ICOS Icos

ICOS Corporation (Nasdaq:ICOS) : Worldwide Sales of Cialis Since Launch Exceed $1 Billion, and Increase 39% Compared to the 2004 Second Quarter; Phase 3 Study Initiated with Tadalafil in Pulmonary Arterial Hypertension ICOS Corporation (Nasdaq:ICOS) today released its financial results for the three and six months ended June 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), is approaching profitability as a result of both sales growth and reductions in marketing and selling expenses. Lilly ICOS' 2005 second quarter net loss narrowed to $1.7 million, compared to $41.7 million in the 2005 first quarter. Worldwide sales of Cialis in the second quarter of 2005, totaled $190.9 million, an increase of 39%, compared to $137.2 million in the second quarter of 2004. Notably, Lilly ICOS reached a significant milestone, in the 2005 second quarter, when cumulative worldwide sales of Cialis passed the $1 billion mark. Lilly ICOS continues to pursue new treatment opportunities with tadalafil, the active ingredient in Cialis, which has been used by more than five million patients with erectile dysfunction (ED). Lilly ICOS recently initiated a Phase 3 clinical study of tadalafil for the treatment of pulmonary arterial hypertension (PAH). "We are excited about the new opportunities for Cialis," stated Paul Clark, ICOS Chairman, President and CEO. "And, we are proud that cumulative worldwide sales of Cialis, since launch, have surpassed $1 billion. Market share continues to grow solidly, reaching 23.3% in the U.S. in June 2005, and 31.2% in the aggregate, across Europe, Canada and Mexico, in June 2005."(2) Financial Results For the three months ended June 30, 2005, ICOS reported a net loss of $22.6 million ($0.35 per share), compared to a net loss of $51.9 million ($0.82 per share) for the three months ended June 30, 2004. Equity in losses of Lilly ICOS was $0.7 million in the second quarter of 2005, compared to $35.1 million in the corresponding period of 2004. The decreased Lilly ICOS losses reflect increased worldwide Cialis revenues and an overall reduction in selling and marketing expenses compared to the 2004 second quarter. ICOS Corporation's total revenue was $18.1 million in the second quarter of 2005, compared to $17.9 million in the second quarter of 2004. Collaboration revenue from Lilly ICOS totaled $12.7 million in the 2005 second quarter, compared to $14.7 million in the second quarter of 2004. The decrease primarily reflects a reduction in Lilly ICOS' reimbursement of our U.S. sales force expenses, 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 $1.9 million in the 2005 second quarter. We began promoting AndroGel(R) (testosterone gel) to physicians, on behalf of Solvay Pharmaceuticals, Inc., in February 2005. Total operating expenses were $40.0 million for the three months ended June 30, 2005, compared to $34.7 million for the three months ended June 30, 2004. Research and development expenses increased $3.8 million from the three months ended June 30, 2004, to $21.3 million for the three months ended June 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 discontinuation of a clinical program in the 2005 first quarter. For the six months ended June 30, 2005, ICOS reported a net loss of $69.0 million ($1.08 per share), compared to a net loss of $138.2 million ($2.18 per share) for the six months ended June 30, 2004. The 2005 decrease is primarily due to lower Lilly ICOS losses. At June 30, 2005, we had cash, cash equivalents, investment securities and associated interest receivable of $192.6 million. Financial Guidance Lilly ICOS' net income for the year ending December 31, 2005, is expected to be around $30 million, plus or minus $10 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 $775 million. We also expect Lilly ICOS' selling, general and administrative expenses to decline, in the second half of 2005, compared to both the second half of 2004 and the first half 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 net income of $30 million for Lilly ICOS in 2005. 