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
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996 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 Southeast, Bothell WA 98021
(Address of principal executive offices) (Zip Code)
(206)485-1900
(Registrant's telephone number, including area code)
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.
/X/Yes / /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 June 30, 1996
----- -----------------------------
Common Stock, $0.01 par value 39,221,823
<PAGE>
ICOS CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Statements of Operations for the three months ended June 30, 1996
and 1995, the six months ended June 30, 1996 and 1995 and the
period from September 21, 1989 (incorporation) through June 30,1996..1
Balance Sheets as of June 30, 1996 and December 31,1995..............2
Statements of Stockholders' Equity for the period from September 21,
1989(incorporation) through June 30, 1996............................3
Statements of Cash Flows for the six months ended June 30, 1996
and 1995, and the period from September 21, 1989 (incorporation)
through June 30, 1996................................................5
Notes to Financial Statements........................................6
ITEM 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................7
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.........11
ITEM 5: Other Information............................................*
ITEM 6: Exhibits and Reports on Form 8-K............................14
SIGNATURE...................................................................15
*No information provided due to inapplicability of item.
<PAGE>
<TABLE>
ICOS CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATIONS
(unaudited)
<CAPTION>
Period from
September 21, 1989
Three months ended Six months ended (incorporation)
June 30, June 30, June 30, June 30, through June 30,
1996 1995 1996 1995 1996
------------ ------------ ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenue:
Collaborative research & development $ 500,000 $ 500,000 $ 1,000,000 $ 500,000 $ 4,500,000
Research grants - - - - 1,451,409
------------ ------------ ------------- ------------- -------------
Total revenue 500,000 500,000 1,000,000 500,000 5,951,409
Operating expenses:
Research and development 7,091,661 5,742,391 13,799,918 11,681,695 99,491,522
General and administrative 675,251 624,368 1,361,138 1,280,515 16,759,127
------------ ------------ ------------- ------------- -------------
Total operating expenses 7,766,912 6,366,759 15,161,056 12,962,210 116,250,649
------------ ------------ ------------- ------------- -------------
Operating loss (7,266,912) (5,866,759) (14,161,056) (12,462,210) (110,299,240)
------------ ------------ ------------- ------------- -------------
Other income (expense):
Investment income 475,142 514,169 698,759 1,025,867 15,916,839
Interest expense - (16,039) - (36,547) (887,535)
Other, net 245 (62,683) 1,214 (61,892) (105,823)
------------ ------------ ------------- ------------- -------------
475,387 435,447 699,973 927,428 14,923,481
------------ ------------ ------------- ------------- -------------
Net loss $(6,791,525) $(5,431,312) $(13,461,083) $(11,534,782) $(95,375,759)
============ ============ ============= ============= ============
Net loss per common share $ (0.19) $ (0.17) $ (0.39) $ (0.36)
============ ============ ============= =============
Weighted average common shares
outstanding 36,208,083 32,202,811 34,236,986 32,153,651
============ ============ ============= =============
<FN>
See accompanying notes to financial statements.
