ICOS Corporation (Nasdaq: ICOS) today released its financial
results for the quarter and year ended December 31, 2005, and
provided guidance regarding expected financial performance for
2006. "The year 2005 was a very good one, with both ICOS and Lilly
ICOS reporting profitable fourth quarters and Lilly ICOS delivering
its first profitable year," stated Paul Clark, ICOS Chairman and
CEO. "These accomplishments were driven by Lilly ICOS' solid 2005
revenue growth combined with disciplined management of selling,
general and administrative expenses." 2005 Highlights Lilly ICOS,
the 50/50 joint venture between ICOS Corporation and Eli Lilly and
Company that is marketing Cialis(R) (tadalafil) for the treatment
of erectile dysfunction in North America and Europe, reported 2005
net income of $37.8 million, a $300 million improvement compared to
the net loss of $262.0 million reported for 2004. For the three
months ended December 31, 2005, Lilly ICOS reported net income of
$61.4 million, compared to the net loss of $31.4 million in the
fourth quarter of 2004. 2005 worldwide sales of Cialis were $746.6
million, 35% higher than the $552.3 million reported in 2004.
During 2005, Cialis continued to gain market share. In the U.S.,
Cialis captured 25.0% of total prescriptions among PDE5 inhibitors
in December 2005, compared to 20.0% in December 2004(1). In
December 2005, aggregate market share of Cialis in Europe, Canada
and Mexico was 33.2%, compared to 29.0% a year earlier(2). Cialis
has become the market share leader in several countries, including
France, South Africa and Venezuela. During 2005, tadalafil was
evaluated in the treatment of lower urinary tract symptoms in men
with benign prostatic hyperplasia (BPH). The Phase 2 clinical study
demonstrated significant improvement in the primary endpoint, the
International Prostate Symptom Score, a seven-item questionnaire
that assessed the severity of symptoms of BPH and the response to
therapy. In addition, tadalafil demonstrated significant
improvement relative to placebo on most of the secondary endpoints
included in the study. The Phase 2 clinical results will be
presented at the upcoming meetings of the European Association of
Urology and the American Urological Association, in April and May
2006, respectively. Lilly ICOS plans to proceed with a Phase 2b
study this year, which may serve as one of two pivotal studies, to
evaluate multiple doses of tadalafil. The results of the multi-dose
study will be useful in the design of a Phase 3 study for BPH,
expected to begin in 2007. During the third quarter of 2005, Lilly
ICOS initiated clinical studies in additional potential indications
for tadalafil. First, was a Phase 3 study to treat patients with
pulmonary arterial hypertension, a life-threatening disease that
affects an estimated 100,000 people in the U.S. Second, was a Phase
2 study to treat patients with hypertension, a common disorder
which dramatically increases the risk of cardiovascular
complications. It is estimated that there are more than 70 million
people in the U.S. with hypertension. 2005 Full-Year Financial
Results For the year ended December 31, 2005, ICOS reported a net
loss of $74.8 million ($1.17 per share), compared to a net loss of
$198.2 million ($3.13 per share) for the year ended December 31,
2004. Equity in earnings of Lilly ICOS was $19.5 million in 2005,
compared to equity in losses of $130.4 million in 2004, a $149.9
million improvement. Lilly ICOS' 2005 profitability resulted from a
35% increase in worldwide Cialis revenue combined with a 24%
reduction in selling, general and administrative expenses. ICOS
Corporation's total revenue was $71.4 million for the year ended
December 31, 2005, compared to $74.6 million in 2004. Collaboration
revenue from Lilly ICOS totaled $50.1 million for 2005, compared to
$56.0 million in 2004. The decrease primarily reflects the
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 the impact of incremental research and
development activities that we conducted on behalf of Lilly ICOS
during 2005. Co-promotion services revenue was $5.3 million in
2005, representing fees earned under a co-promotion arrangement
with Solvay Pharmaceuticals, Inc., which ended in December 2005.
