. Our common stock has no preemptive rights, conversion rights, redemption rights or sinking fund provisions, and there are no dividends in arrears or default. All shares of our common stock have equal distribution, liquidation and voting rights, and have no preferences or exchange rights. On July 14, 2011, our shareholders approved a proposal to change our capital structure by increasing the number of authorized shares of common stock from 90,000,000 to 180,000,000.

In February 2011, in connection with a public offering that we conducted utilizing a $50 million shelf registration statement which was declared effective by the SEC in September 2010, we received net proceeds of approximately $4.5 million from an offering of 637,500 units, each comprised of one share of our common stock and 0.1746 of a warrant, each to purchase one share of our common stock, at a purchase price of $8.00 per unit. We issued an aggregate of 637,500 shares of common stock and warrants to purchase up to an aggregate of 111,308 shares of our common stock in connection with this offering.

In May 2011, in connection with a public offering that we conducted utilizing a registration statement on Form S-1 which was declared effective by the SEC on May 11, 2011, we received net proceeds of approximately $6.3 million from an offering of an aggregate of (i) 2,231,850 units and (ii) 2,231,850 Series B Warrants, each to purchase one unit, at a purchase price of $3.90 per unit. Each unit consists of (x) one share of common stock and (y) one Series A Warrant to purchase one share of common stock. Prior to their July 12, 2011 expiration date, 2,229,350 Series B Warrants were exercised which resulted in additional net proceeds of approximately $3.1 million.

In September 2011, we entered into an agreement to terminate our lease for 3450 Monte Villa Parkway, Bothell, Washington, which eliminated our future lease obligations, and pursuant to which we issued 780,000 shares of our common stock to certain affiliates of the landlord. The estimated fair value of the shares issued was approximately $1.5 million on the date of issuance and was recorded as an increase in common stock and additional paid-in capital and as a decrease to the previously recorded restructuring liability. We agreed to prepare and file with the SEC, on or before February 1, 2012, a registration statement on Form S-3 covering the resale of all of such shares, and to use our continuing best efforts to cause such registration statement to be become and remain effective for so long as the landlord’s affiliates hold any shares. If the resale registration statement is not initially filed on or before February 1, 2012, or declared effective by the SEC by April 1, 2012, each a registration default, we agreed to pay the landlord $10,000 for each month or portion thereof that the registration default continues. We have not filed a registration statement on Form S-3 and we have recorded a liability for $20,000 for the registration default for the months of February and March 2012.

On October 11, 2011, we entered into the Purchase Agreement with Lincoln Park Capital (“LPC”), whereby LPC agreed to purchase up to $15 million of our common stock over a thirty (30) month period. We also entered into a registration rights agreement with LPC pursuant to which we agreed to file a registration statement related to the transaction with the SEC covering the shares that have been issued or may be issued to LPC under the Purchase Agreement. The SEC declared the registration statement effective on October 31, 2011. Pursuant to the Purchase Agreement, we had the right, in our sole discretion, over a 30-month period following the effective date of the registration statement to sell up to $15 million of our common stock to LPC, depending on certain conditions as set forth in the Purchase Agreement.  

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There were no upper limits to the price LPC may pay to purchase shares of our common stock, and the purchase price of the shares related to the future funding under the Purchase Agreement was based on the prevailing market prices of the common stock immediately preceding the time of sales without any fixed discount. LPC did not have the right or the obligation to purchase any shares of our common stock on any business day that the price of the common stock was below the floor price of $1.00 per share as set forth in the Purchase Agreement. We could not issue more than 1,777,913 shares in connection with the Purchase Agreement, unless the average purchase price of all shares of common stock issued by us to LPC equaled or exceeded $2.25 per share.

In consideration for entering into the Purchase Agreement, we issued to LPC 145,279 shares of common stock as a commitment fee and were required to issue to LPC up to 290,557 shares of common stock pro rata when and if LPC purchased, at our discretion, the $15 million of common stock over the 30-month period. We also issued to LPC an additional 5,000 shares of common stock as an expense reimbursement. We terminated the Purchase Agreement effective March 20, 2012. Prior to the termination of the Purchase Agreement, we issued a total of 1,544,901 shares to LPC under this agreement and received proceeds of approximately $1.8 million in 2011.

In March 2012, in connection with a public offering that we conducted utilizing a $50 million shelf registration statement which was declared effective by the SEC in September 2010, we received net proceeds of approximately $1.1 million from a registered direct offering of 1,600,002 units, each comprised of one share of our common stock and 0.5 of a warrant, each to purchase one share of our common stock, at a purchase price of $0.75 per unit. We issued an aggregate of 1,600,002 shares of common stock and warrants to purchase up to an aggregate of 800,001 shares of our common stock in connection with this offering.

In August, October and November 2012 we issued to eleven of our vendors an aggregate of approximately 3.8 million shares of our common stock to settle outstanding amounts due to such vendors in the aggregate amount of approximately $1.2 million. We also agreed to issue an additional 87,254 shares to settle approximately $20,000 in amounts due to one vendor contingent upon and immediately prior to the first to occur of any of the following events: (i) the closing of an equity financing in a transaction or series of related transactions where such financing yields gross proceeds to us of at least $4 million in the aggregate, including amounts converted under any convertible promissory notes; (ii) a merger into another entity if the combined market capitalization of the merging entities is at least $18 million or, if not, upon our market capitalization as the surviving entity of a merger being at least $18 million at any time after the merger; (iii) a sale of all or substantially all of our assets; or (iv) a sale of our stock after which sale a majority of the outstanding equity is held by persons or entities who were not our shareholders prior to the sale.

Effective as of October 1, 2012, we entered into a Lease Termination Agreement with Ditty Properties Limited Partnership (the “Landlord”) with respect to our facilities located at 3830 Monte Villa Parkway, Bothell, WA. As additional consideration, we agreed to issue 1,500,000 shares of our common stock to the landlord contingent upon and immediately prior to the first to occur of any of the following events: (i) the closing of an equity financing in a transaction or series of related transactions where such financing yields gross proceeds to us of at least $4 million in the aggregate, including amounts converted under any convertible promissory notes; (ii) a merger into another entity if the combined market capitalization of the merging entities is at least $18 million or, if not, upon our market capitalization as the surviving entity of a merger being at least $18 million at any time after the merger; (iii) a sale of all or substantially all of our assets; or (iv) a sale of our stock after which sale a majority of the outstanding equity is held by persons or entities who were not our shareholders prior to the sale.

NASDAQ Deficiency Notice — On March 25, 2011, we received a letter from the Listing Qualifications Department of The NASDAQ Stock Market (“NASDAQ”) notifying us that we were not in compliance with the minimum $1.00 per share minimum bid price requirement for continued inclusion on The NASDAQ Global Market set forth in NASDAQ Marketplace Rule 5450(a)(1) (the “Rule”), as a result of the bid price of our common stock having closed below $1.00 for the 30 consecutive business days prior to the date of the letter. NASDAQ’s letter advised us that we had until September 21, 2011 to regain compliance with the Rule.

We did not regain compliance with the Rule on or prior to September 21, 2011 and, accordingly, on September 22, 2011, we received a staff determination letter from NASDAQ stating that our common stock would be subject to delisting from The Nasdaq Global Market as a result of the deficiency. Following a hearing before the NASDAQ Listing Qualifications Panel on October 27, 2011, the Listing Qualifications Panel allowed us until January 31, 2012 to regain compliance with the Rule. On February 1, 2012, we were notified that the Listing Qualifications Panel had determined to delist our common stock from the Nasdaq Stock Market, and to suspend trading in the shares effective at the open of business on February 2, 2012. Our common stock began trading on the OTCQX tier of the OTC Markets commencing on February 2, 2012, and it continued to trade on the OTCQX tier of the OTC Markets until July 10, 2012, following which it began trading on the OTC Pink tier of the OTC Markets.

Warrants — In connection with offerings of our common stock and notes payable, we have issued warrants to purchase shares of our common stock, some of which provide that the exercise price of the warrant will be reduced in the event of subsequent financings at an effective price per share less than the exercise price of the warrants, subject to certain exceptions and limitations.

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On February 7, 2011, the exercise price of warrants to purchase 68,626 shares which we issued in November 2010 was adjusted to $10.60 per share. These warrants are no longer subject to adjustment except in connection with stock splits, dividends, and other similar events.

In February 2011, as part of a public offering, we issued warrants to purchase 111,308 shares of common stock at an exercise price of $8.00 per share. The warrants are exercisable until February 15, 2018, and the exercise price of such warrants is not subject to adjustment in connection with a subsequent financing at an effective price per share less than the exercise price of the warrants.

In May 2011, as part of a public offering, we issued 2,231,850 Series A Warrants to purchase shares of common stock at an initial exercise price of $3.90 per share, which exercise price is subject to adjustment in connection with a subsequent financing at an effective price per share less than the exercise price of such warrants. The Series A Warrants are exercisable during the period beginning on May 21, 2012 and ending on May 21, 2017. As a result of the issuance of warrants to the holders of our secured notes payable, the exercise price of the Series A Warrants adjusted to $0.508 per share in February 2012, and adjusted to $0.28 per share in August 2012. In May 2012, we issued 187,006 shares of common stock as a result of the exercise of 440,000 Series A Warrants on a cashless basis.

In May 2011, we also issued 2,231,850 Series B Warrants, each to purchase one unit consisting of one share of common stock and one Series A Warrant, at an initial exercise price of $3.10 per unit, subject to adjustment, during the period ending on July 12, 2011. From May 20, 2011 to June 30, 2011, 712,150 of the Series B Warrants were exercised, resulting in proceeds of approximately $2.2 million and the issuance of an additional 712,150 Series A Warrants. As per the terms of the Series B Warrants, the exercise price of the Series B Warrants adjusted to $1.28 per unit at the close of trading on July 5, 2011, which adjustment was retroactively effective to June 29, 2011. Holders of the Series B Warrants that were exercised during the period beginning on June 29, 2011 and ending on July 5, 2011 were entitled to a refund of a portion of their previously paid exercise price if the exercise price adjusted to less than $3.10 per unit. The amount of the refund for each Series B Warrant was equal to the difference between the initial exercise price of the Series B Warrant ($3.10 per unit) and the adjusted exercise price of the Series B Warrant ($1.28 per unit). An aggregate of 600,500 Series B Warrants were exercised on June 29 and June 30, with respect to which we paid a refund in the aggregate amount of approximately $1.1 million to the warrant holders on July 6, 2011 and the remaining $0.4 million was reclassified to equity. From July 1, 2011 to the expiration date of July 12, 2011, 1,517,200 Series B Warrants were exercised resulting in additional net proceeds of approximately $2.0 million and the issuance of an additional 1,517,200 Series A Warrants. Total net proceeds received from the exercises of the Series B Warrants was approximately $3.1 million. On July 12, 2011, the remaining 2,500 Series B Warrants expired unexercised.

On February 10, 2012, we entered into a Note and Warrant Purchase Agreement pursuant to which we issued to certain accredited investors 15% secured promissory notes in the aggregate principal amount of $1.5 million and warrants to purchase up to 3,690,944 shares of common stock. The warrants had an initial exercise price of $0.508 per share, which was subject to adjustment (including in connection with subsequent financings), and are exercisable for a period of five years beginning six months and one day following the issuance of the warrants. The purchase agreement and the notes issued pursuant thereto have been amended to extend the maturity date of the notes from May 14, 2012 until December 31, 2012, to issue warrants to purchase up to an additional 3,199,848 shares of our common stock to the noteholders, and to decrease the exercise price of all of the warrants that we issued to the noteholders to $0.28 per share. As a result of the amendments to the purchase agreement and notes we issued the following warrants: (i) in April 2012 we issued 489,033 warrants at an exercise price of $0.56 per share; (ii) in May 2012 we issued 425,100 warrants at an exercise price of $0.64 per share; (iii) in August 2012 we issued 1,250,000 warrants at an exercise price of $0.28 per share and adjusted the exercise price of all of the outstanding warrants issued to the noteholders to $0.28; and (iv) in October 2012 we issued 1,035,715 warrants at an exercise price of $0.28 per share. In addition, we and the noteholders agreed that if we, at any time prior to December 31, 2012, effect any merger or consolidation of our company whereby the holders of the issued and outstanding shares of our common stock immediately prior to the consummation of such transaction hold less than fifty percent (50%) of the issued and outstanding shares of the voting securities of the surviving corporation immediately following the consummation of such transaction, we will have fully satisfied our obligation to repay the entire unpaid principal balance under the notes and all accrued and unpaid interest thereon through the issuance to the noteholders of an aggregate number of shares of common stock calculated by converting the then total outstanding principal and interest under the notes at a value of $0.28 per share of common stock.

On March 22, 2012, as part of a registered direct offering of shares of our common stock and warrants to purchase shares of our common stock, we entered into a Securities Purchase Agreement pursuant to which we issued warrants to purchase up to 800,001 shares of our common stock. The warrants have an exercise price of $0.75 per share, are immediately exercisable, and will be exercisable for a period of five years from the date of issuance. The exercise price and the number of shares issuable upon exercise of the warrants are subject to adjustment in the event of stock splits or dividends, business combinations, sale of assets or other similar transactions, but not as a result of future securities offerings at lower prices.

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 The following summarizes warrant activity during the nine months ended September 30, 2012:

	Warrant Shares			Weighted Average Exercise Price
Warrants outstanding, December 31, 2011		6,261,978		$	3.82
Warrants issued		6,809,705			0.52
Warrants expired		(1,380,597	)		1.34
Warrants exercised		(440,000	)		0.51
Warrants outstanding, September 30, 2012		11,251,086		$	2.26

Subscription investment units — In November 2010, we issued subscription investment units to purchase during the 16-month period following the date of issuance, an aggregate of 242,355 shares of common stock at a per share exercise price equal to the lesser of (i) $22.10, and (ii) 90% of the quotient of (x) the sum of the three lowest volume-weighted average price of the common stock for any three trading days during the ten (10) consecutive trading day period ending and including the trading day immediately prior to the applicable exercise date, divided by (y) three (3). On March 5, 2012, the remaining 25,000 subscription investment units expired unexercised.

Note 5 — Stock Incentive Plans

At September 30, 2012 options to purchase up to 358,373 shares of our common stock were outstanding and 568,429 shares were available for future grants or awards under our various stock incentive plans. We generally issue new shares for option exercises unless treasury shares are available for issuance. We had no treasury shares as of September 30, 2012 and have no plans to purchase any in the next year.

Stock-based Compensation — The following table summarizes stock-based compensation expense (in thousands):

	Three Months ended September 30,					Nine months ended September 30,
	2011		2012			2011		2012
Stock-based compensation:
Research and development	$	103	$	34		$	295	$	186
Selling, general and administrative		13		(33	)		393		159
Total stock-based compensation	$	116	$	1		$	688	$	345

Stock-based compensation expense is recognized on a straight-line basis over the applicable vesting periods, based on the fair value on the grant date. Certain option and share awards provide for accelerated vesting if there is a change in control (as defined in the applicable plan and certain employment agreements we have with key employees).

Stock Options — Stock options to purchase shares of our common stock are granted under our existing stock-based incentive plans to certain employees, at prices at or above the fair market value on the date of grant.

The following table summarizes stock option activity during the nine months ended September 30, 2012:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
								(in thousands)
Outstanding December 31, 2011		578,257		$	26.22
Options expired		(15,446	)		60.43
Options forfeited		(204,438	)		2.27
Outstanding at September 30, 2012		358,373		$	38.41		5.9 years	$	—
Exercisable at September 30, 2012		254,860		$	52.71		4.6 years	$	—

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The per-share fair value of stock options granted was approximately $1.70 in both the three and nine months ended September 30, 2011, which was estimated at the date of grant using the Black-Scholes-Merton option valuation model using an expected dividend yield of 0%, a risk-free interest rate of 1.2%, expected stock volatility of 118% and an expected option life of 6.0 years. We did not grant any options during the three or nine months ended September 30, 2012.

As of September 30, 2012, we had approximately $0.2 million of total unrecognized compensation cost related to unvested stock options. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. We expect to recognize this cost over a weighted average period of approximately 1.8 years.

The intrinsic value of stock options outstanding and exercisable at September 30, 2012 is based on the $0.28 closing market price of our common stock on that date, and is calculated by aggregating the difference between $0.28 and the exercise price of each of the outstanding vested and unvested stock options. There were no stock options outstanding at September 30, 2012 which had an exercise price less than $0.28. There were no stock options exercised in the three or nine months ended September 30, 2011 or September 30, 2012.

Employee Stock Purchase Plan — As of September 30, 2012, a total of 65,000 shares of common stock have been reserved for issuance under our 2007 Employee Stock Purchase Plan (“ESPP”) and 18,141 have been issued. Under the terms of the ESPP, a participant may purchase shares of our common stock at a price equal to the lesser of 85% of the fair market value on the date of offering or on the date of purchase. Stock-based compensation expense related to the ESPP was not material in the three and nine month periods ended September 30, 2011 and September 30, 2012.

Note 6 — Contractual Agreements

RNAi-related

Tekmira – On November 28, 2012, we and Tekmira entered into a license agreement whereby we will provide Tekmira a worldwide, non-exclusive license to our unlocked nucleobase analog (“UNA”) technology for the development of RNA interference therapeutics. Tekmira will have full responsibility for the development and commercialization of any products arising under the License Agreement. In consideration for entering into the license agreement, we received an upfront payment in the amount of $300,000, and we will receive milestone payments upon the satisfaction of certain clinical and regulatory milestone events and royalty payments in the low single digits on products developed by Tekmira that use UNA technology. Tekmira may terminate the license agreement for convenience in its entirety, or in respect of any particular country or countries, by giving 90 days prior written notice to us, provided that no such termination shall be effective sooner than August 28, 2013. Either party may terminate the license agreement immediately upon the occurrence of certain bankruptcy events involving the other party, or, following the expiration of a 120 day cure period (60 days in the event of a default of a payment obligation by Tekmira), upon the occurrence of a material breach of the License Agreement by the other party.

Novartis – On August 2, 2012, we and Novartis Institutes for Biomedical Research, Inc. (“Novartis”) entered into a worldwide, non-exclusive License Agreement for our CRN technology for the development of both single and double-stranded oligonucleotide therapeutics. We received $1 million in a one-time upfront payment for the non-exclusive license. In addition, in March 2009, we entered into an agreement with Novartis pursuant to which we granted to Novartis a worldwide, non-exclusive, irrevocable, perpetual, royalty-free, fully paid-up license, with the right to grant sublicenses, to our DiLA² -based siRNA delivery platform in consideration of a one-time, non-refundable fee of $7.25 million, which was recognized as license fee revenue in 2009. Novartis may terminate this agreement immediately upon written notice to us. In connection with the March 2009 license agreement, we also entered into a separate agreement with Novartis to provide them with an exclusive period in which to negotiate a potential research and development collaboration as well as possible broader licensing rights related to our RNAi drug delivery platform. This exclusive period expired in 2009. Approximately $0.3 million was recognized as license fee revenue in 2009 under this separate agreement. 

Girindus – On May 18, 2012, we and Girindus Group (“Girindus”) entered into a strategic alliance pursuant to which Girindus will have exclusive rights to develop, supply and commercialize certain oligonucleotide constructs using our CRN chemistry and in return, we will receive royalties in the single digit percentages from the sale of CRN-based oligonucleotide reagents as well as a robust supply of cGMP material for us and our partners' pre-clinical, clinical and commercialization needs.

Monsanto – On May 3, 2012, we and Monsanto Company (“Monsanto”) entered into a worldwide exclusive Intellectual Property License Agreement for our delivery and chemistry technologies. On May 3, 2012, we and Monsanto also entered into a Security Agreement pursuant to which we granted to Monsanto a security interest in that portion of our intellectual property that is the subject of the License Agreement in order to secure the performance of our obligations under the License Agreement. Under the terms of the license agreement, we received $1.5 million in initiation fees, and may receive royalties on product sales in the low single digit percentages. Monsanto may terminate the License Agreement at any time in whole or as to any rights granted thereunder by giving prior written notice thereof to us, with termination becoming effective three (3) months from the date of the notice.

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ProNAi Therapeutics, Inc. — On March 13, 2012, we entered into an Exclusive License Agreement with ProNAi Therapeutics, Inc. (“ProNAi”) regarding the development and commercialization of ProNAi’s proprietary DNAi-based therapeutics utilizing our novel SMARTICLES® liposomal delivery technology. The License Agreement provides that ProNAi will have full responsibility for the development and commercialization of any products arising under the License Agreement. Under terms of the License Agreement, we could receive up to $14 million for each gene target in total upfront, clinical and commercialization milestone payments, as well as royalties in the single digit percentages on sales, with ProNAi having the option to select any number of gene targets. Either party may terminate the License Agreement upon the occurrence of a default by the other party (subject to standard cure periods), or upon certain events involving the bankruptcy or insolvency of the other party. ProNAi may also terminate the License Agreement without cause upon ninety (90) days' prior written notice to us, provided that no such termination shall be effective sooner than December 13, 2012.

Mirna Therapeutics — On December 22, 2011, we entered into a License Agreement with Mirna Therapeutics, Inc. (“Mirna”) regarding the development and commercialization of microRNA-based therapeutics utilizing Mirna’s proprietary microRNAs and our novel SMARTICLES® liposomal delivery technology. The License Agreement provides that Mirna will have full responsibility for the development and commercialization of any products arising under the License Agreement and that we will support pre-clinical and process development efforts. Under terms of the License Agreement, we could receive up to $63 million in total upfront, clinical and commercialization milestone payments, as well as royalties in the low single digit percentages on sales, based on the successful outcome of the collaboration. Either party may terminate the License Agreement upon the occurrence of a default by the other party. Commencing on June 22, 2012, Mirna may also terminate the License Agreement without cause upon sixty (60) days prior written notice to us.

Debiopharm S.A. — In February 2011, we entered into a Research and License Agreement with Debiopharm S.A. pursuant to which we granted to Debiopharm an exclusive license to develop and commercialize our pre-clinical program in bladder cancer, for all uses in humans and animals for the prevention and treatment of superficial (non-muscle invasive) bladder cancer, in consideration of the payment by Debiopharm to us of up to $24 million based on predefined research and development milestones, plus royalties in the low double digit percentages from the sales of products resulting under the agreement and sublicensing payments. The agreement provided that Debiopharm would have full responsibility for the development and commercialization of any products arising from the partnership. On November 2, 2012, Debiopharm provided notice that the agreement would be terminated effective December 5, 2012 due to its own operational reasons. The bladder cancer program will be returned to us without obligations beyond those minor activities associated with the termination period and will be reincorporated into our internal preclinical pipeline with the intention of advancing the program once either appropriate funding or a new partner is obtained.

Valeant Pharmaceuticals — In March 2010, we acquired intellectual property related to Conformationally Restricted Nucleotides (“CRN”) from Valeant Pharmaceuticals North America in consideration of payment of a non-refundable licensing fee of $0.5 million which was included in research and development expense in 2010. Subject to meeting certain milestones triggering the obligation to make any such payments, we may be obligated to make a product development milestone payment of $5.0 million within 180 days of FDA approval of a New Drug Application for our first CRN related product and another product development milestone payment of $2.0 million within 180 days of FDA approval of a New Drug Application covering our second CRN related product. As of September 30, 2012, we have not made, and are not under any current obligation to make, any such milestone payments, as the conditions triggering any such milestone payment obligations have not been satisfied. Valeant is entitled to receive earn-outs based upon a percentage in the low single digits of future commercial sales and earn-outs based upon a percentage in the low double digits of future revenue from sublicensing. Under the agreement we are required to use commercially reasonable efforts to develop and commercialize at least one covered product. If we have not made earn-out payments of at least $5.0 million prior to the sixth anniversary of the date of the agreement, we are required to pay Valeant an annual amount equal to $50,000 per assigned patent which shall be creditable against other payment obligations. The term of our financial obligations under the agreement shall end, on a country-by-country basis, when there no longer exists any valid claim in such country. We may terminate the agreement upon 30 days’ notice, or upon 10 days’ notice in the event of adverse results from clinical studies. Upon termination, we are obligated to make all payments accrued as of the effective date of such termination but shall have no future payment obligations.

Novosom — In July 2010, we entered into an agreement pursuant to which we acquired the intellectual property of Novosom AG (“Novosom”) of Halle, Germany for Novosom’s SMARTICLES^®-based liposomal delivery system, which significantly broadens the number of approaches we may take for systemic and local delivery of our proprietary UNA and CRN-based oligonucleotide therapeutics. We issued an aggregate of 141,949 shares of our common stock to Novosom as consideration for the acquired assets. The shares had an aggregate value equal to approximately $3.8 million, which was recorded as research and development expense. As additional consideration for the acquired assets, we will pay to Novosom an amount equal to 30% of the value of each upfront (or combined) payment actually received by us in respect of the license of liposomal-based delivery technology or related product or disposition of the liposomal-based delivery technology by us, up to a maximum of $3.3 million, which amount will be paid in shares of our common stock, or a combination of cash and shares of our common stock, at our discretion. In December 2011 we recognized approximately $0.1 million as research and development expense for additional consideration paid to Novosom as a result of the License Agreement that we entered into with Mirna Therapeutics. During 2012 we issued 340,906 shares of common stock to Novosom as additional consideration as a result of the license agreements that we entered into with Mirna and Monstanto.

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Roche — In February 2009, we entered into an agreement with F. Hoffmann-La Roche Inc., a New Jersey corporation, and F. Hoffmann-La Roche Ltd., a Swiss corporation (collectively, “Roche”), pursuant to which we granted to Roche a worldwide, irrevocable, non-exclusive license to a portion of our technology platform, for the development of RNAi-based therapeutics, in consideration of the payment of a one-time, non-refundable licensing fee of $5.0 million. On September 30, 2011, we agreed to the assignment and delegation by Roche of its non-exclusive license rights in the Licensed Technology upon Roche’s successful divestment of its RNA interference assets. On October 21, 2011, Roche successfully divested its RNA interference assets, including the Licensed Technology, and made a one-time non-refundable payment of $1.0 million to us in consideration for our agreement to the assignment and delegation of Roche’s non-exclusive license rights in the licensed technology. This payment was recognized as revenue in 2011.

University of Michigan — In May 2008, we entered into an exclusive license agreement to intellectual property (“IP”) from the University of Michigan covering cationic peptides for enhanced delivery of nucleic acids. In connection with the agreement, we paid a license issue fee of $120,000. An additional fee of $25,000 is payable annually and creditable against royalty payments. Results from continued internal development efforts made this exclusive license agreement unnecessary and the agreement was terminated on August 7, 2012 with no further financial obligation.