Page 1
</TABLE>
<PAGE>
<TABLE>
ICOS CORPORATION
(A Development Stage Company)
BALANCE SHEETS
ASSETS
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 45,885,624 $ 4,256,366
Investment securities available for sale, at market value 9,008,320 17,013,514
Interest receivable 356,853 106,548
Nontrade receivables 111,350 98,396
Prepaid expenses 465,928 634,134
------------ ------------
Total current assets 55,828,075 22,108,958
Property and equipment, at cost:
Land 2,309,979 2,309,979
Leasehold improvements 7,192,096 7,082,065
Furniture and equipment 10,945,075 9,534,792
Assets acquired under capital lease obligations - 570,530
------------ ------------
20,447,150 19,497,366
Less accumulated depreciation and amortization 12,071,393 10,478,040
------------ ------------
8,375,757 9,019,326
------------ ------------
Construction in progress 7,869,377 6,366,402
------------ ------------
Net property and equipment 16,245,134 15,385,728
------------ ------------
Other assets 127,197 240,844
------------ ------------
$ 72,200,406 $ 37,735,530
============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 309,357 $ 1,598,973
Accrued payroll and benefits 805,033 664,094
Other accrued expenses 1,428,913 1,635,472
Deferred research and development revenue - 500,000
Current installments of obligations under capital lease - 44,633
------------ ------------
Total current liabilities 2,543,303 4,443,172
------------ ------------
Stockholders' equity:
Preferred Stock, $.01 par value. Authorized 2,000,000 shares; none issued - -
Common Stock, $.01 par value. Authorized 100,000,000 shares; issued and
outstanding, 39,221,823 at June 30, 1996 and 32,233,608 at December 31, 1995 392,218 322,335
Additional paid-in capital 164,736,709 115,163,011
Restricted Stock (69,375) (208,125)
Net unrealized loss on investment securities available for sale (26,690) (70,187)
Deficit accumulated during the development stage (95,375,759) (81,914,676)
------------- -------------
Total stockholders' equity 69,657,103 33,292,358
------------- -------------
$ 72,200,406 $ 37,735,530
<FN> ============= =============
See accompanying notes to financial statements.
Page 2
</TABLE>
<PAGE>
<TABLE>
ICOS CORPORATION
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Common Additional Restricted Unrealized Deficit Total
Stock paid-in Common gain(loss) accumulated stockholders'
capital Stock on during the equity
securities development
available stage
for sale,
net
-------- ------------ ----------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of 5,515,000 shares of Common Stock at
$.02 per share $ 55,150 $ 55,150 $ - $ - $ - $ 110,300
Net loss for the period from inception through
December 31, 1989 - - - - (359,952) (359,952)
-------- ------------ ----------- --------- ------------- -----------
Balances at December 31, 1989 55,150 55,150 - - (359,952) (249,652)
Issuance of 455,000 shares of Common Stock at
$.02 per share 4,550 4,550 - - - 9,100
Issuance of 10,752,222 shares of Common Stock at
$3.00 per share, net of issuance costs of $2,513,166 107,522 29,635,979 - - - 29,743,501
Issuance of 300,000 shares of Common Stock at $3.00
per share in payment of note to stockholders 3,000 897,000 - - - 900,000
Repurchase 60,000 shares of Common Stock at $.02
per share (600) (600) - - - (1,200)
Net loss for the year ended December 31, 1990 - - - - (2,775,090) (2,775,090)
-------- ------------ ----------- --------- ------------- -----------
Balances at December 31, 1990 169,622 30,592,079 - - (3,135,042) 27,626,659
Issuance of 4,500,000 shares of Common Stock at $8.00
per share, net of issuance costs of $3,230,856 45,000 32,724,144 - - - 32,769,144
Repurchase 74,000 shares of Common Stock at $.02 per
share (740) (740) - - - (1,480)
Issuance of 135,000 shares of Common Stock, of which
75,000 shares are restricted, to Cold Spring Harbor
Laboratories pursuant to a collaboration agreement, at
fair market value of $18.50 per share 1,350 2,496,150 (1,387,500) - - 1,110,000
Vesting of 3,750 shares of restricted Common Stock - - 69,375 - - 69,375
Issuance of 18,885 shares of Common Stock from the
exercise of options at $3.00 per share 189 56,466 - - - 56,655
Issuance of 86,772 shares of Common Stock from the
exercise of warrants at $3.00 per share 868 259,448 - - - 260,316
Compensation related to options granted - 12,599 - - - 12,599
Net loss for the year ended December 31, 1991 - - - - (6,412,786) (6,412,786)