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 conditions such as benign prostatic hyperplasia, 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. EDT, ICOS will host a conference call to review 2005 second 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 785648, live at (612) 332-0932, or as a replay at (320) 365-3844. The webcast will be available through August 11, 2005. The telephone replay will be available until August 5, 2005 at 8:30 p.m. EDT. (1) Cialis(R) is a registered trademark of Lilly ICOS LLC. All other trademarks are the property of their respective owners. (2) US: IMS Health, IMS National Prescription Audit Plus(TM), (based on total prescriptions) June 2005; Europe, Canada and Mexico: Based on calculations using IMS Health, IMS MIDAS (PDE5 inhibitor tablets from wholesalers to pharmacies) June 2005. -0- *T ICOS Corporation and Subsidiaries SELECTED CONSOLIDATED FINANCIAL DATA (in thousands, except per share data) (unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2005 2004 2005 2004 ------- ------- ------ ------- Condensed Consolidated Statements of Operations: Revenue: Lilly ICOS collaboration $ 12,693 $ 14,697 $ 23,053 $ 28,764 Contract manufacturing 3,502 3,229 5,976 5,685 Co-promotion services 1,893 - 2,843 - ------- ------- ------- ------- Total revenue 18,088 17,926 31,872 34,449 ------- ------- ------- ------- Operating expenses: Research and development 21,295 17,536 43,508 34,790 Marketing and selling 10,549 10,106 20,983 19,903 Cost of contract manufacturing 3,231 2,991 5,082 5,504 General and administrative 4,967 4,048 9,972 8,201 ------- ------- ------- ------- Total operating expenses 40,042 34,681 79,545 68,398 ------- ------- ------- ------- Operating loss (21,954) (16,755) (47,673) (33,949) Other income (expense): Equity in losses of Lilly ICOS (689) (35,090) (21,368) (104,327) Interest expense (1,705) (1,705) (3,409) (3,416) Interest and other income 1,723 1,652 3,441 3,491 ------- ------- ------- ------- Net loss $(22,625) $(51,898) $(69,009) $(138,201) ======= ======= ======= ======= Net loss per common share - basic and diluted $ (0.35) $ (0.82) $ (1.08) $ (2.18) ======= ======= ======= ======= Weighted-average common shares outstanding - basic and diluted 63,941 63,429 63,870 63,333 ======= ======= ======= ======= Condensed Consolidated Balance Sheets: June 30, Dec. 31, 2005 2004 -------- -------- Cash, cash equivalents, investment securities and interest receivable $192,561 $275,769 Receivable from Lilly ICOS 13,865 15,053 Investment in Lilly ICOS 1,905 - Property and equipment, net 18,913 19,206 Deferred financing costs and other 15,545 14,953 --------- --------- Total assets $242,789 $324,981 ========= ========= Due to Lilly ICOS $ - $ 14,147 Other current liabilities 21,482 25,656 Convertible subordinated debt 278,650 278,650 Stockholders' equity (deficit) (57,343) 6,528 --------- --------- Total liabilities and stockholders' equity (deficit) $242,789 $324,981 ========= ========= ICOS Corporation and Subsidiaries SUMMARIZED OPERATING RESULTS OF LILLY ICOS LLC (in thousands) (unaudited) 2005 -------------------------- Q1 Q2 TOTAL ------- ------- -------- Revenue: Product sales, net United States $42,744 $71,118 $113,862 Europe 56,264 60,925 117,189 Canada and Mexico 12,186 13,839 26,025 ---------------------------- 111,194 145,882 257,076 Royalties 7,790 9,010 16,800 --------- -------- --------- Total revenue 118,984 154,892 273,876 --------- -------- --------- Expenses: Cost of sales (a) 9,752 11,934 21,686 Selling, general and administrative 137,027 126,232 263,259 Research and development 13,874 18,413 32,287 --------- -------- --------- Total expenses 160,653 156,579 317,232 --------- -------- --------- Net loss (a) $(41,669) $(1,687) $(43,356) ========= ======== ========= ICOS Corporation's share of net loss $(20,679) $ (689) $(21,368) ========= ======== ========= 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 loss (a) $(138,784) $(70,490) $(21,368) $(31,391) $(262,033) ======= ======= ======= ======= ======= ICOS Corporation's share of net 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