University of Helsinki — In June 2008, we entered into a collaboration agreement with Dr. Pirjo Laakkonen and the Biomedicum Helsinki. The goal of the work involves our patented phage display library, the Trp Cage library, for the identification of peptides to target particular tissues or organs for a given disease. In December 2009, we received a patent allowance in the U.S. covering a targeting peptide for preferential delivery to lung tissues that was identified by us using the Trp Cage Library. We believe the Trp Cage library will be a source of additional peptides for evaluation in our delivery programs, and we will have a strong IP position for these peptides and their use. This agreement terminated by its terms in June 2012. Under this agreement, we may be obligated to make product development milestone payments of up to €275,000 in the aggregate for each product developed under this research agreement if certain milestones are met. As of September 30, 2012, we have not made, and are not under any current obligation to make, any such milestone payments, as the conditions that would trigger any such milestone payment obligations have not been satisfied. In addition, upon the first commercial sale of a product, we are required to pay an advance of €250,000 against which future royalties will be credited. The percentage royalty payment required to be made by us to the University of Helsinki under the terms of this agreement is a percentage of gross revenues derived from work performed under the Helsinki Agreement in the low single digits.

Ribotask ApS. — In June 2009, we announced the revision of the October 2008 agreement in which we had acquired the intellectual property related to Unlocked Nucleobase Analogs (“UNA”) from Ribotask ApS, a privately held Danish company. The original agreement provided us with exclusive rights for the development and commercialization of therapeutics incorporating UNAs. The amended agreement eliminated our obligation to pay all milestone and royalty payments and provided full financial and transactional control of our proprietary UNA technology.

Under the October 2008 agreement we made payments to Ribotask totaling $500,000. We sublicensed the IP under this agreement to Roche on a nonexclusive basis in February 2009, at which time we paid an additional $250,000 to Ribotask, which eliminated the obligation to pay Ribotask any future royalties or milestones with respect to the Roche sublicense. In connection with the June 2009 amendment, we issued 15,152 shares of our common stock valued at approximately $1.0 million to Ribotask ApS and agreed to pay $1.0 million in four installments of $250,000 each due at various intervals through July 2010.

In June 2010, we expanded our rights under the previous agreement with Ribotask to include exclusive rights to the development and commercialization of UNA-based diagnostics. In connection with this amendment, we agreed to pay Ribotask $750,000 in three equal payments of $250,000. In March 2011, the agreement was amended to change the payment terms for the diagnostic rights. The first payment of $250,000 was made in November 2010, a payment of $50,000 was made upon the execution of the amendment, and the remaining $400,000 was paid in eight equal monthly installments beginning on May 1, 2011. In addition we issued 11,377 shares of our common stock valued at approximately $80,000 to Ribotask on March 3, 2011.

In connection with our agreements, as amended, we granted Ribotask a royalty-bearing, world-wide exclusive license to use the assigned patents to develop and sell products intended solely for use as reagents or for testing. The royalty rates to be paid to us by Ribotask are a percentage in the low single digits.

Intranasal related

Cypress Bioscience, Inc. — In August 2010, we entered into an Asset Purchase Agreement with Cypress Bioscience, Inc. (“Cypress”) under which Cypress acquired our patent rights and technology related to carbetocin, a long-acting analog of oxytocin, a naturally produced hormone that may benefit individuals with autism. Under the agreement, we received an upfront payment of $750,000 and we could receive milestone payments up to $27 million. In 2011, the carbetocin asset was spun out to create Kyalin Bioscience. Kyalin Bioscience will be responsible for all future development and IP related expenses as well as all milestone payments due to us. In addition, Kyalin will pay us royalties, in single-digit percentages, based on commercial sales.

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Amylin Pharmaceuticals, Inc. — In January 2009 we amended our 2006 License Agreement with Amylin Pharmaceuticals, Inc. for the development of intranasal exenatide. The License Agreement, as amended, provides for an accelerated $1.0 million milestone payment to us in January 2009, a reduction in the aggregate amount of milestone payments that could be due to us from $89 million to $80 million, and a reduction in the percentage royalty rate payable upon commercial sales of a product to the low single digits. Additionally, as a result of the amendment, we are no longer responsible for any further development of the nasal spray formulation of intranasal exenatide or its manufacture. Either party may terminate the agreement for breach of any material provision of the agreement upon 60 days’ notice of the breach and subject to a 60 day cure period. Amylin may also terminate the agreement upon 90 days’ written notice. 

Note 7 — Income Taxes

We continue to record a valuation allowance in the full amount of net deferred tax assets since realization of such tax benefits has not been determined by our management to be more likely than not. At the end of each interim period, we make our best estimate of the effective tax rate expected to be applicable for the full fiscal year, and the rate so determined is used in providing for income taxes on a current year-to-date basis. The difference between the expected provision or benefit computed using the statutory tax rate and the recorded provision or benefit of zero, is primarily due to the change in valuation allowance.

Note 8 — Commitments and Contingencies

Standby Letter of Credit — In connection with the terms of our lease of our Bothell, Washington facility we have provided our landlord with a stand-by letter of credit. The landlord has periodically drawn on the $1.2 million standby letter of credit for that facility, which has resulted in draws on our restricted cash, and we have periodically replenished the standby letter of credit and increased the restricted cash balance. As of September 30, 2012, approximately $0.7 million was outstanding on the standby letter of credit.

Leases — We lease space for our research and development and corporate offices at 3830 Monte Villa Parkway in Bothell, Washington under an operating lease that was originally scheduled to terminate in 2016. On October 5, 2012, we entered into a Lease Termination Agreement (the “Termination Agreement”), effective as of October 1, 2012, with respect to our facilities at 3830 Monte Villa Parkway. Pursuant to the Termination Agreement, we paid $155,000 to the landlord as rent for the premises for the month of October 2012. Thereafter, our obligation to pay further rent will be satisfied through the letter of credit that we established to support our obligations under the lease. The landlord will draw the amount of each month’s rent by drawing on the letter of credit on or about the first day of each month from November 2012 through February 2013, with the landlord drawing the entire remaining amount available to be drawn on the letter of credit when it draws the February 2013 rent. The lease will terminate effective on March 1, 2013; provided that prior to March 1, 2013 the landlord may terminate the lease on 10 days’ prior written notice, in which event the landlord shall be entitled to immediately draw all remaining amounts under the Termination Agreement on the letter of credit.

As additional consideration for the Termination Agreement we agreed to issue 1,500,000 shares of our common stock to the landlord contingent upon and immediately prior to the first to occur of any of the following events: (i) the closing of an equity financing in a transaction or series of related transactions where such financing yields gross proceeds to us of at least $4 million in the aggregate, including amounts converted under any convertible promissory notes; (ii) a merger into another entity if the combined market capitalization of the merging entities is at least $18 million or, if not, upon our market capitalization as the surviving entity of a merger being at least $18 million at any time after the merger; (iii) a sale of all or substantially all of our assets; or (iv) a sale of our stock after which sale a majority of the outstanding equity is held by persons or entities who were not our shareholders prior to the sale.

We leased space for research and development in Cambridge, Massachusetts under an operating lease expiring in 2012. In February 2012, we announced that we were closing our Cambridge site and we entered into a sublease with a third party for the remainder of the lease term.

Contingencies — We are subject to various legal proceedings and claims that arise in the ordinary course of business. Our management currently believes that resolution of such legal matters will not have a material adverse impact on our consolidated financial position, results of operations or cash flows. 

Note 9 — Subsequent Events

As further described in Notes 4 and 8, effective October 1, 2012, we entered into a Lease Termination Agreement with the landlord for our facilities located at 3830 Monte Villa Parkway, Bothell, WA pursuant to which we reduced the term of the lease. As additional consideration for the Termination Agreement, we agreed to issue to the landlord 1,500,000 shares of our common stock contingent upon and immediately prior to the first to occur of any of the following events: (i) the closing of an equity financing in a transaction or series of related transactions where such financing yields gross proceeds to us of at least $4 million in the aggregate, including amounts converted under any convertible promissory notes; (ii) a merger into another entity if the combined market capitalization of the merging entities is at least $18 million or, if not, upon our market capitalization as the surviving entity of a merger being at least $18 million at any time after the merger; (iii) a sale of all or substantially all of our assets; or (iv) a sale of our stock after which sale a majority of the outstanding equity is held by persons or entities who were not our shareholders prior to the sale. 

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As further described in Note 4, in October and November 2012 we issued to two of our vendors an aggregate of approximately 0.2 million shares of our common stock to settle outstanding amounts due to such vendors in the aggregate amount of approximately $60,000. We also agreed to issue an additional 87,254 shares to settle approximately $20,000 in amounts due to one vendor contingent upon and immediately prior to the first to occur of any of the following events: (i) the closing of an equity financing in a transaction or series of related transactions where such financing yields gross proceeds to us of at least $4 million in the aggregate, including amounts converted under any convertible promissory notes; (ii) a merger into another entity if the combined market capitalization of the merging entities is at least $18 million or, if not, upon our market capitalization as the surviving entity of a merger being at least $18 million at any time after the merger; (iii) a sale of all or substantially all of our assets; or (iv) a sale of our stock after which sale a majority of the outstanding equity is held by persons or entities who were not our shareholders prior to the sale.

As further described in Notes 3 and 4, in October 2012 we issued warrants to purchase up to an additional 1,035,715 shares of common stock to the holders of our secured promissory notes in connection with an amendment to the purchase agreement.

As further described in Note 6, on November 2, 2012, Debiopharm provided notice that our agreement for the bladder cancer program would be terminated effective December 5, 2012 due to its own operational reasons.

As further described in Notes 4 and 6, on November 28, 2012 we entered into a license agreement with Tekmira pursuant to which we granted to Tekmira a worldwide, non-exclusive license to our unlocked nucleobase analog technology for the development and commercialization of oligonucleotide therapeutics.

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ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Statements contained herein that are not historical fact may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are subject to a variety of risks and uncertainties. There are a number of important factors that could cause actual results to differ materially from those projected or suggested in any forward-looking statement made by us. These factors include, but are not limited to: (i) the ability of our company to obtain additional and substantial funding in the immediate future; (ii) the ability of our company to attract and/or maintain research, development, commercialization and manufacturing partners; (iii) the ability of our company and/or a partner to successfully complete product research and development, including pre-clinical and clinical studies and commercialization; (iv) the ability of our company and/or a partner to obtain required governmental approvals, including product and patent approvals; and (v) the ability of our company and/or a partner to develop and commercialize products that can compete favorably with those of competitors. In addition, significant fluctuations in quarterly results may occur as a result of the timing of milestone payments, the recognition of revenue from milestone payments and other sources, and the timing of costs and expenses related to our research and development programs. Additional factors that could cause actual results to differ materially from those projected or suggested in any forward-looking statements are contained in our filings with the Securities and Exchange Commission, including those factors discussed under the captions “Risk Factors” and “Forward-Looking Statements” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as may be supplemented or amended from time to time, which we urge investors to consider. We undertake no obligation to publicly release revisions in such forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events or circumstances, except as otherwise required by securities and other applicable laws.

We are a biotechnology company focused on the discovery, development and commercialization of nucleic acid-based therapies utilizing gene silencing approaches such as RNA interference (“RNAi”) and blocking messenger RNA (“mRNA”) translation. Our goal is to improve human health through the development, either through our own efforts or those of our collaboration partners and licensees, of these nucleic acid-based therapeutics as well as the delivery technologies that together provide superior treatment options for patients. We have multiple proprietary technologies integrated into a broad nucleic acid-based drug discovery platform, with the capability to deliver novel nucleic acid-based therapeutics via systemic, local and oral administration to target a wide range of human diseases, based on the unique characteristics of the cells and organs involved in each disease.

Our pipeline includes a clinical program in Familial Adenomatous Polyposis (“FAP”) and preclinical programs in bladder cancer and myotonic dystrophy. During the past year, we have entered into the following agreements regarding our technology:

· In December 2011, we entered into an exclusive license agreement with Mirna Therapeutics, Inc., a privately-held biotechnology company pioneering microRNA replacement therapy for cancer, regarding the development and commercialization of microRNA-based therapeutics utilizing Mirna’s proprietary microRNAs and our novel SMARTICLES®-based liposomal delivery technology.

· In March 2012, we entered into an exclusive license agreement with ProNAi Therapeutics, Inc., a privately-held biotechnology company pioneering DNA interference (DNAi) therapies for cancer, regarding the development and commercialization of DNAi-based therapeutics utilizing our novel SMARTICLES®-based liposomal delivery technology.

· In May 2012, we entered into a worldwide exclusive license agreement with Monsanto Company, a global leader in agriculture and crop sciences, regarding the agricultural applications for our delivery and chemistry technologies.

· In May 2012, we entered into a strategic alliance with Girindus Group, a recognized leader in process development, analytical method development and cGMP manufacture of oligonucleotide therapeutics, regarding the development, supply and commercialization of certain oligonucleotide constructs using our conformationally restricted nucleotide (“CRN”) technology.

· In August 2012, we entered into a worldwide, non-exclusive license agreement with Novartis Institutes for Biomedical Research, Inc., a global leader in the development of human therapeutics, regarding the development of oligonucleotide therapeutics utilizing our CRN technology.

· In November 2012, we entered into a worldwide, non-exclusive license agreement with Protiva Biotherapeutics Inc., a wholly owned subsidiary of Tekmira Pharmaceuticals Corporation (“Tekmira”), a leading oligonucleotide-based drug discovery and development company, regarding the development of oligonucleotide therapeutics using our Unlocked Nucleobase Analog (UNA) technology.

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In addition to our own, internally developed technologies, we have strategically in-licensed and further developed nucleic acid- and delivery-related technologies, forming an integrated drug discovery platform. We are employing our platform, through our own efforts and those of our partners, for the discovery of multiple nucleic acid-based therapeutics including siRNA, microRNA and single stranded oligonucleotide-based drugs.

Our business strategy is two-fold. First, we strive to establish collaborations and strategic partnerships with pharmaceutical and biotechnology companies in the area of nucleic acid-based therapeutics to: (1) generate revenue through up-front, milestone and royalty payments related to our technology and/or the products that are developed using such technology; (2) gain access to technical resources; and (3) further validate our drug discovery platforms. Secondly, and pending receipt of sufficient funding, we plan to advance our own pipeline of nucleic acid-based therapeutics as a foundation upon which to improve all aspects of our drug discovery platform and to have the opportunity to commercialize drug therapies.

In terms of collaborations and strategic partnerships: (i) Mirna has the right to fund and develop specific microRNA-based nucleic acid therapeutics using our SMARTICLES®-based liposomal delivery technology, which arrangement includes the potential for milestone and royalty payments; (ii) ProNAi has the right to fund and develop DNAi-based nucleic acid therapeutics using our SMARTICLES®-based liposomal delivery technology, which arrangement includes the potential for milestone and royalty payments; (iii) Monsanto has the right to fund and develop applications in the agriculture field if any, using our delivery and chemistry technologies, which arrangement includes the potential for royalty payments; (iv) Girindus will fund the commercialization of CRN-based amidites and CRN-based oligonucleotides for sale to industry and academia, which arrangement includes the potential for royalty payments; (v) Novartis has the right to fund and develop CRN-based nucleic acid therapeutics; and (vi) Tekmira has the right to fund and develop oligonucleotide therapeutics using our UNA technology, which arrangement includes the potential for milestone and royalty payments. Furthermore, ProNAi is funding their Phase 1 clinical trial, and using our proprietary SMARTICLES®-based liposomal delivery technology for systemic administration, which arrangement does not provide any financial benefit to us but continues to validate and advance our SMARTICLES®-based liposomal delivery technology.

With these relationships facilitating the advancement of several of our proprietary delivery technologies for small interfering RNA (“siRNA”) and other nucleic acid-based therapeutics, we have focused resources on the Phase 1b/2a clinical trial of CEQ508 in Familial Adenomatous Polyposis as well as the CRN technology for the development of double- and single-stranded nucleic acid-based therapies. In April 2012, we announced the completion of dosing for Cohort 2 in the Dose Escalation Phase of the START-FAP (Safety and Tolerability of An RNAi Therapeutic in Familial Adenomatous Polyposis) clinical trial of CEQ508. The CEQ508 trial is currently on hold pending the receipt of sufficient funding to continue. We expect to begin the dosing of Cohort 3 as soon as we secure sufficient funding to complete the trial.

With respect to collaborations and strategic partnerships our concept is to provide multiple therapeutic options based on a partner’s disease target and indication. We can apply our broad capabilities to pursue the most appropriate nucleic acid-based therapeutic approach to a specific, often undruggable, target for a specific indication. Each approach, i.e. siRNA, microRNA or single-strand oligonucleotide, has its advantages and disadvantages and we can utilize our broad capabilities to screen across multiple modalities to identify the most effective therapeutic. We believe this capability makes us extremely unique in the sector. We have structured, and expect to continue to structure, certain of our collaborative agreements to receive upfront non-refundable payments, research and development funding, milestone payments and royalties on commercial sales of products.

In order to protect our innovations, which encompass a broad platform of both nucleic acid-based therapeutic constructs and delivery technologies, as well as the drug products that may emerge from that platform, we have aggressively built upon our extensive and enabling intellectual property (“IP”) estate, and, pending receipt of adequate funding, plan to continue to do so.

We believe we have successfully leveraged our broad and proven expertise to create an industry-leading integrated nucleic acid-based drug discovery platform, which is protected by a strong IP position and validated through licensing agreements with Mirna and ProNAi using our SMARTICLES®-based liposomal delivery technology, licensing agreements with Girindus and Novartis using our CRN technology, a licensing agreement with Tekmira using our UNA technology, the Phase 1 clinical trial by ProNAi using our SMARTICLES®-based liposomal delivery technology, licensing agreements with three large international companies (i.e., Roche, Novartis and Monsanto) for certain chemistry and delivery technologies and our own FAP Phase 1b/2a clinical trial with the Trans Kingdom RNA interference (“tkRNAi”) platform.

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Reduction of Operations

On June 1, 2012, we announced that, due to our financial condition, we had implemented a furlough of approximately 90% of our employees and ceased substantially all day-to-day operations. Since that time substantially all of the furloughed employees have been terminated. As of November 30, 2012, we had approximately 10 remaining employees, including all of our executive officers, all of whom are either furloughed or working on reduced salary. We have also sold substantially all of our equipment, and have ceased operations at our facility located at 3830 Monte Villa Parkway in Bothell, WA. As a result, since June 1, 2012 our internal research and development (“R&D”) efforts have been, and as of the date of the filing of this report they continue to be, minimal, pending receipt of adequate funding.

Cash Position and Going Concern

The accompanying condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business.

As of September 30, 2012, we had an accumulated deficit of approximately $325.7 million, and have incurred, and may in the future continue to incur, losses and negative cash flows from operations as we continue our planned business operations. We expect that our operating expenses will consume the majority of our limited cash resources during the remainder of 2012 and will require ongoing funding. We have funded our losses primarily through the sale of common stock and warrants in the public markets and private placements, revenue provided by our collaboration partners, and, to a lesser extent, secured loans.

We plan to continue to work with large pharmaceutical companies regarding R&D collaboration agreements or investments, and to pursue public and private sources of financing to raise cash. However, there can be no assurance that we will be successful in such endeavors.

The market value and the volatility of our stock price, as well as general market conditions, could make it difficult for us to complete a financing or collaboration transaction on favorable terms, or at all. Any financing we obtain may further dilute the ownership interest of our current stockholders, which dilution could be substantial, or provide new stockholders with superior rights than those possessed by our current stockholders. If we are unable to obtain additional capital when required, and in the amounts required, we may be forced to modify, delay or abandon some or all of our programs, or to discontinue operations altogether. Additionally, any collaboration may require us to relinquish rights to our technologies. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty. The Report of Independent Registered Public Accounting Firm included in our Annual Report on Form 10-K for the year ended December 31, 2011 states that we have ceased substantially all day-to-day operations, including most research and development activities, have incurred recurring losses, have a working capital and accumulated deficit, and have had recurring negative cash flows from operations, that raise substantial doubt about our ability to continue as a going concern.

At September 30, 2012, we had a working capital deficit (current assets less current liabilities) of approximately $4.2 million and approximately $1.1 million in cash, including approximately $0.7 million in restricted cash.

We believe that our resources as of the date of the filing of this report will be sufficient to fund our planned limited operations until the end of 2012.

Recent Financing Activities

In February 2012, we received net proceeds of approximately $1.5 million by issuance of secured promissory notes and warrants to purchase up to 3,690,944 shares of our common stock. Through a series of amendments to the purchase agreement and the notes issued pursuant thereto, we have extended the maturity date of the notes to December 31, 2012, and in connection with such extensions have issued to the secured parties additional warrants to purchase up to 3,199,848 shares of our common stock. The warrants are exercisable at $0.28 per share, which is subject to adjustment (including as a result of subsequent financings), and are exercisable for a period of five years beginning six months and one day following the issuance of the warrants. The notes are secured by the assets of our company and our wholly-owned subsidiaries, Cequent Pharmaceuticals, Inc. and MDRNA Research, Inc. The security agreement that we entered into in connection with this transaction provides a security interest in, but not limited to, all of the property, equipment and fixtures, accounts, negotiable collateral, cash, and cash equivalents of our company and our wholly-owned subsidiaries, Cequent and MDRNA Research, subject to certain exceptions. The security interest created in the collateral is first priority, subject to the permitted encumbrances provided in the security agreement, and is perfected to the extent such security interest can be perfected by the filing of a financing statement and filings with the U.S. Patent and Trademark Office. The security interest created in the collateral will be removed at such time as the notes are paid in full.

As a result of amendments to the purchase agreement and the notes issued pursuant thereto, we and the holders of the notes agreed that if we, at any time prior to December 31, 2012, effect any merger or consolidation of our company whereby the holders of the issued and outstanding shares of our common stock immediately prior to the consummation of such transaction hold less than fifty percent (50%) of the issued and outstanding shares of the voting securities of the surviving corporation immediately following the consummation of such transaction, we will have fully satisfied the obligation to repay the entire unpaid principal balance under the notes and all accrued and unpaid interest thereon through the issuance to the noteholders of an aggregate number of shares of common stock calculated by converting the then total outstanding principal and interest under the notes at a value of $0.28 per share of common stock.

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In March 2012, we received net proceeds of approximately $1.1 million by issuance of 1,600,002 shares of our common stock and warrants to purchase up to 800,001 shares of our common stock. The warrants have an exercise price of $0.75 per share, are immediately exercisable (subject to registration or the availability of an exemption under federal and state securities laws), and will be exercisable for a period of five years from the date of issuance. The exercise price and the number of shares issuable upon exercise of the warrants are subject to adjustment in the event of stock splits or dividends, business combinations, sale of assets or other similar transactions, but not as a result of future securities offerings at lower prices.

In May and July, 2012, we received an aggregate of $1.5 million as an upfront payment in connection with the Intellectual Property License Agreement that we entered into with Monsanto Company. At the same time that we entered into the Intellectual Property License Agreement, we and Monsanto also entered into a Security Agreement pursuant to which we granted to Monsanto a security interest in that portion of our intellectual property that is the subject of the license agreement in order to secure the performance of our obligations under the license agreement.

In August 2012 we received $1 million in a one-time upfront payment in connection with the License Agreement that we entered into with Novartis Institutes for Biomedical Research, Inc. Between September and November 2012, we received additional funds as a result of the sale of certain equipment at our corporate headquarters, the receipt of the upfront payment in connection with the license agreement that we entered into with ProNAi Therapeutics, and the receipt of an accelerated milestone payment in connection with the license agreement that we entered into with Mirna Therapeutics. In addition, on November 28, 2012, we entered into a license agreement with Tekmira, in connection with which we received an upfront payment in the amount of $300,000.

Cash flows

Our operating activities used cash of approximately $3.4 million in the nine months ended September 30, 2012, compared to approximately $14.2 million in the nine months ended September 30, 2011. In the nine months ended September 30, 2012, cash used in operating activities related primarily to funding our net loss, adjusted for changes in the liability for fair value of price adjustable warrants and subscription investment units and changes in accounts payable, offset by non-cash amortization of the discount on notes payable, non-cash restructuring expense, stock-based compensation, depreciation and amortization and changes in prepaid and other assets. In the nine months ended September 30, 2011, cash used in operating activities related primarily to funding our net loss, adjusted for changes in the liability for fair value of price adjustable warrants and subscription investment units, and changes in accounts payable and accrued expenses, offset in part by non-cash restructuring charges, stock-based compensation, depreciation and amortization and changes in deferred revenues. To the extent that we obtain sufficient funding, we expect to use cash for operating activities in the foreseeable future as we continue our R&D activities.

Our investing activities provided cash of approximately $0.4 million in the nine months ended September 30, 2012, compared to using cash of approximately $0.1 million in the nine months ended September 30, 2011. In the nine months ended September 30, 2012 cash used in investing activities was the result of proceeds from sales of property and equipment. In the nine months ended September 30, 2011 cash used in investing activities was the result of changes in restricted cash.

Our financing activities provided cash of approximately $2.5 million in the nine months ended September 30, 2012, compared to approximately $14.3 million in the nine months ended September 30, 2011. Changes in cash from financing activities are primarily due to issuance of common stock and warrants, proceeds and repayment of notes payable and proceeds from exercises of stock options, warrants and subscription investment units. In February 2012, we received net proceeds of $1.5 million from the issuance of notes payable and warrants to purchase shares of common stock. In March 2012, we raised net proceeds of approximately $1.1 million through an offering of shares of common stock and warrants to purchase shares of common stock. In February 2011, we raised net proceeds of approximately $4.5 million through an offering of shares of common stock and warrants to purchase shares of common stock and in May 2011, we raised net proceeds of approximately $6.3 million through an offering of shares of common stock and warrants. In the nine months ended September 30, 2011, we received proceeds of approximately $3.6 million from the exercise of warrants and subscription investment units.

Summary

We believe that our resources as of the date of the filing of this report are sufficient to fund our planned limited operations until the end of 2012. The market value and the volatility of our stock price, as well as our current financial situation and general market conditions, could make it difficult for us to complete a financing or collaboration transaction on favorable terms, or at all. Any financing we obtain may further, and substantially, dilute or otherwise impair the ownership interests of our current stockholders. If we fail to obtain significant additional capital in the immediate future, we will be forced to further delay, reduce or eliminate some or all of our planned activities.

