Icos leaders to get $68 million from company's sale

Senior executives at Icos are in line to receive cash payments worth a combined $67.8 million for selling the company to Eli Lilly, according to a filing Wednesday with the Securities and Exchange Commission.

At the top of the list is Paul Clark, 59, Icos chairman, chief executive and president, who will receive a "golden parachute" worth $23.2 million in severance pay, cashed-out stock options, restricted stock awards and other bonuses for retention and closing the deal.

Others cashing out big include Executive Vice President Gary Wilcox ($8.5 million), Chief Financial Officer Michael Stein ($7.1 million) and Chief Medical Officer David Goodkin ($5.9 million).

Rank-and-file employees of the Bothell-based company will not fare nearly as well.

All 180 Icos sales employees nationally learned Wednesday they will be laid off when the deal closes, said spokeswoman Lacy Fitzpatrick. They can apply for sales jobs at Eli Lilly.

The remaining 500 Icos employees in Bothell are still waiting to find out whether they will have jobs, but Eli Lilly has said it will cut a "significant" number.

The creator of the impotence drug Cialis agreed last month to be acquired by longtime partner Lilly for $2.1 billion in cash, or $32 a share.

Icos said it hopes to win shareholder approval and complete the transaction before year-end.

On Clark's first official day on the job as CEO, June 16, 1999, Icos stock closed at $37.12 a share. It traded in the mid-$40s in November 2003 just before Cialis received federal approval.

The stock traded in the $20s over the past two years as the market for erectile-dysfunction drugs fell short of expectations, and investors shied away from an expensive marketing battle with Pfizer's Viagra.

Paul Latta, an analyst with McAdams Wright Ragen in Seattle, said Icos turned Cialis into a blockbuster on Clark's watch but was hobbled by repeated failures of other drugs.

He said the executive payouts may upset some investors.

"It's obvious that with a company like Immunex, everybody made piles of money, so it was OK to send some of it to [former chairman and CEO] Ed Fritzky," Latta said, referring to the Seattle company's $10 billion sale to Amgen in 2002. "But in Icos' situation, sending a big pile of money to Paul Clark is less palatable," Latta said.

Fitzpatrick said management bonuses were approved by the company's compensation committee and were based on an analysis of peer companies. Panel members are Vaughn Bryson, a former Eli Lilly CEO; James Ferguson, former CEO of General Foods; and David Milligan, a vice president at the merchant bank Bay City Capital.

The proxy statement filed Wednesday includes a timeline of the negotiations. It said Eli Lilly CEO Sidney Taurel made offers earlier in the year at $28 to $30 a share and later $31, before the final offer of $32 a share in September.

Icos said Clark tried to get Taurel to raise his offer one last time Oct. 16, but Taurel refused. The Icos board then voted to accept, the filing said.

In explaining the board's rationale for the deal, the filing said the 18 percent premium Lilly paid was "meaningful" for shareholders. The board considered the downsides, including layoffs, but decided the shareholder payout outweighed the concerns.

In an interview the day the takeover was announced, Clark said it was never his ultimate goal to sell the company.

"But at the end of the day, as much fun as this was to do and as proud as we are of what we were doing, I had to take off my CEO hat, and put on my chairman hat, and say 'What is best for shareholders?' " Clark said. "This deal was compelling for shareholders."

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