After Icos' acquisition, no time to mourn

Like the sole survivors of a lost civilization, former Icos medicinal chemists Edward Kesicki and Joshua Oluoch Odingo burrow in the company's Bellevue office park amid empty labs and orphaned coffee mugs.

In the few months since pharmaceutical giant Eli Lilly acquired the Bothell biotechnology company and laid off most of its employees, the building complex suddenly seems like an abandoned ghost ship, frozen in time. Faded drawings of chemical structures still adorn the whiteboards, and some cubicles are in the messy state their former inhabitants left them, name tags and all.

"It's not eerie nor sad," said Kesicki, who, along with Odingo, recently started the nonprofit Afya World Medicines with help from Eli Lilly. They're so engrossed in their new venture that "there is no time to think about how odd and empty the place is," he said.

The stars were aligned for Kesicki and Odingo, who gained a rare opportunity to apply their biotech skills to a worthy cause — developing biotech treatments for neglected diseases in developing countries.

Lilly's interest in tuberculosis research helped Kesicki and Odingo enter into a $15 million partnership with the Indianapolis company. They will receive funds, some of Icos' equipment and stay in their old building until October when they move to new quarters at the Infectious Disease Research Institute in downtown Seattle.

Other startups by former Icos alumni are brewing in the Seattle area. But not everybody could stay: About half of Icos' 35 chemists have left the state, Kesicki says.

Lilly's $2.3 billion purchase still stirs controversy in the Seattle area's tight-knit biotech community.

Many argue Lilly's decision to eliminate hundreds of jobs undermined the longtime struggle of the regional biotech industry to reach the critical mass that will enable it to compete with well-established hubs such as Boston and San Francisco.

Others say the acquisition and dismantling of Icos will spawn a new batch of budding biotechs, or provide experience to growing startups.

The story of Icos underscores the Pacific Northwest's biotechnology dilemma.

No home-grown giant

Despite having some of the world's most prominent life-sciences research institutions, the region has failed to develop a home-grown biotech titan along the lines of California's behemoths Amgen and Gilead. Many say that is what is needed to build a truly vibrant sector.

Most recent successes — such as Icos' Cialis erectile-dysfunction treatment — have resulted in a takeover by Big Pharma or California biotechs. The trend may accelerate as pharmaceutical giants race to fill research gaps with small companies' innovations.

Although Icos "didn't have the outcome a lot of people hoped, a lot of value was generated here," says Jack Faris, president of the Washington Biotechnology and Biomedical Association, which represents local biotech companies.

"There are these things that already have appeared as the offspring of Icos; there may well be more," he said.

Children of Icos

When Lilly announced its intention to acquire Icos, the company made it clear most employees would have to go.

"It was a bit of a shock," said James Schwartz, who moved with his family from Denver to help start Icos' sales department. He briefly considered relocating. But two weeks after his last day at Icos, he became business operations and sales-effectiveness director at ZymoGenetics, Seattle's largest independent biotech.

"Should it be so timely for everyone," he said.

About 130 Icos employees are completing clinical-trial manufacturing contracts. Those jobs may survive if the company manages to sell the unit.

"Icos is currently in advanced discussions that, if successful, will result in the manufacturing operations continuing," said Icos President Ken Ferguson.

Guiding the end

Fifty others in various functions will be laid off, including Ferguson, when Icos finally closes its doors. Ferguson has guided the company through its last throes.

"We fully intend to honor our manufacturing commitments, and Icos is looking to complete its operations somewhere toward the end of this year or early next year," he said.

The company set up a Web site — www.icosalumni.org — for former employees to keep in touch.

Of the approximately 300 employees who left Icos, more than half have landed new positions in ZymoGenetics, Trubion, VLST, Amgen and other local operations; less than 5 percent have found work outside the area, said Jerry Schlagenhauf, the Lee Hecht Harrison human-resources consultant who leads Icos' outplacement effort.

Not only scientists have been in demand. "Executive assistants were just snapped up as fast as they could present themselves," Schlagenhauf said.

Some startups powered by Icos technology or brains are beginning to sprout. Calistoga Pharmaceuticals, which raised $21 million in March, managed to secure one of Icos' drug candidates before the Lilly acquisition. Lilly still has to decide what to do with Icos' unused pipeline.

Following Calistoga

At least two other startups are following in Calistoga's footsteps. CisThera, founded by former Icos scientific fellow Don Staunton, plans to tackle inflammatory diseases, cancer and fibrotic diseases.

Staunton, who left before the acquisition, spent time scouring for technology-licensing opportunities until he found a drug candidate likely to attract venture capitalists.

"Those are very difficult to identify, as a large percentage of pharmaceutical companies are competing for them," Staunton said.

He will receive funding from the Rathmann Family Foundation and is in talks with venture capitalists, he said. The foundation was established by George Rathmann, co-founder of Icos.

Cocrystal Discovery, founded by former Icos researcher Sam Lee, also seeks its initial injection of venture capital for a structure-based drug-discovery company. Its chairman, Gary Wilcox, who was an executive vice president at Icos, said the startup plans to seek out other former colleagues as the company grows.

Lee briefly considered establishing the company in Northern California, where his two scientific advisers — Nobel Prize-winning professors at Stanford University — reside. But operational costs are lower in the Seattle area, and there are many qualified potential recruits.

"We've got a lot of resources here," Lee said.

Local champion

Despite the emergence of the startups, Icos' demise frustrated one of the Seattle biotech community's deepest hankerings: a local giant to anchor growth.

A local big shot would make it easier to attract talent from competing regions and would accelerate capital, technology and people to make the sector bloom here, executives and observers say.

Pessimism over the loss of Icos — which followed Amgen's purchase of Immunex and Gilead's acquisition of Corus, two other successful local firms — was compounded by the scattering of jobs and carefully assembled research teams.

"In the short term, it's certainly very good for companies like ours," said Bruce Carter, ZymoGenetics' chief executive, whose company hired about seven Icos alumni. "For the biotech industry in Seattle, it's a very bad thing — it's an industry where the bigger it gets, the bigger it gets."

Outsiders add heft

Not all the takeovers ended that way, however. Amgen kept a sizable research team in Seattle — it remains the largest biotech employer in the Pacific Northwest.

A planned expansion at the company's scenic Helix campus on Elliott Bay may have been halted because of financial problems, however.

"We manage many more projects than we did when I was at Immunex," says Jim Thomas, an executive who stayed after the acquisition and now leads Amgen's Process and Analytical Science efforts from here.

The bigger company's resources and manufacturing expertise helped leverage Immunex scientists' know-how, he said.

"That was actually quite a good marriage," he said.

Gilead also maintained Corus Pharma's research team, keeping its founder, A. Bruce Montgomery, at the helm of the Seattle operation.

With the acquisition, "we got a product, but most importantly, we got a team," says Gilead Chief Operating Officer John Milligan. Its presence in Seattle allows Gilead to tap in to the local market for biotech talent, he said.

Another try

But the takeovers have left a hole that many yearn to fill.

Icos' Ferguson would have liked to have seen the company become the local champion, but he acknowledges that fate had other plans.

Once he turns off the lights at Icos' last remaining operations, he says he'll launch his own startup.

"I think Icos would have been great in the Seattle area, there's just no question of that. We had a lot of resources, we could have tested a lot of ideas, potentially generating new products," he said. "I think we're going to have to try it again."

Ángel González: 206-515-5644 or agonzalez@seattletimes.com