ICOS Icos

ICOS Corporation (Nasdaq:ICOS) today released its financial results for the three and nine months ended September 30, 2005 and summarized recent events. Lilly ICOS LLC (Lilly ICOS), a 50/50 joint venture between ICOS Corporation and Eli Lilly and Company that is marketing Cialis(R) (tadalafil)(1) for the treatment of erectile dysfunction (ED), reported 2005 third quarter net income of $19.8 million, compared to a net loss of $21.4 million in the 2004 third quarter -- an improvement of $41.2 million. Profitability was achieved as a result of sustained growth in sales of Cialis around the world and reductions in marketing and selling expenses. Worldwide sales of Cialis in the third quarter of 2005, totaled $195.1 million, an increase of 27% compared to $154.1 million in the third quarter of 2004. For the nine months ended September 30, 2005, Lilly ICOS reported a net loss of $23.6 million, compared to a net loss of $230.6 million for the nine months ended September 30, 2004. Worldwide sales of Cialis for the first nine months of 2005, totaled $536.1 million, an increase of 34% compared to $399.6 million in the first nine months of 2004. Lilly ICOS recently announced positive results with tadalafil from a double-blind, placebo-controlled clinical study in the treatment of urinary symptoms in men with benign prostatic hyperplasia (BPH). The Phase 2 proof-of-concept study demonstrated clinically meaningful and statistically significant improvement in the primary endpoint, the International Prostate Symptom Score (IPSS). In addition, tadalafil demonstrated statistically significant improvement relative to placebo on most of the secondary endpoints included in the study. "We are extremely pleased with the robust results of the Phase 2 proof-of-concept study in BPH," commented Paul Clark, ICOS Chairman, President and CEO. "In this study, a new mechanism -- a PDE5 inhibitor -- delivered promising results that, if confirmed in Phase 3 studies, might offer a new, once-a-day treatment of urinary symptoms for men with BPH. For the more than 50 percent of men with BPH who also suffer from ED, tadalafil might offer a unique profile." David Goodkin, M.D., ICOS Senior Vice President and Chief Medical Officer, added, "Other treatment opportunities are also being pursued with tadalafil, including pulmonary arterial hypertension, a rare but life-threatening disease, and hypertension, a common disorder which dramatically increases the risk of cardiovascular complications. Tadalafil relaxes smooth muscle cells within the walls of blood vessels. As a result, we think tadalafil may have potential as a once-a-day treatment for these conditions." Financial Results For the three months ended September 30, 2005, ICOS reported a net loss of $11.5 million ($0.18 per share), compared to a net loss of $26.6 million ($0.42 per share) for the three months ended September 30, 2004. Equity in earnings of Lilly ICOS was $10.0 million in the 2005 third quarter, compared to equity in losses of $10.5 million in the third quarter of 2004, reflecting the aforementioned $41.2 million improvement in Lilly ICOS' results. ICOS Corporation's total revenue was $20.8 million in the third quarter of 2005, compared to $19.7 million in the third quarter of 2004. Collaboration revenue from Lilly ICOS totaled $13.6 million in the 2005 third quarter, compared to $14.0 million in the corresponding period of the prior year. The decrease primarily reflects a reduction in Lilly ICOS' reimbursement of the cost of our sales force, from 100% in 2004, to 60% beginning in January 2005, partially offset by higher revenue for research and development activities conducted on behalf of Lilly ICOS. Co-promotion services revenue was $1.8 million in the 2005 third quarter. We began promoting AndroGel(R) (testosterone gel) to physicians, on behalf of Solvay Pharmaceuticals, Inc., in February 2005. We receive a fee per-sales-call, up to a maximum number of calls. We expect to complete the remaining billable sales calls for this year by the end of November 2005. The agreement will not be extended into 2006. Total operating expenses were $42.0 million for the three months ended September 30, 2005, compared to $35.6 million for the three months ended September 30, 2004. Research and development expenses increased $3.5 million from the three months ended September 30, 2004, to $21.4 million for the three months ended September 30, 2005. The increase was primarily due to higher expenses associated with our discovery and preclinical research programs and incremental development activities being performed by ICOS personnel on behalf of Lilly ICOS, partially offset by the impact of the discontinuation of a clinical program in the 2005 first quarter. For the nine months ended September 30, 2005, ICOS reported a net loss of $80.5 million ($1.26 per share), compared to a net loss of $164.8 million ($2.60 per share) for the nine months ended September 30, 2004. The 2005 decrease is primarily due to lower Lilly ICOS losses, partially offset by the reduced reimbursement of the cost of our sales force. At September 30, 2005, we had cash, cash equivalents, investment securities and associated interest receivable of $167.8 million. Financial Guidance Lilly ICOS' net income for the year ending December 31, 2005, is expected to be around $30 million, plus or minus $7 million. The level of Cialis sales achieved is the primary variable that will affect Lilly ICOS' results for 2005. We presently expect 2005 worldwide Cialis net product sales around $730 million to $750 million. We also expect Lilly ICOS' selling, general and administrative expenses to decline, in the fourth quarter of 2005, compared to both the fourth quarter of 2004 and the third quarter of 2005. We presently expect that ICOS Corporation's net loss for the year ending December 31, 2005, will be in the range of $77 million ($1.20 per share) to $82 million ($1.28 per share), assuming 2005 net income of $30 million for Lilly ICOS. The expected decrease in ICOS' net loss in 2005, compared to $198 million ($3.13 per share) in 2004, is primarily due to our expectation that Lilly ICOS will be profitable in 2005, compared to Lilly ICOS having reported a net loss of $262 million in 2004. ICOS Corporation, a biotechnology company headquartered in Bothell, Washington, is dedicated to bringing innovative therapeutics to patients. Through Lilly ICOS LLC, ICOS is marketing its first product, Cialis (tadalafil), for the treatment of erectile dysfunction. ICOS is working to develop treatments for serious unmet medical needs such as pulmonary arterial hypertension, benign prostatic hyperplasia, hypertension, cancer and inflammatory diseases. Except for historical information contained herein, this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that may cause our results and the timing and outcome of events to differ materially from those expressed in or implied by the forward-looking statements, including risks associated with product commercialization, research and clinical development, regulatory approvals, manufacturing, collaboration arrangements, liquidity, competition, intellectual property claims, litigation and other risks detailed in our latest Quarterly Report on Form 10-Q and our other public filings with the Securities and Exchange Commission. The forward-looking statements contained in this press release represent our judgment as of the date of this release. We undertake no obligation to publicly update any forward-looking statements. The biotechnology and pharmaceutical businesses are risky and there can be no assurance that any of our products or product candidates will achieve commercial success or that competing therapies will not pre-empt market opportunities that might exist for any of our products or product candidates. Conference Call As previously announced, today, beginning at 4:30 p.m. EST, ICOS will host a conference call to review 2005 third quarter financial results and related matters, including financial guidance and plans for the remainder of 2005. The conference call can be accessed as a webcast at www.icos.com, in the Investor/Events section, or by telephone, using the Passcode 795469, live at 612-332-0932, or as a replay at 320-365-3844. The webcast will be available through November 10, 2005. The telephone replay will be available until November 4, 2005 at 8:30 p.m. EST. (1) Cialis(R) is a registered trademark of Lilly ICOS LLC. Selected financial data follows -0- *T ICOS Corporation and Subsidiaries SELECTED CONSOLIDATED FINANCIAL DATA (in thousands, except per share data) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------- 2005 2004 2005 2004 -------- -------- -------- --------- Condensed Consolidated