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Consolidated Results of Operations

Comparison of Quarterly Results of Operations

All amounts, except amounts expressed as a percentage, are presented in thousands in the following table.

	Three Months Ended September 30,						Change						Nine months ended September 30,						Change
	2011			2012			$			%			2011			2012			$			%
Revenue
License and other revenue	$	286		$	1,106		$	820			287	%	$	629		$	2,895		$	2,266			360	%
Operating expenses
Research and development		2,955			753			(2,202	)		(75	)%		9,077			4,506			(4,571	)		(50	)%
Selling, general and administrative		1,852			598			(1,254	)		(68	)%		6,503			3,306			(3,197	)		(49	)%
Restructuring		1,104			1,446			342			31	%		1,390			1,481			91			7	%
Total operating expenses		5,911			2,797			(3,114	)		(53	)%		16,970			9,293			(7,677	)		(45	)%
Interest and other expense		—			(201	)		(201	)		—			—			(2,466	)		(2,466	)		—
Change in fair value liability for price adjustable warrants and subscription investment units		1,238			50			(1,188	)		(96	)%		4,704			3,278			(1,426	)		(30	)%
Gain on settlement of liabilities, net		—			92			92			—			—			92			92			—
Net loss	$	(4,387	)	$	(1,750	)	$	2,637			(60	)%	$	(11,637	)	$	(5,494	)	$	6,143			(53	)%

Comparison of the Three and Nine Months Ended September 30, 2011 to the Three and Nine Months Ended September 30, 2012

Revenue. We had revenue from certain customers, as a percentage of total revenue, as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2012			2011			2012
Novartis		—			95	%		—			36	%
Monsanto		—			5	%					54	%
Mirna		—			—			—			4	%
Debiopharm		91	%		—			63	%		1	%
Astra Zeneca		—			—			9	%		—
Undisclosed Partner #1		—			—			8	%		—
Other		9	%		—			20	%		5	%
Total		100	%		100	%		100	%		100	%

Revenue. Revenue was approximately $1.1 million and $2.9 million in the three and nine months ended September 30, 2012 compared to approximately $0.3 million and $0.6 million in the three and nine months ended September 30, 2011. In the three and nine months ended September 30, 2012, we earned $1.0 million in license revenue from our license agreement with Novartis and in addition, in the nine month period, we earned $1.5 million in license revenue from our agreement with Monsanto. Revenue for the three and nine months ended September 30, 2011 consisted primarily of R&D services under our various agreements. We expect that our license revenue will increase in 2012 as compared to 2011 as a result of our license agreements with Monsanto, Novartis, ProNAi and Tekmira.

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Research and Development. R&D expense consists primarily of salaries and other personnel-related expenses, costs of clinical trials and pre-clinical studies, consulting and other outside services, laboratory supplies, patent license fees, facilities costs and other costs. We expense all R&D costs as incurred. R&D expense for the three and nine months ended September 30, 2012 decreased 74% to approximately $0.8 million and decreased 50% to approximately $4.5 million compared to the same periods of 2011, due to the following:

· Personnel-related expenses decreased by 94% and 65% to approximately $0.1 million and $1.5 million in the three and nine months ended September 30, 2012, compared to approximately $1.4 million and $4.2 million in the three and nine months ended September 30, 2011. Due to our financial condition, on June 1, 2012 we announced that we had implemented a furlough of approximately 90% of our employees and ceased substantially all day-to-day operations. Since that time substantially all of the furloughed employees have been terminated.

· Costs of clinical trials, pre-clinical studies, lab supplies, consulting, and outside testing and services decreased by 93% and 55% to approximately $40,000 and $0.7 million in the three and nine months ended September 30, 2012, compared to approximately $0.6 million and $1.7 million in the prior year periods. Since June 1, 2012 our internal research and development efforts have been minimal, pending receipt of adequate funding.

· Patent license fees included in R&D expense were approximately $25,000 in the three months ended September 30, 2012 and 2011 and approximately $0.2 million in the nine months ended September 30, 2012 and 2011.

· Facilities and equipment costs decreased by 31% and 28% to approximately $0.6 million and $1.9 million in the three and nine months ended September 30, 2012 compared to approximately $0.8 million and $2.6 million in the same periods of 2011. The decreases were due primarily to lower expenses as a result of the closure of our facility in Cambridge in March 2012, decreases in depreciation expense due to the retirement of equipment and other cost containment measures.

· Stock-based compensation included in R&D expense decreased by approximately 67% and 37% in the three and nine months ended September 30, 2012 to approximately $30,000 and $0.2 million compared to approximately $0.1 million and $0.3 million in the same periods of 2011 due primarily to employee terminations.

We expect that our R&D expenses will decrease in 2012 compared to 2011 due to our limited business operations, particularly during the period following our June 1, 2012 announcement that we had ceased substantially all day-to-day operations.

Selling, general and administrative. Selling, general and administrative expense consists primarily of salaries and other personnel-related expenses to support our R&D activities, stock-based compensation for selling, general and administrative personnel and non-employee members of our Board, professional fees, such as accounting and legal, corporate insurance and facilities costs. Selling, general and administrative costs decreased by 68% to approximately $0.6 million and 49% to approximately $3.3 million in the three and nine months ended September 30, 2012 compared to the prior year periods due to the following:

· Personnel-related expenses decreased by 89% and 66% to approximately $0.1 million and $0.7 million in the three and nine months ended September 30, 2012, compared to approximately $0.7 and $2.2 million in the three and nine months ended September 30, 2011. Due to our financial condition, on June 1, 2012 we announced that we had implemented a furlough of approximately 90% of our employees and ceased substantially all day-to-day operations. Since that time substantially all of the furloughed employees have been terminated.

· Costs of legal and accounting fees, consulting, corporate insurance and other administrative costs decreased by 47% and 21% to approximately $0.5 million and $2.2 million for the three and nine months ended September 30, 2012, compared to approximately $0.9 million and $2.7 million in the same periods of 2011, due primarily to cost containment measures.

· Included in selling, general and administrative expense in the three and nine months ended September 30, 2011 were approximately $0.1 million and $0.8 million in transaction costs associated with the issuance of our warrants in May and July 2011. We did not incur any warrant issuance costs in 2012.

· Facilities and equipment costs decreased by 30% and 32% to approximately $0.1 million and $0.2 million in the three and nine months ended September 30, 2012, compared to approximately $0.1 million and $0.4 million in the prior year periods due to cost containment measures.

· Stock-based compensation included in selling, general and administrative expense was not material in the three month periods ended September 30, 2012 and 2011 and was approximately $0.2 million and $0.4 million in the nine months ended September 30, 2012 and 2011. The decrease in the nine month period ended September 30, 2012 compared to the same period of 2011 was due primarily to employee terminations.

We expect selling, general and administrative expenses to decrease in 2012 compared to 2011, due to cost reduction measures.

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Restructuring. Restructuring expense increased by 31% and 7% to approximately $1.4 million and $1.5 million in the three and nine months ended September 30, 2012, respectively compared to approximately $1.1 million and $1.4 million the prior year periods. In September 2012, we sold most of the remaining property and equipment at our facility at 3830 Monte Villa Parkway and abandoned the leasehold improvements at that facility. We recorded approximately $1.4 million as restructuring expense, net of proceeds for the asset sales, relating to these asset sales and abandonments. We terminated our lease for this facility effective October 1, 2012 and expect to record restructuring expense in Q4 2012 related to the remaining payments on the lease of approximately $0.9 million, offset by the remaining deferred rent liability of approximately $1.1 million. Earlier in 2012, we closed our Cambridge site, entered into a sublease with a third party for the remainder of the lease term and recorded restructuring expenses of approximately $35,000 related to that facility. In 2011, we recorded expenses related to our exited facility at 3450 Monte Villa Parkway, which lease we terminated on September 30, 2011, and as a result we had no restructuring expenses related to that facility in 2012.

Interest and other expense. In 2012, we incurred interest and other expense due to interest on our notes payable and due to non-cash amortization of the fair value of the warrants issued in connection with notes payable, which were recorded as debt discount.

Change in fair value liability for price adjustable warrants and subscription investment units. We use the Black-Scholes-Merton option pricing model as our method of valuation for price adjustable securities. The fair value liability is revalued each balance sheet date utilizing Black-Scholes-Merton valuation model computations with the decrease or increase in fair value being reported in the statement of operations as other income or expense, respectively. The change in fair value liability for price adjustable warrants and subscription investment units resulted in the recognition of income of approximately $50,000 and $3.3 million in the three and nine months ended September 30, 2012, compared to income of approximately $1.2 million and $4.7 million in the same periods of 2011. In the three months ended September 30, 2012, our stock price was $0.28 per share at both the beginning and end of the quarter, which did not impact the fair value liability significantly. In the nine months ended September 30, 2012, our stock price decreased from $0.89 per share to $0.28 per shares, which decreased the fair value liability, which represented income for us. In the three months ended September 30, 2011, our stock price decreased from $1.90 per share to $1.40 per share, which decreased the fair value liability, which represented income for us. In the nine months ended September 30, 2011, our stock price decreased from $15.50 per share to $1.40 per share, which decreased the fair value liability, which represented income for us.

Off-Balance Sheet Arrangements

As of September 30, 2012, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4 — CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures. As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our senior management, including our principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Management identified material weaknesses in internal control over financial reporting as described under the heading “Management Report on Internal Control” contained in Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (the “2011 Form 10-K”), which have not been remediated, and therefore our principal executive officer and our principal financial officer concluded that, as of September 30, 2012, our disclosure controls and procedures were not effective.

(b) Internal Control Over Financial Reporting. Management has reported to the Board of Directors material weaknesses described under the heading “Management Report on Internal Control” contained in Item 9A of the 2011 Form 10-K. The material weaknesses discussed therein, which arose during the year end reporting period in connection with the preparation of the financial statements contained in the 2011 Form 10-K, have not been remediated. There have been no changes in our internal control over financial reporting or in other factors during the fiscal quarter ended September 30, 2012 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, our current financial condition, the closure of our facilities and the loss of personnel have placed pressure on our system of internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1A – RISK FACTORS

The risk factor(s) set forth below should be considered in conjunction with the risks discussed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed with the SEC on October 10, 2012, under the heading “Risk Factors.” 

Risks Relating to being an Early Stage Drug Development Company

Although we have ceased substantially all of our day-to-day operations and terminated substantially all of our employees, our cash and other sources of liquidity may only be sufficient to fund our limited operations until the end of 2012. We will require substantial additional funding in the immediate future to continue our operations. If additional capital is not available, we may have to curtail or cease operations, or take other actions that could adversely impact our shareholders.

Our business currently does not generate the cash that is necessary to finance our operations. We incurred net losses of approximately $27.8 million in 2010, $29.4 million in 2011 and $5.5 million during the nine months ended September 30, 2012. We will require significant additional capital in the immediate future to:

· fund research and development activities, including clinical and pre-clinical trials;

· pursue licensing opportunities for our technologies;

· protect our intellectual property;

· attract and retain highly-qualified scientists;

· respond effectively to competitive pressures; and

· acquire complementary businesses or technologies.

Our future capital needs depend on many factors, including:

· the scope, duration and expenditures associated with our research and development;

· continued scientific progress in these programs;

· the outcome of potential partnering or licensing transactions, if any;

· competing technological developments;

· our proprietary patent position, if any, in our products; and

· the regulatory approval process for our products.

As a result of insufficient capital, on June 1, 2012 we announced that we had ceased substantially all day-to-day operations, including most research and development activities, and implemented a furlough of approximately 90% of our employees. Since that time substantially all of the furloughed employees have been terminated. We have also sold substantially all of our equipment, and have ceased operations at our facility located at 3830 Monte Villa Parkway in Bothell, WA. As a result, since June 1, 2012 our internal research and development efforts have been, and as of the date of the filing of this report they continue to be, minimal, pending receipt of adequate funding.

In addition, in February 2012 we issued secured promissory notes to two investors, for which the payment of principal and interest is due and payable in full on December 31, 2012 (if not converted into shares of our common stock prior to such date). The notes are secured by substantially all of our assets. We believe that our currently available cash and cash equivalents will be sufficient to fund our limited operations until the end of 2012. As a result of our limited financial resources and our limited operations, we believe that there is substantial doubt about our ability to continue as a going concern. This doubt has also been expressed by our independent registered public accounting firm in its audit opinion issued in connection with our consolidated balance sheets as of December 31, 2011 and 2010 and our consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the years ended December 31, 2011 and 2010.

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We will need to raise substantial additional funds through public or private equity offerings, debt financings or additional strategic alliances and licensing arrangements in the immediate future to continue our operations. We may not be able to obtain additional financing on terms favorable to us, if at all. General market conditions, as well as market conditions for companies that are facing financial distress, may make it very difficult for us to seek financing from the capital markets, and the terms of any financing may adversely affect the holdings or the rights of our stockholders. For example, if we raise additional funds by issuing equity securities, further dilution to our stockholders will result, which may substantially dilute the value of your investment. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, may involve restrictive covenants that could limit our flexibility in conducting future business activities and, in the event of insolvency, would be paid before holders of equity securities received any distribution of corporate assets. We may be required to relinquish rights to our technologies or drug candidates, or grant licenses on terms that are not favorable to us, in order to raise additional funds through alliance, joint venture or licensing arrangements. If adequate funds are not available, we may have to further delay, reduce or eliminate one or more of our planned activities. These actions would likely reduce the market price of our common stock.

ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

In October and November 2012, we issued to two of our vendors an aggregate of 199,659 shares of our common stock to settle outstanding amounts due to such vendors in the amount of approximately $60,000 in total. The shares were offered and sold in reliance on the exemption from registration afforded by Section 4(2) of the Securities Act.

ITEM 6 — EXHIBITS

The exhibits required by this item are set forth in the Exhibit Index attached hereto.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized, in Bothell, State of Washington, on December 5, 2012.

MARINA BIOTECH, INC.
By:	/S/    J. MICHAEL FRENCH
	J. Michael French
	President and Chief Executive Officer
By:	/S/    PHILIP C. RANKER
	Philip C. Ranker
	Interim Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
10.1	License Agreement, dated as of August 2, 2012, by and between Novartis Institutes for BioMedical Research, Inc. and Marina Biotech, Inc. (1)
31.1	Certification of our Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended. (1)
31.2	Certification of our Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended. (1)
32.1	Certification of our Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (2)
32.2	Certification of our Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (2)
101.INS	XBRL Instance Document (2)
101.SCH	XBRL Taxonomy Extension Schema Document (2)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (2)
101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document (2)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document (2)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (2)

(1) Filed Herewith.

(2) Furnished Herewith.

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EX-10.1

Exhibit 10.1

License Agreement

By And Between

Novartis institutes for biomedical research, inc.

And

Marina Biotech, Inc.

1.	DEFINITIONS AND INTERPRETATION	1
2.	LICENSES	5
3.	DISCLOSURE AND TRANSFER OF MARINA KNOW-HOW AND COOPERATION	7
4.	FINANCIAL PROVISIONS	7
5.	PAYMENT TERMS	7
6.	CONFIDENTIALITY	8
7.	EVENT OF DEFAULT	10
8.	TERM; RIGHTS IN BANKRUPTCY	10
9.	REPRESENTATIONS, WARRANTIES AND COVENANTS	11
10.	INDEMNIFICATION; LIABILITY	15
11.	PUBLICATIONS AND PUBLICITY	18
12.	GENERAL PROVISIONS	20

EXHIBIT A – Marina PATENTS

EXHIBIT B – PRESS RELEASE

LICENSE AGREEMENT

This LICENSE AGREEMENT (“Agreement”) is made as of this ___ day of August, 2012 (“Effective Date”), by and between Novartis Institutes for BioMedical Research, Inc., a Delaware corporation (“Novartis”) and Marina Biotech, Inc., a Delaware corporation (“Marina”). Novartis and Marina are each referred to individually as a “Party” and together as the “Parties.”

RECITALS

WHEREAS, Marina has developed a proprietary platform for creating novel oligonucleotide therapeutics and owns or Controls (as defined below) certain intellectual property relating thereto;

WHEREAS, Novartis wishes to obtain, and Marina wishes to grant, a license to such intellectual property on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Parties agree as follows.

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions. Unless the context otherwise requires, the terms in this Agreement with initial letters capitalized, shall have the meanings set forth below, or the meaning as designated in the indicated places throughout this Agreement.

“Affiliate” means, with respect to a Party, any Person that controls, is controlled by, or is under common control with that Party. For the purpose of this definition, “control” shall mean, direct or indirect, ownership of fifty percent (50%) or more of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or fifty percent (50%) or more of the equity interest in the case of any other type of legal entity, status as a general partner in any partnership, or any other arrangement whereby the entity or person controls or has the right to control the board of directors or equivalent governing body of a corporation or other entity, or the ability to cause the direction of the management or policies of a corporation or other entity. In the case of entities organized under the laws of certain countries, the maximum percentage ownership permitted by law for a foreign investor may be less than fifty percent (50%), and in such case such lower percentage shall be substituted in the preceding sentence, provided, that such foreign investor has the power to direct the management and policies of such entity. In the case of Novartis, “Affiliates” shall also be deemed to include the Novartis Institute for Functional Genomics, Inc. (also known as the Genomics Institute of the Novartis Research Foundation), the Friedrich Miescher Institute for BioMedical Research, and their respective Affiliates.

“Agreement” shall have the meaning set forth in the preamble.

“Novartis Indemnitees” shall have the meaning set forth in Section 10.1.

1

“Business Day” means any day that is not a Saturday, a Sunday, or other day which is a recognized Federal holiday in the United States of America.

“Claims” means all Third Party demands, claims, actions, proceedings and liabilities (whether criminal or civil, in contract, tort or otherwise) for losses, damages, reasonable legal costs and other reasonable expenses of any nature whatsoever.

“Code” shall have the meaning set forth in Section 8.2(a).

“Confidential Information” means all Know-How and other proprietary information and data of a financial, commercial or technical nature which the disclosing Party or any of its Affiliates has supplied or otherwise made available to the other Party or its Affiliates, whether made available orally, in writing or in electronic form, including information comprising or relating to concepts, discoveries, inventions, data, designs or formulae in relation to this Agreement. For purposes hereof, this Agreement and the terms hereof shall be deemed to be the Confidential Information of both Parties, subject to the rights of disclosure set forth in Section 11.2(b) and (c)..

“Control” or “Controlled” means, with respect to any Know How, Patents, other intellectual property rights, or any proprietary or trade secret information, the legal authority or right (whether by ownership, license or otherwise) of a Party to grant a license or a sublicense of or under such Know How, Patents, or intellectual property rights to another Person, or to otherwise disclose such proprietary or trade secret information to another Person, without breaching the terms of any agreement with a Third Party, or misappropriating the proprietary or trade secret information of a Third Party.

“CRN” means a nucleotide analog with a linker connecting C2’ and C4’ carbons of the ribose ring.

“CRN Data” means all data and information Controlled by Marina relating to the structure, activity and/or other characteristics of the CRN Platform Technology.

“CRN Platform Technology” generally means compounds containing one or more CRN, and including any Technology Improvements, as in existence as of the Effective Date.

“Effective Date” shall have the meaning set forth in the first paragraph of this Agreement.

“Encumbrance” means any claim, charge, equitable interest, hypothecation, lien, mortgage, pledge, option, license, assignment, power of sale, retention of title, right of pre-emption, right of first refusal or security interest of any kind.

“Event of Default” shall have the meaning set forth in Section 7.1.

“Field” shall mean all uses and purposes for the development of human therapeutics.

2

“Force Majeure Event” shall have the meaning set forth in Section 12.5.

“Indemnification Claim Notice” shall have the meaning set forth in Section 10.3(b).

“Indemnified Party” shall have the meaning set forth in Section 10.3(b).

“Indemnifying Party” shall have the meaning set forth in Section 10.3(b).

“Know-How” means all technical information, know-how and data, including inventions (whether patentable or not), discoveries, trade secrets, specifications, instructions, processes, formulae, materials, expertise and other technology applicable to compounds, biologics, formulations, compositions, products or to their manufacture, development, registration, use or commercialization or methods of assaying or testing them or processes for their manufacture, formulations containing them, compositions incorporating or comprising them and including all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical and analytical, safety, quality control, manufacturing, preclinical and clinical data, instructions, processes, formulae, expertise and information, regulatory filings and copies thereof, relevant to the development, manufacture, use or commercialization of and/or which may be useful in studying, testing, development, production or formulation of products, or intermediates for the synthesis thereof.

“MAA” means an application for the authorization to market a Product in any country or group of countries outside the United States, as defined in the applicable laws and regulations and filed with the Regulatory Authority of a given country or group of countries.

“Marina Know-How” means the Know-How owned or Controlled by Marina or its Affiliates as of the Effective Date relating to the CRN^® Platform Technology. The Marina Know-How shall also include the CRN Data.

“Marina Patents” means the Patents identified in Exhibit A and any other Patents owned or Controlled by Marina or its Affiliates as of the Effective Date that have claims covering the CRN Platform Technology.

“Marina Technology” means Marina Patents and Marina Know-How.

“Marina Indemnitees” shall have the meaning set forth in Section 10.2.

“Party” shall have the meaning set forth in the preamble.

“Patents” means all patents and patent applications, author certificates, inventor certificates, utility certificates, improvement patents and models and certificates of addition and all foreign counterparts of them and including all divisionals, continuations, substitutions, continuations-in-part, re-examinations, reissues, additions, renewals, extensions, registrations, and supplemental protection certificates and the like of any of the foregoing.

3

“Person” means any individual, partnership, limited liability company, firm, corporation, association, trust, unincorporated organization or other entity.

“Product” means any product or process covered by a claim in a Marina Patent or utilizing or incorporating Marina Know-How.

“Regulatory Authority” means any governmental agency or authority responsible for granting regulatory approvals for Products, including the United States Food and Drug Administration, the European Medicines Agency, or any successor entities thereto and any corresponding national or regional regulatory authorities.

“Regulatory Filings” means any submission to a Regulatory Authority of any appropriate regulatory application, and shall include, without limitation, any submission to a regulatory advisory board, MAA, and any supplement or amendment thereto. For the avoidance of doubt, Regulatory Filings shall include any Investigational New Drug (IND), New Drug Application (NDA) or the corresponding application in any other country or group of countries.

“Term” means the term of this Agreement as set forth in Section 8.1.

“Territory” means all countries of the world.

“Third Party” means any Person other than a Party or an Affiliate of a Party.

“United States” or “US” means the United States of America, its territories and possessions.

“USD” or “US$” means the lawful currency of the United States.

1.2 Interpretation. In this agreement unless otherwise specified:

(a) “includes” and “including” shall mean respectively includes and including without limitation;

(b) a Party includes its permitted assignees and/or their respective permitted successors in title to substantially the whole of its undertaking;

(c) a statute or statutory instrument or any of their provisions is to be construed as a reference to that statute or statutory instrument or such provision as the same may have been or may from time to time hereafter be amended or re-enacted;

(d) words denoting the singular shall include the plural and vice versa and words denoting any gender shall include all genders;

(e) the Exhibits and other attachments form part of the operative provision of this Agreement and references to this Agreement shall, unless the context otherwise requires, include references to the Exhibits and attachments;

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(f) the headings in this Agreement are for information only and shall not be considered in the interpretation of this Agreement;

(g) general words shall not be given a restrictive interpretation by reason of their being preceded or followed by words indicating a particular class of acts, matters or things; and

(h) the Parties agree that the terms and conditions of this Agreement are the result of negotiations between the Parties and that this Agreement shall not be construed in favor of or against any Party by reason of the extent to which any Party participated in the preparation of this Agreement.

2. LICENSES

2.1 License Grant. Subject to the terms and conditions of this Agreement, Marina hereby grants to Novartis and its Affiliates a non-exclusive, irrevocable, perpetual, royalty-free, fully paid-up license, with the right to grant sublicenses as permitted in Section 2.2 of this Agreement, under the Marina Technology to research, develop, make, have made, use, import, offer for sale, sell, have sold, commercialize and otherwise exploit any Product in the Field in the Territory.

2.2 Sublicense Rights. Novartis may sublicense to a Third Party the rights granted to it by Marina under Section 2.1 of this Agreement at any time at its sole discretion, but only in connection with the research, manufacturing, development and or commercialization of a Novartis Product by Novartis or its Affiliates, by such Third Party or its Affiliates or by any of such Persons as part of a collaboration. A “Novartis Product” means any Product with respect to which Novartis or any of its Affiliates has conducted research, manufacturing, development and /or commercialization activities that are material to such Product.

3. DISCLOSURE AND TRANSFER OF MARINA KNOW-HOW AND COOPERATION

3.1 Disclosure and Transfer of Marina Know-How. As soon as reasonably possible after the Effective Date (and in any event within ten (10) days after the Effective Date), Marina, without additional consideration, shall use good faith, diligent efforts to disclose to Novartis or its designated Affiliate all Marina Know-How in existence as of the Effective Date and shall provide such copies of any existing tangible embodiment thereof in written or electronic form as may be reasonably requested by Novartis, including delivery of an electronic copy of the CRN Data in a commonly usable format (to the extent in existence on the date hereof). Such disclosures shall include all Marina Know-How and any other data, information and documents known to and Controlled by Marina as of the Effective Date which may be necessary or useful to Novartis to practice the licenses granted hereunder efficiently.

3.2 Cooperation. Upon request by Novartis within a reasonable period after disclosure by Marina of the Marina Know-How and other data, information and documents pursuant to Section 3.1 of this Agreement, Marina will provide reasonable assistance to Novartis or its designated Affiliate in connection with understanding and using the Marina Know-How for purposes consistent with licenses and rights granted to Novartis hereunder; provided, that Novartis shall promptly pay or reimburse Marina for any travel or other out-of-pocket expenses incurred by Marina in connection with providing such assistance requested by Novartis.

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4. FINANCIAL PROVISIONS

4.1 Upfront Payment. In consideration of the licenses and rights granted to Novartis hereunder, Novartis shall pay to Marina a one-time upfront payment of One Million Dollars (US$1,000,000). Such upfront payment shall be paid within five (5) Business Days after receipt by Novartis of an invoice to be issued no earlier than the Effective Date.

