Eli Lilly and Co. has signed a definitive merger agreement to acquire ICOS Corp., based in Bothell, WA, in a cash transaction valued at $2.1 billion. The two companies have been partners in Lilly ICOS LLC, the joint venture that manufactures, markets and sells Cialis, an oral PDE-5 inhibitor for the treatment of erectile dysfunction. Cialis generated worldwide sales of $456 million in the first six months of 2006, up 34% over the first half of 2005.

“We are pleased to bring the full value of Cialis to Lilly and to continue providing the benefits of Cialis to men suffering from erectile dysfunction,” said Sidney Taurel, Lilly’s chairman and chief executive officer. “We have had a very successful and productive relationship with our partners at ICOS and are looking forward to taking this next step. With full ownership of Cialis, we will be able to realize operational efficiencies in the further development, marketing and selling of this important product. We expect this acquisition will increase the company’s earnings and earnings growth rate beginning in 2008 and, after a significant addition to sales in 2007, will modestly accelerate the company’s sales growth rate thereafter.”

Paul Clark, chairman, president and chief executive officer of ICOS, stated, “Our talented people grew ICOS, over 16 short years, into one of the top-tier biotech companies in the U.S. Along the way, they collaborated to create and commercialize one of the few blockbuster drugs to come from biotech. The acquisition by Lilly, our close partner for nearly a decade, provides a compelling financial outcome for our shareholders.”

The transaction is expected to close in late 2006 or early 2007 and is subject to approval by ICOS shareholders, clearance under the Hart-Scott-Rodino Anti-Trust Improvements Act and certain other closing conditions.