UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-19171
ICOS CORPORATION
- -----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 91-1463450
- -----------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
22021 - 20th Avenue S.E., Bothell, WA 98021
- -----------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(425) 485-1900
- -----------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- -----------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
Class Outstanding at July 31, 1998
----- ----------------------------
Common Stock, $0.01 par value 40,010,496
ICOS CORPORATION
----------------
TABLE OF CONTENTS
-----------------
PAGE NO.
--------
PART I. Financial Information
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Operations for
the three months and six months ended
June 30, 1998 and 1997 1
Consolidated Statements of Comprehensive
Operations for the three months and six
months ended June 30, 1998 and 1997 2
Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997 3
Consolidated Statements of Cash Flows for
the six months ended June 30, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
ITEM 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. Other Information
ITEM 1: Legal Proceedings *
ITEM 2: Changes in Securities *
ITEM 3: Defaults Upon Senior Securities *
ITEM 4: Submission of Matters to a Vote
of Security Holders 14
ITEM 5: Other Information 15
ITEM 6: Exhibits and Reports on Form 8-K *
SIGNATURE 16
EXHIBITS 17
* No information provided due to inapplicability of item.
(This page left blank intentionally.)
ICOS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three months ended Six months ended
June 30, June 30,
------------------------ -----------------------
1998 1997 1998 1997
-------- --------- -------- --------
Revenues:
Collaborative research and development from related parties $ 6,302 $ 6,343 $ 12,386 $ 8,060
License of technology to related party - 8,500 - 8,500
Other 510 500 1,010 1,000
-------- -------- -------- --------
Total revenues 6,812 15,343 13,396 17,560
Operating expenses:
Research and development 15,857 9,842 30,306 18,971
General and administrative 880 548 1,671 1,298
-------- -------- -------- --------
Total operating expenses 16,737 10,390 31,977 20,269
-------- -------- -------- --------
Operating income (loss) (9,925) 4,953 (18,581) (2,709)
-------- -------- -------- --------
Other income (expense)
Investment and interest income 403 473 914 1,000
Other, net (20) (2) (57) (8)
-------- -------- -------- --------
383 471 857 992
-------- -------- -------- --------
Net income (loss) $ (9,542) $ 5,424 $(17,724) $ (1,717)
======== ======== ======== ========
Net earnings (loss) per common share
Basic $ (0.24) $ 0.14 $ (0.44) $ (0.04)
======== ======== ======== ========
Diluted $ (0.24) $ 0.13 $ (0.44) $ (0.04)
======== ======== ======== ========
Weighted average common shares used in calculation of
net earnings (loss) per share:
Basic 39,927 39,550 39,913 39,488
======== ======== ======== ========
Diluted 39,927 40,422 39,913 39,488
======== ======== ======== ========
<FN>
Form 10-Q See accompanying notes to consolidated financial statements. Page 1
ICOS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(in thousands)
(unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
1998 1997 1998 1997
-------- -------- ------- --------
Net income (loss)
Other comprehensive income: $ (9,542) $ 5,424 $ (17,724) $ (1,717)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during the period (29) 16 (8) (5)
Less reclassification adjustments for gains (losses)
included in net loss 3 - (17) (2)
--------- --------- ---------- ---------
Total other comprehensive income (loss) (26) 16 (25) (7)
--------- --------- ---------- ---------
Comprehensive income (loss) $ (9,568) $ 5,440 $ (17,749) $ (1,724)
========= ========= ========== =========
<FN>
Form 10-Q See accompanying notes to consolidated financial statements. Page 2
ICOS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and par value data)
ASSETS
June 30, December 31,
1998 1997
--------------- --------------
(unaudited)
Current assets:
Cash and cash equivalents $ 9,713 $ 1,404
Investment securities available for sale, at market value 4,786 23,845
Interest receivable 124 524
Receivables under collaborative arrangements from related parties 1,568 2,270
Other receivables 257 177
Prepaid expenses 476 509
-------------- -------------
Total current assets 16,924 28,729
Property and equipment, at cost:
Land 2,310 2,310
Buildings and improvements 9,454 9,454
Leasehold improvements 8,421 8,361
Furniture and equipment 17,490 15,450
-------------- -------------
37,675 35,575
Less accumulated depreciation and amortization 19,267 17,676
-------------- -------------
18,408 17,899
-------------- -------------
Construction in progress 1,025 51
-------------- -------------
Net property and equipment 19,433 17,950
-------------- -------------
Loan receivable from related party 7,341 7,341
Other assets 185 45