-------- ------------ ----------- --------- ------------- -----------
Balances at December 31, 1991 216,289 66,140,146 (1,318,125) - (9,547,828) 55,490,482
Issuance of 3,000,000 shares of Common Stock at $9.00
per share, net of issuance costs of $1,780,436 30,000 25,189,564 - - - 25,219,564
Retirement of 299,561 shares of Common Stock at $8.00
per share (2,996) (2,394,226) - - - (2,397,222)
Vesting of 15,000 shares of restricted Common Stock - - 277,500 - - 277,500
Issuance of 800,012 shares of Common Stock from the
exercise of options at $3.00 per share 8,000 2,392,035 - - - 2,400,035
Issuance of 106,800 shares of Common Stock from the
exercise of warrants at $3.00 per share 1,068 319,333 - - - 320,401
Compensation related to options granted - 30,235 - - - 30,235
Net loss for the year ended December 31, 1992 - - - - (8,312,128) (8,312,128)
-------- ------------ ----------- --------- ------------- -----------
Balances at December 31, 1992 252,361 91,677,087 (1,040,625) - (17,859,956) 73,028,867
Page 3
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Repurchase of 12,500 shares of Common Stock at $.02
per share (125) (215) - - - (340)
Vesting of 15,000 shares of restricted Common Stock - - 277,500 - - 277,500
Issuance of 4,998 shares of Common Stock from the
exercise of options at prices ranging from $3.00 to
$8.00 per share 50 17,765 - - - 17,815
Issuance of 59,650 shares of Common Stock from the
exercise of warrants at $3.00 per share 596 178,354 - - - 178,950
Issuance of 326,838 shares of Common Stock from the
exercise of warrants in exchange for Common Stock at
prices ranging from $5.25 to $6.10 per share 3,269 (3,269) - - - -
Compensation related to options granted - 30,235 - - - 30,235
Net loss for the year ended December 31, 1993 - - - - (17,937,930) (17,937,930)
-------- ------------ ----------- --------- ------------- ------------
Balances at December 31, 1993 256,151 91,899,957 (763,125) - (35,797,886) 55,595,097
Issuance of 6,425,000 shares of Common Stock at $3.625
per share, net of issuance costs of $500,072 64,250 22,726,303 - - - 22,790,553
Vesting of 15,000 shares of restricted Common Stock - - 277,500 - - 277,500
Issuance of 12,998 shares of Common Stock from the
exercise of options at prices ranging from $3.00 to
$8.00 per share 129 43,550 - - - 43,679
Compensation related to options granted - 30,235 - - - 30,235
Net unrealized loss on investment securities available
for sale - - - (968,920) - (968,920)
Net loss for the year ended December 31, 1994 - - - - (22,748,200) (22,748,200)
-------- ------------ ----------- --------- ------------- ------------
Balances at December 31, 1994 320,530 114,700,045 (485,925) (968,920) (58,546,086) 55,019,944
Issuance costs related to sale of Common Stock in 1994 - (56,567) - - - (56,567)
Vesting of 15,000 shares of restricted Common Stock - - 277,500 - - 277,500
Issuance of 166,019 shares of Common Stock from the
exercise of options at prices ranging from $4.00 to
$7.625 per share 1,660 504,145 - - - 508,805
Issuance of 5,250 shares of Common Stock from exercise
of warrants at $3.00 per share 53 15,480 - - - 15,533
Issuance of 9,225 shares of Common Stock from the
exercise of warrants in exchange for Common Stock at
prices ranging from $4.95 to $5.13 per share 92 (92) - - - -
Net unrealized gain on investment securities available
for sale - - - 898,733 - 898,733
Net loss for the year ended December 31, 1995 - - - - (23,368,590) (23,368,590)
-------- ------------ ----------- --------- ------------- ------------
Balances at December 31, 1995 322,335 115,163,011 (208,125) (70,187) (81,914,676) 33,292,358
Issuance of 6,900,000 shares of Common Stock at
$7.625 per share, net of issuance costs of
$3,382,968 69,000 49,160,532 - - - 49,229,532
Vesting of 7,500 shares of restricted Common Stock - - 138,750 - - 138,750
Issuance of 88,215 shares of Common Stock from the
exercise of options at prices ranging from $3.00 to
$8.00 per share 883 413,166 - - - 414,049
Net unrealized gain on investment securities available
for sale - - - 43,497 - 43,497
Net loss for the six months ended June 30, 1996 - - - - (13,461,083) (13,461,083)
-------- ------------ ----------- --------- ------------- ------------
Balances at June 30, 1996 $392,218 $164,736,709 $ (69,375) $(26,690) $(95,375,759) $69,657,103
======== ============ =========== ========= ============= ============
<FN>
See accompanying notes to financial statements.
