Lessons from Icos

Shareholders of Icos, the Seattle area's largest locally owned biotech company, have another few days to think about whether to sell out to Eli Lilly, which has just raised its offer by $2 a share. Lilly has not changed its intention to close Icos and lay off all 550 employees here.

It is an odd business to buy a company and discharge everybody who works for it, and we hope shareholders vote it down. It would be far better to find managers who would build Icos into a multi-drug company for the long run.

The temptation to sell is understandable. Icos was started in 1990 with a CEO star, George Rathmann, and money from Bill Gates, and was marketed as having a big future.

When initial hopes faded, scientists went on researching, hoping to discover something before the money ran out. And they did. With Cialis, a drug for erectile dysfunction, the company finally had a future.

This year, after 16 years of losses, Icos finally made a profit — 9 cents a share in the second quarter, and another 15 cents a share in the third. It immediately reached a deal to sell out to Lilly for $32 a share.

That is more than 100 times Icos' entire history of earnings. Management, which stands to gain tens of millions of dollars in bonuses from the deal, was telling shareholders Lilly's $32-a-share offer was good. Now, it's $34 a share. Shareholders might think twice before taking its word for it and selling so easily.

If they sell, the employees of Icos will have to find other work, and no doubt almost all of them will. Jack Faris, president of the Washington Biotechnology and Biomedical Association, says there is strong demand for ex-perienced people. "A year from now we will have more people working in biotechnology than we have today," he says.

That is the atmosphere of biotech: always in ferment. Immunex becomes Amgen, and shrinks but stays. Corixa is bought and is gone. Corus is bought and expanded. Maybe Icos goes poof.

Someday, though, a group of investors who sip the wine of profit will also have patience, and the Seattle area will have a locally owned pharmaceutical company that grows, succeeds and endures.