5. PAYMENT TERMS

5.1 Payment Terms. All payments from Novartis to Marina shall be made by wire transfer to the credit of such bank account as may be designated by Marina in this Agreement or in writing to Novartis. Any payment which falls due on a date which is not a Business Day may be made on the next succeeding Business Day.

5.2 Currency. All payments under this Agreement shall be payable in US dollars.

5.3 Taxes. Marina will pay any and all taxes levied on account of any payments made to it under this Agreement.

6. CONFIDENTIALITY

6.1 Duty of Confidence. Subject to the other provisions of this Section 6, all Confidential Information disclosed by a Party or its Affiliates under this Agreement will be maintained in confidence and otherwise safeguarded by the recipient Party. The recipient Party may only use the Confidential Information for the purposes of this Agreement and pursuant to the rights granted to the recipient Party under this Agreement. Subject to the other provisions of this Section 6, each Party shall hold as confidential such Confidential Information of the other Party or its Affiliates in the same manner and with the same protection as such recipient Party maintains its own confidential information. Subject to the other provisions of this Section 6, a recipient Party may only disclose Confidential Information of the other Party to employees, agents, contractors, consultants and advisers of the Party and its Affiliates and sublicensees and to Third Parties to the extent reasonably necessary for the purposes of, and for those matters undertaken pursuant to, this Agreement; provided, that such Persons are bound to maintain the confidentiality of the Confidential Information in a manner consistent with the confidentiality provisions of this Agreement.

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6.2 Exceptions. The obligations under this Section 6 shall not apply to any information to the extent the recipient Party can demonstrate by competent evidence that such information:

(a) is (at the time of disclosure) or becomes (after the time of disclosure) generally known to the public or part of the public domain through no breach of this Agreement by the recipient Party or its Affiliates;

(b) was known to, or was otherwise in the possession of, the recipient Party or its Affiliates prior to the time of disclosure by the disclosing Party or any of its Affiliates;

(c) is disclosed to the recipient Party or an Affiliate on a non-confidential basis by a Third Party who is entitled to disclose it without breaching any confidentiality obligation to the disclosing Party or any of its Affiliates; or

(d) is independently developed by or on behalf of the recipient Party or its Affiliates, as evidenced by its written records, without reference to the Confidential Information disclosed by the disclosing Party or its Affiliates under this Agreement.

Specific aspects or details of Confidential Information shall not be deemed to be within the public domain or in the possession of the recipient Party merely because the Confidential Information is embraced by more general information in the public domain or in the possession of the recipient Party. Further, any combination of Confidential Information shall not be considered in the public domain or in the possession of the recipient Party merely because individual elements of such Confidential Information are in the public domain or in the possession of the recipient Party unless the combination and its principles are in the public domain or in the possession of the recipient Party.

6.3 Authorized Disclosures.

(a) In addition to disclosures allowed under Section 6.2, Novartis may disclose Confidential Information belonging to Marina or its Affiliates to the extent such disclosure is necessary in the following instances: (i) filing or prosecuting Patents as permitted by this Agreement; and (ii) in connection with Regulatory Filings for Products. In addition, Novartis may disclose Confidential Information belonging to Marina or its Affiliates to the extent such disclosure is necessary in connection with prosecuting or defending litigation as permitted by this Agreement; provided, that Novartis (A) informs Marina as soon as reasonably practicable of the proposed disclosure; and (B) shall use commercially reasonable efforts (but in no event less than the efforts used by Novartis with respect to confidential information derived from its other drug development and commercialization efforts) to limit the disclosure for the required purpose and to obtain protections to maintain the confidentiality of such Marina Confidential Information.

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(b) In addition, Novartis may disclose Confidential Information of Marina to Novartis Affiliates and sublicensees permitted under Section 2.2; provided, that such Novartis Affiliates and sublicensees are bound in writing to maintain the confidentiality of such Confidential Information in a manner consistent with the confidentiality provisions of this Agreement.

(c) In addition, Novartis and its Affiliates and sublicensees may disclose Confidential Information of Marina to Third Parties as may be necessary or useful in connection with the development, manufacture or commercialization of Products; provided, that such Third Parties are bound in writing to maintain the confidentiality of such Confidential Information in a manner consistent with the confidentiality provisions of this Agreement.

(d) In the event the recipient Party is required to disclose Confidential Information of the disclosing Party by law or in connection with bona fide legal process, such disclosure shall not be a breach of this Agreement; provided, that the recipient Party (i) informs the disclosing Party as soon as reasonably practicable of the required disclosure; (ii) limits the disclosure to the required purpose; and (iii) at the disclosing Party’s request and expense, assists in the disclosing Party’s attempt to object to or limit the required disclosure.

(e) Notwithstanding anything to the contrary contained in this Article 6 or Article 11 of this Agreement, Marina shall be permitted to disclose a copy of this Agreement to (a) Marina’s current or prospective banks, financial institutions, investors or other Third Parties for the purpose of raising capital or borrowing money or maintaining compliance with agreements, arrangements and understandings relating thereto, and (b) to any Person who proposes to be an assignee or to purchase or otherwise succeed (by merger, operation of law or otherwise) to all of Marina’s right, title and interest in, to and under this Agreement, if (1) such Person agrees to maintain the confidentiality of this Agreement pursuant to a written agreement at least as protective as the terms set forth in this Article 6 (with the exception of the term of the obligation of confidentiality, which may be for a specified term of years) and (2) any such assignment, purchase or succession would be permitted under Section 12.1 hereof.

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7. EVENT OF DEFAULT

7.1 Event of Default. The rejection of this Agreement under section 365 of the Code by Marina shall constitute an event of default (an “Event of Default”) by Marina under this Agreement.

7.2 Breach by Novartis. Upon material breach of any representation, warranty or covenant by Novartis under this Agreement, Marina may notify Novartis of such breach and require that Novartis cure such breach, which cure period shall be not shorter than ninety (90) days following Marina’s notice for any such breach. In the event Novartis shall not have cured such breach by the end of the applicable cure period, Marina may terminate this Agreement immediately upon written notice to Novartis. Notwithstanding the foregoing cure period, non-payment of the upfront license fee within the time period set forth in Section 4.1, shall automatically and immediately terminate this Agreement.

7.3 Termination for Other Marina Breach. Upon material breach of any representation, warranty or covenant by Marina under this Agreement, Novartis may notify Marina in writing of such Default and require that Marina cure such Default within ninety (90) days of Novartis’s notice. In the event Marina shall not have cured the Default by the end of the cure period, Novartis may terminate this Agreement immediately upon written notice to Marina.

8. TERM; RIGHTS IN BANKRUPTCY

8.1 Term. Subject to Section 8.2, the term of this Agreement (the “Term”) is perpetual and shall continue indefinitely following the Effective Date.

8.2 Termination for Event of Default. Novartis may terminate this Agreement immediately upon written notice to Marina upon the occurrence of an Event of Default.

8.3 Rights in Bankruptcy.

(a) The Parties agree that this Agreement constitutes an executory contract under Section 365 of the US Bankruptcy Code (the “Code”) for the license of “intellectual property” as defined under Section 101 of the Code and constitutes a license of “intellectual property” for purposes of any similar laws in any other country in the Territory. The Parties further agree that Novartis, as licensee of such rights under this Agreement, may retain and may fully exercise all of its protections, rights, and elections under the Code, including, but not limited to, Section 365(n) of the Code, and any similar laws in any other country in the Territory. The Parties further agree that, in the event of the commencement of a bankruptcy case by or against any Marina under the Code, and in the event that MARINA rejects this Agreement and Novartis elects to retain its rights under Section 365(n)(1)(B) of the Code. Novartis will be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property then existing, and the same, if not already in its possession, will be promptly delivered to following the rejection of this Agreement by or on behalf of Marina.

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(b) All rights, powers and remedies of Novartis provided for in this Section 8.3 are in addition to and not in substitution for any and all other rights, powers and remedies now or hereafter existing at law or in equity (including, without limitation, under the Code and any similar laws in any other country in the Territory). In the event of the commencement of a bankruptcy case by or against Marina under the Code, Novartis, in addition to the rights, power and remedies expressly provided herein, shall be entitled to exercise all other such rights and powers and resort to all other such remedies as may now or hereafter exist at law or in equity (including, without limitation, under the Code), subject to any requirements of the Code relating to relief from the automatic stay with respect to Novartis’s exercise of such rights or remedies). The Parties agree that they intend the following Novartis rights to extend to the maximum extent permitted by law, including, without limitation, for purposes of and consistent with the provisions of the Code: (i) the right of access to any such intellectual property (including all embodiments thereof) of Marina licensed or sublicensed to Novartis pursuant to this Agreement, or any Third Party with whom Marina contracts to perform an obligation of Marina under Section 3.1 of this Agreement which is necessary for the development, registration, manufacture and/or commercialization of Products in the Territory; (ii) the right to contract directly with any Third Party described in (i) to complete the contracted work, and (iii) the right to cure any breach of or default under any such agreement with a Third Party and set off the costs thereof against amounts payable to Marina under this Agreement.

9. REPRESENTATIONS, WARRANTIES AND COVENANTS

9.1 Representations and Warranties by Each Party. Each Party represents and warrants to the other as of the Effective Date that:

(a) it is a corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of formation;

(b) it has full corporate power and authority to execute, deliver, and perform this Agreement, and has taken all corporate action required by law and its organizational documents to authorize the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement;

(c) this Agreement constitutes a valid and binding agreement enforceable against it in accordance with its terms;

(d) all consents, approvals and authorizations from all governmental authorities or other Third Parties required to be obtained by such Party in connection with the execution, delivery and performance of this Agreement have been obtained; and

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(e) the execution and delivery of this Agreement and all other instruments and documents required to be executed pursuant to this Agreement, and the consummation of the transactions contemplated hereby do not (i) conflict with or result in a breach of any provision of its organizational documents, (ii) result in a breach of any agreement to which it is a party; or (iii) violate any law.

9.2 Representations and Warranties by Marina. Marina represents and warrants to Novartis as of the Effective Date that:

(a) Exhibit A sets forth a complete and accurate list of all Marina Patents;

(b) Marina has obtained from all individuals who participated in any respect in the invention or authorship of any Marina Technology effective assignments of all ownership rights of such individuals in such Marina Technology, either pursuant to written agreement or by operation of law;

(c) All of Marina’s employees, officers, and consultants have executed agreements or have existing obligations under applicable laws requiring assignment to Marina of all inventions made during the course of and as the result of their association with Marina and obligating the individual to maintain as confidential Marina’s Confidential Information as well as confidential information of other parties (including Novartis and its Affiliates, although they may not be specifically referenced by name) which such individual may receive, to the extent required to support Marina’s obligations under this Agreement;

(d) Marina has all necessary legal rights and authority to grant the licenses and rights granted under this Agreement and has not assigned, transferred, conveyed or licensed its right, title and interest in the Licensed Technology in any manner inconsistent with such license grant or the other terms of this Agreement.;

(e) Marina has all necessary legal rights and authority to use and disclose and to enable Novartis to use and disclose (in each case under appropriate conditions of confidentiality) the Marina Know-How;

(f) To Marina’s knowledge, the issued patents in the Marina Patents are valid and enforceable without any claims, challenges, oppositions, interference or other proceedings pending or, to Marina’s knowledge, threatened and Marina has filed and prosecuted patent applications within the Marina Patents in good faith and, to Marina’s knowledge, complied with all duties of disclosure with respect thereto;

(g) To Marina’s knowledge, Marina has not committed any act, or omitted to commit any act, that may cause the Marina Patents to expire prematurely or be declared invalid or unenforceable;

(h) All application, registration, maintenance and renewal fees in respect of the Marina Patents as of the Effective Date have been paid and all necessary documents and certificates have been filed with the relevant agencies for the purpose of maintaining the Marina Patents;

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(i) To Marina’s knowledge, the practice of the Marina Technology does not infringe Patents or misappropriate Know-How of any Third Party, nor has Marina received any written notice alleging such infringement or misappropriation;

(j) Marina has not initiated or been involved in any proceedings or claims in which it alleges that any Third Party is or was infringing the Marina Patents or misappropriating any Marina Know-How, nor have any such proceedings been threatened by Marina, nor does Marina know of any valid basis for any such proceedings;

(k) Marina has taken all reasonable precautions to preserve the confidentiality of the Marina Know-How;

(l) Marina has not entered into a government funding relationship that would result in rights to any Products residing in the US Government, National Institutes of Health, National Institute for Drug Abuse or other agency, and the licenses granted hereunder are not subject to overriding obligations to the US Government as set forth in Public Law 96-517 (35 U.S.C. 200-204), as amended, or any similar obligations under the laws of any other country;

(m) Subject to Section 9.2, Marina has not granted any Third Party rights that would otherwise interfere or be inconsistent with Novartis’s rights hereunder, and there are no agreements or arrangements to which Marina or any of its Affiliates is a party relating to the Products, Marina Patents, Marina Know-How or that would limit the rights granted to Novartis under this Agreement or that restrict or will result in a restriction on Novartis’ ability to develop, manufacture, register, use or commercialize the Products in the Territory; and

(n) Marina has not failed to disclose to Novartis any fact or circumstance known to Marina and relating to any of the Marina Technology that would be reasonably material to Novartis in determining to enter into this Agreement or the transactions contemplated herein.

9.3 Novartis acknowledges that MARINA has granted rights to practice certain Marina Patents (a) to Mirna Therapeutics, Inc. (“Mirna”) solely in connection with the development and commercialization of a limited number of specified proprietary compounds belonging to Mirna and (b) to ProNai Therapeutics, Inc. (“ProNai”) in connection with DNAi human therapeutic use. DNAi does not include RNAi, antisense and microRNA oligonucleotides that base pair with mRNAs, microRNAs or pre-mRNAs to affect expression of a gene, directly or indirectly). The Parties agree that the foregoing grants do not interfere with, are not otherwise inconsistent with, and do not limit the rights granted to Novartis in Section 2.1.

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9.4 Covenants of Marina. Marina covenants and agrees that:

(a) it will not grant any interest in the Marina Technology which is inconsistent with the terms and conditions of this Agreement;

(b) if, at any time after execution of this Agreement, it becomes aware that it or any employee, agent or subcontractor of Marina who participated, or is participating, in the performance of any activities hereunder is on, or is being added to the FDA Debarment List or any of the three (3) FDA Clinical Investigator Restriction Lists referenced in Section 14.1(f), it will provide written notice of this to Novartis within two (2) Business Days of its becoming aware of this fact;

(c) it shall maintain insurance with respect to its indemnification obligations under this Agreement in such amounts as are commercially reasonable in the industry for companies conducting similar business and shall require any of its Affiliates undertaking activities under this Agreement to do the same.

9.5 No Other Warranties. EXCEPT AS EXPRESSLY STATED IN THIS SECTION 9, (A) NO REPRESENTATION, CONDITION OR WARRANTY WHATSOEVER IS MADE OR GIVEN BY OR ON BEHALF OF ASTRNovartisENECA OR MARINA; AND (B) ALL OTHER CONDITIONS AND WARRANTIES WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE ARE HEREBY EXPRESSLY EXCLUDED, INCLUDING ANY CONDITIONS AND WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.

10. INDEMNIFICATION; LIABILITY

10.1 Indemnification by Marina. Marina shall defend, indemnify, and hold Novartis, its Affiliates, and their respective officers, directors, employees and agents, and all successors and assigns of any of the foregoing (“Novartis Indemnitees”) harmless from and against any Claims against them to the extent arising or resulting from:

(a) the gross negligence or willful misconduct of Marina or any of its Affiliates; or

(b) the breach of any of the covenants, representations or warranties made by Marina to Novartis under this Agreement;

provided, however, that Marina shall not be obliged to so indemnify, defend and hold harmless the Novartis Indemnitees for any Claims to the extent that Novartis has an obligation to indemnify Marina Indemnitees pursuant to Section 10.2 or to the extent that such Claims arise from the breach, gross negligence or willful misconduct of Novartis or a Novartis Indemnitee.

10.2 Indemnification by Novartis. Novartis shall defend, indemnify, and hold Marina, its Affiliates, and their respective officers, directors, employees and agents, and all successors and assigns of any of the foregoing (“Marina Indemnitees”) harmless from and against any Claims against them to the extent arising or resulting from:

(a) the gross negligence or willful misconduct of Novartis or any of its Affiliates or sublicensees;

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(b) the breach of any of the covenants, representations or warranties made by Novartisto Marina under this Agreement; or

(c) the exercise or practice by Novartis, its Affiliates or Sublicensees of the license granted to Novartis under Sections 2.1 (excluding any such Claim that alleges that the exercise or practice of the MARINA Technology infringes a patent or misappropriates other intellectual property of a Third Party); or

(d) the development, manufacture or commercialization of any Product by or for Novartis, its Affiliates or Sublicensees;..

provided, however, that Novartis shall not be obliged to so indemnify, defend and hold harmless the Marina Indemnitees for any Claims to the extent that Marina has an obligation to indemnify Novartis Indemnitees pursuant to Section 10.1 or to the extent that such Claims arise from the breach, gross negligence or willful misconduct of Marina or the Marina Indemnitee.

10.3 Indemnification Procedure.

(a) For the avoidance of doubt, all indemnification claims in respect of a Novartis Indemnitee or Marina Indemnitee shall be made solely by Novartis or Marina, respectively, on behalf of the Novartis Indemnitee or Marina Indemnitee, as the case may be.

(b) A Party seeking indemnification hereunder (“Indemnified Party”) shall notify the other Party (“Indemnifying Party”) in writing reasonably promptly after the assertion against the Indemnified Party of any Claim or fact in respect of which the Indemnified Party intends to base a claim for indemnification hereunder (“Indemnification Claim Notice”), but the failure or delay to so notify the Indemnifying Party shall not relieve the Indemnifying Party of any obligation or liability that it may have to the Indemnified Party, except to the extent that the Indemnifying Party demonstrates that its ability to defend or resolve such Claim is adversely affected thereby. The Indemnification Claim Notice shall contain a description of the claim and the nature and amount of the Claim (to the extent that the nature and amount of such Claim is known at such time). Upon the request of the Indemnifying Party, the Indemnified Party shall furnish promptly to the Indemnifying Party copies of all correspondence, communications and official documents (including court documents) received or sent in respect of such Claim.

(c) Subject to the provisions of sub-Section (d) below, the Indemnifying Party shall, within thirty (30) days after receipt of the Indemnification Claim Notice, advise the Indemnified Party whether it is assuming the defense and handling of such Claim, at the Indemnifying Party’s sole expense. The assumption of the defense of a Claim by the Indemnifying Party shall not be construed as acknowledgement that the Indemnifying Party is liable to indemnify any indemnitee in respect of the Claim, nor shall it constitute a waiver by the Indemnifying Party of any defenses it may assert against any Indemnified Party’s claim for indemnification. In the event that it is ultimately decided that the Indemnifying Party is not obligated to indemnify or hold an indemnitee harmless from and against the Claim, the Indemnified Party shall reimburse the Indemnifying Party for any and all reasonable costs and expenses (including attorneys’ fees and costs of suit) incurred by the Indemnifying Party in its defense of the Claim.

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(d) Upon assumption of the defense of a Claim by the Indemnifying Party: (i) the Indemnifying Party shall have the right to and shall assume sole control and responsibility for dealing with the Claim; (ii) the Indemnifying Party may, at its own cost, appoint as counsel in connection with conducting the defense and handling of such Claim any law firm or counsel reasonably selected by the Indemnifying Party and reasonably satisfactory to the Indemnified Party (such consent not to be unreasonably withheld or delayed); (iii) the Indemnifying Party shall keep the Indemnified Party informed of the status of such Claim; and (iv) the Indemnifying Party shall have the right to settle the Claim on any terms the Indemnifying Party chooses; provided, however, that it shall not, without the prior written consent of the Indemnified Party, agree to a settlement of any Claim which could lead to liability for or create any financial or other obligation or restriction on the Indemnified Party for which the Indemnified Party is not entitled to indemnification hereunder or which admits any wrongdoing or responsibility for the Claim on behalf of the Indemnified Party. The Indemnified Party shall cooperate with the Indemnifying Party at the Indemnifying Party’s expense. In particular, the Indemnified Party shall furnish such records, information and testimony, provide witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith; subject to the right of the Indemnified Party to obtain confidentiality protection in connection therewith consistent with the confidentiality provisions of this Agreement. Such cooperation shall include access during normal business hours by the Indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Claim, and making the Indemnified Party, the Novartis Indemnitees or Marina Indemnitees, as the case may be, and its and their employees and agents available on a mutually convenient basis to provide additional information and explanation of any records or information provided. The Indemnified Party shall be entitled to participate in, but not control, the defense of such Claim with its own counsel and at its own expense; provided, however, that if the litigants in any such action include both the Indemnified Party and the Indemnifying Party and legal counsel for the Indemnified Party shall have reasonably concluded in a written legal opinion delivered to the Indemnifying Party that, by reason of certain bona fide defenses available to the Indemnified Party which are different from or additional to those available to the Indemnifying Party, the interests of the Indemnified Party materially conflict with the interests of the Indemnifying Party such that it would be unethical under applicable rules relating to attorney conflicts of interest for the Indemnifying Party and such Indemnified Party to be represented by the same counsel with respect to such defense, the Indemnified Party shall have the right to select one separate counsel and to assert such legal defenses, with the reasonable expenses and fees of such separate counsel to be reimbursed by the Indemnifying Party as and when incurred.

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(e) If the Indemnifying Party fails to assume or conduct the defense and handling of any Claim in good faith as provided in Section 10.3(c) and (d) above, the Indemnified Party may, at the Indemnifying Party’s expense, select counsel reasonably acceptable to the Indemnifying Party (such consent not to be unreasonably withheld or delayed) in connection with conducting the defense and handling of such Claim and defend or handle such Claim in such manner as it may deem appropriate; provided, that the foregoing shall not be construed as a limitation on the Indemnified Party’s right to claim that the Indemnifying Party has breached its obligations pursuant to this Section 10. In such event, the Indemnified Party shall keep the Indemnifying Party timely apprised of the status of such Claim and the Indemnified Party shall have the right to settle the Claim on any terms the Indemnified Party chooses; provided, however, that the Indemnified Party shall not, without the prior written consent of the Indemnifying Party, agree to a settlement of any Claim which could lead to liability or create any financial or other obligation on the part of the Indemnifying Party, other than its liability for indemnification of the Indemnified Party as provided in this Article 10, or which admits any wrongdoing or responsibility for the claim on behalf of the Indemnifying Party.

10.4 Mitigation of Loss. Each Indemnified Party will take and will procure that its Affiliates take all such reasonable steps and action as are necessary or as the Indemnifying Party may reasonably require in order to mitigate any Claims (or potential losses or damages) under this Section 10. Nothing in this Agreement shall or shall be deemed to relieve any Party of any common law or other duty to mitigate any losses incurred by it.

10.5 Special, Indirect and Other Losses. NEITHER PARTY NOR ANY OF ITS AFFILIATES SHALL BE LIABLE IN CONTRACT, TORT, NEGLIGENCE BREACH OF STATUTORY DUTY OR OTHERWISE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR FOR ANY ECONOMIC LOSS OR LOSS OF PROFITS SUFFERED BY THE OTHER PARTY, EXCEPT TO THE EXTENT ANY SUCH DAMAGES ARE REQUIRED TO BE PAID TO A THIRD PARTY AS PART OF A CLAIM FOR WHICH A PARTY PROVIDES INDEMNIFICATION UNDER THIS SECTION 10.

10.6 No Exclusion. Neither Party excludes any liability for death or personal bodily injury caused by its or its Affiliate’s (or, in the case of Novartis, its sublicensee’s) negligence or that of their respective employees, agents or sub-contractors.

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11. PUBLICATIONS AND PUBLICITY

11.1 Publications

(f) For the avoidance of doubt, Novartis or any of its Affiliates may, without any required consents from Marina but subject to its confidentiality obligations under Article 6 of this Agreement with respect to the Confidential Information of Marina, (i) issue press releases and other public statements as it deems appropriate in connection with the development and commercialization of the Products under this Agreement; and (ii) publish or have published information about clinical trials related to the Products, including the results of such clinical trials

11.2 Publicity

(a) Neither Party shall use the name, symbol, trademark, trade name or logo of the other Party or its Affiliates in any press release, publication or other form of public disclosure without the prior written consent of the other Party in each instance (such consent not to be unreasonably withheld or delayed), except for those disclosures for which consent has already been obtained. Notwithstanding the foregoing, Novartis shall be entitled, upon reasonable prior notice to Marina, to use the name of Marina to identify its licensor to the extent necessary or useful in connection with the development or commercialization of the Products, including in connection with sublicensing and subcontracting transactions.

(b) Subject to paragraph (c) of this Section 11.2, each Party agrees not to issue any press release or other public statement, whether oral or written, disclosing the existence of this Agreement, the terms hereof or any information relating to this Agreement without the prior written consent of the other Party, which approval shall not be unreasonably withheld, conditioned or delayed; provided, however, that Novartis may issue press releases and other public statements as it deems appropriate in connection with the development and commercialization of Products under this Agreement and provided further, that the Parties approve the text of the press release annexed as Exhibit B to this Agreement.

(c) Notwithstanding the foregoing, each Party may, without the prior approval of the other Party, make any disclosures required of it to comply with any duty of disclosure it may have pursuant to law or governmental regulation or pursuant to the rules of any recognized stock exchange. , The Parties shall nevertheless use good faith efforts to coordinate with each other with respect to the timing, form and content of such required disclosure. If so requested by the other Party, the Party subject to such obligation shall use commercially reasonable efforts to obtain an order, agreement or other governmental or Third Party action protecting to the maximum extent possible the confidentiality of such provisions of this Agreement as reasonably requested by the other Party. Unless the Parties otherwise agree, such disclosure shall be limited to the minimum required as determined by the disclosing Party in consultation with its legal counsel. Without limiting the foregoing, each Party shall consult with the other Party on the provisions of this Agreement, together with exhibits or other attachments attached hereto, to be redacted in any filings made by Marina or Novartis with the Securities and Exchange Commission (or other regulatory body) or as otherwise required by law. Marina also may file or submit such redacted version of this Agreement with NASDAQ in connection with maintaining its NASDAQ listing.

