ICOS may not be a one-drug wonder
Impotence drug is one of several promising products
By Jeffry Bartash, CBS MarketWatch
Fri May 29 19:09:17 1998
WASHINGTON (CBS.MW) -- ICOS Corp. stock surged amid reports that it's developing a safer alternative to the wildly popular Viagra male impotence treatment.
ICOS (ICOS) rose 4 13/16, or 30 percent, to close at 21 1/16. Volume topped 23 million shares, about seven times the stock's daily average.
Industry analysts say the company's treatment for impotence, which is still in clinical trials, is potentially more effective than Viagra while possessing fewer side effects.
More importantly, analysts say, ICOS is not a "one-drug wonder."
Viagra, which Pfizer Inc. (PFE) began to sell two months ago, is one of the hottest selling new drugs ever, with a market expected to exceed $1 billion in the near future. In the past week, however, the drug has been linked to more than a dozen deaths worldwide, though Pfizer discounts the possibility that the drug is the culprit.
As noted on the drug's package, Viagra is not supposed to be taken in conjunction with nitrate-type medications, which often are used to combat heart problems.
Big backers
ICOS, which is backed in part by Microsoft Chairman Bill Gates, hasn't yet named its impotence drug. It's now referred to simply as IC351.
In the next 6-12 months, the Bothell, Wash.-based company should be releasing clinical test results that could "drive share prices significantly up," said Sharon Doering, who covers ICOS for Madison Securities in Chicago.
Aside from its impotence drug, the company also is developing treatments for victims of strokes and multiple sclerosis, analysts say.
All told, ICOS has four drugs in nine different Phase II trials, said Andrew Heyward of Ragen MacKenzie, which specializes in coverage of firms in the Pacific Northwest. The FDA requires pharmaceutical companies to conduct three phases of testing before deciding whether or not to approve drugs for sale in the U.S.
"Their pipeline is much larger than the average biotech company in a similar stage of development," Doering added.
Lots of assets
Like most developmental-stage biotech firms, ICOS regularly loses money and earns meager revenue. Yet ICOS is widely described as a diverse company with strong management, technical know-how and and a valuable portfolio of patents. Moreover, the company possesses a good track record in meeting milestones for product development on time.
Thus, it's probably no surprise that ICOS has some big backers. Gates, for instance, is a board member and the company's largest individual shareholder, owning 12.6 percent of the stock. He invested in the company way back in July 1990, though some suggest that's because of his friendship with ICOS chairman George B. Rathman.
Another shareholder is Jerry Larson, an influential California biotech investor. He lists ICOS as one of his top 10 biotech picks.
Lab leaders
While both ICOS and Pfizer's drugs are both so-called PDE (Phosphodiesterase) inhibitors and share a related mechanism of action, clinical tests suggest that ICOS' treatment is more-specific to the problem of male impotence than Viagra, thus reducing the likelihood of harmful side affects.
Indeed, Heyward of Ragen McKenzie suggest that ICOS is in a better position to come up with a superior male impotence treatment because it holds some PDE-related patents that could enhance its own research while hampering that of Pfizer.
"In the lab ICOS has the big advantage," Heyward said. "It would be difficult for Pfizer to come up with a new, improved version."
ICOS officials would not comment on the patent issue.
International market
Despite the good publicity about its impotence treatment, which a small, unheralded company like ICOS desperately can use, the drug is still at least two years away from sales in the United States. (Overseas trials of IC351 are further along, so ICOS could get the drug to market outside the US somewhat earlier, analysts say.)
As a result, the stock, which has traded as low as 7 5/8 in the past year, could experience more volatility, analysts say. And in the topsy-turvy world of biotech, one of the company's top treatments still could fail and send investors running for the life rafts.
Nonetheless, the payoff done the line could be huge if its impotence drug, which might also have application for angina and congestive heart failure, proves a success. Demand for Viagra has been spreading like wildfire all over the globe, with no slowdown in sight.
With billions of dollars likely to be spent on impotence drugs in the next decade, "there's enough room in the market for more competitors," Doering concluded.
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