Investors swiftly approve Icos' sale to Eli Lilly

After an acrimonious three-month takeover battle, it took barely 12 minutes Thursday to bring the curtain down on Bothell-based Icos.

Investors holding about two-thirds of Icos' stock voted to sell the 16-year-old company to Eli Lilly for $34 a share, or $2.28 billion, despite complaints that the developer of the popular impotence drug Cialis was being sold off too cheaply.

Icos will become a subsidiary of Indianapolis-based Lilly, its joint-venture partner in marketing Cialis. Most of Icos' 700 or so workers — including about 500 locally — will lose their jobs in the coming weeks and months.

The prospect of so many lost jobs was just one aspect of the deal that rankled many of the 150 or so shareholders and employees who filled the meeting space at Icos' leased headquarters building in Bothell.

Dissenters pointed to Cialis' success — its $971 million in 2006 sales beat the company's own forecast and delivered its first annual profit — and to the prospect of three more drugs soon entering clinical trials.

The general mood, though, seemed to be one of resigned dismay.

As Chairman and Chief Executive Paul Clark read out the vote totals that sealed Icos' fate, former employee Dan Schwenk leaned over to his neighbor and murmured, "Let the pillage begin."

The deal is expected to formally close after the end of stock market trading Monday.

Clark, who has led Icos since 1999, defended the sale much as he has since Lilly's first offer, $32 a share, was made public in October. After the meeting, Clark called $34 "a compelling share price for our investors."

But when asked if Icos still could have been successful as a stand-alone company, Clark responded, "Sure," and went on to praise the "extraordinarily talented people" who work there.

Indeed, Icos' own projections supporting the buyout show the Lilly-Icos joint venture, which marketed the drug and divided the profits, becoming increasingly profitable over the next decade. Icos itself projected net profits of $63 million for the current year, compared with an estimated $24 million for 2006.

However, the joint-venture deal gave Lilly an effective veto over any potential deal between Icos and a third party, meaning Icos had little negotiating room and Lilly had little reason to top its own bid.

In the end, 43.1 million of the nearly 66 million Icos shares were voted in favor of the Lilly deal, while 12.7 million were voted against it. (The rest either abstained or weren't voted.)

"To me, I feel this is somewhat of a sellout," said Richard Prince, of Kenmore, one of the shareholders who voted against the deal. "For whose benefit, I don't know."

Prince said he felt especially bad for Icos workers, most of whom will be losing their jobs.

Around 125 workers at Icos' contract-manufacturing plant will keep their positions, at least for the time being. Clark told The Seattle Times last month that Lilly intended to sell that operation to someone who would retain the work force.

Another 160 or so Icos employees will be part of a "transition team" to smooth Lilly's takeover, spokeswoman Lacy Fitzpatrick said. Those people will lose their jobs in anywhere from a month to several months, she said.

The remaining 400 or so workers, including around 215 locally, will lose their jobs within two weeks, Fitzpatrick said. They'll receive unspecified severance pay and outplacement services, Clark said. In certain "hardship" cases, where recently hired people relocated to be near Icos, the company will pay to move them back home if they so desire.

There will be little hardship in Icos' senior ranks, however. Ten top executives stand to collect $75.5 million in payments for severance, cashed-out stock options, restricted stock awards and various bonuses.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com