17

12. GENERAL PROVISIONS

12.1 Assignment. Neither Party may assign its rights and obligations under this Agreement without the other Party’s prior written consent, except that (a) a Party may assign its rights and obligations under this Agreement or any part hereof to one or more of its Affiliates without the consent of the other Party; and (b) either Party may assign this Agreement in its entirety to a successor to all or substantially all of its business or assets to which this Agreement relates. The assigning Party shall provide the other Party with prompt written notice of any such assignment pursuant to clause (b) above. Any permitted assignee shall assume all obligations of its assignor under this Agreement (or related to the assigned portion in case of a partial assignment to an Affiliate), and no permitted assignment shall relieve the assignor of liability hereunder. Any attempted assignment in contravention of the foregoing shall be void. Subject to the terms of this Agreement, this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

12.2 Extension to Affiliates; Subcontractors. Novartis shall have the right to extend the rights, immunities and obligations granted in this Agreement to one or more of its Affiliates. All applicable terms and provisions of this Agreement shall apply to any such Affiliate to which this Agreement has been extended to the same extent as such terms and provisions apply to Novartis. Novartis shall remain primarily liable for any acts or omissions of its Affiliates. In addition, Novartis may subcontract to Third Parties the performance of any tasks and obligations relating to its exercise of the license and other rights under this Agreement as Novartis deems appropriate, subject to its confidentiality obligations pursuant to Article 6 of this Agreement.

12.3 Severability. Should one or more of the provisions of this Agreement become void or unenforceable as a matter of law, then this Agreement shall be construed as if such provision were not contained herein and the remainder of this Agreement shall be in full force and effect, and the Parties will use their commercially reasonable efforts to substitute for the invalid or unenforceable provision a valid and enforceable provision which conforms as nearly as possible with the original intent of the Parties.

12.4 Governing Law and Jurisdiction. This Agreement shall be governed by and construed under the laws of New York, without giving effect to the conflicts of laws provision thereof. Any disputes between the Parties relating to this Agreement shall be subject to the exclusive jurisdiction and venue of the federal courts located in the Southern District of New York (without restricting any right of appeal), and the Parties hereby waive any objection which they may have now or hereafter to the laying of venue of any proceedings in such courts and to any claim that such proceedings have been brought in an inconvenient forum, and further agree that a judgment or order in any such proceedings shall be binding upon each of them and may be enforced in the courts of any other jurisdiction.

18

12.5 Force Majeure. Neither Party shall be responsible to the other for any failure or delay in performing any of its obligations under this Agreement or for other nonperformance hereunder if such delay or nonperformance is caused by strike, stoppage of labor, lockout or other labor trouble, fire, flood, accident, war, act of terrorism, act of God or of the government of any country or of any local government, or by other cause unavoidable or beyond the reasonable control of any Party hereto (a “Force Majeure Event”).

12.6 Waivers and Amendments. The failure of any Party to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement shall not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term or condition by the other Party. No waiver shall be effective unless it has been given in writing and signed by the Party giving such waiver. No provision of this Agreement may be amended or modified other than by a written document signed by authorized representatives of each Party.

12.7 Relationship of the Parties. Nothing contained in this Agreement shall be deemed to constitute a partnership, joint venture, or legal entity of any type between Marina and Novartis, or to constitute one as the agent of the other. Moreover, each Party agrees not to construe this Agreement, or any of the transactions contemplated hereby, as a partnership for any tax purposes. Each Party shall act solely as an independent contractor, and nothing in this Agreement shall be construed to give any Party the power or authority to act for, bind, or commit the other.

12.8 Notices. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when: (a) delivered by hand (with written confirmation of receipt); (b) sent by fax (with written confirmation of receipt), provided, that a copy is immediately sent by an internationally recognized overnight delivery service (receipt requested); or (c) when received by the addressee, if sent by an internationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and fax numbers set forth below (or to such other addresses and fax numbers as a Party may designate by notice):

If to Marina:

Marina, Inc.
3830 Monte Villa Parkway
Bothell, WA 98021

USA

Attn.: Mr. J. Michael French, President and CEO
Fax: (425) 908-3101

Email: JMFrench@marinabio.com

19

If to Novartis:

Novartis Institutes for BioMedical Research, Inc.

250 Massachusetts Avenue

Cambridge, MA 02139

USA

Attn.: Dr. Charles Wilson

Vice President, Global Head of Strategic Alliances

Phone: +1 617-871-3320

Email : charles.wilson@novartis.com

12.9 Further Assurances. Novartis and Marina hereby covenant and agree without the necessity of any further consideration, to execute, acknowledge and deliver any and all such other documents and take any such other action as may be reasonably necessary to carry out the intent and purposes of this Agreement.

12.10 Compliance with Law. Each Party shall perform its obligations under this Agreement in accordance with all applicable laws. No Party shall, or shall be required to, undertake any activity under or in connection with this Agreement which violates, or which it believes, in good faith, may violate, any applicable law.

12.11 No Third Party Beneficiary Rights. The provisions of this Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and they shall not be construed as conferring any rights to any Third Party (including any third party beneficiary rights).

12.12 English Language. This Agreement is written and executed in the English language. Any translation into any other language shall not be an official version of this Agreement and in the event of any conflict in interpretation between the English version and such translation, the English version shall prevail.

12.13 Expenses. Except as otherwise expressly provided in this Agreement, each Party shall pay the fees and expenses of its respective lawyers and other experts and all other expenses and costs incurred by such Party incidental to the negotiation, preparation, execution and delivery of this Agreement.

12.14 Entire Agreement. This Agreement, together with its Exhibits, sets forth the entire agreement and understanding of the Parties as to the subject matter hereof and supersedes all proposals, oral or written, and all other prior communications between the Parties, with respect to such subject matter. In the event of any conflict between a substantive provision of this Agreement and any Exhibit hereto, the substantive provisions of this Agreement shall prevail.

12.15 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

20

12.16 Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to in this Agreement or otherwise available under law.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

21

IN WITNESS WHEREOF, the Parties intending to be bound have caused this Agreement to be executed by their duly authorized representatives.

NOVARTIS INSTITUTES FOR BIOMEDICAL RESEARCH, INC.	MARINA BIOTECH, INC.
By: /s/ Christian Klee	By: /s/ J. Michael French
Name: Christian Klee	Name: J. Michael French
Title: Vice President & Chief Financial Officer	Title: President & CEO

EX-31.1

Exhibit 31.1

CHIEF EXECUTIVE OFFICER CERTIFICATION

REQUIRED BY RULES 13A-14 AND 15D-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS AMENDED

I, J. Michael French, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Marina Biotech, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 5, 2012

By:	/s/ J. Michael French
	Name:	J. Michael Frensch
	Title:	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CHIEF FINANCIAL OFFICER CERTIFICATION

REQUIRED BY RULES 13A-14 AND 15D-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS AMENDED

I, Philip C. Ranker, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Marina Biotech, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 5, 2012

By:	/s/ Philip C. Ranker
	Name:	Philip C. Ranker
	Title:	Interim Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, J. Michael French, President, Chief Executive Officer and Director of Marina Biotech, Inc. (“Marina Biotech”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Marina Biotech on Form 10-Q for the fiscal quarter ended September 30, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Marina Biotech.

Date: December 5, 2012

By:	/s/ J. Michael French
	Name:	J. Michael French
	Title:	President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Marina Biotech and will be retained by Marina Biotech and furnished to the Securities Exchange Commission or its staff upon request.

This certification accompanies each periodic report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by Marina Biotech for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Philip C. Ranker, Chief Financial Officer of Marina Biotech, Inc. (“Marina Biotech”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Marina Biotech on Form 10-Q for the fiscal quarter ended September 30, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Marina Biotech.

Date: December 5, 2012

By:	/s/ Philip C. Ranker
	Name:	Philip C. Ranker
	Title:	Interim Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Marina Biotech and will be retained by Marina Biotech and furnished to the Securities Exchange Commission or its staff upon request.

This certification accompanies each periodic report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by Marina Biotech for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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Commitments and Contingencies (Details) (USD $)	Oct. 05, 2012	Sep. 30, 2012
Commitments and Contingencies [Abstract]
The maximum liability under standby letter of credit		$ 1,200,000
Amount outstanding on standby letters of credit		700,000
Amount paid to landlord for termination of lease agreement	155,000
Equity financing from related transactions	4,000,000
Market capitalization	$ 18,000,000

XML

Stockholders' Equity (Subscription Investment Units) (Details) (USD $)	1 Months Ended
	Nov. 30, 2010	Mar. 05, 2012
Stockholders' Equity [Abstract]
Total shares available for purchase, subscription investment units	242,355
Per share price of shares available for purchase, subscription investment units	$ 22.1
Shares that expired that were available for purchase, subscription investment units		25,000

XML

Business, Reduction of Operations, Going Concern, Recent Financing Activities and Basis of Preparation and Summary of Significant Accounting Policies (Schedule of Anti-Dilutive Securities) (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	11,609,459	5,592,662	11,609,459	5,592,662
Stock options outstanding [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	358,373	611,657	358,373	611,657
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	11,251,086	4,956,005	11,251,086	4,956,005
Subscription investment units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	0	25,000	0	25,000

XML

Stock Incentive Plans (Schedule of Weighted Average Assumptions) (Details)	3 Months Ended	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2011
Stock Incentive Plans [Abstract]
Expected dividend yield	0.00%	0.00%
Risk free interest rate	1.20%	1.20%
Expected stock volatility	118.00%	118.00%
Expected option life	6 years	6 years

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Notes Payable

9 Months Ended

Sep. 30, 2012

Notes Payable [Abstract]

Notes Payable

Note 3 - Notes Payable

In February 2012, we received net proceeds of approximately $1.5 million by issuance of secured promissory notes and warrants to purchase up to 3,690,944 shares of our common stock. The warrants had an initial exercise price of $0.508 per share, which was subject to adjustment (including in connection with subsequent financings), and are exercisable for a period of five years beginning six months and one day following the issuance of the warrants. Through a series of amendments to the purchase agreement and the notes issued pursuant thereto, we have extended the maturity date of the notes to December 31, 2012, have reduced the exercise price of all of the warrants that we issued to the noteholders to $0.28 per share and have removed the obligation to pay to the noteholders the sums received by us from the sale of our surplus equipment. In connection with such amendments, we have issued to the secured parties additional warrants to purchase up to 3,199,848 shares of our common stock as follows: (i) in April 2012 we issued 489,033 warrants at an initial exercise price of $0.56 per share; (ii) in May 2012 we issued 425,100 warrants at an initial exercise price of $0.64 per share; (iii) in August 2012 we issued 1,250,000 warrants at an initial exercise price of $0.28 per share and adjusted the exercise price of all of the outstanding warrants issued to the noteholders to $0.28; and (iv) in October 2012 we issued 1,035,715 warrants at an initial exercise price of $0.28 per share.

The notes are secured by the assets of our company and our wholly-owned subsidiaries, Cequent Pharmaceuticals, Inc. and MDRNA Research, Inc. The security agreement that we entered into in connection with this transaction provides a security interest in, but not limited to, all of the property, equipment and fixtures, accounts, negotiable collateral, cash, and cash equivalents of our company and our wholly-owned subsidiaries, Cequent and MDRNA Research, subject to certain exceptions. The security interest created in the collateral is first priority, subject to the permitted encumbrances provided in the security agreement, and is perfected to the extent such security interest can be perfected by the filing of a financing statement and filings with the U.S. Patent and Trademark Office. The security interest created in the collateral will be removed at such time as the notes are paid in full.

As a result of amendments to the purchase agreement and the notes issued pursuant thereto, we and the holders of the notes agreed that if we, at any time prior to December 31, 2012, effect any merger or consolidation of our company whereby the holders of the issued and outstanding shares of our common stock immediately prior to the consummation of such transaction hold less than fifty percent (50%) of the issued and outstanding shares of the voting securities of the surviving corporation immediately following the consummation of such transaction, we will have fully satisfied the obligation to repay the entire unpaid principal balance under the notes and all accrued and unpaid interest thereon through the issuance to the noteholders of an aggregate number of shares of common stock calculated by converting the then total outstanding principal and interest under the notes at a value of $0.28 per share of common stock.

In connection with the issuance of the secured promissory notes and warrants, we recorded a discount on notes payable representing the fair value of the warrants issued to the secured parties, as determined utilizing the Black-Scholes-Merton valuation model. The discount on notes payable was reported net of related notes payable and amortized as interest expense over the original term of the notes. The estimated fair value of the warrants was recorded as an increase in the fair value liability for price adjustable warrants. In connection with amendments to the purchase agreement and notes payable, we issued additional warrants to the secured parties and recorded the fair value of the warrants issued as additional discount on notes payable, as determined utilizing the Black-Scholes-Merton valuation model. The additional discount on notes payable was reported net of related notes payable and amortized as interest expense over the amended term of the notes. The estimated fair value of the warrants was recorded as an increase in the fair value liability for price adjustable warrants.

The following table presents the activity in notes payable and accrued interest and related discount for the nine months ended September 30, 2012 (in thousands):

	Notes Payable and accrued interest			Discount			Notes Payable and accrued interest, net
Balance at January 1, 2012	$	-		$	-		$	-
Issuances of notes payable and warrants		1,500			(1,651	)		(151	)
Issuances of warrants upon amendments		-			(910	)		(910	)
Accrued interest		138						138
Payments		(200	)		-			(200	)
Amortization of discount to interest expense		-			2,324			2,324
Balance at September 30, 2012	$	1,438		$	(237	)	$	1,201

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Stockholders' Equity (Preferred Stock) (Details) (USD $) In Millions, except Share data, unless otherwise specified	Oct. 31, 2012	Sep. 30, 2012	Aug. 31, 2012	May 31, 2012	Apr. 30, 2012	Mar. 31, 2012	Feb. 10, 2012	Dec. 31, 2011	Dec. 29, 2011 Series B Preferred Stock/Socius Purchase Agreement [Member]	Sep. 30, 2012 Series A Junior Participating Preferred Stock [Member]	Sep. 30, 2012 Series B Preferred Stock [Member]	Dec. 22, 2011 Series B Preferred Stock [Member] Series B Preferred Stock/Socius Purchase Agreement [Member]
Class of Stock [Line Items]
Preferred stock, shares authorized		100,000						100,000		90,000	1,000
Preferred stock, shares outstanding										0	0
Preferred stock, value of shares available under purchase agreement												$ 5.0
Number of shares issuable through warrant			3,199,848			800,001	3,690,944		1,305,970
Exercise price of warrants	0.28	0.28	0.28	0.64	0.56	0.75	0.508		1.34
Preferred stock, par or stated value per share		$ 0.01						$ 0.01		$ 0.01
Number of preferred shares entitled to be purchased per stock purchase right										0.001
Purchase price per share for Series A preferred stock purchased under share purchase rights agreement.		$ 50.0

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Notes Payable (Schedule of Notes Payable) (Details) (USD $) In Thousands, unless otherwise specified	1 Months Ended	9 Months Ended
	Feb. 29, 2012	Sep. 30, 2012	Sep. 30, 2011
Notes Payable and accrued interest
Beginning balance
Issuances of notes payable and warrants	1,500	1,500
Issuances of warrants upon amendments
Accrued interest		138
Payments		(200)
Amortization of discount to interest expense
Ending balance		1,438
Discount
Beginning balance
Issuances of notes payable and warrants		(1,651)
Issuances of warrants upon amendments		(910)
Payments
Amortization of discount to interest expense		2,324
Ending balance		(237)
Notes Payable and accrued interest, net
Beginning balance
Issuances of notes payable and warrants		(151)
Issuances of warrants upon amendments		(910)
Accrued interest		138
Payments on notes payable		200
Amortization of discount to interest expense		2,324
Ending balance		$ 1,201

XML

Stockholders' Equity (Common Stock) (Details) (USD $)	1 Months Ended	9 Months Ended				1 Months Ended		0 Months Ended	1 Months Ended										1 Months Ended		4 Months Ended
	Mar. 31, 2012	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Jul. 13, 2011	Feb. 28, 2011 Public Offering One [Member]	May 31, 2011 Public Offering Two [Member]	Jun. 30, 2011 Public Offering Two [Member] Series B Warrants [Member]	Jul. 31, 2011 Public Offering Two [Member] Series B Warrants [Member]	Jun. 30, 2011 Public Offering Two [Member] Series B Warrants [Member]	May 31, 2011 Public Offering Two [Member] Series B Warrants [Member]	May 31, 2012 Public Offering Two [Member] Series A Warrants [Member]	Jul. 31, 2011 Public Offering Two [Member] Series A Warrants [Member]	Jun. 30, 2011 Public Offering Two [Member] Series A Warrants [Member]	May 31, 2011 Public Offering Two [Member] Series A Warrants [Member]	Mar. 31, 2012 Public Offering Three [Member]	Sep. 30, 2011 Lease Termination - 3450 Monte Villa Parkway, Bothell, Washington Property [Member]	Sep. 30, 2012 Lease Termination - 3450 Monte Villa Parkway, Bothell, Washington Property [Member]	Oct. 31, 2012 Lease Termination - Ditty Properties Limited Partnership [Member]	Oct. 31, 2011 Stock Purchase Agreement - Lincoln Park Capital [Member]	Nov. 30, 2012 Stock Issued To Multiple Vendors [Member]	Nov. 30, 2012 Stock Issued To Vendor [Member]
Stockholders Equity Note [Line Items]
Common stock, shares authorized		180,000,000		180,000,000	90,000,000
Proceeds from sales of common shares and warrants, net	$ 1,111,000	$ 1,111,000	$ 10,726,000			$ 4,500,000	$ 6,300,000		$ 2,000,000	$ 2,200,000						$ 1,100,000
Value of shelf registration statement used for public offering						50,000,000										50,000,000
Number of units issued						637,500	2,231,850									1,600,002
Number of common shares issued per unit						1										1
Number of warrants issued per unit						0.1746										0.5
Sales price per share of common stock sold through offering						$ 8.0										$ 0.75
Common shares issued during period	1,600,002					637,500										1,600,002
Number of common shares issued during period through exercise of warrants						111,308						187,006				800,001
Number of warrants issued		6,809,705					2,231,850				2,231,850	440,000	1,517,200	712,150	2,231,850
Number of units that can be purchased per one Series B warrant							1
Purchase price per unit purchased through Series B warrants							$ 3.9
Number of warrants exercised							2,229,350	600,500	1,517,200	712,150
Additional net proceeds recorded from sale of equity							3,100,000
Share-based compensation issued, value		2,000															780,000
Share-based compensation issued, shares																	1,500,000
Payment owed to landlord for each month registration statement is in default																	10,000
Liability accrued for amounts owed relating to registration default																		20,000
Total contingent shares issuable to landlord as additional consideration for termination of lease agreement																			1,500,000
Shares issued during period for settlement of outstanding amounts due to vendors																					200,000	87,254
Value of shares issued during period for settlement of outstanding amounts due to vendors																					60,000
Value of amounts owed to vendor, settled with issuance of stock																						20,000
Value of stock agreed to be purchased under agreement																				$ 15,000,000
The minimum floor price of stock set forth in purchase agreement																				$ 1.0
Maximum number of shares issuable under purchase agreement unless the average purchase price of all shares of common stock issued equaled or exceeded $2.25 per share																				1,777,913
Shares issued as commitment fee as consideration for entering purchase agreement																				145,279
Shares required to be issued to purchasing agent when and if all shares are purchased under agreement																				290,557
Shares issued to purchasing agent as expense reimbursement																				5,000
Total shares issued under purchase agreement, prior to termination																				1,544,901

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Stockholders' Equity (Warrants) (Details) (USD $)	1 Months Ended		9 Months Ended							1 Months Ended								0 Months Ended	1 Months Ended					1 Months Ended
	Mar. 31, 2012	Feb. 29, 2012	Sep. 30, 2012	Sep. 30, 2011	Oct. 31, 2012	Aug. 31, 2012	May 31, 2012	Apr. 30, 2012	Feb. 10, 2012	Feb. 28, 2011 Public Offering One [Member]	May 31, 2011 Public Offering Two [Member]	May 31, 2012 Public Offering Two [Member] Series A Warrants [Member]	Jul. 31, 2011 Public Offering Two [Member] Series A Warrants [Member]	Jun. 30, 2011 Public Offering Two [Member] Series A Warrants [Member]	May 31, 2011 Public Offering Two [Member] Series A Warrants [Member]	Aug. 31, 2012 Public Offering Two [Member] Series A Warrants [Member]	Feb. 10, 2012 Public Offering Two [Member] Series A Warrants [Member]	Jun. 30, 2011 Public Offering Two [Member] Series B Warrants [Member]	Jul. 31, 2011 Public Offering Two [Member] Series B Warrants [Member]	Jun. 30, 2011 Public Offering Two [Member] Series B Warrants [Member]	May 31, 2011 Public Offering Two [Member] Series B Warrants [Member]	Jul. 12, 2011 Public Offering Two [Member] Series B Warrants [Member]	Jul. 05, 2011 Public Offering Two [Member] Series B Warrants [Member]	Oct. 31, 2012 Amended Note And Warrant Purchase Agreement [Member]	Aug. 31, 2012 Amended Note And Warrant Purchase Agreement [Member]	May 31, 2012 Amended Note And Warrant Purchase Agreement [Member]	Apr. 30, 2012 Amended Note And Warrant Purchase Agreement [Member]	Sep. 30, 2012 Amended Note And Warrant Purchase Agreement [Member]
Stockholders Equity Note [Line Items]
Number of common shares issued during period through exercise of warrants										111,308		187,006
Sales price per share of common stock sold through offering										$ 8.0
Number of warrants issued			6,809,705								2,231,850	440,000	1,517,200	712,150	2,231,850						2,231,850			1,035,715	1,250,000	425,100	489,033
Exercise price of warrants	0.75		0.28		0.28	0.28	0.64	0.56	0.508						3.9	0.28	0.508						1.28	0.28	0.28	0.64	0.56
Number of warrants exercised											2,229,350							600,500	1,517,200	712,150
Proceeds from sales of common shares and warrants, net	$ 1,111,000		$ 1,111,000	$ 10,726,000						$ 4,500,000	$ 6,300,000								$ 2,000,000	$ 2,200,000
Amount of refund remitted to warrant holders																			1,100,000
Adjustment to equity due to change in exercise price of warrants																			400,000
Number of warrants expired																						2,500
Proceeds from issuance of notes payable and warrants		$ 1,500,000	$ 1,500,000
Number of shares issuable through warrant	800,001					3,199,848			3,690,944																			3,199,848

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Concentration of Credit Risk and Significant Customers

9 Months Ended

Sep. 30, 2012

Concentration of Credit Risk and Significant Customers [Abstract]

Concentration of Credit Risk and Significant Customers

Note 2 - Concentration of Credit Risk and Significant Customers

We operate in an industry that is highly regulated, competitive and rapidly changing and involves numerous risks and uncertainties. Significant technological and/or regulatory changes, the emergence of competitive products and other factors could negatively impact our consolidated financial position or results of operations.