Page 4
</TABLE>
<PAGE>
<TABLE>
ICOS CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Period from
September 21,
1989
(incorporation)
Six Months Ended through
June 30, June 30,
------------------------
1996 1995 1996
------------ ----------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(13,461,083) $ (11,534,782) $(95,375,759)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 1,593,353 1,572,231 12,071,393
Amortization of deferred rent - - (475,000)
Amortization of investment premiums/discounts 48,856 79,918 1,112,723
Loss (gain) on sale of investment securities 19,359 - (1,372,964)
Amortization of restricted stock 138,750 138,750 1,318,125
Compensation related to stock options granted - - 103,304
Common Stock issued in payment of research and development costs - - 1,110,000
Change in certain assets and liabilities:
Increase in interest receivable (250,305) (165,717) (356,853)
Increase in nontrade receivables (12,954) (19,834) (111,350)
Decrease (increase) in prepaid expenses 168,206 170,462 (465,928)
Increase in other assets - (7,205) -
Decrease in accounts payable (1,289,616) (59,677) (460,643)
(Decrease) increase in accrued payroll, benefits and other
accrued expenses (65,620) (10,692) 2,233,946
Decrease in deferred research and development revenue (500,000) - -
------------ ------------ -------------
Net cash used in operating activities (13,611,054) (9,836,546) (80,669,006)
------------ ------------ -------------
Cash flows from investing activities:
Purchases of investment securities (1,986,875) (11,592,490) (361,772,624)
Maturities of investment securities 5,000,000 - 83,907,775
Sales of investment securities 4,967,351 - 269,090,081
Acquisitions of property and equipment (2,452,759) (1,644,306) (23,957,326)
Decrease (increase) in other assets 113,647 - (127,197)
------------ ------------ -------------
Net cash provided by (used in) investing activities 5,641,364 (13,236,796) (32,859,291)
------------ ------------ -------------
Cash flows from financing activities:
Deferred rent payment received - - 475,000
Proceeds from note payable to stockholders - - 900,000
Principal payments on obligations under capital lease (44,633) (385,073) (3,589,201)
Proceeds from issuance of Common Stock 49,229,532 (56,567) 159,871,693
Proceeds from exercise of options and warrants 414,049 499,529 1,759,539
Common Stock retired - - (3,110)
------------ ------------ -------------
Net cash provided by financing activities 49,598,948 57,889 159,413,921
------------ ------------ -------------
Net increase (decrease) in cash and cash equivalents 41,629,258 (23,015,453) 45,885,624
Cash and cash equivalents at beginning of period 4,256,366 24,743,465 -
------------ ------------ -------------
Cash and cash equivalents at end of period $45,885,624 $1,728,012 $ 45,885,624
============ ============ =============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 364 $ 36,547 $ 959,466
Supplemental disclosure of noncash financing and investing
activities:
Assets acquired under capital lease obligations - - 3,589,201
Exercise of stock options funded by retirement of previously
issued Common Stock - - 2,397,132
Common Stock issued in payment of note payable to stockholders - - 900,000
============ ============ =============
<FN>
See accompanying notes to financial statements.
Page 5
</TABLE>
<PAGE>
ICOS CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (unaudited) and December 31, 1995
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, the information
reflects all adjustments necessary to make the results of operations for the
interim period 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 financial
statements should be read in conjunction with the audited financial statements
for the year ended December 31, 1995, included in the Company's Annual Report
on Form 10-K.
2. Common Stock Transactions
----------------------------------
Public Offering
In May of 1996, the Company completed a public offering selling 6,900,000
shares of Common Stock at $7.625 per share, with the Company receiving net
proceeds of $49,229,532. The Company anticipates that the proceeds from this
offering will be used for continued research and product development, funding of
preclinical testing and clinical trials, expansion of the Company's facilities
and general corporate purposes.