-------------- -------------
$ 43,883 $ 54,065
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,576 $ 2,363
Accrued payroll and benefits 1,145 873
Other accrued expenses 686 957
Deferred research and development revenue 3,594 -
---------- ----------
Total current liabilities 9,001 4,193
Stockholders' equity:
Preferred stock, $.01 par value. 2,000,000 shares authorized; none issued - -
Common stock, $.01 par value. 100,000,000 shares authorized; 39,948,409
issued and outstanding at June 30, 1998 and 39,885,414 issued and
outstanding at December 31, 1997 399 399
Additional paid-in capital 174,638 171,879
Net unrealized gain (loss) on investment securities available for sale (6) 19
Accumulated deficit (140,149) (122,425)
---------- ----------
Total stockholders' equity 34,882 49,872
---------- ----------
$ 43,883 $ 54,065
========== ==========
<FN>
Form 10-Q See accompanying notes to consolidated financial statements. Page 3
ICOS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six months ended June 30,
-----------------------------
1998 1997
----------- -----------
Cash flows from operating activities:
Net loss $ (17,724) $ (1,717)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 1,591 1,917
Amortization of investment premiums/discounts 184 349
Gain on sale of investment securities (17) (2)
Change in operating assets and liabilities:
Interest receivable 400 (234)
Receivables under collaborative arrangements from related parties 702 (5,478)
Other receivables (80) (45)
Prepaid expenses 33 80
Accounts payable 1,213 449
Accrued payroll, benefits and other expenses 1 (174)
Deferred research and development revenue 3,594 -
---------- ----------
Net cash used in operating activities (9,305) (4,855)
Cash flows from investing activities:
Purchases of investment securities (12,092) (26,158)
Maturities of investment securities 7,980 18,312
Sales of investment securities 22,979 18,325
Acquisitions of property and equipment (3,074) (770)
Loan receivable from related party - (5,513)
Increase in other assets (140) (193)
---------- ----------
Net cash provided by investing activities 15,653 4,003
---------- ----------
Cash flows from financing activities:
Proceeds from exercise of stock options 403 465
Proceeds from issuance of warrants 1,558 1,500
---------- ----------
Net cash provided by financing activities 1,961 1,965
---------- ----------
Net increase in cash and cash equivalents 8,309 1,113
Cash and cash equivalents at beginning of period 1,404 2,159
---------- ----------
Cash and cash equivalents at end of period $ 9,713 $ 3,272
========== ==========
Supplemental disclosure of noncash financing and investing activities:
Receivable for issuance of warrants - 762
========== ==========
<FN>
Form 10-Q See accompanying notes to consolidated financial statements. Page 4
ICOS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998 (unaudited) and December 31, 1997
1. Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
The information contained herein has been prepared in accordance
with instructions for Form 10-Q. In the opinion of management of ICOS
Corporation ("ICOS" or the "Company"), the information reflects all
adjustments necessary to make the results of operations for the interim
periods a fair statement of such operations. All such adjustments are
of a normal recurring nature. Interim results are not necessarily
indicative of results for a full year. For a presentation including all
disclosures required by generally accepted accounting principles, these
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements for the year ended December
31, 1997, included in the Company's Annual Report on Form 10-K.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, ICOS Development Corporation.
All significant intercompany transactions and balances have been
eliminated.
2. Research and Development Arrangements
-------------------------------------
Suncos
The Company owns a 50% interest in Suncos Corporation ("Suncos"), a
corporation formed for the development and commercialization of Pafase(tm).
Pursuant to the terms of agreements entered into with Suncos, the
Company conducts certain research and development activities on behalf
of Suncos and is paid for such services based upon costs incurred.
Suncos was funded initially with a $30 million investment from Suntory
Limited of Japan ("Suntory"). Once the initial $30 million has been
exhausted, ICOS and Suntory have each agreed to make a $10 million
investment in Suncos to provide funds for continued development of
Pafase(tm).
For the three months and six months ended June 30, 1998, the
Company recognized research and development cost reimbursement revenue
under this arrangement of $3.0 million and $5.4 million, respectively.
For the three months and six months ended June 30, 1997, the Company
recognized research and development cost reimbursement revenue under
this arrangement of $3.1 million and $4.9 million, respectively.
Form 10-Q Page 5
ICOS Clinical Partners, L.P.