Total operating expenses were $165.2 million in the year ended
December 31, 2005, compared to $142.0 million in the year ended
December 31, 2004. Research and development expenses increased
$16.5 million from 2004, to $88.3 million in 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 a clinical program
discontinued in the 2005 first quarter. Marketing and selling
expenses increased $3.2 million from 2004, to $42.6 million in
2005. The increase primarily reflects higher sales force costs.
General and administrative expenses increased $2.0 million from
2004, to $20.3 million in 2005. The increase primarily reflects
higher legal expenses and compensation increases. 2005 Fourth
Quarter Financial Results For the three months ended December 31,
2005, ICOS reported net income of $5.6 million ($0.09 per share),
compared to a net loss of $33.4 million ($0.53 per share) for the
three months ended December 31, 2004. Equity in earnings of Lilly
ICOS was $30.8 million in the fourth quarter of 2005, compared to
equity in losses of $15.5 million in the fourth quarter of 2004.
The $46.3 million improvement reflects sustained growth in sales of
Cialis around the world and planned reductions in marketing and
selling expenses. ICOS Corporation's total revenue was $18.8
million in the fourth quarter of 2005, compared to $20.4 million in
the fourth quarter of 2004. The fourth quarter of 2004 included
$2.2 million of revenue from licenses of technology. Total
operating expenses were $43.6 million in the fourth quarter of
2005, compared to $38.0 million in the fourth quarter of 2004,
primarily due to higher research and development expenses. At
December 31, 2005, we had cash, cash equivalents, investment
securities and associated interest receivable of $162.8 million.
Financial Guidance For 2006, we expect that ICOS Corporation's net
loss will be in the range of $5 million ($0.08 per share) to $25
million ($0.39 per share), after considering all stock compensation
expense, including the cost of stock options, determined in
accordance with FASB Standard No. 123R (FAS 123R). We previously
stated that we expected ICOS Corporation to report a "modest"
full-year profit in 2006, before stock compensation expense. As
shown below, that continues to be our expectation: -0- *T 2006 ($
millions) --------------- Expected net loss ($5.0 - $25.0) Expected
total stock compensation expense 31.0 - 29.0 ---------------
Expected income before total stock compensation expense $26.0 -
$4.0 =============== *T On a proforma basis, in accordance with FAS
123R, ICOS Corporation's 2005 total stock compensation expense was
$33.4 million, and its 2005 proforma net loss was $106.1 million
($1.66 per share). The $81 million to $101 million reduction in
ICOS Corporation's net loss, from proforma 2005 to 2006, is
primarily due to our expectations that Lilly ICOS' profitability
will continue to grow during 2006, as Cialis revenues increase and
associated selling, general and administrative expenses decrease.
For 2006, we expect that worldwide sales of Cialis will be between
$860 million and $900 million. Based on that revenue estimate, we
expect that Lilly ICOS' 2006 net income will be in the range of
$210 million to $240 million, with ICOS Corporation's share being
between $105 million and $120 million. The full text of prepared
remarks made by Michael A. Stein, Senior Vice President and Chief
Financial Officer, during today's investor conference call,
regarding 2005 financial results and expectations for 2006, will be
available on the Company's Web site at www.icos.com, in the
Investor/Financial Information section, beginning today at 5:30 pm
Eastern Time, until February 14, 2006 at 5:30 pm Eastern Time. 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 benign prostatic hyperplasia,
hypertension, pulmonary arterial 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. Eastern Time, ICOS will host a conference call to review 2005
financial results and related matters, including financial guidance
for 2006. The conference call can be accessed as a webcast at
www.icos.com, in the Investor/Events section, or by telephone,
using the Passcode 808246, live at 612-332-1213, or as a replay at
