News » May 2005

During the summer of 2005, Lilly ICOS LLC (Lilly ICOS), a 50/50 joint venture between ICOS and Eli Lilly and Company, expects to begin a pivotal clinical study of tadalafil for the treatment of pulmonary arterial hypertension (PAH). In the United States, PAH affects an estimated 100,000 patients of all ages. When untreated, death typically ensues over the course of three years and, even with current therapy, the median life expectancy remains less than five years. This rare, progressive disorder is characterized by an elevation of blood pressure in the pulmonary arteries, which leads to shortness of breath, fatigue and heart failure.(2) Tadalafil is the same active ingredient in Cialis, a product that has been used to treat more than 4.5 million patients with erectile dysfunction (ED).

"Our goals continue to be to both maximize the value of tadalafil for the long-term and achieve profitability for Lilly ICOS this year," stated Paul Clark, ICOS Chairman and Chief Executive Officer. "Toward our long term goal, I am pleased to announce that we plan to initiate a pivotal clinical study in PAH, a serious cardiovascular disease. Tadalafil's desirable half-life of 17.5 hours may make it amenable to once a day dosing for PAH. We continue to evaluate tadalafil in a second indication, benign prostatic hyperplasia."

During the 2005 first quarter, worldwide sales of Cialis (tadalafil) totaled $150.1 million, a 39% increase compared to the 2004 first quarter. Lilly ICOS financial results, for the first quarter of 2005, were reported on April 18, 2005.

U.S. wholesalers continued to reduce their inventory levels of Cialis during the 2005 first quarter, in accordance with the terms of recent wholesaler agreements. Lilly ICOS estimates that U.S. wholesaler inventories of Cialis were reduced approximately $27 million during the quarter.

In March 2005, the FDA authorized a U.S. product label change, related to the use of Cialis with alpha blockers, removing a contraindication and replacing it with precautionary information. This product label change allows a new group of patients to use Cialis.

"In France, where Cialis has been available for about two years, Cialis has overtaken Viagra(R) to become the number one selling ED treatment for the third consecutive month," added Clark.

Other First Quarter Highlights

In January 2005, ICOS and Solvay Pharmaceuticals, Inc. entered into a co-promotion agreement for AndroGel(R) (testosterone gel) 1% CIII. AndroGel is approved in the U.S. for replacement therapy in men for conditions associated with a deficiency or absence of a man's own testosterone. ICOS is providing promotional support for AndroGel through physician sales calls and other promotional activities conducted by its U.S. sales representatives.

In March 2005, ICOS announced an expansion of its efforts to develop monoclonal antibodies for the treatment of cancer, through the formation of a joint development collaboration with Caprion Pharmaceuticals, Inc. ICOS is responsible for target validation and preclinical development of therapeutic antibodies. Caprion is to contribute a selection of proprietary antibody targets and perform certain target characterization activities for the collaboration.

Financial Results

For the three months ended March 31, 2005, ICOS reported a net loss of $46.4 million ($0.73 per share), compared to a net loss of $86.3 million ($1.36 per share) for the three months ended March 31, 2004.

Equity in losses of Lilly ICOS was $20.7 million in the first quarter of 2005, compared to $69.2 million in the corresponding period of 2004. The decreased Lilly ICOS losses largely reflect the impact of increased worldwide Cialis revenues and an overall reduction in selling and marketing costs compared to the 2004 first quarter. Lilly ICOS' 2005 first quarter results were negatively affected by approximately $27 million of aggregate reductions in U.S. wholesale inventories of Cialis during that period.

ICOS Corporation's total revenue was $13.8 million in the first quarter of 2005, compared to $16.5 million in the first quarter of 2004.

Collaboration revenue from Lilly ICOS totaled $10.4 million in the 2005 first quarter, compared to $14.1 million in the first 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.

Co-promotion services revenue was $1.0 million in the 2005 first quarter. We began promoting AndroGel to physicians, on behalf of Solvay Pharmaceuticals, Inc., in February 2005.

Total operating expenses were $39.5 million for the three months ended March 31, 2005, compared to $33.7 million for the three months ended March 31, 2004.

Research and development expenses increased $5.0 million from the three months ended March 31, 2004, to $22.2 million for the three months ended March 31, 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.

At March 31, 2005, we had cash, cash equivalents, investment securities and associated interest receivable of $240.2 million.

Financial Guidance

Based on 2005 first quarter results and other appropriate factors, we presently expect that ICOS Corporation's 2005 net loss will be in the range of $70 million ($1.09 per share) to $83 million ($1.29 per share). The decrease in net loss, compared to $198 million ($3.13 per share) in 2004, is primarily due to our expectation that Lilly ICOS will become profitable in 2005. We expect Cialis market share and sales to continue to grow in 2005, and we expect certain Lilly ICOS marketing and selling expenses to decline.

Lilly ICOS' 2005 net income is expected to be in the $30 million to $50 million range. The level of Cialis sales achieved is the primary variable that will affect Lilly ICOS' results for 2005.

For the second quarter of 2005, we expect that ICOS Corporation's net loss will be in the range of $21 million to $30 million, approximately $0.33 per share to $0.47 per share. The decrease in net loss, compared to the 2005 first quarter is primarily due to the performance of Lilly ICOS. In the 2005 second quarter, we expect Lilly ICOS to generate between a $10 million net loss and a $5 million net profit.

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.

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