Statements of Operations: Revenue: Lilly ICOS collaboration $ 13,628 $ 13,958 $ 36,681 $ 42,722 Contract manufacturing 5,347 5,786 11,323 11,471 Co-promotion services 1,791 - 4,634 - -------- -------- -------- --------- Total revenue 20,766 19,744 52,638 54,193 -------- -------- -------- --------- Operating expenses: Research and development 21,435 17,933 64,943 52,723 Marketing and selling 10,871 9,827 31,854 29,730 Cost of contract manufacturing 4,350 3,617 9,432 9,121 General and administrative 5,324 4,179 15,296 12,380 -------- -------- -------- --------- Total operating expenses 41,980 35,556 121,525 103,954 -------- -------- -------- --------- Operating loss (21,214) (15,812) (68,887) (49,761) Other income (expense): Equity in income (losses) of Lilly ICOS 10,038 (10,528) (11,330) (114,855) Interest expense (1,704) (1,704) (5,113) (5,120) Interest and other income 1,426 1,444 4,867 4,935 -------- -------- -------- --------- Net loss $(11,454) $(26,600) $(80,463) $(164,801) ======== ======== ======== ========= Net loss per common share - basic and diluted $ (0.18) $ (0.42) $ (1.26) $ (2.60) ======== ======== ======== ========= Weighted-average common shares outstanding - basic and diluted 64,075 63,498 63,940 63,388 ======== ======== ======== ========= Condensed Consolidated Balance Sheets: Sept. 30, Dec. 31, 2005 2004 -------- -------- Cash, cash equivalents, investment securities and interest receivable $167,820 $275,769 Receivable from Lilly ICOS 20,172 15,053 Investment in Lilly ICOS 11,995 - Property and equipment, net 18,383 19,206 Deferred financing costs and other 14,010 14,953 -------- -------- Total assets $232,380 $324,981 ======== ======== Due to Lilly ICOS $ - $ 14,147 Other current liabilities 20,490 25,656 Convertible subordinated debt 278,650 278,650 Stockholders' equity (deficit) (66,760) 6,528 -------- -------- Total liabilities and stockholders' equity (deficit) $232,380 $324,981 ======== ======== ICOS Corporation and Subsidiaries SUMMARIZED OPERATING RESULTS OF LILLY ICOS LLC (in thousands) (unaudited) 2005 ------------------------------------ Q1 Q2 Q3 TOTAL --------- -------- --------- --------- Revenue: Product sales, net United States $ 42,744 $ 71,118 $ 77,438 $191,300 Europe 56,264 60,925 61,992 179,181 Canada and Mexico 12,186 13,839 14,727 40,752 --------- --------- --------- -------- 111,194 145,882 154,157 411,233 Royalties 7,790 9,010 8,172 24,972 -------- -------- -------- -------- Total revenue 118,984 154,892 162,329 436,205 -------- -------- -------- -------- Expenses: Cost of sales (a) 9,752 11,934 12,378 34,064 Selling, general and administrative 137,027 126,232 112,152 375,411 Research and development 13,874 18,413 18,035 50,322 -------- -------- -------- -------- Total expenses 160,653 156,579 142,565 459,797 -------- -------- -------- -------- Net income (loss)(a) $(41,669) $ (1,687) $ 19,764 $(23,592) ======== ======== ======== ======== ICOS Corporation's share of net income (loss) $(20,679) $ (689) $ 10,038 $(11,330) ======== ======== ======== ======== 2004 -------------------------------------------------- Q1 Q2 Q3 Q4 TOTAL ---------- --------- --------- --------- ---------- Revenue: Product sales, net United States $ 32,807 $ 50,768 $ 70,226 $ 52,783 $ 206,584 Europe 36,356 45,301 43,414 52,859 177,930 Canada and Mexico 5,854 8,931 9,380 13,063 37,228 ---------- --------- --------- --------- --------- 75,017 105,000 123,020 118,705 421,742 Royalties 6,652 6,449 6,210 6,809 26,120 --------- -------- -------- -------- --------- Total revenue 81,669 111,449 129,230 125,514 447,862 --------- -------- -------- -------- --------- Expenses: Cost of sales (a) 6,573 8,982 10,173 10,338 36,066 Selling, general and administrative 195,053 157,838 123,222 130,398 606,511 Research and development 18,827 15,119 17,203 16,169 67,318 --------- -------- -------- -------- --------- Total expenses 220,453 181,939 150,598 156,905 709,895 --------- -------- -------- -------- --------- Net income (loss)(a) $(138,784) $(70,490) $(21,368) $(31,391) $(262,033) ========= ======== ======== ======== ========= ICOS Corporation's share of net income (loss) $ (69,237) $(35,090) $(10,528) $(15,541) $(130,396) ========= ======== ======== ======== ========= (a) Cost of sales includes $103 per month of license fee amortization applicable only to Eli Lilly and Company's interest in Lilly ICOS LLC. *T