Increase In Authorized Shares of Common Stock
On May 8, 1996, the stockholders of the Company approved an amendment to
Article 4 of the Company's Restated Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 50,000,000 shares to
100,000,000 shares.
Page 6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Overview
The Company's mission is to improve the quality of life and health for
people worldwide by leading in the discovery, development, and
commercialization of novel therapeutics by focusing on molecular targets in
inflammatory and other serious diseases. The Company has discovered important
mechanisms underlying directed cell movement, inhibition of pro-inflammatory
mediators, and intracellular signal transduction that may provide broad
opportunities in the treatment of chronic diseases that have inflammatory
components and in the treatment of acute inflammatory conditions.
Financial results for the first half of 1996 reflect a planned increase
in operating expenses for activities related to advancing potential products
through the therapeutic development process. Such activities include
product development, process development and clinical trials. The Company
expects to invest in additional clinical, regulatory, process development and
product development efforts over the remainder of the year and in future
periods.
The Company has a deficit accumulated during the development stage from
September 21, 1989 (incorporation) through June 30, 1996 of $95,375,759. 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,
payments received from certain collaborations, and the progress of the
Company's research and development efforts. The Company expects increased
expenditures over the next several quarters as the Company continues and
expands clinical trials of its product candidates and continues to expand
pre-clinical research and development activities for additional potential
products and begins clinical trials of those deemed most promising.
When used in this discussion, the words "expects," "believes,"
"anticipates" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from those projected.
Factors which could affect the Company's financial results are described in
the Company's latest Annual Report on Form 10-K for the year ended December
31, 1995, which is filed with the Securities and Exchange Commission. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Company undertakes no obligation
to publicly release the result of any revisions to these forward-looking
statements that may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
Page 7
Revenue
Revenue of $500,000 earned in each of the quarters ended June 30, 1996
and 1995 represented payments received under the Company's agreement with
Abbott Laboratories which commenced in April of 1995. Revenue earned under the
agreement totaled $1,000,000 for the six months ended June 30, 1996 and $500,000
for the six months ended June 30, 1995.
Operating Expenses
Total operating expenses for the second quarter ended June 30, 1996
increased 22% to $7,766,912 from $6,366,759 for the second quarter ended
June 30, 1995. Total operating expenses for the first half of 1996 increased
17% to $15,161,056 from $12,962,210 for the first half of 1995. Research and
development expenses for the second quarter of 1996 increased 23% to $7,091,661
from $5,742,391 for the second quarter of 1995. For the six months ended
June 30, 1996, research and development expenses increased 18% to $13,799,918
from $11,681,695 for the six months ended June 30, 1995. The increase in
research and development expenses is due primarily to increased costs
associated with product development, process development, regulatory
submissions and clinical trials. General and administrative expenses for the
second quarter increased 8% to $675,251 in 1996 from $624,368 for the same
period in 1995. For the first six months of 1996, general and administrative
expenses increased 6% to $1,361,138 from $1,280,515 for the same six month
period ended June 30, 1995. These increases were primarily the result of
increased personnel costs and other administrative activities.
Other Income and Expense
Other income primarily represents investment income earned on the
Company's investment securities. Investment income decreased 8% to $475,142
for the second quarter of 1996 from $514,169 for the second quarter of 1995.
Investment income for the six months ended June 30, 1996 decreased 32% to
$698,759 from $1,025,867 for the six months ended June 30, 1995. These
decreases were primarily the result of lower average cash balances in the first
half of 1996 compared to the first half of 1995.
Page 8
Net Loss
The net loss for the quarter ended June 30, 1996 increased 25% to
$6,791,525 from $5,431,312 for the quarter ended June 30, 1995. The net loss
for the six months ended June 30, 1996 increased 17% to $13,461,083 from
$11,534,782 for the six months ended June 30, 1995. The increases in net
loss are primarily attributable to the planned increases in research and
development expenses as noted above.