We have been dependent on our collaborative agreements with a limited number of third parties for a substantial portion of our revenue, and our discovery and development activities may be delayed or reduced if we do not maintain successful collaborative arrangements. We had revenue from customers, as a percentage of total revenue, as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2012			2011			2012
Novartis		-			95	%		-			36	%
Monsanto		-			5	%					54	%
Mirna		-			-			-			4	%
Debiopharm		91	%		-			63	%		1	%
Astra Zeneca		-			-			9	%		-
Undisclosed Partner #1		-			-			8	%		-
Other		9	%		-			20	%		5	%
Total		100	%		100	%		100	%		100	%

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Stockholders' Equity (Summary of Warrant Activity) (Details) (USD $)	9 Months Ended
	Sep. 30, 2012
Stockholders' Equity [Abstract]
Warrants outstanding	6,261,978
Number of warrants issued	6,809,705
Warrants expired	(1,380,597)
Warrants exercised	(440,000)
Warrants outstanding	11,251,086
Warrants outstanding, weighted average exercise price	$ 3.82
Warrants issued, weighted average exercise price	$ 0.52
Warrants expired, weighted average exercise price	$ 1.34
Warrants exercised, weighted average exercise price	$ 0.51
Warrants outstanding, weighted average exercise price	$ 2.26

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Subsequent Events (Details) (USD $)	1 Months Ended								4 Months Ended		1 Months Ended
	Oct. 31, 2012	Aug. 31, 2012	May 31, 2012	Apr. 30, 2012	Oct. 05, 2012	Sep. 30, 2012	Mar. 31, 2012	Feb. 10, 2012	Nov. 30, 2012 Stock Issued To Multiple Vendors [Member]	Nov. 30, 2012 Stock Issued To Vendor [Member]	Oct. 31, 2012 Lease Termination Two [Member]
Subsequent Event [Line Items]
Number of warrants issued	1,035,715	1,250,000	425,100	489,033
Exercise price of warrants	0.28	0.28	0.64	0.56		0.28	0.75	0.508
Total contingent shares issuable to landlord as additional consideration for termination of lease agreement											1,500,000
Equity financing from related transactions					$ 4,000,000
Market capitalization					18,000,000
Value of amounts owed to vendor, settled with issuance of stock										20,000
Shares issued during period for settlement of outstanding amounts due to vendors									200,000	87,254
Value of shares issued during period for settlement of outstanding amounts due to vendors									$ 60,000

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Current assets:
Cash	$ 413	$ 976
Restricted cash	692	1,011
Prepaid expenses and other current assets	208	589
Total current assets	1,313	2,576
Property and equipment, net		2,429
Intangible assets	6,700	6,700
Other assets		45
Total assets	8,013	11,750
Current liabilities:
Accounts payable	1,760	2,536
Accrued payroll and employee benefits	249	376
Deferred rent, current portion	1,096
Other accrued liabilities	553	879
Notes payable and accrued interest, net of discount	1,201
Deferred revenue	682	848
Total current liabilities	5,541	4,639
Deferred rent and other liabilities, net of current portion		1,243
Fair value liability for price adjustable warrants and subscription investment units	2,477	3,485
Deferred tax liabilities	2,345	2,345
Total liabilities	10,363	11,712
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 100,000 shares authorized: no shares issued and outstanding
Common stock and additional paid-in capital, $0.006 par value; 180,000,000 shares authorized, 10,438,912 shares issued and outstanding as of December 31, 2011 and 180,000,000 shares authorized, 16,166,756 shares issued and outstanding as of September 30, 2012	323,338	320,232
Accumulated deficit	(325,688)	(320,194)
Total stockholders' equity (deficit)	(2,350)	38
Total liabilities and stockholders' equity	$ 8,013	$ 11,750

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Operating activities:
Net loss	$ (5,494)	$ (11,637)
Adjustments to reconcile net loss to net cash used in operating activities:
Compensation related to restricted stock, stock options and employee stock purchase plan	345	688
Depreciation and amortization	555	1,005
Non-cash research and development expense		30
Non-cash amortization of discount on notes payable and debt issuance costs	2,324
Non-cash restructuring expense	1,481	1,298
Accretion of restructuring liability		92
Change in fair value of price adjustable warrants and subscription investment units	(3,278)	(4,704)
Gain on settlement of liabilities, net	(92)
Loss on retirement of assets	17
Changes in assets and liabilities:
Restricted cash	319
Accounts receivable		49
Prepaid expenses and other assets	456	372
Accounts payable	440	(1,012)
Deferred revenue	(166)	480
Accrued expenses and deferred rent and other liabilities	(314)	(488)
Accrued restructuring		368
Net cash used in operating activities	(3,407)	(14,195)
Investing activities:
Change in restricted cash		(140)
Proceeds from sales of property and equipment	371
Net cash provided by (used in) investing activities	371	(140)
Financing activities:
Proceeds from sales of common shares and warrants, net	1,111	10,726
Proceeds from issuance of notes payable and warrants	1,500
Payments on notes payable	(140)
Proceeds from exercise of warrants, subscription investment units, stock options and employee stock purchase plan purchases	2	3,587
Net cash provided by financing activities	2,473	14,313
Net decrease in cash	(563)	(22)
Cash - beginning of year	976	1,066
Cash - end of period	413	1,044
Non-cash financing activities:
Issuance of common stock to settle liabilities	1,124	1,562
Issuance of common stock in connection with license agreement	233
Supplemental disclosure:
Cash paid for interest	$ 62

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Stock Incentive Plans (Schedule of Stock-Based Compensation Expense) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation	$ 1	$ 116	$ 345	$ 688
Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation	34	103	186	295
Selling, General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation	$ (33)	$ 13	$ 159	$ 393

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Business, Reduction of Operations, Going Concern, Recent Financing Activities and Basis of Preparation and Summary of Significant Accounting Policies (Narrative) (Details) (USD $)	1 Months Ended				3 Months Ended	9 Months Ended
	Nov. 30, 2012	Aug. 31, 2012	Mar. 31, 2012	Feb. 29, 2012	Jul. 31, 2012	Sep. 30, 2012	Sep. 30, 2011	Oct. 31, 2012	Jun. 01, 2012	May 31, 2012	Apr. 30, 2012	Feb. 10, 2012	Dec. 31, 2011	Jun. 30, 2011	Dec. 31, 2010
Business, Reduction of Operations, Going Concern, Recent Financing Activities, and Basis of Preparation and Summary of Significant Accounting Policies [Abstract]
Percentage of employees on furlough									90.00%
Number of employees	10
Accumulated deficit						$ (325,688,000)							$ (320,194,000)
Working capital deficit						(4,200,000)
Cash						413,000	1,044,000						976,000	4,705,000	1,066,000
Restricted cash						692,000							1,011,000
Proceeds from issuance of notes payable and warrants				1,500,000		1,500,000
Number of shares issuable through warrant		3,199,848	800,001									3,690,944
Exercise price of warrants		0.28	0.75			0.28		0.28		0.64	0.56	0.508
Class of warrant, ownership threshold						50.00%
Proceeds from sales of common shares and warrants, net			1,111,000			1,111,000	10,726,000
Common shares issued during period			1,600,002
Upfront payment for license agreement	$ 300,000	$ 1,000,000			$ 1,500,000

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Stock Incentive Plans (Schedule of Stock Option Activity) (Details) (USD $)	9 Months Ended
	Sep. 30, 2012
Options
Outstanding December 31, 2011	578,257
Options expired	(15,446)
Options forfeited	(204,438)
Outstanding at September 30, 2012	358,373
Exercisable at September 30, 2012	254,860
Weighted Average Exercise Price
Outstanding December 31, 2011	$ 26.22
Options expired	$ 60.43
Options forfeited	$ 2.27
Outstanding at September 30, 2012	$ 38.41
Exercisable at September 30, 2012	$ 52.71
Weighted Average Remaining Contractual Life
Outstanding at September 30, 2012	5 years 10 months 24 days
Exercisable at September 30, 2012	4 years 7 months 6 days
Aggregate Intrinsic Value
Outstanding at September 30, 2012
Exercisable at September 30, 2012

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Business, Reduction of Operations, Going Concern, Recent Financing Activities and Basis of Preparation and Summary of Significant Accounting Policies (Schedule of Activity of Fair Value Liability) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Fair value liability for price adjustable warrants and subscription investment units
Beginning balance			$ 3,485
Fair value of warrants issued			2,561
Reclassification to equity upon exercise of warrants			291
Change in fair value included in statement of operations	(50)	(1,238)	(3,278)	(4,704)
Ending balance	$ 2,447		$ 2,447
Exercise Price
Beginning balance			$ 0.76
Fair value of warrants issued			$ 0.28
Reclassification to equity upon exercise of warrants			$ 0.51
Ending balance	$ 0.25		$ 0.25
Stock Price
Beginning balance			$ 0.89
Fair value of warrants issued			$ 0.49
Reclassification to equity upon exercise of warrants			$ 0.74
Ending balance	$ 0.28		$ 0.28
Volatility
Beginning balance			124.00%
Fair value of warrants issued			127.00%
Reclassification to equity upon exercise of warrants			135.00%
Ending balance	143.00%		143.00%
Contractual life in years
Beginning balance			5.4
Fair value of warrants issued			5.5
Reclassification to equity upon exercise of warrants			5.0
Ending balance	4.7		4.7
Risk free rate
Beginning balance			0.90%
Fair value of warrants issued			0.80%
Reclassification to equity upon exercise of warrants			0.70%
Ending balance	0.90%		0.90%

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Business, Reduction of Operations, Going Concern, Recent Financing Activities and Basis of Preparation and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Business, Reduction of Operations, Going Concern, Recent Financing Activities, and Basis of Preparation and Summary of Significant Accounting Policies [Abstract]

Business, Reduction of Operations, Going Concern, Recent Financing Activities, and Basis of Preparation and Summary of Significant Accounting Policies

Note 1 - Business, Reduction of Operations, Going Concern, Recent Financing Activities, and Basis of Preparation and Summary of Significant Accounting Policies

Business

We are a biotechnology company focused on the discovery, development and commercialization of nucleic acid-based therapies utilizing gene silencing approaches such as RNA interference ("RNAi") and blocking messenger RNA ("mRNA") translation. Our goal is to improve human health through the development, either through our own efforts or those of our collaboration partners and licensees, of these nucleic acid-based therapeutics as well as the delivery technologies that together provide superior treatment options for patients. We have multiple proprietary technologies integrated into a broad nucleic acid-based drug discovery platform, with the capability to deliver novel nucleic acid-based therapeutics via systemic, local and oral administration to target a wide range of human diseases, based on the unique characteristics of the cells and organs involved in each disease.

Our pipeline includes a clinical program in Familial Adenomatous Polyposis ("FAP") and preclinical programs in bladder cancer and myotonic dystrophy. During the past year we have entered into the following agreements regarding our technology:

· In December 2011, we entered into an exclusive license agreement with Mirna Therapeutics, Inc., a privately-held biotechnology company pioneering microRNA replacement therapy for cancer, regarding the development and commercialization of microRNA-based therapeutics utilizing Mirna's proprietary microRNAs and our novel SMARTICLES®-based liposomal delivery technology.

· In March 2012, we entered into an exclusive license agreement with ProNAi Therapeutics, Inc., a privately-held biotechnology company pioneering DNA interference (DNAi) therapies for cancer, regarding the development and commercialization of DNAi-based therapeutics utilizing our novel SMARTICLES®-based liposomal delivery technology.

· In May 2012, we entered into a worldwide exclusive license agreement with Monsanto Company, a global leader in agriculture and crop sciences, regarding the agricultural applications for our delivery and chemistry technologies.

· In May 2012, we entered into a strategic alliance with Girindus Group, a recognized leader in process development, analytical method development and cGMP manufacture of oligonucleotide therapeutics, regarding the development, supply and commercialization of certain oligonucleotide constructs using our conformationally restricted nucleotide ("CRN") technology.

· In August 2012, we entered into a worldwide, non-exclusive license agreement with Novartis Institutes for Biomedical Research, Inc., a global leader in the development of human therapeutics, regarding the development of oligonucleotide therapeutics utilizing our CRN technology.

· In November 2012, we entered into a worldwide, non-exclusive license agreement with Protiva Biotherapeutics Inc., a wholly owned subsidiary of Tekmira Pharmaceuticals Corporation ("Tekmira"), a leading oligonucleotide-based drug discovery and development company, regarding the development of oligonucleotide therapeutics using our Unlocked Nucleobase Analog (UNA) technology.

In addition to our own, internally developed technologies, we have strategically in-licensed and further developed nucleic acid- and delivery-related technologies, forming an integrated drug discovery platform. We are employing our platform, through our own efforts and those of our partners, for the discovery of multiple nucleic acid-based therapeutics including siRNA, microRNA and single stranded oligonucleotide-based drugs.

Reduction of Operations

On June 1, 2012, we announced that, due to our financial condition, we had implemented a furlough of approximately 90% of our employees and ceased substantially all day-to-day operations. Since that time substantially all of the furloughed employees have been terminated. As of November 30, 2012, we had approximately 10 remaining employees, including all of our executive officers, all of whom are either furloughed or working on reduced salary. We have also sold substantially all of our equipment, and have ceased operations at our facility located at 3830 Monte Villa Parkway in Bothell, WA. As a result, since June 1, 2012 our internal research and development ("R&D") efforts have been, and as of the date of the filing of this report they continue to be, minimal, pending receipt of adequate funding.

Going Concern

The accompanying condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As of September 30, 2012, we had an accumulated deficit of approximately $325.7 million, have incurred, and may in the future continue to incur, losses as we continue our planned business operations and have had recurring negative cash flows from operations. We expect that our operating expenses will consume the majority of our limited cash resources during the remainder of 2012, and will require ongoing funding. We have funded our losses primarily through the sale of common stock and warrants in the public markets and private placements, revenue provided by our collaboration partners and secured loans.

We plan to continue to work with large pharmaceutical companies regarding R&D collaboration agreements or investments, and to pursue public and private sources of financing to raise cash. However, there can be no assurance that we will be successful in such endeavors.

The market value and the volatility of our stock price, as well as general market conditions and our current financial condition, could make it difficult for us to complete a financing or collaboration transaction on favorable terms, or at all. Any financing we obtain may further dilute the ownership interest of our current stockholders, which dilution could be substantial, or provide new stockholders with superior rights than those possessed by our current stockholders. If we are unable to obtain additional capital when required, and in the amounts required, we may be forced to modify, delay or abandon some or all of our programs, or to discontinue operations altogether. Additionally, any collaboration may require us to relinquish rights to our technologies. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty. The Report of Independent Registered Public Accounting Firm included in our Annual Report on Form 10-K for the year ended December 31, 2011 states that we have ceased substantially all day-to-day operations, including most research and development activities, have incurred recurring losses, have a working capital and accumulated deficit, and have had recurring negative cash flows from operations, that raise substantial doubt about our ability to continue as a going concern.

At September 30, 2012, we had a working capital deficit (current assets less current liabilities) of approximately $4.2 million and approximately $1.1 million in cash, including approximately $0.7 million in restricted cash.

We believe that our resources as of the date of the filing of this report will be sufficient to fund our planned limited operations until the end of 2012.

Recent Financing Activities

In February 2012, we received net proceeds of approximately $1.5 million by issuance of secured promissory notes and warrants to purchase up to 3,690,944 shares of our common stock. Through a series of amendments to the purchase agreement and the notes issued pursuant thereto, we have extended the maturity date of the notes to December 31, 2012, and in connection with such extensions have issued to the secured parties additional warrants to purchase up to 3,199,848 shares of our common stock. The warrants are exercisable at $0.28 per share, which is subject to adjustment (including as a result of subsequent financings), and are exercisable for a period of five years beginning six months and one day following the issuance of the warrants. The notes are secured by the assets of our company and our wholly-owned subsidiaries, Cequent Pharmaceuticals, Inc. and MDRNA Research, Inc. The security agreement that we entered into in connection with this transaction provides a security interest in, but not limited to, all of the property, equipment and fixtures, accounts, negotiable collateral, cash, and cash equivalents of our company and our wholly-owned subsidiaries, Cequent and MDRNA Research, subject to certain exceptions. The security interest created in the collateral is first priority, subject to the permitted encumbrances provided in the security agreement, and is perfected to the extent such security interest can be perfected by the filing of a financing statement and filings with the U.S. Patent and Trademark Office. The security interest created in the collateral will be removed at such time as the notes are paid in full.

As a result of amendments to the purchase agreement and the notes issued pursuant thereto, we and the holders of the notes agreed that if we, at any time prior to December 31, 2012, effect any merger or consolidation of our company whereby the holders of the issued and outstanding shares of our common stock immediately prior to the consummation of such transaction hold less than fifty percent (50%) of the issued and outstanding shares of the voting securities of the surviving corporation immediately following the consummation of such transaction, we will have fully satisfied the obligation to repay the entire unpaid principal balance under the notes and all accrued and unpaid interest thereon through the issuance to the noteholders of an aggregate number of shares of common stock calculated by converting the then total outstanding principal and interest under the notes at a value of $0.28 per share of common stock.

In March 2012, we received net proceeds of approximately $1.1 million by issuance of 1,600,002 shares of our common stock and warrants to purchase up to 800,001 shares of our common stock. The warrants have an exercise price of $0.75 per share, are immediately exercisable (subject to registration or the availability of an exemption under federal and state securities laws), and will be exercisable for a period of five years from the date of issuance. The exercise price and the number of shares issuable upon exercise of the warrants are subject to adjustment in the event of stock splits or dividends, business combinations, sale of assets or other similar transactions, but not as a result of future securities offerings at lower prices.

In May and July, 2012, we received an aggregate of $1.5 million as an upfront payment in connection with the Intellectual Property License Agreement that we entered into with Monsanto Company. At the same time that we entered into the Intellectual Property License Agreement, we and Monsanto also entered into a Security Agreement pursuant to which we granted to Monsanto a security interest in that portion of our intellectual property that is the subject of the license agreement in order to secure the performance of our obligations under the license agreement.

In August 2012 we received $1 million in a one-time upfront payment in connection with the License Agreement that we entered into with Novartis Institutes for Biomedical Research, Inc. Between September and November 2012, we received additional funds as a result of the sale of certain equipment at our corporate headquarters, the receipt of the upfront payment in connection with the license agreement that we entered into with ProNAi Therapeutics, and the receipt of an accelerated milestone payment in connection with the license agreement that we entered into with Mirna Therapeutics. In addition, on November 28, 2012, we entered into a license agreement with Tekmira, in connection with which we received an upfront payment in the amount of $300,000.

Basis of Preparation and Summary of Significant Accounting Policies

Basis of Preparation - The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by U.S. generally accepted accounting principles for complete financial statements. The accompanying unaudited financial information should be read in conjunction with the audited consolidated financial statements, including the notes thereto, as of and for the year ended December 31, 2011, included in our 2011 Annual Report on Form 10-K filed with the SEC. The information furnished in this report reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for each period presented. The results of operations for the interim period ended September 30, 2012 are not necessarily indicative of the results for the year ending December 31, 2012 or for any future period.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting periods. Estimates having relatively higher significance include revenue recognition, research and development costs, stock-based compensation, valuation of warrants and subscription investment units, valuation and estimated lives of identifiable intangible assets, impairment of long-lived assets, estimated accrued restructuring charges and income taxes. Actual results could differ from those estimates.

Restricted Cash - Amounts pledged as collateral underlying letters of credit for facility lease deposits are classified as restricted cash.

Fair Value of Financial Instruments - We consider the fair value of cash, restricted cash, accounts payable and accrued liabilities to not be materially different from their carrying value. These financial instruments have short-term maturities.

We follow authoritative guidance with respect to fair value reporting issued by the Financial Accounting Standards Board ("FASB") for financial assets and liabilities, which defines fair value, provides guidance for measuring fair value and requires certain disclosures. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

We currently measure and report at fair value our liability for price adjustable warrants and subscription investment units using the Black-Scholes-Merton valuation model using Level 3 inputs. The following tables summarize our liabilities measured at fair value on a recurring basis as of September 30, 2012 (in thousands):

	Balance at September 30, 2012		Level 1 Quoted prices in active markets for identical assets		Level 2 Significant other observable inputs		Level 3 Significant unobservable inputs
Liabilities:
Fair value liability for price adjustable warrants and subscription investment units	$	2,477		-		-	$	2,477
Total liabilities at fair value	$	2,477		-		-	$	2,477

The following presents activity of the fair value liability of price adjustable warrants and subscription investment units determined by Level 3 inputs (in thousands, except per share data):

				Weighted average as of each measurement date
	Fair value liability for price adjustable warrants and subscription investment units (in thousands)			Exercise Price		Stock Price		Volatility			Contractual life in years		Risk free rate
Balance at December 31, 2011	$	3,485		$	0.76	$	0.89		124	%		5.4		0.9	%
Fair value of warrants issued		2,561			0.28		0.49		127	%		5.5		0.8	%
Reclassification to equity upon exercise of warrants		(291	)		0.51		0.74		135	%		5.0		0.7	%
Change in fair value included in statement of operations		(3,278	)
Balance at September 30, 2012	$	2,447		$	0.25	$	0.28		143	%		4.7		0.9	%

Property and equipment - Long-lived assets include property and equipment. These assets are recorded at our original cost and are increased by the cost of any significant improvements after purchase. Property and equipment assets are depreciated evenly over the estimated useful life of the individual assets. Depreciation begins when the asset is ready for its intended use. For tax purposes, accelerated depreciation methods are used as allowed by tax laws.

Identifiable intangible assets - Intangible assets associated with in-process research and development ("IPR&D") projects acquired in business combinations are not amortized until approval is obtained in a major market, typically either the U.S. or the European Union, or in a series of other countries, subject to certain specified conditions and management judgment. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated.

Impairment of long-lived assets - We review all of our long-lived assets for impairment indicators throughout the year and we perform detailed testing whenever impairment indicators are present. In addition, we perform detailed impairment testing for indefinite-lived intangible assets at least annually. When necessary, we record charges for impairments. Specifically:

· For finite-lived intangible assets, such as developed technology rights, and for other long-lived assets, such as property and equipment, we calculate the undiscounted amount of the projected cash flows associated with the asset, or asset group, and compare this estimated amount to the carrying amount. If the carrying amount is found to be greater, we record an impairment loss for the excess of book value over fair value. In addition, in all cases of an impairment review, we re-evaluate the remaining useful lives of the assets and modify them, as appropriate.

· For indefinite-lived intangible assets, such as IPR&D assets, each year and whenever impairment indicators are present, we determine the fair value of the asset and record an impairment loss for the excess of book value over fair value, if any.

Net Loss Per Common Share - Basic and diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share excludes the effect of common stock equivalents (stock options, unvested restricted stock, warrants and subscription investment units) since such inclusion in the computation would be anti-dilutive. The following numbers of shares have been excluded for periods ended September 30:

	2011		2012
Stock options outstanding		611,657		358,373
Warrants		4,956,005		11,251,086
Subscription investment units		25,000		0
Total		5,592,662		11,609,459

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets [Abstract]
Preferred stock, par or stated value per share	$ 0.01	$ 0.01
Preferred stock, shares authorized	100,000	100,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value per share	$ 0.006	$ 0.006
Common stock, shares authorized	180,000,000	180,000,000
Common stock, shares issued	16,166,756	10,438,912
Common stock, shares outstanding	16,166,756	10,438,912

XML

Business, Reduction of Operations, Going Concern, Recent Financing Activities and Basis of Preparation and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2012

Business, Reduction of Operations, Going Concern, Recent Financing Activities, and Basis of Preparation and Summary of Significant Accounting Policies [Abstract]

Schedule of Liabilities Measured at Fair Value on a Recurring Basis

The following tables summarize our liabilities measured at fair value on a recurring basis as of September 30, 2012 (in thousands):

	Balance at September 30, 2012		Level 1 Quoted prices in active markets for identical assets		Level 2 Significant other observable inputs		Level 3 Significant unobservable inputs
Liabilities:
Fair value liability for price adjustable warrants and subscription investment units	$	2,477		-		-	$	2,477
Total liabilities at fair value	$	2,477		-		-	$	2,477

Schedule of Activity of Fair Value of Liabilities Determined by Level 3 Inputs

The following presents activity of the fair value liability of price adjustable warrants and subscription investment units determined by Level 3 inputs (in thousands, except per share data):

				Weighted average as of each measurement date
	Fair value liability for price adjustable warrants and subscription investment units (in thousands)			Exercise Price		Stock Price		Volatility			Contractual life in years		Risk free rate
Balance at December 31, 2011	$	3,485		$	0.76	$	0.89		124	%		5.4		0.9	%
Fair value of warrants issued		2,561			0.28		0.49		127	%		5.5		0.8	%
Reclassification to equity upon exercise of warrants		(291	)		0.51		0.74		135	%		5.0		0.7	%
Change in fair value included in statement of operations		(3,278	)
Balance at September 30, 2012	$	2,447		$	0.25	$	0.28		143	%		4.7		0.9	%

Schedule of Anti-Dilutive Securities

The following numbers of shares have been excluded for periods ended September 30:

	2011		2012
Stock options outstanding		611,657		358,373
Warrants		4,956,005		11,251,086
Subscription investment units		25,000		0
Total		5,592,662		11,609,459

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 30, 2012
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2012
Entity Registrant Name	MARINA BIOTECH, INC.
Entity Central Index Key	0000737207
Trading Symbol	MRNA
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		16,366,415

XML

Concentration of Credit Risk and Significant Customers (Tables)

9 Months Ended

Sep. 30, 2012

Concentration of Credit Risk and Significant Customers [Abstract]

Schedule of Revenue by Major Customers as Percentage of Total Revenue

We had revenue from customers, as a percentage of total revenue, as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2012			2011			2012
Novartis		-			95	%		-			36	%
Monsanto		-			5	%					54	%
Mirna		-			-			-			4	%
Debiopharm		91	%		-			63	%		1	%
Astra Zeneca		-			-			9	%		-
Undisclosed Partner #1		-			-			8	%		-
Other		9	%		-			20	%		5	%
Total		100	%		100	%		100	%		100	%

XML

Condensed Consolidated Statements of Operations (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Condensed Consolidated Statements of Operations [Abstract]
Revenue	$ 1,106	$ 286	$ 2,895	$ 629
Operating expenses:
Research and development	753	2,955	4,506	9,077
Selling, general and administrative	598	1,852	3,306	6,503
Restructuring	1,446	1,104	1,481	1,390
Total operating expenses	2,797	5,911	9,293	16,970
Loss from operations	(1,691)	(5,625)	(6,398)	(16,341)
Other income (expense):
Interest and other expense	(201)		(2,466)
Change in fair value liability for price adjustable warrants and subscription investment units	50	1,238	3,278	4,704
Gain on settlement of liabilities, net	92		92
Total other income (expense), net	(59)	1,238	904	4,704
Net loss	$ (1,750)	$ (4,387)	$ (5,494)	$ (11,637)
Net loss per common share - basic and diluted	$ (0.12)	$ (0.55)	$ (0.44)	$ (2.22)
Shares used in computing net loss per share - basic and diluted	14,309	8,041	12,417	5,248

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Contractual Agreements

9 Months Ended

Sep. 30, 2012

Contractual Agreements [Abstract]

Contractual Agreements

Note 6 - Contractual Agreements

RNAi-related

Tekmira - On November 28, 2012, we and Tekmira entered into a license agreement whereby we will provide Tekmira a worldwide, non-exclusive license to our unlocked nucleobase analog ("UNA") technology for the development of RNA interference therapeutics. Tekmira will have full responsibility for the development and commercialization of any products arising under the License Agreement. In consideration for entering into the license agreement, we received an upfront payment in the amount of $300,000, and we will receive milestone payments upon the satisfaction of certain clinical and regulatory milestone events and royalty payments in the low single digits on products developed by Tekmira that use UNA technology. Tekmira may terminate the license agreement for convenience in its entirety, or in respect of any particular country or countries, by giving 90 days prior written notice to us, provided that no such termination shall be effective sooner than August 28, 2013. Either party may terminate the license agreement immediately upon the occurrence of certain bankruptcy events involving the other party, or, following the expiration of a 120 day cure period (60 days in the event of a default of a payment obligation by Tekmira), upon the occurrence of a material breach of the License Agreement by the other party.

Novartis - On August 2, 2012, we and Novartis Institutes for Biomedical Research, Inc. ("Novartis") entered into a worldwide, non-exclusive License Agreement for our CRN technology for the development of both single and double-stranded oligonucleotide therapeutics. We received $1 million in a one-time upfront payment for the non-exclusive license. In addition, in March 2009, we entered into an agreement with Novartis pursuant to which we granted to Novartis a worldwide, non-exclusive, irrevocable, perpetual, royalty-free, fully paid-up license, with the right to grant sublicenses, to our DiLA² -based siRNA delivery platform in consideration of a one-time, non-refundable fee of $7.25 million, which was recognized as license fee revenue in 2009. Novartis may terminate this agreement immediately upon written notice to us. In connection with the March 2009 license agreement, we also entered into a separate agreement with Novartis to provide them with an exclusive period in which to negotiate a potential research and development collaboration as well as possible broader licensing rights related to our RNAi drug delivery platform. This exclusive period expired in 2009. Approximately $0.3 million was recognized as license fee revenue in 2009 under this separate agreement.

Girindus - On May 18, 2012, we and Girindus Group ("Girindus") entered into a strategic alliance pursuant to which Girindus will have exclusive rights to develop, supply and commercialize certain oligonucleotide constructs using our CRN chemistry and in return, we will receive royalties in the single digit percentages from the sale of CRN-based oligonucleotide reagents as well as a robust supply of cGMP material for us and our partners' pre-clinical, clinical and commercialization needs.

Monsanto - On May 3, 2012, we and Monsanto Company ("Monsanto") entered into a worldwide exclusive Intellectual Property License Agreement for our delivery and chemistry technologies. On May 3, 2012, we and Monsanto also entered into a Security Agreement pursuant to which we granted to Monsanto a security interest in that portion of our intellectual property that is the subject of the License Agreement in order to secure the performance of our obligations under the License Agreement. Under the terms of the license agreement, we received $1.5 million in initiation fees, and may receive royalties on product sales in the low single digit percentages. Monsanto may terminate the License Agreement at any time in whole or as to any rights granted thereunder by giving prior written notice thereof to us, with termination becoming effective three (3) months from the date of the notice.

