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Ah yes, attempting to take notes at a biotech meeting and come away with something useful can be challenging. Here's what I heard at this year's meeting. Don't be surprised if I missed something or copied it down wrong. The CEO talked fast to get through all of that information.

This year's meeting was held in the same place as the last couple of years but had grown to fill the room. I wouldn't be surprised to hear that the company meets somewhere else next year. There was a lot more food, chairs and people. My rough guess was that there were about 500 seats and about 3/4 of them were occupied. The age mix was more evenly spread than most meetings. There were even some kids there. Oh yeah, and Bill Gates was there.

The formal part of the meeting was brief and as orderly as ever. More than 90% of the votes were represented and everything passed. They mentioned that the minutes from the previous year's meeting are available which is an offer I might take them up on.

The CEO started off with a broad overview and then went into detail on individual products.

In 1990 the company had 65 researchers. It now has 470 employees and drugs getting close to the market.

The most significant highlights from 2001 that I caught were the NDA (New Drug Application?) for Cialis, progress in Pafase for treating sepsis, and a $314M financing effort. He emphasized that they have built a strong team of management and directors. I expected to hear about the employees here but missed any mention of them. The company is ranked within the top 20 of a subset of the biotechs when measured by market cap but looks even better when measured by a more technical criteria that I think refers to the pipeline.

He emphasized that the FDA has designated Cialis as approvable which is significant. He also did not hide the fact that the FDA also wants more studies, has questions about Lilly's manufacturing process, and is discussing the specifics of the labeling. This all means a delay in the US approval process of about a year, so it probably won't be approved in 2002 but might be approved in 2003. The European approval process has not been held up though so that might come through in the second half of this year. He showed some data that demonstrates the advantages Cialis offers over Viagra. It was at about that time that the one family in attendance shrunk as the Mom escorted the kids out of the room. Cialis seems to act sooner, last longer and have fewer side effects than Viagra if I read him right.

A phase 2b study is completed I believe and phase 3 has been initiated. They need about 2,500 patients for the phase 3 study. Both the 28 day and 56 day data are very encouraging. It sounds like they are saving lives. About 750,000 people contract the disease every year in the US and about 215,000 die from it. Evidently this is more than the number who die from heart attacks.

A phase 2b/3 study for treating, pulmonary arterial hypertension, began in 2Q01 and initial results are expected in 4Q02. The competition may be leading here but I didn't get much in the way of details.

Another sepsis treatment based on a monoclonal antibody takes on the disease earlier in it's cycle (though I don't know exactly what that means). Phase 2 should start in the second half of this year.

Psoriasis is a $4B market affecting 4M-5M people in the US. The phase 1 study was completed 1Q02 and phase 2 should start in 3Q02.

I believe this is for chronic inflammation though the annual report uses different words. Within biotech maybe it all means the same. The arthritis application has a possible market of 2.1M patients and phase 1 should be completed 3Q02.

I was slowing down at this point and just noted that it is licensed from someone else, is a topical small molecule, and phase 2 should start 3Q02.

One last chart showed six more that were glossed over. This was to my dismay as I wanted to hear about the innovative antibiotics. Maybe next year.

He summarized the pipeline nicely by showing the anticipated news flow of results and phase milestones for the rest of the year. It was an impressive list and longer than I could record. I'd like to get a copy of it somehow.

That concluded the presentation. Before I go on to the Q&A section I should note that there was very little presented that wasn't in the annual report. When in doubt go there.

> A stockholder wanted to make sure that ICOS wouldn't have the production rate problems that Immunex had with Enbrel (sp?). The CEO assured him that IMNX's problem were because Enbrel is a biologic issue and ICOS is chemical (protein?).
> One stockholder wanted to know if Cialis would be sold in Europe regardless of the FDA ruling and whether he could go there, but some, and bring it back. He was also interested in the timing of earnings profitability. I'm not sure I heard a good answer to this one.
> Some concern about the extra Cialis clinical pharmacology trials were expressed. Evidently the studies are not large but the CEO didn't go into details because of competition sensitivities.
> If Lilly can't make the drug can Cialis at least be manufactured by someone else for Europe? Yes it is possible to use an alternate supplier.
> There are evidently no life-threatening allergic reactions to Cialis.
> The FDA action does not mean that ICOS has to modify the European application.
> The Cialis delay might allow a competitor to beat ICOS to the market but they might stumble too.
> The FDA delay is not related to the "Notice of Violation" that ICOS received. Evidently the FDA objected to some of the verbiage ICOS was using to describe the product in technical and business publications. ICOS immediately complied which should keep this from being an issue. He made a special effort to point out that it was NOT a "Warning Letter" which is evidently more serious.
> The AMGN/IMNX merger will affect ICOS by removing a role model from the Seattle scene (but they'll still be in town, won't they?). IMNX was nice enough to help ICOS get visibility before the analysts at a critical time for the company. The possibility of an ICOS buyout exists and substantial serious efforts could happen but the focus remains on building a long-term free-standing company.
> Euro Cialis approval does not dramatically make up for the lack of an FDA approval. Europe is a smaller market with tougher pricing and higher costs. The multiple cultures mean more labeling and such.
> missed this one
> Biotechs have two main challenges: getting the first product out there and developing a pipeline. ICOS' goal is to have an average of one or two products entering research every year. They currently have a $25M-$30M research budget.
> Will Bill Gates take the company private? The CEO said no and emphasized Bill's strategic thinking as well as his financing.

That concluded the meeting. A two hour tour followed at the company's facility. I enjoyed the tour but didn't get much more concrete data from the visit. It was a good confidence builder to see how the work is being done, how the employees are being treated, and it was good to listen and participate in more detailed discussions of the company's operations.

It was a well run meeting with few surprises and seemed like a reprise of last year's meeting. Like a lot of other companies these days, a year from now the 2002 ICOS will look undervalued in hindsight if things reasonably well. They are not a one trick pony but they are also not in the market yet. Profitability is probably delayed by a year but is not cancelled. Others are better at quantifying the value of the company. Personally I am most interested in the pipeline and am encouraged by the potential for a cash source like Cialis.

I don't own the stock; my wife does and has held the stock for years. I go to the meetings and take notes. This time she was able to go along too which was good. I think it is a good company but there are others out there too. I take on a bit more risk so am more willing to hold companies that are farther from FDA approval. I probably won't go out and buy some but that drop in the stock price is enticing. Who knows? Good luck.

Feel free to ask questions and make corrections. If you were there it would be great if you could fill in the blanks.
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