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 and grants, and a capital lease. Through June 30, 1996, the
Company had raised $107,218,240 in net proceeds from three public offerings of
Common Stock, $30,762,901 in net proceeds from private sales of Common
Stock, $22,733,986 in net proceeds from a Rights Offering of Common Stock to
existing shareholders, and $4,156,671 from the exercise of stock options and
warrants. Through June 30, 1996, the Company had earned $15,916,839 in
investment income and $5,951,409 in research-related revenue.
At June 30, 1996, the Company had $55,250,797 in cash and cash
equivalents, investment securities, and interest receivable. Through
June 30 1996, the Company had invested a total of $26,006,548 in production,
laboratory and administrative facilities, laboratory and computer equipment,
furniture, and leasehold improvements. In addition, the Company has invested
$2,309,979 in land for future facilities expansion. The Company anticipates
that its operating expenses will continue to increase in 1996 and subsequent
years as the Company adds personnel and facilities associated with advancing
several potential products through development and clinical trials.
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 may incur obligations and costs under the Glaxo Wellcome
collaboration agreement related to its portion of development costs for
potential products developed under the agreement. Under certain provisions of
the collaboration agreement, the Company is only liable for certain of these
costs if the product candidate has successfully passed certain milestones in
the development process. The Company will recognize these potentially
significant costs once its liability for them has been established.
Page 9
The Company expects to continue to enter into collaborations with other
parties where the work complements that at ICOS. These relationships may
involve commitments by ICOS to fund some or all of certain research programs
over a defined period. Although corporate collaborations have provided
revenue to the Company in the past, there can be no assurance that similar
sources of funds will be available to the Company in the future. The Company
plans to hire the additional personnel necessary to continue its discovery
research, as well as continue development of its current portfolio of product
candidates, and to continue to modify its existing facilities in the future to
complete a production facility and add additional laboratory and office space.
Further expenditures will be required for additional laboratory, development
and office facilities to accommodate the activities and personnel associated
with discovery research, development of current and potential products and
expansion of the number of clinical trials in the future. All these
activities will require substantial financial resources. There can be no
assurance that the Company will have sufficient resources to fund the cost of
such activities or that the Company will be able to obtain additional
resources on acceptable terms or in time to fund any necessary or desirable
expenditures.
The Company anticipates that its existing capital resources should be
sufficient to fund its cash requirements through 1997. The preceding
forward-looking statement is subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected. The
amounts and timing of expenditures will depend on the progress of ongoing
research and development, the results of preclinical testing and clinical
trials, the rate at which operating losses are incurred, the execution of
any development and licensing agreements with corporate partners, the
Company's development of products, the FDA regulatory process and other
factors, many of which are beyond the Company's control. Additional capital
resources will be required to fund the Company's operations through
commercialization of its first product. The Company will need to raise
substantial additional funds for its programs.
Regulation by governmental authorities in the United States and foreign
countries is a significant factor in the manufacture and marketing of the
Company's proposed products and in its ongoing research and product
development activities. The Company's product candidates will require
regulatory approval by governmental agencies prior to commercialization. In
particular, human therapeutic products are subject to rigorous pre-clinical
and clinical testing and other approval procedures by the FDA and similar
regulatory authorities in foreign countries.
Given that regulatory review is an interactive and continuous process,
the Company has adopted a policy of limiting announcements concerning, or
comments upon, specific details of the ongoing regulatory review of its
product candidates, subject to its obligations under the securities laws,
until definitive action is taken.
Page 10
<PAGE>
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 8, 1996. 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 of three years or until their successor is duly elected and
qualified, received not less than 30,215,050 votes, which represents
98.9% of the shares of Common Stock voted. Each Director received the
number of votes set opposite his respective name:
Nominee For Withheld
------- --- --------
David V. Milligan 30,215,050 345,002
Alexander B. Trowbridge 30,221,790 338,262
Gary L. Wilcox 30,233,555 326,497
Walter B. Wriston 30,235,112 324,940
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
1997 Annual Meeting of Stockholders and until their respective
successors are duly elected and qualified:
Frank T. Cary
James L. Ferguson
Janice M. LeCocq
The following Directors are currently serving terms that expire at the
1998 Annual Meeting of Stockholders and until their respective
successors are duly elected and qualified:
William H. Gates, III
Robert W. Pangia
George B. Rathmann
Page 11
2. The proposal to approve an amendment to the Company's Restated
Certificate of Incorporation to increase the number of authorized
shares of Common Stock received the following votes:
Votes
-----
For 29,169,345
Against 1,131,861
Withheld 112,596
Broker non-votes 146,250
The foregoing proposal was approved.