ProNAi Therapeutics, Inc. - On March 13, 2012, we entered into an Exclusive License Agreement with ProNAi Therapeutics, Inc. ("ProNAi") regarding the development and commercialization of ProNAi's proprietary DNAi-based therapeutics utilizing our novel SMARTICLES® liposomal delivery technology. The License Agreement provides that ProNAi will have full responsibility for the development and commercialization of any products arising under the License Agreement. Under terms of the License Agreement, we could receive up to $14 million for each gene target in total upfront, clinical and commercialization milestone payments, as well as royalties in the single digit percentages on sales, with ProNAi having the option to select any number of gene targets. Either party may terminate the License Agreement upon the occurrence of a default by the other party (subject to standard cure periods), or upon certain events involving the bankruptcy or insolvency of the other party. ProNAi may also terminate the License Agreement without cause upon ninety (90) days' prior written notice to us, provided that no such termination shall be effective sooner than December 13, 2012.

Mirna Therapeutics - On December 22, 2011, we entered into a License Agreement with Mirna Therapeutics, Inc. ("Mirna") regarding the development and commercialization of microRNA-based therapeutics utilizing Mirna's proprietary microRNAs and our novel SMARTICLES® liposomal delivery technology. The License Agreement provides that Mirna will have full responsibility for the development and commercialization of any products arising under the License Agreement and that we will support pre-clinical and process development efforts. Under terms of the License Agreement, we could receive up to $63 million in total upfront, clinical and commercialization milestone payments, as well as royalties in the low single digit percentages on sales, based on the successful outcome of the collaboration. Either party may terminate the License Agreement upon the occurrence of a default by the other party. Commencing on June 22, 2012, Mirna may also terminate the License Agreement without cause upon sixty (60) days prior written notice to us.

Debiopharm S.A. - In February 2011, we entered into a Research and License Agreement with Debiopharm S.A. pursuant to which we granted to Debiopharm an exclusive license to develop and commercialize our pre-clinical program in bladder cancer, for all uses in humans and animals for the prevention and treatment of superficial (non-muscle invasive) bladder cancer, in consideration of the payment by Debiopharm to us of up to $24 million based on predefined research and development milestones, plus royalties in the low double digit percentages from the sales of products resulting under the agreement and sublicensing payments. The agreement provided that Debiopharm would have full responsibility for the development and commercialization of any products arising from the partnership. On November 2, 2012, Debiopharm provided notice that the agreement would be terminated effective December 5, 2012 due to its own operational reasons. The bladder cancer program will be returned to us without obligations beyond those minor activities associated with the termination period and will be reincorporated into our internal preclinical pipeline with the intention of advancing the program once either appropriate funding or a new partner is obtained.

Valeant Pharmaceuticals - In March 2010, we acquired intellectual property related to Conformationally Restricted Nucleotides ("CRN") from Valeant Pharmaceuticals North America in consideration of payment of a non-refundable licensing fee of $0.5 million which was included in research and development expense in 2010. Subject to meeting certain milestones triggering the obligation to make any such payments, we may be obligated to make a product development milestone payment of $5.0 million within 180 days of FDA approval of a New Drug Application for our first CRN related product and another product development milestone payment of $2.0 million within 180 days of FDA approval of a New Drug Application covering our second CRN related product. As of September 30, 2012, we have not made, and are not under any current obligation to make, any such milestone payments, as the conditions triggering any such milestone payment obligations have not been satisfied. Valeant is entitled to receive earn-outs based upon a percentage in the low single digits of future commercial sales and earn-outs based upon a percentage in the low double digits of future revenue from sublicensing. Under the agreement we are required to use commercially reasonable efforts to develop and commercialize at least one covered product. If we have not made earn-out payments of at least $5.0 million prior to the sixth anniversary of the date of the agreement, we are required to pay Valeant an annual amount equal to $50,000 per assigned patent which shall be creditable against other payment obligations. The term of our financial obligations under the agreement shall end, on a country-by-country basis, when there no longer exists any valid claim in such country. We may terminate the agreement upon 30 days' notice, or upon 10 days' notice in the event of adverse results from clinical studies. Upon termination, we are obligated to make all payments accrued as of the effective date of such termination but shall have no future payment obligations.

Novosom - In July 2010, we entered into an agreement pursuant to which we acquired the intellectual property of Novosom AG ("Novosom") of Halle, Germany for Novosom's SMARTICLES^®-based liposomal delivery system, which significantly broadens the number of approaches we may take for systemic and local delivery of our proprietary UNA and CRN-based oligonucleotide therapeutics. We issued an aggregate of 141,949 shares of our common stock to Novosom as consideration for the acquired assets. The shares had an aggregate value equal to approximately $3.8 million, which was recorded as research and development expense. As additional consideration for the acquired assets, we will pay to Novosom an amount equal to 30% of the value of each upfront (or combined) payment actually received by us in respect of the license of liposomal-based delivery technology or related product or disposition of the liposomal-based delivery technology by us, up to a maximum of $3.3 million, which amount will be paid in shares of our common stock, or a combination of cash and shares of our common stock, at our discretion. In December 2011 we recognized approximately $0.1 million as research and development expense for additional consideration paid to Novosom as a result of the License Agreement that we entered into with Mirna Therapeutics. During 2012 we issued 340,906 shares of common stock to Novosom as additional consideration as a result of the license agreements that we entered into with Mirna and Monstanto.

Roche - In February 2009, we entered into an agreement with F. Hoffmann-La Roche Inc., a New Jersey corporation, and F. Hoffmann-La Roche Ltd., a Swiss corporation (collectively, "Roche"), pursuant to which we granted to Roche a worldwide, irrevocable, non-exclusive license to a portion of our technology platform, for the development of RNAi-based therapeutics, in consideration of the payment of a one-time, non-refundable licensing fee of $5.0 million. On September 30, 2011, we agreed to the assignment and delegation by Roche of its non-exclusive license rights in the Licensed Technology upon Roche's successful divestment of its RNA interference assets. On October 21, 2011, Roche successfully divested its RNA interference assets, including the Licensed Technology, and made a one-time non-refundable payment of $1.0 million to us in consideration for our agreement to the assignment and delegation of Roche's non-exclusive license rights in the licensed technology. This payment was recognized as revenue in 2011.

University of Michigan - In May 2008, we entered into an exclusive license agreement to intellectual property ("IP") from the University of Michigan covering cationic peptides for enhanced delivery of nucleic acids. In connection with the agreement, we paid a license issue fee of $120,000. An additional fee of $25,000 is payable annually and creditable against royalty payments. Results from continued internal development efforts made this exclusive license agreement unnecessary and the agreement was terminated on August 7, 2012 with no further financial obligation.

University of Helsinki - In June 2008, we entered into a collaboration agreement with Dr. Pirjo Laakkonen and the Biomedicum Helsinki. The goal of the work involves our patented phage display library, the Trp Cage library, for the identification of peptides to target particular tissues or organs for a given disease. In December 2009, we received a patent allowance in the U.S. covering a targeting peptide for preferential delivery to lung tissues that was identified by us using the Trp Cage Library. We believe the Trp Cage library will be a source of additional peptides for evaluation in our delivery programs, and we will have a strong IP position for these peptides and their use. This agreement terminated by its terms in June 2012. Under this agreement, we may be obligated to make product development milestone payments of up to €275,000 in the aggregate for each product developed under this research agreement if certain milestones are met. As of September 30, 2012, we have not made, and are not under any current obligation to make, any such milestone payments, as the conditions that would trigger any such milestone payment obligations have not been satisfied. In addition, upon the first commercial sale of a product, we are required to pay an advance of €250,000 against which future royalties will be credited. The percentage royalty payment required to be made by us to the University of Helsinki under the terms of this agreement is a percentage of gross revenues derived from work performed under the Helsinki Agreement in the low single digits.

Ribotask ApS. - In June 2009, we announced the revision of the October 2008 agreement in which we had acquired the intellectual property related to Unlocked Nucleobase Analogs ("UNA") from Ribotask ApS, a privately held Danish company. The original agreement provided us with exclusive rights for the development and commercialization of therapeutics incorporating UNAs. The amended agreement eliminated our obligation to pay all milestone and royalty payments and provided full financial and transactional control of our proprietary UNA technology.

Under the October 2008 agreement we made payments to Ribotask totaling $500,000. We sublicensed the IP under this agreement to Roche on a nonexclusive basis in February 2009, at which time we paid an additional $250,000 to Ribotask, which eliminated the obligation to pay Ribotask any future royalties or milestones with respect to the Roche sublicense. In connection with the June 2009 amendment, we issued 15,152 shares of our common stock valued at approximately $1.0 million to Ribotask ApS and agreed to pay $1.0 million in four installments of $250,000 each due at various intervals through July 2010.

In June 2010, we expanded our rights under the previous agreement with Ribotask to include exclusive rights to the development and commercialization of UNA-based diagnostics. In connection with this amendment, we agreed to pay Ribotask $750,000 in three equal payments of $250,000. In March 2011, the agreement was amended to change the payment terms for the diagnostic rights. The first payment of $250,000 was made in November 2010, a payment of $50,000 was made upon the execution of the amendment, and the remaining $400,000 was paid in eight equal monthly installments beginning on May 1, 2011. In addition we issued 11,377 shares of our common stock valued at approximately $80,000 to Ribotask on March 3, 2011.

In connection with our agreements, as amended, we granted Ribotask a royalty-bearing, world-wide exclusive license to use the assigned patents to develop and sell products intended solely for use as reagents or for testing. The royalty rates to be paid to us by Ribotask are a percentage in the low single digits.

Intranasal related

Cypress Bioscience, Inc. - In August 2010, we entered into an Asset Purchase Agreement with Cypress Bioscience, Inc. ("Cypress") under which Cypress acquired our patent rights and technology related to carbetocin, a long-acting analog of oxytocin, a naturally produced hormone that may benefit individuals with autism. Under the agreement, we received an upfront payment of $750,000 and we could receive milestone payments up to $27 million. In 2011, the carbetocin asset was spun out to create Kyalin Bioscience. Kyalin Bioscience will be responsible for all future development and IP related expenses as well as all milestone payments due to us. In addition, Kyalin will pay us royalties, in single-digit percentages, based on commercial sales.

Amylin Pharmaceuticals, Inc. - In January 2009 we amended our 2006 License Agreement with Amylin Pharmaceuticals, Inc. for the development of intranasal exenatide. The License Agreement, as amended, provides for an accelerated $1.0 million milestone payment to us in January 2009, a reduction in the aggregate amount of milestone payments that could be due to us from $89 million to $80 million, and a reduction in the percentage royalty rate payable upon commercial sales of a product to the low single digits. Additionally, as a result of the amendment, we are no longer responsible for any further development of the nasal spray formulation of intranasal exenatide or its manufacture. Either party may terminate the agreement for breach of any material provision of the agreement upon 60 days' notice of the breach and subject to a 60 day cure period. Amylin may also terminate the agreement upon 90 days' written notice.

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Stock Incentive Plans

9 Months Ended

Sep. 30, 2012

Stock Incentive Plans [Abstract]

Stock Incentive Plans

Note 5 - Stock Incentive Plans

At September 30, 2012 options to purchase up to 358,373 shares of our common stock were outstanding and 568,429 shares were available for future grants or awards under our various stock incentive plans. We generally issue new shares for option exercises unless treasury shares are available for issuance. We had no treasury shares as of September 30, 2012 and have no plans to purchase any in the next year.

Stock-based Compensation - The following table summarizes stock-based compensation expense (in thousands):

	Three Months ended September 30,					Nine months ended September 30,
	2011		2012			2011		2012
Stock-based compensation:
Research and development	$	103	$	34		$	295	$	186
Selling, general and administrative		13		(33	)		393		159
Total stock-based compensation	$	116	$	1		$	688	$	345

Stock-based compensation expense is recognized on a straight-line basis over the applicable vesting periods, based on the fair value on the grant date. Certain option and share awards provide for accelerated vesting if there is a change in control (as defined in the applicable plan and certain employment agreements we have with key employees).

Stock Options - Stock options to purchase shares of our common stock are granted under our existing stock-based incentive plans to certain employees, at prices at or above the fair market value on the date of grant.

The following table summarizes stock option activity during the nine months ended September 30, 2012:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
								(in thousands)
Outstanding December 31, 2011		578,257		$	26.22
Options expired		(15,446	)		60.43
Options forfeited		(204,438	)		2.27
Outstanding at September 30, 2012		358,373		$	38.41		5.9 years	$	-
Exercisable at September 30, 2012		254,860		$	52.71		4.6 years	$	-

The per-share fair value of stock options granted was approximately $1.70 in both the three and nine months ended September 30, 2011, which was estimated at the date of grant using the Black-Scholes-Merton option valuation model using an expected dividend yield of 0%, a risk-free interest rate of 1.2%, expected stock volatility of 118% and an expected option life of 6.0 years. We did not grant any options during the three or nine months ended September 30, 2012.

As of September 30, 2012, we had approximately $0.2 million of total unrecognized compensation cost related to unvested stock options. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. We expect to recognize this cost over a weighted average period of approximately 1.8 years.

The intrinsic value of stock options outstanding and exercisable at September 30, 2012 is based on the $0.28 closing market price of our common stock on that date, and is calculated by aggregating the difference between $0.28 and the exercise price of each of the outstanding vested and unvested stock options. There were no stock options outstanding at September 30, 2012 which had an exercise price less than $0.28. There were no stock options exercised in the three or nine months ended September 30, 2011 or September 30, 2012.

Employee Stock Purchase Plan - As of September 30, 2012, a total of 65,000 shares of common stock have been reserved for issuance under our 2007 Employee Stock Purchase Plan ("ESPP") and 18,141 have been issued. Under the terms of the ESPP, a participant may purchase shares of our common stock at a price equal to the lesser of 85% of the fair market value on the date of offering or on the date of purchase. Stock-based compensation expense related to the ESPP was not material in the three and nine month periods ended September 30, 2011 and September 30, 2012.

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Business, Reduction of Operations, Going Concern, Recent Financing Activities and Basis of Preparation and Summary of Significant Accounting Policies (Schedule of Liabilities Measured at Fair Value on a Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities at fair value	$ 2,447	$ 3,485
Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities at fair value	2,477
Recurring [Member] | Other Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities at fair value	2,477
Level 1 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities at fair value
Level 1 [Member] | Recurring [Member] | Other Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities at fair value
Level 2 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities at fair value
Level 2 [Member] | Recurring [Member] | Other Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities at fair value
Level 3 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities at fair value	2,477
Level 3 [Member] | Recurring [Member] | Other Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities at fair value	$ 2,477

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Notes Payable (Tables)

9 Months Ended

Sep. 30, 2012

Notes Payable [Abstract]

Schedule of Notes Payable

The following table presents the activity in notes payable and accrued interest and related discount for the nine months ended September 30, 2012 (in thousands):

	Notes Payable and accrued interest			Discount			Notes Payable and accrued interest, net
Balance at January 1, 2012	$	-		$	-		$	-
Issuances of notes payable and warrants		1,500			(1,651	)		(151	)
Issuances of warrants upon amendments		-			(910	)		(910	)
Accrued interest		138						138
Payments		(200	)		-			(200	)
Amortization of discount to interest expense		-			2,324			2,324
Balance at September 30, 2012	$	1,438		$	(237	)	$	1,201

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Subsequent Events

9 Months Ended

Sep. 30, 2012

Subsequent Events [Abstract]

Subsequent Events

Note 9 - Subsequent Events

As further described in Notes 4 and 8, effective October 1, 2012, we entered into a Lease Termination Agreement with the landlord for our facilities located at 3830 Monte Villa Parkway, Bothell, WA pursuant to which we reduced the term of the lease. As additional consideration for the Termination Agreement, we agreed to issue to the landlord 1,500,000 shares of our common stock contingent upon and immediately prior to the first to occur of any of the following events: (i) the closing of an equity financing in a transaction or series of related transactions where such financing yields gross proceeds to us of at least $4 million in the aggregate, including amounts converted under any convertible promissory notes; (ii) a merger into another entity if the combined market capitalization of the merging entities is at least $18 million or, if not, upon our market capitalization as the surviving entity of a merger being at least $18 million at any time after the merger; (iii) a sale of all or substantially all of our assets; or (iv) a sale of our stock after which sale a majority of the outstanding equity is held by persons or entities who were not our shareholders prior to the sale.

As further described in Note 4, in October and November 2012 we issued to two of our vendors an aggregate of approximately 0.2 million shares of our common stock to settle outstanding amounts due to such vendors in the aggregate amount of approximately $60,000. We also agreed to issue an additional 87,254 shares to settle approximately $20,000 in amounts due to one vendor contingent upon and immediately prior to the first to occur of any of the following events: (i) the closing of an equity financing in a transaction or series of related transactions where such financing yields gross proceeds to us of at least $4 million in the aggregate, including amounts converted under any convertible promissory notes; (ii) a merger into another entity if the combined market capitalization of the merging entities is at least $18 million or, if not, upon our market capitalization as the surviving entity of a merger being at least $18 million at any time after the merger; (iii) a sale of all or substantially all of our assets; or (iv) a sale of our stock after which sale a majority of the outstanding equity is held by persons or entities who were not our shareholders prior to the sale.

As further described in Notes 3 and 4, in October 2012 we issued warrants to purchase up to an additional 1,035,715 shares of common stock to the holders of our secured promissory notes in connection with an amendment to the purchase agreement.

As further described in Note 6, on November 2, 2012, Debiopharm provided notice that our agreement for the bladder cancer program would be terminated effective December 5, 2012 due to its own operational reasons.

As further described in Notes 4 and 6, on November 28, 2012 we entered into a license agreement with Tekmira pursuant to which we granted to Tekmira a worldwide, non-exclusive license to our unlocked nucleobase analog technology for the development and commercialization of oligonucleotide therapeutics.

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Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes [Abstract]

Income Taxes

Note 7 - Income Taxes

We continue to record a valuation allowance in the full amount of net deferred tax assets since realization of such tax benefits has not been determined by our management to be more likely than not. At the end of each interim period, we make our best estimate of the effective tax rate expected to be applicable for the full fiscal year, and the rate so determined is used in providing for income taxes on a current year-to-date basis. The difference between the expected provision or benefit computed using the statutory tax rate and the recorded provision or benefit of zero, is primarily due to the change in valuation allowance.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 8 - Commitments and Contingencies

Standby Letter of Credit - In connection with the terms of our lease of our Bothell, Washington facility we have provided our landlord with a stand-by letter of credit. The landlord has periodically drawn on the $1.2 million standby letter of credit for that facility, which has resulted in draws on our restricted cash, and we have periodically replenished the standby letter of credit and increased the restricted cash balance. As of September 30, 2012, approximately $0.7 million was outstanding on the standby letter of credit.

Leases - We lease space for our research and development and corporate offices at 3830 Monte Villa Parkway in Bothell, Washington under an operating lease that was originally scheduled to terminate in 2016. On October 5, 2012, we entered into a Lease Termination Agreement (the "Termination Agreement"), effective as of October 1, 2012, with respect to our facilities at 3830 Monte Villa Parkway. Pursuant to the Termination Agreement, we paid $155,000 to the landlord as rent for the premises for the month of October 2012. Thereafter, our obligation to pay further rent will be satisfied through the letter of credit that we established to support our obligations under the lease. The landlord will draw the amount of each month's rent by drawing on the letter of credit on or about the first day of each month from November 2012 through February 2013, with the landlord drawing the entire remaining amount available to be drawn on the letter of credit when it draws the February 2013 rent. The lease will terminate effective on March 1, 2013; provided that prior to March 1, 2013 the landlord may terminate the lease on 10 days' prior written notice, in which event the landlord shall be entitled to immediately draw all remaining amounts under the Termination Agreement on the letter of credit.

As additional consideration for the Termination Agreement we agreed to issue 1,500,000 shares of our common stock to the landlord contingent upon and immediately prior to the first to occur of any of the following events: (i) the closing of an equity financing in a transaction or series of related transactions where such financing yields gross proceeds to us of at least $4 million in the aggregate, including amounts converted under any convertible promissory notes; (ii) a merger into another entity if the combined market capitalization of the merging entities is at least $18 million or, if not, upon our market capitalization as the surviving entity of a merger being at least $18 million at any time after the merger; (iii) a sale of all or substantially all of our assets; or (iv) a sale of our stock after which sale a majority of the outstanding equity is held by persons or entities who were not our shareholders prior to the sale.

We leased space for research and development in Cambridge, Massachusetts under an operating lease expiring in 2012. In February 2012, we announced that we were closing our Cambridge site and we entered into a sublease with a third party for the remainder of the lease term.

Contingencies - We are subject to various legal proceedings and claims that arise in the ordinary course of business. Our management currently believes that resolution of such legal matters will not have a material adverse impact on our consolidated financial position, results of operations or cash flows.

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Business, Reduction of Operations, Going Concern, Recent Financing Activities and Basis of Preparation and Summary of Significant Accounting Policies (Policy)

9 Months Ended

Sep. 30, 2012

Business, Reduction of Operations, Going Concern, Recent Financing Activities, and Basis of Preparation and Summary of Significant Accounting Policies [Abstract]

Basis of Preparation

Basis of Preparation - The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by U.S. generally accepted accounting principles for complete financial statements. The accompanying unaudited financial information should be read in conjunction with the audited consolidated financial statements, including the notes thereto, as of and for the year ended December 31, 2011, included in our 2011 Annual Report on Form 10-K filed with the SEC. The information furnished in this report reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for each period presented. The results of operations for the interim period ended September 30, 2012 are not necessarily indicative of the results for the year ending December 31, 2012 or for any future period.

Use of Estimates

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting periods. Estimates having relatively higher significance include revenue recognition, research and development costs, stock-based compensation, valuation of warrants and subscription investment units, valuation and estimated lives of identifiable intangible assets, impairment of long-lived assets, estimated accrued restructuring charges and income taxes. Actual results could differ from those estimates.

Restricted Cash

Restricted Cash - Amounts pledged as collateral underlying letters of credit for facility lease deposits are classified as restricted cash.

Fair Value of Financial Instruments

Fair Value of Financial Instruments - We consider the fair value of cash, restricted cash, accounts payable and accrued liabilities to not be materially different from their carrying value. These financial instruments have short-term maturities.

We follow authoritative guidance with respect to fair value reporting issued by the Financial Accounting Standards Board ("FASB") for financial assets and liabilities, which defines fair value, provides guidance for measuring fair value and requires certain disclosures. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

We currently measure and report at fair value our liability for price adjustable warrants and subscription investment units using the Black-Scholes-Merton valuation model using Level 3 inputs. The following tables summarize our liabilities measured at fair value on a recurring basis as of September 30, 2012 (in thousands):

	Balance at September 30, 2012		Level 1 Quoted prices in active markets for identical assets		Level 2 Significant other observable inputs		Level 3 Significant unobservable inputs
Liabilities:
Fair value liability for price adjustable warrants and subscription investment units	$	2,477		-		-	$	2,477
Total liabilities at fair value	$	2,477		-		-	$	2,477

The following presents activity of the fair value liability of price adjustable warrants and subscription investment units determined by Level 3 inputs (in thousands, except per share data):

				Weighted average as of each measurement date
	Fair value liability for price adjustable warrants and subscription investment units (in thousands)			Exercise Price		Stock Price		Volatility			Contractual life in years		Risk free rate
Balance at December 31, 2011	$	3,485		$	0.76	$	0.89		124	%		5.4		0.9	%
Fair value of warrants issued		2,561			0.28		0.49		127	%		5.5		0.8	%
Reclassification to equity upon exercise of warrants		(291	)		0.51		0.74		135	%		5.0		0.7	%
Change in fair value included in statement of operations		(3,278	)
Balance at September 30, 2012	$	2,447		$	0.25	$	0.28		143	%		4.7		0.9	%

Property and equipment

Property and equipment - Long-lived assets include property and equipment. These assets are recorded at our original cost and are increased by the cost of any significant improvements after purchase. Property and equipment assets are depreciated evenly over the estimated useful life of the individual assets. Depreciation begins when the asset is ready for its intended use. For tax purposes, accelerated depreciation methods are used as allowed by tax laws.

Identifiable intangible assets

Identifiable intangible assets - Intangible assets associated with in-process research and development ("IPR&D") projects acquired in business combinations are not amortized until approval is obtained in a major market, typically either the U.S. or the European Union, or in a series of other countries, subject to certain specified conditions and management judgment. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated.

Impairment of long-lived assets

Impairment of long-lived assets - We review all of our long-lived assets for impairment indicators throughout the year and we perform detailed testing whenever impairment indicators are present. In addition, we perform detailed impairment testing for indefinite-lived intangible assets at least annually. When necessary, we record charges for impairments. Specifically:

· For finite-lived intangible assets, such as developed technology rights, and for other long-lived assets, such as property and equipment, we calculate the undiscounted amount of the projected cash flows associated with the asset, or asset group, and compare this estimated amount to the carrying amount. If the carrying amount is found to be greater, we record an impairment loss for the excess of book value over fair value. In addition, in all cases of an impairment review, we re-evaluate the remaining useful lives of the assets and modify them, as appropriate.

· For indefinite-lived intangible assets, such as IPR&D assets, each year and whenever impairment indicators are present, we determine the fair value of the asset and record an impairment loss for the excess of book value over fair value, if any.

