Another clinical trial near from Icos pipeline

Eli Lilly has said it wants to buy Icos for its ownership stake in the billion-dollar impotence drug Cialis. But if the takeover is completed, Lilly will get three other potentially valuable drugs thrown in, about which Icos executives have said little or nothing to shareholders.

The Icos research "pipeline" was considered all but empty in recent years. Investors in the Bothell company may not have factored additional drug candidates into their calculations about whether to accept Lilly's $32-a-share offer.

The latest advance is from an Icos proprietary molecule called Pafase. Investors last heard about it roughly four years ago, when a clinical trial for severe sepsis failed.

They haven't heard a researcher plans to start a new clinical trial of Pafase for a rare but deadly gastrointestinal disease in newborns, necrotizing enterocolitis.

The researcher, Dr. Michael Caplan, said he expects the trial to begin in February or March.

Last week, The Seattle Times reported an Icos drug had entered human testing in Europe for psoriasis, while a cancer drug was on the verge of clinical trials.

Shareholders were not informed about any of these new developments. Spokeswoman Lacy Fitzpatrick said the advances in psoriasis and cancer were not considered "material" events for investors in a company of Icos' size.

Internally, however, Icos has said something different.

Gary Wilcox, executive vice president of operations and a member of the board of directors, wrote in an internal e-mail Oct. 25 that "there were two big events" when paperwork was submitted to the U.S. Food and Drug Administration to begin clinical trials of the psoriasis and cancer drugs.

"All of Icos should be proud of this accomplishment," another manager wrote.

The Pafase study further adds to the Icos pipeline. Fitzpatrick confirmed that Icos has discussed a trial with Caplan but has not yet signed legal agreements with him, and hasn't yet gotten the green light from the FDA to begin.

The study, of 48 newborns at a medical center affiliated with Northwestern University in Evanston, Ill., is expected to begin in February or March, under direction of Caplan, chairman of pediatrics.

Icos is not sponsoring the trial but is cooperating and could stand to gain commercially if the trial succeeds.

In an interview, Caplan said about 6,000 to 7,000 babies are afflicted with the disease each year, and about one-third die. He said he's hopeful that Pafase, a genetically engineered human enzyme, can help.

The drug blocks a molecule that damages the bowels of infants with the disease, he said.

Companies are often eager to promote news of clinical progress. Chris Young, who has studied the Lilly takeover bid for proxy adviser Institutional Shareholder Services (ISS), said Icos executives have "flip-flopped" from bullish to bearish, as takeover targets often do once a deal is made.

Instead of touting positive news, they have begun downplaying their company's prospects. ISS recommended that shareholders, who vote on the Icos deal next week, reject Lilly's offer as too low.

Icos executives, who stand to receive $68 million in bonuses for closing the deal, continue to urge investors to vote for it.

Paul Latta, an analyst with McAdams Wright Ragen in Seattle, said the rebound in clinical-trial activity at Icos is meaningful news to investors, because research has been such a weakness for years.

In 2001, the company had eight molecules besides Cialis in human tests; all later failed or were transferred to partners.

"[New] clinical trials don't get as much credit on the Street as a [pivotal trial], but with three new molecules entering the clinic around the same time, that ought to collectively mean something," Latta said.

Latta said he first thought Lilly's bid had an 80 percent chance of success, with some chance it could be sweetened. Now, because of investor activism and the revelations of clinical progress at Icos, he said it has about a 60 percent chance.

The odds are now greater that the bid will be sweetened or fall apart, he said.

Luke Timmerman: 206-515-5644 or