Healthy Skepticism Library item: 7287

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Moore A.
Eli Lilly to buy Icos for $2.1 billion: Deal aimed at leveraging Cialis drug worldwide
Market Watch.com 2006 Oct 17
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B46AA60B8%2D614B%2D4C2A%2D8B55%2DEF900FD23C87%7D&source=blq%2Fyhoo&dist=yhoo&siteid=yhoo

Abstract:

Eli Lilly & Co. on Tuesday said it agreed to acquire Icos Corp., its partner in the production and marketing of erectile-dysfunction drug Cialis, for about $2.1 billion.
Under terms of the deal, Icos shareholders will receive $32 in cash for each share of Icos common stock, representing an 18% premium over Monday’s closing price.
Shares of Icos ended the day up $4.38, or 16.2%, to $31.50. Lilly shares were down fractionally to $57.55.
“We have had a very successful and productive partnership with Icos over the past eight years,” said Sidney Taurel, Eli Lilly’s chairman and chief executive, in a statement.
The collaboration between Eli Lilly and Icos “has produced outstanding results for both companies,” Taurel said, adding: “We now look forward to building on this success and continuing to provide the benefits of Cialis to patients around the world.”
But Wall Street analysts aren’t so sure about Cialis’ future, and wondered whether the drug would be able to withstand market pressures from competitors Viagra and Levitra.
Morgan Stanley’s Jami Rubin said in a note to analysts that, “we are still surprised by [Lilly’s] actions given the uncertain outlook for [erectile dysfunction] drugs in particular and the lack of any meaningful R&D behind Cialis.
“While we agree that [Lilly] should be able to achieve significant synergies by owning the whole [joint venture], we are less confident in the outlook for Cialis,” Rubin went on to say.
Icos has been conducting tests of Cialis for treatment of various forms of hypertension, and some preclinical programs in cancer and inflammation, said UBS’s Maged Shenouda. But other than that, the company’s pipeline is thin, Shenouda said in a note to clients. That could prove problematic if Lilly has to rely solely on Cialis for current uses.
“In our opinion, the biggest risks to our Icos projections are related to the market uptake of Cialis,” Shenouda wrote. “If IMS prescription estimates are significantly and consistently different from our expectations, our Cialis and Icos projections would be at risk.”
The Icos board of directors voted unanimously to approve the merger agreement and to recommend that shareholders approve the deal. The transaction’s expected to close late this year or early in 2007, pending approval by Icos shareholders, regulatory clearance and other conditions.
Upon completing the acquisition, Indianapolis-based Eli Lilly will incur a one-time charge to earnings for acquired in-process research and development, but the company said it’s “premature to estimate what that charge will be.”
Eli Lilly said it expects the impact of including the operations of Icos in its financial results to dilute “modestly” its earnings for 2007. Starting in 2008, however, the company expects the acquisition to add to earnings and to generate positive cash flow.