In 1997, ICOS Clinical Partners, L.P. (the "Partnership"), an
affiliate of the Company, completed the sale to private investors of
interests in the Partnership. Proceeds from the offering will be used
by the Partnership to fund continued development of product candidates
by the Company pursuant to the terms of a Product Development Agreement
based on three compounds: LeukArrest(tm), Pafase(tm) and ICM3.
For the three months and six months ended June 30, 1998, the
Company recognized cost reimbursement revenue from the Partnership of
$3.3 million and $7.0 million, respectively. For the three months and
six months ended June 30, 1997, the Company recognized cost
reimbursement revenue from the Partnership of $3.2 million. In addition,
the Company received a one-time payment in the first quarter
of 1997 for the license of technology to the Partnership.
3. Net (Earnings) Loss Per Common Share
------------------------------------
Computation of Per Share Earnings (Loss)
(in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
---------------------- --------------------
1998 1997 1998 1997
---------- --------- -------- --------
Basic earnings (loss ) per share computations:
Numerator:
Net earnings (loss) $ (9,542) $ 5,424 $(17,724) $ (1,717)
Denominator:
Weighted-average common shares 39,927 39,550 39,913 39,488
---------- --------- -------- --------
Basic net earnings (loss) per share $ (0.24) $ 0.14 $ (0.44) $ (0.04)
========== ========= ======== ========
Diluted earnings (loss) per share computation:
Numerator:
Net earnings (loss) $ (9,542) $ 5,424 $(17,724) $ (1,717)
Denominator:
Weighted-average common shares 39,927 39,550 39,913 39,488
Effect of dilutive securities - stock options - 872 - -
---------- --------- --------- ---------
Denominator for dilutive net earnings (loss) per share 39,927 40,422 39,913 39,488
---------- --------- --------- ---------
Diluted net earnings (loss) per share $ (0.24) $ 0.13 $ (0.44) $ (0.04)
========== ========= ========= =========
Form 10-Q Page 6
For the quarter and six months ended June 30, 1998, options to
acquire 6.5 million shares of common stock with a weighted average
exercise price of $8.88 per share, warrants to acquire 7.6 million
shares of common stock with a weighted average exercise price of $9.45
per share and contingently issuable stock warrants to acquire 7.6
million shares of common stock have been excluded from the computation
of diluted net loss per common share as their impact would be
antidilutive.
For the quarter ended June 30, 1997, options to purchase 959 shares
of common stock with a weighted average exercise price of $9.87 per
share have been excluded from the computation of diluted net earnings
per common share as their impact would be antidilutive. For the six
months ended June 30, 1997, options to purchase 5.5 million shares of
common stock with a weighted average exercise price of $6.92 per share
have been excluded from the computation of diluted net loss per common
share as their impact would be antidilutive.
4. New Accounting Standard
In 1998, the Company adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("Statement 130"). The objective of Statement 130 is to report a
measure of all changes in equity of an enterprise that do not result from
transactions with owners ("comprehensive income"). Comprehensive income is
the total of net income (loss) and all other nonowner changes in equity.
Form 10-Q Page 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Risks and Uncertainties
- -----------------------
This discussion contains forward-looking statements that are
subject to certain risks and uncertainties that could cause actual
results to differ materially from those projected. The Company's future
cash requirements and expense levels will depend on many factors,
including continued scientific progress in its research and development
programs; the results of research and development, preclinical studies
and clinical trials; acquisitions of products or technology, if any;
relationships with corporate collaborators; competing technological and
market developments; the time and costs involved in filing, prosecuting
and enforcing patent claims; the time and costs of manufacturing scale-
up and commercialization activities; and other factors. Reference is
made to the Company's Annual Report on Form 10-K for more detailed
description of such factors. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the
date of this report. The Company undertakes no obligation to publicly
release the results of any revisions to these forward-looking statements
that may be made to reflect events or circumstances after the date of
this report or to reflect the occurrence of unanticipated events.
Overview
The Company is developing and commercializing proprietary
pharmaceutical products for the treatment of inflammatory diseases and
other serious medical conditions. The Company's strategy is to identify
therapeutic targets through an understanding of inflammation at the
molecular level. The Company is developing pharmaceutical products that
address important cellular and molecular mechanisms in three separate,
yet interrelated, areas of the inflammatory process: directed cell
movement, the inhibition of proinflammatory mediators and intracellular
signal transduction. Each of these different mechanisms may provide
broad opportunities in the treatment of clinical conditions including
chronic diseases that have inflammatory components, such as multiple
sclerosis, and in the treatment of acute inflammatory conditions, such
as those associated with acute respiratory distress syndrome,
hemorrhagic shock and myocardial infarction. In addition, the Company's
programs have yielded additional approaches that may be useful in
treating cardiovascular diseases, erectile dysfunction and cancer. The
Company believes that its discoveries will allow it to develop novel
therapeutics that are more selective in their activities than existing
drugs.
