When analysts are asked to point at an example of a smooth, well-regarded acquisition of a local biotech company, I have a feeling that Eli Lilly’s yet-to-be-finalized $2.1 billion buyout of Bothell’s ICOS Corp. won’t be looked at as the model.
Even those who aren’t complaining about the deal’s fundamentals are saying this could have been handled better. Pressure’s now mounting for Lilly to up its offer of $32 a share, especially after one of the nation’s better-known proxy recommendation firms took the semi-unusual step of recommending that ICOS shareholders vote “no” unless the deal sweetens. (see that story here, http://www.indystar.com/apps/pbcs.dll/article?AID=/20061206/BUSINESS/612060400/1003). A big shareholder already has committed to voting no, and a relatively small shareholder also has asked the state of Washington to review the deal, http://www.heraldnet.com/stories/06/12/05/100bus_icos001.cfm.
Then comes today’s news. It turns out that ICOS quietly moved a drug into phase 1 trials in Europe a couple weeks ago. The drug is a potential treatment for psoriasis. Another drug also is about ready for phase 1, the company admitted in a media report today.
Now, phase 1 is the first real test in humans of a drug. Things fail all the time in phase 1. Normally, it’s worth only a few sentences in the newspaper when a biotech moves a drug into phase 1 trials.
But ICOS has had virtually nothing else in its development pipeline, besides secondary uses that the active ingredient of Cialis is being tested for, for a few years. The barren pipeline, in some analysts’ opinions, is what made ICOS ripe for a takeover because its future prospects looked limited.
So starting human trials on a new drug actually is a pretty big deal for ICOS. And the fact the company didn’t disclose it makes shareholders suspicious that the company’s hiding “good” news right now so it won’t affect Lilly’s offer. Paul Latta, a Seattle-based analyst who covers ICOS, said this morning that the new test is a “modestly material event” that should have at least earned a mention from ICOS.
“It sounds like something that should have been disclosed in a press release to me,” he said.
For the record, Latta’s not been as critical of the buyout itself as others. The shareholders who are already grumbling about the acquisition, of course, agree that this is a big deal. Saul Kerpelman, an East Coast attorney who already has written to the state and the SEC hoping they will scrutinize the buyout of ICOS, said the company’s decision not to voluntarily disclose the new drug news is “illegal,” and he’s complaining anew to regulators.
We’ll have a full story in the paper and on the Web tomorrow. Despite being down a little, ICOS stock is still trading today a full dollar above Lilly’s buyout price of $32 a share. Keep up on the stock here, http://finance.yahoo.com/q?s=ICOS.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
