Shareholders of Bothell-based ICOS Corp. voted in January to accept the $2.3 billion acquisition offer made by pharmaceutical giant Eli Lilly and Co. The move signals the end of a 16-year-old venture that grew to be one of the state’s largest biotechnology companies, employing about 700 people.
“We are pleased that this transaction has been approved, as we believe it represents attractive value for ICOS shareholders,” Paul Clark, ICOS chairman, president and chief executive, said following the vote, in which 77 percent of the shares voted favored the merger.
“The value our employees have created is the result of years of innovation and hard work to build a highly skilled organization that has produced a best-in-class product with nearly $1 billion in sales, and achieved profitability in an industry where few companies ever do,” Clark said, referring to ICOS’ blockbuster drug, Cialis.
Used to treat erectile dysfunction, Cialis was developed and marketed in partnership with Eli Lilly. In 2006, the drug produced $971 million in net sales. This year, net sales are expected to exceed $1 billion.
Under the agreement approved by shareholders Jan. 25, Eli Lilly will acquire all outstanding ICOS stock for $34 per share in cash. That is $2 more per share than Eli Lilly’s original acquisition offer proposed in October.
That initial offer met with resistance from proxy advisory firms Institutional Shareholder Services and Glass Lewis &Co. as well as hedge fund HealthCor Management, who argued that the offer undervalued ICOS in light of Cialis’ strong sales. Also, in recent months, it was reported that ICOS had begun testing a new potential treatment for psoriasis.
For some of the shareholders attending the January meeting, the issue of stock value was only part of the reason they voted to oppose the merger — jobs was the other.
“They’re going to lay off all these people — and these are the people who created the drug,” said Seattle shareholder Vernon Young.
With Indianapolis-based Eli Lilly officially taking over in late January, 400 ICOS employees were expected to be laid off by early February, with a transition team of about 160 staying on for additional weeks or months.
About 125 employees also were expected to stay at the company’s contract manufacturing facility in Bothell until later this year, with efforts in the works to find a new owner to continue operating the plant.
“There’s going to be a real brain drain,” shareholder Amy Johnson said of the number of scientists who will have to look outside the region for new jobs.
Johnson also was turned off by the executive severance packages that were part of the merger, with upper management splitting more than $75 million, including at least $26 million for chief executive Clark.
Clark said he stands by the due diligence ICOS management performed, including projecting earnings out to 2020 before it decided to accept Lilly’s buyout offer.
He said the departing employees are receiving varying severance packages and job placement help. The employee on-site day care will stay open through May, and recently hired employees who moved to the area to work for ICOS are being offered money to relocate to their old locations if they want.
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