Setback for Icos' rival to Viagra: FDA approval delayed at least a year; stock price dives
Seattle Times business reporter
The news was a surprising reversal for Icos and its partner, Eli Lilly. As recently as last week, Icos said Cialis could be FDA-approved by next month.
The markets reacted to the news with an intense sell-off. Icos shares traded hands 17 times more than usual, falling $13.24 to $25.76 a share, erasing about one-third of its market value in one day. Shares of Eli Lilly, the Indianapolis pharmaceutical giant fell $2.25 to $66.05.
Icos Chief Executive Paul Clark outlined the decision yesterday in a conference call with analysts. For competitive reasons, he didn't answer specific questions about the FDA letter. But he did say that before Cialis could be approved the FDA wants more clinical studies — not another clinical trial — more labeling negotiations and resolution of some manufacturing deficiencies at Eli Lilly's factories.
For the additional clinical studies, Icos needs to enroll patients, maybe no more than 100, to get information that would be used to confirm findings from Cialis clinical trials in 4,000 patients. The FDA says the drug can be approved if it meets certain criteria, Clark said.
"We have some work to do, which we're confident we can execute," Clark said.
The news forced changes in the financial outlook of the Bothell company. It had been expecting to lose $165 million to $180 million this year, or $2.70 to $2.95 a share this year, because of expenses linked to the Cialis marketing rollout, such as hiring a sales force of 165 people.
Because Cialis will not be launched this year, Icos will spend $35 million to $45 million less than it had intended and expects the losses in 2003, Clark said. Profitability is at least three years away, instead of two years.
Clark said Cialis still appears on track for approval in Europe in the second half of this year, and the company has one of the largest pipelines in biotech with seven other drugs in clinical development.
As of the end of March, Icos had $434 million in cash and investments.
Ian Somaiya, an analyst with Morgan Stanley, said Icos and Lilly exacerbated the damage yesterday by not being forthcoming about details in the FDA letter.
He was disappointed because the delay could allow a competitor from Bayer to leapfrog Cialis in the race behind Viagra. Many analysts had been expecting Cialis to become a billion-dollar success.
"If (Icos) had been open and truly believed it was a delay and not a question mark about the drug, they should have been open about that," Somaiya said. "The market, especially now, doesn't respect uncertainty."
Five of six analysts who regularly track Icos left their ratings unchanged after the news. John McCamant, the editor of Medical Technology Stock Letter who has been recommending Icos since 1993, said the biotech has a record of credibility and good reasons for not revealing details of the letter.
McCamant criticized the FDA for what he called its unpredictability and its motto of late, "When in doubt, ask for more data."
But, he said, the agency's action toward Icos could have been worse.
"The FDA did not ask for new Phase III trials," McCamant said.
In the conference call, Clark reiterated the same points he'd made last year: Cialis lasts longer than Viagra and has fewer side effects.
"Cialis has a very strong competitive profile, which we believe will do well in the marketplace," Clark said. "We also have seven other products in the pipeline, which we believe will show positive results over time."
Luke Timmerman can be reached at 206-515-5644 or email@example.com.