The first official opposition to the proposed sale of ICOS Corp. has emerged. Managers of a hedge fund called HealthCor, which owns about 5 percent of ICOS’ shares, submitted a filing and letter to the SEC on Thursday indicating they don’t support Eli Lilly &Co.’s buyout offer.
While they’re the first to file opposition, they may not be alone in their sentiment. The always vocal smaller investors who hang out on online message boards — especially here, http://messages.finance.yahoo.com/mb/ICOS — have howled about the deal the past three weeks.
Most cite the same things HealthCor does: the buyout price is too low and the payout to ICOS’ top executives is too high.
As local analyst Paul Latta put it, he thinks Lilly’s acquisition bid will be approved by shareholders, but “it’s not going to be a unanimous vote.”
Worth noting are two points. First, HealthCor acquired most of its shares AFTER Lilly announced its intent to buy ICOS. Second, ICOS stock price has risen above the $32-a-share buyout level in recent days, apparently because investors are speculating the Lilly will have to raise its offer.
Here’s the Herald’s story today on the stockholder opposition, http://www.heraldnet.com/stories/06/11/03/100bus_oppose001.cfm, and the payouts that ICOS CEO Paul Clark and others will receive in the deal, http://www.heraldnet.com/stories/06/11/03/100bus_icos001.cfm. Here’s a similar story from the New York Times, http://dealbook.blogs.nytimes.com/2006/11/03/hedge-fund-to-vote-against-eli-lilly-deal-for-icos/.
To view HealthCor’s letter to ICOS: http://www.sec.gov/Archives/edgar/data/874294/000114420406044914/v056258_ex1.htm.
Kind of lost in all the sound and fury over a potential proxy fight over ICOS’ sale was the company’s release of its third-quarter earnings on Thursday. Here’s the raw press release on that, http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20061102006169&newsLang=en.
The company generated a net income of $9.7 million, compared to a loss of $19 million in the year-ago period. But the tidbit that caught my eye was further down. It summarized phase 2 results of tadalafil — the active ingredient in Cialis — against hypertension.
The drug seemed to have some effect and was safe in patients. BUT: “The magnitude of reduction in blood pressure induced by tadalafil in this clinical trial would likely be insufficient for tadalafil to compete successfully in the broad hypertension marketplace for first line therapy. Lilly ICOS is considering next steps for this program.” In other words, it doesn’t seem to work very well. Which could reduce potential revenue from sales of Cialis or tadalafil under another name. Whether that factor played into Lilly’s offer is up for debate.
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