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Wednesday, October 18, 2006


Besides Amgen, Icos was the only biotech company in the Seattle area that had ever turned a profit. They did so last year. Yesterday they were bought by Eli Lilly for 2.1 billion dollars. Good work guys. Significant layoffs are coming your way.

Icos CEO, Paul Clark, said employees greeted the news with sadness and anxiety but there was enormous "pride in what they built and what they accomplished." The deal was just too good to pass up. Icos has been working with Lilly since 1998 on an erectile disfunction drug called Cialis. It's not a cure for cancer but it's a money maker. Worldwide sales of the drug are on track to bring in between 920 to 950 million dollars. Contrast this with the other leading biotech in Seattle Trubion. They raised 52 million dollars from investors, the low end of what they intended to raise. Their goal was 86 million. If that's a success, imagine being a part of a company that has a drug that will bring in 950 million. Some of that money will count towards a profit! But it's all going away.

The first activity in this deal will involve Eli Lilly handing over 2.1 billion to the investors of Icos. Paul Clark said it would have been "really wonderful from a geographic standpoint" if Icos remained an independent company in the Pacific Northwest. As a businessman, he had to make the best decision for his shareholders. Lilly paid 32$ per share, an 18% premium over Mondays stock price and 32% over the 90 day average. Still rumors of the buyout had people estimating around 36$ per share.

The decreased valuation did generate some discussions on Icos mistakes. First they had a deal with Lilly that prevented outside bidders from jacking up the price. Second they failed to come up with a second drug. Only one airplane landed. Since most biotech companies are actively engaged in futile drug development projects, this piece of Icos was not an asset. Only Cialis is expected to make this deal worth the 2.1 billion. Still, Icos had to try. You must have several drugs in the pipeline. In spite of their mistakes, they made money.

For the investor, Icos is a rare success. One investor, Bill Gates will walk away with 173 million dollars. Here in the Northwest we're not too concerned if Bill gets any more money in his time here on planet earth. In fact, we'd like some of that money to go to some of the others living up here. People who once worked at Icos, making it a company worth 2.1 billion dollars. True, Cialis was what Lilly bought. But there were a lot of people working and earning a living. Now there will be less. It's sad when the Cargo Cults of biotechnology suddenly rise above the norm and actually produce a product. Then they make a profit. Then they go away.

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