Form 10-Q Page 8
LeukArrest(tm), a humanized monoclonal antibody, was formerly
called Hu23F2G. Pafase(tm), the recombinant form of a human enzyme, was
formerly called rPAF-AH.
Financial results for the second quarter and first half of 1998
reflect planned increases in operating expenses necessary for advancing
multiple therapeutic product candidates through the development process.
Development activities include product development, process development
and the establishment and management of clinical trials. The Company
expects increased clinical, regulatory, process development and product
development activities over the remainder of the year and in future
periods.
The Company has an accumulated deficit at June 30, 1998 of $140.1
million. The Company's results of operations may vary significantly
from quarter to quarter and will depend, among other factors, on the
timing of certain expenses and payments received from certain
collaborations, joint ventures and other business relationships, as well
as the progress of the Company's own research and development efforts,
timing of clinical trials and the regulatory process. The Company
expects increased expenditures over the next several quarters as it
continues to expand the size and number of clinical trials of its
product candidates, continues to expand preclinical research and
development activities in support of additional potential products, and
initiates clinical trials of those product candidates deemed most
promising.
Revenues
Revenues for the quarter ended June 30, 1998 totaled $6.8 million
and consisted of (i) $3.3 million in cost reimbursement revenue from
ICOS Clinical Partners, L.P. (the "Partnership"), (ii) $3.0 million in
cost reimbursement revenue from Suncos Corporation ("Suncos"), the
Company's joint venture with Suntory Limited of Japan ("Suntory"), and
(iii) $0.5 million received under the Company's research and development
agreement with Abbott Laboratories ("Abbott"). Revenue for the quarter
ended June 30, 1997 totaled $15.3 million, and consisted of (i) $3.2
million in cost reimbursement revenue from the Partnership, (ii) a one-
time payment of $8.5 for the license of technology to the Partnership,
(iii) $3.1 million in cost reimbursement revenue from Suncos, and
(iv) $0.5 million received under the Company's agreement with Abbott.
Revenues for the six months ended June 30, 1998 totaled $13.4
million and consisted of (i) $7.0 million in cost reimbursement revenue
from the Partnership, (ii) $5.4 million in cost reimbursement revenue
from Suncos, and (iii) $1.0 million received under the Company's
agreement with Abbott. Revenue for the six months ended June 30, 1997
totaled $17.6 million, and consisted of (i) $3.2 million in cost
reimbursement revenue from the Partnership, (ii) a one-time payment of
$8.5 for the license of technology to the Partnership, (iii) $4.9
million in cost reimbursement revenue from Suncos, and (iv) $1.0 million
received under the Company's agreement with Abbott.
Form 10-Q Page 9
Operating Expenses
Total operating expenses for the quarter ended June 30, 1998
increased to $16.7 million from $10.4 million for the quarter ended June
30, 1997. Total operating expenses for the first half of 1998 increased
to $32.0 million from $20.3 million for the first half of 1997.
Research and development expenses for the second quarter of 1998
increased to $15.9 million from $9.8 million for the second quarter of
1997. Research and development expenses for the first half of 1998
increased to $30.3 million from $19.0 million for the first half of
1997. The increase in research and development expenses for both the
second quarter and first half of 1998 was due primarily to costs
associated with the progression of clinical trials for LeukArrest(tm),
Pafase(tm), ICM3 and IC351, and the expansion of other product development
efforts.
General and administrative expenses for the second quarter of 1998
increased to $0.9 million from $0.5 million in the second quarter of
1997. General and administrative expenses for the first half of 1998
increased to $1.7 million from $1.3 million for the first half of 1997.
General and administrative expense for the second quarter of 1997 was
reduced by $0.2 million due to the recovery of certain organizational
costs related to the formation of the Partnership.