Net Loss Per Common Share

Net Loss Per Common Share - Basic and diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share excludes the effect of common stock equivalents (stock options, unvested restricted stock, warrants and subscription investment units) since such inclusion in the computation would be anti-dilutive. The following numbers of shares have been excluded for periods ended September 30:

	2011		2012
Stock options outstanding		611,657		358,373
Warrants		4,956,005		11,251,086
Subscription investment units		25,000		0
Total		5,592,662		11,609,459

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Stock Incentive Plans (Narrative) (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Stock Incentive Plans [Abstract]
Options to purchase shares of common stock outstanding		358,373		578,257
Common stock available for future grants or awards		568,429
Per-share fair value of stock options granted	$ 1.7		$ 1.7
Unrecognized compensation cost related to unvested stock options		$ 0.2
Unrecognized compensation cost related to unvested stock options, recognition period		1 year 9 months 18 days
Closing market price		$ 0.28
Common stock reserved for issuance		65,000
Shares issued under ESPP		18,141
ESPP price as a percent of fair market value		85.00%

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Stock Incentive Plans (Tables)

9 Months Ended

Sep. 30, 2012

Stock Incentive Plans [Abstract]

Schedule of Stock-Based Compensation Expense

Stock-based Compensation - The following table summarizes stock-based compensation expense (in thousands):

	Three Months ended September 30,					Nine months ended September 30,
	2011		2012			2011		2012
Stock-based compensation:
Research and development	$	103	$	34		$	295	$	186
Selling, general and administrative		13		(33	)		393		159
Total stock-based compensation	$	116	$	1		$	688	$	345

Schedule of Stock Option Activity

The following table summarizes stock option activity during the nine months ended September 30, 2012:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
								(in thousands)
Outstanding December 31, 2011		578,257		$	26.22
Options expired		(15,446	)		60.43
Options forfeited		(204,438	)		2.27
Outstanding at September 30, 2012		358,373		$	38.41		5.9 years	$	-
Exercisable at September 30, 2012		254,860		$	52.71		4.6 years	$	-

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Concentration of Credit Risk and Significant Customers (Details) (Revenues [Member])	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Concentration Risk [Line Items]
Percentage of revenue	100.00%	100.00%	100.00%	100.00%
Novartis [Member]
Concentration Risk [Line Items]
Percentage of revenue	95.00%	0.00%	36.00%	0.00%
Monsanto [Member]
Concentration Risk [Line Items]
Percentage of revenue	5.00%	0.00%	54.00%	0.00%
Mirna [Member]
Concentration Risk [Line Items]
Percentage of revenue	0.00%	0.00%	4.00%	0.00%
Debiopharm [Member]
Concentration Risk [Line Items]
Percentage of revenue	0.00%	91.00%	1.00%	63.00%
Astra Zeneca [Member]
Concentration Risk [Line Items]
Percentage of revenue	0.00%	0.00%	0.00%	9.00%
Undisclosed Partner #1 [Member]
Concentration Risk [Line Items]
Percentage of revenue	0.00%	0.00%	0.00%	8.00%
Other [Member]
Concentration Risk [Line Items]
Percentage of revenue	0.00%	9.00%	5.00%	20.00%

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Condensed Consolidated Statement of Stockholders' Equity (USD $) In Thousands, except Share data	Total	Common Stock and Additional Paid-In Capital [Member]	Accumulated Deficit [Member]
Balance at Dec. 31, 2011	$ 38	$ 320,232	$ (320,194)
Balance, shares at Dec. 31, 2011	10,438,912	10,438,912
Proceeds from the issuance of common shares and warrants, net	1,111	1,111
Proceeds from the issuance of common shares and warrants, net, shares		1,600,002
Shares issued in connection with license agreement	233	233
Shares issued in connection with license agreement, shares		340,906,000
Fractional shares redeemed, shares		(104)
Proceeds from employee stock purchase plan purchases	2	2
Proceeds from employee stock purchase plan purchases, shares		3,908
Reclassification of fair value liability for price adjustable warrants exercised	291	291
Reclassification of fair value liability for price adjustable warrants exercised, shares		187,006,000
Shares issued in connection with settlement of liabilities	1,124	1,124
Shares issued in connection with settlement of liabilities, shares		3,596,126
Compensation related to stock options and employee stock purchase plan, net of forfeitures	345	345
Net loss	(5,494)		(5,494)
Balance at Sep. 30, 2012	$ (2,350)	$ 323,338	$ (325,688)
Balance, shares at Sep. 30, 2012	16,166,756	16,166,756

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Stockholders' Equity

9 Months Ended

Sep. 30, 2012

Stockholders' Equity [Abstract]

Stockholders' Equity

Note 4 - Stockholders' Equity

Preferred Stock - Our board of directors has the authority, without action by the stockholders, to designate and issue up to 100,000 shares of preferred stock in one or more series and to designate the rights, preferences and privileges of each series, any or all of which may be greater than the rights of our common stock. We have designated 1,000 shares of preferred stock as Series B Preferred Stock and 90,000 shares of preferred stock as Series A Junior Participating Preferred Stock. No shares of Series B Preferred Stock or Series A Junior Participating Preferred Stock are outstanding.

Series B Preferred Stock/Socius Purchase Agreement - On December 22, 2011, we entered into a Securities Purchase Agreement with Socius CG II, Ltd., or Socius, pursuant to and subject to the conditions of which, we had the right, in our sole discretion, over a term of two years, to demand through the delivery of separate tranche notices that Socius purchase up to a total of $5 million of Series B Preferred Stock. The delivery of a tranche notice by us to Socius would have triggered the automatic vesting and automatic exercise of both the additional investment right to purchase shares of our common stock that we granted to Socius in the purchase agreement, and the warrant to purchase shares of our common stock that we issued to Socius on December 29, 2011 upon the closing of the purchase agreement. On March 20, 2012, we notified Socius that we were terminating the purchase agreement, effective thirty (30) days from the date of such notice. We did not deliver any tranche notices to Socius during the term of the facility created by the purchase agreement, and as a result we did not issue, and are under no obligation to issue, any shares of Series B Preferred Stock, or any shares of our common stock issuable upon the automatic exercise of the additional investment right and the warrant, to Socius.

Upon the closing of the purchase agreement, on December 29, 2011 we delivered to Socius an unvested and therefore unexercisable warrant to purchase up to 1,305,970 shares of our common stock at an initial exercise price of $1.34 per share. The exercise price of the warrant and the number of shares of common stock issuable upon exercise thereof were subject to adjustment from time to time. In connection with each tranche notice delivered to Socius under the purchase agreement, a portion of the warrant equal to a number of shares calculated by dividing (1) 37% of the dollar amount of the tranche of Series B Preferred Stock by (2) the closing bid price of the common stock for the most recently completed trading day prior to the delivery or deemed delivery of the tranche notice would vest and be automatically exercised. At each time of delivery or deemed delivery of a tranche notice, the number of shares of common stock underlying the warrant would also be adjusted immediately prior to the automatic exercise such that after such adjustment the aggregate exercise price for the adjusted number of shares would be equal to the aggregate exercise price in effect immediately prior to such adjustment. The warrant expired unexercisable in April 2012 as a result of our termination of the facility created by the purchase agreement.

Stockholder Rights Plan - In 2000, our board of directors adopted a stockholder rights plan and declared a dividend of one preferred stock purchase right for each outstanding share of common stock. Each right entitles the holder, once the right becomes exercisable, to purchase from us one one-thousandth of a share of our Series A Junior Participating Preferred Stock, par value $.01 per share. We issued these rights in March 2000 to each stockholder of record on such date, and these rights attach to shares of common stock subsequently issued. The rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our board of directors and could, therefore, have the effect of delaying or preventing someone from taking control of us, even if a change of control were in the best interest of our stockholders.

Holders of our preferred share purchase rights are generally entitled to purchase from us one one-thousandth of a share of Series A preferred stock at a price of $50.00, subject to adjustment as provided in the Stockholder Rights Agreement. These preferred share purchase rights will generally be exercisable only if a person or group becomes the beneficial owner of 15 percent or more of our outstanding common stock or announces a tender offer for 15 percent or more of our outstanding common stock. Each holder of a preferred share purchase right, excluding an acquiring entity or any of its affiliates, will have the right to receive, upon exercise, shares of our common stock, or shares of stock of the acquiring entity, having a market value equal to two times the purchase price paid for one one-thousandth of a share of Series A preferred stock. The preferred share purchase rights expire on March 17, 2013. We have designated 90,000 shares of preferred stock as Series A Junior Participating Preferred stock.

Common Stock - Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the holders of our common stock. Subject to the rights of the holders of any class of our capital stock having any preference or priority over our common stock, the holders of shares of our common stock are entitled to receive dividends that are declared by our board of directors out of legally available funds. In the event of our liquidation, dissolution or winding-up, the holders of common stock are entitled to share ratably in our net assets remaining after payment of liabilities, subject to prior rights of preferred stock, if any, then outstanding. Our common stock has no preemptive rights, conversion rights, redemption rights or sinking fund provisions, and there are no dividends in arrears or default. All shares of our common stock have equal distribution, liquidation and voting rights, and have no preferences or exchange rights. On July 14, 2011, our shareholders approved a proposal to change our capital structure by increasing the number of authorized shares of common stock from 90,000,000 to 180,000,000.

In February 2011, in connection with a public offering that we conducted utilizing a $50 million shelf registration statement which was declared effective by the SEC in September 2010, we received net proceeds of approximately $4.5 million from an offering of 637,500 units, each comprised of one share of our common stock and 0.1746 of a warrant, each to purchase one share of our common stock, at a purchase price of $8.00 per unit. We issued an aggregate of 637,500 shares of common stock and warrants to purchase up to an aggregate of 111,308 shares of our common stock in connection with this offering.

In May 2011, in connection with a public offering that we conducted utilizing a registration statement on Form S-1 which was declared effective by the SEC on May 11, 2011, we received net proceeds of approximately $6.3 million from an offering of an aggregate of (i) 2,231,850 units and (ii) 2,231,850 Series B Warrants, each to purchase one unit, at a purchase price of $3.90 per unit. Each unit consists of (x) one share of common stock and (y) one Series A Warrant to purchase one share of common stock. Prior to their July 12, 2011 expiration date, 2,229,350 Series B Warrants were exercised which resulted in additional net proceeds of approximately $3.1 million.

In September 2011, we entered into an agreement to terminate our lease for 3450 Monte Villa Parkway, Bothell, Washington, which eliminated our future lease obligations, and pursuant to which we issued 780,000 shares of our common stock to certain affiliates of the landlord. The estimated fair value of the shares issued was approximately $1.5 million on the date of issuance and was recorded as an increase in common stock and additional paid-in capital and as a decrease to the previously recorded restructuring liability. We agreed to prepare and file with the SEC, on or before February 1, 2012, a registration statement on Form S-3 covering the resale of all of such shares, and to use our continuing best efforts to cause such registration statement to be become and remain effective for so long as the landlord's affiliates hold any shares. If the resale registration statement is not initially filed on or before February 1, 2012, or declared effective by the SEC by April 1, 2012, each a registration default, we agreed to pay the landlord $10,000 for each month or portion thereof that the registration default continues. We have not filed a registration statement on Form S-3 and we have recorded a liability for $20,000 for the registration default for the months of February and March 2012.

On October 11, 2011, we entered into the Purchase Agreement with Lincoln Park Capital ("LPC"), whereby LPC agreed to purchase up to $15 million of our common stock over a thirty (30) month period. We also entered into a registration rights agreement with LPC pursuant to which we agreed to file a registration statement related to the transaction with the SEC covering the shares that have been issued or may be issued to LPC under the Purchase Agreement. The SEC declared the registration statement effective on October 31, 2011. Pursuant to the Purchase Agreement, we had the right, in our sole discretion, over a 30-month period following the effective date of the registration statement to sell up to $15 million of our common stock to LPC, depending on certain conditions as set forth in the Purchase Agreement.

There were no upper limits to the price LPC may pay to purchase shares of our common stock, and the purchase price of the shares related to the future funding under the Purchase Agreement was based on the prevailing market prices of the common stock immediately preceding the time of sales without any fixed discount. LPC did not have the right or the obligation to purchase any shares of our common stock on any business day that the price of the common stock was below the floor price of $1.00 per share as set forth in the Purchase Agreement. We could not issue more than 1,777,913 shares in connection with the Purchase Agreement, unless the average purchase price of all shares of common stock issued by us to LPC equaled or exceeded $2.25 per share.

In consideration for entering into the Purchase Agreement, we issued to LPC 145,279 shares of common stock as a commitment fee and were required to issue to LPC up to 290,557 shares of common stock pro rata when and if LPC purchased, at our discretion, the $15 million of common stock over the 30-month period. We also issued to LPC an additional 5,000 shares of common stock as an expense reimbursement. We terminated the Purchase Agreement effective March 20, 2012. Prior to the termination of the Purchase Agreement, we issued a total of 1,544,901 shares to LPC under this agreement and received proceeds of approximately $1.8 million in 2011.

In March 2012, in connection with a public offering that we conducted utilizing a $50 million shelf registration statement which was declared effective by the SEC in September 2010, we received net proceeds of approximately $1.1 million from a registered direct offering of 1,600,002 units, each comprised of one share of our common stock and 0.5 of a warrant, each to purchase one share of our common stock, at a purchase price of $0.75 per unit. We issued an aggregate of 1,600,002 shares of common stock and warrants to purchase up to an aggregate of 800,001 shares of our common stock in connection with this offering.

In August, October and November 2012 we issued to eleven of our vendors an aggregate of approximately 3.8 million shares of our common stock to settle outstanding amounts due to such vendors in the aggregate amount of approximately $1.2 million. We also agreed to issue an additional 87,254 shares to settle approximately $20,000 in amounts due to one vendor contingent upon and immediately prior to the first to occur of any of the following events: (i) the closing of an equity financing in a transaction or series of related transactions where such financing yields gross proceeds to us of at least $4 million in the aggregate, including amounts converted under any convertible promissory notes; (ii) a merger into another entity if the combined market capitalization of the merging entities is at least $18 million or, if not, upon our market capitalization as the surviving entity of a merger being at least $18 million at any time after the merger; (iii) a sale of all or substantially all of our assets; or (iv) a sale of our stock after which sale a majority of the outstanding equity is held by persons or entities who were not our shareholders prior to the sale.

Effective as of October 1, 2012, we entered into a Lease Termination Agreement with Ditty Properties Limited Partnership (the "Landlord") with respect to our facilities located at 3830 Monte Villa Parkway, Bothell, WA. As additional consideration, we agreed to issue 1,500,000 shares of our common stock to the landlord contingent upon and immediately prior to the first to occur of any of the following events: (i) the closing of an equity financing in a transaction or series of related transactions where such financing yields gross proceeds to us of at least $4 million in the aggregate, including amounts converted under any convertible promissory notes; (ii) a merger into another entity if the combined market capitalization of the merging entities is at least $18 million or, if not, upon our market capitalization as the surviving entity of a merger being at least $18 million at any time after the merger; (iii) a sale of all or substantially all of our assets; or (iv) a sale of our stock after which sale a majority of the outstanding equity is held by persons or entities who were not our shareholders prior to the sale.

NASDAQ Deficiency Notice - On March 25, 2011, we received a letter from the Listing Qualifications Department of The NASDAQ Stock Market ("NASDAQ") notifying us that we were not in compliance with the minimum $1.00 per share minimum bid price requirement for continued inclusion on The NASDAQ Global Market set forth in NASDAQ Marketplace Rule 5450(a)(1) (the "Rule"), as a result of the bid price of our common stock having closed below $1.00 for the 30 consecutive business days prior to the date of the letter. NASDAQ's letter advised us that we had until September 21, 2011 to regain compliance with the Rule.

We did not regain compliance with the Rule on or prior to September 21, 2011 and, accordingly, on September 22, 2011, we received a staff determination letter from NASDAQ stating that our common stock would be subject to delisting from The Nasdaq Global Market as a result of the deficiency. Following a hearing before the NASDAQ Listing Qualifications Panel on October 27, 2011, the Listing Qualifications Panel allowed us until January 31, 2012 to regain compliance with the Rule. On February 1, 2012, we were notified that the Listing Qualifications Panel had determined to delist our common stock from the Nasdaq Stock Market, and to suspend trading in the shares effective at the open of business on February 2, 2012. Our common stock began trading on the OTCQX tier of the OTC Markets commencing on February 2, 2012, and it continued to trade on the OTCQX tier of the OTC Markets until July 10, 2012, following which it began trading on the OTC Pink tier of the OTC Markets.

Warrants - In connection with offerings of our common stock and notes payable, we have issued warrants to purchase shares of our common stock, some of which provide that the exercise price of the warrant will be reduced in the event of subsequent financings at an effective price per share less than the exercise price of the warrants, subject to certain exceptions and limitations.

On February 7, 2011, the exercise price of warrants to purchase 68,626 shares which we issued in November 2010 was adjusted to $10.60 per share. These warrants are no longer subject to adjustment except in connection with stock splits, dividends, and other similar events.

In February 2011, as part of a public offering, we issued warrants to purchase 111,308 shares of common stock at an exercise price of $8.00 per share. The warrants are exercisable until February 15, 2018, and the exercise price of such warrants is not subject to adjustment in connection with a subsequent financing at an effective price per share less than the exercise price of the warrants.

In May 2011, as part of a public offering, we issued 2,231,850 Series A Warrants to purchase shares of common stock at an initial exercise price of $3.90 per share, which exercise price is subject to adjustment in connection with a subsequent financing at an effective price per share less than the exercise price of such warrants. The Series A Warrants are exercisable during the period beginning on May 21, 2012 and ending on May 21, 2017. As a result of the issuance of warrants to the holders of our secured notes payable, the exercise price of the Series A Warrants adjusted to $0.508 per share in February 2012, and adjusted to $0.28 per share in August 2012. In May 2012, we issued 187,006 shares of common stock as a result of the exercise of 440,000 Series A Warrants on a cashless basis.

In May 2011, we also issued 2,231,850 Series B Warrants, each to purchase one unit consisting of one share of common stock and one Series A Warrant, at an initial exercise price of $3.10 per unit, subject to adjustment, during the period ending on July 12, 2011. From May 20, 2011 to June 30, 2011, 712,150 of the Series B Warrants were exercised, resulting in proceeds of approximately $2.2 million and the issuance of an additional 712,150 Series A Warrants. As per the terms of the Series B Warrants, the exercise price of the Series B Warrants adjusted to $1.28 per unit at the close of trading on July 5, 2011, which adjustment was retroactively effective to June 29, 2011. Holders of the Series B Warrants that were exercised during the period beginning on June 29, 2011 and ending on July 5, 2011 were entitled to a refund of a portion of their previously paid exercise price if the exercise price adjusted to less than $3.10 per unit. The amount of the refund for each Series B Warrant was equal to the difference between the initial exercise price of the Series B Warrant ($3.10 per unit) and the adjusted exercise price of the Series B Warrant ($1.28 per unit). An aggregate of 600,500 Series B Warrants were exercised on June 29 and June 30, with respect to which we paid a refund in the aggregate amount of approximately $1.1 million to the warrant holders on July 6, 2011 and the remaining $0.4 million was reclassified to equity. From July 1, 2011 to the expiration date of July 12, 2011, 1,517,200 Series B Warrants were exercised resulting in additional net proceeds of approximately $2.0 million and the issuance of an additional 1,517,200 Series A Warrants. Total net proceeds received from the exercises of the Series B Warrants was approximately $3.1 million. On July 12, 2011, the remaining 2,500 Series B Warrants expired unexercised.

On February 10, 2012, we entered into a Note and Warrant Purchase Agreement pursuant to which we issued to certain accredited investors 15% secured promissory notes in the aggregate principal amount of $1.5 million and warrants to purchase up to 3,690,944 shares of common stock. The warrants had an initial exercise price of $0.508 per share, which was subject to adjustment (including in connection with subsequent financings), and are exercisable for a period of five years beginning six months and one day following the issuance of the warrants. The purchase agreement and the notes issued pursuant thereto have been amended to extend the maturity date of the notes from May 14, 2012 until December 31, 2012, to issue warrants to purchase up to an additional 3,199,848 shares of our common stock to the noteholders, and to decrease the exercise price of all of the warrants that we issued to the noteholders to $0.28 per share. As a result of the amendments to the purchase agreement and notes we issued the following warrants: (i) in April 2012 we issued 489,033 warrants at an exercise price of $0.56 per share; (ii) in May 2012 we issued 425,100 warrants at an exercise price of $0.64 per share; (iii) in August 2012 we issued 1,250,000 warrants at an exercise price of $0.28 per share and adjusted the exercise price of all of the outstanding warrants issued to the noteholders to $0.28; and (iv) in October 2012 we issued 1,035,715 warrants at an exercise price of $0.28 per share. In addition, we and the noteholders agreed that if we, at any time prior to December 31, 2012, effect any merger or consolidation of our company whereby the holders of the issued and outstanding shares of our common stock immediately prior to the consummation of such transaction hold less than fifty percent (50%) of the issued and outstanding shares of the voting securities of the surviving corporation immediately following the consummation of such transaction, we will have fully satisfied our obligation to repay the entire unpaid principal balance under the notes and all accrued and unpaid interest thereon through the issuance to the noteholders of an aggregate number of shares of common stock calculated by converting the then total outstanding principal and interest under the notes at a value of $0.28 per share of common stock.

On March 22, 2012, as part of a registered direct offering of shares of our common stock and warrants to purchase shares of our common stock, we entered into a Securities Purchase Agreement pursuant to which we issued warrants to purchase up to 800,001 shares of our common stock. The warrants have an exercise price of $0.75 per share, are immediately exercisable, and will be exercisable for a period of five years from the date of issuance. The exercise price and the number of shares issuable upon exercise of the warrants are subject to adjustment in the event of stock splits or dividends, business combinations, sale of assets or other similar transactions, but not as a result of future securities offerings at lower prices.

The following summarizes warrant activity during the nine months ended September 30, 2012:

	Warrant Shares			Weighted Average Exercise Price
Warrants outstanding, December 31, 2011		6,261,978		$	3.82
Warrants issued		6,809,705			0.52
Warrants expired		(1,380,597	)		1.34
Warrants exercised		(440,000	)		0.51
Warrants outstanding, September 30, 2012		11,251,086		$	2.26

Subscription investment units - In November 2010, we issued subscription investment units to purchase during the 16-month period following the date of issuance, an aggregate of 242,355 shares of common stock at a per share exercise price equal to the lesser of (i) $22.10, and (ii) 90% of the quotient of (x) the sum of the three lowest volume-weighted average price of the common stock for any three trading days during the ten (10) consecutive trading day period ending and including the trading day immediately prior to the applicable exercise date, divided by (y) three (3). On March 5, 2012, the remaining 25,000 subscription investment units expired unexercised.

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Notes Payable (Narrative) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended					9 Months Ended
	Oct. 31, 2012	Aug. 31, 2012	May 31, 2012	Apr. 30, 2012	Feb. 29, 2012	Sep. 30, 2012	Sep. 30, 2011	Mar. 31, 2012	Feb. 10, 2012
Notes Payable [Abstract]
Proceeds from issuance of notes payable and warrants					$ 1,500	$ 1,500
Number of shares issuable through warrant		3,199,848						800,001	3,690,944
Number of warrants issued	1,035,715	1,250,000	425,100	489,033
Exercise price of warrants	0.28	0.28	0.64	0.56		0.28		0.75	0.508
Class of warrant, ownership threshold						50.00%

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Contractual Agreements (Details)	3 Months Ended		9 Months Ended			12 Months Ended							1 Months Ended			9 Months Ended			1 Months Ended		1 Months Ended								1 Months Ended
	Sep. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Sep. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Nov. 28, 2012 Tekmira [Member] USD ($)	Dec. 31, 2009 Novartis [Member] USD ($)	Aug. 02, 2012 Novartis [Member] USD ($)	Mar. 31, 2009 Novartis [Member] USD ($)	May 03, 2012 Monsanto [Member] USD ($)	Mar. 13, 2012 ProNAi Therapeutics, Inc. [Member] USD ($)	Dec. 22, 2011 Mirna Therapeutics [Member] USD ($)	Feb. 28, 2011 Debiopharm S.A. [Member] USD ($)	Mar. 31, 2010 Valeant Pharmaceuticals [Member] USD ($)	Dec. 31, 2011 Novosom [Member] USD ($)	Jul. 31, 2010 Novosom [Member] USD ($)	Sep. 30, 2012 Novosom [Member]	Oct. 21, 2012 Roche [Member] USD ($)	Feb. 28, 2009 Roche [Member] USD ($)	May 31, 2008 University of Michigan [Member] USD ($)	Jun. 30, 2008 University of Helsinki [Member] EUR (€)	May 31, 2011 Ribotask ApS [Member] USD ($)	Mar. 31, 2011 Ribotask ApS [Member] USD ($)	Nov. 30, 2010 Ribotask ApS [Member] USD ($)	Jun. 30, 2010 Ribotask ApS [Member] USD ($)	Jun. 30, 2009 Ribotask ApS [Member] USD ($)	Feb. 28, 2009 Ribotask ApS [Member] USD ($)	Oct. 31, 2008 Ribotask ApS [Member] USD ($)	Aug. 31, 2010 Cypress Bioscience, Inc. [Member] USD ($)	Jan. 31, 2009 Amylin Pharmaceuticals, Inc. [Member] USD ($)	Dec. 31, 2006 Amylin Pharmaceuticals, Inc. [Member] USD ($)
Contractual Agreements [Line Items]
One-time, initial license fee					$ 300,000		$ 1,000,000	$ 7,250,000	$ 1,500,000								$ 1,000,000	$ 5,000,000										$ 750,000
Days notice required to terminate agreement					90					90	60		30																60
License revenue						300,000
Potential upfront revenue										14,000,000	63,000,000	24,000,000
Potential total revenue from agreement																												27,000,000	89,000,000	80,000,000
Possible milestone payment													5,000,000							275,000
Possible second milestone payment													2,000,000
Minimum earn-out payments needed													5,000,000
Conditional annual payments													50,000
Shares issued for intellectual property															1,419,490	340,906						11,377			15,152
Value of shares issued for intellectual property															3,800,000							80,000			1,000,000
Additional consideration for assets, percentage															30.00%
Maximum additional consideration for assets															3,300,000
Research and development expense	753,000	2,955,000	4,506,000	9,077,000									500,000	100,000
License issue fee																			120,000
Annual license fee payable																			25,000
Royalty advance																				250,000
Payments related to intellectual property																						400,000		750,000	1,000,000	250,000	500,000
Accelerated milestone revenue																													1,000,000
Installment payments amount																					$ 50,000		$ 250,000	$ 250,000	$ 250,000
Number of installment payments																						8		3	4

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2012

Stockholders' Equity [Abstract]

Schedule of Warrant Related Activity

The following summarizes warrant activity during the nine months ended September 30, 2012:

	Warrant Shares			Weighted Average Exercise Price
Warrants outstanding, December 31, 2011		6,261,978		$	3.82
Warrants issued		6,809,705			0.52
Warrants expired		(1,380,597	)		1.34
Warrants exercised		(440,000	)		0.51
Warrants outstanding, September 30, 2012		11,251,086		$	2.26