320-365-3844. The webcast will be available until February 14, 2006
at 5:30 pm Eastern Time. The telephone replay will be available
until February 8, 2006 at 8:30 pm Eastern Time. (1) IMS National
Prescription Audit Plus(TM), December 2005. (2) IMS Health. IMS
MIDAS, Copyright 2005. -0- *T ICOS Corporation and Subsidiaries
SELECTED CONSOLIDATED FINANCIAL DATA (in thousands, except per
share data) (unaudited) Three Months Ended Year Ended December 31,
December 31, ------------------ ------------------- 2005 2004 2005
2004 -------- -------- -------- --------- Condensed Consolidated
Statements of Operations: Revenue: Lilly ICOS collaboration $
13,374 $ 13,309 $ 50,055 $ 56,031 Contract manufacturing 4,722
4,906 16,045 16,377 Co-promotion services 676 - 5,310 - Licenses of
technology - 2,200 - 2,200 -------- -------- -------- ---------
Total revenue 18,772 20,415 71,410 74,608 -------- --------
-------- --------- Equity in income (losses) of Lilly ICOS 30,849
(15,541) 19,519 (130,396) -------- -------- -------- ---------
Operating expenses: Research and development 23,346 19,068 88,289
71,791 Marketing and selling 10,725 9,662 42,579 39,392 Cost of
contract manufacturing 4,596 3,440 14,028 12,561 General and
administrative 4,979 5,867 20,275 18,247 -------- -------- --------
--------- Total operating expenses 43,646 38,037 165,171 141,991
-------- -------- -------- --------- Operating income (loss) 5,975
(33,163) (74,242) (197,779) Other income (expense): Interest
expense (1,704) (1,704) (6,817) (6,824) Interest and other income
1,350 1,420 6,217 6,355 -------- -------- -------- --------- Net
income (loss) $ 5,621 $(33,447) $(74,842) $(198,248) ========
======== ======== ========= Net income (loss) per common share -
basic $ 0.09 $ (0.53) $ (1.17) $ (3.13) ======== ======== ========
========= Net income (loss) per common share - diluted $ 0.09 $
(0.53) $ (1.17) $ (3.13) ======== ======== ======== =========
Weighted average common shares outstanding - basic 64,167 63,574
63,996 63,435 ======== ======== ======== ========= Weighted average
common shares outstanding - diluted 65,372 63,574 63,996 63,435
======== ======== ======== ========= Condensed Consolidated Balance
Sheets: December 31, ------------------- 2005 2004 --------
-------- Cash, cash equivalents, investment securities and interest
receivable $162,782 $275,769 Receivable from Lilly ICOS 14,300
15,053 Investment in Lilly ICOS 35,497 - Property and equipment,
net 17,995 19,206 Deferred financing costs and other 11,193 14,953
-------- -------- Total assets $241,767 $324,981 ======== ========
Current Liabilities $ 22,387 $ 25,656 Due to Lilly ICOS - 14,147
Convertible subordinated debt 278,650 278,650 Stockholders' equity
(deficit) (59,270) 6,528 -------- -------- Total liabilities and
stockholders' equity (deficit) $241,767 $324,981 ======== ========
ICOS Corporation and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS (in thousands, except per share data) (unaudited)
2005 ----------------------------------------------- Q1 Q2 Q3 Q4
TOTAL -------- -------- -------- ------- -------- Revenue: Lilly
ICOS collaboration $ 10,360 $ 12,693 $ 13,628 $13,374 $ 50,055
Contract manufacturing 2,474 3,502 5,347 4,722 16,045 Co-promotion
services 950 1,893 1,791 676 5,310 Licenses of technology - - - - -
-------- -------- -------- ------- -------- Total revenue 13,784
18,088 20,766 18,772 71,410 -------- -------- -------- -------
-------- Equity in income (losses) of Lilly ICOS (20,679) (689)
10,038 30,849 19,519 -------- -------- -------- ------- --------
Operating expenses: Research and development 22,213 21,295 21,435
23,346 88,289 Marketing and selling 10,434 10,549 10,871 10,725
42,579 Cost of contract manufacturing 1,851 3,231 4,350 4,596
14,028 General and administrative 5,005 4,967 5,324 4,979 20,275
-------- -------- -------- ------- -------- Total operating
expenses 39,503 40,042 41,980 43,646 165,171 -------- --------
-------- ------- -------- Operating income (loss) (46,398) (22,643)
(11,176) 5,975 (74,242) Other income (expense): Interest expense
(1,704) (1,705) (1,704) (1,704) (6,817) Interest and other income
1,718 1,723 1,426 1,350 6,217 -------- -------- -------- -------