3. The proposal to approve an amendment to the 1989 Stock Option Plan to
increase the number of shares authorized under the Plan and to comply
with Section 162(m) of the Internal Revenue Code received the
following votes:
Votes
-----
For 17,824,604
Against 2,522,365
Withheld 161,229
Broker non-votes 10,051,854
The foregoing proposal was approved.
4. The proposal to approve an amendment to the 1991 Stock Option Plan for
Nonemployee Directors to increase the number of shares authorized under
the Plan received the following votes:
Votes
-----
For 16,695,294
Against 1,209,294
Withheld 215,590
Broker non-votes 12,439,874
The foregoing proposal was approved.
Page 12
5. The proposal to ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent public accountants for fiscal year 1996 received
the following votes:
Votes
-----
For 30,373,930
Against 91,291
Withheld 94,831
The foregoing proposal was approved.
Page 13
<PAGE>
Index to Exhibits
-----------------
Page
3.1 Restated Certificate of Incorporation dated May 8, 1996 #
10.1 ICOS Corporation 1989 Stock Option Plan (Amended and Restated
as of December 6, 1995) *
10.2 ICOS Corporation 1991 Stock Option Plan for Nonemployee
Directors (Amended and Restated as of December 6, 1995) *
27.1 Financial Data Schedule #
- --------------------
# Filed with this document.
* Filed as an exhibit to the Company's registration statement
No. 333-08485 effective July 19, 1996 and incorporated by
reference herein.
Page 14
<PAGE>
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 9, 1996 By: /S/ GEORGE B. RATHMANN
-------------- ----------------------
George B. Rathmann
Chairman of the Board of
Directors, Chief Executive
Officer and President
Date: August 9, 1996 By: /S/ HOWARD S. MENDELSOHN
-------------- ------------------------
Howard S. Mendelsohn
Chief Accounting Officer
Page 15
RESTATED CERTIFICATE OF INCORPORATION
OF
ICOS CORPORATION
ICOS Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware,
does hereby certify:
1. The original Certificate of Incorporation was filed
with the Secretary of State on September 21, 1989.
2. The following Restated Certificate of Incorporation
was duly proposed by the corporation's Board of Directors and
adopted by the corporation's stockholders in accordance with
the provisions of Section 242 and Section 245 of the General
Corporation Law of the State of Delaware.
ARTICLE 1. NAME
The name of this corporation is ICOS Corporation.
ARTICLE 2. REGISTERED OFFICE AND AGENT
The address of the initial registered office of this
corporation is 1013 Centre Road, Wilmington, Delaware 19805,
and the name of its initial registered agent at such address
is The Prentice-Hall Corporation System, Inc.
ARTICLE 3. PURPOSES
The purpose of this corporation is to engage in any lawful
act or activity for which corporations may be organized under
the General Corporation Law of Delaware.
ARTICLE 4. SHARES
The total authorized stock of this corporation shall
consist of 100,000,000 shares of common stock having a par
value of $.01 per share and 2,000,000 shares of preferred stock
having a par value of $.01 per share. Authority is hereby
expressly granted to the Board of Directors to fix by
resolution or resolutions any of the designations, powers,
preferences and rights, and the qualifications, limitations or
restrictions that are permitted by Delaware General
Corporation Law in respect of any class or classes of stock or
any series of any class of stock of the corporation.
ARTICLE 5. BYLAWS
The Board of Directors shall have the power to adopt,
amend or repeal the Bylaws for this corporation, subject to
the power of the stockholders to amend or repeal such Bylaws.
