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Cialis to be profit engine by mid-2005, Icos predicts

By Luke Timmerman
Seattle Times business reporter

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Bothell-based Icos, on a year-end conference call with analysts, did not confirm or deny the spending figure or say whether it is outspending its rivals, but it did say it expects the Cialis joint venture to lose $235 million to $275 million this year.

It will all seem worthwhile soon, Chief Executive Paul Clark said as he made his boldest predictions yet about how Cialis will fare in the battle with Viagra and Levitra.

Clark predicted couples will prefer Cialis' 36-hour window of effectiveness over the short-acting rivals, particularly Viagra, which he called "a habit whose time has passed" because "couples don't want to be on the NBA shot clock."

"We intend to aggressively invest to make (Cialis) a big winner," Clark said.

Besides reporting its year-end revenue and losses, which were no surprise, Icos made a series of predictions and disclosures:

• Cialis will bring in $500 million to $600 million in worldwide sales this year, with 70 to 80 percent coming in North America and Europe, where Icos splits the money evenly with Eli Lilly. Lilly keeps most of the sales from the rest of the world.

• Icos expects to lose $3 to $3.35 a share, or $192 million to $215 million, this year because of the massive rollout of Cialis.

• The company expects the joint venture to be profitable in 18 months, Icos to be profitable in mid-2006 and sales and marketing spending to gradually level off or decline.

• It scrapped development of RTX, an experimental drug for frequent and painful urination, after failure in a clinical trial. Two years ago, Icos had eight experimental drugs in human testing; after a string of failures, it now has one experimental drug besides Cialis, IC485 for emphysema and chronic bronchitis.

• Icos plans to intensify its hunt for experimental drugs it could buy partial rights to develop. It also has tried to pull in more money by making drugs for other companies.

• Cialis had $203 million in worldwide sales last year, $28 million of that from the U.S., where pharmacies stocked up after it was approved in late November.

Paul Latta, an analyst with McAdams Wright Ragen, said he was encouraged that Cialis commercials will be "carpet-bombed" to make it a household name, but he was disappointed with Icos' diminishing research and development. Latta doesn't own the stock but rates it a "buy."

"The hit rate on drugs for a biotech company is low, but this concentration of failures is above normal," Latta said. "It's a bad patch for their (research and development)."

Luke Timmerman: 206-515-5644 or ltimmerman@seattletimes.com

Icos results
Figures in parentheses are losses
			%
4th qtr	Dec. 31, 2003	2002	Chg
Profit	($34,158,000)	($47,461,000)	+28.0
Per share	(0.54)	(0.76)	+28.9
Sales	29,213,000	26,156,000	+11.7
Annual
Profit	($125,507,000)	($161,617,000)	+22.3
Per share	(2.01)	(2.64)	+23.9
Sales	75,104,000	92,877,000	-19.1

Copyright © 2004 The Seattle Times Company