All Icos workers losing their jobs

By Luke Timmerman

Seattle Times business reporter

Eli Lilly is laying off all 700 employees at Icos, including all 550 in Washington, as part of its pending purchase of the state's largest locally based biotech company.

The cuts will become effective over the next year if Icos shareholders ratify the proposed $2.1 billion sale at a shareholders vote at its Bothell headquarters next Tuesday.

Icos said in mid-November that most employees had gotten layoff notices but hadn't confirmed until now that all workers are being dismissed.

George Rathmann, a biotech legend who co-founded Icos after guiding Amgen to the top of the industry, said in an interview he was "surprised" and "disappointed" to learn of the comprehensive layoff. "That is very strange," he said.

Rathmann, 78, co-founded the company in 1990, took it public a year later and in 1998 struck the original 50-50 partnership under which Icos and Lilly jointly market the impotence drug Cialis.

He handed over the CEO job to former Abbott Laboratories executive Paul Clark in 1999.

In the past, Rathmann said, he'd hoped to build Icos into an industry powerhouse. When asked if he had hoped Icos would someday be as big as Amgen, he said, "Why would I stop there? You don't have to limit your hopes to that. It was always a wonderful company."

Rathmann still holds 800,000 Icos shares. He said he hasn't decided yet which way to vote on the sale.

"I liked the way the company was going a few years ago, but then it veered off course," he said.

In October, the Icos board agreed to sell the company to Lilly for $32 a share.

Employees are expected to leave in waves. Many have received 60-day layoff notices, and some have been asked to stay through longer transition periods.

The last remaining workers will be in contract manufacturing, where they make small batches of biotech drugs for other companies. Those employees will stay through 2007 to fulfill contract obligations, said Icos spokeswoman Lacy Fitzpatrick.

Eli Lilly Chief Executive Sidney Taurel promised in October there would be "significant" job cuts at Icos. He has said the acquisition will fatten profits in 2008.

The deal has stirred controversy. A leading proxy advisory firm, Institutional Shareholder Services of Rockville, Md., has recommended shareholders defeat it because the price is too low. It also questioned the timing of the deal, which was struck two days before positive news broke that profits at the Cialis joint venture had quadrupled.

Last week, The Seattle Times reported that Icos advanced another drug, IC 776, into clinical trials for psoriasis without telling investors.

Icos has about 325,000 square feet of lab and office space spread among eight buildings in Bothell, and smaller facilities in Bellevue and Redmond.

In its last annual report, Icos said it also owned 300,000 square feet of land at its Bothell campus that was being saved for future expansion. Its main leases expire between 2007 and 2012.

Fitzpatrick said Icos hasn't begun looking to sublease space, because it is still operating until the takeover is finalized.