Lilly to Buy Cialis Partner Icos

Updated from 8:33 a.m. EDT

Eli Lilly(LLY) said Tuesday that it will take control of making and marketing the impotence drug Cialis by paying $2.1 billion for the Bothell, Wash., biotech company Icos(ICOS).

Lilly's takeover price of $32 a share represents an 18% premium over Icos' closing price Monday. After the announcement, Icos' stock jumped $4.53, or 16.7%, to $31.66, while Lilly slipped 30 cents to $57.36.

Cialis is the No. 2-selling impotence drug behind Viagra from Pfizer(PFE). For the first six months of this year, Cialis produced worldwide sales of $456 million, up 34% from the same period last year. First-half sales for Viagra were $784 million, down 5% from a year ago.

Lilly and Icos have been partners since 1998 in a joint venture to make and sell Cialis.

"With full ownership of Cialis, we will be able to realize operational efficiencies in the further development, marketing and selling of this important product," said Sidney Taurel, chairman and CEO of Lilly. "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."

The board of Icos approved the deal unanimously. Lilly, based in Indianapolis, expects to close the transaction later this year or early next year, subject to a vote by Icos shareholders and clearance by federal regulators.