Other Income and Expense
Other income primarily represents investment income earned on the
Company's investment securities and interest income on the Company's
loan to the Partnership. Investment income for the second quarter of
1998 totaled $0.2 million compared to $0.4 million for the second
quarter of 1997. Investment income for the first half of 1998 totaled
$0.6 million compared to $1.0 million for the first half of 1997. The
decrease in investment income for both the second quarter and first half
of 1998 was due primarily to lower average cash and investment balances
during the second quarter and first six months of 1998 compared to the
same periods of 1997. Interest income on the loan to the Partnership
totaled $0.2 million for the second quarter of 1998 and $0.3 million for
the first half of 1998.
Net Income (Loss)
For the quarter ended June 30, 1998, the Company recognized a net
loss of $9.5 million or $0.24 per diluted share compared to net income
of $5.4 million or $0.13 per diluted share for the quarter ended June
30, 1997. For the first half of 1998, the Company recognized a net loss
of $17.7 million or $0.44 per diluted share compared to a net loss of
$1.7 million or $0.04 per diluted share for the first half of 1997. The
increase in net loss for both the second quarter and first half of 1998
was due primarily to costs associated with the progression of clinical
trials for LeukArrest(tm), Pafase(tm) and ICM3 and IC351, the expansion of
other product development efforts and the recognition of $8.5 million as
Form 10-Q Page 10
a one-time fee for the license of technology to the Partnership in the
second quarter of 1997. Excluding the one-time payment from the
Partnership, the Company would have recognized a net loss of $3.1
million or $0.08 per diluted share for the quarter ended June 30, 1997
and a net loss of $10.2 million or $0.26 per diluted share for the six
months ended June 30, 1997.
Liquidity & Capital Resources
The Company has financed its operations since inception through
private and public sales of common stock, investment income, revenue
from research collaborations, license payments and grants and capital
lease obligations.
At June 30, 1998, the Company had $14.6 million in cash and cash
equivalents, investment securities, and interest receivable, a decrease
of $11.2 million from December 31, 1997. This decrease is primarily
attributable to increased costs associated with conducting clinical
trials for LeukArrest(tm), Pafase (tm), ICM3 and IC351, increased
production of materials to support these and future clinical trials,
regulatory submissions and expansion of the Company's other research
and development programs.
For the six months ended June 30, 1998, the Company spent $3.1
million for the purchase of capital equipment and leasehold improvements
to support research and development activities. To support its ongoing
and future research and product development efforts over the next
several years, the Company will need to purchase additional capital
equipment and lease or purchase additional laboratory and administrative
facilities.
In 1997, the Partnership completed the sale to private investors of
interests in the Partnership. Proceeds from the offering will be used
by the Partnership to fund continued development by the Company of
product candidates based on three compounds: LeukArrest(tm); Pafase(tm);
and ICM3, pursuant to the terms of a product development agreement. The
product candidates were licensed to the Partnership by the Company in
connection with the sale of the Partnership units. The sale will result
in net proceeds to the Partnership of approximately $79.8 million. The
Partnership received $25.9 million, before payment of offering costs, on
closing and the balance will be paid in installments over a three-year
period of which the first installment totaling $21.9 million was
received in the second quarter of 1998. In connection with the offering
of Partnership units, the Company issued warrants to purchase an
aggregate of 7.6 million shares of the Company's common stock. These
warrants are exercisable beginning October 1, 1998. The Company has
agreed to use its commercially reasonable efforts to establish and
maintain an effective shelf registration statement for resales of the
shares to be issued pursuant to the exercise of these warrants. In
addition, the Company is obligated, subject to certain conditions, to issue
in June, 1999 warrants to purchase an aggregate of 7.6 million shares of
the Company's common stock.
During 1997, the Company loaned the Partnership $7.3 million to
fund certain initial expenditures of the Partnership that consist
primarily of organizational expenses, selling commissions and financial
advisory and other fees. Interest is payable annually on June 1, and
the principal balance of the loan is payable on June 1, 2000.
Form 10-Q Page 11
The Company anticipates that its operating expenses will continue
to increase during 1998 and in subsequent years as it adds personnel,
equipment and facilities associated with advancing its product
candidates including LeukArrest(tm), Pafase(tm), ICM3 and IC351 through
development and clinical trials. The Company also plans to continue
preclinical research and development activities for additional potential
product candidates and initiate clinical trials for those product
candidates deemed most promising. Foreseeable incremental costs may
include, but are not limited to, those associated with the Company's own
product development, preclinical studies and clinical trials, patent
filings and administrative activities. In addition, the Company will
incur costs and make capital contributions under its joint venture
agreement with Suntory related to the development of Pafase(tm). Under
provisions of the development agreement with Suncos, the Company will be
reimbursed for certain of these costs, however, there can be no
assurance that all such costs will be reimbursed. The Company will also
incur costs associated with the development of LeukArrest(tm), Pafase(tm)
and ICM3, pursuant to the terms of the Partnership Development Agreement.