The stockholders shall also have the power to adopt, amend or
repeal the Bylaws for this corporation.
ARTICLE 6. ELECTION OF DIRECTORS
The Board of Directors shall be composed of not less than
three nor more than twelve Directors, the specific number to
be set by resolution of the Board of Directors; provided that
the Board may be less than three until vacancies are filled.
No decrease in the number of Directors shall have the effect
of shortening the term of any incumbent Director. The Board
of Directors shall be divided into three classes, with the
classes to be as equal in number as may be possible, with any
Director or Directors in excess of the number divisible by
three being assigned to Class 3 and Class 2, as the case may
be. At the 1993 annual meeting of stockholders, the following
classes shall be elected for the terms set forth below:
Class Term
----- ----
Class 1 1 year
Class 2 2 years
Class 3 3 years
At each annual meeting of stockholders following the 1993
annual meeting, the number of Directors equal to the number of
Directors in the class whose term expires at the time of such
meeting shall be elected to serve until the third ensuing
annual meeting of stockholders. Unless a Director dies,
resigns or is removed, he or she shall hold office for the
term elected or until his or her successor is elected and
qualified, whichever is later. Directors may be removed only
for cause. Directors need not be stockholders. Written
ballots are not required in the election of Directors.
Any amendment or modification of this Article 6 shall
require the affirmative vote of the holders of two-thirds of
the outstanding shares entitled to vote at an election of
Directors; provided, however, that the number of Directors may
be increased above twelve by the affirmative vote of two-
thirds of the Continuing Directors then in office.
"Continuing Directors" means the Directors who are members of
the Board of Directors immediately following the 1993 annual
meeting of stockholders and each new Director nominated or
elected by a majority of the Continuing Directors.
ARTICLE 7. PREEMPTIVE RIGHTS
Preemptive rights shall not exist with respect to shares
of stock or securities convertible into shares of stock of
this corporation.
ARTICLE 8. CUMULATIVE VOTING
The right to cumulate votes in the election of Directors
shall not exist with respect to shares of stock of this
corporation.
ARTICLE 9. AMENDMENTS TO CERTIFICATE OF INCORPORATION
This corporation reserves the right to amend or repeal
any of the provisions contained in this Certificate of
Incorporation in any manner now or hereafter permitted by law,
and the rights of the stockholders of this corporation are
granted subject to this reservation.
ARTICLE 10. LIMITATION OF DIRECTOR LIABILITY
To the full extent that the Delaware General Corporation
Law, as it exists on the date hereof or may hereafter be
amended, permits the limitation or elimination of the
liability of directors, a Director of this corporation shall
not be liable to this corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
Any amendment to or repeal of this Article 10 shall not
adversely affect any right or protection of a Director of this
corporation for or with respect to any acts or omissions of
such Director occurring prior to such amendment or repeal.
ARTICLE 11. ACTION BY STOCKHOLDERS WITHOUT A MEETING
Any action that could be taken at any annual or special
meeting of the stockholders may be taken without a meeting,
without prior notice and without a vote, if a written consent
setting forth the action taken is signed by all the
stockholders entitled to vote with respect to the subject
matter thereof.
IN WITNESS WHEREOF, the undersigned has executed this
document and affirms that the statements herein are true and
this instrument is the act and deed of ICOS Corporation as of
this 8th day of May, 1996.
ICOS CORPORATION
/S/ George B. Rathmann
George B. Rathmann, Chairman,
Chief Executive Officer and
President
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 45,885,624
<SECURITIES> 9,008,320
<RECEIVABLES> 468,203
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<CURRENT-ASSETS> 55,828,075
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<DEPRECIATION> 12,071,393
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<BONDS> 0
0
0
<COMMON> 392,218
<OTHER-SE> 69,264,885
<TOTAL-LIABILITY-AND-EQUITY> 72,200,406
<SALES> 0
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<INCOME-PRETAX> (13,461,083)
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<EXTRAORDINARY> 0
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<NET-INCOME> (13,461,083)
<EPS-PRIMARY> (.39)
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