-------- Net income (loss) $(46,384) $(22,625) $(11,454) $ 5,621
$(74,842) ======== ======== ======== ======= ======== Net income
(loss) per common share - basic $ (0.73) $ (0.35) $ (0.18) $ 0.09 $
(1.17) ======== ======== ======== ======= ======== Net income
(loss) per common share - diluted $ (0.73) $ (0.35) $ (0.18) $ 0.09
$ (1.17) ======== ======== ======== ======= ======== Weighted
average common shares outstanding - basic 63,799 63,941 64,075
64,167 63,996 ======== ======== ======== ======= ======== Weighted
average common shares outstanding - diluted 63,799 63,941 64,075
65,372 63,996 ======== ======== ======== ======= ======== 2004
------------------------------------------------- Q1 Q2 Q3 Q4 TOTAL
--------- --------- --------- --------- ---------- Revenue: Lilly
ICOS collaboration $ 14,067 $ 14,697 $ 13,958 $ 13,309 $ 56,031
Contract manufacturing 2,456 3,229 5,786 4,906 16,377 Co-promotion
services - - - - - Licenses of technology - - - 2,200 2,200
-------- -------- -------- -------- --------- Total revenue 16,523
17,926 19,744 20,415 74,608 -------- -------- -------- --------
--------- Equity in income (losses) of Lilly ICOS (69,237) (35,090)
(10,528) (15,541) (130,396) -------- -------- -------- --------
--------- Operating expenses: Research and development 17,254
17,536 17,933 19,068 71,791 Marketing and selling 9,797 10,106
9,827 9,662 39,392 Cost of contract manufacturing 2,513 2,991 3,617
3,440 12,561 General and administrative 4,153 4,048 4,179 5,867
18,247 -------- -------- -------- -------- --------- Total
operating expenses 33,717 34,681 35,556 38,037 141,991 --------
-------- -------- -------- --------- Operating income (loss)
(86,431) (51,845) (26,340) (33,163) (197,779) Other income
(expense): Interest expense (1,711) (1,705) (1,704) (1,704) (6,824)
Interest and other income 1,839 1,652 1,444 1,420 6,355 --------
-------- -------- -------- --------- Net income (loss) $(86,303)
$(51,898) $(26,600) $(33,447) $(198,248) ======== ======== ========
======== ========= Net income (loss) per common share - basic $
(1.36) $ (0.82) $ (0.42) $ (0.53) $ (3.13) ======== ========
======== ======== ========= Net income (loss) per common share -
diluted $ (1.36) $ (0.82) $ (0.42) $ (0.53) $ (3.13) ========
======== ======== ======== ========= Weighted average common shares
outstanding - basic 63,237 63,429 63,498 63,574 63,435 ========
======== ======== ======== ========= Weighted average common shares
outstanding - diluted 63,237 63,429 63,498 63,574 63,435 ========
======== ======== ======== ========= ICOS Corporation and
Subsidiaries SUMMARIZED OPERATING RESULTS OF LILLY ICOS LLC (in
thousands) (unaudited) 2005
--------------------------------------------------- Q1 Q2 Q3 Q4
TOTAL ---------- --------- --------- --------- ---------- Revenue:
Product sales, net United States $42,744 $71,118 $77,438 $81,615
$272,915 Europe 56,264 60,925 61,992 65,311 244,492 Canada and
Mexico 12,186 13,839 14,727 18,575 59,327 ---------- ---------
--------- --------- ---------- 111,194 145,882 154,157 165,501
576,734 Royalties 7,790 9,010 8,172 8,997 33,969 ----------
--------- --------- --------- ---------- Total revenue 118,984
154,892 162,329 174,498 610,703 ---------- --------- ---------
--------- ---------- Expenses: Cost of sales(a) 9,752 11,934 12,378
13,200 47,264 Selling, general and administrative 137,027 126,232
112,152 84,416 459,827 Research and development 13,874 18,413
18,035 15,494 65,816 ---------- --------- --------- ---------
---------- Total expenses 160,653 156,579 142,565 113,110 572,907
---------- --------- --------- --------- ---------- Net income
(loss) $(41,669) $(1,687) $19,764 $61,388 $37,796 ==========
========= ========= ========= ========== ICOS Corporation's share
of net income (loss) $(20,679) $ (689) $10,038 $30,849 $19,519
========== ========= ========= ========= ========== (a) Cost of
sales includes $103 per month of license fee amortization
applicable only to Eli Lilly and Company's interest in Lilly ICOS.
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) $(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. *T
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