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Table of Contents
 
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 The Quarterly Period Ended September 30, 2002
 
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
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  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 October 31, 2002
Common Stock, $0.01 par value
     
62,039,160
 

Table of Contents
ICOS CORPORATION
 
FORM 10-Q
For the Quarterly Period Ended September 30, 2002
 
TABLE OF CONTENTS
 
         
Page No.
PART I.
   
FINANCIAL INFORMATION
     
ITEM 1.
   
Financial Statements
     
       
1
       
2
       
3
       
4
ITEM 2.
      
7
ITEM 3.
      
14
ITEM 4.
      
14
PART II.
   
OTHER INFORMATION
     
ITEM 1.
      
15
ITEM 6.
      
15
  
16
  
17
 

Table of Contents
 
PART I.    FINANCIAL INFORMATION
 
ITEM 1.    Financial Statements
 
ICOS CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2002
     
2001
     
2002
     
2001
  
    
(in thousands, except per share data)
  
Revenue:
                                    
Collaboration revenue from related parties
   
$
17,908
 
   
$
13,884
 
   
$
55,173
 
   
$
38,009
 
Licenses of technology
   
 
1,477
 
   
 
2,294
 
   
 
3,491
 
   
 
29,209
 
Contract manufacturing
   
 
2,825
 
   
 
2,687
 
   
 
8,057
 
   
 
4,261
 
    
  
  
  
Total revenue
   
 
22,210
 
   
 
18,865
 
   
 
66,721
 
   
 
71,479
 
    
  
  
  
Operating expenses:
                                    
Research and development
   
 
34,288
 
   
 
25,620
 
   
 
104,934
 
   
 
75,363
 
Selling, general and administrative
   
 
3,864
 
   
 
2,289
 
   
 
13,698
 
   
 
5,749
 
    
  
  
  
Total operating expenses
   
 
38,152
 
   
 
27,909
 
   
 
118,632
 
   
 
81,112
 
    
  
  
  
Operating loss
   
 
(15,942
)
   
 
(9,044
)
   
 
(51,911
)
   
 
(9,633
)
    
  
  
  
Other income (expense):
                                    
Equity in losses of affiliates
   
 
(21,578
)
   
 
(18,437
)
   
 
(71,579
)
   
 
(44,885
)
Interest and other income
   
 
2,989
 
   
 
3,113
 
   
 
9,334
 
   
 
9,730
 
    
  
  
  
Total other income (expense)
   
 
(18,589
)
   
 
(15,324
)
   
 
(62,245
)
   
 
(35,155
)
    
  
  
  
Net loss
   
$
(34,531
)
   
$
(24,368
)
   
$
(114,156
)
   
$
(44,788
)
    
  
  
  
Net loss per common share—basic and diluted
   
$
(0.56
)
   
$
(0.45
)
   
$
(1.87
)
   
$
(0.84
)
    
  
  
  
Weighted average common shares outstanding—basic and diluted
   
 
61,980
 
   
 
53,715
 
   
 
61,056
 
   
 
53,110
 
    
  
  
  
 
See accompanying notes to condensed consolidated financial statements.

1

Table of Contents
 
ICOS CORPORATION
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
    
September 30,
2002
     
December 31,
2001
  
    
(unaudited)
         
    
(in thousands)
  
ASSETS
Current assets:
                  
Cash and cash equivalents
   
$
49,272
 
   
$
260,905
 
Investment securities, at market value
   
 
35,634
 
   
 
143,435
 
Interest receivable
   
 
5,092
 
   
 
3,834
 
Receivables from affiliates
   
 
39,275
 
   
 
11,405
 
Other
   
 
5,120
 
   
 
5,326
 
    
  
Total current assets
   
 
134,393
 
   
 
424,905
 
Investment securities, at market value
   
 
283,701
 
   
 
62,533
 
Property and equipment, net
   
 
20,567
 
   
 
19,754
 
Other assets
   
 
806
 
   
 
395
 
    
  
    
$
439,467
 
   
$
507,587
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
                  
Payables and accruals
   
$
22,616
 
   
$
21,079
 
Due to affiliates
   
 
32,789
 
   
 
18,132
 
Deferred revenue
   
 
4,782
 
   
 
4,329
 
    
  
Total current liabilities
   
 
60,187
 
   
 
43,540
 
    
  
Deferred revenue
   
 
15,301
 
   
 
10,297
 
Stockholders’ equity:
                  
Common stock
   
 
620
 
   
 
597
 
Additional paid-in capital
   
 
777,277
 
   
 
754,674
 
Unearned equity compensation
   
 
(527
)
   
 
—  
 
Accumulated other comprehensive income
   
 
3,114
 
   
 
828
 
Accumulated deficit
   
 
(416,505
)
   
 
(302,349
)
    
  
Total stockholders’ equity
   
 
363,979
 
   
 
453,750
 
    
  
    
$
439,467
 
   
$
507,587
 
    
  
 
See accompanying notes to condensed consolidated financial statements.

2

Table of Contents
 
ICOS CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
    
Nine Months Ended
September 30,
  
    
2002
     
2001
  
    
(in thousands)
  
Cash flows from operating activities:
                  
Net loss
   
$
(114,156
)
   
$
(44,788
)
Adjustments to reconcile net loss to net cash used in operating activities:
                  
Depreciation and amortization
   
 
8,601
 
   
 
4,974
 
Equity in losses of affiliates
   
 
71,579
 
   
 
44,885
 
Deferred revenue
   
 
255
 
   
 
(5,656
)
Change in operating assets and liabilities:
                  
Receivables
   
 
(27,190
)
   
 
411
 
Other assets
   
 
396
 
   
 
(1,578
)
Payables and accruals
   
 
(516
)
   
 
1,474
 
    
  
Net cash used in operating activities
   
 
(61,031
)
   
 
(278
)
    
  
Cash flows from investing activities:
                  
Purchases of investment securities
   
 
(322,443
)
   
 
(178,651
)
Maturities of investment securities
   
 
91,070
 
   
 
51,447
 
Sales of investment securities
   
 
115,434
 
   
 
14,807
 
Purchases of property and equipment
   
 
(5,137
)
   
 
(3,326
)
Investments in affiliates
   
 
(56,678
)
   
 
(52,723
)
    
  
Net cash used in investing activities
   
 
(177,754
)
   
 
(168,446
)
    
  
Cash flows from financing activities:
                  
Proceeds from stock options and warrants
   
 
21,950
 
   
 
19,793
 
Proceeds under line of credit
   
 
5,202
 
   
 
—  
 
    
  
Net cash provided by financing activities
   
 
27,152
 
   
 
19,793
 
    
  
Decrease in cash and cash equivalents
   
 
(211,633
)
   
 
(148,931
)
Cash and cash equivalents, beginning of period
   
 
260,905
 
   
 
194,708
 
    
  
Cash and cash equivalents, end of period
   
$
49,272
 
   
$
45,777
 
    
&