The Partnership has agreed to reimburse the Company for certain of these
costs.
The Company anticipates that its existing cash, including interest
income from cash investments and payments from Abbott, Suncos and the
Partnership, will be adequate to satisfy its cash requirements through
at least the third quarter of 1998. The Company will need to raise
substantial additional funds over the next several years to conduct its
research and development activities, preclinical studies and clinical
trials necessary to bring its product candidates to market and to
establish sales and marketing capabilities if and when a product
candidate is ready for commercialization.
The Company is currently evaluating several public and private
financing alternatives, some of which would involve the sale of
additional stock, the issuance of debt and/or entering into additional
corporate partnerships. The Company anticipates completion of one or
more of these financing events prior to the end of 1998. In addition,
the exercise of warrants, issued to Limited Partners in conjunction with
the Limited Partnership financing, which become exercisable in October
1998, may provide additional capital to the Company. There can be no
assurance that additional funds will be available as needed or on terms
that are acceptable to the Company. Insufficient funding will require
the Company to delay, scale-back or eliminate some or all of its research
and development activities, planned clinical trials and administrative
programs.
The Company has been successful in negotiating collaborations and
joint development agreements with other parties where the work and
strategies of the other parties complement those of the Company. In
some instances, these relationships may involve commitments by the
Company to fund some or all of certain development programs. Although
corporate collaborations and joint ventures have provided cost
reimbursement revenue to the Company in the past, there can be no
assurance that funds from such sources will be available to the Company
in the future.
Form 10-Q Page 12
The amounts and timing of operating expenditures will depend on the
progress of ongoing research and development of the Company's potential
products, as well as the activities of corporate collaborators and joint
venture partners related to collaborative research and development
activities, the FDA regulatory process and other factors, many of which
are beyond the Company's control.
Form 10-Q Page 13
PART II. OTHER INFORMATION
ITEM 4: Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on May 6, 1998.
The proposals voted upon and the results of the voting are as
follows:
1. The following nominees for election as Directors, each to hold
office for a term as defined in the Proxy Statement and until
their successors are duly elected and qualified, received not
less than 36,825,335 votes, which represent 96.67% of the
shares of Common Stock voted. Each Director received the
number of votes set opposite his or her name:
Nominee For Withheld
------- --- --------
William H. Gates, III 36,825,335 1,267,835
Robert W. Pangia 37,966,824 126,346
George B. Rathmann 37,968,216 124,954
The aforesaid nominees have been elected as Directors for the
term set forth in the Proxy Statement.
The following Directors are currently serving terms that expire
at the 1999 Annual Meeting of Stockholders and until their
respective successors are duly elected and qualified:
David V. Milligan
Alexander B. Trowbridge
Gary L. Wilcox
Walter B. Wriston
The following Directors are currently serving terms that expire
at the 2000 Annual Meeting of Stockholders and until their
respective successors are duly elected and qualified:
Frank T. Cary
James L. Ferguson
Janice M. LeCocq
Form 10-Q Page 14
2. The proposal to approve the appointment of KPMG Peat Marwick
LLP as the Company's independent public accountants for fiscal
year 1998 received the following votes:
Votes
-----
For 37,957,162
Against 45,444
Withheld 90,564
The foregoing proposal was approved.
ITEM 5: Other Information
If the Company receives notice of a shareholder proposal after
February 9, 1999, the persons named as proxies in such proxy
statement and proxy will have discretionary authority to vote
on such shareholder proposal.
ITEM 6: Exhibits and Reports on Form 8-K
(a) See Exhibit Index
Form 10-Q Page 15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ICOS CORPORATION
Date: August 14, 1998 By: /S/ GEORGE B. RATHMANN
--------------- -----------------------
George B. Rathmann
Chairman of the Board of
Directors, Chief Executive
Officer and President
Date: August 14, 1998 By: /S/ HOWARD S. MENDELSOHN
--------------- -------------------------
Howard S. Mendelsohn
Chief Accounting Officer
Form 10-Q Page 16
Index to Exhibits
-----------------
Page
----
27.1 Financial Data Schedule 18
Form 10-Q Page 17